Today’s Blog – Friday 28th April 2017

Editorial

On Monday we expressed some doubts about the investment wisdom of buying stock in Aramco’s planned IPO, as a tiny stake in a company controlled by a medieval theocracy did not seem the acme of good corporate governance.  The addition of major Chinese investors taking up shares as part of strategic and/or geo-political move did not ameliorate those concerns – we don’t know if there is a Chinese phrase for “minority shareholders”.

However, we may see another oil and gas IPO coming to market soon whose dynamics may rival the unattractiveness of Aramco.  The Australian Financial Review (AFR) has just reported in its financial gossip column “Street Talk” that the private equity owners (Macquarie Bank and Brookfield Asset Management, etc) of WA offshore oil and gas company Quadrant Energy are preparing for an IPO.

Quadrant was bought from US IOC Apache in 2015 for US$2.  The hoped for IPO valuation is A$4B.  What has changed in the last 2 years?  Oil and gas prices have got no better.  We very much doubt that Quadrant has added any new reserves whilst obviously depleting existing assets each year.  Maintenance spend is not normally top of the list for PE.  Those Saudi oil-fields are starting to look better.

The AFR did not mention anything about Macquarie’s assets in the Northern Territory – 50% of Mereenie and a path to takeover Central Petroleum (CTP) in the next couple of months. Our view has been that these would augment a Quadrant IPO – as East Coast gas is more understandable by East Coast fund managers and bankers than that strange place in the West.

Commodity prices

Oil prices slipped a fraction in overnight trading, with Brent down ~0.1% to US$51.44 and WTI falling harder (~1.3%) to US$48.97.  That old chestnut, a strengthening US dollar, was seen as the major trading catalyst for the day.

In the longer term, the IEA continues to warn of potential material oil supply shortages by 2020 – due to the US$1T investment strike since 2014.

The market has just dodged an “event” – the Saudis preventing a terrorist attack on a 400,000 bbl/day facility in the South of the country.  If that had been even partially successful, oil prices could have spiralled as the home of 10 mmbbs/day would have been seen to be vulnerable.

A less impactful “event” also just occurred on Russia’s Sakhalin Island.  This was the prevention of a supposedly ISIS led attack there (not directly on the Island’s rich oil and gas infrastructure – but presumably making a point about same).

Henry Hub closed down ~0.6% to US$51.44.

LNG and international gas

Speaking of Sakhalin, Russian news agency Interfax reported earlier this week that the Exxon/Rosneft JV on the island had nearly finished a feasibility study into their own LNG project.  The gas for this is a a matter of fierce inter-Russian NOC jostling – with Gazprom (with Shell) as the owner of the existing LNG infrastructure on the Island saying this gas should be used by it in a brownfields expansion).

Maybe that was not an ISIS attack after all.

Governments

Origin Energy (ORG) followed STO yesterday in issuing a response to the Federal Government’s proposed Domestic Gas Security Mechanism.  Its position is clear – APLNG supplies a lot of net gas to domestic markets.

STO’s lawyerly statement yesterday about supplying more gas into the “Australian” domestic market is being interpreted by some as saying “look – we supply lots of gas to WA”.  That is true – but not exactly helpful to politicians focused on East Coast woes.

Governments, fracking, etc

The NT Government’s taskforce reviewing fracking issued a report yesterday which contained an interesting snippet that may show where its thinking is going.  They called for a tender for an economic analysis of the consequences of: banning fracking, allowing fracking, or – only allowing fracking in the Beetaloo Basin.

There would be zero technical reason that we can think of to support only the latter (but would be seen as some sort of compromise). It would delight the licence owners in that region such as ORG and its partners (SASOL and AIM listed Falcon Oil and Gas) – but really annoy everyone else.

There could be potential negative blow-back for CTP as well – it has made the case that its existing production assets in the Amadeus do not “need” to be fracked.  But they would benefit a lot from having the ability to do so.

Quote of the day

We take a break from the recent interesting quotes from Martin Houston and revert to Friday favourite Rodney Dangerfield:

“The way my luck is running, if I was a politician I would be honest.”

“My wife wants sex in the back of the car and she wants me to drive.”

Today’s Blog – Thursday 27th April 2017

Editorial

We have been closely following the recent politics of Gladstone LNG exports occurring at a time of massive gas price increases (well above LNG net-backs) on Australia’s East Coast.  We had noted that the Federal Government’s policy armaments choices seemed to be between pop-guns and nuclear weapons.

Last night the Prime Minister announced a new “Australian Domestic Gas Security Mechanism” – and it is not clear what weapon’s category this falls into.  It looked tough – and was very squarely aimed at the Santos (STO) led GLNG joint venture – but very little detail has been released as to how it will actually work.

So far today’s STO’s share price has been hit hard – down nearly 8%.  STO has just released a short announcement which indicates it is seeking further information as to what the new policy might actually mean.  It has pointed out its long time serving of the domestic market – but it seems unlikely that history will sway Canberra on easing up on the company when its denizens are receiving much flack from gas customers about prices trebling and more.

STO’s current weakness might provide a more fertile environment for its disgruntled Chinese strategic investor to agitate for more change.  STO’s AGM is next week – but will likely be dominated by such irrelevant items such as protests against New South Wales CBM; etc.  However, we would love to see the Chinese version of Gordon Gekko stand up and take the Board to task in a modern Wall Street moment.

Commodity prices

Crude oil prices have bobbed up and down this week on fears that OPEC might not extend its current cuts – but on the other hand has been helped with some OK crude inventory numbers.  Last night Brent closed at US$51.51 and WTI at US$49.62.

The weekly EIA report was bullish on crude itself – a draw of 3.6 mmbbls (or 4.1 mmbbls when adjusted for SPR sales).  However, product numbers were bear-ish – a 3.4 mmbbls increase in gasoline and a 2.7 mmbbl increase in distillate.  Its still too early for the Griswolds to get into their gas guzzlers and head for Wally World.

Henry Hub has had a couple of down days but rallied strongly last night to close at US$3.26.

LNG and international gas

Our readers are more used to hearing about Senegal in the context of its large oil discoveries – but in addition the country has hosted some LNG scale gas discoveries in recent years.  BP has just increased its equity in the ~15 Tcf Tortue gas discovery on the Senegal/Mauritania border – bringing JV interests on each side of the border into line.  That moves this project up the LNG pre-development ranks a bit.

Could more West African LNG be developed before East Africa?  The Atlantic and Indian/Pacific markets are coming together – but still face differing dynamics (for instance, West Africa more directly competes with the dynamics Gulf of Mexico liquefaction owners), but has an existing LNG track record.

Our view that the Power of Siberia pipeline would struggle to meet its intended first gas target of 2018 received a fillip with recent news that a 8 billion ruble (~US$150M) contract for certain services required for the pipeline’s construction had just been awarded to a tiny new company called Inter Management.  Don’t ask who ultimately owns this newly enriched venture…….but it will not exactly help a very difficult project meet a very tight deadline.  Other rival gas suppliers to China will be pleased.

Company news – FAR Ltd

On matters Senegalese, FAR has recently announced that it will shortly move to drill a new exploration well – FAN South-1.  This part of the world is being more and more closely watched by the international oil industry (says we, hoping for a large takeover offer for our FAR shares).

Quote of the day

Another recent quote from Tellurian’s Martin Houston, which manages to make a few rather more interesting points in the one statement than he would have allowed to do at BG:

“It’s making sure that the golden age of gas doesn’t pass by and then becomes the golden age of coal. That worries me. We’re not driving policy makers towards the outcomes we need in the industry. Gas should be punching much further above its weight than it is. I worry about the industry’s ability to rally around the new order. The new order is cheap LNG from America. Not expensive LNG from projects in East Africa”.

 

 

 

 

Today’s Blog – Monday 24th April 2017

Editorial

Our ongoing doubts about Saudi Arabia achieving a successful float of part of Aramco at its preferred US$2T valuation received a bit of a jolt last week.  This was due to news that China was assembling a heavy hitting consortium to take a key stake in the floated stock – with parties including PetroChina, Sinopec, large banks, etc, being in the group.   A Hong Kong listing would be sought as a quid pro quo.

An investment of this nature would likely be strategic rather than value-based in its approach.  It could therefore support a much higher share price than would otherwise be the case.  From our personal investing point of view, the one thing that would be worse than putting money into a company controlled by a medieval government is one controlled by a medieval government in partnership with the current Communist dynasty of the Middle Kingdom.  We don’t think caring for minority shareholders would somehow be the highest item on their priority list.

If this concept gains further traction it will be interesting to see if the American Government has any concerns about the Chinese messing in what has been a sphere of influence since the famous meeting between Roosevelt and Ibn Saud in 1945.

Saudi oil is more important to China than the US these days – but still there would likely be some concerns in Washington about Beijing growing its influence in Riyadh.

Commodity prices

Crude prices continued to fall at the end of last week (and were down 7% for the week overall).  Brent closed at US$51.96 and WTI fell below US$50 again to US$49.62.

The “numbers” news in the week was not that bad – but still somewhat negative – and the overall market vibe was concern about rising US production.  This factor got another boost on Friday with the weekly BHI rig count having a rise in oil rigs of 5 (and gas rigs were also up by 5).

Henry Hub also had a poor week – down 4% – closing at US$3.10.

LNG and international gas

Some very large new gas numbers were reported in the press late last week following a media release by the United States Geological Survey.   The USGS has just revised its estimateds of the resource potential of the Haynesville and Bossier formations on the Gulf of Mexico shore-line – coming up with a massive figure of > 300 Tcf of gas.

Many media outlets reported this figure as a gas “discovery”.  Closer inspection of the USGS’s actual release revealed that this is in fact an “undiscovered technically recoverable resource”.

So the rest of the gas supply world dosen’t need to quake in its boots just yet.

Governments

The ACCC has gleefully taken up the baton passed to it by the Federal Government last week to more closely look at Australia’s gas supply industry.   Based on some of their early comments, the pipeline industry could be in the cross-hairs more than the up-streamers.  That seems only fair when one looks at the prima facie evidence of who is earning economic rents and who isn’t – e.g. the comparative share price performance of APA Group versus that of Santos (STO) and Origin Energy (ORG).

Company news – STO

The Australian Financial Review (AFR) had yet another detailed article today analysing the woes of the STO led GLNG joint venture.  It appears that the pages of the press are a tool to assist the JV parties in thrashing out their disagreements.  Selective leaks seem the order of the day – and one well known feature of STO’s current structural weaknesses was explicitly emphasised.

This was its 750 PJ contract to sell gas from the Cooper Basin to GLNG at ~US$3.  The simple arithmetic behind multiplying the first number by the delta between the second number and current Australian gas prices of say A$9-10 (and some much higher figures are being quoted) gives quite a few billion dollars.  So some incentives there to see whether this contract can be broken.

To date the AFR is not being used by STO’s unhappy Chinese strategic shareholder – if it was, the position of the long-standing members of the company’s Board would surely come under more scrutiny.  One can readily imagine this would be the case if this investor was American.

Quote of the day

BG Group’s ex-COO Martin Houston – a co-founder of US LNG company Tellurian with Charif Souki – gave an interesting interview recently, with many quotes that will resonate with those of our readers who are or have been inside big E&P companies in recent years.  An example:

“So you would take a 25-year-old engineer and say you are in charge of the standard of door handles.  My God he will make sure you have the best door handles. And if you want to build something with different door handles, no dice. Because he owns that standard. Aluminium? Forget it, only gold. Pure gold. 24K by the way. Not the cheap stuff.”

Today’s Blog – Thursday 20th April 2017

Editorial

Yesterday the Northern Territory Government announced that it was contributing $250,000 towards a study into the potential to add another train to Darwin LNG.  Various owners of offshore gas resources will put in a massive $375,000 as well.  These include Santos, Engie, Shell, Origin Energy, etc, etc – basically everyone who has stranded gas within 1,000 kilometres.

The NT Government has dressed this up as being all about creating construction jobs, economic activity, etc, etc.  In our view the real intention is to provide cover for an indefinite extension of the Territory’s current “moratorium” on onshore fracking (which effectively has closed down the entire onshore industry outside relatively small current production in the Amadeus Basin).  It seems that, like Victoria, offshore gas is lovely stuff and onshore gas is nasty.

This move likely kicks the can that is the moratorium down the road past the next election.

But what about the chances of a second train you ask?  Our view:

  • If the gas companies thought this was real then they would not need Government money and a lot more than $650k would be required.  Maybe they get some marginal benefit in protecting retention lease statuses.
  • DLNG Train 2 is somewhat lower down the LNG development merit order than about 100 other projects.  Feedstock gas is distant, lean, acid and held by disparate owners.  The likes of Qatar have massive competitive advantages in supplying an LNG market in which buyers have the upper hand.  (We still think DLNG Train 1 back-fill will take place – the economics are completely different).
  • The potential supply source companies to DLNG Train 2 would take a lot of cat-herding.  And for instance include the likes of CNOOC – not necessarily to be welcomed by DLNG’s current Japanese partners.
  • The owners of onshore licences will suffer from this process.  That includes Macquarie Bank, Santos, Blue Energy, Pangaea, Origin, Falcon, etc.  However, the biggest loser will likely be pipeline company Jemena – its already very challenged NGP pipeline project will struggle even more for customers.  Oops, thats close to $0.5B that it may have to write-off in the next few years because of this Government policy.

Commodity prices

Oil prices fell sharply last night, with Brent down ~3.3% to US$53.08 and WTI falling ~3.8% to US$50.44.  The main driver appeared to be a disappointing inventory report from the EIA.

However, the reaction seemed somewhat over-blown to us – with crude falling by 1 mmbbls (plus a SPR draw of 0.2 mmbbls), gasoline up by 1.5 mmbbls and distillate down by 2 mmbbls.

Henry Hub closed up ~1.6% to US$3.19.

Governments

Yesterday’s Canberra meeting between the Prime Minister and leaders of the Queensland LNG companies delivered only a damp squib.  The only tangible outcome appeared to be increasing public reporting of key price and volume information.    The Government’s problem is that its armoury contains nuclear weapons that entail sovereign risk – and then nothing but pop-guns.

Oh, and the Federal Government said it is looking again at building a pipeline to Northern WA. Fat chance.  And interestingly given moves by the likes of AGL, a FSRU would be a far cheaper gas delivery mechanism than that.

Company news – Santos (STO)

STO put out its quarterly report this morning, no doubt feeling like it dodged a bullet in Canberra yesterday.

The company’s poor strategic position was outlined in depth in today’s Australian Financial Review by respected columnist Matt Stevens.  However, he did not mention the company’s disgruntled ~15% shareholder once – perhaps Chinese activist investors are invisible compared to e.g. Americans.  One can readily imagine that if Elliot Management had a stake of this size and was demanding Board seats it would attract more journalistic attention.  Our view on this Chinese stake is like the old saying in Westerns – “its quiet, too damn quiet…”

One last thing on STO – its quarterly report didn’t exactly say much about a current drilling program to the North of the NT which is intended to delineate gas for Darwin LNG train 1 backfill.   The “vibe” of the reporting (in the absence of any facts) appeared to be negative.

Quote of the day

A pithy, but not very cheery, recent view from well known investor, Bill Gross:

“Equity markets are priced for too much hope, high yield bond markets for too much growth, and all asset prices elevated to artificial levels that only a model driven, historically biased investor would believe could lead to returns resembling the past six years, or the decades predating Lehman. High rates of growth, and the productivity that drives it, are likely distant memories from a bygone era.”

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)

 

Today’s Blog – Tuesday 18th April 2017

Editorial

Can a leak in one old onshore oil well affect global oil markets?  The answer is probably not – but the possibility exists.  The background to this question is a recent oil and gas leak from an old 1970s well located in Alaska’s Prudhoe Bay.  The well has been successfully killed and the extent of the leak seems minor.

However, the cause of the leak is unclear – the well apparently “jacked up” by 3-4 feet – how does that happen? Prudhoe Bay currently produces – and reinjects – about 8 Bcf of gas a day – i.e. 3 to 4 times the entire East Coast of Australia’s production, which serves 6 liquefaction trains and a domestic market.  That’s a lot of gas circulating in a system which includes obviously old wells and a challenging climatic environment.

If further investigations and remediation work is required, then Prudhoe Bay production – and even wider North Slope production – could be curtailed for a period.  That’s nearly quarter of a million barrels per day – and most importantly, those are US barrels.

Production might vary by this order of magnitude from day to day in the likes of Libya and Nigeria – but when it is US barrels, the market takes much more notice – because the data is trusted, immediate and wired into traders’ thought patterns.

Commodity markets

Overnight trading in crude obviously took no account of the thesis outlined above, as prices fell by around 1% to US$55.36 in London and US$52.65 in New York.  The key data point from late last week – the BHI rig count – was negative, with an increase of 11 oil rigs (and a fall of 3 gas rigs).

The weekly inventory data issued earlier last week was in fact positive – with a fall in crude of 2.2 mmbbls (plus an SPR draw of 0.6 mmbbls), a fall in gasoline stocks of 3 mmbbls and another drop in distillate stocks of 2.2 mmbbls.  However, the market didn’t seem to react much to these numbers before the Easter break and then on Monday the more recent rig count (and fears of rising US production) took hold.  As we noted above, US data drives oil markets more than that foreign stuff.  Geopolitical tensions in Korea didn’t seem to affect traders much – but that could change, and dramatically, if things escalate from here.

Henry Hub fell ~2% overnight to US$3.16.

LNG and international gas

We are now very much in a seasonal low demand “shoulder” period for LNG in North Asia and that is reflected in Asian spot prices that begin with a US$5 (obviously quite a bit less than current Australian domestic gas prices on offer).

Total has just signed a deal with Japan’s JERA group to sell 6 spot cargoes of LNG – some based on oil price linkages and some on spot market indices.

A JERA Mark II is also emerging from Japan with Tokyo Gas and Kyushu Electric forming their own buying joint venture.

Somewhat to Japan’s West, Gazprom has recently reported that 650 km of the Power of Siberia pipeline to China has been “constructed”.  The originally promised 2018 commencement date still seems pretty unlikely.

Governments

This week these is scheduled a follow-up meeting between Australia’s Prime Minister and the leaders of the Queensland LNG exporting companies.  The latter are expected to provide an update on progress to supply domestic customers.  Origin and Shell have both issued press releases in recent weeks about the new supply contracts – particularly to the politically sensitive South Australian electricity sector.

Santos has yet to say anything and is the key political focus point.  The Australian Financial Review has today reported that the Government is being lobbied to somehow take part in facilitating the Santos led GLNG venture swapping spot LNG cargoes for more domestic gas supplies.  That should not be that complicated – until one remembers GLNG comprises a weakened and small operator in the form of Santos, two Asian “NOCs” (Petronas and Kogas) and one Super-Major (Total).  Good luck in herding those cats.  And what Governments can actually do in terms of helping undertake swaps is somewhat opaque to this reader.

Quote of the day

Last year we reported on what we roughly calculated to be a US$1 trillion sum in forgone investment in oil and gas exploration and development caused by the oil price slump.  Amin Nasser, chief executive of Saudi Aramco, has joined us, saying on Friday that 20m barrels a day in future production capacity was required to meet demand growth and offset natural field declines in the coming years.

“That is a lot of production capacity, and the investments we now see coming back — which are mostly smaller and shorter term — are not going to be enough to get us there.”

Today’s Blog – Wednesday 12th April 2017

Editorial

Yesterday’s blog joined the wide-spread current media commentary on the recent move on BHP made by activist hedge fund Elliot Management.  Most of the Australian commentators share our view that the move does not seem to adequately take account of the significant political hurdles in Australia to the recommended re-structuring (which specifically includes a transfer of value from our BHP shares listed on the ASX to Elliot’s shares listed on the LSE – hang on!).

So BHP may not be particularly vulnerable to this approach.  But what about Australia’s other large E&P companies – our quick thoughts:

  • Woodside Petroleum (WPL) has had what could be called an “activist” shareholder for many decades: Shell.  However the latter has been seeking to exit for some time – which could give an aggressive hedge fund or other player a platform from which to agitate.  We think WPL (like all other LNG companies) would be better off not owning liquefaction facilities – these should be owned by lower cost of capital midstream entities.  But given the JVs it is in, can WPL effect much change itself?Otherwise, although WPL has characteristics of being a bit fat and lazy (exemplified by its recent cringeworthy change-out of its Chairman) it does not seem so obviously so as to induce a hedge fund attack.
  • Oilsearch (OSH) also owns liquefaction assets – but also does not exactly control how they might be disposed of (“please Mr Exxon, can we sell these?”).  Otherwise it does not appear to be particularly open to an activist hedge fund attack.
  • Santos (STO) already has its own activist investor – Chinese energy company ENN. The latter’s efforts to procure Board representation and influence strategy have been rebuffed by STO’s current Directors.  We don’t think this game is over.
  • Origin Energy (ORG) is currently fixing up its most obvious structural fault – disposing of most of its conventional oil and gas assets.  However,  it is still left with its large stake in APLNG.  Our view remains that this stake would benefit from being bundled up with STO’s GLNG asset – but the social and financial barriers to doing so have seemed too large.  We think they would also be too large for a disruptive investor to deliver but would love to see someone take on the challenge.
  • Beach Energy (BPT) also has a key shareholder – Seven Group – but one who is inside the fold.  At some point that party will either exit or deliver something that is designed to be for its benefit rather than that of other shareholders (“we have this lovely asset called Longtom…”).

Commodity prices

Oil prices continued their upwards run overnight, with Brent up ~0.5% to USS$56.26 and WTI up slightly more at US$53.40.  The bullish momentum was sustained by apparent Saudi support for the widely mooted extension of OPEC’s current production cut.

Henry Hub took a bit of a dive – closing down nearly 3% to US$3.15.

LNG and international gas

Yesterday we quoted Jera’s Chief Fuel Transactions Office, Hiroki Sato, speaking at last week’s Gastech LNG conference in Japan on Charif Souki’s offer to sell LNG on a fixed price basis.  We thought it worthwhile to quote him further as follows:

 “If you hear now that you can buy LNG for Japan at $8 in 2023, everybody would probably say it’s cheap. But … actions based on predictions rarely work out. That is how it works in the world.”

We thought this was very revealing.  Buying LNG on a fixed or floating (linked to oil) prices have exactly the same risks of being “wrong”.  However, what Sato alludes to is the career risk of acting differently from the herd.  No-one gets fired for buying LNG as it always has been done – but someone would risk being fired doing something new and then diverging from the herd.

Company news – ORG

One point we failed to mention yesterday about ORG’s developing plans to spin-out certain upstream assets under the name of Lattice Energy was the proposed location of the new company’s headquarters.  Melbourne is the lucky winner – ostensibly because it is close to certain key assets of Lattice in the Otway and Bass Basins.

Only a heartless cynic would suggest this choice had anything to do with the current living quarters of the CEO-designate of Lattice – one town called Melbourne, our sources say.

Quote of the day

The Australian Financial Review’s Matt Stevens on the sophistication of the political analysis made by the Elliot crew in New York:

“It seems risible to imagine that any Australian Treasurer might sign-off on an arrangement that would see BHP unified around a British entity that has a primary listing in London and would see the company’s majority Australian ownership transformed into CHESS depositary instruments.”