Friday, October 17, 2014
Wednesday, October 15, 2014
Ebola outbreak upsets Exxon drilling plans
The Ebola outbreak in West Africa is disrupting some drilling plans for the USA's biggest oil company.
ExxonMobil CEO Rex Tillerson said at a press conference Thursday in Houston that the company is having second thoughts about plans to start offshore drilling in some areas in West Africa due to concerns.
USA TODAY was not present at the meeting, but company spokesman Patrick McGinn confirmed the comments first reported by Reuters in an e-mail to USA TODAY.
"Safety, health and logistical issues related to Ebola will delay the planned late 2014 start of ExxonMobil's first exploration well offshore Liberia," McGinn said.
The postponement will affect one well off the Liberian coast. Exxon's operations in Nigeria are not affected.
The company also said it is restricting non-essential travel by employees to the West African countries where the outbreak has struck. The hardest-hit countries are Liberia, Sierra Leone and Guinea, but the virus has also struck in Senegal and Nigeria.
Shares of Exxon closed up 44 cents, or 0.5%, at $93.30. Africa is home to 20% of Exxon's proven developed crude oil reserves and 3% of natural gas. Meanwhile, 20% of Exxon's proven undeveloped oil reserves are in Africa.
Few large U.S. companies have significant activity even in the sub-Saharan Africa region, of which only a portion is affected by the outbreak. Many of the companies that do business in the sub-Saharan Africa region are centered in South Africa, far from the region affected by the outbreak.
Seven companies have disclosed an undefined but notable presence in the sub-Saharan region, says S&P Capital IQ. They are Accenture (ACN), American International Group (AIG), Chevron (CVX), Cisco Systems (CSCO), Citigroup (C), Morgan Stanley (MS) and Starwood Hotels (HOT).
Their exact exposure to Ebola-affected countries is not clear:
• Accenture, a global consulting firm, lists South Africa as one of its priority emerging markets. Accenture's revenue from emerging-markets nations, which include Asia as well as Africa, accounted for 40% of revenue in fiscal 2013.
• American International Group, an insurer, lists Johannesburg Insurance Holdings as a significant unit. Last year, AIG's emerging-markets business wrote $6.8 billion in property casualty policies, accounting for 20% of the total.
• Chevron, the energy company, competes with Exxon in Africa. The company in 2013 reported net production of 431 oil-equivalent barrels a day in Africa, which was 17% of its total.
• Cisco Systems the networking company also maintains a presence in South Africa. Revenue from Cisco's African business is consolidated with its emerging markets, including Asia. Total emerging markets revenue in the year ended July 26 was 26% of total revenue.
• Citigroup, the global financial firm, has been aggressive in the emerging world. Revenue from emerging markets, which includes Africa, accounted for 41% of Citi's revenue in 2013. And trouble in emerging nations has caused the company to relocate staff before, the company says in its annual regulatory filing.
• Morgan Stanley, the global investment bank, operates a unit out of South Africa. Revenue from the region isn't nearly as significant to Morgan Stanley as it is to Citi. Revenue from Africa, combined with Europe and the Middle East was $4.5 billion in 2013, or 14% of total revenue.
• Starwood Hotels operates and franchises hotels all over the world, including 85 in Africa and the Middle East. Those properties account for 7% of the company's 1,175 worldwide properties at the end of last fiscal year.
Starwood's stock was among the hardest hit travel stocks Wednesday as investors reacted to the confirmation of an Ebola-infected patient in the U.S. Shares closed down 81 cents, or 1.0%, to $79.39 Thursday. That's after falling 3.6% on Wednesday.
Tema workers threaten to block BDCs
The Tema District Council of Labour (TDCL) has threatened to block the transportation of finished petroleum products by the Bulk Distribution Companies (BDCs) from the points of entry if the government fails to stock the Tema Oil Refinery (TOR) with crude oil for processing within two weeks.
It also hinted of a massive demonstration by all workers groups in the Tema metropolis on October 30 should the government fail to fulfill the numerous promises it had made in relation to resuscitating TOR.
The latest decision is contained in a letter signed by Mr Wilson Agana, the Chairman of the TDCL, and addressed to the Chief of Staff.
It forms part of a “Save TOR Campaign” launched in July this year aimed at ensuring that the government fulfils promises it made in 2011 to recapitalise the refinery.
The letter, dated October 13, 2014, a copy of which the Daily Graphic has laid hands on, expressed dissatisfaction with the way issues concerning TOR were being handled by the government.
According to the letter, it was envisaged that the government had no intention of ensuring the profitability of the facility, as dialogue after dialogue between the two had clearly showed that the government was only toying with organised labour.
“We have realised that the government is just toying with us without putting in any meaningful and concrete steps to bring crude oil for TOR to process to ensure fuel stability,” it said.
It further expressed regret that dialogue with the government since 2009 had not yielded any fruitful results.
“As such, we can only conclude that there is a deliberate attempt on the part of the government to do away with this vital national asset for parochial gains,” the letter said.
It observed that the government had keen interest in the growth of the businesses of BDCs in the country and had provided a framework for such businesses to flourish, to the detriment of TOR.
The letter queried why the Ghana National Petroleum Corporation (GNPC) had to be made to abandon its core business to join the bandwagon of BDC business, becoming a determinant of storage toll charges for TOR.
“While the commercial rates for private storage facilities are pegged at $12 per day, those of TOR have been fixed at $5 per day, and as such provided a framework for TOR to be shortchanged,” it added.
The letter expressed regret that the GNPC had also sidestepped its core business of exploration and had become a major player in the downstream sector of importing finished products.
“This activity would have been better handled by TOR if the institution was being supported.
“The above measures are calculated attempts by the government to oversee an eventual collapse of TOR,” it concluded.
It also hinted of a massive demonstration by all workers groups in the Tema metropolis on October 30 should the government fail to fulfill the numerous promises it had made in relation to resuscitating TOR.
The latest decision is contained in a letter signed by Mr Wilson Agana, the Chairman of the TDCL, and addressed to the Chief of Staff.
It forms part of a “Save TOR Campaign” launched in July this year aimed at ensuring that the government fulfils promises it made in 2011 to recapitalise the refinery.
The letter, dated October 13, 2014, a copy of which the Daily Graphic has laid hands on, expressed dissatisfaction with the way issues concerning TOR were being handled by the government.
According to the letter, it was envisaged that the government had no intention of ensuring the profitability of the facility, as dialogue after dialogue between the two had clearly showed that the government was only toying with organised labour.
“We have realised that the government is just toying with us without putting in any meaningful and concrete steps to bring crude oil for TOR to process to ensure fuel stability,” it said.
It further expressed regret that dialogue with the government since 2009 had not yielded any fruitful results.
“As such, we can only conclude that there is a deliberate attempt on the part of the government to do away with this vital national asset for parochial gains,” the letter said.
It observed that the government had keen interest in the growth of the businesses of BDCs in the country and had provided a framework for such businesses to flourish, to the detriment of TOR.
The letter queried why the Ghana National Petroleum Corporation (GNPC) had to be made to abandon its core business to join the bandwagon of BDC business, becoming a determinant of storage toll charges for TOR.
“While the commercial rates for private storage facilities are pegged at $12 per day, those of TOR have been fixed at $5 per day, and as such provided a framework for TOR to be shortchanged,” it added.
The letter expressed regret that the GNPC had also sidestepped its core business of exploration and had become a major player in the downstream sector of importing finished products.
“This activity would have been better handled by TOR if the institution was being supported.
“The above measures are calculated attempts by the government to oversee an eventual collapse of TOR,” it concluded.
http://finance.yahoo.com/news/dwarf-throwing-saudi-prince-warns-100141737.html
REUTERS/Neil Hall
Prince Alwaleed bin Talal al-Saud has published an open letter on his website expressing his "astonishment" at reports that the Saudi oil minister is comfortable with collapsing oil prices.
The famously eccentric billionaire investor Alwaleed (who has allegedly tossed dwarves at parties) took issue with recent media reports suggesting Ali bin Ibrahim Al-Naimi, the Saudi oil minister, was telling market participants that the kingdom would be comfortable with oil under $90 a barrel. Oil prices continued their seemingly unstoppable slide, with Brent crude falling to $86 a barrel on Tuesday from a recent high of over $110 in June.
Alwaleed's opinion is taken seriously because of his investments in Apple, Time-Warner, and News Corp. He also has a massive stake in Square. In his letter he warns that 90% of the Saudi budget is still reliant on oil revenues and that if prices are allowed to continue their slide, it could be a "catastrophe":
http://www.alwaleed.com.sa Prince Alwaleed bin Talal al-Saud's open letter.
Analysts had been suggesting that Saudi Arabia, OPEC's largest member, was happy to allow the oil price to slide to make exports of the commodity competitive with the shale boom in the US. The country will also be looking for new sources of demand with the Chinese economy decelerating and the ongoing eurozone crisis dragging down the oil consumption outlook.
On Tuesday the International Energy Agency cut its demand forecast for 2015 by 300,000 barrels per day (bpd) and its 2014 forecast by 200,000 bpd. The energy agency reported that prices would remain under pressure because of increased global production. Significantly the IEA warned that OPEC may not be able to hold back the price slides as it has been able to in the past.
Chief analyst Antoine Halff said that, given the US shale oil boom, "we should not expect OPEC to necessarily play its traditional role of swing producer."
However, some OPEC members have expressed their concerns over the price slide. Reuters reports Venezuela's foreign minister Rafael Ramirez has been warning against a race to the bottom on oil prices, saying "it doesn't suit anyone to have a price war, for the price to fall below $100 a barrel."
Tuesday, October 14, 2014
This time, cheaper gas may fuel trouble
Pump prices are expected to fall, which in the past has benefited the economy. (Photo: David Coates , The Detroit News )
Michael Kanell, Atlanta Journal-Constitution
Everybody knows lower gas prices are good for the economy.
And yet, as prices gently flow downward and experts predict more declines over the next several months, there have been troubling contrarian undercurrents that warn that what has always been good news this time could have a bad side.
To be fair, the majority opinion — the conventional wisdom — is that energy prices this autumn will fall and that the decline will help growth, profits, hiring and household finances — not to mention consumer spending — during the upcoming holidays.
Gas prices are largely dependent on oil prices, and oil prices recently fell to their lowest level in more than two years, down about $20 a barrel from late spring. Each dollar per barrel can translate to a 2.38 cent dip in the price of each gallon of gas an American driver pumps, according to Tom Kloza, chief oil analyst for GasBuddy.
No, we haven't had the price drop yet, but the change in oil prices is starting to ripple through the system, he said. "We expect nationwide gasoline prices will move to between $3.10 per gallon and $3.20 per gallon in November and December. The actual bottom in this current down-cycle may not occur until January."
Adding to that expectation was news Thursday that Saudi Arabia — the dominant oil force in the Middle East — has been hinting it is ready for a price war. That is, that the massive producer would ratchet up pumping.
And that nearly guarantees lower prices.
Dramatic drops in oil prices helped fuel economic growth in both the 1980s and 1990s. After a painful recession and a sluggish expansion, wouldn't lower prices now again be good economic news?
Of course. And yet …
"This time could be different," wrote energy economist James Williams in a letter to clients. "While counter-intuitive, it is entirely possible that lower prices could lead the U.S. into recession."
To the Atlanta Journal Constitution, he added: "Another $10 to $15 lower and we start to have problems."
Ironically, one of the reasons we might be vulnerable is also one of the reasons prices are falling: Because U.S. oil production has been booming.
Adding about 4 million barrels a day of oil output — hydraulic fracturing and all that — has been a boon for places like North Dakota and Texas, states that have led in job growth since the Great Recession ended. It has been great for companies that make equipment for oil production or sell services to the sector.
In the past five years, the five largest oil-producing states have added more than 1.35 million jobs — roughly 16 percent of the jobs the nation added as a whole. And they account for 32 percent of all private sector jobs.
But new supplies of oil have combined with modest global demand and more efficiency to lower prices that had been floating well above $100 a barrel. By mid-week, some benchmark markets had prices below $90 a barrel and falling.
But most of the new production only makes economic sense at high prices. That is, it's expensive to get the oil out of the ground, so if prices fall too much, it will cost more to get it than it's worth.
"At $80, I suspect a third of planned tar sands projects would not be funded and if it fell $20 more, it would probably slow drilling in shale, that is, fracking," said Jon Gabrielsen, president of J.T. Gabrielsen Consulting.
Of course, if production slowed down enough, that could mean an increase in prices. But it could take a while, Gabrielsen said. In the meantime, the economic boom in the oil fields would shift into full-speed reverse.
It has happened repeatedly to countries that rely on oil production — even some pretty big nations. After all, it was years of dropping oil prices in the 1980s that doomed the Soviet Union.
"Producing countries, many of which are relatively poor, suffer when prices drop," wrote the Economist magazine this week, embracing the contrarian view. "A big enough bust could rattle financial markets around the world."
But the Economist also adds a crucial caveat: "Just how much trouble to expect depends on the scale of the drop."
And after all, unlike poor producers or the Soviet Union, the United States has a huge, diverse economy that is much less energy-dependent than in decades past.
Gabrielsen, for his part, is a skeptic, which is this case means an optimist.
Lower prices — and shutdowns in production — would hit Texas and North Dakota hard, he said. But consumers would be delighted with still-lower prices and several important industries are heavily dependent on energy, he said, especially steel, aluminum, chemicals and textile mills.
Friday, October 10, 2014
Fuel transparency will lower emissions and cut costs
NGOs Transport & Environment (T&E), Seas at Risk (SAR) and Carbon War Room have urged the IMO not to withhold data on ship efficiency and fuel consumption.
This call for action follows moves by some industry groups to undermine initiatives at the IMO and EU level that would make efficiency performance publicly available and require ships to report and publicise their energy efficiency data.
In submissions to the MEPC 67, T&E and SAR – both members of the Clean Shipping Coalition – have used research by the University of Gothenburg, which states that transparency is essential if the industry is to reduce its GHG emissions and develop a sustainable low-carbon future.
The study prepared by Jessica Coria, associate professor at the Department of Economics, University of Gothenburg, stated that: “Social and market pressure resulting from information disclosure can generate strong incentives for pollution control in a way that traditional enforcement tools may not be able to achieve.”
One of the principle barriers to the sector reducing its emissions is the lack of publicly available data on the energy performance of individual ships. The IMO’s MEPC plans to restrict access to the energy efficiency design index (EEDI) data on newly built ships.
Some shipowners/operators claim that efficiency performance data is commercially sensitive and should remain confidential. However, this is in stark contrast to the experience of other industries; the publication of vehicle performance standards in the European car industry, for example, has led to average annual improvements in vehicle fuel efficiency of 4%. In the aviation industry, US carriers have been required to publish quarterly data on fuel consumption and other operational aspects since 1958.
Failure to make efficiency data transparent would be neither productive, nor in the best economic interests of the industry; freely available information is the key to promoting energy efficiency and driving down industry costs. Moreover the current situation, where some privileged actors pay for access to such data, distorts competition and divides the market between data ‘haves’ and ‘have nots’.
Disclosure of efficiency data ensures greater competition, prompting more calls for transparency from many shippers, cargo owners and operators. This is demonstrated by the increasing uptake of independent efficiency indices such as the Clean Cargo Working Group, the Clean Shipping Index and the A-G efficiency rating from RightShip and Carbon War Room. Indeed use of the A-G rating alone has been introduced as a policy by nearly 30%, representing 2 bill tonnes of cargo, of shipping’s non-containerised charter market.
T&E and SAR have called on the IMO to recognise that a single source of official and certified data from the industry regulator would offer a more reliable and universal metric; one that would drive competition to increase efficiency across the industry.
John Maggs, president of the Clean Shipping Coalition and policy advisor on shipping and environment issues with Seas at Risk, said: “Transparency of efficiency data is needed to inform good policy making and is a win-win for the shipping industry and the environment. Transparency of data will help drive down industry costs, improve the functioning of the shipping market and lead to desperately needed reductions in ship GHG emissions.”
Bill Hemmings, shipping manager at T&E, said: “Energy performance data is an essential first step to reducing the sector’s emissions, which are predicted to treble by 2050 on a business-as-usual basis and threaten to undermine other global attempts at tackling dangerous levels of climate change."
Victoria Stulgis, senior associate at Carbon War Room’s shipping operation said: “Open data on efficiency is essential to achieving the sustainable reductions in carbon emissions our industry needs. Carbon War Room knows a lack of access to data is a major barrier to the take up of clean technologies, so we urge the IMO to deliver open access to EEDI data.”
Warwick Norman, CEO, Rightship, added: “The take-up of RightShip’s A to G efficiency rating is an example of the market moving faster than industry regulations. In 2012 we had three charterers using A-G in their selection process: now we have over 30 customers, including ports, terminals and banks, who factor energy efficiency into their vessel selection criteria. This collectively represents almost 240,000 login sessions to our online efficiency tool. Our experience demonstrates that if the IMO were to make efficiency data on newer ships freely available it would be used in vessel selection and therefore help reduce emissions of the world’s fleet.”
Thursday, October 9, 2014
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