US Energy Advantage Vis A Vis Europe

The Financial Times is reporting:

The US shale gas revolution is forcing a redoubling of efforts by European chemical producers to move away from low-margin petrochemicals and focus on higher margin speciality products.

European petrochemical makers risk being squeezed between low-cost producers in the Middle East and a resurgent chemicals industry in the US, where feedstock and energy prices have plummeted following shale gas discoveries.

The big story:

After a decade of almost zero capacity expansion in US petrochemicals, shale gas has prompted the likes of Dow Chemical, LyondellBasell, Chevron Phillips and ExxonMobil Chemical to invest billions of dollars in ethane cracker capacity on the US Gulf Coast.

Fresh US supplies of petrochemicals – primarily ethylene derivatives such as polyethylene and PVC – will hit global export markets in coming years. Meanwhile, Middle Eastern chemical companies that have long had a big feedstock and energy cost advantage over Europe may struggle to export to a more competitive US and seek European customers instead.

Environmental concerns and greater population density have so far prevented Europe developing its own shale gas reserves, which threatens to leave European chemical producers at a competitive disadvantage in the near term. Natural gas prices in the US are roughly a third of the Europe price.

But now a contrarian view. Jeffrey Rubin over at The Huffington Press suggests it is only a matter of time before Europe starts drilling for natural gas. 

Once fracking technology opens up shale gas reserves overseas, why wouldn't the onset of new production have the same dramatic effect on prices in the rest of the world as it has in North America? If that happens, why would Asian countries want to import expensive LNG from across the Pacific? Taking it a step further, why would anyone want to build a pipeline across B.C. to Kitimat to supply an albatross of an LNG plant that will be lucky to scrape by with economics that will suddenly have become exceedingly marginal.

The shale gas revolution in North America reversed the polarity of global LNG flows. The spread of the shale gas revolution to Asia and Europe could have just as big of an impact. Will North America's LNG hopes, from plants to pipelines, soon become obsolete?

Won't happen in my investing lifetime. 

Death Of King Coal Is Premature: This Rigzone Story Is Really Quite Incredible; Thank Goodness For China -- Saving The Earth From Another Ice Age

Updates

December 10, 2013: CNBC is reporting:

In 2011 the World Energy Council estimated China's recoverable coal reserves at 128 billion short tons, the third largest in the world exceeded only by the United States and Russia Federation, equivalent to about 13 percent of the world's total coal reserves.

Chinese coal consumption is now roughly 300 percent higher than it was in 2000, reversing the decline seen from 1996 to 2000, with more than half of China's coal being used for power and heat generation. This soaring, relentless demand has meant that, despite its enormous reserves, China became a net coal importer in 2009 for the first time in over two decades.  

Thank goodness for China, saving us from a coming ice age.

Original Post

 

Rigzone is reporting: "Lured by coal, southeast Asia is turning TO coal, AWAY FROM natural gas.

Southeast Asia's power sector will tilt away from gas to use more coal by the end of this decade, chipping away at demand for liquefied natural gas as the region of more than 600 million people tries to cut costs to meet soaring electricity needs.

With a wave of LNG projects due to come online this decade, this shift in consumption from a region long expected to be a key growth market could help take some of the heat out of rising Asian prices of the cleaner fuel.

Gas prices in Asia are about five times more expensive than in the United States, driven by demand for LNG from countries such as Japan and South Korea - whose nuclear power sectors are in crisis, and China, where stringent pollution control measures are driving a switch from dirtier coal.

Demand for more coal could also help lift flagging prices of the fuel by at least partially compensating for China's move to cleaner energy sources.

Presidents come and go. King Coal is here to stay. 

QEP Makes Another Move: $950 Million For Oil Acreage In The Permian; Not Much In Specifics

Reuters is reporting:

QEP Resources Inc said it would buy oil assets in Texas' Permian Basin as it looks to transform itself into a pure-play exploration and production company, following pressure from activist investor Jana Partners. The purchase of the oil and natural gas properties for about $950 million will add production of 6,700 barrels of oil equivalent per day (boepd), of which roughly 68 percent was crude oil, QEP said. 

Some other data points:

• QEP said last Monday that it planned to spin off its QEP Field Services division, as well as its 25 percent stake in QEP Midstream Partners LP;
• QEP said it would also sell some non-core assets located in the Mid-continent region during the first half of 2014; and, 
• QEP now expects to focus its spending on its oil assets, the Permian basin and North Dakota's Williston Basin, besides its liquids-rich gas assets in the Uinta Basin in Utah. 

Not much in the way of specifics, but it confirms that the three big shale plays remain: the Bakken, the Permian, the Eagle Ford. 

Yahoo!Finance reports it here, but again lacking in specifics.

For Investors Only; Random Data Point On NOG; Musings: Are Energy Investors Rotating Out Of Independents Into Big Oil?

Disclaimer: this is not an investment site. Do not make any investment decisions based on anything you read here or anything you think you might have read here. 

This is very, very interesting. Not the data point itself, but rather the fact that a relatively "small" company (market cap: $865 million) like NOG makes the "front page" of Yahoo!Finance, unfortunately not for the best of reasons.

Forbes is reporting:

In trading on Monday, shares of Northern Oil & Gas Inc crossed below their 200 day moving average of $14.20, changing hands as low as $13.97 per share. Northern Oil & Gas Inc shares are currently trading off about 1.7% on the day.

A chart at the link shows the one year performance of NOG shares, versus its 200 day moving average.

**********************************

I started noticing "this" about one to weeks ago, but didn't say anything because this is not an investment site. Now that others are reporting it, I can link those reports. From SeekingAlpha, one of my favorite contributors:

As I write this, the DJIA is up +184 points yet the stocks of some of the fastest growing shale oil producers are strong to the downside: EOG Resources is down -$3.67, Whiting Petroleum is down -$1.70, and Continental Resources is down -$3.70. Smaller producers like Kodiak Oil & Gas and Oasis Petroluem are also off sharply. Meanwhile, Exxon Mobil is up +$1.30 and Chevron is up +$1.12. 

Energy investors appear to be rotating into big cap dividend paying oil stocks.

Random Tweets: Record Amount To Be Spent On Oil Exploration In 2014; Natural Gas Price Rising On Forecast For More Global Warming

Platts tweets (without a link): Global spending for oil and natural gas exploration and production is poised to rise to a record; near $723 billion in 2014, up 6.1% from 2013: Barclay's.

Platts also tweets NYMEX January natural gas up 11.8 cents to $4.232/MMBtu as frigid weather forecast for much of the US spurred buying interest. The AP is reporting: natural gas "soars" on weather forecast.

Meanwhile, natural gas rose above $4.20 for the first time since May 28, on the likelihood that homeowners turned up the heat to try to shake off the effects of two wintry storms that plowed across the country. Forecasts are for colder than normal temperatures in the Midwest this week.