Oil & Gas

Build cost inflation threatens new gas economics

13 Jan 2012

Australia’s latest liquid natural gas mega-project will cost 70 pct more than initially envisaged. The French and Japanese backers should still be able to justify the $34 billion price. But cost inflation makes life more difficult for U.S. groups planning big LNG export facilities.

China will fudge Iran oil sanctions

12 Jan 2012

Simple disobedience of the U.S. freeze would give China cheap oil, but it can’t afford the cost of angering Uncle Sam. Total obedience would push up prices, and could spark social unrest in China. But Beijing can probably find a middle way: do just enough to placate the Americans.

Iran sanctions shouldn’t shift oil price

10 Jan 2012

The latest sanctions are not enough to justify an oil price spike. Sure, the lack of foreign equipment may bring Iran’s oil production down, but not in a hurry. Globally, crude supplies will remain fairly steady. A serious military escalation in the Gulf would change that.

Shale oil set to take edge off crude price

9 Jan 2012

Gas from shale has flooded the U.S. market, providing 20 pct of supply and squashing prices. Rock-derived oil, by contrast, may add only about 4.5 pct to global supply by 2020. But that would still cover the expected rise in Chinese demand and help keep a lid on crude inflation.

Tighter sanctions push Iran to unpleasant choices

9 Jan 2012

The Islamic Republic can probably cope with a decline in oil revenue and restrictions on its central bank. But tighter sanctions will worsen already high inflation and put extreme pressure on the rial. President Ahmadinejad risks political fallout, however he chooses to respond.

Iran sanctions’ impact could prove slippery

6 Jan 2012

Iran’s nuclear ambitions are a problem, but more sanctions may not be a solution, especially if China doesn’t cooperate. Iran will suffer, but may just become more determined. Without a realistic plan for unwinding sanctions if they fail, they will just distort oil markets.

Exxon’s Japan sale may not show downstream doubts

4 Jan 2012

With rivals like Conoco splitting off refining, investors are on the lookout for signs the Texas titan will join the trend. Exxon’s likely $5 bln exit in Japan isn’t a clear one. The group recently sank $25 bln into downstream projects. It may merely be ditching a weak asset.

Uncle Sam’s gas exports could sink global prices

3 Jan 2012

If energy firms win official approval, the U.S. may one day export up to a fifth of its gas – enough to shift the balance of energy power elsewhere in the world. But exporters risk undercutting the buoyant global prices that justify the huge capital cost of LNG projects.

Refiner’s credit crunch augurs wider pains

29 Dec 2011

Petroplus, Europe’s biggest independent oil refiner, may have to close plant if it can’t refinance a $1 bln credit line. Rivals may benefit if a poor result for the Swiss firm speeds reduction in refining capacity. But weak profit margins are likely to remain a widespread problem.

Oil services outlook firmer than stocks suggest

21 Dec 2011

Halliburton, for one, has lost a third of its value in six months. Yet capital spending by big energy groups, which becomes revenue for services firms, is set to rise to a record $600 bln in 2012 - even if oil prices decline. It’s hard to justify the sector’s low multiples.

Exxon bets its size, not troops, will help in Iraq

20 Dec 2011

American forces may have left, but the world-dominating U.S. oil giant is still willing to take risks. Exxon is playing Baghdad off with the Kurdish government, wagering the spoils are worth it and that the company is too important for Iraq’s own oil wealth to be forced out.

Fracking tie-up makes sense for shale-rich China

16 Dec 2011

Buying a piece of Frac Tech, a U.S. gas services company, for a mooted $2.2 billion would be a savvy move by China’s national energy majors. Frac Tech’s drilling technology should be easy to copy, and could help China unlock 140 years of gas supplies. The strategic benefits justify a premium price tag.

Oil price looks set for a reality check

15 Dec 2011

The oil market will remain in balance if the relatively rosy economic forecasts made by OPEC and others prove accurate. But at $106 a barrel, Brent looks vulnerable to a euro zone recession. If growth slows, OPEC’s new production ceiling might quickly seem overly generous.

OPEC desperately looking for a deal, any deal

13 Dec 2011

Global oil markets are fragile, but it might not matter whether the cartel maintains or increases its output target when it meets later this week. Quotas are already ignored. After OPEC’s last acrimonious get together, simply reaching a consensus would soothe buyers and sellers.

Frackers need to get ahead of the regulatory curve

12 Dec 2011

A report linking hydraulic fracturing to polluted drinking water is a significant setback for U.S. shale gas. Fracking’s economic benefits are huge, but drillers risk losing public support. To avoid a backlash, they should embrace more centralised regulation.

Exxon nicely hedged against its own green guess

8 Dec 2011

Tighter environmental rules will curb coal, boost cleaner gas and cause a leap in vehicle efficiency, the energy titan says. This rosy scenario has the growth in CO2 emissions halting by 2030. But despite hefty gas investments, a less green future would also suit Exxon dandily.

Europe’s Iranian oil ban is affordable but risky

30 Nov 2011

Attacks on the UK’s Tehran embassy have added momentum to calls for an embargo. As the economic slowdown hits demand, cutting off Iranian supply won’t be too hard. But a ban could be in place for years. And it’s not clear Saudi Arabia would be willing to fill the gap in the long term.

Sub-$90 oil would quickly restore OPEC harmony

29 Nov 2011

Spats like the one at the oil cartel in June once often stemmed from the hugely different crude prices members needed to balance their books. Now, even Nigeria’s ultra-low $20 a barrel mark six years ago is up to $80. If prices fall anywhere near that level, OPEC will reunite.

Pricey oil doesn’t insulate Russia from euro woes

25 Nov 2011

High oil prices have done little to boost Russia’s economic growth, which is now heading for a slowdown. More euro zone turmoil will hit Russia hard, even if prices stay resilient – which is far from certain.

KKR’s $7.2 bln Samson deal looks more BO than LBO

23 Nov 2011

The private equity firm and its partners are putting more than 50 pct equity down to buy the Oklahoma energy firm. That surely reflects more than Henry Kravis’ desire to bet on a hometown play. Banks are understandably nervous about lending against the promise of wildcat riches.