Today’s Blog – Wednesday 25th January 2017

Blogging services for the rest of the week will be interrupted due to the Australia Day holiday tomorrow


Unfortunately yesterday’s “alternative facts” of high oil prices and vast personal riches turned out not to be true – so we are treading again the weary boards of blog-dom.

We have recently commented on the retreat by the Super-Majors and Independents from much of Asia, as they concentrate on lower risk US activities.  In addition to Exxon’s recent deal to acquire Permian acreage for >US$5.5B, we note that this figure was only around one quarter of the total deal value of > US$20B done over acreage in this West Texan Basin in the last few months alone.  That is greater than the total deal value for everywhere else on the planet in the same period.

Other recent news out of the US was BP bringing on a massive Gulf of Mexico oil project – Thunder Horse South – below budget and ahead of schedule.  Capex is ~US$9/BOE.  Why would one invest in a high risk regime when costs like that can be achieved in the US?

However, it is unlikely that politicians and regulators in Asian countries will straight away recognise the issue and say “hmm, we must try harder to attract investment and skills” (maybe more like – “hmm, that nice Mr Zhou gave me a big fat envelope last week, unlike those damn Yanqui a**holes”).

Commodity prices

Crude was flat to slightly up in overnight trading, with Brent closing at US$55.33 and WTI at US$53.08.  Predictions for this week’s US inventory numbers were much better than last week’s (although the forecast then was way out) and rumbles from OPEC continue to be positive.

Henry Hub closed up 1% at US$3.29.

LNG and international gas

The recently reported spat between Australian and East Timor over maritime borders – and the gas-fields therein – has mellowed over the last day or so, with talks now underway to try and amicably resolve the issue.

However this plays, we don’t think it will induce the development of Sunrise LNG anytime soon. Or ever.

Governments, fracking, etc

In an early executive action, the Trump White House has rescinded certain regulatory blockages to the much fought over Keystone XL and Dakota Access pipeline developments.  Whether they will now proceed however will depend not only on overcoming of non-Federal opposition (such as Indian groups) – but also and more importantly basic economics.

For Keystone, oil sands in Canada face economic and political challenges of their own – and without certainty about long term through-put, pipelines won’t go ahead.  For Dakota – the Bakken’s material decline needs to reverse.

Company news – Oil Search (OSH)

OSH’s recent quarterly report was bullish about additional gas resources being available to add further trains to PNG LNG.  Now they just need a customer…..

If I was a short/medium term buyer I would rather deal with our recently reported on hard luck story – Toshiba – with its take or pay commitments over US liquefaction capacity.

Quote of the day

A quote from Daniel Yergin’s The Prize, on when pipelines seemed rather easier to build in the US:

“Construction finally began in August 1942 and what followed was one of the extraordinary feats of engineering in World War II…Within a year and a half..Big Inch, 1,254 miles long, was carrying half of all the crude oil moving in the East Coast.”





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