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10 January 2015

Press review 10-01-2015 - Nous sommes tous Charlie

Over the past decade Europe has been the stage of various terrorist attacks resulting in great loss of indiscriminate civilian lives: Madrid in 2004, London in 2005, Utoya Island in 2011. To these adds the Beslan massacre of 2004, that while taking place in the Caucasus, sent similar shock waves across the continent. This week similar events took place in France, with 17 lives lost in the course of 3 days. If the death toll is not as large as in previous cases, this latest attack hit far more than civilian lives. It was an attack on one of the tenets of modern European societies: freedom of expression, and thus an attack on European identity itself.

The reaction unleashed by this attack is naturally one of unity but above all it must counter the goals of its perpetrators. In first place the fear of expression, the ability to put forward one's opinion, however controversial. And secondly the spread of hatred; if that is the only answer we can muster, then we are no better than the disturbed individuals that committed such hideous acts.

Issuing a newspaper, authoring a book, hosting a radio talk show, composing politically aimed music, even writing a blog, are possible today for many of our ancestors fought for it, in many cases with their blood and their lives. Freedom of expression is not for granted, we must never forget that, and fight for it when necessary.

Coming back to the main topic of these reviews, I would start by highlighting the efforts to de-escalate the stand off with Russia over Ukraine. Ever since the flash visit to Moscow by François Hollande a month ago that various Council members have changed their discourse on Russia. I suspect that a full trade blockade from the BRICS has come on the table, forcing those leaders once brandishing bravery to come back to reality.
France: EU-Russia sanctions 'must stop now'
Andrew Rettman, 05-01-2015

French leader Francois Hollande has dangled the prospect of lifting EU sanctions on Russia ahead of the year’s first Ukraine crisis summit.

"I think the sanctions must stop now. They must be lifted if there is progress. If there is no progress the sanctions will remain”, he said on France Inter radio on Monday (5 January).

“[Russian president] Mr Putin doesn’t want to annex eastern Ukraine. He’s told me that … what he wants is to remain influential. What he wants is for Ukraine not to fall into the Nato camp”, he added, referring to his impromptu meeting with Putin at a Moscow airport in December.

[...] His remarks come ahead of a summit of French, German, Russian, and Ukrainian leaders - the so-called Normandy format - in Kazakhstan on 15 January.
Meanwhile Ukraine continues to slowly pay the gas it is receiving from Russia. Presently, it seems the country will fare through this winter without shortages; thus many months have been gained to negotiate a more lasting solution ahead of next winter. Unless summer heats up nationalistic sentiment again.
Ukraine Will Have Russian Gas, For Now
Andy Tully, 04-01-2015

Kiev’s payment of $150 million to the Russia’s government-owned gas monopoly Gazprom will keep supplies flowing into Ukraine for at least the first quarter of 2015.

Gazprom said Dec. 31 that Ukraine’s gas company, Naftogaz, had paid in advance for 1 billion cubic meters of Russian gas, including 300 million cubic meters fuel it had paid for in December but had not used. That amount is to be shipped in January.

[...] Under a deal brokered in October by the European Union between Gazprom and Naftogaz, the Ukrainian company agreed to pay $378 per 1,000 cubic meters to cover the fourth quarter of 2014 and $365 per 1,000 cubic meters in the first quarter of 2015. This also ensured gas supplies to the EU.

To ensure deliveries, Ukraine had to pay off $3.1 billion in debt for previous gas deliveries. It made an initial installment of $1.45 billion to Gazprom on Nov. 4. A second payment of $1.65 billion, due by year’s end, was paid on Dec. 24 to ensure gas deliveries in January.
The other big story is naturally the decline in petroleum prices. Yesterday Brent closed exactly on the psychological mark of 50 $/b, trading much of the session below that value. The decline has been following a very similar pattern to that of 2008/2009; continuing on that track, prices should continue following until March. All across the board petroleum companies are writing down assets; the equity loss is gigantic.
Oilfield Writedowns Loom as Plummeting Prices Gut Drilling Values
Joe Carroll, 06-01-2015

Tumbling crude prices will trigger a flood of oilfield writedowns starting this month after industry returns slumped to a 16-year low, calling into question half a decade of exploration.

With crude prices down more than 50 percent from their 2014 peak, fields as far-flung as Kazakhstan and Australia are no longer worth pumping, said a team of Citigroup Inc. (C) analysts led by Alastair Syme. Companies on the hook for risky, high-cost projects that don’t make sense in a $48-a-barrel market include international titans such as Royal Dutch Shell Plc (RDSA) and small wildcatters like Sanchez Energy Corp. (SN)

The impending writedowns represent the latest blow to an industry rocked by a combination of faltering demand growth and booming supplies from North American shale fields. The downturn threatens to wipe out more than $1.6 trillion in earnings for producing companies and nations this year. Oil explorers already are canceling drilling plans and laying off crews to conserve cash needed to cover dividend checks to investors and pay back debts.
Yet again I refer to the impeding shock on the US bond market unleashed by this price rout. Behind the scenes the concern over this issue is far wider than what the press lets go through. On the 200 G$ of high risk bonds issued directly by the petroleum industry rests an unknown volume of leveraged products that will certainly amplify the impact of a default deluge. What is more, the US petroleum industry is not the only being affect: metallurgy, logistics, sand extraction, and other sectors that got overheated on the "shale oil" boom are now in for the bust.
Wolf Street
Oil-Bust Bloodletting: Projects Cancelled, Layoffs Ripple to Other Areas, Default Hits Private-Equity and Pension Funds
Wolf Richter, 07-01-2015

[...] With funding uncertain and oil prices collapsing, capital expenditures are getting slashed, and it’s beginning to show up in the Baker Hughes rig count. Rigs drilling for oil and gas in Canada have plunged 64% in five weeks, from 438 rigs on November 26 to 156 by January 2. Canada is shutting down its drilling operations.

Many of these rigs were operated by smaller drillers. But even oil giants have reacted by cancelling or postponing multi-billion dollar oil-sands projects: Shell’s Pierre River project, Total’s Joslyn mine, and Statoil’s Corner project. Cancelling projects before they become massive capital investments is the easier thing to do. It doesn’t lower current production, but it stops the cash drain.

In the US, the trend has started a week later and is happening more slowly at this point. Rig count dropped by 109 in four weeks, from 1,920 rigs in the week ending December 5 to 1,811 in the most recent week. But the side-effects are already rippling through the economy.

US Steel is going to shutter plants in Houston, Texas, and Lorain, Ohio, that together produce annually over 800,000 tons of steel pipe for the oil and gas industry. In total, 756 workers will be axed starting in March, the majority in Ohio.
So far I had perceived this price collapse mostly as a result of a shift in demand, with Europe insisting on slowing down its economic activity and the Chinese trying to reign in an overheated financial sector. But as the monthly data slowly arrives in, I am now obliged to recognise the role of supply. As it turns out, in the month of September, Canada remarkably increased its petroleum extraction by 0.5 Md/b. This coincided with the end of the offshore maintenance season in the northern hemisphere, and thus world extraction increased 1 Mb/d in a single month, up to a new all time record.
World Oil Production, September Numbers
Ron Patterson, 29-01-2014

The EIA has published International Energy Statistics with Crude + Condensate numbers for September 2014. As most of you know I only follow Crude + Condensate because I believe that biofuels and natural gas liquids should not be part of the peak oil equation.

The data in all charts is thousand barrels per day with the last data point September 2014.

Euan Mearns has decided to re-enact Oilwatch Monthly, a newsletter run by Rembrandt Koppelaar for various years in the old days of TheOilDrum.com. It now returns in a shorter and re-branded format. I salute this initiative and will naturally become one of its readers.
Energy Matters
Oil Production Vital Statistics – January 2015
Euan Mearns, 07-01-2015

  • The oil price crash of 2014 / 15 is following the same pace of the 2008 crash. The 2008 crash was demand driven and began 2 months ahead of the broader market crash.
  • The US oil rig count peaked in October 2014, is down 127 rigs from peak and is falling fast.
  • Production in OPEC, Russia and FSU, China and SE Asia and in the North Sea are all stable to falling slowly. The bogey in the pack is the USA where a production rise of 4 Mbpd in 4 years has upset the global supply dynamic.
  • It is unreasonable for the OECD IEA to expect Saudi Arabia to cut production of cheap oil in order to create market capacity for expensive US oil [1].
  • There are likely both over supply and weak demand factors at play, weighted towards the latter.
A quick note on Libya, where petroleum infrastructure has been again targeted in the ongoing warfare. My impression is that significant petroleum exports out of this deceased country are at best years away.
International Business Times
Unidentified Libyan Plane Bombs Derna Oil Port, Killing Two Amid Government Crackdown On Rival Militias
Erin Banco, 05-01-2015

An unidentified warplane bombed a Greek-owned tanker ship Monday at the eastern Libyan port of Derna, killing two crew members. The plane was later identified and belongs to the internationally recognized government, which has for the past week bombed several targets held by rival militias, Reuters reported.

The bomb targeted an oil port in the eastern city of Derna, where Islamist factions allied with the Islamic State group are thought to be stationed. Libyan fighters who pledged allegiance to the Islamic State group, also known as ISIS or ISIL, consolidated their power in Derna in September and hundreds of others joined in October. Derna was the first city outside of Iraq and Syria to have a recognized ISIS presence.

The Greek ship damaged during the airstrike was carrying 12,600 tons of crude oil. Reuters reported that military officials aligned with the internationally recognized government warned crew members on the vessel not to enter the port. It claimed the vessel was carrying Islamist militants to Derna. According to the Associated Press, the vessel's crew consisted of 21 Filipinos, three Greeks and two Romanians.
There were a few news bits of note regarding renewable energy. In spite of the persistent bad press, solar power continues to grow at an ever faster pace. And it is important to note where this growth is taking place.
Utility-scale Solar Has Another Record Year in 2014

Utility-scale solar installations will surge for a fifth consecutive year in 2014, according to provisional figures released this week by Wiki-Solar.org, which defined utility-scale as projects greater than 4 MW in capacity. New global total installed capacity for the year already exceeds 10 GW, and is expected to climb further, when the official figures are available in March.

For the first time, Africa and South America show significant new capacity to join the traditional lead continents of North America, Asia and Europe. Only Oceania is refusing to join the solar era, dogged in particular by policy reversals in Australia.

Africa’s contribution is led by South Africa, whose largest project — the 74 MW plant at Sishen — was commissioned in December. Meanwhile Chile is leading the charge in South America, with 13 new plants connected so far this year.
There was also a new world record set for the cost of solar power: 50.5 €/MWh in Dubai. This is just an hair over 0.05 €/kWh. In all likelihood this psychological barrier will be broken during 2015.
Dubai Utility DEWA Procures the World’s Cheapest Solar Energy Ever
Moritz Borgmann, 07-01-2015

On November 20, 2014, ten bids for the 100 MW PV IPP tender issued by Dubai’s state utility DEWA were opened. The results provoked awe throughout the Gulf region’s power community and will set the standards for future tenders.

Saudi Arabia’s Acwa Power bid an unprecedented 5.98 USD cents/kWh, with a consortium of Spain’s Fotowatio Renewables and Saudi Arabia’s ALJ Energy coming a close second with 6.13 cents/kWh. The low tariffs, bid in a fully commercial, unsubsidized setting, disprove persisting misconceptions in the region about the allegedly high cost of PV and should provide a boost to other governmental procurement programs in the Gulf, in particular, in Saudi Arabia. Apricum Partner Dr. Moritz Borgmann analyzes the results and gives his view on the keys to success behind the stunning results and the wider implications for the region.

After Saudi Arabia had announced ambitious plans for renewable energy, only to delay their implementation over and over again, the emirate of Dubai is now emerging as one of the forerunners for renewable energy in the Gulf region. As part of its program to reach energy diversification goals for 2030, Dubai launched the Mohammed bin Rashid Al Maktoum Solar Park in 2012. The park is located on 40 square kilometers of land south of Dubai city and is planned to eventually host 1 GW of solar projects.
The general election in Greece takes place in two weeks time, and will certainly dominate European politics in the months after. This is the greatest test so far to the recessive policies that have dominated the European economy since 2009. Together with the elections in Portugal and Spain later in the year, Europe might have to re-assess its philosophy of impoverishment as sole response to the economic challenges of the XXI century. Below a quick glance on the present context in Greece.
The eurozone's debt moment
Dan Steinbock, 05-01-2015

Greece will hold snap general elections on 25 January bringing to a head a long brewing conflict between Brussels economic austerity policies and Greece's political protests.

Between 2008 and 2015 Greek GDP per capita, adjusted to inflation, tanked 30 percent to €18,000.

In absolute terms, that is comparable to a collapse of living standards from the level of Israel to those of Libya or Gabon.

In the process, Greece’s ranking in the global competitiveness index has plunged from 67 to 81, below Ukraine and Algeria.

The subsequent social devastation has translated to a new normal in politics.
Beyond these topics, next week Iran will resume negotiations over its Nuclear programme with the five world powers representing the UN. Time is ripe for a final decision.

Have a nice weekend.

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