The first wellhead will be supplied in the fourth quarter of 2016, with GE manufacturing part of the scope in India for the first time, in Kakinada.
One of the factors both accompanying and abetting the current rally in assets is the recent jump in the oil price, with Brent crude up about one-fifth to $50 a barrel since the start of this month. It is now back to levels not seen since last autumn (apart from a brief flurry this June). What is going on?
Quite a number of things, argues Medley Global Advisors, a macro research service owned by the FT. On top of the weaker dollar and technical factors such as reduced summer trading and expiries in the options markets there is a continued drawdown in US gasoline inventories, US production declines and dreams of a cold northern hemisphere winter (of which more later).
But the most immediate spur to the crude price has been talk from Saudi Arabia’s new oil minister that hinted at another attempt by the kingdom to organise an output freeze among .
To most investors, the oil cartel continues to look like a dysfunctional organisation. There are few things the Saudis and Iranians can agree on, for a start. And the former have been raising their own production over the summer while preaching forbearance at others — though much of that extra oil is being burnt domestically rather than exported. So the risk of a market disappointment leading up to the next Opec meeting, which is not until the end of November, is very possible.
Having said that, the Saudis very much regard $50/barrel as a floor for the oil price and are already extending feelers to Russia and other less hardline Opec members regarding potential output quotas, while their own exports have actually been stable to slightly down this year. So some type of production freeze remains a real possibility.
Meanwhile, the global balance between supply and demand continues to adjust in favour of higher prices. Output in Nigeria is hovering around 1.4m barrels/day, some 700,000 b/d down from 2015’s peak as more than 10 separate attacks on facilities in the Niger Delta this year have taken their toll. MGA remains pessimistic about the government’s capacity to pacify a new generation of militants who are pushing — however unrealistically, ultimately — to secede from Abuja.
In Libya, despite repeated attempts to establish a unified government and some success in pushing back Isis, infighting between the various rival political and religious movements remains the and the bulk of the country’s oil facilities remain shut in. Libya, which once pumped 1.6m b/d is currently managing just over 300,000 b/d.
On top of that, Angola is on course for a big drop in output later this year as its refineries go into maintenance and production is also down across most of Latin America (especially Venezuela) and — most significantly — in the US shale oil basins.
The US, in fact, is the final piece in the puzzle since this is where the rebalancing of supply and demand can be most easily observed and monitored. This rebalancing hit a hiccup earlier this year as the exceptionally warm winter caused American refineries to switch early and aggressively from producing distillates (which encompass fuel oil, diesel and kerosene) used for heating to making more gasoline (petrol). The result has been soaring gasoline inventories that have depressed refinery margins, causing them to process less crude . . . which has fed back in the form of a .
That process should reverse as we head for the autumn and then into winter, Medley believes, as refineries shift back to producing distillates. And while distillate inventories are high by historical standards, they are in better shape than gasoline stocks. The key to what happens next is what kind of winter we will get in the US and the northern hemisphere in general.
A big part of the unseasonably warm winter in 2015/16 was due to the strongest El Niño effect in the past 40 years, as measured by the rise in water temperatures in the equatorial Pacific. This tends to have a warming effect across the globe.
Notably, a strong El Niño tends to be followed by a strong La Nina, during which cool water wells back up into the Pacific and reverses everything. This happened in the early 1980s, the mid-1990s and most recently when a warm 2009/10 was followed by a very cold northern winter in 2011/12 — boosting demand for heating fuel and thus running down inventories and pushing up prices.
Forecasting the weather is hardly a sound investment strategy. But coupled with all the other factors discussed above, it suggests that crude oil could be entering a more stable trading range of $50-$70/barrel rather than falling back below $50 again for a significant period. Not only would that please the Saudis, it also suggests significant upside for investors compared with what is currently priced into the market.
Dan Bogler is a commissioning editor at
Currently, it is a 50:50 project but we are open to inducting a strategic partner, says HPCL Chairman and Managing Director Mukesh K Surana told.
This is the fourth extension for OVL to explore Block-128, the license for which is now valid till June 15, 2017, sources privy to the development said.
After the announcement, Reliance hasn’t clearly said if it wants to withdraw the arbitration but has initiated the process of developing its deep sea fields.
in its recent funding round, the Australia India Strategic Research Fund (AISRF) announced a new grant of Australian Dollar one million to support the project.
Oil explorers and have been reported to UK regulators for allegedly failing to tell investors enough about the risks that climate change poses to their businesses.
Soco and Cairn deny the claims.
The complaint from ClientEarth environmental law firm in London is the latest in a string of legal challenges to fossil fuel companies from campaigners seeking faster action on global warming.
The firm has written to the , the accounting and auditing watchdog, arguing climate change poses “significant” physical and financial threats to oil and gas companies that amount to a material risk.
This should be disclosed to investors under UK companies’ law provisions that required businesses to describe “the principal risk and uncertainties” they faced, ClientEarth said.
London-listed Soco and Cairn did not do this sufficiently in their most recent annual reports and accounts, the firm alleged.
“Failing to adequately disclose climate risks is failing to mention one of the most important risks facing the company,” said Alice Garton, the ClientEarth lawyer handling the case.
Soco strongly rebuffed ClientEarth’s claims and said it was confident the group had met its legal obligations. However, the group said it took allegations of non-compliance seriously and was reviewing the law firm’s complaint.
While climate change was a key consideration for the company, Soco told the FT its board had decided that, “in keeping with its sector peers”, it would not include climate change as “a separate risk among the principal risks to the company’s strategy in 2015”.
The company said the principal risks listed in its annual report include uncertainties and trends potentially associated with climate change, as identified by ClientEarth, including environmental impacts, commodity prices and operating costs.
Soco added it will continue to identify the key areas of risk and uncertainties to the group’s business, including a continued assessment of the potential impact of climate change.
Cairn said it was a constituent of the FTSE4Good index designed to identify companies with recognised corporate responsibility practices and took its commitments to responsible and transparent reporting “very seriously”.
“We continually identify corporate responsibility priorities and our 2015 annual report featured climate change in the comprehensive materiality matrix,” Cairn said.
The matrix is a diagram showing the importance of various issues to Cairn and its stakeholders, including succession planning, biodiversity and accident prevention.
Both Cairn and Soco’s annual reports disclose greenhouse gas emissions from their own activities, as required under UK law.
Cairn noted the UN , which nearly every country agreed in Paris in December, said net emissions should fall to zero some time between 2050 and 2100 and governments should keep global warming “well below 2C” from pre-industrial levels, while trying for a safer 1.5C.
Cairn, which operates in Senegal, the UK and other countries, said it expected emissions management “will become increasingly important to any future production”.
The report by Soco, which is active in Vietnam, Angola and the Republic of Congo, mentioned the climate risk information it volunteered to the , a non-government organisation. It has said the magnitude of the impact of threats such as energy taxes and hurricanes is unknown.
ClientEarth said physical climate threats could disrupt companies’ operations on the ground.
Separately, the law firm pointed to bank research on the financial risks fossil fuel companies face from carbon taxes, electric car subsidies and other policies aimed at cutting greenhouse gases and promoting greener energy alternatives.
last year the switch to a low-carbon world could lead to “unburnable” fossil fuel reserves with a value amounting to more than $100tn by 2050. that oil industry revenues could be cut by $22tn between 2014 and 2040.
“These are obviously very serious predictions for the oil and gas industry and those who invest in it,” said ClientEarth.
The firm said climate risks were spelt out in the reports of other London-listed oil companies, such as and
Tullow’s latest acknowledged suggestions that, as governments adopted stricter climate policies, “the majority of coal, oil and gas deposits will remain undeveloped”.
“Tullow recognises the potential risks in light of this issue,” the report said, adding the group still believed the oil and gas industry will have a role “for decades to come”.
The FRC said it would look at ClientEarth’s suggestions and “see what if any next steps need to be taken”.
India has been hoping to use more gas, one of the cleanest fuels, in its factories, and homes as international pressure mounts to lower carbon footprint.
Companies pay dividends to reward their shareholders, and to signal confidence. Management is pushing out its chest: we will be here for years to come, and we have the money to prove it. That confidence has to be backed by growing cash flows. But in the commodities sector, now is not the time for such bravado. Big mining companies have already made the . Major oil companies — , , and — should follow suit.
In theory, better earnings — and therefore dividend growth — do not necessarily require rising revenues. Get costs down, and perhaps do an acquisition or two, and over time profits should expand enough to give your shareholders something for hanging around. But the reality of commodity industries is that the advantages of lower costs get competed away over time. Consider that the price of a basket of the major commodities has fallen over 1 per cent annually in real terms since 1934, according to research from Robeco, an asset manager.
Certainly oil prices have struggled in recent years. Adjusted for inflation, Brent crude prices at $22 per barrel are not much above their average since 1983. As cash flow has withered the oil companies have done what they can to cut costs and capital spending. However, some of the biggest companies — such as BP and Shell — still need to sell off parts of their businesses, and perhaps , to pay dividends.
So the big producers cannot maintain their dividends if oil prices do not go up. In order to pay a dividend, the largest oil producers need oil at $63 just to cover dividends and investment with cash flow, according to consultants Wood Mackenzie. Even if that break-even price comes down in years to come, the threat to dividends is clear. Brent is currently struggling to stay above $50.
Confidence is fine. . Four of the oil majors so far refuse to cut their dividends. They will need to do so.
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is facing a shareholder revolt after it emerged that the US oil and gas pipeline group had rejected a takeover approach from larger rival Enterprise Products Partners that would have created an $80bn company.
Corvex Management, which owns more than 4 per cent of Williams shares, wants the company’s senior management to engage with Enterprise Products, according to people familiar with the hedge fund.
Several other investors, who asked not to be named, told the Financial Times that Williams’ decision to rebuff the offer cast fresh doubt over the future of Alan Armstrong, the company’s chief executive.
Shareholders in favour of a deal argued that , the US’s largest gas pipeline group, was “a perfect fit” for Williams, as the Tulsa-based company holds complementary natural gas assets.
“This is the dream combination,” said one investor, adding Enterprise Products had the kind of management that could help Williams flourish.
The US oil and gas pipeline sector, which traditionally has not been a hotbed of dealmaking, has been under sustained pressure following the collapse in energy prices since 2014.
Shares in Houston-based Enterprise Products have dropped about 28 per cent over that period. It had a market value of $58.4bn before details of the deal were made public on Thursday. A deal with Williams would allow Enterprise Products to cut costs and reshape its pipeline portfolio.
Investors’ anger emerged after the on Thursday that Williams had rebuffed Enterprise Products’ offer.
Shares in Williams closed up 7.9 per cent on Thursday following the news, giving it a market value of $21.1bn. They slipped just over 1 per cent on Friday. Enterprise fell 2 per cent Thursday and a further 1 per cent on Friday.
News of the bid came after the planned $33bn sale of Williams to another rival, Energy Transfer Partners, following a bitter court battle. Since then, Williams has suffered a series of boardroom upheavals, with six of 13 directors resigning following a failed attempt to depose Mr Armstrong.
Among the directors that stepped down from the board were two activist investors — Keith Meister of Corvex Management and Eric Mandelblatt of Soroban Capital Partners — as well as Ralph Izzo, chief executive of New Jersey’s Public Service Enterprise Group.
In a letter to Williams on July 1, when the six board members resigned, Mr Meister wrote: “I have resigned because I can no longer in good conscience serve on a Board where a majority of that Board was unwilling to make a change that I felt was critical to the future direction of the Company — replacing Alan Armstrong as CEO.”
It is unclear whether Williams was approached by Enterprise Products before or after July 1. The structure of the offer made by Enterprise Products is also unknown at this stage. Both companies declined to comment.
Williams said on Monday that it three independent board members before its next annual shareholder meeting scheduled for November 23.
The previous deal for Williams collapsed after Latham & Watkins, the lawyers for Energy Transfer Partners said they were not in a position to provide an opinion on whether the transaction would be tax-free, which was a mandatory condition to the successful completion of the transaction.
Public hearings were underway the week of Aug. 15 on a lower Cook Inlet Outer Continental Shelf lease sale – OCS Sale 244 – but whether the sale will actually be held on schedule in June, 2017, seems uncertain.
U.S. Bureau of Ocean Energy Management Director Abigail Hopper said planning continues f…
Andy Mack, Alaska’s new natural resources commissioner, has Alaska roots that go pretty deep.
‘I grew up on a homestead in Soldotna. The Kenai River was my front yard,’ Mack said in an interview.
Mack’s parents, John and Carol Mack, moved to Soldotna after a year and a half as Jesuit volunteers at t…
In a recent twist in a federal court case in Alaska over the bankruptcy of Cook Inlet gas producer, Aurora Gas, Aurora Well Services has questioned the court’s approval of a payment of $87,000 by Aurora Gas to Furie Operating Alaska. Aurora Well Services, a separately owned and operated company, is…
The six Alaska Railbelt electric utilities have continued to make progress toward the potential formation of a transmission company, or transco, to operate the Railbelt power transmission grid, the utilities and the American Transmission Co. told the Regulatory Commission of Alaska in an Aug. 10 fil…
Seismic company SAExploration restructured in June and the company said bondholders participating in the financing would ‘provide new loan funding of up to $30 million to fund expected cash needs until SAE can monetize its tax credit-related account receivables.’
Alaska tax credits were not the only…
The Environmental Protection Agency and the U.S. Department of Transportation have published a final rule for fuel efficiency and emissions standards for heavy-duty trucks and trailers. Called ‘the phase two standards’ in reference to an earlier phase one standard for medium- and heavy-duty vehicles…
With lawmakers expressing concern over the loss of Deputy Natural Resources Commissioner Marty Rutherford and still learning who the new guy is running the Alaska Gasline Development Corp. – Keith Meyer – Gov. Bill Walker had another surprise. While speaking at the Anchorage Chamber luncheon, he ann…
Glacier Oil and Gas Corp. appointed former Gov. Sean Parnell to its board of directors in August, according to the Division of Corporations, Business and Professional Licensing.
The Tennessee-based independent with considerable holdings in Alaska was created earlier this year through the bankruptcy p…
Golden Valley Electric Association and Cook Inlet Region Inc. said Aug. 17 that they have re-started negotiations for GVEA to purchase wind power from CIRI’s planned Fire Island Wind, Phase 2, adding 11 windmills to the 11 already in place.
Phase 1 of the Fire Island wind farm began operation in Au…
The Alaska Legislature’s House and Senate Resources committees have scheduled joint hearings on the new concept plan for a state-led pipeline from the Alaska Gasline Development Corp.
The hearings will be from 1-4 p.m. Aug. 24 and 25 in the auditorium at the Anchorage Legislative Information Office…
The Alaska Energy Authority has been putting the final touches to a state-of-the-art diesel powerhouse destined for the village of Perryville on the south coast of the Alaska Peninsula. The powerhouse, which has been constructed in Anchorage, will integrate seamlessly with a wind farm at the village…
The state has officially expanded the Milne Point unit to include ADL 47438 and ADL 392703 and created the new lease ADL 393174 through a segregation of existing leases, according to the July lease report from the Alaska Department of Natural Resources.
The state also approved a request from Eni Pet…
The spill volume at Drift River is still unknown, the Alaska Department of Environmental Conservation’s Division of Spill Prevention and Response said in an Aug. 16 update. There were two spills at the Cook Inlet Pipeline Co.-operated facility on the west side of Cook Inlet (see stories in Aug. 7 a…
Enstar Natural Gas Co. has petitioned the Regulatory Commission of Alaska for alternative dispute resolution procedures for its new tariff, filed June 1 (see story in July 10 issue of Petroleum News).
The commission has suspended the rate increase and ordered a hearing into the proposed rate change…
After five years as president and CEO of ASRC Energy Services Jeff Kinneeveauk has tendered his resignation. Jeff’s last day with AES was Aug. 19. ‘On behalf of Arctic Slope Regional Corp.’s board of directors, I thank Jeff for his service to the corporation and wish him all the best in the future,’…
Reliance Steel and Aluminum Co. said Aug. 2 that it has acquired all of the capital stock of Alaska Steel Co., a full-line metal distributor headquartered in Anchorage, Alaska. Alaska Steel will operate as a fully owned subsidiary of Reliance’s American Metals Corp., with current management in place….
aeSolutions said it worked throughout 2015 with the International Society of Automation to develop their new ISA/IEC 62443-based cybersecurity training and certificate program www.isa.org/CYBERCertificate. The program is designed to help professionals involved in industrial IT and industrial control…
Many were skeptical of Ucore Rare Metals Inc.’s claims that it had identified a technology that would revolutionize the way the notoriously tightly interlocked rare earth elements are separated. Less than two years later, however, the mineral explorer turned innovator has quieted some of this doubt…
Contango Ore Inc. Aug. 16 provided another round of drill results from the second phase of 2016 drilling at the Tetlin project near the crossroads town of Tok in eastern Alaska. The results, from 13 holes drilled in the North Peak and Connector zones, include the best intercept ever encountered at T…
Coventry Resources Ltd. Aug. 17 provided an update on its exploration of the high-grade Caribou Dome copper project in Southcentral Alaska. The company said mechanical issues it experienced with one of the two drills on site have been resolved, and nine holes were completed for 3,934 meters. This in…
According to legend, in 333 BC, while on his way to conquer the Persian Empire, Alexander the Great stopped at Gordion, where he learned about a special wagon that had its pole tied to the wagon body with an intricate knot. A prophecy had foretold that whoever could unfasten the knot would go on to…
Golden Predator Mining Corp. Aug. 15 reported the discovery of visible gold mineralization in the newly identified Jack of Spades quartz vein at its 3 Aces project in southeastern Yukon. This is the first discovery arising from the company’s phase 2 exploration program that began Aug. 3. The newly…
Goldstrike Resources Ltd. Aug. 16 reported abundant visible gold in the first 2016 drill hole at the Goldstack zone of its Plateau property in the Yukon Territory. The Goldstack discovery hole, drilled last year, cut 17.5 meters averaging 13.5 grams per metric ton gold. The first hole of this season…
Alexco Resource Corp. Aug. 10 reported plans to expand its 2016 summer drill program at the Bermingham deposit at its Keno Hill Silver District to 14,000 meters. The company originally planned to drill 8,000 meters but has now added 6,000 meters to follow up on high-grade silver results identified a…
IDM Mining Ltd. Aug. 16 posted results from the first four underground core holes completed this year at its Red Mountain gold project near Stewart, B. C. The initial phase of 2016 exploration at Red Mountain includes infill and step-out drilling from the current resource, as well as collecting mat…
