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News Update: 13th February 2012 |
Greetings!
Please find enclosed a copy of our weekly news summary. Please feel free to pass this to anyone who could benefit from it.
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Energy Investment | |
China's State Grid to Take a 25% Stake in REN
China's state power grid is to take a 25% stake in Portugal's national power grid, the second large scale Portuguese acquisition by a Chinese energy group in 6 weeks. Oman Oil, the only other bidder would acquire 15% in a deal that values the 40% being sold by the Portuguese Government at E529mn. In December, Three Gorges Corporation defeated rivals bids from EON, to acquire 21|% of Energias de Portugal (EDP). FT, 3rd February.
A Merger Fit for World Domination
News that Glencore, the world's largest commodity trader and Xstrata, a large mining company, are nearing a merger deal brings a long but expected courtship to an end..... Glencore is the undisputed champion of physical commodities trading and has been busy accumulating mines on its own account. ...Xstrata is a miner of thermal coal, cooper and nickel....The joint group will be in a position to go an acquisition spree world-wide. FT, 6th February.
UK's First Carbon Capture Plant Opens
Energy Secretary Chris Huhne has launched a carbon capture test programme in Yorkshire. The project is a partnership between SSE, Doosan Power Systems and Vattenfall and will see innovative technology capture the equivalent of up 100 tonnes of carbon emissions a day from SSE's Ferrybridge coal-fired power station. TUNSE/Water, Energy & Environment, 2nd February.
Utility Credit Ratings Critical to Raising Capital
For an industry that is among the most capital-intensive in the United States, failure to maintain investment grade could have significant upward cost implications. Energy Biz News, 8th February.
EU Could Require E210bn Power and Gas Grid Investment
Investments of about 210bn Euros ($274bn) in gas and power grid upgrades are required if the EU wants to become a single energy market by 2014, EC energy Chief Guenther Oettinger said....Europe needs to invest in new electricity and gas grids in the next 10 to 15 years to give all EU member-states access to a pan-European market. Bloomberg, 7th February.
www.globalenergyadvisory.com |
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Gas | |
Reduced Russian Gas Flow
Several European countries reported reduced flows of Russian gas on Thursday (2nd), as bitter cold caused soaring demand, and although overall supplies were adequate the issue had echoes of a 2009 crisis caused by tensions between Moscow and Ukraine.....The EU's executive Commission has said supplies to Italy via the Austrian border are down by 10%. Poland reported a 7% decline, and Slovakia said it suffered a 30%. Russian gas export monopoly Gazprom voiced surprise, saying it was sending as much gas as it could spare to Europe and that Ukraine, across which the fuel flows through pipelines, must be taking more than its contracted share. Reuters, 3rd February.
Analysis - UK Gas Curve Signals U.S. LNG Imports
Forecasts that cheap gas from the US will one day reshape the global natural gas market are increasingly commonplace. Now the first hard evidence is beginning to emerge. Forward prices on the UK gas market suggest that traders are already pricing in expectations of a flow of gas from the US to Europe.The market appears to be preparing to receive liquefied U.S. LNG shipments 3yrs from now, even though companies have not yet broken ground on export plants in the Gulf of Mexico. Reuters, 3rd February.
Failed Shale in Poland
Exxon Mobil's failed shale-gas wells in Poland may hobble the nation's effort to become one of the world's major energy sources and dismantle Russian dominance of Eastern European natural-gas markets....Exxon said 2 exploratory wells drilled in a Polish shale formation last year weren't commercially viable. The gas discovered in the wells, Exxon's first in Poland, failed to flow in sufficient quantities to justify bringing them into production. Bloomberg, 2nd February.
Cyprus
A raft of legislative proposals relating to hydrocarbons has sprung up in the wake of Noble's announcement of a gas bonanza off the island's southern shores. Pending before the House Commerce Committee, there are currently 3 items of legislation. What the bills do have in common is that they are vying to become part of the legal framework governing natural gas, significantly, before the government issues a call for interest for the 2nd offshore licensing round. .....A reading of these bills unveils ideas that are at odds with one another over how the natural gas should be handled post-discovery. Cyprus Mail, 5th February.
India
If Iran were to shut off the Strait of Hormuz, it would deprive India of nearly 90% of its long-term LNG supplies at a time when the country's domestic production is dropping and demand is climbing. www.interfax.com, 7th February.
Canada
Canada's National Energy Board said it backs plans submitted by BC LNG Export Cooperative to ship LNG from a port in Kitimat, British Columbia, primarily to Asian markets. The export license is for the equivalent of 84bn square feet of natural gas per year for a 20yr period. PO Review, 6th February.
www.globalenergyadvisory.com
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Oil | |
Iran Update
The situation went down hill last Friday as Iran's supreme leader, Ayatollah Khamenei, added his voice to those seeking to push on with the uninspected nuclear program despite the growing pressures on his country......(He) attacked the US and its allies for sanctioning and threatening Iran. He warned that any attack on Iran would be 10 times worse for the interests of the US. ...Last week the US Senate banking committee approved a new measure aimed at cutting Iran off from the Society of Worldwide Interbank Financial Telecommunication (SWIFT). The measure is aimed at forcing SWIFT to ban Iranian banks from exchanging money with banks around the world. If fully implemented, this would be catastrophic for Tehran as it could no longer conduct foreign trade. Buyers of Iranian crude say it is already difficult to find ship owners willing to accept Iranian cargoes because of the web of sanctions already tightening around Iran's trade. There is currently a bill in the US Congress that would prohibit a ship from visiting a US port that has stopped at an Iranian port in the previous 180 days. The sanctions are already affecting Iranian oil shipments from the Egyptian port of Sidi Kerir which Tehran uses as a transfer point for oil going to European ports. Here the problem is insurance for the cargoes which is being withdrawn because of the EU's embargo. ...There is no telling where all this is going. The Iranian economy is clearly being hurt by the sanctions in place already and it is likely to suffer still greater harm in coming months. Unemployment is increasing, businesses are closing, and prices are soaring. Exchange rates are collapsing so that the country is having trouble importing food for its 74mn people. PO Review, 6th February.
Uganda
The Ugandan government has finally awarded the U.K. oil firm 3 production licenses brings "extra flexibility" to its balance sheet. Some who follow the company suggests that Tullow could double production during the next 5 years. Rigznone, 3rd February.
Australia
Shares in Woodside Petroleum fell in early trading after comments overnight from Royal Dutch Shell that the European energy giant intends selling its remaining ¼ stake in the company. Shell failed to win Australian government approval to take full control of Woodside, selling down part of its holding in late 2010, and stoking speculation it would be only a matter of time before it sold off the balance of its holding. Sydney Morning Herald, 3rd February.
BP Is Preparing A Robust Defence
BP is preparing a robust defence for the forthcoming limitation and liability trial relating to the Deepwater Horizon oil spill that is due to begin in New Orleans on Feb. 27 2012, according to Chief Executive Bob Dudley....Last month, the firm dismissed what it described as "speculation" from an analyst at investment bank Morgan Stanley that it would settle the Macondo case for $25bn, although it would not comment on whether it was in discussions with the US Department of Justice. Rigzone, 7th February.
Brazil
Brazilian state-run energy giant Petrobras said that it had discovered a new accumulation of oil and natural gas in a remote region of the Amazon rainforest. PO Review, 6th February.
China
Contemplating the possible disruption of oil supplies from Iran, China appears to be making moves toward cementing its links with energy newcomer Israel, a move that could outflank the US in the Middle East. PO Review, 6th February.
End of Week Oil Prices
Oil futures moved up a few dollars a barrel this week with NY trading above $100 before the weekly EIA stocks report, which showed demand continuing to fall, sent prices down to close at $98.71. In London, where cold weather demand and fears of an Iranian embargo have more of an impact, Brent futures settled at $117.20, the highest close since late July. The spread between London and NY prices is back up to $18.49 amid predictions that the spread will soon move above the $28 record set last fall as demand falls and another glut is starting to build at the Cushing, Okla. contract delivery site. The reversal of the Seaway pipeline which will drain some of the excess oil from Cushing is due to take place on June 1st. PO Notes, 9th February.
www.globalenergyadvisory.com
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Nuclear | |
US Life Extensions to 60 Years
A new research program headed by the US Department of Energy will begin to investigate the case for reactor life-spans of greater than 60yrs. There are 104 operating nuclear power reactors in the US, all of which are either boiling water reactors (BWR's) or pressurized water reactors (PWR's). Both these designs are types of light water reactor - referring to the fact they use water as a moderator. The US system sees reactors originally licensed for a period of 40yrs, with the possibility of a one-off 20yr licence renewal. The majority of operating US reactors have already received this and the remainder are expected to eventually apply. .....The safety and economic case has not yet been made for going beyond 60yrs, although operators and regulators are aware of some risks and benefits. World Nuclear News, 3rd February.
French Nuclear Safety Push To Cost Billions
France's nuclear regulator has introduced new safety standards which it is estimated will cost nuclear operator EdF Eur10bn. This contrasts with UK regulators, which recommended no additional nuclear safety measures beyond work already underway. France's nuclear plants will be required to install bunkered control rooms and flood-proof diesel generators, while EdF will set up an emergency response team. Cancellations of planned nuclear facilities in different countries contributed to an operating loss at Areva of E1.4bn in 2011. Areva will cut around 1,200 out of 6,000 positions in Germany by 2016. TUNSE/ The Chemical Engineer, 1st February.
AP1000 Approval
Westinghouse's AP1000 reactor design has received final approval from the US Nuclear Regulatory Commission, clearing the path for 12 planning applications to proceed. TUNSE/ The Chemical Engineer, 1st February.
Japan PM Declares Cold Shutdown at Fukushima
A state of cold shutdown has been achieved at Japan's Fukushima nuclear plant, with the prime minister saying: "the accident is now under control." Decommissioning work will begin at the plant this, though it could take 40yrs to complete. TUNSE/ The Chemical Engineer, 1st February.
Leak at Nuclear Power Station
A reactor at the San Onofre nuclear power station in California has been shut down after a small leak was detected in a steam generator tube. There was no risk to the public or workers, its operator said. TUNSE/ The Herald, 2nd February.
GE Hitachi
Even the most hardened anti-nuclear campaigner should be forced to think 'long and hard' about the option of using Britain's nuclear waste to generate low-carbon electricity in fast reactors, potentially for hundreds of years. GE Hitachi has offered to build a fast reactor within 5yrs to consume the plutonium stockpile at Sellafield, and carry the costs if it doesn't work. TUNSE/ The Guardian, 3rd February.
Japan
Chugoku Electric Power took its 820MW No. 2 reactor at its Shimane nuclear plant offline for planned maintenance. The shutdown leaves only 3 reactors operating in Japan out of a total of 54. PO Review, 6th February.
China To Slow Down Approvals Of Nuclear Projects
China will be cautious in pursuing nuclear power and is likely to approve only 3 or 4 projects each year.... It also conducted rigorous safety checks at all nuclear projects, including those under construction. No new project was approved or started last year. Asia Power News, 7th February.
TVA, Watts Bar Construction Delays
Construction efficiency is the priority for Tennessee Valley Authority (TVA) as it examines the Watts Bar completion project and the start-up date for the new reactor slips backwards. ..Having stood 55% completed since the 1980s, TVA began the Watts Bar project in late 2007 under Bechtel's management. There was an 'aggressive' 5 yr schedule for completion that would have had it start up this year, but by August 2011 TVA had taken back control of the work and set a new completion target of 2013. World Nuclear News, 7th February.
Oldbury and Berkeley Land for Reuse
A significant part of the land at both the Oldbury and Berkeley nuclear power plant sites in the UK can now be used for other purposes following the decision by the Nuclear Decommissioning Authority (NDA) to release the land for new development. Half of the original Oldbury site has now been released. In June 2011, following extensive grounds and building testing carried out by Magnox, 35 hectares of the site were de-licensed by the UK Office of Nuclear Regulation (ONR) and the land declared to be in a condition fit for any kind of re-use because it contains no radiation hazard. This land includes a popular nature trail and a historic visitor centre. World Nuclear News, 7th February. Global Energy Advisory, a nuclear licensed site could be a valueable asset in the long term, yet these are being released.
www.globalenergyadvisory.com
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Renwable Investment | |
Giant Wind Farms Can Alter Weather
Wind turbines being built to combat climate change are themselves having an effect on the climate. Research by the University of Illinois found that temperatures downwind of a wind-farm can fall by as much as 4C during the day, while at night the reverse happens. Some studies have taken this idea even further, proposing that giant wind farms could actually be used to control the weather. At present the impact on climate of wind turbines is minimal and highly localised, but this could change as the number of turbines grows. Britain is planning a tenfold increase in wind turbine numbers. TUNSE/ The Sunday Times, 5th February.
Vestas Resignations
Vestas has been thrown into turmoil after chairman Bent Carlsen and Deputy Chairman Torsten Rasmussen informing the board they will not be seeking re-election. The decision was announced as Vestas prepared to publish its annual report for 2011....In addition to Carlsen and Rasmussen, non-executive director Freddy Frandsen also said he will not stand for re-election. But perhaps more importantly, deputy CEO and CFO Henrik Norremark, who was appointed to the position by CEO Ditlev Engel, only last month, has announced his resignation. In 2011, Vestas recorded revenue of €5.8bn, a 16% fall against a target of €7bn. Windpower Monthly 9th February.
Global Wind Capacity Increased 6% in 2011
The largest addition came from China, which installed an additional 18GW and almost 3 times as much as the US with 6,810MW. China took its capacity to over 62GW with the US on 47GW. Other big increases came from India, adding 3GW to go to 16GW, and Germany, adding 2GW to go to 29GW. Germany was also the major developer in Europe, with Spain and the UK adding 1GW and 1.2GW respectively. Overall Europe installed 10GW to take its total to 96.6GW. Windpower Monthly, 9th February.
www.globalenergyadvisory.com
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Coal |
Coal Market to 'Struggle' on Supply Gains, Morgan Stanley Coal prices are forecast to decline this half as supply recovers from flooding in Australia, the biggest exporter, and demand in China and Japan slows, Morgan Stanley said....Morgan Stanley forecasts coking coal, used to make steel, to trade at an average spot price of $210 to $235 a m/ton during 2012, and thermal coal in a range of $110 to $120 a ton. Bloomberg, 3rd February. First Energy Benefits from Closing Coal Plants First Energy, announced it would close 6 coal-fired plants, blaming new federal rules aimed at slowing emissions of mercury and other toxins (MATS)....Without these plants, electricity prices in parts of Ohio dominated by First Energy are expected to nearly double at a power auction scheduled for May. The reason: There will now be a smaller fleet of power plants available to meet potential power needs. Julien Dumoulin-Smith, an analyst at UBS, predicted rates would rise from $126MWh per day to $200. For the 8GWs of power plant capacity owned by First Energy in the region, that would be an extra $216mn for the year covered by the auction. The Wall Street Journal, 3rd February. Mozambique Mozambique capital Maputo is hotting up as a magnet for companies aspiring to be significant South African coal exporters, following a Vitol joint venture deal. The port has been used on a small scale for coal exports which shippers were unable to move from the main export hub, Richards Bay Coal Terminal (RBCT), but is now the centre of major expansion plans for South African coal. Reuters, 2nd February. Malaysia's TNB to Build Bangladesh's $2.5bn Coal-Fired Power Plant Tenaga Nasional Bhd (TNB) is targeting to develop a 1,400 MW coal-based power plant in Cox's Bazar, Bangladesh worth US$2.5bn. The Bangladeshi government has already engaged TNB and had proceeded with a letter of intent indicating its interest to establish a joint venture for the purpose. Asia Power News, 6th February. Appalachian Coal Alpha Natural Resources said it will scale back production at many of its central Appalachian coal mines, citing weakening demand from its electric utility customers. PO Review, 6th February. China China should increase coal production and imports and curb exports to ensure ample supplies for power generation, as the country heads for another year of power shortage, the China Electricity Council said. Coal consumption by power plants will grow some 150mn/tonnes in 2012, which requires new coal supplies of more than 300mn tonnes in the domestic market, the council, an association representing power firms, said in a report on its website (www.cec.org.cn). The government should control the price of coal shipped to power plants, raise electricity prices in a timely manner, approve construction of more coal transport railways and power transmission lines, and deepen power demand management and restructure the economy to help balance the power market. China is the world's largest coal producer and consumer, and nearly half its production of more than 3.2 bn/tonnes is burned by power plants. Dawn.com Business News, 7th February. www.globalenergyadvisory.com |
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Energy Trading Dynamics |
Power Loop Flows Power loop flows, for example from Germany through its neighbours, are one of the key sticking points in developing the EU internal energy market, a senior EU energy regulator said....Power loop flows occur when a country does not have enough internal grid infrastructure to handle new production, for example from wind, and so the power is diverted through neighbouring countries' grids and then back into a different part of the producing country. Such loop flows have become more common since Germany developed large amounts of wind power in its northern states, but did not develop the grid infrastructure to transfer the output south to where the demand is. Platts, 2nd February. Global Energy Advisory Comment: As we said earlier, there could be 210bn Euros ($274bn) of investment is for gas and power grid upgrades across Europe. That's rather a large number that should be in a cost benefit analysis somewhere. Energy Price DiscountsSantee Cooper, South Carolina's biggest power producer, is offering discounts as high as 45% to businesses moving to or expanding in the state - but the deal may not help existing customers such as Alcoa. ...Effective immediately, Santee Cooper is offering new industrial customers a 45% discount in the 1st yr, 30% the 2nd, 20% the 3rd and 10% the 4th. The discount will be available through 2014. Environmental Leader, 3rd February. Oil Industry Sees No Threat from Electric Car The biggest oil companies in the world have calculated that few, if any, of today's drivers will see electric cars out number gasoline and diesel models in their lifetimes. While politicians and green lobby groups insist the future of transport is electric, in the past two months BP and Exxon have released data which points to electric cars making up only 4-5% of all cars globally in 20-30 years. Moneycontrol.com, 5th February. Cash Incentives to Change Supplier Rising energy bills have caused tens of thousands of households to switch their gas and electricity accounts from one of the 'big 6' suppliers to a smaller, cheaper supplier in recent months. According to website Uswitch.com, 35,500 households switched from a big to a small supplier in January alone, a 10-fold increase on last September. Now in a bid to lure lapsed customers back, some of the large energy companies are offering households cash incentives worth over £100 to return. The Telegraph, 6th February. www.globalenergyadvisory.com |
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Our news update comments are provided by our Advisory CEO, Aily Armour-Biggs, any comments then contact her on aily@globalenergyadvisory.com or +44 207 692 0888.
Sincerely,
Anthony Francis
Global Energy Advisory |
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