Today’s Blog – Wednesday 14th December 2016


The two latest additions to President-Elect Trump’s cabinet are of great interest to the global oil patch – Exxon’s CEO Rex Tillerson as Secretary of State and to a lesser extent ex Texan Governor Rick Perry as Energy Secretary.

Most media commentary has focused on Tillerson’s historic closeness with Russia and its long time leader.  The Senate confirmation process could prove interesting given comments like the following from Republican ex-Presidential candidate, POW and war here (but unfortunately in The Donald’s eyes, someone who he likes less than someone who was not captured), John McCain:

“Vladimir Putin is a thug and a murderer and a killer and a KGB agent.”

(But as a KGB agent, at least he was not captured!  So there!)

In our view, getting to the top of Exxon and then running that Private Empire for 10 years is demonstration of a pretty handy set of skills and character that should prove useful to the US (and its free-loading allies such as ourselves).

Exxon’s operations in Australia are either non-operated or in Bass Strait have been in harvest mode for decades, so Tillerson would not be as close to Oz as to some other countries.  However one such country is our nearest neighbour – PNG – where Exxon has successfully invested significant time and money under Tillerson’s watch.

More broadly, Tillerson’s experience in global LNG markets will be useful in terms of bringing free market, Asian and liberalising perspectives to an otherwise protectionist leaning cabinet room.

Perry’s appointment is of less consequence for Australia – although he may preside over a Department which on the margins should allow more US gas to be developed – which will compete in global LNG markets.

Commodity prices

Crude continued on its post OPEC deal run, with Brent up nearly 1% overnight to US$55.61 and WTI up around the same to US$52.85.

Whether this euphoria will continue to be resilient in the face of what could be pretty negative “numbers” due out later this week remains to be seen.

Henry Hub was down again, closing at US$3.45.

LNG and international gas

Rosneft continues to grow its gas business, with a recent deal with Eni in the Mediterranean under which it has purchased a 30% stake in the massive Zohr gas-field located off Egypt – for US$1.1B.  Eni had recently previously sold a 10% stake in Zohr to BP and now has 60% equity therein.

Gazprom would be unlikely to be pleased given its self-view as the Russian gas company.   Igor Sechin is Teacher’s Pet!

And maybe Teacher’s Billionaire Buddy as well.  The recent sale by the Russian Government of a 20% stake in Rosneft to Glencore and Qatar for US$11B is reported in some quarters to involve the payment of this sum into a company controlled by Putin/Sechin rather than the Russian Treasury.

Malaysia’s Prime Minister can only look on with envy – it was only a lousy $1B of Governments funds that was found “resting” in his bank account.

Governments, fracking, etc

As we have occasionally commented on before, capital markets can be more powerful actors in what potentially environmentally damaging (even if not scientifically supported) actions go ahead than do Governments.

A recent report indicated that groups controlling funds under management of US$5 trillion had committed to reducing or eliminating investments in fossil fuel companies.  Originally the target of their dislike was coal – but increasingly it is oil and gas as well.

The biggest advantage that solar has over fossil fuels is its much lower cost of capital.  This sort of development only adds to this differential.

Company news – Cooper Energy (COE)

COE continues its hot streak – kicking a few more goals in announcements issued today.

Firstly it has signed another gas off-take deal for its Sole development in Victoria – with China Light & Power utility company Energy Australia.  The only remaining large utility that it has not signed with yet is Origin Energy.   We would expect the latter to do so – even if it does not need much gas it should maximise diversification and support new competitive entrants.

COE also announced progress on extracting itself from its Tunisian ventures at minimal cost.

Quote of the day

Like all other media outlets, news on Rick Perry reminds us of his flame-out when running for President in 2012, when he did not forsee what Federal Department he would ultimately end up being appointed to run:

“It’s three agencies of government, when I get there, that are gone—Commerce, Education and the, um, what’s the third one there? Let’s see…..The third agency of government I would do away with—the education, uh, the, uh, commerce and let’s see. I can’t—the third one. Sorry. Oops.”


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