Energy Market updates

Oil from Tar sands -

The European Commission is set to classify oil derived from tar sands as more polluting than conventional crude. However, UK is seeking to delay attempts of implementing this plan by persuading other EU countries to follow a “compromised” approach. These restrictions will affect future exports from Canada, whose oil reserves total 175bn barrels behind only Saudi Arabia, and Venezuela. 

Shale gas market -

US Gas markets have been transformed into a self sufficient, exporter of gas to other countries. This has been due to one reason – Shale gas. Using advances in technology such as hydraulic fracturing (fracking) and horizontal drilling, this energy source has become viable. The dramatic gas price reduction from $10-13mcf to $4-5mcf has excited the rest of the world to improving its prospects in reducing energy dependence and building an export industry of its own.

In Europe, Poland, Ukraine, France and some reserves in UK are significant sources of shale gas. However a number of challenges remain:

        

• ·         The economics in shale gas extraction process, supported by existing 2000 land rigs involved in drilling of declining oil fields, along with skilled workforce was favourable in US. This case might not be applicable in Europe, Asia and Australia.
• ·         In US, land owners benefited from royalty payments for continuous drilling. These privileges are not existent for landowners in Europe.
• ·         The geology for most reserves outside N America is not conducive for drilling of shale gas. Most shale gas basins are found in water constrained parts of the region.
• ·         Environment safety concerns as fracking fluid can enter the water table.

There is a general feeling that shale gas will not have a negative impact on renewable energy as drivers for renewable investment is government commitment of achieving carbon reduction. However if gas prices comes down, shale gas will compete directly with nuclear as a supplier of base load power.

Major Oil production companies release earning reports for Q3.

BP, UK oil group, with its clean replacement cost profit, a measure to strip out oil and gas inventories, is expected to earn $4.9bn, a decline by 11% on same period on year before.

BG group, production affected by North Sea maintenance, is expected for operating profit of $1.89bn compared to $1,67bn year on year for its third quarter.

Royal Dutch Shell, Europe’s largest international oil company, will be expected to report net income of Euro 6.1bn, up from Euro 4.93 bn. Exxon Mobile, world’s largest oil group by market capitalization, is expected to report earnings about 5 cents below second quarter of $2.18 per share but up 48% on last years third quarter.