September 2011 Archives

The expansion of the Panama Canal is going to have much wider effects on the US than just larger ships calling ports; it is going to shape the country's port infrastructure and ship movements.

European refiners, that most endangered of species, are facing up to the realities of the markets they serve with an increasing sense of despair, it seems.

At a recent conference on European refining markets, organized by Platts, the scale of the fears gripping the sector were really brought to light with one senior figure from an Italian independent refiner daring to think the hitherto unthinkable.

President Barack Obama continues to travel the country trying to sell a weary American public on his jobs bill, but a bill he signed into law 14 months ago has already created hundreds, if not thousands of new jobs.

While US exchanges continue to argue that the Dodd-Frank Act could spur markets participants to flee for European or Asian markets once the law's mountain of new rules take place, lawyers and lobbyists are seeing a financial windfall as the rules are being developed.

Companies make decisions on operating multi-million dollar facilities in the long-term, so ConocoPhillips' announcement today that it is looking to find a buyer for its Trainer, Pennsylvania refinery -- with closure an option if a buyer isn't found -- clearly wasn't just cooked up in the past few days.

It merely takes an industry pipeline conference to make demonstrably clear the United States' reversal of fortune as a hydrocarbon producer. 

The Platts sixth annual Pipeline Development and Expansion Conference in Houston wrapped up last week, and the two days of presentations revealed a largely uniform message: We're building pipeline infrastructure as fast and vast as we can, and often it's still not enough to handle the burgeoning streams of crude, NGLs and natural gas.

The dysunfctional operations of Pemex, Mexico's state oil company have long been known, and long been the source of exasperation almost worldwide. Mexico analyst George Baker touched on some of those issues several months ago in this entry. Now, in this week's Platts Oilgram News column, Platts correspondent Ron Buchanan discusses the latest attempt to change Pemex' trajectory.

In recent years US and European clean-energy companies have rushed to cash in on China's renewables boom, selling solar photovoltaic panels and wind turbines as fast as Chinese authorities could erect them.

Now that relationship has turned sour, as Western companies complain that China is unfairly subsidizing its domestic renewables industry and stealing technology.

They talked about a lot of things at the Alaska Oil & Gas Congress in Anchorage earlier this week. There's the issue of a gas pipeline to take natural gas away from the North Slope. Does it go to Alberta and into the North American grid, or does it go to Valdez for export as LNG?

And what about the tax system? Is it discouraging production from existing fields? And how about the federal government? Will it bless more production in places long guarded by an environmental velvet rope?

But at the end of the day, there's really only one issue in Alaska.

US crude inventories tumbled 7.336 million barrels last week, government data showed Wednesday. While production recovered following the passing of a tropical storm, refiners were increasing throughputs, while imports remained at below-normal levels. Margins may be low on the Gulf Coast, but in the Midwest, refiners continued to take advantage of comparatively healthy crack spreads.

You can find more of this analysis in Platts weekly EIA/API analysis .

All the signs point to a continued softening of Chinese demand in this month's Platts survey. The most relevant figure might be the rate of growth year-on-year. It's still high, but it's less than 7%. It was regularly double-digits just a few years ago.

You can read Platts analysis here.

"Season of mists and mellow fruitfulness" was how the great English poet John Keats described autumn. But for OPEC, the next few months may turn out to be just a season of mists without the fruitfulness.

Casting a particularly gloomy veil over world oil markets is the outlook for the world economy. Earlier this week, the International Monetary Fund declared that the global economy was in "a dangerous new phase," with the risks "clearly to the downside."

As the Alaska state government announced Tuesday that the state's residents were going to get their smallest dividend check since 2006 from its permanent oil fund -- $1,174 compared to $1,281 last year -- many of the industry's leaders were just down the street, talking about a future both optimistic and pessimistic at the same time.

Generic and industry polls indicate development of the state's Marcellus Shale gas reserves has widespread support  --  but challenges at the local level indicate the support is far from universal.

While the politicians argue about the government's guarantee of a $535 million to bankrupt California solar panel manufacturer Solyndra, lost is the fact that after September 30 the Department of Energy could have a portfolio of as many as 32 renewable projects for which it could have guarantees for a total of  $18.7 billion in loans.

Among the 32 projects, of which Solyndra is but one, there are 22 that are geared to produce in the future approximately 5,688 MW of power from wind, geothermal, utility-scale and commercial and residential solar rooftop projects. The DOE could end up guaranteeing $16.8 billion of loans to those projects, or roughly $2.9 million per megawatt.

OPEC crude production is still rising, as the latest Platts survey shows. Total output from all 12 members rose to 30.13 million b/d in August from 30 million b/d in July.

It seems fair to assume that member countries will be keen to maintain output at least around current levels in the runup to the group's next meeting on December 14 because, effectively, everything is up for grabs.

Nearly a month after a US senator leaked confidential energy market information to the public in an attempt, he said, to show that big banks were artificially driving up prices, the calls for controls, probes and reforms have begun.

During a Commodity Futures Trading Commission meeting Thursday, CFTC Commissioner Jill Sommers, a Republican, called on the agency to set up a process to better protect confidential market data.

Given the recent stream of poor data and the warnings for the potential double dip recession, it comes as no surprise that over the last month as the economic doom and gloom set in the majority of the world's largest financial institutions have been quick to lower their oil price forecasts.

For Brent, the sudden rebel offensive into the Libyan capital Tripoli during the month and the speed with which the Transitional National Council have been able to take control over much country and its oil installations, has added a secondary bearish tone to the outlook.

Just before President Obama went before a restive Congress Thursday to offer what many people say looks like a job-creation agenda that actually isn't one, his Department of Energy tossed one jobs effort into the pot. As if every little bit helped.

Wednesday's announcement was a guarantee of about $272 million of a $344 million private-equity loan for solar roof installations on military housing. DOE says SolarCity's project, SolarStrong, promises nearly 800 jobs over five years. That's not a lot. (Some news releases about the project claim it will create thousands of jobs, which doesn't help the whole credibility problem that has developed around green jobs.)

SolarCity itself says it does not claim a specific number of created jobs, and it will give as many as possible to military families and veterans. But for DOE, it can't really be about the right-now jobs; it's about an energy-forward, decentralized power agenda.

The Energy Information Administration has posted a small commentary about product exports that reads a wee bit defensive.

As US exports of products have risen, along with the rise in gasoline prices toward the $4/gal level, it seems only a matter of time before it becomes a political issue. "Do you know that Big Oil is shipping gasoline abroad while charging you hard-working Americans outrageous prices at the pump?" That sort of thing.

It's almost a cliche to note that liquids rich plays are booming these days. So it comes as no surprise that rig counts in five such plays, including the legendary Bakken Shale oil field in North Dakota and Montana, hit record levels last week, according to investment bank Global Hunter Securities. Global Hunter uses both the Baker Hughes rig count and its own estimates to calculate the rigs working in assorted US plays.

Sunoco's announcement that it is planning on selling its remaining refineries in the Philadelphia area completes a more than 20-year transition in the company that is unprecedented in the recent history of the oil industry.

Consider the scope of the change: Sunoco went from a fully integrated oil company to a very big retailer over the course of less than 20 years, and it did so completely by decisions it took on its own. It didn't have to sell any assets because it was under a takeover threat (at least none that were known publicly); it wasn't cash-desperate; it didn't have some scandal that required it to take steps to get out of a certain business.

Petrobras is getting ready to embrace floating production, storage and offloading (FPSO) technology in the coming months. But as Gary Taylor notes in this week's PetroDollars column from Platts Oilgram News, other companies are not all following suit.

If there's a conclusion to be found in the Federal Trade Commission's latest report on the reasons for high gasoline prices, it's tough to detect.

Actually, it's easy, if you define conclusion as statements of fact. The report is full of them. For example: "This observed correlation between the increase in commodity prices and rising financial trader participation in futures markets has led concerned parties to focus on two possible mechanisms that could lead to purely speculative effects on spot prices."

Few, if any, companies have complained more frequently about the adverse impact that the Dodd-Frank Act may have on US futures and swaps markets than CME Group, parent company of NYMEX.

But while CME executives will readily discuss the unintended consequences they believe Dodd-Frank will have, from a flight to European markets to higher costs for US market participants, they have all been extremely hesitant to use the L word.

With celebrities getting arrested in the wake of last week's decision on the environmental suitability of the Keystone XL pipeline, it's time to take a look at just what is going to flow through it should it be approved.

So The Barrel spoke with Platts' head of Americas oil market coverage Esa Ramasamy, who has been dealing with Canadian crudes and their quality differences--which are vast--since he was stationed in Calgary several years ago. He's now in Houston.  

It's said that the line will be carrying "oil sands" or "tar sands." No; it will be carrying oil, though mostly produced from oil sands. Here's his overview:

Todd Kozel, the Executive Chairman and CEO of Gulf Keystone Petroleum, says the Kurdistan focused independent is not for sale.

Don't believe a word of it. Every junior resources company is for sale at a price, especially those that are publicly traded, have not yet booked reserves and have no established revenue stream.