Genel Energy (GENL) is hot right now, with new April finds in Northern Iraq, a targeted uptick in production here, as well as a new gas-to-oil pipeline conversion to come on line this year. The latest feather in its cap is the securing of a rig contract for offshore drilling in its Africa portfolio.
The second test on the Chia Surkh-10 well yielded a sustained preliminary flow rate of 3,200 barrels of oil per day and 8.4 million cubic feet of natural gas. (Related article: Kenya Aspires to be East Africa Hydrocarbon Transit Hub)
This is one of five exploration wells Genel has in Chia Surkh, and the testing confirms it’s a significant discovery. ( Continue… )
A nuclear plant in Wisconsin closed Tuesday, after nearly four decades of power generation. Earlier this year, owners of a plant in Florida opted for retirement over rehabilitation. The fate of the San Onofre nuclear plant in California hangs in the balance.
Differing factors play a role these plants' demise – age, regulations, leaks, and regional market conditions, to name a few. But one unifying pressure on these nuclear plants and others is the abundance of cheap, American natural gas.
Low-cost, low-emission natural gas has already been blamed for shuttering coal plants and weighing on wind and solar financing. Now, it seems, nuclear is also falling victim to the natural gas glut.
RECOMMENDED: Cheapest way to heat your home? Four fuels compared.
It partly explains Tuesday's closing of the Wisconsin-based 556-megawatt Kewaunee Power Station. ( Continue… )
One of the country's largest utility companies could face a record $2.5 billion fine for its role in a 2010 natural gas pipeline explosion that killed eight people, injured 66, and destroyed 38 houses. If adopted, it would be the largest penalty ever levied by a state regulatory body in the US.
“There is no amount of money that will bring back the eight people who tragically lost their lives in the pipeline blast or heal the lasting wounds to the people of San Bruno," Jack Hagan, director of the California Public Utilities Commission’s Safety and Enforcement Division, said in a statement prepared for the release of the Commission's report Monday. "All we can do is make sure such a tragedy does not happen again."
How effective such a fine would be in preventing another explosion is another question. Pacific Gas and Electric Co., the target of the proposed penalty, says they've already made significant improvements in operational safety and any additional financial burden would have the opposite effect.
There is a broader question about the country's infrastructure. Is the vast distribution network of underground pipelines keeping pace with a population that relies increasingly on natural gas? ( Continue… )
The U.S. is experiencing a boom in the production of oil. Only since the beginning of 2011, oil production in the U.S. has gone up by 30%, from 5.5 million barrels per day (mbd) to 7.2 mbd. Just this week, the U.S. Geological Survey announced that the amount of technically recoverable oil in North Dakota was tripled from a previous estimate – so this boom is unlikely to fall away in the short term.
At the same time, U.S. and European demand for petroleum products are declining. The economic troubles in the Euro zone have dampened economic activity (and petroleum demand), while in America, economic growth has returned, but the consumption of petroleum products are down as consumers change habits and lifestyles to drive less. At the same time, the low price of natural gas, particularly in the United States due to the boom in shale gas production, has some analysts predicting that gas will increasingly act as a substitute for oil whenever possible.
Given all this – an increase in production of oil coupled with a decline in demand – an elementary Economics 101 class would say that prices should be in a steep decline. Over the past several months, there have been a slew of articles predicting that oil prices are bound to drop.
RECOMMENDED: Think you know energy? Take our quiz.
However, while there was a dip in oil prices in April, prices for Brent Crude are back up above $100 per barrel. And, while there has been a persistent price spread between the American-based WTI and the global-based Brent (reflecting the U.S. oil boom, and infrastructure problems in getting it out), the price has stayed remarkably steady throughout the boom in the last two years. ( Continue… )
As the Iraqi Kurds boost their bargaining power with their first unilateral sale of crude oil on the international market, and new unilateral pipelines coming online soon, Kurdish officials and Baghdad have reached a tentative agreement to restore relations.
Last week, the Iraqi central government and authorities of the semi-autonomous Kurdistan Regional Government (KRG) put together a seven-point deal that could see the Kurds resume oil exports to Iraq in return for a revision of the Iraqi 2013 budget, which cut two-thirds out of the Kurd’s share.
On 1 May, KRG Prime Minister Nechirvan Barzani announced that the two sides had made headway in discussions on the issue following over a month of boycotts of the Iraqi parliament by Kurdish deputies over the budget discrepancy.
In January, the KRG halted exports of crude through Iraqi-government-controlled pipelines over non-payment of fees by Baghdad (to wit: $4.5 billion). Baghdad has refused to pay arrears for foreign oil companies operating on KRG territory, which the Iraqi central government says is a violation of the country’s sovereignty. (Related article: OPEC Falling Apart at the Seams) ( Continue… )
JPMorgan Chase is reportedly accused of manipulating energy prices to make money-losing power plants seem profitable.
Between 2010 and 2011, JPMorgan Chase sold electricity to authorities in California and Michigan at prices “calculated to falsely appear attractive,” reads a confidential government document acquired by The New York Times.
The alleged market manipulation cost the states $83 million in excess payments.
The nation's largest bank could face stiff penalties from the Federal Energy Regulatory Commission (FERC), a low-profile agency charged with regulating the sale of electricity. FERC has not yet made a public statement about the investigation, but analysts suggest the regulator is likely to pursue charges. Call it the "Enron effect."
RECOMMENDED: World's five largest companies
"In 2001, FERC acted as if market manipulation was a sort of boys-will-be-boys situation," Frank Lindh, general counsel at the California Public Utilities Commission (CPUC), said in a telephone interview. "Now, they seem to be taking it more seriously." ( Continue… )
Growing security risks in the Middle East are giving oil companies the jitters. French supermajor Total said recently that it was spending more on security since the January attack on the In Amenas gas facility in Algeria. BP said it had its own concerns, noting it was holding back on natural gas projects in the country because of the security situation there. OPEC-member Algeria has seen production declines in every month so far this year. In a lackluster economy, there hasn't been much from OPEC members to suggest there was any sort of revival. But with seven of the 12 members of the cartel experiencing at least some form of upheaval, the cost of doing business suggests members may need more than a little bit of luck to return to glory.
In January, fighters affiliated with al-Qaida stormed the In Amenas natural gas facility in Algeria. The facility is operated by British supermajor BP, Norwegian energy giant Statoil and Algerian state-owned oil and natural gas company Sonatrach. A four-day operation by Algerian forces left dead more than two dozen militants and 37 hostages, some of them energy company employees. The attack was perpetrated by an al-Qaida group, dubbed Those who Sign with Blood, from across the border in Libya. (Related article: Saudis Dare U.S. to Play Oil Ball)
Four months on and energy companies working in the region are expressing concern that the cost of doing business in the region may be too high. BP suspended an oil contract in Libya when civil war descended on the country in 2011. By last year, it said the situation there had approved enough to consider exploratory drilling but backed off again after the cross-border attack in January. It's Algeria's turn this time around, with BP saying it was reviewing its plans to develop natural gas fields in the country. ( Continue… )
As usual, the real news belongs to a couple of things you may have missed this week.
One, at first completely unrelated to energy, but of major consequence to everything else was the discovery that the Reinhart/Rogoff economic study that underpinned austerity economics world-wise had a key error in it.You couldn’t make this up. Reinhart and Rogoff certainly didn’t but they did make two key errors in the 2010 economic study that was cited world-wide as the reason why governments should cut back spending during the recession instead of spending their way out. In short, it was all down to an Excel error and leaving some key information out. This was easy to miss due to the newsflow from Boston and Texas, but seek this amazing story out or go directly to Paul Krugman in the NY Times or just one of several places in the FT. Think of this as paradigm shift equal to that of shale energy, only bigger and quicker.
I can hardly believe that I'm about to write this sentence: oil companies - some of the most highly valued companies in the world - may actually be undervalued on the stock markets. Let me explain.
As those of us who follow the energy industry know, the oil industry is undergoing a sea-change. Usually cited as the result of a combination of hydrofracking and horizontal drilling, there is a boom in oil production. It is doubtless that those technologies were important, but it is how they have been paired with information technology and seismic imaging that has completed the puzzle. The companies now know where to drill and what will come out, long before any steel goes in the ground.
The results speak for themselves; only five years ago, North Dakota was producing 172,000 barrels of oil per day, today it is producing 779,000 barrels per day - an almost 5-fold increase. Similar things are happening at previously obscure shale plays around the country.
RECOMMENDED: Top 5 bull markets since 1929
This is important to a company's valuation because in the past, oil companies were valued by the amount of reserves they have available. However, with this new suite of technologies, oil production has become more akin to advanced manufacturing. The companies apply skilled labor, scientific know-how, and large amounts of capital to a resource area that doesn't looks like a traditional oil field - and you get a valuable product out. Because of this, the oil majors should be treated more like manufacturing companies than resource extraction firms. Traditional oil drilling (as it is still practiced in most of the world) was like sticking a straw into a water balloon - you knew how much was in the balloon, and valued the company based off those estimates. ( Continue… )
A solar-powered plane took off from an airfield near San Francisco early Friday morning, intent upon completing the first cross-country flight relying only on the power of the sun.
If you're picturing photovoltaics glistening on jumbo-jet wings, some curbing of enthusiasm is in order. Friday's landmark event is less a peek into the future of commercial flight than it is a dramatic endorsement of clean-energy technology.
"It is the first and only airplane that can fly day and night on solar power without any fuel," said Bertrand Piccard, a pilot of the so-called Solar Impulse, in a midflight interview via radio with CBS 5 News Phoenix.
RECOMMENDED: Think you know energy? Take our quiz.
"It is possible because all the technologies we use are really energy-efficient technologies," Mr. Piccard added, his voice crackling through static as he soared 13,000 feet over Fresno, Calif., en route to Phoenix. "We want to promote these technologies." ( Continue… )