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News Update: 5th March 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 | |
UK Investment Update
The government and energy industry have quietly shelved plans for wind-farms equivalent to 4 large traditional coal and nuclear power stations, amid growing public and political anger over the cost and sight of the turbines...A report by the Electricity Networks Strategy Group (ENSG), which is the most up-to-date view of government officials, the regulator Ofgem, and leading industry investors, estimates that 28.3GW of onshore and offshore wind power may have been built by 2020. The estimate has fallen by 4GW in the 2yrs since its last forecast. Another 1GW of other renewables such as tidal and wave power have also been removed from the forecast. There is also a big rise in the expected contribution from nuclear energy, by just over 5GW, allowing the government to still meet its pledge of cutting greenhouse gas emissions by a 1/3rd by 2020. In the same report, the officials warn that the cost of linking new power generation to the national distribution network has increased from £4.7bn to £8.8bn in just 2yrs. Nearly all the extra cost is the money needed to connect wind and marine renewable energy from the Scottish islands to mainland Britain, and to transfer power from generators to consumers via 2 new undersea cables from Scotland to England and north to south Wales. The remainder is a £450mn increase due to inflation. The Guardian, 27th February.
China's State Grid in Talks to Invest in Power Assets of AES
State Grid, China's largest utility company is in talks over a possible investment in AES a deal that would make the Chinese groups first foray into the US power market ... State Grid is considering taking stakes in the power generation business, including wind. FT, 28th February.
UK Energy Security at Risk, Warns Centrica
Crucial investment in new power stations is at risk unless the government clarifies its energy policy. The warning came as Centrica reported a 55% slump in profits to £1.27bn. The firm revealed it was scrapping a planned gas storage facility and was cutting 2,300 jobs worldwide. There are doubts whether an investment decision on the Hinkley Point project - led by EDF - would be taken this year. TUNSE/The Daily Telegraph (Business) 24th February.
Energy Efficiency
Energy Minister Greg Barker has described his ambition for improving energy efficiency in the UK and spelled out the "win-win-win scenario" of reducing emissions, saving cash and creating business opportunities. In a speech to the British Property Federation, the DECC chief said energy efficiency was at the heart of the Coalition's pledge to be the greenest Government ever. Click Green, 1st March.
Offshore Transmission to Co-ordinate
Energy regulator Ofgem and the Department of Energy and Climate Change (DECC) published a report showing how more co-ordination in the development of offshore links and infrastructure can be achieved. (This is to allow) between 11 - 18GW of wind farm capacity to be built off Britain's coast (by 2020), compared to 1.6GW now. ...Instead of building individual connections for each development, they could be interlinked to lower the overall construction and operating costs...This could reduce the cost of offshore connections by 8-15% (£0.5-3.5bn)....and would help meet the Government's target of reducing the cost of offshore wind to £100MWh by 2020. DECC, 1st March.
European TSO's to Invest €104bn
European power Transmission System Operators (TSO's) plan to invest €104bn ($140bn) over the next 10yrs in improving and expanding the extra high voltage transmission grid. The figures come from Entso-e's first official draft 2012 10yr network development plan, required under the EU's 3rd package of energy market laws that took effect in March 2011. Germany dominates with €30.1bn of planned investments, mainly as a result of its decision to phase out nuclear power which means it will have to upgrade its internal north-south links. The UK is next with €19bn, driven mainly by the need to integrate large-scale offshore wind farms planned in the North Sea. Platts, 2nd March.
www.globalenergyadvisory.com . |
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Gas | |
Tanzania
Statoil and ExxonMobil have confirmed they made a large gas discovery in the Zafarani prospect offshore Tanzania in Block 2. Logging results reveal that it is a high-impact discovery, far proving that the well holds up to 5 Tcf of gas-in-place. This discovery is the first Statoil-operated discovery in East Africa and an important event for the future development of the Tanzanian gas industry. Rigzone, 24th February.
Exxon Mobil
Exxon Mobil announced that additions to its proved reserves in 2011 totalled 1.8bn oil-equivalent barrels, replacing 107% of production. Excluding the impact of asset sales, reserves additions replaced 116% of production. Much of this is natural gas, not oil. PO Review, 27th February.
Japan
A consortium of Japanese natural gas companies agreed to examine investments needed for an LNG plant with Gazprom. PO Review, 27th February.
Nabucco and South Stream
OMV hosted a meeting in Vienna on Tuesday between the Nabucco gas pipeline project consortium partners to discuss a reported merger with the Trans-Anatolian Pipeline (TANAP), while rival project South Stream pushed ahead with development of its Slovenian section following a summit in Ljubljana. The conference between the 6 partners of the Nabucco pipeline will be used as a forum to discuss a potential merger with TANAP, Reuters reported, in a bid to make the project a more viable export route for Azeri gas. www.interfaxenergy.com 28th February. ..... Meanwhile a few days later: ..... (Ukraine says) The modernization of Ukrainian gas transporting system is in the EU's best interests, while South Stream is a political project rather than economical one. Market Watch, 1st March.
Colombia
Colombia launched a new oil and gas bidding round last week. This is the first step in the development of its unconventional resources. Interfax has discovered that the country's authorities are offering 3 incentives to attract foreign investors to shale and coal-bed methane (CBM)..... The country's in-place CBM resources were estimated at between 300bcm and 1tcm, and tight gas reserves at 33bcm. Most of these resources are in central Colombia. www.interfaxenergy.com 28th February.
Prices
Natural gas was again a loser on the day. April futures fell nearly 15 cents on the day to settle at $2.463 per MBTU. Data from the EIA showing a weekly withdrawal of 82bcf, well below estimates calling for a 90Bcf reduction, was the primary source of the natural gas market's woes on Thursday. Rigzone, 1st March.
Israel
The owners of the giant Leviathan field in Israel are in discussions with Gazprom and other potential bidders, including companies from China, Yossi Abu, chief executive of Delek Drilling said. The partners are in general discussions with Gazprom, over the "understanding of the basin, not anything specific", as well as "a couple of others including Chinese companies". www.interfaxenergy.com 1st March.
LNG
Private equity money continues to flow into the North American gas sector, with firms tempted by arbitrage from large price differentials between US and Asian gas prices. US-based Cheniere Energy
said on Monday that it will receive $2bn from private equity giant Blackstone to fund the Sabine Pass LNG plant expansion and conversion project in Southern Louisiana. Analysts told Interfax that the medium-term ambitions of producers are to export LNG to Asia. www.interfaxenergy.com 28th February.
Australia Needs Engineers
Long-term global demand for natural gas has triggered construction for a number of liquefied natural gas (LNG) export projects in Australia in recent years and has created significant demand for workers within Australia. Chevron Corp. is seeking to hire engineers from a range of disciplines, including subsea, civil/structural, pipeline design/construction and marine. Chevron, which is the largest holder of gas resources in Australia, is leading development of the Gorgon project ...and the Wheatstone project as an LNG and domestic gas operation near Onslow in the Pilbara region of Western Australia. The company is also investing in the Browse LNG development, another proposed LNG project offshore Western Australia. Rigzone, 2nd March.
Australia Pacific LNG Gets Financed
Thirteen lenders have committed between $100-350mn each to a $2.625bn project financing to fund the development of Origin Energy Ltd and ConocoPhillips' Australia Pacific liquefied natural gas (LNG) project in Queensland. Origin and Conoco approved the $14bn first phase of their 9mn tonnes a year project, Australia Pacific LNG Pty Ltd, in July 2011. They are expected to approve the second phase this quarter, after China's Sinopec agreed to increase its stake in the project to 25% and buy more gas. Reuters, 2nd March.
www.globalenergyadvisory.com |
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Oil | |
Thailand's Major Energy Firm PTT Group Bids For Cove Energy
PTTEP, the exploration and production arm of Thailand's major energy firm PTT Group has launched a bidding war for London-listed Cove Energy as it seeks to enter the highly prospective hydrocarbon market of East Africa. The Thai state-run oil and gas company has made an all cash offer of 220p for every share of Cove to acquire the UK-based petroleum firm in a deal valued at about £1.12bn ($1.78bn). PTTEP's offer tops a bid by global energy major Royal Dutch Shell, which has offered to pay 195p per share or about £992.4mn for Cove Energy. The Asset, 27th February.
Oil Market Supply Tightens
Despite increases in Saudi oil production in recent months, the global oil market is tight due to production outages, which total some 750,000 b/d, in South Sudan, Yemen, and Syria. Libya's output is still 600,000 b/d below normal. The incessant refrain from OPEC that the markets are "well supplied" ignores the shortages and rolling blackouts taking place across much of the underdeveloped world as $127 crude is simply unaffordable. Throw in the increased demand from Japan which now is down to only operating 2 nuclear reactors and is burning another 300,000 b/d to keep the lights on and you have a tight global market despite the fall in US demand to a level last seen nearly 15yrs ago. PO Review, 27th February.
Iran
The confrontation over Tehran's alleged efforts to acquire nuclear weapons has grown into a multi-ringed circus being played out all over the world. With the fate of the global economy at stake should the situation deteriorate into efforts to block the Straits of Hormuz, most of the world has an interest in the outcome of this confrontation.....Last week the situation took a turn for the worse with Tehran's refusal to allow UN inspectors into sites where nuclear weapons development is suspected. This refusal was followed by an IAEA report saying that Iran had tripled its production of highly enriched uranium and is attempting to move much of its enrichment efforts underground where it would be less vulnerable to air attack....... In the meantime, efforts to modify Tehran's policies, by discouraging foreign countries from purchasing its oil and making it difficult to carry out trade with Iran, continue.... While Iran's economy is already suffering from the sanctions now in place, for now the $30 a barrel jump in oil prices is helping the Iranians weather the storm. However, it is beginning to look as if the effort to slow shipping to and from Iran and the difficulties the country has in collecting money from its exports is starting to take a toll...... Predictions of the outcome of all this are all over the map. Some say that in event of hostilities oil prices would go to $220 a barrel, but nobody really knows what would happen - there are simply too many variables. A rational Iranian government, that must import half its food supply, should realize that its export revenues, its armed forces, its nuclear facilities, and indeed much of its economy could quickly be destroyed if the situation gets out of hand....Unless there is a change in the political dynamics in Tehran fairly soon, much higher oil prices in the near future seem unavoidable. PO Review, 27th February.
Kazakhstan
Chevron's Kazakhstan venture will spend between $6- $8bn to sustain output in the country's Tengiz oil field. PO Review, 27th February.
North Sea Oil Exploration and Production Plunges
Oil exploration activity in the North Sea fell by half last year to only 15 wells, the lowest level since the 1960s according the sectors trade body. Annual production declined 18%, despite high prices. This was 3 times the average fall of 6% registered in the past 3yrs. (Increases on the tax burden on North Sea Oil companies is the main reason). FT, 28th February.
Saudi Arabia Production
Saudi Arabia, OPEC's largest crude producer, reduced oil output and exports in December from November when it produced the most in more than 30yrs. The country reduced output by 237,000 barrels a day or 2.4% to 9.81mn/b/d of crude compared with 10.047mn in November. PO Review, 27th February.
Exxon Mobil Corp. Now Expects To Invest $37bn/pa Over the Next Several Years, As Do Others
Exxon Mobil Corporation, the world's largest publicly traded oil company, now expects to invest $37bn annually over the next several years, coming in at the top of a previous range and in line with an industry trend toward robust spending...Smaller rival Chevron Corporation set the tone for the large oil companies in December when it increased its capital budget to $32.7bn, after its 2011 spending of $29.1bn came in $3bn over budget. Rigzone, 28th February.
Oil Leaps to Its Highest Level Since 2008
Oil leaped to its highest levels since its highest level since mid 2008 in a frenzy of buying that followed a disputed report of a pipeline blast in Saudi Arabia. Brent crude traded at $128.40/b which is a retreat from its all time high of $147.50 on a report of a pipeline blast in Saudi Arabia. FT, 2nd March.
Obama Pressed to Open Emergency Oil Stocks
The Obama administration is coming under growing pressure to cool petrol prices by releasing emergency stocks of oil. However critics say this would be the wrong response to the wrong problem at the wrong time. Oil prices climbed to a 9 month high on Friday (24th) to $125/b raising fears of a new oil shock that could damage economic recovery. The trigger was the release of a statement from the International Nuclear Agency saying Iran had significantly increased its production of higher grade uranium in the last 6 months. ...The IEA is monitoring the situation closely. FT, 27th February.Global Energy Advisory comment: we have for many years being saying commodities are about flow, not reserves. The US oil transportation flows inside the USA are now such that the fast release of the reserves cannot be guaranteed.
www.globalenergyadvisory.com
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Nuclear | |
UK Research & Development
The UK must set up a central body to co-ordinate nuclear research and development (R&D). Various UK bodies including the House of Lords Select Committee on Science and Technology have called for a roadmap to inform the strategic direction for the country's nuclear industry and identify the R&D needed to support it. The Committee recently described existing UK governmental views on nuclear R&D as "troublingly complacent." World Nuclear News, 24th February.
Taiwan Set To Expand Nuclear Power
Taiwan intends to complete its Nuclear Power Plant 4, despite little support for nuclear energy in the country. Taiwan's 3 nuclear plants supply nearly 1/5th of the island's electricity, and the new-build is the first nuclear project to be tackled by Taipower, the public electricity utility. Political problems have led to the accumulation of huge quantities of nuclear waste at Taiwan's existing plants. TUNSE/The Guardian Weekly, 17th February.
Kier Wins UK Nuclear Contract, To Create 350 Jobs
Kier has won a £100mn contract from EDF to prepare the ground for construction of a new nuclear power station in the west of England. The group will carry out works at the Hinkley Point C nuclear power station, which is due to provide 6% of British energy needs. TUNSE/Reuters UK (Web), 20th February.
Iran
The International Atomic Energy Agency (IAEA) has confirmed that Iran has increased production of 20% enriched uranium and has begun been feeding uranium hexafluoride into its Fordow enrichment plant, but says the country is still not co-operating in its quest to provide assurance on the peaceful nature of Iran's nuclear program. ....While the agency says it has been able to continue to verify the non-diversion of Iran's declared nuclear materials at nuclear facilities and hospitals, Iran's lack of co-operation means that it is unable to give any assurance about the absence of undeclared nuclear material. Furthermore, the IAEA said it "continues to have serious concerns regarding possible military dimensions to Iran's nuclear program". In particular, the report cites Iran's refusal to allow IAEA inspectors access to the Parchin military site during a visit on 20-21 February. World Nuclear News Daily, 27th February.
Public Opinion
Support for nuclear energy in the USA has increased slightly in the past 5 months, but still remains lower than pre-Fukushima levels, a new public opinion poll shows. Meanwhile, a survey in Belgium has found that while most people are in favour of nuclear energy, they want less of it. World Nuclear News Daily, 27th February.
Olkiluoto Progress
According to utility Teollisuuden Voima Oyj (TVO), mechanical installation work in the non-nuclear turbine island is almost complete, about 90% of final inspections have been carried out, and commissioning has begun in earnest. Okliluoto 3 is the first-of-a-kind EPR reactor, and is being built by a consortium of Areva and Siemens. Construction started on the plant in 2005, and TVO announced in December 2011 that it anticipates the plant to begin commercial operation in August 2014. World Nuclear News, 28th February.
Sellafield's Super Contracts
The first of some £9bn ($14.2bn) in long-term contracts has been awarded to support decommissioning at the UK's Sellafield site. It covers design services and could be worth some £1.5bn ($2.3bn) over 15yrs. The award has gone to two joint ventures: one is known as Axiom and made up of Amec, Assystem, Jacobs Engineering Group and Mott MacDonald; the other is called Progressive Alliance and made up of Babcock and URS Corp. World Nuclear News Daily, 28th February.
www.globalenergyadvisory.com
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Renwable Investment | |
Siemens Secures 200MW Thai Deal
Thailand has entered the international wind energy arena by confirming a 200MW, 90-turbine deal with Siemens. The  deal, that includes delivery and installation, is due to be completed before the start of 2013. Thailand currently has just 5MW of installed wind
power capacity, although the country has set an ambitious target of reaching 800MW by 2022. With a population of 66.9mn, peak power demand equates to 24,495MW. www.aworkdaboutwind.com 27th February.
RWE Lodges 1.2GW Offshore Planning Proposal
RWE Npower has lodged a planning application for Triton Knoll, a North Sea offshore wind farm site that it is licensed to develop. The energy giant has proposed a 1.2GW site - a project that would be 3 times bigger than the world's largest site. www.aworkdaboutwind.com 27th February.
Biomass Plant Shuts Down After Fire
A fire at RWE Npower 750MW biomass plant at Tilbury in Essex has damaged storage units holding thousands of tonnes of wood pellets, just weeks after it began commercial operation. No one was hurt. FT, 28th February.
TenneT
TenneT has informed the German ministries for economic affairs and the environment "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." The operator has put forward a number of changes to the current regulatory system. These include:
- Long-term planning: a 10-year offshore grid development strategy and early planning and standardization of power connections.
- Legal liability: ambiguities regarding who is liable in the event of unavailability or delivery delays need to be settled. TenneT wants to establish insurance coverage for connection delays and non-availability.
- The creation of a DC grid operator. TenneT said: "The creation of offshore direct-current connections and the construction of large-scale direct-current connections in Germany require not only unprecedented use of capital, but also closely co-ordinated planning.
This is not the first time in recent months TenneT has issued a warning about offshore connection problems. In November, it said it might struggle to install further offshore connections to North Sea wind farms due to a shortage of cables and cash. Windpower Monthly, 28th February.
Sumatra
GDF SUEZ and International Power announced that IPR-GDF SUEZ Asia, together with project partners PT Supreme Energy and Sumitomo Corporation, has signed 30-year Power Purchase Agreements (PPAs) for two 220MW geothermal projects with PLN, the state-owned utility of Indonesia. The 2 projects, called Muara Laboh and Rajabasa, are planned to be built on Sumatra Island to deliver power to the region which continues to experience high demand growth. Both projects are included in the Indonesian Government's 2nd fast-track programme, of which around 4,5GW should come from geothermal sources. International Power, 2nd March.
www.globalenergyadvisory.com
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Coal | |
China
Putting a cap on total coal consumption will help to hasten industrial restructuring and promote the transformation of China's economic growth model," Liu Tienan, head of the National Energy Administration said. China aims to cap its total energy consumption at 4bn metric tonnes of coal equivalent by 2015, an annual increase of 4.24%. The country's coal output rose 8.7% year-on-year to reach 3.52bn metric tonnes in 2011. Coal is the primary source for about 80% of China's generated power. The country has established a goal of deriving 15% of its energy from renewable sources by 2020. China.com, 27th February.
Vietnam
The Vietnam coal industry needs investment of about VND 317.74tn ($15.13bn) to fulfill its development targets between now and 2020. According to Mr Tho, the industry planned to reach cross-sector merchandised coal yield of 55 to 58mn tonnes in 2015, 60-65 mn tonnes in 2020, and over 75 mn tonnes in 2030 (requiring) ~ 47 new mine projects would be built in the Dong Bac (North East) coal basin. Several mines using underground coal gasification technology and with capacities of 3mn tonnes per year, would be developed in the Red River Delta coal basin. Steel Guru, 27th February.
India
India is poised to surpass China as the world's biggest thermal coal importer as Prime Minister Singh seeks supplies for power companies that have halted plans for $36bn of new plants because of a fuel shortage. PO Review, 27th February.
Poland
One of Poland's largest mining companies has been working on a plan to merge with London-listed New World Resources to create a £4.5bn Eastern European coal-producing giant. The Telegraph, 29th February.
New Hope
Coal miner New Hope Corp has scrapped plans to sell itself for more than $5bn after a 5 month sale process failed to seal a deal, a sign that tighter credit has taken the sizzle out of Australia's hottest deal sector. Reuters, 1st March.
The Sierra Club
Built during the early part of the last century to satisfy Chicago's growing demand for electricity, 2 of the nation's oldest coal-fired power plants will shut down amid concerns about lung-damaging air pollution and competition from cleaner, less-expensive energy sources. A combination of economic realities and steady pressure from environmental leaders, federal regulators, community groups and Chicago aldermen nudged Midwest Generation to speed up closure of the Fisk plant in Pilsen and the Crawford plant in Little Village. Chicago Tribune, 1st March......Meanwhile, The Sierra Club made the following statement: Today, the Sierra Club marked a major milestone in the transition to clean energy as the Fisk and Crawford facilities in Chicago became the 99th and 100th coal-fired plants to announce retirement since January, 2010. These iconic Midwest Gen owned plants are 2 of 9 coal-fired plants from Chicago to Pennsylvania that announced plans to retire today, including the Portland plant in Mt. Bethel, Pennsylvania. The Sierra Club's goal is to retire 1/3rd of America's polluting coal plants by the year 2020 and replace that power with clean energy like wind and solar.
www.globalenergyadvisory.com |
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Energy Trading Dynamics | |
EU Politicians to Prop Up the Collapsed Carbon Market
European Union politicians are expected on Tuesday to back action to prop up the collapsed carbon market, as part of a wider debate on energy saving, putting pressure on the EU executive to tackle a huge surplus of pollution permits...Supporters of market intervention span the political divide and include industry as well as the environmental lobby. They argue decisive parliamentary backing would make it hard for the European Commission, the 27-member bloc's executive, not to act....In December an environment committee vote called for the withdrawal of 1.4bn carbon permits from the market beginning in 2013. But the specific number was passed by only one vote. In an effort to win cross-party consensus, Tuesday's industry committee will instead vote on a compromise amendment asking the Commission to consider measures that could include withholding "the necessary amount" of allowances.... Recession has already led to a huge surplus of allowances and pushed prices far below the level needed to encourage a shift towards a low carbon economy. Reuters, 27th February.
EON
E. ON has announced it will study Ofgem's proposals that are designed to improve liquidity and transparency in the UK energy market. The company reports it has also challenged other large energy players-which goes beyond the UK's 6 major players to include other prominent power generating companies-"to match its current commitment to the day-ahead market and begin to help deliver benefits to UK consumers." Smartmeters.com, 1st March.
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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