Toxic Water Plagues Australian Gas Project

There’s trouble in the water. Actually, no, there’s toxins in the water. PetroChina and Royal Dutch Shell owned Arrow Energy is reporting toxic levels of petroleum byproducts in water samples around its Moranbah Gas Project. The gas development project is based in Queensland’s Bowen Basin, Austrailia, and it has faced public opposition, specifically from farmers, amongst groundwater contamination concerns.

The contaminates are in no way a shocking discovery for Arrow, as their occurrence is relatively common in gas drilling sites. There seems to be no concern, however. Arrow claims that while the chemicals exist in their trace amount tests, they have not actively used any of them in their fraccing fluids. Further testing will hopefully show whether the chemicals, known as BTEX, are a natural occurrence or have been introduced by a third party.

Despite the fact that officials have declared the low amounts to be harmless and that there is no reason for public worry, skepticism remains, and I am skeptical myself. Considering the regulatory onslaught that’s occurring in the United States, it seems logical that companies are hoping to be as under the radar as possible. I’m not insinuating that Arrow would lie about the toxicity of the leak, but they instead may downplay the severity of the issue to a level they hope to be manageable. Whether or not this turns into anything remains to be seen, but even if there are no public health effects, I am left to wonder what damage the BTEX chemicals will do to the surrounding environment. 

Sources: The Wall Street Journal

Signs of What's to Come

US supermajors are expected to greatly increase capital spending in 2011 and beyond with Chervon leading the way. Besides the billions of dollars that this will involve, this is significant because it is a sign that better times are coming—at least for the oil and gas industry. The Great Recession proved to be a very difficult time for the energy industry, so much so that demand for oil declined for the first time since 1983. The narrower profit margins over the last couple of years have meant that energy companies are not spending nearly as much as they did before the financial crisis. Lesser capital spending means that companies are not doing as many exploration endeavors as they would like.

The reason that oil and gas companies are now able to afford greater spending is due to rises in demand which is bringing prices of crude oil back up to more normal levels. Oil prices had been $145 per barrel—an unprecedented high—just before the financial crisis in July of 2008, they then tanked to just $40 per barrel. Oil is now back up to $80 per barrel and it is expected to more than double in the next two years due to increased demand.

I believe the prospect of oil prices doubling in the next two years makes US oil companies a potentially very strong investment, and at least a very secure investment. Oil companies are using their greater profits to explore more oil producing regions within the US to tap large quantities of previously unattainable reserves. Marcellus Shale in Pennsylvania and New York is particularly promising and it could prove to be a safer bet than the Gulf Region and other off shore projects, which oil companies expect to made more expensive by increased government regulation in the wake of the BP oil spill.  Overall, US oil companies are poised for strong growth in the near future.

Sources: The Wall Street Journal, Picture, Standard & Poor

Vassar Cash Shell The World's Largest Exporter of Coal?

According to The Wall Street Journal, Nat Rothschild’s Vallar Cash Shell is now the world’s largest exporter of steam coal. This deal came to fruition because Mr. Rothschild arranged a complex 3 billion dollar reverse takeover with Indonesia’s Bakrie family. The deal will leave the Bakrie family with a 41% share in Vallar while Mr. Rothschild receives a 51% share in PT Bumi Resources, which is Indonesia’s largest coal producer. As a result of this transaction Vallar will be renamed Bumi PLC. Also simultaneously Vallar has invested 1.6 billion dollars in cash and shares to buy a 75% stake in PT Berau Coal Energy, which is a smaller coal producer that has various gold and metal-based assets.

I believe that this investment by Vallar Cash Shell should put them in excellent positioning heading into the next decade and beyond. Vassar, or PT Bumi Resources, is not only the world’s largest steam coal exporter, but it also will have the greatest access to asia’s developing markets, specifically China. According to the EIA, China is the world’s largest coal consumer and I believe is likely to continue to buy coal as they develop there infrastructure and economy. I think that as a result of this and the various other developing countries in Asia including India, Vietnam and Singapore that PT Bumi Resources will be a good stock to invest in, in the long term as its profit margins will rise significantly due to the high demand it will receive from countries neighboring Indonesia. In addition PT Bumi Resouces will have low interest costs, as it has better access to the world’s capital markets than its competitors since PT Bumi is a London listed company. From a regional perspective in Indonesia and Southeast Asia it will be intriguing to see how the newly formed PT Bumi Resources will affect the coal market.
Sources: http://http://online.wsj.com/article/SB10001424052748704312504575618771973862424.html?mod=WSJ_Energy_leftHeadlines
http://http://www.eia.doe.gov/cabs/China/Coal.html

The informational interview provided me with different new ideas. Many times people don't know how prices of one product can affect another factor of production. Different types of industry look for specific job positions in their companies. When companies in are new to an industry, all of the job positions are increasing; they rarely reduce or decrease a specific position. This is the case of Ampacet in Mexico, which was established in this new area six years ago. Ampacet operates in 17 different countries. In general there are some key points of interest.

It is interesting how an increase or decrease in the price of petroleum can affect the price of another product when petroleum is an input for that factor of production.

I learned why the demand for all job positions can be increasing at the same time because a company has been recently established in a new area.

It is interesting as well, to see that the most common jobs are open to engineers. This shows that depending of the industry in which the companies belong, there is certain preference over job positions preferred by each company.

Changing Hands?

Vermont’s Yankee nuclear plant may be on its way to changing hands. Entergy Corp. has positioned itself to execute a possible sale of the plant in the midst of the troubles it’s facing. Combined with a depressed power market fueled by low natural gas prices, the Vermont plant is getting older. By some standards in fact, the plant is becoming ancient. The 39 year old plant is commissioned through March 2012, yet Entergy is hoping to extend its license for another 20 years before selling it off.

The plant is facing other issues as well. Last year the plant’s groundwater tests showed an increase in a radioactive material known as tritium—which can lead to cancer. Despite the levels being deemed innocuous after further testing, the plant’s ownership has fallen out of fashion with State and even Federal officials. Vermont, unlike most other states, has the ability to block proposed extensions of a nuclear plant operating there. It seems like the time is now for Entergy to get out.

It’s not all bad for the plant, though. The Yankee plant is responsible for producing about 1/3 of the state’s power, which bodes well for a potential buyer. Secondly, the state’s objection to the plant seems more with the current ownership, especially after their mishandling of the tritium leak, not with the plant itself. Is Vermont equipped to suffer a loss of a third of its power production and 650 jobs? I’m not sure, and I’m willing to say that in this economy, such a move is unlikely.

Wall Street Journal Analyst Naureen Malik deemed the possible sale a win-win situation, and I’m inclined to agree. The plant, who sells power a market price not a regulated one, could benefit immensely from a change in ownership. A new owner with a new focus would help to secure the plant’s jobs and power output, and would also be more likely to have a license extension granted.


Sources: The Wall Street Journal, Entergy Corp.

Chinese Imports of Crude Oil Decrease

According to Bloomberg, China’s crude oil imports in October of 2010 declined to their lowest level since May of 2009. This is especially surprising considering that in September of 2010 China recorded their highest amount of imports of oil at 3.8 million barrels of oil per day. Bloomberg News and JP Morgan analyst Brynjar Eirik Bustnes speculate that the reason for this sudden decline is due to the excess oil that was brought to China in September, which according to them lasted in to October. However, conversely China’s oil products imports that include gasoline and diesel rose for the third consecutive month to 840,000 tons.

This decrease in Chinese imports of oil brings several issues to mind including how this news will affect the world oil market. As well as, whether it will lead to an increase or decrease in gasoline prices at the pumps. I believe in the short term that as a result of this import decrease that gasoline will be cheaper to purchase than in the previous months. However, unfortunately for the American and global consumer, prices will most likely rise again as China begins to increase its imports. In addition, I think that from a macroeconomic perspective it will be interesting to see how the decrease in crude oil imports and increase in oil product imports will affect the global economy.

The EPA is Now All the Way

 

 The EPA will now require United States oil and gas companies, along with certain electronics manufacturing plants to report their greenhouse has emissions. This requirement is part of the EPA's new (as of earlier this year) Greenhouse Gas Reporting Program which is designed not to directly regulate the emissions rates of companies, but rather to inform the public as to how much pollution a particular company or industry sector emits. Now that the energy sector is now accounted for, the EPA has all of the 'high-profile sectors[s]' under its monitoring, which amount to 85% of all industrial greenhouse gas emissions produced in the US. While the EPA estimates this tracking of emissions will cost the energy industry $62 million for companies to be able to a get the software and monitoring needed, others argue that cost may range from $123 million to $1 billion.

I believe the costs of this program will actually be worth the benefits; although, in the short term the balance will likely prove to be the other way around. I believe this because it will afford people to know if there is a particularly inefficient company which they are then able to compare with other companies who produce the same good, and then make an informed decision about purchasing the companies good or service. While there is no immediate possibility for regulation of oil and gas production companies, there does appear to be potential for future regulation of greenhouse gas emissions, especially given the analytical approach the EPA is taking to compartmentalize businesses into their specific sectors. If the EPA does choose to regulate the emissions that US oil and gas companies, I believe it will be making a big mistake, because it would force our companies to be potentially much less competitive than the state-run oil giants which give no regard to emissions produced. However, even if the EPA were to attempt to regulate oil and gas companies enough to hurt their competitive edge, the political upheaval that this would create would soon crush such hopes of the EPA.
Sources: New York Times, Photo, EIA

Analysts Observe Trends

Many analysts look at upstream, which refers to the exploration and production of oil and gas expenditures, from previous quarters to estimate future industry trends. For example, a decline in upstream expenditures usually drops down to other areas such as transportation and marketing.

Some analysts believe that rather than analyzing energy companies, you should just predict the trend in energy prices. More analysis is needed for a wise investment than simply looking at price trends in oil. However, it is true that there is a strong correlation between the performance of energy companies and the commodity price for energy.

The industry trend for the past five years has been that the upstream capital spending by oil and natural gas producers are the fundamental element for the revenue base of the equipment and oilfield services. Companies give significant amounts of money each year for exploration and development activities.

Analysts have been working carefully watching out the industry trends to see what type of investments can be made into the industry.

The Oil Services Industry

http://www.investopedia.com/features/industryhandbook/oil_services.asp

Devon Energy: Independently Moving Forward

The third largest independent producer of oil and gas in the U.S., Devon Energy Corp., reported that the sale of overseas assets and the spike in crude oil prices has increased their profits by fourfold. This great increase in profits caused their shares to reach even greater levels than expected by analysts. In fact, their shares reached their highest levels in five months. This comes as Devon's share prices have dropped 7.2 % this year alone. Although, the jump in shares amounted to 3.5% which was the largest one day leap of any oil and gas company of the 13 among the S&P 500. Devon sold $10 billion worth of BP Plc., Apache Corp., and in Chinese producer Cnooc Ltd.

I believe that Devon Energy's success is due, in large part, to being in the right place at the right time. While it made many valuable transactions in international asset sales, this, combined with a recently stronger dollar and federal stimulus that will buy $600 billion in government bonds makes Devon's success due to more than simply wise business practices. And, Devon is not the only company to back out of major overseas endeavors in recent days. In a similar move toward more domestic concentration of production, PDVSA sold great stakes it had in US oil deals; although, PDVSA also reinvested some of that into oil companies in Belarus and Syria. Even still, this recent move by Devon does seem to be the right move because the company will have greater control and oversight into its production; enabling much needed boost in productivity.


Sources: Image, Bloomberg, Reuters

Trouble in the Water

Offshore drilling company Transocean Ltd. is facing a huge drop in their third quarter profits. The company reported a 48% drop which was fueled by a decrease in their utilization rate, average daily revenue, and the BP Deepwater spill. Transocean has not been held responsible for the spill, but they have been speculated to have been a contributing member to the chain of events that resulted in the disaster.

As I blogged about in late October, the lifting of the Obama administration’s moratorium won’t take real effect until January 2011 in all likelihood, due to the slow process of approving permits for drilling. In conjunction with the additional new regulations that have been imposed, the business climate has been transformed from explosive production and consumption into lukewarm stagnation.

Yet I don’t think that Transocean is a completely fair example of the effects the new regulations are having. Despite that shallow-water drilling companies are already reporting delayed approvals because of the new process, I think that there is something else going on with Transocean. As previously discussed, the company has been in the spotlight since April’s Deepwater disaster, and I think this is the biggest reason for the skepticism around the company.  The stock has dropped 23% from this point last year, and while increased costs of production via regulation are contributing, the uncertainty around the legal action the company may face is an even bigger issue.

Sources: The Wall Street Journal

The effects of the Deepwater Horizon Rig Explosion Continue

According to The Wall Street Journal Houston, Texas-based offshore oil driller, Pride International Inc., is evaluating strategic options for the future, which could include selling to a larger offshore drilling company. Pride is considering this option because of the potential onslaught of offshore drilling regulations soon to be passed by congress. Other possible options that Pride International are currently evaluating include a strategic alliance with another offshore drilling company such as Norway’s Seadrill Ltd. or Britain’s Ensco PLC. Other companies currently facing this uncertainty include another Houston, Texas-based offshore oil driller Seahawk Inc., a former affiliate of Pride International, who are at the moment weighing their options on what to strategically do.

I believe that Pride International Inc.’s current situation reflects that of many other offshore oil drilling companies, who are presently struggling to make ends meet due to the recently lifted Moratorium and the oncoming regulations. If Pride International does decide to allow themselves to be acquired by another company then a good match for them could be Seadrill Ltd., who employs similar equipment to them on drill sites and at the moment has a small stake in Pride International Inc. According to The Wall Street Journal further solidifying my belief that Seadrill Ltd. will acquire Pride International is the news that they have been aggressively courting Pride for an acquisition for months. As a result of this speculation on Pride International’s future their stocks rose 11% on the evening of November 2, 2010, which could lead to interest from other companies as more investors are beginning to buy stock in Pride International. Pride appears to be a good investment both in the short and long term as their stock prices go up and the potential of further earnings from a merger become ever greater.

Oil Peak

Alternatives for oil have already began. The peak oil theory sees the Hubert curve (Hubert from the Shell Company created this theory), which sees oil production increasing at one point, but then decreasing. The curve works for any limited natural resource. The curve predicts a “steep fall off, or a high rate of decline of production” as existing assets go down. Peak oil debates tend to argue that global oil production will decline too fast for the world to develop sufficient alternative sources of energy to replace the use of oil.

Shell doesn’t promise to peak oil theory but agrees that since the year two thousand the demand for oil has increased. Research shows that demand for oil will continue to increase, the highest being 2.5%. At this rate, the demand in the year 2030 will be more than double what it was in 2000. Shell is not promising to pursue the oil peak theory, however the company does agree that oil is being depleted in the Middle East. Shell has been looking for options. Some of the options include stepping up the progress on renewable resources.

The environmental lobby, however, is strongly opposed to oil sands exploitation, arguing that they are easily one of the worst (most polluting) forms of energy. Some argue that the extraction of oil from oil sands creates “three times the carbon emissions of oil production and destroys the local environment. Oil shal is worse according to many other companies.

It is very important to fin better ways of replacing consumption of oil with probably renewable resources. The demand is increasing and natural resources are decreasing.

Q-finance- The Ultimate Financial Resource

http://www.qfinance.com/sector-profiles/oil-and-gas

Venezuela: Refining its Allegiances

Venezuela's state-owned oil company, Petróleos de Venezuela (PDVSA), after already having sold its assets in German oil company Ruhr Oel, is now going to back out of US oil company Citgo, which has long been owned by PDVSA. In addition to selling its assets in Germany and the United States, Venezuela is also planning to shift its sales to Belarus and Syria. The president of the state-owned oil company, Rafael Ramirez, made clear, "We are aiming at reducing the spot market... We are signing long-term supply agreements." Both Ramirez and Hugo Chavez (who appointed Rafael Ramirez to be the president of PDVSA), not surprisingly agree and have called their stake in the American market "bad business." This process of selling their stake in Citgo is made complicate further by contracts with the company that will not allow them to outright sell Citgo, which will prove to make the process of leaving the American marketplace all the more drawn out.

I believe Venezuela is choosing to leave the American marketplace, not because it is purely "bad business," but rather because it is looking to further distance itself from American politics and Western interests. Venezuela reported that it was leaving Germany because of profitability reasons; but, this is hard to entirely believe, given the fact that , overall, Germany's economy is strong and is doing very well in spite of the current state of the global economy. In lieu of the economic powerhouses of Germany and the United State, Venezuela is focusing business further in Syria and Belarus; not exactly the nations that come to mind when considering profitability. But the most compelling reason of all to believe that this company, that is no doubt under Hugo Chavez's thumb, is acting on politics rather than economics is its shipments of oil to Iran that were intended to circumvent the effects of US and EU sanctions against it. These shipments were enough to sustain any shortages that Iran had and were recently discontinued because Iran no longer needed Venezuela's assistance. 


Sources: Reuters, WSJ, Photo

Potential Investment Losses Ahead For Cali

With California facing additional threats of investment leakage, the anxiously awaited decision on Proposition 23 will be levied on Tuesday. Prop. 23 aims to suspend the state’s greenhouse gas law that was in 2006. The law mandated substantial cuts in California’s greenhouse gas emissions by 2020.

The Silicon Valley venture capitalists are in clear objection to the potential ratification of Prop. 23. These venture capitalists have a major stake in the clean technology firms that have sprung up, and thus their investments are at risk if such a proposal were to pass. Jim Watson, managing general partner at the venture-capital firm CMEA Capital is ready to play hardball. “If lawmakers nationwide block legislation that benefits these clean-tech firms,” he says, “we have to start thinking about moving a lot of our investment dollars to China.”

Venture capital investment in California, specifically in clean-tech companies has been on the decline, but has been increasing rapidly in Asia. Prop. 23 is the latest factor to perhaps speed up that investment leak. What I am especially interested in covering this story is the struggle within the private sector that is taking place over Prop 23. While the venture capitalists may lose money on their investment as a result of this, existing firms that emit greenhouse gasses will benefit immensely. A thorough analysis of the economic implications of this proposition on both sides of the debate is required before any sort of affirmation of one position can be made.

It’s an interesting struggle between the established business heavyweights who serve to benefit from Prop. 23 and the risk taking innovators who oppose it. Personally, I feel the proposition is going to pass, and the entrepreneurs may once again be left out of the rain.


Sources: The Wall Street Journal, California Voter's Guide

Leviathan the future of Natural Gas?

According to a Wall Street Journal article published October 18, 2010 drilling began last week in Israel on a recently discovered natural gas well known as Leviathan. Leviathan is the second large natural gas well found of the coast of Israel in the Mediterranean Sea in the past year, the first being the natural gas well Tamar. Leviathan is currently projected to have upwards of 16 trillion cubic feet of natural gas, which would be enough to supply Israel’s energy needs for the next 100 years. This is the largest Natural Gas find in Israel’s history and one of the largest in the world in recent years. Noble Energy Incorporated and Delek Energy Limited are currently leading the initiative on the Leviathan project and together own approximately 86% of Leviathan and are expected to report the findings of their 150 million dollar exploratory drilling in March of 2011.

I think that it will be interesting to see what happens with Leviathan in the long run especially with the Israeli Finance Minister recently announcing that he has ordered a review of how the Israeli government taxes oil and gas exploration. The Israeli Knesset has been advised to not change royalty rates because it could lead Noble Energy to sue the Government of Israel at The International Court of Justice in The Hague. Also it will be intriguing to see how the Leviathan find will impact natural gas sales in both the Middle East and on the international level. It remains to be seen whether investment in the Leviathan natural gas well will expand or whether companies will choose not to invest because of the current uncertainty due to the possibility of making less profit. From a macroeconomic and political perspective it will shift the way that Israel currently conducts business with energy since they will no longer have to rely on receiving some of their oil from hostile countries.

Segmenting the Oil and Gas industry

In order to be successful at managing a business in the oil and gas industry, it is necessary to market the business and its services to the right target audience and with enough impact and coverage. This is why the oil and gas industry can segment the market.

It is very important to understand customers; if you are selling directly to a consumer, you must know as much as possible about your customer's geographic, demographic, psychographic and behavioral profiles. From the geographic point of view, it helps to know where the majority of the consumers are located for example, in rural or urban areas, to see where to put gas stations. Another important aspect is demographics. By knowing the age, you know about how many people from the population are in need of production from the oil and gas industry. Income, under the demographics category, also shows how about how much money is able to be used for oil and gas products. For example, a high income leaves money to be used for other resources such a gas. In the psychographic segmentation, the consumption of gas can depend on whether people like to have their calls full of gas (personality traits) or not. If a gas company for example, offers special services such as discount coupons or a has a person who pour the gasoline into the customer’s car without making the customer come out of the car, most probably the customer will have preference for this gas station and therefore will develop brand loyalty. This would also apply for the demographic segment because old people prefer to have the gas poured by an employee rather than come out of their car. Thus, behavioral segmentation also applies to the oil and gas industry.

By having segmentation, there is a better way of targeting the market. The four segmentations, geographic, demographic, and behavioral, can be used in the oil and gas industry in different ways.

Sources:

Guide to Marketing Your Business in the Oil and Gas Industry EZ Article

Moratoridone.

Almost six months after the Obama administration’s controversial moratorium on deepwater drilling was initially imposed, the gulf drilling ban was finally lifted today. As I blogged about in early September, the moratorium has resulted in an unemployment increase in the gulf region, and in productivity stagnation in an already fragile economy.

The news of its repeal is good news, but there are strings attached. The moratorium is gone, yes, but drilling likely won’t resume before the end of 2010 due to companies needing to re-apply for drilling rights by demonstrating their compliance with the new regulations the Obama administration has begun to levy. It’s important to consider the timing of the announcement, too. The administration has repealed the ban six weeks previous to its originally planned date in an effort to show their focus remains on the economy.

But there are question marks surrounding the future of the gulf energy industry. For starters, how long will the permit process take to resume drilling? The White House’s projections of 2010 are just that: projections; and it’s a real possibility that the process will be subject to delay. Yet much of the concern is about small businesses or midsize companies that cannot afford the idle waiting time or the new safety regulation costs. Complimentary manufacturers are also feeling the pressure. Gulf Island Fabrications Inc., a builder of massive steel platforms used by the oil and gas industry, laid off a third of its workforce, or about 500 employees this year.

It’s unclear to what extent the new regulations will affect gulf coast companies and the industry as a whole, but there is no doubt that the cost of production is going up – a lot.


Sources: The Wall Street Journal, Foreign Policy

Breakthrough Energy Legislation Blows In

After eight years of vying, final approvals to the Cape Wind Project have finally gone through, and a 28 year lease marks the first of its kind in the US. The Cape Wind Project will be the first of many offshore wind project in the US, and other offshore wind projects in the US include: the Offshore Wind Economic Development Act in New Jersey, a project in Rhode Island, several projects in New York, and in Maine, Delaware and even Ohio (in Lake Erie). While the US is a major competitor in many renewable energy technologies, the United States lags behind many European countries in the development of offshore renewable energy. The United Kingdom, Germany and Denmark are two countries which are far ahead of the game, as they already produce the great majority of offshore wind energy in the world.

The implications of such major projects are not as large as should be expected from the amount of hype around these recent US projects. While the scale of projects in the US is not small, compared to European nations, especially Germany, which will likely soon become the second in the world for offshore wind power generation despite its limited coastline, and the UK, which has a project in the works for 2020 that is valued at $150 billion. Despite being dwarfed by many European projects, the fact that the United States overcame eight years of legislative gridlock is a major breakthrough, and it is a great step in securing American independence from foreign oil by both curbing the need at the level of utilities and for the production of greener electricity that will go on to provide energy to electric vehicles, thus helping to substitute the great thirst that the transportation sector has for oil.

Sources: Reuters , Picture

Technology, Manufacturing, and Costs in the Oil and Gas industry

Technology has influenced the growth and development of the oil and gas industry in many ways. Some manufacturing is done domestically and also internationally. In some cases, companies lowered their production costs.

The capabilities, cost, risk, and legality of new technologies must be determined before are moved into commerce. Argonne's Environmental Science Division conducts independent feasibility studies of the technical, regulatory, economic, and risk aspects of promising oil field technologies to foster technology evaluation and implementation. Some technology that Argonne's Environmental Science has incorporated are synthetic based drilling fluids that offer both good drilling performance and low environmental impacts, the use of underground salt caverns for disposing of oil field waste below water supplies, and downhole oil and water separators that produce cost savings through lower produced water management costs and a safer environment.

Many small producers exist in Europe, Canada, Russia, Asia, and Australia. The U.K. has the largest number of firms, which are concentrated in Scotland. The U.S. oil and gas equipment industry is very strong both domestically and internationally, particularly in areas involving advanced technology. The domestic industry is so competitive in the U.S. market that imports make up only a very small portion of the U.S. market. Perhaps, a very large portion of the oil and gas equipment manufactured in the U.S. is exported.

U.S. oil and gas equipment manufacturers are strong in every market around the world; however, they have extensive competition from manufacturers in Western Europe, Canada, Japan, Korea, Russia, China, Brazil, Argentina, and Australia. These producers tend to have favorable market shares in their regions. For example, European manufacturers have an advantage in the North Sea region, while the U.S. leads in the Western Hemisphere. The world market for upstream oil and gas equipment rises and falls with the price of oil. This happens as oil and gas companies increase and decrease their exploration and production activities. When the price of oil falls drastically the equipment market declines and the oil and gas equipment industry experiences bankruptcies and layoffs.

Technology manufacturing and companies costs play an important role in the energy industry. Technology helps in advancing drillings and many explorations in the oil and gas industry. The United States accounts for many of the production of gas and oil domestically and internationally.

http://www.evs.anl.gov/project/dsp_topicdetail.cfm?topicid=18

Atlantic Wind Connection the future of commercial wind development?

On October 11, 2010 Google officially announced its investment in the Atlantic Wind Connection for tens of millions of dollars. The Atlantic Wind Connection is a project funded by Google, Good Energies, and the Marubeni Corporation who according to The Wall Street Journal have teamed up to provide funding for the building of a transmission line for wind generated energy. The Atlantic Wind Connection is expected to begin construction in 2013 and is projected to be completed by 2020.

The project itself is broken up into five sections with Google, Good Energies, and the Marubeni Corporation pledging to invest in the first section of the project with the possibility of funding the rest as well. When completed it is expected to provide power for approximately 1.9 million households spanning 350 miles from Virginia to New Jersey. The Atlantic Wind Connection would eliminate the need for offshore wind developers to build their own transmission lines and according to The Wall Street Journal lowering costs by 17-20% for offshore wind developers. The Atlantic Wind Connection, according to Google and The Wall Street Journal, has chosen the mid-Atlantic region of the United States to build this project because it has shallower water off the coast and would be easier to build a transmission line going out 10 to 15 miles to sea.

I think that the Atlantic Wind Connection is a risky investment because of the possible financial and regulatory drawbacks. One such hindrance being that the project is projected to cost over 5 billion dollars when completed. In addition acquiring government permission to build the transmission line will be an obstacle as the United States last week approved, for the first time ever, the construction of a commercial wind development. Also the permission process will require going through various different sectors of government including Federal Energy Regulatory Commission among others. This brings up the question of whether the Atlantic Wind Connection with these impediments will be able to be completed by 2020 and if Google and the other firms will still be willing to invest at that juncture in time. Overall, the project while promising does not appear to be worth the approximately five billion dollars that it may be worth upon completion with so many chances to falter along the way.

Sources: http://online.wsj.com/article/SB10001424052748703440004575547381873787098.html?mod=WSJ_Energy_leftHeadlines
http://googleblog.blogspot.com/2010/10/wind-cries-transmission.html

Fresh Pickens

Founder of BP Capital Management, Mesa Petroleum, Clean Energy, philanthropist and more, T. Boone Pickens is one of the most innovative leaders of the move to make America energy independent. For the past few years Pickens has invested in alternative energy, as well as his mainstay natural gas, in order to help America lift its dependence on foreign oil. In recent weeks he spoke to an energy conference in Virginia, and next he will be headed to Texas, about energy alternatives to oil and the impact that that may have to benefit our nation.

A quotation of Pickens from the conference in Virginia that summarizes well  his platform for energy reform:

"If we are going to address the environmental and economic crisis associated with our escalating dependence on OPEC oil, we have to get serious about using North American resources in transportation to back out foreign oil/ diesel/ gasoline.  Gov. McDonnell understands that we have to get serious about our energy challenges, problems and opportunities in this country.  It’s going to take leadership, new thinking, big ideas and serious innovation to achieve greater energy independence and help transition to a more sustainable and economical energy model. Conferences like this one are an important part of that effort, and I’m pleased to be a part of it."

After having seen and having been intrigued by T. Boone Pickens on the Tonight Show in 2007, I am confident that his plans are now on their way to being implemented. A quotation from Barack Obama atop the web page for the Pickens Plan reiterates Pickens plan to make America independent of Middle Eastern oil in 10 years, even though Pickens himself voted for McCain. This type of radical action using existing technologies is just what our nation needs to truly make a dent in our energy usage and in our impact on the environment.

Sources:
Forbes
PickensPlan

World Oil Tax

According to The Economist the United States has the world’s second lowest petrol tax at $.039, with the exception being Mexico which subsidizes petroleum. Most countries especially now with “green” energy becoming more mainstream have a tax of at least $3 as is the case in Germany, Britain, Finland, France, Norway and Turkey. These countries having high taxes on gasoline and oil is significant because it shows that governments throughout the world are making a concerted effort to give incentives to the consumer to stop using oil and gas as frequently. To the contrary the fact that the United States has such a low tax helps to explain the trend of American consumers driving more frequently and people buying more vehicles defined as “gas guzzlers.”

The notion of having such a low petrol tax raises the question of whether the United States should raise it in order to provide further incentives for the United States consumer to become less reliant on oil and gas. In addition if the United States Government were to implement this it would lead to more money available for the Federal Government to have to spend instead of continuing to borrow from China and Japan, thus raising the national debt. Raising petrol taxes could also show that the United States Government is worried about climate change and would be a step in the right direction by imposing higher taxes. In addition, higher taxes would show that President Obama is backing his pledge to make the United States a more energy efficient country.
Sources:http://www.economist.com/node/17101124?story_id=17101124

Cali Goes Solar: Cool, right?

Following Tuesday’s announcement of the approved construction of two solar power facilities in California, the string of skepticism has already begun to sink in. The Wall Street Journal reported that the two projects will be built on federal publically owned land and will be contracted by Chevron Corp. and Irish Developer NTR PLC.

The buzz in California is currently over the estimated $1 billion dollars that the projects will generate for the economy, including 950 jobs and the resulting capacity to power 500,000 homes. The projects are being partially subsidized by federal tax incentives for renewable energy that expire at the end of the year.

Everyone is excited, but how great will the projects really be? It’s important to consider a few of the unknowns before we give the project our blessing. First, what are the construction costs going to be? Likely astronomical. The cost of building these plants is enormous and in order to generate and store power past dark, the plants will require special batteries that are also extremely expensive.  The price per kilowatt is still unknown, but the plants will have to churn out massive amounts of power to recoup the initial investment price and prove it to be beneficial.

There’s no doubt it’s a step in the right direction for California who aims cut greenhouse gas emissions to 1990 levels by 2020, but the question marks surrounding the plant’s productivity and construction costs remain important. Until then, it sounds good, and it’s election season. With only 22 days to go, I’d say timing is everything. 

Sources: The Wall Street Journal, Chevron

US EXPORTS GAS

Many years ago the supply in domestic US gas was fairly low. The demand was much higher. Thus, the United States was forced to import gas. However, times have changed.

The US wants to make investment in drilling gas. The US currently has a lot of shale gas attained domestically. The price of gas in the US has gone down to $3.80 I addition to having a surplus. The demand has risen. However, if the United States doesn’t invest in other drilling technologies to attain more gas, in the future, it will eventually lack gas. Besides just consuming the gas in the US, it should be exported to other countries as well.

As many debates have been held, many companies have come to ask the Federal Energy Regulatory Commission for permission to export gas instead of importing gas. The US would highly benefit since it would be able to rank higher in the oil and gas industry just like for example, Qatar.

This is a new opportunity for the US economy. Having abundance of gas is helpful for exporting more than importing and therefore bringing up the GDP of the country, since there will be less imports in gas.

http://blogs.forbes.com/christopherhelman/2010/09/27/its-time-for-the-u-s-to-export-natural-gas/

The Competetive Market of Biofuels

Biofuels are garnering renewed attention as they prove not only to be an alternative to petroleum products, but because they have other environmentally friendly applications as well. Anything from sugar cane, to algae, to willow trees (wood biomass pictured on the left) are being used to create bioproducts, including biochemicals, and biofuels. All of this is being done on a large scale, quickly, cleanly and, incredibly, cheaply. Some of the bioproducts that these facilities are creating are products that would otherwise be harmful to the environment, but that can be created without the same harmful pollutants. One such product is an adhesive that uses lignin, the natural glue in wood molecules, as an alternative to more harmful, synthetic glues. Another derivative of biomass is xylitol, a natural sweetener; certainly not something that can be made from petroleum refinery.





The implications of all of this green technology will likely be substantial. The ability of Pure Power, the company that Forbes focused on in particular, to create such a wide variety of products, and to do so in large quantities and cost effectively is a big breakthrough for business to have greater incentive to join the green movement. Pure Power is positioned to become a greater and greater power in biomass exploitation, as they plan to build one or two bio-refineries per year, first in North America, then Brazil and then Asia. Another sign that business has incentive to join create bioproducts is the fact that Pure Power has formidable competitors. As I mentioned in a previous blog post, and as Forbes cites, Solazyme is a major player in algal biofuel technology and proves a source of competition in this pioneering field. So, not only is there competition for what types of fuels will become major players in the future, but there is also competition as to who will produce them.



Scource: Forbes

Images: 1, 2

Germany: Building the Energy Bridge

The German cabinet took a major step forward today in securing their vision of Germany’s energy future. A range of new proposals were passed, with the most talked about being the operational lifespan of the country’s nuclear plants. The plants were initially commissioned to operate through 2020, but plants built before 1980 were instead given an 8 year extension and newer plants were given an additional 14 years of operating time.

Germany has committed fully to the goal of making renewable energy the country’s primary energy source. The plan that was signed off on today outlines that ambitious goal. Chancellor Angela Merkel hopes that the lifespan extension of the country’s 17 nuclear plants will allow enough time for the renewable energy sector to expand. She’d better be right, because the German cabinet has turned its back on nuclear energy and now describes its role as “bridge technology” for future energy sources. The outright abandonment of nuclear energy is an interesting one. It’s still unclear why instead of having nuclear energy work in conjunction with Germany’s renewable sector, which accounts for a mere 16% of the country’s energy output, they have instead declared nuclear energy to be a dead end.

Germany's nuclear plants will be discontinued in 2034

Today’s plan details just how lofty the German renewable energy goals are. By 2050, Germany hopes to have reduced greenhouse gas emissions by 80%, and to have increased renewable energy to 60% of its total output. In order to facilitate the plan, the four German companies who operate reactors will be mandated to invest in additional security measures for the plants, and in return for the additional profits they expect to gain from the life extension, they will return half of those revenues to the government.  

Although the proposals have yet to pass the lower house of parliament, their affirmation looks promising. The renewable energy sector in Germany employed over 210,000 people in 2006; it remains to be seen whether its rapid expansion will result in a net job gain when the nuclear industry evaporates, or if renewable sources will be able to satisfy the expected energy demand.

Sources: The Wall Street Journal, The Energy Collective

Nuclear Energy a temporary replacement for oil and gas?

On Tuesday September 28, 2010 Germany disclosed its new energy policy and plans. According to The Wall Street Journal the plans involve brining down Germany’s consumption of greenhouse gasses by 80% by the year 2050. On a more controversial note the government has decided that nuclear energy is going to be their energy “bridge” to a more environmentally friendly energy source that will hopefully be created by 2050. In Germany this is especially controversial because the previous plan was to have all nuclear power plants closed by the year 2020 and now the last power plant according to this new policy will close at some point in the 2030’s.

Germany making the policy decision to become more reliant on nuclear energy will have repercussions globally as countries throughout the world try to cut down on greenhouse gasses and fuel emissions. It will be interesting to see if in the next few years other countries take on policies similar to Germany and attempt to cut down on their oil consumption. In addition it leads to the possibility of future legislation forcing car companies to make their cars more energy efficient if they want to sell in Germany, or if adopted in other countries, globally. It will also be intriguing to see how the oil and gas market, in Germany, responds to these policies.

Sources: http://online.wsj.com/article/SB10001424052748703882404575519493309998222.html?mod=WSJ_Energy_leftHeadlines
Pictures: http://www.google.com/imgres?imgurl=http://forum.johnson.cornell.edu/alumni/rochester/images/green_energy.gif&imgrefurl=http://forum.johnson.cornell.edu/alumni/rochester/news.html&usg=__vtqoSnWhry5sQybfwuH78oeMwLk=&h=302&w=262&sz=20&hl=en&start=0&zoom=1&tbnid=EJwSkTGpDU0_6M:&tbnh=96&tbnw=84&prev=/images%3Fq%3Dgreen%2Benergy%2Bsymbol%26um%3D1%26hl%3Den%26biw%3D1291%26bih%3D475%26tbs%3Disch:10%2C5&um=1&itbs=1&iact=hc&vpx=104&vpy=123&dur=1965&hovh=241&hovw=209&tx=95&ty=257&ei=QgGkTKevAYX6lwekmf2nCw&oei=QgGkTKevAYX6lwekmf2nCw&esq=1&page=1&ndsp=20&ved=1t:429,r:0,s:0&biw=1291&bih=475

and http://www.google.com/imgres?imgurl=http://skepticalteacher.files.wordpress.com/2010/08/nuclear-power-plant.jpg&imgrefurl=http://skepticalteacher.wordpress.com/2010/08/15/conservapedia-disconnected-from-reality-einsteins-theories-are-a-left-wing-conspiracy/&usg=__L5jEa7bXeXvm9NY0JQSIwrQx_7o=&h=396&w=500&sz=39&hl=en&start=0&zoom=1&tbnid=t3RsnRjXDZjPpM:&tbnh=148&tbnw=246&prev=/images%3Fq%3DNuclear%2Bpower%2Bplant%26um%3D1%26hl%3Den%26sa%3DN%26biw%3D1291%26bih%3D475%26tbs%3Disch:1&um=1&itbs=1&iact=hc&vpx=163&vpy=164&dur=31&hovh=200&hovw=252&tx=207&ty=164&ei=-wKkTObHCcT6lwfPpajRCw&oei=-wKkTObHCcT6lwfPpajRCw&esq=1&page=1&ndsp=11&ved=1t:429,r:6,s:0

Shale Gas projects in Poland

According to Gerson Lehrman Group, Chevron and Exxon Mobil are two of the most influential companies in the oil and gas industry. The gas and oil industry is looking outside the Middle East for future drilling projects. Russia and Poland are two locations that are recently gaining interest from major gas and oil companies such as Chevron Corp. and Exxon Mobil Corp. Chevron has exploration rights for four shale gas contracts to operate in southeastern Poland. Europe prefers shale gas in order reduce its dependence on imported gas specifically from Russia.

ExxonMobil has also have recently gained exploration rights in Poland. Chevron won five-year exploration licenses. These licenses belong to the Zwierzyniec, Kransnik, Frampol, and Grabowiec projects. Chevron has 100 percent ownership in these concessions.

ExxonMobil is targeting Germany and Poland to test efforts at finding shale gas in Europe. Techniques like horizontal drilling (a type of drilling used when it is harder or hardly impossible to drill) make it possible to explore even in densely populated areas. But authorities are concerned by projections that 70% of Europe’s natural gas will be imported by 2030.

It is important that European countries start to be independent of gas. Targeting shale gas project will improve their dependence and diminish it. It is incredible how Chevron and Exxon Mobil are trying to come up with these projections in search of shale gas. Poland has been recently found to be a potential country to drill for shale gas and Chevron and Exxon Mobil have started projecting the area.

http://www.marketwire.com/press-release/Analyst-Study-on-Chevron-and-Exxon-Mobil-The-New-Oil-Gas-Frontiers-1326048.htm

http://oilprice.com/Energy/Gas-Prices/Chevron-to-Seek-Shale-Gas-in-Poland-as-Europe-Focuses-on-Unconventional

http://www.glgroup.com/News/Exxon-Mobil-Royal-Dutch-Shell-BP-Total-Chevron-and-other-big-companies-know-37909.html

Revolutionizing a Revolution

Founded in 2005 in Fremont, California, Solyndra is an up and coming solar energy company that has a technology which promises to transform the solar electric game. The green movement to change the energy industry may itself be changed with Solyndra's solar tube technology that, at the very least, is a product that will keep other energy players on their toes. According to Green Tech Media, Solyndra has technology that will, "allow the company to compete with, and even undercut, the price for standard crystalline silicon solar arrays."


While oil and gas companies primarily focus on the production of oil and gas, all energy companies have invested at least some money and resources into alternative energy technologies. Given the amount of capital at hand, existing energy companies are most easily able to afford spending on research for future technologies, however, many smaller companies, even newcomers, seem to do the job more effectively. Solyndra is one such company that states as a goal to provide the lowest cost of installation in the commercial rooftop market. This strategy enabled the company to get contracts from Frito Lay and Anheuser-Busch, two major corporations looking to take advantage of this cost effective technology. The cost effectiveness of the Solyndra system is not from production cost, but from correlative money savers that come with installation, including tax credits and the incidental energy savings given the nature of having a reflective, white roof that is an essential part of what makes Solyndra's tubes so effective.

With a greater demand and movement toward renewable energy sources, not only will oil and gas companies have to protect their direct sales to power companies, but also the shift toward hybrid electric and fully electric vehicles now threaten the long standing sales of oil and gas to fuel transportation. The future of  oil and gas companies is relying, to a greater and greater extend, upon renewable energy, and battle that is being won, in many cases, from the ground up.


 Scources:

1. Bloomberg and Businessweek 
2. Green Tech Media
3. Solyndra

Champions of Electricity

Since its founding in 2005, Champion Energy Services has quickly climbed its way to the top of the private electricity providers in the U.S. Champion primarily serves markets in Texas, Illinois, and Pennsylvania with affordable energy from a company who values customer service. In 2006, Champion acquired competitor Mpower; the combined entity makes Champion one of the top 20 retail electric providers in deregulated domestic markets.

Deregulation in the energy industry is cited by the company as a key reason for its success and ability to grow as a company. Aware that consumers don’t usually judge the “quality” of electricity, but instead whether it is affordable and reliable, Champion has made a major push to be a leader in customer service. The company has changed the competitive landscape of the by making a distant but necessary commodity, such as electricity, accessible to the average consumer. This includes customer-friendly electricity bills, 24/7 live assistance, no hidden fees, and a commitment to offering the most competitive electricity rates.

Despite the fact that most energy companies are well established veterans who influence the industry with their sheer size and capital, Champion Energy has offered a new, focused approach to providing the best consumer experience possible—and it’s paying off. 

Sources: Eisenbach Consulting, Champion Energy