|
|
|
News Update: 27th 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.
|
|
Energy Investment | |
UK& France Sign 4GW Interconnection Agreement
The UK and France have signed an agreement to develop a 4GW interconnector between the 2 countries. The deal creates another important energy trading link between the UK and Europe. Alderney Renewable Energy (ARE) and its partner Transmission Capital have won the rights to develop the project. www.awordaboutwind.com 20th February.
€1.1 billion Irish Sea Transmission Project Goes Ahead
Cable manufacturer Prysmian and Siemens have been handed a €1.1bn deal to build an undersea connection between England and Scotland to handle the additional power supplied by renewable energy. The Western HVDC link will run under the Irish Sea between Hunterston, western Scotland and the Wirral in north-west England. The project's customers are National Grid. The connection will have a rating of 2.2GW and will be the first undersea interconnection using a DC voltage level of 600kV. Its total length will be 420km. Windpower Monthly, 15 February.
Belgium
With just 3yrs to go before Belgium is due to begin phasing out nuclear power, the country is still grappling with basic questions about its plans, including whether the 2015 deadline has to be adjusted to ensure electricity supplies remain reliable. PO Notes, 20th February.
AES Sells Chinese Assets
AES Corp, the first U.S. power producer to enter China about 2 decades ago, is looking to sell all or some of its assets there, (Because they are)"hobbled by not being able to pass on higher coal costs in a state-regulated industry"....The sources said Arlington, Virginia-based AES, which has a market value of around $10.5bn, has recently hired an investment bank to kick off the process. A sale or sales could potentially be worth $300-$400mn. Reuters, 21st February.
US Bank Buys European Assets
Wells Fargo has agreed to buy an energy loan portfolio from BNP Paribas with a historical value of $11bn, according to people familiar with the matter. The deal would be one of the biggest disposals by a European bank as part of a pattern across the continent of shrinking balance sheets. It is the latest example of Wells, the biggest US bank by market capitalisation, snapping up assets from European institutions. FT, 22nd February. Global Energy Advisory Comment: If banks are selling energy loans then it doesn't demonstrate an appetite to lend more; which could pose a problem when energy policy is driving investment and we could need more margining capital.
Government's Energy Plans Could Cost UK Billions If Gas Price Falls, Warns Policy Exchange
Policy Exchange argued that the government's "flawed strategy towards the electricity generation market" is "unnecessarily gambling with bill-payers' money". "The view that future gas prices are likely to be high was a key driver of the government's Electricity Market Reform (EMR) proposals," it said. "No one can predict future gas prices but shale gas developments suggest prices may be lower than previously assumed." The think tank argues that EMR directs money to technologies such as wind power in preference to gas, and that if the price of gas comes down the UK would therefore no longer have the gas-fired generation flexibility to fully benefit, potentially meaning it would lose out on billions of pounds. It said: "The Department for Climate Change's own figures show that the costs of its electricity market plans will be £22bn higher if future gas prices are low, than if they are high." The Telegraph, 24th February.
Russian German JV
Inter RAO UES, a Russian state-run power generator and exporter, and the Germany utility RWE are holding talks over establishing a JV power plant company. The JV would oversee the operation of existing and new coal and gas-fired power stations in Germany, the Benelux countries and the UK. RWE confirmed it has meet with Inter RAO representatives once earlier this week but a spokesperson declined to comment on the status of ongoing negotiations. Gas to Power Journal, 16th February.
Frozen To Death As Fuel Bills Soar
The number of pensioners dying of hypothermia has nearly doubled in 5yrs, according to statistics from the NHS Information Centre. The increase toll of hypothermia coincides with a surge in energy costs. Age UK urged the government to take more action to protect those at risk from freezing to death. TUNSE/Daily Mail, 13th February.
www.globalenergyadvisory.com . |
|
Gas | |
Marcellus Shale
Canada's Talisman Energy is making even heavier cuts to its rig count in Pennsylvania's Marcellus Shale natural gas play and will not increase drilling until gas prices return to $4/Mcf. PO Notes, 20th February.
Salem Coal/Oil-Fired Plant May Be Converted To Gas-To-Power Generation
Dominion Energy is considering converting the 745 MW coal and oil-fired Salem Harbour Power Station in Massachusetts into a natural gas-fired power plant. The Virginia-based utility already had to scale down the operations of the plant in reaction to rising coal and oil prices in relation to gas prices. Gas to Power Journal, 16th February.
Mitsubishi to Invest in Gas in British Columbia
Japan's Mitsubishi Corp. will invest about C$2.9bn (US $2.9bbn) to acquire a 40% stake in Encana's undeveloped Cutbank Ridge natural-gas assets in North Eastern British Columbia. The deal comes as Japan scrambles to lock in global natural-gas supplies. FT, 17th February.
Mozambique
Italian oil and gas group Eni said it had made a new giant offshore natural gas discovery in Mozambique with a potential capacity of 212.5bcm. PO Notes, 20th February.
Cove Energy
Royal Dutch Shell announced Wednesday that it wants to buy East Africa-focused Cove Energy for $1.57bn (£992 mn). The news comes after Cove announced that it and its partner Anadarko had discovered further natural gas in the Lagosta field in Mozambique's offshore Rovuma Basin. Rigzone, 22nd February.
Azerbaijan Group Hones Gas Delivery Options
The consortium developing the giant natural gas field in Azerbaijan has narrowed down the number of pipeline options for transporting the gas to the European markets, rejecting a project backed by the Italian and Greek Governments. The Shah Denis consortium chose the Trans Adriatic Pipeline (TAP) for the Italian leg of the pipeline, dropping the rival interconnector ITGI (Interconnector, Turkey, Greece, Italy). The second phase of Shah Denis development is to cost $22bn. FT, 21st February.
Dolphin
The estimated resources of Israel's Dolphin offshore gas field have been sharply reduced, according to a statement by the Israeli partners in the licence. PO Notes, 20th February.
Rig Count
The number of rigs drilling for natural gas in the United States fell last week to the lowest level in 28 months as producers continued a rapid cut in activity in the face of ultra-low prices. The gas rig count fell for the 5th straight week, by 25 to 720. PO Notes, 20th February.
Black Sea Gas Discovery
ExxonMobil Exploration and Production Romania and OMV Petrom SA have made a potentially "significant" gas discovery in the Black Sea, offshore Romania. The Domino-1 exploration well encountered 232 feet (70.7 meters) of net gas pay, resulting in a preliminary estimate for the accumulation ranging from 1.5 to 3 Tcf or 42 to 84 Bcm, OMV said in a statement. Rigzone, 22nd February.
LNG Financing
LNG ship owners are injecting more of their own  capital into financing new LNG vessels as stricter financial regulations squeeze access to bank debt. However - even if cash-constrained - the inherently conservative project finance industry is adjusting funding to suit the realities of a more flexible, short-term LNG shipping market. "The main adjustment banks are making at the moment is the trend towards shorter charter contracts. Compared to the 20-year contracts we structured financing on in the past, we have to deal now with five to seven year contracts," Raymond Ko, director of transportation at ABN AMRO Bank, told delegates at the third International LNG Shipping Conference 2012 in London. www.interfaxenergy.com, 23rd February.
www.globalenergyadvisory.com
|
|
Oil | |
Iran
Despite the widespread scepticism that sanctions could ever bring about a change in Iranian behaviour, the sceptics apparently did not fully appreciate the economic pressure that the US, EU, and the rest of the OECD could bring upon a country if they really tried. Despite the reluctance of China and India to support the more extreme sanctions, a stream of reports suggests that the Iranian economy is suffering far more than is generally realized. Many major shipping companies will no longer visit Iranian ports for fear of running afoul of sanction rules that would prevent their ships from visiting US or EU ports. .....Another development in the offing is a plan to ban Iranian banks from using the international system for electronic banking known as SWIFT. Should this sanction go into effect, Iranian financial institutions would no longer be able to transfer funds electronically and would in essence be blocked from much of their foreign trade.... Tehran has clearly backed itself into a corner. If present trends continue, the country seems on course to have serious economic problems by summer. The Iranian military undoubtedly will have great troubles opening the doors to its secret nuclear programs to international inspectors so there is likely to be prolonged debate in Tehran over what concessions the country can make to ease the sanctions. It seems too early to call last week a turning point in the confrontation, but movement, for good or bad, is clearly taking place. PO Review, 20th February.
Iran Struggles to Find New Oil Customers
Tehran is trying to find buyers for 500,000 barrels of oil per day; or nearly 23% of what it exported last year to Chinese or Indian refiners. FT, 21st February.
Keystone Pipeline
A bill that would require approval of TransCanada's Keystone pipeline project passed the US House of Representatives by a vote of 237-187. PO Notes, 20th February.
Vitol Warns Oil Could Pass $150
The world's largest independent energy trader has warned that oil prices could surge this year to a record high due to growing geopolitical tensions in the Middle East. FT, 21st February.
Qatar Most to Lose From Hormuz Closure Threat
While all the Gulf states, including Iran itself, would suffer ( from the closure of Hormuz threat), Qatar's dependence of oil and gas exports and ocean going shipping means that it is emerging as particularly vulnerable, according to rating agencies and other analysts. FT, 21st February.
Prices
Brent rose above a 9 month high just shy of $124 per barrel on Thursday (23rd) due to heightened tension between Iran and the West together with a weaker dollar, and offsetting concern that a slowdown in the global economy could curb oil demand. U.N. inspectors sent to visit Iran's nuclear installations declared their mission a failure, a setback likely to increase the risk of confrontation with the West. But a larger-than-expected build in crude stockpiles in the United States following weak economic data from China and Europe depressed U.S. crude futures. Brent crude for April delivery was up 86 cents at $123.76 by 0948 GMT, having touched a session peak of $124.09 per barrel, the highest in 9 months. U.S. crude futures for April were 15 cents firmer at $106.43 after settling at a nine-month high of $106.28 a barrel the previous day. Reuters, 23rd February.
www.globalenergyadvisory.com
|
|
Nuclear | |
US Committed to Nuclear, Chu Tells Vogtle Workers
The Obama Administration is "committed to doing our part to help jump start America's nuclear industry," US energy secretary Steven Chu said during a visit to the Vogtle site in Georgia, where construction of two new reactors is due to start soon. World Nuclear News, 16th February.
Hinkley Campaigners Set Up Camp
Protesters have set up camp in an abandoned farm on the site of the proposed Hinkley Point C nuclear power station in Somerset. They are angry West Somerset Council has given EDF Energy the go-ahead for preparatory work before planning permission has been granted. TUNSE/ BBC (Web), 12th February.
Sellafield Faces Nuclear Option as Overspending Threatens Plant's Future
The future of the nuclear reprocessing operation at Sellafield in Cumbria is under threat because of cost overruns and missed deadlines. The 'Evaporator D' project was originally estimated to cost £90mn and was due to be completed as early as 2010; costs have now risen to an estimated £400mn, with completion no sooner than 2014. Sellafield is now run by the Nuclear Decommissioning Authority, which took over the site from the now defunct British Nuclear Fuels Ltd. TINSE/ The Independent, 14th February.
Spanish Nuclear
Spain's nuclear regulator has ruled that the Garoña nuclear power plant is safe to operate beyond its current licence's arbitrarily imposed expiry date, while Canadian regulators have agreed to a licence extension and restart permission for Point Lepreau following major refurbishment. World Nuclear News, 20th February.
Merger of Constellation and Exelon
The proposed merger of US utilities Exelon and Constellation Energy moved one step closer with the transaction being approved by the Maryland Public Service Commission (PSC). However, the Maryland regulator said that a number of conditions must be met. The Commission's approval lists 40 conditions, including requirements that the new company create a $113.5mn Customer Investment Fund to invest in energy efficiency and low-income energy assistance and provide a $100 rate credit to residential customers of Baltimore Gas & Electric (BGE) within 90 days. The conditions also include enhanced ratepayer protections, such as the strengthening of certain aspects of BGE's existing ring-fencing conditions and safeguards against the new company's ability to increase wholesale electricity prices by exerting market power. World Nuclear News, 20th February.
Only 2 Nuclear Power Reactors Remain in Operation in Japan
Only 2 of Japan's nuclear power reactors now remain in operation after Kansai Electric Power Company's Takahama unit 3 entered a scheduled inspection outage....Tests have now been completed at a number of plants, and Japan's nuclear safety regulator, the Nuclear and Industrial Safety Agency, recently endorsed the findings from the first units to complete the tests - Kansai's Ohi 3 and 4 - although the plants are still awaiting permission to restart. World Nuclear News, 21st February.
China to Build Six Nuclear Power Plants In Pakistan
Pakistan and China are close to a deal in which China will build at least 6 nuclear power plants throughout Pakistan. The Pakistan Atomic Energy Commission expects all 6 to come online by 2023. Four plants will be built at Karachi, Pakistan's largest city; another will rise at Sukkur in the interior of Sindh and one at Chashma in the Mianwaki district of Punjab province. Asia Power, 22nd February.
www.globalenergyadvisory.com
. |
|
Renwable Investment | |
Marubeni to Build Floating Wind Farm off Fukushima
Japanese trading house Marubeni is planning to build a floating wind farm off the Japanese coast, according to reports. Marubeni plans to start developing the wind farm in March with the ai m to build it off the coast of the Fukushima Prefecture. The project will be supported by the Japanese Government via the reconstruction budget from last year's tsunami. Mitsubishi Heavy Industries, Nippon Steel Corp and Mitsui Engineering & Shipbuilding are also involved. Windpower Monthly, 15 February.
French Government Report Issues Renewables Warning
A French government committee has warned on the consequences of "intermittence" caused by renewable energy. The commission was asked to analyse 4 energy policy scenarios to 2050. It said "intermittence" could cause problems "which should not be underestimated". These ranged from prolonging the life of France's current nuclear fleet to abandoning nuclear power completely. Windpower Monthly, 17 February.
Biofuels to Reduce Fuel Bill
A.P. Moeller Maersk, the world's biggest container ship owner, is leading its industry in developing bio-fuels made from organic waste that could cut its carbon emissions and reduce a $6bn pa fuel bill. PO Notes, 20th February.
EON Has Warned It Will Halt Investment In Offshore Wind Project Unless Grid Operators Speed Up Construction Of Transmission Lines
The head of E.ON's Climate and Renewables division said it and other wind developers would put the brakes on future off-shore development if the grid operators failed to act. "The situation is disastrous. The grid operators aren't keeping up. They have overestimated themselves an underestimated the problems. Secondly, they don't have sufficient financial incentives." He also said that the suppliers are struggling to manufacture the required cables while there is a lack of regulatory coordination among the German authorities. Windpower Monthly, 20th February.
TenneT
European cross-border grid operator TenneT has warned the German Chancellery and federal ministries that the construction of connecting cables for offshore wind farms in the German part of the North Sea is "no longer possible under current conditions". TenneT explains that this will compromise the target of increasing renewable energy to at least 35% of electricity consumption by 2020. As a result, TenneT has come up with a series of measures to help this transition, including "a binding long-term offshore plan, the clarification of legal liability, and the creation of a German direct-current grid operator". www.awordaboutwind.com 22nd February.
Commitment to Renewable Energy
As the sovereign debt crisis unfolds in Europe, onlookers have questioned whether the region will stay committed to renewable energy. The answer so far is "yes." Even with a few countries pulling back on government support of the industry because of fiscal troubles, 2011 was still a huge year for deployment - with wind and solar alone representing almost 70% of new capacity. That's almost a 10-fold increase over deployment in 2000, when only 3.5 GW of renewable energy projects were installed. Last year, 32 GW of renewables - mostly wind and solar - were deployed across European countries. Care 2 Make a Difference, 19th February.
www.globalenergyadvisory.com
|
|
Coal | |
Stanmore
Queensland-focused coal explorer-developer Stanmore Coal is a clean takeover target amid ongoing industry consolidation, according to RBS Morgans. The broker reckons if the market doesn't properly value the company, which has a market value of 139mn Australian dollars (US$150mn), then potential acquirers ultimately will since it can achieve growth via exploration, with commercialization providing multiples of upside. The Wall Street Journal, 20th February.
New Horizon
Australia-based New Horizon Coal in which European utility and coal trader EDF Trading has a 4.3% stake has ambitious plans to become a large-scale exporter of US thermal coal to markets in Asia, Europe and South America. New Horizon Coal is targeting first production from its recently acquired Kinney coal project in the US state of Utah in late 2013 and is planning further mine acquisitions with the stated aim of becoming a "mid-tier coal producer with multiple mines in America." The company outlined the potential for its Utah thermal coal to be railed to US or Canadian ports for shipment to Asian customers, or for its coal to be railed to ports in Mexico and Texas for dispatch to Europe or South America. Platts, 20th February.
Coal India Running Short of Coal-Fast
The world's biggest coal miner faces the ironic situation of having to import coal because consumption is running out of control. Coal India, Ltd, is almost certain to resume coal imports, both to power India's ravenous thermal power plants and to avoid paying stiff penalties to the Indian Government. Coal powers over half of India's electricity generating plants. Analysts said Coal India, which supplies 85% of India's coal, will have to import as much as 30mn metric tons of coal beginning this April 1 because its output will certainly fall short of demand. India imported 114.4mn tons of coal in 2011. Asian Power, 22nd February.
Low-Cost Carbon Capture Technologies From China To Soon Find Use In The USA
Thanks to a 3-year agreement between China and US companies for a research cooperation. China Huaneng Group, China's largest power producer, and the U.S. firm Duke Energy have signed a new, 3 yr agreement expanding their research cooperation in advanced coal and carbon capture and sequestration technologies. Asian Power, 22nd February.
Australia
Australia, despite being deeply committed to curbing greenhouse gas emissions GGEs, is nonetheless experiencing a fossil fuel surge. The growth comes despite a carbon tax, due to be implemented later this year, which is deeply unpopular with the country's mining industry. According to the government agency Geoscience Australia, in fiscal year 2011 coal exploration spending in Australia surged by 62%, with investment in exploration for new coal deposits reaching $520mn, with spending on exploration surging faster than any other mineral commodity. Oilprice.com, 22nd February.
www.globalenergyadvisory.com |
|
Energy Trading Dynamics | |
Fresh Push to Trade Water
Leaders of the water industry have urged a fresh push behind efforts to promote water trading between different regions amid mounting drought fears in parts of the South East of England. .... Industry leaders are loathed to talk of a "national grid" for water, while others favour limited interconnections. FT, 20th February.
Large Scale Downgrades
Moody's warned .... It may cut the credit ratings of 17 global and 114 European financial institutions in another sign the impact of the euro zone government debt crisis is spreading throughout the global financial system. ...The ratings agency was reviewing the long-term ratings and standalone credit assessments of a range of banks. Proactive Investors Australia, 20th February. Global Energy Advisory Comment: If downgrades of this scale are possible then financial support for other industries could be influenced. Credit risk is increasing at a time when liquidity is decreasing.
Are Commodity Merchants "Swap Dealers" By Any Other Name?
Big energy companies like Royal Dutch Shell and commodity merchants like Cargill have a simple argument in pushing back against looming new swap market rules: We're not a bank, so don't regulate us like one...But their efforts to avoid being branded a "swap dealer," a designation that brings with it greater scrutiny and onerous new rules, tend to sidestep the fact that, in one small but important way, most of them trade exactly like a bank.... The Commodity Futures Trading Commission is expected to vote on definitions for "major swap participant" and "swap dealer" on February 23, designations that will determine which companies will face heightened regulations. Reuters, 21st February. Global Energy Advisory Comment: the EU also has a labyrinth of regulations which will have the same impact.
Japanese Power Close to Physical Limit
The Japanese electricity sector is understood to be close to hitting a physical limit in its overall gas-to-power generation capacity at about 6mn tonnes per month. Keen to avert looming electricity shortages, the Tokyo government now considers restarting 2 nuclear reactors in April, according to a Japanese media report. The volume of electricity supplied by gas-fired plants has surged following the shutdowns most of Japan's nuclear power generation capacity following the Fukushima crisis almost a year ago. Utilities are on a buying spree to source additional LNG import volumes. Chubu Electric Power on Friday said it signed a deal with BP to purchase about 8 mtpa of for a period of 16 yrs. Gas to Power Journal 16th February.
.
UK Wholesale Market Competition
Energy regulator Ofgem, set out a detailed road map to open up the wholesale electricity market by setting out three clear objectives which the Big Six suppliers will have to meet. This is to enhance competition and will ensure independent suppliers can buy wholesale power in the range of products they need more easily. The objectives are:
- Availability of a range of products which support hedging
- Robust reference prices showing how much power would cost in forward markets
- Effective short/near term market
Ofgem, 23rd February.
Simpler Tariffs
Scottish and Southern Energy is to radically simplify the energy tariffs it offers to new customers ahead of a market reform proposal from Ofgem. The energy supplier is cutting its range of products from 68 to 4 in an attempt to simplify energy tariffs for customers. The 4 tariffs will be made up of 2 variable and 2 fixed tariffs with customers given the option of adding additional measures, such as, loyalty points and charity donations, onto their energy plan. This is the Money.com, 22nd February.
UK Gas Price Volatility
Traders in U.K. natural gas are grappling with the most changeable prices in more than 2 years as investors weigh Britain's
growing dependence on imports and a waning ability to respond to surges in demand. Price swings in day-ahead gas, as measured by 30-day historical volatility, more than tripled to 156% in the 2 weeks to Feb. 13, the highest since October 2009, broker prices compiled by Bloomberg show. Bloomberg, 23rd February. Global Energy Advisory Comment, these vol levels are very high, typically power and gas exhibit price volatility levels, in the UK, of around 40% front month. This jump also came when DECC produced a report to say that the UK imported 48% of its gas last year with the two main sources being Norway and Qatar.
www.globalenergyadvisory.com
|
|
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 |
|
|
