Today’s Blog – Friday 16th December 2016

Editorial

Yesterday we mentioned Australia’s new gas pipeline regulatory regime emerging from COAG – basically requirements for pipeline companies to provide make much more information public – and a mandatory arbitration process to deal with failed negotiations.

The latter is the key to the success or not of the new policy.  In our view, to succeed the Government must deliver a very tight terms of reference for the proposed arbitrator(s) and an affordable and speedy arbitration process.

Pipeline behemoth APA Group welcomed the new policy – which should make potential shippers pause for a moment.

APA will desire an arbitration process that is as loose, expensive, unwieldy and time consuming as possible.  Expect it to lobby Governments and regulators hard with phrases like “due process”, “expert input”, “fair treatment of property rights”, etc, etc.

Even an issue like the number of arbitrators is important (these guys typically cost A$10k per day on the cost side – a lot if you are a smaller industrial or junior oil and gas company).  More important than the cost though is who choses the arbitrators – and the key process for selecting a tie-breaking “neutral” arbitrator.  In our view, there should be one arbitrator – appointed by a party like the ACCC.

Lets see who has the lobbying power over the next few months as the policy settings solidify (we expect the big boys to play this hard).

Commodity prices

In the absence of much trade-worthy news, crude prices were fairly flat overnight, with Brent closing at US$54.18 and WTI at US$51.04.

Henry Hub fell ~3% to close at US$3.42.

LNG and international gas

A potentially price-bearish view on US gas just came from the current Barcelona LNG conference (why are these things never held in the likes of LNG importer Pakistan…?).

This was from the CEO of private US LNG hopeful NextDecade, ex-Shell and Excelerate Energy executive  Kathleen Eisbrenner, who stated that:

“There is so much associated gas in Texas, we can literally afford to pay people to take it away so we can produce oil.”

We love a bit of good old Texas optimism, Kathleen – if you are even vaguely right, then the rest of the world’s LNG project proponents better look out, given all the other advantages the US has in undertaking LNG developments.

Company news – Shell

Speaking of Shell executives, the Anglo-Dutch Super-Major has just announced its next CFO – Jessica Uhl.  Media reports have noted that Jessica is somewhat unusually not a Shell lifer and indeed had spent part of her career at Enron – so she is presumably one of “the smartest gals in the room” (and we don’t mean that cheekily – in our experience, Enron did in fact have a lot of very talented people).

Company news – FAR Ltd (FAR)

Longtime readers will know our fascination with whether FAR does or does not hold a pre-emptive right over the sale by Conoco of a stake in a Senegalese oil asset to Woodside Petroleum (WPL).

Conoco announced overnight that its current global asset sale processes had delivered it more than US$1B – including proceeds from the Senegal sale.

That omelette is looking increasingly scrambled with respect to a potential pre-empt.

Quote of the day

A quote from veteran oil patch commentator Philip Verlerger on genuine US exceptionalism – in the energy industries at least – as exemplified by the likes of NextDecade:

“The United States is different. Its culture promotes entrepreneurism and experimentation. Its laws permit those who find technological breakthroughs for resource development to capture much or all of the rents”.

 

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