Today’s Blog – Wednesday 19th April 2017

Editorial

Although George Orwell’s cadaver might be spinning in his grave at a high frequency at present, it seems that many current politicians (and now businessmen) can’t help but copy the linguistic manipulations of Donald Trump.  On the political side, yesterday saw Australia’s Prime Minister, the previously urbane Malcolm Turnbull, push an anti skilled immigration policy under the banner of “Australia First” (we bet he cringed when doing so).

On the business side, Santos’s CEO, Kevin Gallagher, joined the Trumpian fray in an interview last night in which he accused the other Queensland LNG projects of creating “fake” constructs about who was to blame for what in the current domestic gas imbroglio.  This was part of a build-up to a meeting with the Prime Minister today – which could turn out to be a war of the Trump phrases.

Gallagher appears to be a fairly combatative type (from the Scottish look of him you wouldn’t want to spill his pint in a Glasgow pub) and he has come out swinging at the other LNG players.  They have been taking the high ground of “please sir, we are supplying some of the domestic market whereas the STO led GLNG venture buys a lot of third party gas from domestic markets to supply its LNG contracts”.

Other than personality type, we don’t really understand STO’s motivation here – perhaps it is conveying the views of its joint venture parties about Australian sovereign risk.?Or perhaps Gallagher is conveying the views of his Board who sanctioned more liquefaction capacity than they should have.

What STO’s own “activist” investor back in China will make of this – and or make of this opportunity if STO is shown to be weak – remains to be seen.

Commodity prices

Crude prices slipped somewhat in overnight trading, with Brent down ~0.8% to US$54.89 and WTI down ~0.5% to US$52.41.  The key driver seemed to be some evidence of poor inventory numbers emerging this week – with the official EIA figures out tomorrow.

Our thesis of yesterday that a blown-out well in Prudhoe Bay could affect oil markets has not got any traction – yet – but has hit operator BP’s share price.  Some 3% of its market cap was lost on Monday – only a few billion dollars – as investors remember the company’s previous blow-out and its horrendous consequences.

Henry Hub closed down ~0.6% to US$3.14.

Disruption

The Saudi Energy Minister, Khalid al-Falih, promoted the country’s renewable energy plans at a conference on Monday.  The kingdom is seeking US$50B to be invested in the sector in the next five years.

It is currently conducting a tender for 700 MW of solar capacity. Given other superb results obtained from solar tenders in the Gulf in the last year, the Saudis should get some very competitive offers.

Cynics could say that history suggests that real reform of the Saudi energy sector is more often spoken about than delivered – but solar is so relatively “easy” and less political than fossil fuels that we expect this to go ahead – possibly even faster than currently planned.

In due course that would release more barrels currently consumed by the country’s generation sector for export.

Company news – Origin Energy (ORG)

ORG today announced a change-out in the leadership of the upstream business that it intends to keep (basically its stake in APLNG and a few much less material assets).  The change of job title involved – from “Integrated Gas CEO” to “EGM Integrated Gas” suggests that the move is not necessarily one of a long planned retirement.

Quote of the day

Possibly to be said in a tough Glaswegian accent by Kevin Gallagher to the PM today if he reprises his interview of yesterday (perhaps in a private meeting a few swear words could be added to give more Scottish authenticity):

“If Government decides to intervene because we are unable as an industry to sort this problem then I would suggest that any intervention has to be equitable across all projects.”

Ya bas! (added by us)

 

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