The 20th of January was a “black Tuesday” for the Service Companies of global oil and gas branches. According to figures of Dave Lesar, CEO of Halliburton, distribution of branches for their Service Companies fell by 25 - 30% as a consequence of the drastic decline in the price of oil. Experts in the US are counting on a drop of around 15% for drilling in the first quarter of this year, compared to the year before.
On this Tuesday therefore, the two leading Service Companies world wide announced a drastic cut back in positions. Schlumberger is cutting 9,000 and Halliburton 7,000 jobs. On the same day during a conference of the Handelsblatt in Berlin, the new head of Siemens Ernergy introduced herself to German energy industry. In the middle of the previous year, she had been acquired by Shell as US strategy expert for the oil and gas service sector to guide Siemens into the US Service sector from Houston. How Siemens would deal with the now completely altered situation and the only recently - but still before the drop in oil prices – concluded acquisition of the compressor producer Dresser Rand for nearly 6 billion Euro, was not even mentioned by Davis, to the great disappointment of economic representatives.
The Financial Times published on January 21st: „ Abdalla El-Badri, Opec secretary-general, told a panel at the World Economic Forum in Davos that cutting output to stabilise prices was not a viable strategy for the oil cartel, which has sought to retain market share in the face of surging non-Opec supply. “If we [had] cut in November, we would have to cut again in March and June and again,” said Mr El-Badri. “Non-Opec would keep on producing and replace us.”
He added the move to protect Opec’s market share was not directed to any one country. “It was a pure economic decision,” he said. “I don’t understand, everyone is crying [and saying this was a] decision against the US, [it is a] war between Saudi and US. It is all nonsense. It is the logic.”
In his current talks with ENERGLOBE, Carlos Pascual, former leading US energy diplomat points to this “logic”, which at its core is about the struggle for the energy markets of Asia.
<pre>While the biggest Service Company world wide for oil and gas branches in the US awaits drastic losses, it simultaneously announces the acqusition of 45.7% of the biggest Russian drilling firm, “Euasia Drilling”, for 1.7 billion US dollars. Along with that goes also the option to acquire the remaining part of the firm in three years. The interesting question would be whether these three years are the assumed period for changes in the program of sanctions of the west with Russia?</pre>
If one considers the immense size and relatively mild usefulness of fusion reactors currently in existence, the recent announcement by Lockheed Martin that, within ten years, it hopes to bring a portable fusion plant to market which can be transported on the back of a truck should evoke images of a “pocket-sized” wonder technology. Alongside this announcement has also come a report from the Washington Post indicating that these reactors could be assembled in a factory, rather than as part of a massive construction project.
Fantastic, apart from the lingering memory of rumors years ago, which also circulated through the Post, of successful “cold fusion”, the fulfillment of an epic human ambition, and, alas, a hoax.
The investment bankers from Goldman Sachs have adjusted their price forecast for North American oil (WTI) in 2015 downwards by 18 percent to 74 US dollars per barrel. For weeks it has been speculated as to whether this development – particularly in the context of continuing unbridled oil production in Saudi Arabia – is backed by further market- or geopolitical strategic concerns, namely the battle to retain market shares or efforts to weaken the financial security of states like Russia, Venezuela or Iran that depend crucially on oil exports. Analysts quoted by the Frankfurter Allgemeine Zeitung (Nov. 29th) are nonetheless convinced that “it is becoming ever more clear that a price war is emerging on the international oil market between Saudi Arabia and American shale oil. The next meeting of OPEC, scheduled for the end of November, is thus awaited with much anticipation.”
The meaning of Goldman’s announced price forecast adjustment to 74 dollars per barrel becomes clear if one also recalls that the financial viability of shale oil exploitation through fracking in the US is tied to a price of between 75-78 dollars per barrel. At any lower price, production must be scaled back, which would in turn alter the contours of the whole debate over future US oil exports and the “shale boom” in general. In this context, it is hard to imagine those in Riyadh inclined to strictly separate markets and geopolitics in their thinking.
In a move surprising to outside observers but which has received little attention in the European media, Gasprom has offered to allow its competitor Rosneft to borrow one of its drilling platforms for operations in the Kara Sea, after a planned joint project between Rosneft and ExxonMobile fell through as a result of US-imposed sanctions.
Reuters sees in this move evidence of the contradictory effects being produced by the current set of sanctions, as the Russian political leadership draws state energy companies more closely within its sphere of control. In the lead-up to the sanctions, the West had announced its intention to loosen these tightening bonds and to nudge Russia on a new geo-political course.
Incidentally, one can appreciate the degree to which Gazprom is constantly at work on new strategic options by looking at the often contradictory statements they issue, as, for example, with their recent announcement that they plan to delay the construction of a LNG terminal in Vladivostok and consider instead building a direct pipeline to Japan, as reported in the Moscow Times.
ENERGLOBE recently mentioned the Turkish president Erdogan’s rebuke of the New York Times and the Financial Times for reporting on the smuggling of oil out of Iraq and over the Turkish border, through which the IS is able to finance much of its terrorist activities. Erdogan sharply denied that such oil was able to pass illegally into his country.
A new report by IHS, however, confirms that this smuggling is taking place along with providing an estimate as to its magnitude and value. According to the analysis, IS is capable of producing between 50,000 and 60,000 barrels a day and can sell this product on the black market at an average price of 40 US dollars per barrel, “mostly via trucks through smuggling routes on the Turkish border”.
In its latest World Economic Outlook, the IMF estimates that the US economy has derived a six percent annual increase in the export of manufactured goods from the lower price of American natural gas alone. The price of natural gas in the US has fallen significantly below prices in Europe and Asia over the last several years.
In Germany, with its strongly export-oriented economy, the competitive advantage currently enjoyed by American industry has been the object of much public discussion, but this has generally remained on the abstract level. The IMF’s six percent figure now indicates a very real surge by the US.
Following the publication of an interview conducted by ENERGLOBE with Iran’s deputy oil minister for international relations, Ali Majedi, in which he discussed Iran’s desire – conditional on the lifting of economic sanctions – to revive and expand economic relations with Europe, including transporting natural gas through Turkey and along the Trans Adriatic Pipeline (TAP) to European consumers, this topic has garnered increasing attention in the press. A few days ago, Reuters reported on an internal paper drafted by the European Commission’s Directorate-General for foreign policy in which Iran is classified as an important future alternative to Russian gas imports, again, conditional on the lifting of sanctions and the construction of the necessary transport infrastructure.
TAP, responding to an inquiry by ENERGLOBE, explained that "TAP’s shareholders have stated that TAP will not transport any Iranian gas under the current political circumstances. Any unsanctioned gas can be transported given that participants in the booking phase have submitted a valid booking request.”
In connection with the convening in August of the “Dialog-Europe-Russia” (DER) think tank, the Geopolitical Information Service (GIS) reports that the figure of 400 billion euros for the resuscitation of the Ukrainian economy, including its energy sector, was raised at this meeting by experts.
As critically as such figures should be regarded – and, in contrast to the lead-up to the crisis in Greece and southern Europe, there are few reliable data on the state of the Ukranian economy – they nonetheless offer a glimpse into the sheer scale of the situation...up to this point.
As a comparison: the EU’s share in the first rescue package for Greece was a “mere” 80 billion euro, out of a total amount of 110 billion.
‘... The family whose legendary wealth flowed from Standard Oil is planning to announce on Monday that its $860 million philanthropic organization, the Rockefeller Brothers Fund, is joining the divestment movement that began a couple years ago on college campuses. [...] Steven Rockefeller, a son of Nelson A. Rockefeller and a trustee of the fund, said that he foresees financial problems ahead for companies that have stockpiled more reserves than they can burn without contributing significantly to climate damage. “We see this as having both a moral and economic dimension,’ he said,” reports The New York Times.
With this move, the heirs to the Rockefeller fortune are not only sending a signal to the students on America’s elite campuses, but are taking a position in the growing global debate on the prudence of long-term investment in fossil fuels, joining voices such as those of Britain’s Lord Stern and former US Vice-President Al Gore, who have long warned of the grave dangers of sustaining current levels of hydrocarbon exploitation.
Such warnings led the leadership at ExxonMobil this year to issue a statement to their investors, assuring them that, because there is currently no recognizable, coherent global political will to achieve climate targets, their investments in fossil fuel remain secure.
Briefly noted: in an in-depth and, in keeping with tradition, unsigned editorial, the Financial Times has lamented the present state of affairs in university economics departments worldwide, in which an exclusive focus on quantitative analysis and reasoning has risen to unchallenged prominence. As a corrective, the editors advocate a return of Marx, Schumpeter and Hayek to the lecture theater.
Marx, after his usual fashion, would surely have written “recte” in the margin.
During his recent visit to New York, Turkish president Erdogan denounced reporting fromThe New York Times and the Financial Times indicating that his country is allowing oil produced in parts of Syria and Iraq under the control of the Islamic State (IS) to be smuggled across its borders along established regional networks, where it then enters the market, providing a key source of financing for the terrorist organization.
The complexity of the situation in northern Iraq, aside from the “geopolitical nightmare” of IS conquests there, can be gauged from reports that established smuggling corridors in the region are controlled largely by Kurds, who are thus facilitating the sale of IS-produced oil at the same time as fighting the IS itself.
The pressure placed on leading US think tanks by The New York Times is starting to have an effect. On September 7, the Times, on the basis of extensive investigative research, accused the Atlantic Council, Brookings, CSIS – all think tanks with major output on energy security issues – and 25 other institutions of accepting money from foreign governments (e.g. Qatar, Norway) totaling at least 92 million US dollars, without however declaring this to be the case. Although the reasons for this are understandable – the assumption of impartiality and objectivity is one of the most important forms of capital these institutions posses, empowering them for example to deliver testimony before the US Senate – failure to declare overseas financial sources constitutes a violation of the Foreign Agents Registration Act of 1938. The Times today cites legal experts and members of Congress, all of whom agree that the need for such disclosure is essential.
Just before the planned meeting between Chinese Premier Xi Jinping and his Indian counterpart Modi, we have received a recommendation from our contributor Cleo Pascal – an expert on India and associate fellow at Chatham House, London – for an article providing a good overview of current India-China relations, taken from the Indian Sunday Guardian.
Berlin/Teheran/July 6, 2014. Dr. Ali Majedi, Iran’s current Deputy Petroleum Minister for International Affairs, is to be named the ambassador of the Islamic Republic of Iran to Germany. Majedi confirmed this to the web magazine ENERGLOBE/Energy and Geopolitics. He anticipates being able to take up his responsibilities in Berlin in September, pending the approval of Germany’s Federal Foreign Office.
In an exclusive interview with ENERGLOBE, Majedi spoke for the first time about his coming appointment. He is very pleased to be coming to Germany, says Majedi, and he plans to focus in his new role on questions surrounding future economic cooperation with Germany and the EU.
With the appointment of Majedi as ambassador, Iran’s president Rouhani is dispatching to Germany one of his leading policy specialists in the international oil and gas trade. Germany occupies a key position in the European economy and is playing an important role in the 5+1 negotiations with Iran, says Majedi. According to Majedi’s own assessment, based in part on positive experiences dealing with Germany in the past, the prospects for a closer cooperation between Germany and Iran are encouraging.
Majedi has accumulated diplomatic experience over many years, last serving as Iran’s ambassador to Japan.
The complete interview with Dr. Ali Majedi appears in the June 17 issue of ENERGLOBE.
Ed Crooks is the FT’s US industry and energy editor. He gives an overview of the most important publications on the issue of the US “shale revolution“. Here they are. (Read his full recommendations at http://www.ft.com/intl/cms/s/2/0d830306-e104-11e3-b59f-00144feabdc0.html#axzz32XDz0btD.)
Groundswell: The Case for Fracking, by Ezra Levant, Random House Canada, RRP£19.99/$27.95, 272 pages
The Boom: How Fracking Ignited the American Energy Revolution and Changed the World, by Russell Gold, Simon & Schuster, RRP$26, 384 pages
The Frackers: The Outrageous Inside Story of the New Billionaire Wildcatters, by Gregory Zuckerman, Portfolio, RRP£14.99/$29.95, 416 pages
Cold, Hungry and in the Dark: Exploding the Natural Gas Supply Myth, by Bill Powers, New Society Publishers, RRP£13.99/$19.95, 336 pages
The Power Surge: Energy, Opportunity, and the Battle for America’s Future, by Michael Levi, OUP, RRP£18.99/$27.95, 288 pages
Until recently, the White House has refused to issue any statements regarding the long-standing ban, but, due to extreme increases in extraction volume, the Administration has apparently begun to rethink its approach.
At Columbia University’s Center on Global Energy Policy, John Podesta, one of President Barack Obama’s most senior advisers, was asked about the administration’s thinking on crude oil exports. He said: “We’re taking an active look at what the production looks like, particularly in Eagle Ford, in Texas, and whether the current refinery capacity in the US can absorb the capacity increase to refine the product that’s being produced.”
“We’re taking a look at that and deciding whether there’s the potential for effectively and economically utilizing that resource through a variety of different mechanisms,” he added.
“If we put 100 billion cubic meters into the LNG market, that inherently could lead to a more liquid global market,” said US Secretary of Energy, Ernest Moniz, recently in an interview for Platts in Rome, adding that “prices would never equilibrate because of the large transportation costs, but nevertheless it could go in that direction.”
With this statement, Moniz has finally given a concrete indication of the magnitude of future US-LNG exports. Their potential impact on world markets can be grasped by means of a comparison: Qatar, the world’s largest LNG exporte, ships 105 billion cubic meters a year. Germany’s annual demand, by the way, amounts to approximately 93 billion cubic meters a year.
From May, 2014, ENERGLOBE will be strengthening its focus on energy security and geopolitics. “News and Notes” will be presenting items gleaned from academic studies and international media, selected by the editors as relevant and of interest in this regard.