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Is East Africa the Next Frontier for Oil?
Nick Wadhams, Time
According to local lore, Portuguese travelers as far back as the late 19th century suspected that oil might lie beneath parts of East Africa after noticing a thick, greasy sediment wash up on the shores of Mozambique. More interested in finding cheap labor, though, the explorers had little use for oil.
A century later, it turns out that the Portuguese were right. Seismic tests over the past 50 years have shown that countries up the coast of East Africa have natural gas in abundance. Early data compiled by industry consultants also suggest the presence of massive offshore oil deposits. Those finds have spurred oil explorers to start dropping more wells in East Africa, a region they say is an oil and gas bonanza just waiting to be tapped, one of the last great frontiers in the hunt for hydrocarbons. “I and a lot of other people in oil companies working in East Africa have long been convinced that it’s the last real high-potential area in the world that hasn’t been fully explored,” says Richard Schmitt, chief executive of Black Marlin Energy, a Dubai-based East Africa oil prospector. “It seems, for a variety of geopolitical reasons, that more than anything else, it’s been neglected over the last several decades. Most of those barriers are currently being lowered or [have] disappeared altogether.”
Few have wanted to pay the cost of searching for oil or gas in the region, or risk drilling wells in volatile countries such as Uganda, Mozambique or Somalia. But better technology, lower risk in some of the countries and higher oil prices in recent years have changed the equation. Wildcatters and majors such as Italy’s Eni, Petronas of Malaysia and China National Offshore Oil Corporation (CNOOC) have all moved on East Africa in the past few years…
(10 Mar 2010)
‘Market can absorb spare Saudi capacity’ – Al Falih
Arabianbusiness.com
In a speech at a Cambridge Energy Research Associates confernce in Houson, Khalid al Falih, chief executive officer, Saudi Arabian Oil Co, said: “Oil supply will decline if there is no investment, so that 4 million could be absorbed by demand alone.”
The kingdom, the world’s largest producer, raised output by 100,000 barrels a day to 8.25 million in February, the highest level since December 2008, a Bloomberg survey of oil companies, producers and analysts showed last month.
Saudi Arabia can produce as much as 12.5 million barrels a day, he said. It plans to maintain a spare capacity level “in excess of 1.5 million barrels a day” when demand returns and it restores its production levels, he said.
(10 Mar 2010)
Royal Dutch Shell halts gasoline sales to Iran
Julianne Pepitone, cnn
Royal Dutch Shell has stopped selling gasoline to Iran, the company confirmed Wednesday, adding to a list of oil giants that have stopped sales after a threat of future U.S. sanctions.
Royal Dutch Shell (RDS) said it had no official announcement beyond the confirmation, but according to someone with knowledge of the situation the company ceased gas sales to Iran sometime in 2009.
“Shell is currently not selling gasoline to Iran,” a Shell spokesman said, but he would not comment on whether the decision was related to talk of possible U.S. sanctions on Iranian gasoline imports.
Concerns have grown over Iran’s nuclear program, and last month the Senate passed a bill that would allow President Obama to expand sanctions against Iran to pressure the republic into dropping its plans…
(10 Mar 2010)
Traders bet on higher gasoline prices
Emma Farge, Reuters via the Globe and Mail
Some of the boldest speculative oil traders at banks and hedge funds are betting on a return of gasoline’s strength ahead of peak summer demand, bringing an early shift to summer from winter to the oil market.
Many traders use a popular spread play between gasoline and heating oil to try to make money from seasonal shifts in demand in the Northern Hemisphere.
But the spread is one of the most volatile and unpredictable in the oil market and is often called “the widowmaker” after the plight of those who have made the wrong bet.
Unusually cold winter weather and a belief in resurgent gasoline demand this summer has lured traders back onto the seasonal play after 2009’s relatively flat demand picture, analysts and traders said.
…Traders said historically low refinery utilization rates of around 80 per cent in the United States and Europe triggered by a sharp drop in industry demand for middle distillates, such as diesel, should constrain gasoline supply in the world’s top oil consumer.
“The hot money is on gasoline this season and a lot of hedge funds have bet on it,” said an oil products trader at a bank and a regular widowmaker trader.
“Seasonality is back because of run cuts and because it’s been such a cold winter. There is a belief that demand for gasoline will be very good this year because it is not as connected to the recession as distillates,” the trader said.
The disappearance of one of last year’s most lucrative revenue streams, the floating storage contango play, may also be boosting the appeal of the “gas to heat” spread, sources said.
…Non-commercial players made up 29 per cent of open interest on RBOB gasoline futures in February, compared with 24 percent a year earlier, the report showed.
If the rewards for the play can be rich, the losses can be brutal.
In 2008 gasoline remained below heating oil all summer as record high crude prices over $147 a barrel slashed demand for the motor fuel.
A crushing position on the wrong side of that anomaly brought a case of a loss of up to $500 million, traders said.
…By backing gasoline, this year’s bulls are betting that a sizeable chunk of U.S. and European refining capacity shut for maintenance or due to poor margins will remain offline.
“We expect U.S. gasoline stocks to draw down over the coming four months, driven partly by heavy Midwestern refinery maintenance and the seasonal increase in demand,” said J.P. Morgan analyst Lawrence Eagles in a research note.
But some argued that better gasoline margins will encourage refiners to ramp up production. One trader estimated that 3 million barrels a day of capacity will be back by late April.
“We could see higher runs if the margins are so good and a shift in yields from heating oil to gasoline. It will probably keep a certain premium but the crack (gasoline margin) is overdone,” said Mr. Jakob.
Other unpredictable factors like hurricanes can also affect the spread.
“People think they can trade it because it is seasonal but sometimes it just blows the other way and catches people off guard,” said an oil products trader with a hedge fund. “Even the most experienced traders get caught out.”
(1X February 2010)
sent in by EB reader Scott Lamont
How a 22-year-old student uncovered peak oil fraud
Tom Leavitt, the ecologist
Lionel Badal was working on his undergraduate dissertation when he suddenly found himself privy to information that he knew must be made public
When will we reach the peak of global oil production? It’s a question of crucial importance as governments around the world prepare for a world of declining oil resources, in which we will be much more reliant on alternative sources of energy.
The body on which the UK and others rely heavily to make that assessment is the International Energy Agency (IEA) based in Paris and set up in the aftermath of the oil crisis between 1973 and 1974.
For years, IEA reports have been reiterating the conclusion that peak oil was not a problem. Behind the scenes however, it is now clear that senior staff thought otherwise.
It was only through the work of 22-year-old Lionel Badal, a politics student at Exeter University, that the truth about this cover-up finally emerged…
(10 Mar 2010)
