The 3 Week Diet System

Thursday, April 30, 2015

Gazprom In Dire Straits As Profits Plunge 86 Percent

April 30:

Gazprom, Russia’s state-controlled gas company, suffered an 86 percent dive in net profits during 2014, due primarily to the decline in the value of the ruble, its feud with Ukraine over gas prices and debt from previous gas deliveries, and the continued low price of oil.
In its annual Management Report, issued April 29, the world’s largest gas producer said net income last year plunged to 159 billion rubles, or $3.1 billion, compared with about 1.1 trillion rubles in 2013. This is a crucial revenue decline for a company that provides the Moscow government with about one-fifth of its budget revenues.
Much of the decline mirrors the drop in the ruble’s value, which has affected companies across Russia that do business with foreign companies accustomed to trading in euros or US dollars. The report said Gazprom’s own foreign exchange losses rose in 2014 over 2013 by 926 billion rubles.
The company’s operating profits also fell to 1.3 billion rubles, a 17 percent decline, because of the reduced value of its electricity and oil assets, as well as lower payments from Naftogaz, Ukraine’s state-controlled gas company.
Gazprom cut off gas supplies to neighboring Ukraine in June as Kiev complained that the Russian company was charging it above market price and Moscow said Ukraine still owed Gazprom billions of dollars for past gas deliveries. At the same time, relations between Russia and the West declined over Russia’s involvement in the unrest in eastern Ukraine.
The cutoff of gas deliveries to Ukraine pushed down Gazprom’s output to 444 billion cubic meters in 2014, its lowest ever, as Ukraine was once Gazprom’s largest customer. Now, though, it has reduced gas imports from Russia to 14.5 billion cubic meters in 2014, down from 59 billion cubic meters in 2006.

And this year Naftogaz is expected to buy no more than 8 billion cubic meters of gas from Gazprom.
Although there is still bad blood between Kiev and Moscow, there is also a semblance of stability in their trade relations, thanks to a deal brokered by the European Union. Under that agreement, Naftogaz now pays Gazprom $247 per 1,000 cubic meters of gas, a discount of about $100 from Gazprom’s previous demand.
This is only one element that shrinks Gazprom’s bottom line. The company, once considered the world’s most profitable, was operating in an “adverse economic environment” that could lead to a “slowdown of growth in energy demand with an appreciation of debt capital.”
“Lower oil prices make gas prices lower too,” the report said. “(A) Further drop in oil prices or their maintenance at the current level for a long time period would reduce the group’s income.”

The price of oil has plummeted by nearly half since June 2014. This also affects gas, though any related drop in gas prices doesn't follow until about six to nine months later. But Gazprom was hit immediately by the drop in oil prices because one of its subsidiaries is the oil company Gazprom Neft.

Petrodollar, Forensic Audit and Endangered Publisher, By Steve Ayorinde

April 30:
Not a few people would have been surprised last Saturday, when Premium Timesreported the escape of a well-known journalist, Toyin Akinosho, from Nigeria after an apparent assassination attempt on his life.
Akinosho is famous in the Lagos arts and media circle as a critic with more than a passing interest in reporting the culture beat. Although he has written popular art columns in the past and published an art-centric newspaper, FESTAC News, thereby earning the sobriquet ‘Publisher’ among friends and admirers, he is actually a trained geologist with many years of experience at Chevron Nigeria Limited.
He has become even more celebrated in the past few years as the publisher of Africa Oil and Gas Reportwhich focuses on issues affecting the petroleum industry across Africa. And as an award-winning writer, with unwavering commitment to investigative journalism and knack for routinely challenging the official line, for a good cause, he has amassed great followership.
I had spent the better part of last Tuesday evening with him at the Freedom Park on Broad Street, the new hub of cultural activities in Lagos. He was the moderator of the interactive session with the veteran iconoclastic actor, Olu Jacobs, together with whom we all later went to watch The Beatification of Area Boy, a stage play directed by Prof. Wole Soyinka, at the venue’s open ground. The play was part of last week’s Black Heritage Festival.
We did exchange a few banters about his unapologetic focus on the petrodollar industry and how he has always managed to unearth, in that juicy and ferociously tempting sector, the corruption others missed, or, more likely, disregarded. But not once did he betray any emotion about the ordeal he went through just over a month ago and for which he has had to flee Nigeria for a few weeks only to return unannounced last week.
Although it turned out that Premium Times’ story was somewhat delayed, more than a month after Akinosho had run for his life and later returned unintimidated, it was still a shock to have learnt of how suspected assassins trailed him for two days, damaged his car, harassed and physically attacked his driver for withholding information about his boss’ whereabouts.
Akinosho may have reported the incidence of March 20 to the police and the State Security Service through a petition submitted by his lawyers, his ordeal, nonetheless, deserves more than a cursory look. Those gun-wielding five men inside the white minivan that trailed his car did not appear like they were kidding, from the account of the driver. They meant business and they were armed. The parlance “I will waste you” (meaning: I can kill you for nothing) which they said to Akinosho’s driver repeatedly is believed to be typically associated with those in the business of unlawful use of arms.
In the absence of any direct links or suspects, the general suspicion of why a journalist would be the target of assassins is largely on account of scathing revelations about the corruption in the petroleum industry that he has personally authored or generally published by his magazine. Akinosho may have written about his personal conviction that the Minister of Petroleum, Diezani Alison-Madueke, does not deserve to return as the supervisor in that ministry, if President Goodluck Jonathan had won his reelection bid, but he wouldn’t have said anything completely new; for not a few commentators have disparaged her ineffectual supervision of the fuel importation and subsidy regime, as well as the lack of transparency in the management of the four refineries in Nigeria.
If indeed he has written about the rot in the Nigerian National Petroleum Corporation and the malfeasance that permeates its soul and structure, he still would not have authored anything new. The corruption that NNPC represents has, for many years, been the subject of journalistic and scholarly account of how not to administer a nation’s commonwealth. It is not unexpected, therefore, that the illuminating insight that such investigative instinct which journalists like Akinosho bring to the reportage of the petroleum industry will be disturbing to the guilty ones, the nation still owes it a duty not only to save courageous chroniclers of our recent history from the same marauders looting the treasury, but to also bring those lawless, anything-goes public officers to book.
It is for this reason that the outgoing regime, for the post-election honour it lays claim to, and the incoming administration that announces itself as the harbinger of change and commonsense revolution, should not let Akinosho’s petition to the security agencies be left unattended. A few people would be tempted to believe that because the suspected assassination attempt happened just before the last Presidential election might be instructive on the motive of the assassins, yet this should lend credence to why it is important not to let the imminent change of guard in government affect the need to establish the truth in this matter.
Already, providence is working in favour of Akinosho and those who believe that a good chunk of this country’s stolen wealth went through the oil and gas drainpipes; and that if that industry could be fixed and its subsequent revenues saved from its profligate managers and their thieving supervisors in government, Nigeria could indeed rise again on the path of true greatness and accomplishments.
The mere interest expressed by President-Elect Muhammadu Buhari to revisit the $20bn that allegedly got missing from the federal purse has confirmed not just the extent of corruption in the Petroleum Ministry but also the lies and apparent complicity of very top functionaries of the Jonathan administration who tried to misinform the nation about this horrendous mismanagement of resources.
The $20bn debacle is an onerous case that requires more than a feeble forensic audit. Its eventual outcome might be very damning indeed. And who knows, maybe this necessary probe can unmask those behind the desperation to silence journalists and the nation’s collective push for truth.

Tauranga Harbour oil spill update 4

May 01:
• A clean-up crew of approximately 70 people worked yesterday to clean up oil at Maungatapu and Bridge Marina and shoreline assessments continued. The workers included staff from Bay of Plenty Regional Council and Tauranga City Council, Ministry for Primary Industries fisheries officers, Envirowaste, trained oil responders from Waikato Regional Council and volunteers from local iwi/hapū and the community.
• Clean-up crews scooped up oil and oiled debris at all sites and at the end of yesterday (Thursday 30 April) had collected a total of 12 tonnes of oil waste and oil covered vegetation, sand and debris from the Maungatapu and Motuopuhi Island shoreline and Bridge Marina. This work is continuing today.
• The waste is being disposed of by Envirowaste at the specialist facility at Hampton Downs in the Waikato.
• Some water-borne oil remains well-contained under the port wharf by approximately 70 booms which are can absorb up to 20 litres of oil each. The booms are being replaced with fresh ones today and on-water oil recovery will progress if conditions allow.
• Scientists from Regional Council and University of Waikato accompanied by iwi are surveying affected areas of the harbour and taking samples to measure any impacts on shellfish and sea grass. It will be a few weeks before analysis of the first sampling round is completed.

• One moderately oiled penguin was found on Wednesday night. It was cleaned and released last night. Mauao Wildlife Trust volunteers are continuing to check penguin roosts on Mauao and Motoriki (Leisure Island) each night.
• Effects on birdlife appear to remain minimal. DOC staff have been checking high tide roost sites and other areas around the harbour, a small number of lightly oiled shags, penguins and gulls been observed but have not required capture. Any oiled wildlife found should be reported to DOC 0800 362 468 (0800 DOC HOT).
• Boaties are reminded not to clean their boats or gear with any aggressive chemicals as this may cause more contamination. Please contact your marina operator for advice. The Regional Council has provided pads, disposal bags and skips and protective gloves at the marina to help boaties keep their berths clean.
• People should stay away from oil wash-up areas. Oil slicks or oiled vessels should be reported to the Regional Council’s Pollution Hotline, phone 0800 884 883, or email
• Mobil has set up two 0800 numbers: for boat owners wanting advice – 0800 895 011. For boat owners wanting to make insurance claims to Mobil – 0800 692 524.

Shell pushes on with Arctic exploration as it awaits U.S. permit

April 30:
LONDON, April 30 (Reuters) - Royal Dutch Shell is pushing ahead with plans to explore for oil in the Arctic Ocean near Alaska this summer despite opposition from environmental groups.
The Anglo-Dutch oil major is preparing "an armada of 25 vessels" to begin a two-year programme to explore two to three wells in the Chukchi Sea off the coast of Alaska, Chief Financial Officer Simon Henry said on Thursday.
"We are currently on track. Some of the permits are issued at the last moment," he told reporters.
Although Shell had to pull out of the region in 2012 after an oil rig ran aground, the Arctic oil reserve "remains a massive value opportunity," Simon said.
Shell has submitted plans to explore the Arctic to the U.S. Interior Department after the Obama administration last month upheld a 2008 Arctic lease sale, clearing an important hurdle for Shell.
The Department of the Interior will now consider the company's drilling plan, which could take 30 days.
Shell has lined up the necessary equipment and vessels to deal with any mishaps, which Henry said are of a "very low probability".
Environmental organisations fear that an oil spill would be destructive for an ecologically sensitive region and extremely hard to clean up in a remote area with rough and frigid seas. (Editing by Keith Weir)


Could Tory wind farm ‘halt' offer reprieve to small wind turbines?

April 30:

Scottish Water install Evance small wind turbines to power water treatment works

Conservative sources indicate vow to 'halt' wind farms will focus on large projects, potentially leaving door open for small turbine market
When do wind turbines become a wind farm? It is a riddle that has given rise to yet more policy uncertainty for wind energy developers as they wrestle with the likely implications of the Conservative Party's high-profile pledge to "halt the spread of onshore wind farms".
The Conservative manifesto declaresthe party would "end any new public subsidy for [wind farms] and change the law so that local people have the final say on wind farm applications", arguing local opposition to some projects justifies a crackdown on the relatively low cost renewable energy source.
Related articles
Conservative sources have defended the controversial move, arguing there are sufficient onshore wind projects in the planning system to meet the UK's renewables targets for 2020.
However, the move has angered wind energy developers, with trade association RenewableUK accusing the party of pursuing a "breathtakingly illogical and therefore idiotic" policy. It also sparked 

criticism from Labour and the Lib Dems, fuelling hopes among renewable energy developers that a minority Conservative government may struggle to deliver on its wind farm pledge.
However, in addition to being angry at the likely impact on their project pipelines, wind energy developers also remain in the dark as to how the Conservative policy would work in practice.
Specifically, industry sources have raised questions over when subsidies for onshore wind farms would be ended under a Conservative government, what happens to projects in the planning system awaiting a final decision, and whether the pledge to end "any new public subsidy" for wind projects covers small turbines or projects with one or two large turbines, such as those deployed on industrial estates that may not qualify as wind farms?
Conservative sources have declined to provide further details on how the policy would work in practice, butBusinessGreen understands the plans could leave the door open for the small turbine market to continue and may even allow for one or two turbine projects, particularly if they include an element of community ownership.
"The focus for cuts to onshore wind would be on subsidies for larger wind farms," a Conservative source said, adding that the party remains "supportive of community energy - when it's done in a sensible way".
Currently, small wind turbines and projects with less than 5MW of capacity can qualify for subsidies through the feed-in tariff (FiT) incentive scheme, while larger projects benefit from the Renewables Obligation (RO) scheme and recently introduced contract for difference (CfD) regime.
Barring onshore wind farms from accessing the RO and CfD would effectively bring a halt to the development of new large onshore wind farms, while allowing small turbine projects and small-scale community or business-owned projects to proceed under the FiT, subject to planning approval.
Industry insiders warned leaving the FiT open to wind energy developers who have previously focused on the RO would create its own challenges, as any surge in small projects could quickly burn through the available budget for the scheme.
However, the chance of a reprieve for small turbine developers is likely to be welcomed by a fledgling industry, whichaccording to a report last year from RenewableUK could be worth over £860m a year by 2023.
"The UK's small and medium wind industry would welcome any suggestion that they might be exempt from such a misguided policy," said Maf Smith, deputy chief executive at RenewableUK. "It would certainly be good news for the 3,500 people in the UK whose livelihoods depend on the small and medium wind sector.

"We would hope that these remarks are indicative of a more considered approach to onshore wind policy as a whole. With onshore wind already the cheapest source of low-carbon power, any move to limit it just heaps further cost onto the UK bill-payer, and risks the £900m that the industry was worth to the country last year."

Chinese accused of solar tax evasion

April 30:

Image: ThinkstockImage: Thinkstock

European companies have accused the Chinese solar industry of tax evasion.
This could mean there are hundreds of millions of euros in lost EU import duties, according to European solar industry initiative EU ProSun.
The company has accused China of shipping solar modules and cells to third countries and importing them into the EU to avoid tariffs.
China has previously been legally threatened by EU ProSun and it has now made another official request to the European Commission to launch an investigation into solar imports from Taiwan and Malaysia.
This could result in anti-dumping and anti-subsidy duties on all solar imports from the two countries where the exporters cannot show they were produced locally.
Milan Nitzschke, President of EU ProSun said: “Up to 30% of Chinese solar imports bypass EU import measures through fraudulent circumvention.
“European industry has already been devastated by illegal Chinese practices and the EU and European governments have lost substantial tax revenues at a time of great need.”

Turkey starts building first nuclear power plant

April 30:
Image: Thinkstock

Image: Thinkstock
Turkey has officially launched the construction of its first nuclear power plant.
The Russian-designed Akkuyu Nuclear Power Plant in Mersin on the Mediterranean coast is the first of three nuclear plants the country plans to build.
Turkey hopes the $22 billion (£14.3bn) project will boost its economy and reduce its dependence on fossil fuel imports.
Construction on the first 1,200MW reactor has begun.
Turkish Energy Minister Taner Yıldız was reported as saying: “[Economic] development cannot take place in a country without nuclear energy. If the Akkuyu plant had been built a decade ago, Turkey would have saved $14 billion (£9bn) in natural gas purchases and nuclear power would today cover 28% of the country’s electricity demand.”
The project is expected to create around 10,000 jobs and be completed by the end of the decade.

Amec Foster Wheeler wins 10 year Sellafield waste contract

April 30:
AMEC Foster Wheeler has won a 10-year contract to supply radioactive waste analysis to the Sellafield nuclear plant in Cumbria.
The multi-million pound contract will see the engineering consultant perform lab-based work to help in the disposal of waste via the safest and most cost-effective meansAMEC Foster Wheeler has won a 10-year contract to supply radioactive waste analysis to the Sellafield nuclear plant in Cumbria.
The multi-million pound contract will see the engineering consultant perform lab-based work to help in the disposal of waste via the safest and most cost-effective means.

“The long-term nature of this contract is an endorsement of the exceptional skills and expertise within Amec Foster Wheeler,” said company spokesman Greg Willetts.
“Our laboratories have been delivering high quality, reliable analysis results since the 1980s and this award confirms our position as a leading provider of decommissioning services to the UK nuclear industry.”

Amec Foster Wheeler will be investing in new equipment and laboratory infrastructure to deliver the contract and will also be creating jobs increasing employment within the laboratory, including further expansion of the company's laboratory technician apprentice scheme.
Amec, which has its European engineering division headquartered in Darlington, last year agreed a £2bn deal to buy US firm Foster Wheeler, which has offices in Middlesbrough. he rebranded Amec Foster Wheeler employs about 700 people in the combined Tees Valley operations, with an additional 200-plus in its environmental services headquarters in Newcastle. An additional 500 people are employed across the region off-site or on project work.
In the meantime, Amec Foster Wheeler said it was consulting on about 100 onshore posts in Aberdeen. A company statement said: "statement said: "We have started a consultation process with our Aberdeen-based employees about the impact on jobs of the downturn of the oil and gas market.
"The consultation process includes looking at mitigating the impact through a variety of measures, including other cost savings, and moving people to the company's other diversified operations.
"Currently we are in consultation with 149 individuals about 64 potentially affected roles."

Iowa group looks to Moline’s heavy use of alternative fuels

April 30:
MOLINE, Ill. (AP) - Moline’s use of alternative fuels to power its city fleet has caught attention across the border in Iowa.
The (Moline) Dispatch ( reports at least 80 percent of the western Illinois city’s vehicle fleet runs on something other than gasoline. That includes electric cars, as well as vehicles and equipment that use an 85 percent ethanol blend, compressed natural gas, propane and biodiesel.
The Iowa Clean Cities Coalition has asked Moline’s fleet department to lead presentations on its efforts this year at the Iowa League of Cities conference in Cedar Rapids and the Growing Sustainable Communities Conference in Dubuque.
Moline fleet manager J.D. Schulte said the alternative-fuel vehicles are purchased when it makes financial sense, but said that isn’t always the case. He said the environmental impact is secondary but still important.
“You don’t do green for the headlines,” Schulte said. “You make sure it makes sense for the city.”
The city has bought three electric cars and seven natural gas-powered vehicles and equipment in the past year. A city analysis of the electric cars’ cost over their lifetime, including purchase price and maintenance, says each will save Moline $5,043 over buying a sedan that uses gasoline.
Buying a Ford F-250 pickup that runs on natural gas saves $25,611, according to the city’s analysis. The city bought four.
Schulte said the city could replace as many as 12 vehicles with natural gas-powered models this year, and has six propane-powered commercial mowers on order.
“If it makes sense financially to do this, and it’s good for the community and environment, then it is the right thing to explore,” Schulte said.

Pregnant oil company employee threatens to jump out of window for non-paid salary

April 30:
A pregnant employee of an Aktobe-based oil company threatens to jump out of a window because she has not been paid any salary for months, Tengrinews reports.
Lines Jump LLP, the oil company, owes its employees over 20 million tenge ($107 thousand) in wages. According to the company, the delay in salary payments was caused by the crisis. In February, at the request of the Prosecutor’s office and in response to the claims filed by the employees, the local labor inspection conducted an investigation into the situation and fined the company. The company was supposed to pay the outstanding salaries to the employees by February 5, 2015 but failed to do so.
According to the 5-month pregnant employee, Lines Jump LLP oil company has not paid her and 40 other employees for seven month. Her colleagues even sent a letter to President Nazabrayev asking the government to interfere, but to no avail so far. They are also planning to visit the Akim (Mayor) of Aktobe Oblast to file more complaints.
Meanwhile, Kuanysh Amantayev of the Employment and Social Programs Department at the Aktobe Akimat (municipal authorities) reassured that the situation had been taken under control. According to Amantayev, the General Director of the oil company Vitaliy Li provided a guarantee letter. Li promised to pay the outstanding salaries by the end of the day.

Saudi Arabia could cause the death of the OPEC

April 30:

Staff work on solar panels in Hami. China has increased investment in renewable alternatives to oil

For some, the influence on the global price of oil that the Organisation of the Petroleum Exporting Countries (OPEC) has held in the global economy makes it little more than a cartel. For decades, the group has carried significant sway over global energy policy, with its primary role being seen as ensuring a stable price around the world.

However, the collapsing price of oil and an increase in the prominence of rival markets and technologies have led to concerns that OPEC’s influence is waning. Surprisingly, while this has caused great concern to many member states, the dominant OPEC nation – Saudi Arabia – is seemingly content to let things progress the way they have been.
Formally created in 1960 as a response to the influence the major oil companies – known as the ‘Seven Sisters’ – had on the global industry, OPEC has always been dominated by Saudi Arabia, though other prominent members carry significant sway over global oil supply. The current full list of 12 members is Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela.
OPEC nations first flexed their collective muscles in 1973, when the Arab members – known as the Organisation of Arab Petroleum Exporting Countries – pushed up the price of oil as a response to the US government’s aid given to Israel during the Yom Kippur War. Libya embargoed oil shipments to the US, quickly followed by Saudi Arabia and other Arab OPEC states. The oil embargo lasted for around six months, forcing the price per barrel up from just $3 to $12. However, its impact on the global oil market has had far longer lasting effects.
In retaliation for the oil embargo, the US announced rationing of oil in the country, and imposed a national speed limit of just 55mph to conserve fuel, and a series of daylight saving initiatives. However, the biggest effect was the export ban US authorities placed on the domestic oil industry, which remains in place more than 40 years later.
Saudi dominance
The creation of OPEC represented a massive shift away from private ownership of the oil markets, instead giving power to the nations where the oil was located. By collectively deciding on production levels, OPEC countries have been able to keep the price of oil relatively stable for the last 50 years. Meeting twice a year in their Vienna headquarters, the OPEC nations operate on a one member, one vote system, giving each an equal say in policy. However, it is perhaps for this reason Saudi Arabia is growing tired of the constraints of the group, with the country controlling 16 percent of global oil, all of which is far easier to access than other nations’ fields.
As well as its ease of access, Saudi Arabia is one of the only OPEC members that enjoys a relatively stable political situation. Libya has been engulfed in trouble ever since Colonel Gaddafi was ousted in 2011, while Iraq continues to be deeply split between warring factions. While Venezuela has comparatively high levels of oil, its political leaders have run its economy into the ground and squandered any potential oil-related benefits.
Iran is perhaps the biggest rival to Saudi Arabia’s OPEC dominance. While it does not enjoy the levels of oil that Saudi Arabia sits on, its resources are relatively plentiful. However, it has been hampered for the last 35 years by the sanctions imposed on its economy by Western nations. With relations thawing considerably in the last year, Iran could be well placed to benefit from opening up its oil exports to the rest of the world.
Despite the huge demand for oil, Saudi leaders have been predicting its demise for well over a decade. In 2000, former Saudi oil minister Sheikh Yamani told The Daily Telegraph there would be far less demand for oil by 2030 as a result of new technologies taking over. “30 years from now there will be a huge amount of oil – and no buyers. Oil will be left in the ground. The Stone Age came to an end, not because we had a lack of stones, and the oil age will come to an end not because we have a lack of oil”, he said. “On the supply side it is easy to find oil and produce it, and on the demand side there are so many new technologies, especially when it comes to automobiles.”
Yamani also predicted a crash in the price of oil, although his timings were slightly off: “I have no illusion – I am positive there will be, some time in the future, a crash in the price of oil. I can tell you with a degree of confidence that, after five years, there will be a sharp drop in the price of oil.”
Cutting loose
In an article published at the start of the year on industry website, analyst Elias Hinckley wrote that the sharp fall in the price of oil, and Saudi Arabia’s determination to maintain high production levels, reflected not only the end of OPEC’s influence, but was also a sign the country wanted to generate a more substantial share of the market for itself through its easier to access resources. “The theory assumes that this can be done in some kind of orderly bring-down of prices where the Saudis can find an ideal price below the production cost of this marginal oil production but still high enough to maintain significant profits for the Kingdom while this market correction plays out”, wrote Hinckley. “The assumption is that, following the correction, there will be a return to business as usual along with higher prices, but with Saudi Arabia commanding a relatively larger share of that market.”
Hinckley also suggested “an alternative rationale is that Saudi Arabia is fighting an economic war with oil; a strategy designed to economically, and in turn politically, cripple rival producers Iran and Russia because the governments of these countries that depend on oil exports cannot withstand sustained low prices and will be significantly weakened”.
Despite both strategies being quite likely, there is also a third, longer-term motivation behind Saudi Arabia’s increase of production, according to Hinckley. This goes back to former oil minister Yamani’s prediction in 2000 that the demand for oil will have evaporated by 2030: “Saudi Arabia has embarked on an absolute quest for dominant market share in the global oil market. The near-term cost of grabbing that market share is immense, with the Saudis sacrificing potentially hundreds of billions of dollars if low prices persist. In a world of endless consumption, this risk would be hard to justify merely in exchange for a temporary expansion of global market share – the current lost revenue would take years to recover with a marginally higher share of global supply. But in a world where a producer sees the end of its market on the horizon, then every barrel sold at a profit is more valuable than a barrel that will never be sold.”
Renewable uprising
Although oil has been the dominant fuel for the global economy for many decades, it is widely assumed its days are numbered – certainly in the medium term. Whereas much has been written about the failures of certain renewable technologies – including their unreliable nature and high cost of installation – the industry has, in recent years, begun to grow at a rate that suggests it is finally ready to be taken seriously.
Solar power has enjoyed a rapid upsurge in use, with the cost of the technology falling sharply and the number of solar plants being installed across the world increasing. China has even taken a prominent role in the industry, heavily investing in solar firms.
Car manufacturers are increasingly looking at ways to run on electricity rather than petrol. It is thought the next decade will see these types of cars become far more prominent on the roads as charging infrastructures are improved. Even big technology companies such as Apple and Google are thought to be on the verge of entering the electric car industry.
Alongside the new efficiencies in renewable technologies, there have been firmer commitments from the world’s two leading economies (the US and China) to make serious cuts to their carbon emissions. Last year, US companies invested around $52bn in clean energy technologies, up $4bn on the previous year’s figure. By contrast, China snapped up $89bn worth of clean energy investments, considerably more than 2013’s $68bn.
Things to come
The likely result of Saudi Arabia’s actions will be severe economic pain for Iran, Russia, Venezuela and other oil-producing nations that have weak economies. It could also lead to further political turmoil in those countries. With Russia intent on seizing back parts of Eastern Europe and ensuring its dominant role as Europe’s oil and gas supplier, a collapse in the price of oil could not come at a worse time. Sanctions on its economy and oil industry as a result of its actions in Ukraine mean it can ill afford to lose more money from a drop in the price of oil.
Russia’s state-owned energy company
Rosneft has seen its profits tumble as a result of OPEC maintaining high production. Rosneft President Igor Sechin told a room full of delegates at the International Petroleum Week event in London in early February: “A group of countries in the Middle East is pursuing its policy and considers the interests of other members of OPEC as secondary.”
Sechin has also warned the American shale revolution might not be the long-term solution to the US’s energy needs that some may think. “We know that revolutions are short-lived and the US production increase is not well supported by reserves”, he told the conference.
For the US shale industry, the falling oil price will mean a lot of its costly projects will no longer be seen as financially viable. This may crush a large number of smaller US oil-producing companies, but the larger ones should be able to weather the storm. However, President Obama’s refusal to pass the Keystone XL pipeline extension project in February could hamper the industry’s growth yet further.
Saudi Arabia is also concerned about the warmer relations between the US and Iran. With ongoing negotiations over a potential deal allowing Iran to develop nuclear power and a softening of sanctions on its key industries, Iran could be on the verge of becoming a wealthy and influential neighbour to Saudi Arabia.
Ending exploration
With the price of oil languishing below $50 per barrel, it is proving increasingly difficult for producers to justify investing in new wells. North Sea oil exploration has been dramatically scaled back by UK operators in recent months, while a number of US shale producers are starting to worry they might not be able to afford new digs.
In a note to investors in February, analysts Capital Economics said 2015 would likely see a continuation of oversupply of oil. Commodities economist Tom Pugh wrote: “It is clear that there are no signs of OPEC’s output being cut in response to lower prices.”
Surprisingly, it is not just Saudi Arabia that has been leading the way in pushing up oil production. According to Pugh, a large amount of the increase in oil production from OPEC came from Iraq during December, with the country providing the second largest amount of oil to the global supply last year. The country is reportedly producing 3.6 million barrels per day, which represents a new record, despite the political troubles across large parts of the country and neighbouring Syria.
Pugh added: “Much of this increase has come from the Kurdish region after the two governments finally agreed a revenue sharing deal. The increase in Iraqi production was only partly offset by further falls in Libyan output due to strike action. The upshot is that supply should continue to remain ample over the next year. But we expect lower growth in non-OPEC production and higher demand to put some upward pressure on oil prices in 2016.”
Hinckley concludes: “Saudi Arabia no longer needs OPEC.” Because of global efforts to cut carbon dioxide emissions and the increasing effectiveness of renewable energy technologies, oil’s future is looking increasingly uncertain. As a result, Saudi Arabia has realised it needs to get all its oil out of its wells as quickly as possible if it is going to make any money from it at all. Hinckley says: “The Kingdom has effectively opened the valve on the carbon asset bubble and jumped to be the first to start the race to the end of the age of hydrocarbons by playing its one great advantage – a cost of production so low that it can sell its crude faster, and hoping not to find itself at the end of the age of oil holding vast worthless unburnable reserves.”
The effects of such a strategy are likely to be profound both politically and economically. The days when OPEC held sway over the global energy market may not be over just yet, but, with the leading producer looking to preserve its own interests over the wider industry, it seems the organisation is less concerned with regulating global prices and more about getting any money for oil while it can.

Where From Here For The Oil Price?

April 30:

The first topsy-turvy quarter of the current oil trading year is behind us, with both benchmarks – Brent and WTI – currently trading above the stated period’s average price well in to the second quarter. In fact, some commentators are quite keen to flag-up the fact that both benchmarks are hovering around price levels not seen since mid-December.
Using Brent, the global proxy benchmark, as a measuring rod – it is also worth remembering that mid-December’s mid-$60 per barrel price level was a decline from a higher mark, that continued into the next month with bearishness entrenched all around. April’s return to the stated level achieved recently is part of a price uptick, if not some sort of an overblown bullish rally.
It also marked the first full month wherein Brent, WTI futures contracts as well as the OPEC basket of crude oils ended each week higher than the one before (see graph below). Not getting ahead of ourselves, all that conveys is that we’ve probably crossed the bottom of this cycle for Brent and the benchmark is likely to stay at or above my equilibrium price of $60.
Friday oil benchmark closes 2 January to 24 April, 2015, using 21:30 GMT as a cut-off point © Oilholics Synonymous Report, April 2015
Oil benchmark Friday closes 2 January to 24 April, 2015, using 21:30 GMT as a cut-off point © Oilholics Synonymous Report, April 2015
What becomes crucial from here on is the demand-side of the debate. In that respect, while the global economy may not be firing on all cylinders there are certainly signs of demand picking up, says Jason Schenker, President of Prestige Economics.
“The present fiscal year would be one of consolidation with demand in emerging markets, especially China picking up pace. Furthermore, OECD demand could also pick up as cheaper fuel stimulates usage. At the same time, capital expenditure cutsby producers would serve to reinforce perceptions of supply diminishing to a certain extent if not dramatically, while OPEC is most likely to hold production levels when it meets next in June.
Schenker also shares my skepticism about an imminent and speedy return of Iranian crude to the global supply pool. Even if we were to sidestep a major factor such as Iran’s nuclear compliance with the international community that is needed for it to re-enter the market, chemistry of a cruder kind is a great leveler.
“Refineries that had been receiving Iranian crude years ago, retooled their linear program models to adapt themselves to other blends and grades of crude, in wake of sanctions imposed on the Islamic Republic. In the case of many refiners, the Saudis stepped in to help replace some of the lost Iranian barrels,” Schenker says.
Of course, retooling can take six months, perhaps much longer. Schenker feels what most people ignore is that purely from a petrochemical standpoint you may well run any grade of crude through any refinery. However, what you get at the end of that product wise may not be optimal with more sludge, more slurries, etc.
“What refiners want is optimized yield comprising of more distillates, more gasoline, and not hefty sludge piles via a non-optimized refinery. Linear program models are quite complicated as is the chemistry. This needs to be worked out and can be, but it is not an instantaneous process. That’s if and when Iranian crude is gradually allowed in to the market in meaningful volumes in the first place!”
Iran aside, at this juncture, it is worth assessing how the market is reacting, and consensus is that while both benchmarks are not skyrocketing anytime soon, oil prices are likely to strengthen towards the latter half of the year. I’ve found at least a dozen physical traders in recent weeks who seem to think so and the so-called paper traders are finding their voices too whether you use InterContinental Exchange (ICE) or US Commodity Futures Trading Commission (CFTC) data to draw your conclusions.
Starting with the former, money managers including hedge funds, increased their net long positions in Brent futures and options by 8,351 contracts to 271,929 in the week to April 21, the highest level since ICE’s records began in 2011.
Concurrently, data from the CFTC indicates that net long positions in WTI contracts held by our speculative friends rose by 40,994 contracts to 276,051 in the week to April 21.
While, there is no harm in subscribing to ‘the only way is up now’ theory, it is best to temper expectations between now and the year-end. There is still plenty of crude oil out there and you shouldn’t read too much into weekly Baker Hughes rig count declines as a harbinger of the demise of US shale.
The story of US shale, was, is and will remain a relevant supply-side saga down to ingenuity of the independents wildcatters who kick-started the whole thing in the first place, and the many of will make it work even at a $35 oil price.
As of now, I do expect to see Brent strengthening above $60 and possibly touching $75 come the end of the year. However, barring a major financial tsunami, it’s not going to dip below $30 and barring a major geopolitical shock or sudden supply constriction we won’t go above $75.
Finally, the spread between both benchmarks has widened yet again, but I expect it to narrow down over the course of the year to what I perceive to be a $5 per barrel norm in favor of Brent. All things being equal, while spikes are hard to call, I certainly do see higher oil prices than current levels next year.
The above commentary is meant to stimulate discussion based on the author’s opinion and analysis. It is not solicitation, recommendation or investment advice to trade oil and gas futures, options or products. Oil and gas markets can be highly volatile and opinions in the sector may change instantaneously and without notice.

UPDATE 1-Tullow too complicated to be takeover target - CEO

April 30:
LONDON, April 30 (Reuters) - The chief executive of Africa-focused Tullow Oil has ruled out a takeover of the company, saying the involvement of several African governments in its projects would make it too complicated to buy.
The oil industry, hit by a collapse in crude prices on the back of a global supply glut, is ripe for takeover deals as cash-rich players can target smaller firms, a reality highlighted by Shell's $70 billion move for BG.
But Tullow CEO Aidan Heavey said he had not received any offers for his company, which reported first-quarter trading in line with expectations on Thursday after making its first loss in 15 years in 2014.
"You will be negotiating with every country in Africa. It's a monumental task, it's a distraction, we don't even think about it," he said.
London-listed Tullow has oil assets spread across the African continent, including Ghana, Kenya and Uganda, where state oil companies require an involvement in energy projects.
The company is in the process of making cost cuts of around $500 million over the coming three years, a process which is expected to come at a one-off $45 million cost in the first half of 2015 to cover redundancies and closures.
Oil production from Tullow's fields was in line with expectations in the first quarter, as were revenue and cost of sales.
"Incremental positives within the release are a strong Q1 production performance and encouraging appraisal results from Kenya's South Lokichar basin," said analysts at Barclays, who rate Tullow's stock as overweight.
Shares in Tullow were up 0.1 percent at 0844 GMT.
Tullow shares reached a five-month high earlier this week following a favourable ruling by an international maritime tribunal that allowed it to continue development of its TEN oil field off the coast of Ghana, removing a major uncertainty obstacle.
Heavey, an oil industry veteran with over 30 years experience, said he expected oil prices to recover to around $90 per barrel within the next couple of years.
"Supply won't meet demand in a couple of years," he said, referring to growing demand and an emerging supply gap due to the lack of major exploration over the past years. (Reporting by Karolin Schaps; editing by Jason Neely and Pravin Char)