High Oil Prices Take Their Toll

Fears are rising that persistent high oil prices -- Brent crude has now been over $100 a barrel for more than a year -- will eventually lead to a new recession. Oil stockpiles, especially in the EU, are low and, even though Libyan oil is mostly back to normal, a series of smaller outages around the world now add up to 1.2mnb/d less output than would be expected. If prices remain high for the rest of the year, the cost of oil imports for the lead economies will grow to $1.5tn this year. The IEA estimates that the EU will spend $502bn on oil imports this year as compared to $472bn in 2011, which on an annual basis is well beyond 2008 when the world economy went into recession. PO Review, 26th March.

Iran Update

Last week, the EU foreign ministers adopted detailed rules on how the ban on Iranian oil imports will be handled after July 1st. For now, most analysts believe that the oil embargo will eventually cut between 800,000 and 1mn b/d from Tehran's normal exports of 2.5mn b/d. Under a new US law, foreign nations have until June 28th to demonstrate that they have significantly cut back on Iranian crude imports or face having the banks handling Iranian crude transactions cut off from the US financial system. Washington announced last week that the EU and Japan are meeting the requirements of the law and expressed the hope that China, India, and South Korea would follow suit....While publicly rejecting sanctions that are not approved by the UN, China has cut back significantly on its Iranian oil imports, perhaps out of fears of what could happen to their Middle Eastern imports should hostilities arise and a realization that Iranian intransigence is behind most of the trouble. PO Review, 26th March.

Elgin Platform Flare Is Out

TOTAL has confirmed to the Government that the flare on the Elgin  (oil and gas) platform has gone out. Energy Minister Charles Hendry said: "This comes as very welcome news and a considerable relief. Although the platform was designed to use the prevailing wind to keep the flare from the escaping gas, the fact the flare is out removes a major risk from the equation...The task now is very clear - every effort must be made to locate and stop the gas leak....The Government continues to monitor the situation very closely to ensure this incident can be resolved as quickly and with as little risk to human life and the environment as possible." DECC 1st April.

TransCananda

Canadian pipeline company TransCanada may be considering a $5.6bn pipeline system to carry oil from Canada's western provinces to refineries in Ontario and possibly to eastern ports. PO Review, 26th March.

Argentina

Argentina's Foreign Ministry has formally notified stock exchanges in London and New York that it will pursue administrative, civil and criminal charges against companies exploring for oil in waters surrounding the disputed Falkland Islands. PO Review, 26th March.

Iran & Kuwait

Iran is pursuing a national policy of extracting crude oil from shared fields with Kuwaitas part of an effort to expand overall production. PO Review, 26th March.

Seaway Expansion Competes with Keystone

The Seaway expansion will increase the pipeline's capacity to 850,000 barrels per day by mid-2014. In addition to reversing the flow of the existing 512-mile pipeline, Enbridge and Enterprise will build another 30-inch diameter parallel "twin" pipeline along the Seaway route to add 450,000 bpd of capacity. The companies say the capacity can be expanded cost-effectively on a timely basis by adding and upgrading pump stations. The estimated price tag for the Seaway project is $1bn. Also on Monday, Enbridge announced that it will proceed with its Flanagan South Project from Flanagan, Ill., to Cushing, where it will tie into Seaway. In effect, the Flanagan South Project, which Enbridge is upsizing to 585,000 bpd will give Bakken oil producers a link to Gulf Coast refineries. The 36-inch diameter pipeline project is expected to cost $2.8bn. Rigzone, 28th March.

End of Week Pricing

(There is) Confirmation by France that it was in talks with the US, UK and Japan to release billions of barrels of oil on to the market combined with an FT op-ed by Saudi minister of petroleum, Ali Naimi (in which he said: "The bottom line is that Saudi Arabia would like to see a lower price") sent crude prices tumbling on Wednesday. FT Alphaville, 29th March.

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CCS Uncertainty Jeopardises EU Climate Targets

When Günther Oettinger, the EU's Commissioner for Energy, presented the Energy Roadmap 2050 to journalists in December last year, he made it clear that the targets were unachievable without deployment of CCS in both coal and gas-fired power plants....But limited access to funding, due to the credit crunch, as well as low prices for carbon allowances has led to growing pessimism regarding the future of CCS. Earlier this week, Adam Gierek, Polish member of the European Parliament, told Interfax that he defended his country's decision to reject the EU climate targets beyond 2020, partly because of the uncertainties linked to CCS. Around 90% of power production in Poland is coal-fired, hence large-scale CCS deployment would be a prerequisite to decarbonise the energy sector there. www.interfaxenergy.com 23rd March.

US North West Exports

A trio of coal export operations totaling nearly $1bn in investment is under proposal along the shores of the Columbia River. Each is vying to become the nation's first West Coast-based coal export terminal, promising jobs and economic growth to communities that sorely need it. But as officials representing the project developers - principally Australian coal firm Ambre Energy and Houston-based pipeline and terminal operator Kinder Morgan - conduct public outreach in coming weeks, they're expected to come under intense scrutiny. Many public officials and environmental groups are staunchly opposed to the notion of more coal crossing into Oregon. Sustainable Business Oregon, 24th March.

India

A report suggesting India's government lost $210bn in revenue by under-pricing coal assets also reveals a catalogue of wider delays and mismanagement, deepening pressure on the nation's embattled coalition government. The draft document from India's comptroller and auditor-general..., suggests that the provision of coal to businesses without competitive auctions resulted in significant production shortfalls. The report.....shows that 60 of 86 allocated coal concessions had failed to begin production as planned by March 2011, resulting in coal output falling more than 50% below target. CNN, 26th March.

Worldwide, Coal-To-Liquids Plants Not Built With-out Government Help

Projects similar to the DKRW Advanced Fuels coal-to-gasoline plant proposed for Wyoming seem to have one thing in common besides what they do: If they got built, they all depended on government support. Plants that convert coal to fuels exist in South Africa and China. But they're rare in the U.S. because of their multibillion-dollar price tags, opposition from environmental groups and difficulty obtaining financing, says Luke Popovich, spokesman for the National Mining Association....With an eye to newly skyrocketing oil prices in 2007, Congress considered encouraging the development of coal-to-fuels plants with loan guarantees, tax credits, purchase promises and protection from oil price swings. Trib.com, 26th March.

Tavan Tolgoi

Shenhua Energy Co Ltd , China's largest coal producer, expects its negotiations to invest in Mongolia's giant Tavan Tolgoi coal mining project to restart after the country's parliamentary elections in June, its CEO said on Monday. Shenhua is the most competitive bidder for the project given its technology, transport infrastructure, access to the Chinese market and the backing of the Chinese government. Reuters, 26th March

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Vitol Takes Stake in South African Coal Miner CIC

Energy trader Vitol is taking a 9.1% stake in South Africa miner CIC Energy Group as part of its strategy to develop a substantial coal business for the long-term...Falling coal qualities in South Africa's Mpumalanga coal heartland and a lack of access to export capacity have forced coal players to look to the north of the country, to Botswana, the Waterberg and across the border to largely-undeveloped Mozambique for investments. Reuters, 27th March.

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