The Bullroarer - Sunday 17 August 2008

SMH - Trigger happy and oil mad

Georgia overplayed its hand this week, and Russia got to build its trumps, writes Paul McGeough.

Dig deep enough and you come to oil and gas. The war this week between Russia and the headstrong former Soviet republic of Georgia prompted hand-wringing about another awkward demonstration of the limits of American power.

The Australian - LNG Ltd set for CSM offtake agreement next month

GLADSTONE liquefied natural gas hopeful LNG Ltd is set to sign an offtake agreement next month for its planned Fisherman's Landing project, which is one of five schemes to export Queensland's coal seam methane. ...

Arrow, which recently boosted its proven and probable CSM reserves by 81 per cent to 1431 petajoules, has agreed to supply the CSM for the first production unit and has an option to supply the second. However, its agreement with Shell, which is due to be finalised this month, has raised questions about what the oil major's plans are for the CSM and whether it would want a third party to process its LNG.

Peak Energy - Iraq Resumes oil exploration after 20 year break

The SMH reports that Iraq has restarted oil exploration. My prediction is that they will find quite a lot of oil - Iraq resumes oil exploration after 20-year break. ... The SMH also reports that the Chinese are interested in buying this oil - Iraq and China revisit major oil deal.

The Australian - BG might lose gas to trim down for Origin

BG Group, the British gas producer bidding $13.8 billion for Australia's Origin Energy, may have to sell its Queensland Gas Company assets to win the competition watchdog's approval, Credit Suisse says.

The Australian - Uranium miner accepts blame for dumping waste

URANIUM explorer Marathon Resources has given shortcomings in its corporate culture as the reason it dumped 46 tonnes of exploration waste in an environmentally sensitive South Australian wilderness sanctuary.

The Australian - Shenhua Energy gets NSW coal exploration licence for $300m

Business Spectator - Lowest carbon denominator

In a corner of the noisy financial trading room at ICAP in Sydney on Friday, where I was visiting Business Spectator’s Matthew Johnson, I spied a small desk that, unusually for that place, wasn’t doing much shouting. It was the energy desk, and one of the contracts being traded was for September 2011 Australian carbon emission units. So, there is now a market in Kevin Rudd’s carbon policy.

When I was there on Friday, the market was bid $19.75, offer $22.50, last sale $21.50 – per tonne of carbon dioxide. It is traded in 10,000 tonne lots, so each contract is a $215,000 transaction. The first forward trade was done in May this year when AGL Hydro Partnership sold 10,000 tonnes to Westpac, for settlement on February 1, 2012 at $19 a tonne. The contracts were drawn up by Minter Ellison’s Mitzi Gilligan.

The price for Australian carbon emissions has risen 13 per cent in three months but is still at a big discount to the European Climate Exchange. There the 2011 price is €25.83 or $44.50 – more than twice the current Australian price.

Good - Climate change - 10 simple facts

1. 2005 was the warmest year ever recorded, closely followed by 1998 and 2007. Twelve of the 13 warmest years on record were between 1995 and 2007.

Peak Energy - Crowing About CTL, Part 2

The Australian reports that aspiring CTL (coal to liquids) and urea entrepreneur Allan Blood has grabbed a stake in the Crow CTL project in Montana I mentioned recently - Aussie coal deal with Montana's Crow tribe. As usual they are dreaming about a way of sequestering all the carbon dioxide produced.

Business Spectator - Decoupling debunked

China, and the mind-boggling need for it to build a new London/Australia every year to house the mass migration from rural areas to the cities, has been, and remains, the key hope for the world’s investors in the face of the collapsing US financial system and the effect of this on global credit availability. But even that seems to be coming into question as markets get the jitters about post-Olympics China.

A central part of the action on sharemarkets lately has been the sharp reversal in the pattern of falling financials and rising energy/commodity stocks that has characterised most of 2008. This has badly caught many investors who relied on the China-good/US-bad story to short banks and go long commodities. That trade is now being unwound, no matter what the fundamentals might be.

frogblog - Cow Poo Powers Carnival Ride

I forget which politician said it, was it Lange?, that the future of New Zealand was as a primary producer and a theme park. Well, it looks like he was a prophet after all. The technology has been perfected and now we can turn Godzone into one big carnival ride, thanks to our ever expanding dairy industry. We can use all that effluent to power carnival rides!

frogblog - Human powered geek fest

Some people will claim that the effort of generating power from human activity is pointless, because we still have to feed the human with energy first. Ignoring the fact that so much of our food is actually made of oil, humans do convert lower ordered energy (food) into what we hope amounts to higher ordered energy. (thought, activity, etc.) Why not tap some of that energy?

frogblog - Conservative support for the green food movement

John Schwenkler from The American Conservative has an interesting article on how green food movements like Locavorism and Slow Food exemplify conservative values.
The production, distribution and preparation of food is an emotive sustainability and health issue. So it's not surprising that food distributed by small, independent farms fits tidily into Schwenkler's conservative ethos.

Peak Energy - Tackling Indonesia's Power Crisis With Geothermal Power

Peak Energy - A Desire Named Streetcars

Peak Energy - Falling Oil Price, Record Oil Production, Empty Tankers

Peak Energy - More Solar Power Plans For California

Peak Energy - Predicting Wind Strength Up To 4 Days In Advance

Peak Energy - Solar PV Prices To Fall By 20%

Peak Energy - The Money Shot: William Gibson's Spook Country. OK - This one is pretty off topic...

Concerning all the trades that are being unwound...

...many investors who relied on the China-good/US-bad story to short banks and go long commodities. That trade is now being unwound, no matter what the fundamentals might be...

Now that oil is below USD$120 (a price that was considered cripplingly high only a couple of years ago, but is now apparently no cause for alarm) I think that the next major oil price move will be back onto the exponential conveyor upwards again. If so, prepare for another panicky U-turn in investment market sentiment.

...I do hope my superannuation fund haven't been too efficient in unwinding all their energy positions now...

My observation is that there is a lot of wishfull thinking going on in Australia and the chief culprits are those in positions of power who should know better.The oil price is only one of the critical factors.

The blind faith in China is misplaced.China is a very fragile political,economic and environmental "system".One has to wonder just how much control the powers there actually have over the population and their direction.The current direction will very likely end in a monumental smash.

Re superannuation-I've never been very fond of the model introduced by Hawke/Keating.It is really at the mercy of the markets and a lot of the funds are not invested to the long term benefit of Australia.I am in favour of a national super scheme but it should be a single,central federal government authority with a guaranteed return and a requirement to invest in Australia's future,not Wall St.Singapore has a better model.

Re super, totally agree with your comments thirra. It all works wonderfully when the economy's booming, but everyone takes a massive hit when there's a slowdown. Look at the incredible power of sovereign wealth funds overseas to get an idea of what we're missing by not having super centralised & managed for the good of the population rather than making a profit.

Btw Cretaceous, I'd hope you'd transferred your super investment to "Cash" rather than "Growth", "Balanced" or whatever else they call it. I did that with mine last September & as a result my super's increased over the past year. The MSM keep repeating the mantra that everyone needs to take the hit because it'll all come back sometime in the future, and that if you put your money in cash you'll miss out when the market rebounds. Its propaganda serving not your interests but those of the super industry.

The superannuation system as a nation-wide saving and retirement-income strategy is in a major predicament, certainly. And for the thousands of boomers between 50 and 60, it becomes a major dilemma. If they retire and crystallise their current balance, they lock in and take the heavy 2007-2008 losses permanently. If they do not crystallise, and wait for the market to re-establish the happy times, then the risks of capital loss (let alone any serious return on the investment) are probably unacceptably high for someone for whom this income will be their only post-work finance.

My partner has worked full-time all of 2007-2008 - she has lost more in superannuation capital than she earned during that period. A real savings incentive, eh? A national (government-administered) central fund also has its problems, since it still has to be invested somewhere, and make a profit to justify the establishment of such a creature. But cash is king for sure ... even property in the right market(s) remains good too, with the national shortage of housing and lots of renters out there.

It hasn't taken long for peak oil theory to be considered dead by The Oz - its a shame people confuse the oil price with long term production trends - with a vicious enough recession, you could be past peak and have a falling oil price (though I don't believe we are post peak or in a deep recession yet) - but apparently that is too complex for newspaper columnists or economists to understand.

The Australian - Shock waves spread as oil bubble bursts

"The oil price went up, so peak oil seemed real, but now it's down again so that must all be rubbish and really oil will last forever."

"Whatever. You know, I think the boss is giving you the boot."

"Look, how can you possibly say they're going to sack me? I mean, yes my pay went down last week, but it's really high this week!"

"Yeah, that's your redundancy payment."