by Jasmina Kelemen (MarketWatch)
Shares of major oil companies were unable to hold onto the slight gains achieved early Wednesday and declined as oil prices reversed course and slipped into decline.
The Amex Oil Index
(XOI :1,158.40,
5.18,
0.4% ) was off 0.3% to 1,149.93 points as crude for April delivery dropped 17 cents to $56.68 a barrel.
The Amex Natural Gas Index (XNG : 456.53, 0.26, 0.1% ) slipped 0.3% to 455.07 points as natural gas rose 0.2% to $7.59 per million British thermal units. The Philadelphia Oil Service Index ($OSX : 195.37, 1.10, 0.6% ) was flat at 194.42 points.
Forecasts for warmer-than-average temperatures across the northeastern U.S. from now until March has kept the market in check, with few players willing to move sharply in either direction.
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Uncertainty over the market’s direction is also keeping the equity sector contained within a trading range.
"Stocks feel trapped between gas bulls / bears and deciding battle might not be waged until fall (when storage is either full or it isn’t)," said Dan Pickering, of Pickering Energy Partners in a pre-market note to clients.
"Nothing to catapult us [in] either direction…so we drift," he said.
On the oil index, over half of the eleven components were trading at a loss. The only issues to break out of the early session’s torpor were Sunoco Inc.
(SUN :63.62,
1.25,
2.0% ) and Valero Energy Corp.
(VLO :57.10,
1.13,
2.0% ) , which both rose 1.5%.
Friedman Billings Ramsey raised Valero’s 2007 and 2008 earnings forecast to $7.80 from $7.50 and $7.10 from $6.75, respectively. According to analyst Jacques Rousseu, Valero is likely to have significant cash flow due to a likely sale of its Lime, Ohio refinery and could "easily" repurchase up to 20% of its shares this year. On the natural gas index, which largely consists of exploration and production companies, Pogo Producing Co.
(PPP : 49.05,
0.32,
0.6% ) was again a loss leader, falling 1.1% to $48.83.
Bear Stearns downgraded the Houston-based company’s shares to peer perform from outperform after the company announced last week that it swung to a loss of 29 cents a share, falling well below the Street’s estimates.
Qatar Petroleum and ExxonMobil have dropped plans to build a gas-to-liquids plant in Qatar due to spiraling costs and will turn their attention to developing part of the country’s huge North gasfield.Qatari Energy Minister Abdullah Al Attiyah said other projects in Qatar were not under threat and ground would be broken on Thursday for a multi-billion-dollar GTL plant with Royal Dutch Shell. Costs for that facility, which processes gas into refined products that are market-ready, have risen to as much as $18 billion from a 2003 estimate of around $5 billion. The Exxon/QP GTL scheme, signed in 2004, had an initial budget of $7 billion.
Exxon executives in Qatar and a spokeswoman in the US declined to say how high costs had risen for the plant which was to have churned out 154,000 barrels per day.
‘GTL technology is expensive and very technical,’ Al Attiyah said.
‘Technology for the other projects is proven … No other projects are under threat.’
GTL plants process gas into clean oil products like low sulphur diesel, demand for which is growing on the back of tougher limits on emissions.
QP has offered Exxon a role in the development of the Barzan gasfield, part of Qatar’s North field—the largest reservoir of non-associated gas in the world. QP also offered Exxon rights to participate in any future development at Barzan. Al Attiyah said it was too early to estimate the development cost of Barzan, which will pump 1.5 billion cubic feet per day of gas from 2012 to meet demand from the country’s rapidly growing domestic market.
‘We need the gas,’ he said. Exxon’s Qatar country manager Alex Dodds said the Barzan cost would be similar to the company’s Al Khaleej gas project, also at the North Field.
He did not say whether he was referring to the first stage of the project, which cost $1.1 billion, or the more expensive $3 billion second phase.
‘We are pleased to have been the only international oil company selected to participate in the Barzan Project and look forward to continuing our successful partnership with Qatar Petroleum,’ said Stuart McGill, senior vice-president of Exxon, in a statement released in the US.
A flurry of gas projects in Qatar have inflated labour and raw material costs, exacerbated by rising costs globally across an oil and gas industry straining to bring new capacity online to meet rapidly rising demand for energy. Other oil companies, including ConocoPhillips and Chevron, have also cut spending or delayed projects due to the increased costs.
‘It’s hard to say that Exxon is losing out,’ said Lysle Brinker, an analyst with John S Herold in Maine, who noted that in terms of overall production the two projects are quite close.
‘You have to take Exxon and Qatar at their word that the project is too costly,’ Brinker said. ‘Exxon is not going to throw money away—that’s their long term record.’
ExxonMobil, the biggest foreign investor in Qatar’s energy sector, also has stakes in Qatar’s huge Rasgas and Qatargas liquefied natural gas projects. Qatar is home to the world’s third largest gas reserves after Russia and Iran.
TradeArabia
A Pakistani delegation has held talks with IPIC for the implementation agreement on the $5 billion Khalifa Coastal Refinery project.
The three-member Pakistani delegation led by Ahmed Waqar, Secretary, Ministry of Petroleum held a meeting in Abu Dhabi with senior officials of the International Petroleum Investment Company.
The refinery will be established in Hub, Balochistan with a capacity of 13 million tonnes per annum.
The ground-breaking ceremony of the project will take place next month. General Shaikh Mohammed bin Zayed Al Nahyan, Crown Prince of Abu Dhabi and Deputy Supreme Commander of the UAE Armed Forces, is expected to visit Pakistan to lay the foundation for the mega project.
The project will be completed in 2010. The refinery would give a major boost to the refinery capacity in Pakistan. This mega project will create thousands of both skilled and unskilled jobs.
TradeArabia
Qatar’s huge liquefied natural gas projects Rasgas and Qatargas will have a combined cost of $56 billion when they are completed in 2012, the country’s energy minister said.
Rasgas will cost $26 billion, while Qatargas will cost $30 billion, Energy Minister Abdullah Al Attiyah told QNA news agency. He did not say whether the costs had risen from previous estimates.
On Tuesday, Qatar Petroleum and Exxon Mobil dropped plans to build a multi-billion gas-to-liquids plant in Qatar due to spiraling costs.
Al Attiyah said that LNG output from the two projects was on target to rise to 47 million tonnes in 2008. Qatar is aiming for LNG exports of 77 million tonnes in 2010.
TradeArabia
Qatargas has safely completed the largest lift on its site for Train 4 of the Qatargas expansion projects.
The lift involved moving by crane the AGR absorber column, which is a critical piece of a liquefied natural gas processing train.
The column weighed a whopping 1,450 tonnes (equivalent to over 700 Toyota Landcruisers) and measuring 45.7 metres by 7.4 metres.
The absorber column was put in place by a 2,000 tonne Platform Ringer Crane which was shipped into Qatar to specially perform the lifting operations by Mammoet Heavy Lift and CCIC International who executed the project on behalf of Qatargas. This crane was supported by a second crane of 800 tonnes known as the Demag CC4800-3. Prior to performing the lift, the crane was proof load tested to 2,000 tonnes to ensure it was safe to perform the operation.
On the day of the lift in a carefully coordinated procedure the Platform Ringer Crane and the Demag CC4800-3 picked up the absorber in tandem from its shipping saddles where it has been lying for several months awaiting installation. The crane then slowly hoisted the absorber into a vertical position. Once vertical the Platform Ringer Crane then supported the full 1,450 load and slowly moved the absorber over its foundation and then lowered it onto the anchor bolts. Once secured the Platform Ringer Crane then released the column and the largest lift in the Qatargas projects to date was completed.
The absorber column is a critical piece of the processing train as raw gas from the inlet facilities is routed to each of the LNG Process trains where it is first fed into the absorber column where the gas comes into contact with a specially designed solvent to remove the Sulphur from the gas. Once this process has occurred the gas leaves the top of the absorber and continues through the process to the dehydration unit prior to it becoming liquefied natural gas.
TradeArabia
by Chris Noon
The French state-run energy company Electricite de France (EDF), Europe’s biggest power producer, said Wednesday that sales rose 15.4% in 2006 to 58.9 billion euros ($77.3 billion). Sales for the fourth quarter rose to 16.2 billion euros ($21.1 billion) from 15.6 billion euros ($20.5 billion) for the year-earlier period.
The company is looking well-positioned in Europe. Sales in the U.K. jumped 22%, German sales rose 13.4% and Italian sales increased 5%.
EDF (other-otc: ECIFF – news – people ) was up 0.40 euros (52 cents), or 0.7%, to 56.90 euros ($74.67) at the close of trading in Paris.
Price increases in July in the U.K. were a big positive factor. EDF Energy supplies gas and electricity to over 5 million customers in the U.K. Despite raising the cost of gas by an average of 19% and electricity by 9.1%, the company managed to add 450,000 new accounts over the year.
A spokesman from uSwitch.com, an online comparison service, confirmed to Forbes.com that there were periods of 2006 when EDF was cheaper than its rivals.
Nevertheless, EDF may soon be drawn into a price war in the U.K. Last week, British Gas, a unit of energy supplier Centrica (other-otc: CPYYY – news – people ), said its customers could expect a cut of about 17% in gas prices and 11% in electricity. "EDF Energy’s prices are continually under review," a company spokesman told Forbes.com.
EDF will probably be forced to slash its prices. According to a comparison on uSwitch.com of similar service plans offered by the two companies, their gas rates are currently roughly equal for a two-bedroom apartment in central London, but British Gas charges about 3 pence (6 cents) per KWh less for electricity. It has a lower customer satisfaction rating than EDF.
Legal victories are allowing the company to raise prices in its home market. Last year, EDF won a 1.7% increase in regulated power prices in France that started on Aug. 15. And in December, France’s constitutional court, which ensures new laws are in line with the French constitution and EU law, ruled that price caps on power prices set by the government should be abolished. The ruling provided a major boost to shares of EDF, which produces, transmits and distributes about 95% of France’s electricity.
The court’s ruling was in line with the EU’s objective to open up Europe’s electricity markets to full retail competition by July 2007, which in theory should see an increase in the roster of electricity providers available to consumers.
Government-regulated power prices, the French court said, were "manifestly incompatible" with the EU’s liberalizing directive. The state currently caps electricity bills for individual households and some businesses, but the court ruling stipulated that limits should only be applied for certain public service purposes, such as concessions for the poor.
Analysts believe that regulated tariffs will eventually be canceled, which would have a major positive impact on EDF’s valuation as electricity prices in France would rise in line with other European countries.
Despite the movement toward higher prices in its home country, fourth-quarter sales grew slower in France than in other regions, up only 3.8%.
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