Wildcat's Pick of the Week

Every Monday, Wildcat will give you a headstart on the coming week, as well as a round-up of what mattered in the previous week.

Week Ahead

Monday, 28 May: Lukoil Q1 results; 2012 Mediterranean Oil and Gas Conference, Greece (until 29 May)

Tuesday, 29 May: RBCC Business Forum, London

Wednesday, 30 May: Iraq fourth licensing round (until 31 May); Shareholder meetings: Chevron, Exxon Mobil, Repsol, Tullow Oil; Hearing in the European Parliament’s ITRE committee (until 31 May)

Thursday, 31 May: E.On to consider gas supply contract with state oil major Rosneft for the Surgutskaya GRES 2 power plant

Friday, 1 June: Sound Oil shareholder meeting

Winners & Losers

Winner: London-listed Cove Energy received an improved takeover offer from Thai group PTT on Wednesday, only hours before a deadline for shareholders to accept Royal Dutch Shell’s bid for the company was due to expire. PTT’s offer came in at $3.78 per share, valuing Cove at $1.92 billion. This is a 9% premium to Shell’s offer of $3.46. Cove’s Chief Executive John Craven said the improved bid represents “significant value for shareholders and confirms the world class nature of Cove’s East African assets”.

Winner: The ambitious Turkmenistan-Afghanistan-Pakistan-India pipeline project took a firm step forward on Wednesday when Indian and Pakistani state-run companies finalised a gas sales and purchase deal with Turkmenistan. India’s largest distributor, Gail, and Pakistan’s Inter State Gas System, signed the agreement for 90 MMcm/d  from Turkmenistan. Afghanistan signed a memorandum of understanding for cooperating on the long-term supply of gas with Turkmenistan.

Winner: UK gas-fired power producers welcomed the government’s draft energy bill, put before the House of Commons on Tuesday. The bill proposes a cap on carbon emission from new power stations, ruling out new coal-fired power plants without carbon capture technology. “The draft energy bill is a welcome next step in providing clarity on the future structure of the electricity market and its administration,” Centrica said. There was no mention of the prospects for shale gas in the report.

Loser: The scaling back of the planned Nabucco gas pipeline project has undermined the EU’s hopes of decreasing dependence on Russian imports by establishing direct access to Caspian gas. The Nabucco consortium announced that it had submitted a proposal to the Shah Deniz 2 consortium, which is developing Azerbaijan’s vast gas resources, for the construction of a “Nabucco West” pipeline, which would bring Caspian gas from the Bulgarian-Turkish border to Baumgarten in Austria, and beyond.

Loser: The European Bank for Reconstruction and Development (EBRD) has been criticised for excessive lending to polluting energy technology. The bank should urgently revise its lending policy in the energy sector to bring it into line with its own sustainable energy strategy, the NGO Bankwatch said in a report released on 17 May. “While the EBRD has made some steps forward during the last few years, including large increases in lending for energy efficiency and renewable energy, the good news is spoilt by the fact that nearly half of the bank’s lending from 2006-2011 still supported fossil fuels,” said the Prague-based organisation that monitors international financial institutions.

Loser: Israel’s Public Utilities Authority (PUA) has requested the gas supply contract between the Tamar consortium and state-owned Israel Electric Corp., which took nearly two years to negotiate, be re-opened in the interests of increasing competition in the Israeli gas market. Smaller supply contracts to Israel’s private power producers will also be reviewed. The PUA claims the contracts give the Tamar partners a monopoly over the local gas market for several years and could lead to an “excessive gas price for consumers”.

Quotes of the Week

“The Argentine economy is in flux, and I can’t tell you where it’s going to go. We’ll continue to do our best to get a return on investment. But is this a place where I’d put additional investment? No.  Would I run to exit? No.” – Andrew Vesey, chief operating officer of global utilities at AES, admitted at the La Jolla Energy Conference that the investment climate in Argentina was more risky after President Cristina Fernandez de Kirchner wrested control of YPF from Spanish company Repsol in April.

“The fact the Brazilian government is also withholding acreage in the pre-salt field sets the stage for more doors to be closed. Unfortunately there was lots of money willing to come to Brazil, and that has been stalled.” – Read Taylor, senior executive vice-president at Petra Energia, expressed frustration at the La Jolla Energy Conference this week over the continued delay to Brazil’s 11th bidding round.

“[A] herculean task” – That is how German Chancellor Angela Merkel described the implementation of the Energiewende, or national energy transition, to the German press on Wednesday. She added that greater coordination between the federal government and regional authorities was needed to meet emerging challenges. Merkel met the 16 regional governors in Berlin to discuss plans for a modernised national network, and transition to renewable power generation as a means of replacing declining nuclear capacity post-Fukushima.

We are convinced that we have submitted a competitive and comprehensive proposal to the Shah Deniz 2 consortium, and that this proposal represents a win-win situation for our shareholders and for suppliers alike” – Reinhard Mitschek, managing director of Nabucco Gas Pipeline International, said as a smaller Nabucco West pipeline was submitted in place of the original Nabucco pipeline.

“We are supportive of EMR [electricity market reform] and moves to give industry further clarity to facilitate investment” – Centrica Head of Media Relations Julian Mears said this week, as the UK’s draft energy bill was put before the House of Commons. The bill includes provisions to promote low-carbon technologies within the electricity sector. 

Week in Numbers

El deficit

49 MMcm/d: Average supply deficit in Brazil by 2020

37 MMcm/d: Average supply deficit in Argentina by 2020

20.4 MMcm/d: Average supply deficit in Chile by 2020

Source: Equion

Dart maul

186.6 bcm: Resources in Dajing block in China, where Dart Energy has a PSC

0: Dart’s present income from gas sales

76%: Drop in Dart’s stock price over the past year

Source: Interfax, Yahoo, Dart

The big switch

10 years: Time for Germany to move from nuclear power to renewables

80%: Percentage of Germany’s power to be generated by renewables by 2050

€300 billion: Estimated cost of transition by 2030

Source: Interfax, VBW