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Vol. 60, No. 102, Tuesday, May 26, 2010
Oil Prices to Rise as Demand Sees Significant Growth to 2035
   The US Department of Energy’s Energy In-            Demand...
Some Benchmarks Hit Yearly Lows as Prices Continue Retreat
   Crude and oil products had another sig-                     ...
AIM-Listed Oil and Gas Firms Continue Share Price Recovery
    Share prices of small-cap oil and gas compa-       ration p...
Senators Call on US Attorney General                                                                Oil Tanker Collision C...
Stock Market
                                    NEWS ALERT                                                               ...
oil price and US economic growth.
   Energy security risk rose throughout the         South America Expects Renewables Gro...
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Oil Daily features GBI\'s "South and Central America Oil Market, Forecasts and Trends to 2015"


Published on

The largest economies in South America
should expect annual growth in renewable
energy production of 10.1% from
2009 to 2020, according to a report released

The study, by London-based business information
firm GBI Research, cites support
for renewables development by governments,
the private sector, and international
financial institutions as important drivers of
this growth.

Published in: Business, Technology
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Oil Daily features GBI\'s "South and Central America Oil Market, Forecasts and Trends to 2015"

  1. 1. Vol. 60, No. 102, Tuesday, May 26, 2010 Copyright © 2010 EIG. Unauthorized access or electronic forwarding, even for internal use, is prohibited. BP Readies Kill Attempt on Leaking Oil Well News in Review BP Tuesday began the process of doing di- will be able to inject mud at each of the five In This Issue: agnostics on its equipment in preparation for ports, or entry points, on the device. The EIA: Oil Prices to Rise, Demand Grows . .2 a “top kill” of its damaged Macondo well, concept calls for attaching hoses to the Some Benchmarks Hit Yearly Lows . . . . .3 which has been leaking oil into the US Gulf choke and kill valves and then pumping AIM-Listed Firms Continue Recovery . . .4 of Mexico since an explosion a month ago. If mud — as much as 40 to 50 barrels per hour Iran Expected to Cut Term Prices . . . . . .4 successful, the procedure will flood the well’s — into the BOP. Senators Decry Transocean Program . . . .5 blowout preventer (BOP) with mud and stop “The idea is that this will fill up the Noble Keeping Eye on Spill . . . . . . . . . . .5 the oil flow. blowout preventer and then shut off the flow Tanker Spills Oil Off Singapore . . . . . . . .5 At the same time, though, BP senior vice from the well,” Wells said. He said re- PetroQuest Inks Woodford JV . . . . . . . . .6 president Kent Wells said he did not want to searchers will also take readings of the static South America to Up Renewables . . . . . .7 raise expectations. While “top kill” proce- pressure and the pumping pressure at each dures “have been used on land, it has never of the valves. been tried at this depth,” Wells cautioned. The tests are expected to take 12 to 24 An analysis indicates that the well also Meanwhile, oil leaking from the damaged hours, and Wells said the results will deter- contains obstructions that are restricting the well continues to threaten beaches across mine how BP ultimately proceeds. Once the flow rate. All of that, Wells said, will have to Louisiana, Alabama, and Mississippi. In re- procedure is started, it could take “12 hours be taken into account as BP and its support sponse to requests from state officials, the or a couple of days” before BP knows if it staff look over everything from pressure federal government declared a “fishery disas- succeeded, he said. readings to tidal conditions. ter” in each of those three states. The leaking oil and natural gas is appar- Wells said that while BP is hoping the “top Wells said the equipment is on site, about ently not flowing up the main well bore, ac- kill” works, it is also working on alternative 42 miles southwest of Venice, Louisiana, at cording to Douglas Suttles, BP’s chief operat- plans in case it fails. Mississippi Canyon Block 252. He said ing officer. He said Monday that the most The next option would be for remotely crews there and at BP’s two command posts likely path is between two casing strings. operated vehicles to cut off the riser from — in Houston and Robert, Louisiana — are BP has come under fire for repeatedly re- the lower marine riser package (LMRP) starting their last-minute preparations. vising the flow rate from the leaking well, and attach another dome to collect the He said the diagnostic testing of the BOP and some have accused the firm of a cover- flow. That flow would then be funneled will give workers an idea as to whether they up, which BP denies (OD May24,p1). (See Leaking, page 2) Latest Market Trends US to Increase Oil Firms’ Financial Liability Crude & Gas Futures Congress is weighing an array of changes in civil penalties for “continuing violations $/bbl (Nymex 1st Month) $/MMBtu to outdated US liability laws governing pro- that constitute a threat of serious, irrepara- 90 7 ducers found responsible for oil spills or oth- ble, or immediate harm or damage to life.” 80 6 er environmental disasters. Criminal penalties could also swell to $10 70 5 Steeper liability limits and other measures million per violation, per day — up from under consideration could each hold far- $100,000 at present. 60 4 --- Natural Gas reaching consequences for all offshore pro- Another competing plan from Sens. David 50 3 – Light Sweet ducers if passed into law. Vitter (R-Louisiana) and Jeff Sessions (R-Al- 40 2 At present, US law limits economic dam- abama) aims to set liability caps proportion- 4/13 4/20 4/27 5/4 5/11 5/18 5/25 age claims to $75 million on companies re- ately based on an individual company’s prof- sponsible for an oil spill, although responsi- its in the four quarters prior to a spill. Oil & Gas Shares ble parties must shoulder unlimited liability Their alternative is in response to wide- DJIA IPF 11,800 400 for clean-up costs. spread industry concerns that $10 billion 380 The ongoing oil spill originating from BP’s limits could make it difficult for most US in- 10,800 360 Macondo well in the deepwater Gulf of Mex- dependent producers to obtain insurance. 9,800 340 ico has prompted three Senate Democrats to The administration of President Barack 320 considering raising the economic liability of Obama and Congressional Democrats 8,800 – IPF Index individual operators to $10 billion. hope to pass higher liability caps retroac- 300 --- Dow Jones Industrials 7,800 280 Another proposal unveiled Tuesday by tively in time to bring BP, and possibly its 4/13 4/20 4/27 5/4 5/11 5/18 5/25 Sen. Sheldon Whitehouse (D-Rhode Is- contractors, under the new requirements land) would allow for up to $150 million (See Liability, page 2)
  2. 2. Oil Prices to Rise as Demand Sees Significant Growth to 2035 The US Department of Energy’s Energy In- Demand growth will mainly depend on lion b/d in 2035, up more than 4 million formation Administration (EIA) has issued a prices, but for the reference case, the EIA b/d from 2008. new long-term forecast for energy supply projects demand to be 111 million barrels Iraq will see the fastest growth rate, with and demand saying that petroleum’s share of per day in 2035, up from about 86 million output rising by 4 million b/d, or 4% per the world’s energy mix will decline by 2035. b/d in 2007. year, to 6.1 million b/d. While that is a large But increases in transportation demand will Economic growth, particularly in devel- jump from today, the forecast is much more still push oil prices up and raise greenhouse oping countries outside the OECD, will be sober than the Iraqi government’s own pro- gas emissions. the main driver. Non-OECD demand will jection of 16 million b/d. In the lower-price In its “International Energy Outlook,” re- skyrocket by almost 24 million b/d, or scenario, the EIA has Iraqi production at 7.6 leased Tuesday, light, sweet crude prices will 1.8% per year, during the timeframe to 61 million b/d in 2035. trend upward and average $133 per barrel million b/d. Of total supply in 2035, unconventional (in 2008 real dollars) by 2035. This is mostly Meanwhile, OECD demand is expected to sources such as oil sands, biofuels, and gas- consistent with the EIA’s forecast in last year’s rise only slightly from 2007 levels, to 49.5 to-liquids will make up 13 million b/d, a Outlook (OD Jun.2,p5). million b/d. roughly 9 million b/d rise from 2008 levels. Speaking in Washington on Tuesday, In the high-price case, world demand Non-Opec conventional supply will remain EIA’s deputy administrator, Howard Gru- would be considerably lower, averaging flat at 52 million b/d. enspecht, acknowledged the high degree 90 million b/d, while the lower-price sce- The EIA also says that overall energy de- of uncertainty in the forecast. He also nario would put demand at 120 million mand in non-OECD countries will surpass pointed out that the forecast is based on b/d in 2035. that of OECD members in 2025. Non- existing policies and regulations, which To meet demand, supply will come from OECD demand will make up 86% of the in- are, of course, subject to change. both conventional and unconventional crease over the next two and a half decades. Gruenspecht made his comments at the outlets. Oil production is set to rise by al- By 2035, non-OECD energy demand will Center for Strategic and International Stud- most 26 million b/d from current levels, constitute 62% of the world’s total. As a result, ies (CSIS), where the EIA announced the with Opec making up about 40% of the the agency says, most increases in the world’s launch of its new forecast. world’s total in 2035, more or less the greenhouse gas emissions will come from de- In the Outlook, the agency has a number same share as today. veloping countries. The EIA predicts green- of different price scenarios to 2035, with the Within Opec, the biggest gains will come house gas emissions of 42 billion metric tons highest-price case at $210/bbl and the low- in Saudi Arabia, Iraq, and Kuwait. The EIA in 2035, a 43% increase from current levels. est case at a price of $51/bbl. pegs Saudi Arabia’s production at 15.1 mil- Matt Piotrowski, Washington Liability . . . (Continued from 1) (OD May13,p1). bility Trust Fund with “significant increases” against individual firms. At a hearing before the Senate Energy in liability caps for individual companies, “The litigation on punitive damages for Committee on Tuesday, lawmakers griped Associate US Attorney General Thomas Per- the Exxon Valdez spill took two decades to that the existing liability limits set under the relli told senators. resolve, and that itself was a tragedy,” she Oil Pollution Act of 1990 were not crafted to The trust fund, administered by the US said. “I’m committed to ensuring that we keep pace with inflation. Coast Guard, spreads the cost of disaster don’t see a similar situation unfold over this The $75 million economic damage cap is response across the offshore oil industry, Gulf spill.” “nowhere near the damages which will result he said. Lauren O’Neil, Washington from this accident,” said Sen. Jeff Bingaman Withdrawals from the fund are capped (D-New Mexico), who chairs the panel. at $1 billion per incident, but the presi- “Equally troubling, the law requires the dent is hoping to boost this to $1.5 billion Leaking . . . Secretary of Interior to adjust the amount of by increasing per-barrel fees to 9¢ from 8¢ (Continued from 1) these caps at least every three years ... yet the at present. to Transocean’s Deepwater Enterprise on limits on damages for offshore facilities have Perrelli also addressed mounting concerns the surface, where the oil would be col- not been increased since the law was passed that higher liability caps could make it too lected and the natural gas flared. in 1990 — 20 years of inflation have been difficult for small, independent producers to Wells said such an “LMRP cap” would al- ignored,” he added. obtain insurance. low BP to capture as much of the flow from Some feel a retroactive liability hike could Lawmakers should be aware that some the well as possible while the company violate the ex post facto clause of the US Con- liability hikes may diminish “the number works on other options to kill the well. The stitution, which prohibits new laws from be- of market participants,” he urged in his “LMRP cap” has already been lowered to the ing applied to most past occurrences. testimony. seabed near the well, so it can immediately Robert Meltz, a legislative attorney for the Sen. Lisa Murkowski (R-Alaska), the com- be put into position should the “top kill” fail. Congressional Research Service, countered mittee’s ranking member, is pressing for en- The final option, according to Wells, that retroactive adjustments to liability law hancements to the trust fund through legis- would be to drill two new relief wells and di- may legitimately conflict with three constitu- lation she has co-sponsored with Sen. Mark vert the oil and gas flow from the damaged tional clauses regarding contracts and prop- Begich (D-Alaska). well to there. BP is currently drilling those erty rights. However, she said lawmakers should use wells, and they should reach their target The Obama administration hopes to cou- caution when reexamining the value of eco- depth in about 40 days, he said. ple an expansion of the existing Oil Spill Lia- nomic damage claims that can be brought John A. Sullivan, Houston May 26, 2010 2
  3. 3. Some Benchmarks Hit Yearly Lows as Prices Continue Retreat Crude and oil products had another sig- Crude markets and equities had the same which could drive down oil demand. nificant sell-off Tuesday as investors contin- downward trajectory, both driven by a host Heightened tensions between North and ued to steer away from risky assets such as of news events which cast doubt on the South Korea also caused traders to seek safe commodities into safe havens like the dollar. health of the global economy. investments. Nymex July crude futures fell $1.46 Concerns about Europe’s economic “Fear has gripped market participants. to end at $68.75 per barrel. In London health once again contributed to the day’s There is no other way to explain the com- on ICE Futures, July Brent contracts negative sentiment. The dollar approached plete reversal of the consensus that held just dropped $1.62 to $69.55, their lowest a four-year high against the euro, one day a few weeks ago that $90 crude oil was in- since October. Nymex June gasoline fu- after news broke that Spanish regulators evitable,” wrote MF Global’s Mike Fitzpatrick tures slipped 4¢ to close at $1.9308 per were forced to take over a bank. in a note. “What began as skepticism that re- gallon. Nymex June heating oil futures, A strengthening dollar makes dollar-de- covery was sustainable has now become a which also hit a yearly low, finished at nominated commodities such as oil more wholesale rout.” $1.8717, down 2.76¢. expensive for users of other currencies, Gregory Gethard, New York Daily Oil & Gas Price Review Prices for Tuesday, May 25, 2010 Crude Oil Nymex Light Sweet ($/barrel) Light Sweet Futures — Prompt Month ($/barrel) Change 1st Month 5-Day Avg. 2nd Month 3rd Month 150 79 Nymex Light Sweet -1.46 68.75 69.38 70.10 71.04 125 77 ICE Brent -1.62 69.55 71.59 70.38 71.09 100 75 75 73 50 71 Cash/Spot Change Spot Price 5-Day Avg. Month-Ago Year-Ago 69 WTI (Cushing) -3.40 64.33 67.55 82.41 59.49 25 67 D J F M A M J J A S O N D J F M A M M T W T F M T WTI (Midland) -0.64 65.30 67.68 81.83 59.31 Brent (Dated) -2.44 66.93 69.48 85.63 57.21 North American Crudes ($/barrel) International Crudes ($/barrel) Cash/Spot Change Spot Price 5-Day Avg. Month-Ago Cash/Spot Change Spot Price 5-Day Avg. Month-Ago WTS (Midland) -0.64 64.10 66.31 80.08 Opec Crude Basket I -+1.05 68.59 70.50 83.91G LLS (St. James) -0.64 72.20 74.13 86.48 Nigeria Bonny Light -2.49 68.43 70.84 86.83 ANS (California) -0.04 69.41 69.20 79.83 Dubai -1.66 68.37 70.17 83.92 Mars (Clovelly) -0.64 74.15 72.25 80.98 Oman -2.19 67.41 69.65 83.63 Maya (Mexico) -0.35 58.64 60.22 72.81 Russia Urals -2.44 65.63 68.00 83.23 Refined Products Nymex Gasoline (¢/gallon) Heating Oil/Gasoline Futures — Prompt Month (¢/gallon) Futures Change 1st Month 5-Day Avg. 2nd Month 3rd Month 375 240 Nymex (¢/gal.) 275 230 RBOB Gasoline -4.00 193.08 196.85 191.93 191.66 220 Heating Oil -2.76 187.17 190.30 188.42 190.24 175 210 200 75 190 ICE (London) D J F M A M J J A S O N D J F M A M M T W T F M T Gasoil ($/ton) -11.75 592.50 605.30 595.50 599.75 Gasoil (¢/gal.) -3.73 188.10 192.16 189.05 190.40 US Product Spot MarketsH —————— Gulf Coast —————— —————— New York —————— —————— Los Angeles —————— Gasoline (¢/gal.) Change Spot Price 5-Day Avg. Month-Ago Change Spot Price 5-Day Avg. Month-Ago Change Spot Price 5-Day Avg. Month-Ago Regular Gasoline -2.27 182.33 185.49 219.21 -1.37 185.83 188.06 222.21 -1.33 191.67 192.89 231.48 Premium Gasoline -0.02 200.33 199.39 229.21 -1.37 198.08 200.11 234.96 -1.33 201.67 202.89 240.48 Regular RBOB -2.77 189.43 192.03 225.96 -1.37 195.33 197.38 231.71 -1.33 193.67 194.89 233.48 Mid-Distillates (¢/gal.) No. 2 Heating Oil -1.84 186.19 187.69 216.35 -1.46 187.64 189.57 219.10 — — — — No. 2 Low Sulfur Diesel -0.96 188.54 189.65 219.60 -1.46 191.29 193.20 224.10 -1.84 198.19 198.22 230.23 Jet Fuel -1.46 191.54 192.70 221.60 -1.46 195.29 196.80 223.10 -1.46 197.04 198.30 229.73 Residual Fuel ($/bbl) No. 6 Oil (low sulfur) -0.15 64.88A 66.02 75.97 +0.10 66.13B 67.21 79.97 — — — — No. 6 Oil 1% S -0.15 63.88C 65.02 74.97 +0.10 63.88D 64.96 78.03 — — — — No. 6 Oil 3% S -0.10 62.03 63.08 74.05 +0.19 62.47 62.84 74.97 0.00 445.00E 454.00 485.00 Natural Gas Nymex Henry Hub ($/MMBtu) Nymex Henry Hub — Prompt Month ($/million Btu) Futures Change 1st Month 5-Day Avg. 2nd Month 14 4.7 Nymex ($/MMBtu) 11 4.2 Henry Hub +0.034 4.051 4.073 4.114 8 5 3.7 Spot Gas Prices ($/MMBtu)F 2 3.2 Key Hubs/Cities Change Spot Price Week-Ago Month-Ago D J F M A M J J A S O N D J F M A M M T W T F M T New York +0.12 4.61 4.82 4.55 Henry, Louisiana -0.00 4.08 4.42 4.18 Chicago +0.02 4.12 4.49 4.27 Produced by Oil Daily in cooperation with Reuters. All spot assessments are bid prices published by Reuters at 5.30 p.m. ET. Katy, Texas +0.00 4.02 4.38 4.15 Notes: A—0.7% sulfur low pour. F—Source: Natural Gas Week Southern California Border +0.04 3.90 4.27 4.10 B—0.3% sulfur high pour. G—20-day avg. AECO Hub (Canada) -0.03 3.37 3.69 3.61 C—Low pour. H—Bid prices for latest spot deals at press time. D—High pour. I—Opec basket price is for previous day. E—Price is for 380 CST, given in $/metric ton. May 26, 2010 3
  4. 4. AIM-Listed Oil and Gas Firms Continue Share Price Recovery Share prices of small-cap oil and gas compa- ration point,” E&Y said. “Many, but by no ed estimated oil reserves off Namibia. nies listed on London’s junior Alternative In- means all, companies have been able to repair For the other 52% whose share prices vestment Market (AIM) made further gains in their balance sheets — now it’s time for them dropped, the main reason was poor drilling re- the first quarter of 2010, outperforming their to deliver on expectations.” sults. Shares in Uganda-focused Tower Re- larger peers on the main FTSE market. The outlook for energy IPOs is promising, sources tumbled 63% after it drilled a second Ernst & Young said its Oil and Gas Eye in- with several oil and gas firms planning flota- dry well in Block EA5, Desire’s shares fell 45% dex, which monitors shares of the top 20 AIM- tions this year. E&Y said investors are more after it abandoned a well in the North Falkland listed firms, increased for the fifth quarter in a likely to plow their money into firms with Basin, and shares in Oilex tumbled 30% after a row, rising 20% in the three months to March. proven track records of delivering growth. New Timor Sea well was dry. This brought the increase since the start of Zealand-focused Kea Petroleum — whose Two companies — Cove Energy and Ser- 2009 to 167% — although share prices are still board brought Rift Oil to AIM before it was ac- ica Energy — joined AIM in March, while 8% below their value in March 2008. quired by Talisman Energy — raised $6 mil- Amerisur Resources and Faroe Petroleum Secondary fundraising slowed in the quarter lion in February in the exchange’s first oil and delisted. Thirteen oil and gas firms have as firms raised £180.6 million ($258 million), gas IPO since September 2008. quit AIM since the start of 2009, leaving just under the total a year earlier, but far below “However, with a large junior oil and gas 106 trading. the £547 million raised in the last quarter of population and strong funding demands in the The tough operating environment for oil- 2009. Of the 19 oil and gas firms that secured secondary market, it is perhaps not surprising field service companies was brought into finance, many plan to use the proceeds to ac- that larger main market listings, such as En- sharp focus. Hallin Marine Subsea Interna- celerate drilling programs. Quest, are seeing more traction,” the report tional delisted in January after its takeover Recently, Cove Energy raised $37 million for said. “This is where the gap in the market is by Superior Energy Services, while Sovereign work in Mozambique’s frontier Rovuma Basin, currently perceived by investors.” Oilfield Group cancelled its planned listing while Desire Petroleum raised $28.5 million for Almost 48% of oil and gas players saw share after going bankrupt. exploration in the Falkland Islands. Dominion prices gain in the quarter. Energy XXI, which In the broader global oilfield services sec- Petroleum also raised $47 million for cam- operates in the US Gulf of Mexico, saw its tor, consolidation gathered pace in the quar- paigns in Uganda and Tanzania, while Aurelian shares jump by 290% after a massive discovery ter, with Schlumberger’s acquisition of Smith Oil & Gas put together $39 million to fund at its Davy Jones ultra-deep prospect. International, Halliburton’s purchase of Boots drilling in Poland. Gulf Keystone raised $23 Similarly, shares in Cove Energy jumped & Coots and KBR’s acquisition of Energo En- million for its Kurdish campaign in northern 147% after news of a significant gas find at the gineering. Many of the larger oilfield services Iraq and has just nailed down more funding. Windjammer exploration well off Mozambique companies have both the cash and the ap- “That said, there is a feeling that investors in (OD Feb.19,p1). Chariot Oil & Gas’ share petite for further deals, E&Y said. the junior oil and gas sector are reaching satu- price ended the quarter up 179% as it upgrad- Deb Kelly, London Iran Expected to Cut Term Prices to Increase Japanese Appetite Japanese refiners expect Iran to agree to “will be a little more flexible and a little more in- national Energy Agency said in its most recent cut official selling prices (OSPs) for a range clined to lower the price, because their crudes monthly oil market report. Iran has reportedly of crudes during key meetings in Tokyo this are not selling well these days.” built up more than 30 million bbl of crude and week. With Japan losing its appetite for Iran- For the second quarter, Iran Light offered to condensates in floating storage (OD Apr.21,p2). ian grades — at a time when Tehran is also Asian customers carried a 20¢ per barrel premi- NIOC officials declined to comment Tuesday feeling widespread political heat over its nu- um to Saudi Arabia’s Arab Light; Iran Heavy a but said the Iranian state firm’s marketing strate- clear program — buyers say National Iranian 10¢ premium to Arab Heavy; and Foroozan a gy in Asia is unchanged. Oil Co. (NIOC) is likely to reduce prices of 15¢ premium to Arab Heavy. One buyer sus- “Our main target is to make direct relation- Iran Heavy, Iran Light and Foroozan. pects Iran will be willing to cut by up to ships with the final users, the refiners. That is Japanese buyers have been complaining that 10¢/bbl, although — not surprisingly — buy- the major strategy of marketing our crude oil,” the price of Iranian crudes is well above that of ers want bigger reductions. a NIOC official said, while refusing to discuss comparable grades and have been cutting back Japanese imports of Iranian crude fell by either prices or buyers. on imports as they trim buying to cope with 19% year-on-year in the first three months of Other leading Asian buyers have also been falling domestic demand. Refiners say the Iran- 2010 to roughly 420,000 barrels per day. Of the cutting their Iranian imports. ian supplies have been first to get the ax because main grades, Iran Heavy accounted for 194,000 In India, private-sector giant Reliance Indus- of the “unrealistic” prices. b/d, or roughly 46%, of the total. Imports of tries did not renew its 110,000 b/d term con- Iran sets OSPs to Japan every quarter after Foroozan averaged 92,500 b/d, of Iran Light tract with Iran for this year, but sources say it meeting with buyers, who have been represent- 57,700 b/d, and of South Pars condensate still has an option to buy. ed for the past 10 years or so by Showa Shell, 38,000 b/d. In 2005, Iran was Japan’s third- India’s state-owned Oil and Natural Gas the largest Japanese customer for Iranian crude. largest crude supplier, providing an average of Corp.’s Mangalore Refinery and Petrochemicals Buyers say a team of four or five NIOC repre- 581,000 b/d, or 14% of its imports. Last year, it also trimmed term volumes, by 10,000 b/d to sentatives is now in Tokyo for talks, which be- fell to fourth place — the spot it still holds — 130,000 b/d, but remains India’s largest term gan Tuesday, over third-quarter prices. and in the first quarter of 2010 accounted for buyer of Iranian crude. The Japanese are optimistic. “We expect 10.6% of Japan’s imports. In China, imports from Iran dropped 21% them to lower their prices,” a member of the “Weaker demand for heavier crudes, unat- year-on-year in April to 424,000 b/d. For the Japanese negotiating team tells Oil Daily. A buy- tractive price formulas and the threat of new first four months of the year, they tumbled er at a major Japanese refiner that is not directly sanctions have combined to reduce buying in- more than 20%, to average 396,000 b/d. involved in the discussions says he believes Iran terest in [Iran’s] heavier, sour crudes,” the Inter- Ramsey al-Rikabi, Singapore May 26, 2010 4
  5. 5. Senators Call on US Attorney General Oil Tanker Collision Causes Spill in Straits of Singapore To Decry Transocean Dividend Program At least 18,000 barrels of crude oil have More than a dozen US senators, led by those who died in the disaster, the fishing been spilled into the waters between Sin- Ron Wyden (D-Oregon), have called on industry that has been devastated by the gapore and Malaysia after a bulk carrier the US attorney general to investigate oil spill and the governments that have collided with an oil tanker. Transocean’s $1 billion dividend program. worked full-time to clean up this spill de- The dry bulk carrier MV Waily struck Transocean recommended a serve better,” the letter stated. the port side of the Aframax-size tanker 77.75¢/share quarterly dividend in Febru- Transocean has, in fact, said it is not li- Bunga Kelena 3 early Tuesday in the Straits ary, and shareholders approved the mea- able for the clean-up and containment of Singapore, according to the Maritime sure this month. It is Transocean’s first costs associated with the ongoing spill, Port Authority of Singapore (MPA) and dividend since 2002. saying that responsibility lies instead with the Bunga Kelena 3’s owners. The senators, though, believe such a well operator BP. The accident occurred 13 kilometers move is inappropriate after the Apr. 20 “The way the contract typically reads, southeast of Singapore’s eastern tip. By explosion of Transocean’s Deepwater Hori- we are indemnified from any expense or mid-afternoon, the resulting oil slick mea- zon rig in the US Gulf of Mexico. That ac- claim related to pollution from the well- sured 4 km by 1 km and was about 6 km cident killed 11 workers and caused a gi- bore, and we believe in this particular in- south of the city-state, the MPA said. ant oil spill that has continued to date, stance that the contract is pretty clear Emergency teams are now working to fouling the Gulf coastline and devastating about that,” Transocean Chief Executive contain the spill. The MPA said late Tues- regional fisheries. Steven Newman told analysts on the com- day that 20 government and private craft In a letter to Attorney General Eric pany’s first quarter earnings call earlier had responded to the accident, “equipped Holder, the senators said “such action to this month (OD May7,p1). with 41 tonnes of non-toxic and bio- quickly move money out of corporate cof- Meanwhile, BP continues to point the fin- degradable oil spill dispersants, 1,500 fers to individual investors may make it ger at Transocean over the cause of the acci- metres of containment booms and two more difficult to pursue liability claims dent, but the UK supermajor has accepted skimmers with fast tanks.” against the company.” financial responsibility for costs associated The accident “caused a significant gash” “Transocean’s stockholders should with the spill itself (OD Apr.28,p1). in the double-hulled Bunga Kelena 3, said not take huge profits from polluting Nevertheless, news of the possible Paul Lovell, spokesman for the vessel’s our country’s Gulf Coast,” the letter investigation sent Transocean’s stock owner, AET Tankers. AET is a wholly- continued. down 9% on Monday alone, bringing owned subsidiary of shipping giant MISC, The letter pointed to Transocean’s its total losses since last month’s explosion itself a subsidiary of Malaysian state oil “troubling” refusal to accept financial to 41%. company Petronas. Lovell declined to say responsibility for the spill. “Families of Casey Sattler, Houston who had chartered the ship. The tanker was carrying very light Noble Watching Spill Situation in US Gulf crude oil and condensates from Bintulu, Indonesia, and was heading towards It is too early to tell just how the Deepwa- One rig is still on site at the recent Malacca, Malaysia. Malacca is home to ter Horizon oil spill will affect Noble Energy’s Deep Blue discovery in Green Canyon two refineries — one wholly owned by operations in the Gulf of Mexico, the compa- Block 723 and is slated to drill an ap- Petronas and the other owned by a ny’s chief operating officer said Tuesday. praisal well at the deepwater Gunflint dis- Petronas-ConocoPhillips joint venture. While there will likely be stricter regu- covery later this year (OD May12,p7) According to Lovell, only the very light latory oversight of offshore drilling, the (OD Oct.15’08,p1). crude had been spilled. AET said that extent of that is still uncertain, Dave Stover said Noble already has a permit booms were being put in place to isolate Stover told the UBS Global Oil and Gas to drill the Gunflint well, but “like every- the spill on Tuesday afternoon. Conference in Austin, Texas. one else is interested in seeing any new AET said the initial report estimated “When you look at the deepwater Gulf [regulatory] requirements that could go that 2,500 tons (18,325 bbl) of crude had of Mexico, it still has a tremendous poten- into place.” been spilled, although the final volume tial,” Stover said. “It’s still a large produc- On land, Noble is focusing much of its will not be known for days. It added that ing resource for the country.” effort on the liquids-rich Wattenberg gas the Bunga Kelena 3 was carrying 200,000 While the US is unlikely to put an end field in northeast Colorado. The field is bbl of condensate and 300,000 bbl of Bin- to all offshore drilling in the Gulf in the Noble’s largest onshore US asset. tulu crude at the time of the collision. wake of the disaster, as the region ac- Of the 12 rigs Noble has working in The accident has not affected shipping in counts for nearly one-third of domestic the onshore US, six are drilling in the the sea lanes round Singapore. production, Stover said that Noble, like Wattenberg Field. The MV Waily, registered in St Vincent everyone else, is “concerned with what’s The company recently expanded its and the Grenadines, was travelling from going on out there.” acreage position in the field to 700,000 India to China, the MPA said. Both ships “We’ll just have to wait and see what net acres, with a $494 million purchase were anchored off Singapore Tuesday the outcome is,” Stover said. from Suncor in January (OD Jan.6,p1). evening. The spill is unlikely to have a signifi- The other six rigs Noble is operating in The Straits of Singapore are one cant impact on Noble in the near-term, the US are spread across the Haynesville of the world’s busiest sea lanes, connect- as the independent producer presently Shale, Western Oklahoma and the Rock- ing trade routes from Asia to Africa has only two rigs working in the US Gulf ies, Stover said. and Europe. of Mexico. Rachael Seeley, Houston Ramsey al-Rikabi, Singapore May 26, 2010 5
  6. 6. Stock Market NEWS ALERT Scorecard From staff and wire reports Integrated Close 1-Day % Chg. Majors 5/25 Chg. % Chg. 10-Day 52-Wk YTD Hess 52.24 +0.96 +1.87% -12.86% -14.09%-13.65% BP 42.56 +0.70 +1.67 -12.70 -10.23 -26.58 Electricity Work on the grid modernization will start in Shell-B 49.94 +0.67 +1.36 -8.48 -3.87 -14.09 June. As part of the project, Iberdrola will build Shell-A 51.72 +0.63 +1.23 -8.51 +0.78 -13.96 Total 45.45 +0.32 +0.71 -11.68 -17.60 -29.03 Iberdrola Sells US Gas Assets or renovate some 800 kilometers of transmis- Eni 36.64 +0.12 +0.33 -12.80 -20.74 -27.60 Spanish power giant Iberdrola, which sion lines of between 115 and 345 kilovolts and Statoil 19.21 -0.01 -0.05 -14.89 -3.32 -22.88 bought US-based utility Energy East for $4.5 start up five new 345 kV substations. ConocoPhillips 49.92 -0.19 -0.38 -11.91 +11.78 -2.25 billion in 2008, is now selling three gas distrib- UIL Holdings, based in New Haven, Con- Exxon Mobil 59.71 -0.48 -0.80 -8.46 -12.69 -12.44 Repsol YPF 19.89 -0.18 -0.90 -10.37 -7.10 -25.39 utors acquired under that deal for $1.3 billion necticut, provides electricity to about 325,000 Suncor 28.61 -0.29 -1.00 -10.14 -6.81 -18.97 to UIL Holdings Corporation. customers in that state. The gas companies it is Chevron 72.57 -0.87 -1.18 -9.16 +12.56 -5.74 Iberdrola is divesting Connecticut Natural acquiring serve about 333,000 customers in Marathon 30.62 -0.98 -3.10 -3.04 +4.11 -1.92 EIF Index 290.09 -0.82 -0.28 -9.32 -6.71-15.24 Gas, Southern Connecticut Gas and Berkshire Connecticut and 36,000 in Massachusetts. Large Producers Gas Company, all of which serve communities Murphy Oil 51.38 +0.81 +1.60 -7.16 -6.82 -5.20 in the northeastern US. Together, they distrib- Exploration & Production EOG Resources 98.71 +1.35 +1.39 -7.31 +41.52 +1.45 Occidental 78.94 +1.04 +1.34 -6.20 +28.90 -2.96 ute 1.6 billion cubic meters per year (155 mil- Nexen 21.08 +0.22 +1.05 -7.05 -0.43 -11.91 lion cubic feet per day) of gas. PetroQuest Inks Woodford JV Pioneer 58.60 +0.52 +0.90 -8.28 +136.67 +21.65 The Spanish firm plans to reinvest proceeds US independent oil and gas producer Petro- Apache 88.04 +0.69 +0.79 -10.41 +12.51 -14.67 from the transaction to support a $1.4 billion Quest Energy has announced a joint venture Canadian Natural 63.99 +0.39 +0.61 -11.47 +21.12 -11.06 Chesapeake 20.79 +0.04 +0.19 -10.00 -0.38 -19.67 plan to connect the electricity grids linking with power company NextEra Energy Re- Talisman 16.21 +0.02 +0.12 -5.43 +7.56 -13.04 New England states Massachusetts, New sources in the Woodford shale in Oklahoma. Devon Energy 60.87 -0.12 -0.20 -10.25 +1.62 -17.18 Hampshire, and Maine to Canada. That project The deal gives NextEra a 50% stake in EnCana 29.42 -0.07 -0.24 -6.40 +6.19 -9.17 Anadarko 52.80 -0.39 -0.73 -8.38 +21.91 -15.41 will integrate renewable energy projects in the PetroQuest’s proved undeveloped reserves in XTO Energy 42.25 -0.32 -0.75 -7.69 +4.12 -9.20 area to the grid. the Woodford shale. PetroQuest received Refiners $60 million in cash at the deal’s closing and Sunoco 28.08 -0.01 -0.04 -9.74 +2.37 +7.59 will get another $14 million in Nov. 2011. Frontier Oil 13.36 -0.05 -0.37 -8.05 -18.09 +10.96 Holly 24.36 -0.10 -0.41 -7.73 +3.31 -4.96 PetroQuest will receive an additional $14 Tesoro 11.25 -0.15 -1.32 -12.04 -31.94 -16.97 million in Nov. 2011 if the firm achieves cer- Alon 6.56 -0.11 -1.65 -2.81 -45.83 -4.09 tain production metrics. Valero 17.38 -0.33 -1.86 -11.91 -16.28 +3.76 Integrated Energy NextEra also agreed to fund PetroQuest’s Williams 19.13 +0.12 +0.63 -10.94 +22.47 -9.25 drilling costs in a two-phase program to de- El Paso 10.65 +0.05 +0.47 -11.54 +21.02 +8.34 velop the shale acreage. As a result of the TransCanada 32.22 -0.23 -0.71 -7.73 +16.61 -6.26 Sempra 45.07 -0.41 -0.90 -5.08 +1.28 -19.49 joint venture, PetroQuest plans to accelerate Duke Energy 15.82 -0.15 -0.94 -6.39 +17.62 -8.08 Founded 1951 • drilling in the Woodford shale, bringing a Enbridge 43.59 -0.46 -1.04 -8.35 +32.49 -5.69 • Washington Editorial Tel.: (202) 662-0700 Oneok 42.00 -0.79 -1.85 -13.33 +53.12 -5.77 • Fax: (202) 783-8230. New York Tel.: (212) 532-1112. second rig online within the next 60 days and a third in the fourth quarter of this year. Service Companies Houston Tel.: (713) 222-9700 Transocean 57.16 +3.20 +5.93 -13.84 -20.47 -30.97 Ensco 38.99 +1.16 +3.07 -9.39 +17.02 -2.38 Published By: International Schlumberger 58.46 +0.86 +1.49 -12.52 +12.55 -10.19 Nabors 17.20 +0.12 +0.70 -14.81 +3.49 -21.43 Baker Hughes 40.63 +0.24 +0.59 -13.83 +14.58 +0.37 Raja W. Sidawi, Chairman Marcel van Poecke, Vice Chairman PetroChina Raises Money Halliburton 25.62 -0.03 -0.12 -7.14 +20.06 -14.86 Thomas E. Wallin, President China’s state-owned oil firm PetroChina Patterson-UTI 12.46 -0.03 -0.24 -11.63 -2.12 -18.83 Andrew Kelly, Editor, Oil Daily says it has raised 40 billion yuan ($5.86 bil- Note: Ranked by daily percentage change. lion) from two notes issued on the interbank Jane Collin, Editor, International Edition debt market earlier this month. The company says it earned 20 billion yuan reliability, and environmental – to track US Editorial: Sarah Miller Editor-at-Large. Washington: Jason Fargo, Paul Merolli, Bill Murray, Matt Piotrowski. from the proceeds of seven-year notes issued energy security risk going back to 1970 and Houston: Andrew Kelly, Alan Lammey, Casey Sattler, at a nominal interest rate of 3.97% per year, to project future risk through 2030. Rachael Seeley, Barbara Shook, Emily Wilkinson. and a similar amount from five-year notes. “People often connect energy independence New York: Deirdre Daly, John Galante, Gregory Gethard, David Knapp, Leslie Palti-Guzman, Lisa Viscidi. London: Both tranches were issued on May 19. with energy security, and that is an insufficient James Batty, Deborah Kelly, Peg Mackey, Kerry Preston. PetroChina will use the proceeds to supple- way to look at it,” said Karen Harbert, presi- Singapore: Song Yen Ling, Ramsey al-Rikabi, Clara Tan. ment its working capital. dent and chief executive of the Chamber’s In- Moscow:Nelli Sharushkina. Dubai:Onur Ant, Alex Schindelar. Production: Terry King, Production Manager stitute for 21st Century Energy. “Energy secu- Ronald Hernandez, Production Coordinator Legislation/Regulation rity also involves cost and availability. Looking forward, we are returning to the highest level Copyright © 2010 by Energy Intelligence Group, Inc. (“EIG”) ISSN 1529-4366. Oil Daily ® is a registered trademark of EIG. All rights reserved. Access, distri- New Energy Risk Index Launched of risk moving into the future.” bution and reproduction are subject to the terms and conditions of the subscrip- The US Chamber of Commerce has devel- According to the index, 1980 was the year tion agreement and/or license with EIG. Access, distribution, reproduction or oped an energy security risk index to mea- when the US had the highest energy risk, fol- electronic forwarding not specifically defined and authorized in a valid subscrip- tion agreement or license with EIG is willful copyright infringement. Additional sure America’s exposure to energy insecurity. lowed closely by 2008. Both years saw copies of individual articles may be obtained using the pay-per-article feature The index uses 37 separate metrics from spikes in the oil price, followed by global offered at four primary areas – geopolitical, economic, economic downturns that lowered both the May 26, 2010 6
  7. 7. oil price and US economic growth. Energy security risk rose throughout the South America Expects Renewables Growth 1970s and fell during the 1990s, in part be- cause of policy decisions such as tougher fu- The largest economies in South Ameri- many countries in the region has lagged el-efficiency standards and the deregulation ca should expect annual growth in renew- due to political instability, government of oil markets. The tool will be used to assess able energy production of 10.1% from controls on energy prices, and a lack the effects of potential future legislation, 2009 to 2020, according to a report re- of financing (OD Mar.2’09,p2). Harbert said. leased Tuesday. The Inter-American Development Bank The study, by London-based business in- has provided $2.1 billion for renewable Oil & Gas Markets formation firm GBI Research, cites support projects – hydroelectric, wind and geot- for renewables development by govern- hermal among them – since 2000, accord- Euro Gas Flat Before Driving Peak ments, the private sector, and international ing to GBI Research. European gasoline exports have fallen flat financial institutions as important drivers of South America has also received much as- at a time when shipments should be boom- this growth. sistance from developed economies, which ing ahead of the start of the US summer dri- Governments across the region have “en- have invested in hundreds of projects related ving season. acted favorable policies to encourage invest- to the Kyoto Protocol’s Clean Development Officially, the gasoline season kicks off with ment in non-conventional energy sources Mechanism, established in 2006. the May 31 Memorial Day holiday, when the such as wind, solar and biomass,” according “More than 60% of the total projects relate American Automobile Association expects to the report. These energy sources as well to the energy segment, especially renewable 32.1 million Americans to take to the roads as hydroelectricity, which provides 63.5% of energy sources,” GBI Research says. “A com- — the first annual increase in five years. power generation in South America, should bination of small hydro, solar, wind and bio- But instead of an armada of European all increase in importance going forward. mass contributes to the majority of this in- gasoline tankers heading across the Atlantic The report notes that new laws in Ar- vestment.” to quench American thirst for gasoline, weak gentina, Brazil, Chile, and Colombia have Underlining the growing interest and US buying has kept the trans-Atlantic arbi- instituted development incentives to pro- investment in expanding the use of renew- trage stubbornly closed — despite a mount- mote investment in renewables, while subsi- able energy in South America is the threat ing European surplus. dies and tax credits also encourage growth. of declining production and availability of Fresh from maintenance, Europe’s refin- The private sector, meanwhile, has en- fossil fuels. ers have ramped up diesel production, mak- couraged the expansion of renewable ener- “The focus is to develop sustainable energy ing gasoline almost a byproduct. Benchmark gy production through financing and tech- for the longer term through renewable ener- Eurobob gasoline shed a massive $20/ton nical assistance programs, the report says. gy sources,” the report reads. Tuesday to trade at a three-month low of The United Nations Framework for Cli- Technological advances are also making $646-$648/ton. mate Change estimates some 85% of the renewable energy more cost-competitive rel- One of the region’s biggest gasoline bro- region’s energy investment will come from ative to traditional sources of energy, particu- kers tells Oil Daily that the sudden change in private sources. larly in the wind power sector, according to oil market conditions in general has para- Investment in electricity generation GBI Research. lyzed Europe’s gasoline market. will need to reach $572 million between Further impetus for the development of “Traders are just sitting on their hands,” 2007 and 2030 to meet increased de- renewable energy resources comes from a be- he says. “Most companies did very well in mand estimates, says the United Nations’ lief that such projects are effective job-cre- the first quarter, only to give up all of those Economic Commission for Latin America ation mechanisms and can provide a boost to profits in April. People were hedged the and the Caribbean. small and medium enterprises. wrong way. One or two have been very badly However, renewables investment in John Galante, New York burned [by the collapse in prices].” May 26, 2010 7