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.
Monday, 23 July: Deadline set by Colombian power and gas regulator Creg to allow companies to comment on a plan for gas services in the country
Tuesday, 24 July: Dragon Oil trading update; Capacity auction on Spain-Portugal gas interconnector (until 25July)
Saturday, 28 July: Results of tender to build facilities for the first stage of the Sabetta Arctic marine port in Russia, where LNG will be transported from the Yamal Peninsula, to be announced.
Winners & Losers
Winner: Thai state energy company PTT Exploration and Production is likely to win the battle for east African explorer Cove Energy, after rival bidder Shell announced it is not going to up its offer of £1.95 ($3.40) per share. The deal will ensure the company meets its top priority for 2012: make at least one large overseas acquisition that would help the company increase its hydrocarbon – particularly gas – supplies in the long term. This is key to achieving PTTEP’s goal of lifting its total production by 200%, to 900,000 barrels per day, by 2020.
Winner: United States President Barack Obama has made support for domestic oil and gas production a prominent feature of his re-election campaign. “I want to encourage natural gas production,” Obama said at a campaign event in Ohio this week. The US gas boom “is something we should welcome, because not only are we blessed with incredible natural gas resources now accessible because of new technologies, but natural gas actually burns cleaner than some other fossil fuels, and is an ideal fuel – an energy source that we potentially can use for the next 100 years”, he said.
Winner: BP announced the next stage of negotiations to sell its stake in TNK-BP by entering into a 90-day period of good faith negotiations with partner Alfa-Access-Renova (AAR). BP said it would also enter into negotiations with other interested parties in parallel with its talks with AAR, though it is bound to tread carefully after its experience with Rosneft last year. AAR has said it was prepared to buy 25% of TNK-BP at its “current market value” – a subject that is sure to prompt lots of debate.
Loser: Plans by the Chinese central government to turn China into a leading shale gas producer have been undermined following Sinopec’s announcement that it has cut is shale output target for 2015. Sinopec intends to produce 1.7 billion cubic metres per year of shale gas by 2015, Bao Shujing, deputy manager of unconventional energy at Sinopec’s Petroleum Exploration and Development Research Institute, told Interfax last week. The figure marks a 15% decline from the 2 bcm/y forecast, Bao said on the sidelines of a conference in March.
Loser: Japan’s energy policy remains in disarray as government plans to restart nuclear power plants prompted a huge anti-nuclear protest in the streets of Tokyo. The protesters want the government to break from Japan’s traditional dependence on nuclear power, but critics argue that getting rid of all its nuclear capacity would leave Japan haemorrhaging money on expensive fuel imports for thermal power plants. Stocks of the country’s nine largest utilities tumbled following the news, losing an average of 15% over a five-day period. The Nikkei 225 dropped by 2.5% in comparison.
Loser: The incidence of VAT fraud in Europe is increasing, especially in the gas and power sectors, industry experts told Interfax. The fraudsters are allegedly infiltrating energy markets to charge buyers VAT but not pay it to the relevant state. Another scam is “carousel fraud”, which involves a complex web of bogus companies making fraudulent VAT claims. Fraudsters are able to offer energy contracts below market prices because they do not pay VAT on them or make fraudulent repayment claims – thus damaging the price signals and the credibility of the markets.
Quotes of the Week
“The only thing we’ve got going for us is that Argentina is a ‘bad’ buyer of LNG. They have been paying very high prices, making Bolivian supply relatively attractive,” said Carlos Delius, president of Cámara Boliviana de Hidrocarburos y Energia, a producers’ association. Argentine imports of LNG overtook gas shipped from Bolivia in May for the first time.
“Somewhere around 2025-2030, the carbon dioxide intensity needs to be below what natural gas can provide. At some point, natural gas will go from being part of the solution to being part of the problem,” said Markus Wrake, senior energy analyst for the IEA. Gas’s shift from helpful to harmful raises questions about how the US invests in gas.
“At this point we oppose all [nuclear] restarts, and we don’t think the government can give us that guarantee,” said a spokesperson for Japan’s Citizen’s Nuclear Information Centre, which does not believe the government can rule out another Fukushima-like accident.
Week in Numbers
€4.5 billion: Repsol’s target for asset sales by 2016.
€1.85 billion: Total raised as of 20 July 2012.
€3 billion: Estimated value of Repsol’s LNG assets that may be up for sale.
Source: Interfax, Repsol, Reuters
$17/MMBtu: LNG prices for August delivery to east Asia in June.
$14/MMBtu: LNG prices for August delivery to east Asia in July.
$12-$13/MMBtu: Long-term forecast for prices, according to Mitsui trader.
Source: Interfax, Mitsui
2 bcm/y: Sinopec’s previous forecast for its shale gas production in China by 2015.
1.7 bcm/y: Sinopec’s new forecast for its shale gas production in China by 2015.
100 bcm/y: Top end of Chinese shale production targets by 2020.
Source: Interfax, Sinopec