We love the Energy Producing States Coalition's advocacy for domestic energy and join the group in welcoming a new legislative member, Pennsylvania's Representative Pam Snyder (Photo).  -dh

Calgary Herald, by Geoffrey Morgan.Suncor Energy Inc.’s Steve Williams blasted the “stupidity” of pipeline politics in the U.S. and Canada….

Tom Brennan, Anchorage Daily Planet, Alaska Waterfoul, Dave Harbour PhotoOur Readers will be interested in Tom Brennan's (NGP Photo) Sunday, Anchorage Daily Planet review of the role Exxon, ARCO, Tom, Hank Rosenthal and others — including your author — played in Alaska Waterfowl enhancement policies of the 1970s and 80s.  -dh

Exxon CEO Rex Tillerson explains factors contributing to middle eastern oil producer decisions affecting world-wide supply, demand and pricing.  This excerpt once again underlines the importance of competitive tax and royalty policies.  In these volatile economic times, elected leaders in Alberta, Alaska and other North American energy producing areas should be focused more on "what we can do to attract investment," rather than, "what can we do to squeeze more blood out of the oil producing 'turnips' at the expense of future prosperity."  -dh

Alaska Governor Bill Walker, Japan, LNG Conference, Dave Harbour Photo

ADN.  Alaska Governor pays gasline consultants more than $100k PER MONTH.  (Comment: meanwhile, Alaska's annual budget deficit exceeds $3 billion.  Spending programs are on the chopping block and higher taxes are on the horizon.  Brilliant.   -dh)

ADN.  Gov. Bill Walker (NGP Photo) is heading to Japan to speak at a conference on the global liquefied natural gas market.  Walker spokeswoman Katie Marquette says the governor will be in Tokyo next week for the LNG Producer-Consumer Conference. While there, he plans to meet with prospective liquefied natural gas buyers about bringing Alaska's gas to the global market.  (Meanwhile, the LNG world continues to be flooded with competitors — leading to a growing trend of LNG spot market pricing.  Depressed oil and gas prices are in the process of stranding big LNG projects, including Russia's Arctic energy development plans.  To deepen our understanding of world price trends, we provide this  interview summary featuring Exxon's CEO.  -dh)

 

 

Today's comment from our anonymous, Aussie LNG expert reader:

LNG

The troubled Yamal LNG project in Arctic Russia was the subject of a recent Reuters report which provided an update on the financing for the project.  As we noted last week, the appetite of Chinese financiers to come to the Yamal party is far less than the Russians would like and other options appear nebulous.

That leaves JV partner Total potentially having to provide even more support for Yamal than it has already given.  This factor could have some relevance to current machinations in Australia and PNG over Woodside Petroleum's (WPL) proposal to acquire Oil Search (OSH).

Media reports have speculated that Total could be a potential rival bidder for OSH.  However, even a Super-Major needs to manage its available cash, and with its commitments to Yamal possibly being unpredictable, Total may be reluctant to over-stretch itself in PNG.

 

Energy Supply/Demand/Pricing.  

Here is an excerpt of Exxon CEO Rex Tillerson's insightful comments during a recent interview by Petroleum Intelligence Weekly.  This excerpt and commentary was provided by one of our gracious, anonymous readers, a Mid-Atlantic energy consultant:

…comments during an interview with with Rex Tillerson, CEO of Exxon, on several aspects of the current global crude oil market. In particular, we were interested in his observations of OPEC’s (non)actions to support crude oil pricing.  He provides an excellent, long-term view of the dilemma facing the Saudis, particularly after they spent billions to provide reserve supply capacity after 2008. This is an excellent observation on how Saudi Arabia (essentially OPEC in one country) is really focused on how the oil market will morph from its current condition. … There is obviously some collateral damage inflicted on some players (Russia, Venezuela, Iran, et al), but it does not represent the primary issue being dealt with by Saudis.

The relevant passage:

Regarding Opec, Tillerson does not believe that the organization, and Saudi Arabia in particular, has given up its oil market management role; rather, it has recognized the magnitude of the challenge created by current market conditions. He explains this point as follows:

"I don't think Opec has surrendered at all. I think they have recognized what they are dealing with. Their alternatives were to do what they have traditionally done when we have gone through these cycles, and that is manage their production to sustain a price band.They, too, rightly judged how out of balance this thing was and concluded that wasn't going to get them anywhere other than to really have to curtail their production. So, I think what they are doing is classic price discovery. It is largely the Saudis that have decided they need to undertake this. It is the future of the kingdom — how they are going to manage their resources, what level of capacity do they need to maintain, and

[whether] they have to continue to invest to maintain capacity that they cannot produce. This is something that that a lot of folks overlook. And I remind folks that when prices went out of whack, got up to the $140 per barrel range, the Saudis, [Oil Minister] Ali Naimi in particular, recognized that was not good. The world looked at spare capacity and it was gone, evaporated. The Saudis had on everything they could produce, so, the king authorized them to develop two million barrels per day of capacity with the intent of shutting it in. I tell policymakers in Washington, who bash these guys all the time, you don't understand, these are the best friends you've got. No other nation in the world would invest billions and billions of dollars to develop 2 million b/d of oil producing capacity to shut it in. They had to demonstrate to the markets that spare capacity had been restored. Otherwise they can't play that role. Now they've invested all that money, they've got all that spare capacity, and now they are asking themselves: boy, did we make a big mistake? All this North American stuff came on and they have to understand what the pricing structure is today in order to make decisions about how much spare capacity, if any, they need to manage in the future in order to continue to play their role. So, I don't think they have changed their view about what role they need to play and what role they want to play. It is rather: how do they play it? And that is not obvious to any of us. It is going to be very informative to all of us to understand the price discovery process. Just where are the marginal barrels and how elastic are they? A lot of people thought it gets to $60 and everything would become obvious. I never held that view. I commented early on that I thought people would be pretty surprised at just how resilient this thing is, which is what I told the Opec meeting when I spoke to them in June. I said, you need to be ready for this to take a while. I think the fact that we have gone through several of these price convulsions this year, shouldn't be a surprise to anyone."