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News Update: 28th May 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. But given there was a draft energy bill including proposals to reform the UK power market was produced last week, we thought you would be expecting our comment. UK Policy to Keep the Lights On - Nuclear and Wind It represents sweeping changes to the power (and by consequence, the gas market also). The document tells us that the "UK will struggle to keep lights on without these reforms". Guaranteed Prices for Nuclear and Renewables It guarantees prices for nuclear and renewable energy and intends to pay producers for providing back-up supply when wind power falls short. It also promotes low carbon generation and energy efficiency. It's supported by an emissions performance standard and a carbon floor. Global Energy Advisory Comment But what does it really mean? We are in for a big shock: coal and gas generation will be severely marginalised, radicalising existing business performance in a matter of years. Furthermore, the potential financial liabilities, driven by the new European Market Infrastructure Regulation (EMIR), which come into force by the end of this year, could by our estimates cost suppliers dearly. At Global Energy Advisory we are energy experts, who work as strategic consultants and provide valuation services. We are disciplined energy traders/power professionals who have seen the future of energy markets, networks and commodity flow. We work with integrity to nurture and support our clients, getting them ready for a challenging future: We have researched and considered the energy trading dynamics and financial implications of the firms trading in this new market. We have concerns regarding the prudential arrangements not being strong enough and liquidity (as DECC does too). If you would like to discuss how the changes could impact you, then do call us on 44 207 692 0888. |
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Energy Investment | |
The Cost of Energy Bills Soar by 140% in Eight Years
The average household's annual energy bill of £1,252 now accounts for 11% of a couple's basic state pension of £11,175 a year. The cost of energy is now the top household worry for Britons (90%), ahead of the rising cost of food (77%) and mortgage payments (42%). The Telegraph, 18th May.
Spain: Investment in 5GW of New CHP Capacity on the Horizon
Investors in new cogeneration plants in Spain eagerly await the introduction of a new support mechanism. "An extension of the cogeneration tariff could prompt new investments worth up to €2bn for about 5GW of new capacity by 2015," Jose Luis Garcia forecasts. Gas to Power Journal, 18th May.
US Offshore Transmission Line
The U.S. government announced it cleared the way for the development of an offshore wind energy transmission line for the Atlantic coast. PO Review, 21st May.
The Economic Cost of the Expansion of Renewable Energy Could Become Prohibitively Expensive
Subsidies in the EU for solar and wind power should be phased out as quickly as possible. That is what the European Commission says in an internal draft strategy paper that EU Energy Commissioner, Günther Oettinger, will present in Brussels early next month. The Climate Policy Network/Hendrik Kafsack, Frankfurter Allgemeine Zeitung, 19 May 2012.
Australia's Clean Energy Finance Corp
Australia has passed legislation establishing the $10 bn Clean Energy Finance Corp (CEFC) to provide grants and government investment to green projects. The CEFC is a component of Australia's Clean Energy Future plan to cut the country's emissions by 5% from year 2000 levels by 2020 and further bring emissions down 80% by 2050.....Australia relies on coal to generate about 80% of its electricity. The government says the transformation of the country's energy sector will drive around $100 bn in investment in the renewables sector through 2050. UPI.com, 24th May.
www.globalenergyadvisory.com |
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Gas | |
Volatility in Spain's Gas Demand Set to Rise
The volatility of natural gas demand in Spain is set to rise as the integration of electricity and gas market intensifies, Maria Teresa Bravo, responsible of European gas infrastructure development at Enagas said ... "Natural gas is as a facilitator for Spain's rising renewable energy production; therefore gas infrastructure needs provide sufficient flexibility for gas to play that role". Gas to Power Journal, 18th May.
Government Backtracks On Fracking
Industry experts have made clear to senior ministers, including David Cameron and Ed Davey, that the UK's shale gas reserves are smaller than first thought and could uneconomical to extract. The PM convened the summit to hear from companies including Shell, Centrica and Schlumberger. Senior Coalition figures now agree that shale gas could be deeply controversial without lowering carbon emission or reducing energy costs. TUNSE/ The Independent On Sunday, 20th May.
Frontera Significantly Expands Georgian Gas Fields
Republic of Georgia-focused Frontera Resources Corporation's operations update revealed that the firm's Mtsare Khevi gas complex has "significantly expanded in potential and area". Frontera.....have continued to evaluate the extent of the Mtsare Khevi field's gas potential. In support of this, approximately 40 Soviet-era wells throughout an expanded area have been analyzed and many of these encountered gas. The firm added that, based on its internal estimates, analysis has revealed significant gas potential throughout the area of as much as 1.2tn cubic feet of gas in place and approximately 700bn cubic feet of recoverable gas. Rigzone, 21st May.
Japan Seeks LNG for its Thermal Power Plants
Japanese firms are negotiating to buy a $4.4 bn stake in Australia's Wheatstone gas field as Japan shores up energy supplies. Japanese utilities are scouring the world for fuel to power thermal plants after all its 50 nuclear reactors were shut down. Tepco and Japan's other utilities burned 4.56 mn tonnes of LNG gas in April, up 33 % from a year ago and a record for the month. The Wheatstone LNG project off the coast of Western Australia, operated by Chevron Australia, is expected to produce 8.9 mn tonnes of gas a year from late 2016. Chevron plans eventually to expand production at the $29 bn project to 25 mn tonnes per year. Asia Power, 23rd May.
Origin Energy Secures $8.5bn in Project Finance
An Australian gas-export joint venture between Origin Energy, ConocoPhillips and China Petroleum & Chemical Corp., or Sinopec, has signed agreements with banks and export credit agencies for US$8.5 bn in project finance. Origin said the US$14 bn foundation stage of the Australia Pacific LNG joint venture in Queensland remains on track for completion in 2015. A final investment decision on an expansion of the project to two LNG production units, to cost an additional US$6 bn, is on track to be made in mid-2012. The Wall Street Journal, 24th May.
Turkey is Close to Importing Gas from Iraq
Turkey is close to importing natural gas from Iraq's autonomous Kurdish region with the buyer understood to have earmarked some of the volumes for gas-to-power generation. A deal could be struck soon: "A buyer is out there, right next door to Iraq," said Ibrahim Palaz, General Manager of Botas International. Turkey is determined to become an energy hub....Natural gas is the dominant fuel in the Turkish energy mix, with 45% of electricity demand covered by gas-fired power plants in 2011. Gas to Power Journal, 24th May.
Mozambique Could Become World's Third Largest LNG Exporter
Mozambique could become the world's third largest exporter of liquefied natural gas (LNG), an Anadarko Petroleum Corp. executive told attendees at the Mayer Brown Seventh Annual Global Energy Conference in Houston. The company plans to develop two-train LNG facility associated with the Prosperidade discovery, which contains between 17 and more than 30 tn cubic feet (Tcf) gross recoverable resources. The plant will be situated in the far northern part of the country on the southern side of Palma Bay, which provides a natural shelter from typhoons. Rigzone, 24th May.
www.globalenergyadvisory.com |
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Oil | |
Iran Helps Syria Beat Oil Embargo
An oil tanker belonging to Iran's state owned shipping line has been switching flags and using multiple companies to switch oil from Syria to Iran, illustrating how Tehran is helping to side step efforts to choke the finances of Bashar al-Assad, Syria's President. FT, 18th May.
Oil & the Global Economy
Again a combination of turmoil surrounding Greece's remaining in the Eurozone, unfavourable economic news from the EU, China, and the US, weak demand and growing crude stockpiles was behind the (decline in oil prices last week). Oil has now fallen some $18 a barrel since March. The spread between NY and Brent crude increased to over $15 a barrel last week as a consensus grew that the reversal of the Seaway Pipeline will not be sufficient to drain much of the glut from Cushing. Okla. until its capacity is increased to 400,000 b/d next year. PO Review, 21st May.
Saudi Oil Production
The recent surge in Saudi oil production to an official 9.923 mn b/d has pushed the Kingdom into first place as the world's top oil producer, surpassing Russian production for the first time since February 2006. PO Review, 21st May.
Iran
(G-8 update) There seemed to be a remarkable unanimity concerning the Iranian confrontation. For a group that included Russia and China as well as the major western powers, this may be bad news for Tehran. The meeting agreed that Iran is entitled to peaceful uses of atomic energy, but must be more open regarding activities related to developing nuclear weapons. Moscow and Beijing now seem willing to accept the West's program of economic sanctions on Tehran as a fait accompli and realize that a slow tightening of economic pressure on the Iranians is more in line with their interests than unleashing the Israelis which could easily lead to a major conflict. PO Review, 21st May.
North Dakota
North Dakota has passed Alaska to become the second-leading oil-producing state in the nation, trailing only Texas. PO Notes, 21st May.
Record Breaking North Sea Licensing Round
The latest North Sea licensing round for oil and gas drilling has broken all previous records for the number of applications received by the Government. A total of 224 applications have been submitted for the 27th Licensing Round covering 418 blocks of the UK Continental Shelf. It is the largest number since offshore licensing began in 1964 and is 37 more than the previous high total received in the last licensing round. DECC, 23rd May.
Oil Falls to 7-Month Low Near $91 After Iran Agrees To Allow UN Nuclear Probe
Benchmark oil for July delivery was down 56 cents to $91.29 a barrel at late afternoon Singapore time in electronic trading on the New York Mercantile Exchange. The contract fell $1.01 to settle at $91.85 in New York on Tuesday. Brent crude for July delivery was down 84 cents at $107.57 per barrel in London. Washington Post, 23rd May.
www.globalenergyadvisory.com |
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Nuclear | |
Small Modular Reactor (SMR) Technology
Three major US nuclear utilities have joined an alliance formed by Westinghouse and Ameren to support the licensing and deployment of Westinghouse small modular reactor (SMR) technology. Exelon, Dominion Virginia and First Energy are among a dozen power utilities and electricity suppliers to sign up to the NexStart SMR Alliance - a group formed by Westinghouse and Missouri Electric Alliance to help secure investment funds from the US Department of Energy (DoE). WNN Daily, 18th May.
UK Nuclear Investment
Only months left to save nuclear plans from collapsing into a lost horizon Charles Hendry has warned that said that there was only a "window of a few months" to sell the Horizon nuclear project abandoned by E.ON and RWE. The Energy Minister told MPs on the Energy and Climate Change Select Committee: "It's an urgent situation." Volker Beckers, the chief executive of RWE Npower, told the Energy and Climate Change Select Committee that to press ahead with the Horizon project would have resulted in the company being downgraded. TUNSE/The Times, 16th May.
Power Shift Begins To Move German Industry
Germany's third largest aluminium producer has filed for bankruptcy as trade groups call for affordable power supply equivalent to the nuclear capacity taken off the grid as a response to the Fukushima accident. Voerde Aluminium announced its insolvency on 8 May due to lowering prices for aluminium combined with rising production costs. World Nuclear News, 22nd May.
Significant Step for WA Uranium
Western Australia's Environmental Protection Authority (EPA) has recommended that the state's first uranium mine, Toro Energy's Wiluna, be allowed to go ahead. Wiluna, which comprises the Centipede and Lake Way uranium deposits, contains uranium resources of 24,360 t U3O8 (20,657 tU). Discovered in the early 1970s, Wiluna is set to become the first uranium project to receive a positive EPA recommendation since Western Australia's government formally lifted its ban on uranium mining in 2008. World Nuclear News, 22nd May.
www.globalenergyadvisory.com |
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Renewable Investment | |
US Gov't Sets Stiff Tariffs on China Solar Panels
The Obama administration moved ...to impose stiff new tariffs on solar panels made in China, finding that Chinese companies are improperly flooding the U.S. market with government-subsidized products. Daily Finance, 18th May.
Portugal to Cut Subsidies
The Portuguese government has confirmed plans to cap "excessive" energy tariffs currently on offer to the renewable energy sector. The measures are set to save consumers €1.8 bn between now and 2020 and, the government argues, will boost economic competitiveness. The measures to cut the tariffs are part of the agreement that the country reached twelve months ago, following an EU/IMF bailout. www.awordaboutwind.com, 21st May.
BP & Sempra to Develop Hawaiian Wind Farm
BP and Sempra US Gas & Power have announced plans to develop the Auwahi Wind farm in Hawaii. The 21MW Siemens powered wind farm has been sold under a long-term power purchase agreement to the Maui Electric Company. This is the fifth project developed under a strategic partnership between the two companies that includes more than 1,000 megawatts (MW) of wind generating capacity in operation or under construction. www.awordaboutwind.com, 21st May.
Wind Sites Blocked As Gas Given Priority
The ready-to-boom Polish offshore wind sector has been stopped in its tracks by the environment ministry, which has opposed most of the country's proposed 40 wind farm locations because it says they interfere with future shale gas exploitation. For almost a year the infrastructure ministry has been reviewing applications from 59 investors that are competing for 40 projects in the Polish Baltic Sea. The investors, with a potential 20GW pipeline of work, now face a serious threat to progress. Windpower Monthly, 21st May.
Japanese Banks Extend Largest Wind Power Loan
Six of Japan's largest banks place a huge vote of confidence in the profitability of wind power. Mizuho Corporate Bank, Development Bank of Japan and Sumitomo Mitsui Banking Corporation lead a six bank consortium that will extend a syndicated loan of about US$252 mn by the end of this month to two Japanese companies to purchase Seajacks. Asia Power, 22nd May.
www.globalenergyadvisory.com |
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Coal | |
Continental Coal to Enter Higher Margin Coking Coal Market With 50% Interest in Colombian Mine
Continental Coal .... will enter the higher margin coking coal market with an option to acquire a 50% interest in a producing Colombian mine. This means the potential for near to medium term cash flow from the already producing operation if Continental chooses to exercise the option. Sales of hard coking coal are made at mine gate with current margins of around 75%. Sales directly to the export market are planned for 2013. The potential cost of this acquisition is US$15mn. Proactive Investors, 19th May.
Fights Brewing Over Massive Coal-Export Plans For the Northwest
The Northwest is poised to become the country's leading coal-exporting region, but critics worry about one of the biggest impacts: increased greenhouse-gas emissions from burning U.S. coal in China....On the table are proposals to capitalize on Asia's thirst for cheap energy by building a half-dozen terminals in Washington and Oregon that would export coal from the Rockies. If each of the proposed terminals, which range from Bellingham to Coos Bay, is built to capacity, Washington and Oregon eventually would export 150 mn or more tons of coal a year - half again as much coal as all U.S. exports combined in 2011. The Seattle Times, 21st May.
Thermal Coal Price Dip Should Induce Supply Discipline: Macquarie
A supply-driven fall in the international seaborne thermal coal market has pushed prices down to a level which should induce supply discipline, analysts at investment bank Macquarie said...A well-documented ramp-up in US thermal coal exports has helped pressure the global thermal coal market this year, with Platts 90-day European-delivered CIF ARA prices marked at $86/mt Thursday, a two-year low....Macquarie said that a combination of "decent" pricing at the end of last year, fortunate weather and the "diabolical state of the US domestic market" has ensured that seaborne coal supply has been very strong, growing at a rate of 10-15% year-on-year.....Macquarie said downside risk to international prices appears low, given that the current CFR South China price of $102/mt for 5,500 kcal/kg NAR material is pricing out high cost Chinese domestic supply. Platts, 21st May.
China's Largest Coal Mines
China's three largest coal-mining areas Inner Mongolia, Shanxi and Shaanxi mined 760.97 mn tons of coal over January-April, up 15% year on year, and comprising 65% of China's total coal output for the period. PO Review, 21st May.
China Buyers Defer Raw Material Cargos
Chinese consumers of thermal coal and iron ore are asking traders to defer cargos and, in some cases, defaulting on their contracts, in the clearest sign yet of the impact of the country's economic slowdown on the global raw materials markets. We have some clients in China asking us this week to defer volumes," said a senior executive with a global commodities trading house, who warned that consumers were cautious. "China is hand to mouth at the moment." Financial Times, CNBC, 21st May.
www.globalenergyadvisory.com |
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Energy Trading & Market Dynamics | |
UK Spot Gas Prices Drop On Warmer Weather
British prompt gas prices dropped on Tuesday morning as an oversupplied system and mild weather weighed on the market. At forecast flows of 224.5 mn cubic metres (mcm), Britain's gas market was expected to be almost 9 % oversupplied on Tuesday, according to data from National Grid. Reuters, 22nd May.
Steam Turbine Upgrade at Drax Power Station Nears Completion
Drax Power Station is a month away from completing a £100 mn upgrade programme to modernize the steam turbines. Upon completion, Drax and Siemens will have replaced the low pressure and high pressure turbines on all six units at the power station. Gas to Power Journal, 18th May.
China's Planned Carbon Emissions Scheme
The outcome of China's planned carbon emissions scheme could have a transforming effect on efforts to tackle climate change, experts say. China is preparing to run pilot carbon trading schemes beginning in 2013 in Beijing, Shanghai, Tianjin, Chongqing, Shenzhen, Hubei and Guangdong, major cities with a combined population of 250 mn people. PO Review, 21st May.
www.globalenergyadvisory.com |
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Our news update comments are provided by our Advisory CEO, Aily Armour-Biggs, if you want to talk to her then contact her on +44 207 692 0888 or aily@globalenergyadvisory.com.
Sincerely,
Anthony Francis
Global Energy Advisory |
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