Monthly Archives: October 2011

Australia: Tap Oil Gets Several Enquiries for Zola Stake

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Tap Oil Ltd. said Monday it will consider selling its 10% stake in the Zola gas discovery offshore Western Australia before any liquefied natural gas development occurs, and has already received several enquiries about its plans.

Tap has recently received several enquiries from large overseas industry players about Tap’s plans for Zola,” the company said in a statement to the Australian Securities Exchange.

The Zola-1 exploration well in the WA-290-P permit area in the Carnavon Basin discovered a mean contingent resource of 378 billion cubic feet of natural gas. The block is operated by U.S. producer Apache Corp. .

The entire Zola structure–located south of the giant Gorgon gas field being developed by a Chevron Corp.-led consortium–contains a mean 2.33 trillion cubic feet of gas, according to a report by independent experts RPS Energy Services Pty Ltd.

It is appropriate for a company of Tap’s size and funding capabilities to consider monetizing an asset like Zola prior to the incurrence of the large scale LNG development costs which are likely required to bring the asset into production in a timeframe of at least five years,” Tap said.

Tap, which has a market value of A$170 million, said it is “confident that it can maximize the value of Zola by monetizing the asset on attractive terms at the right time.”

(businessweek)

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Santos: Only Way to Meet Eastern Australia Gas Demand is Allow CSG

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The only way to meet a tripling in natural gas demand in eastern Australia is by allowing unconventional gas projects, including CSG, Santos says.

The oil and gas company’s eastern Australia vice president James Baulderstone told a conference that he expected gas prices to more than double within two decades, driven by demand and linking it to oil prices.

Soaring global demand for liquefied natural gas (LNG) is expected to contribute to Australia’s wealth and make it one of the world’s biggest exporters of the commodity.

However the use of fracking to access coal seam gas (CSG) or shale gas is strongly opposed by many Australians and Americans, including farmers, who say it contaminates prime agricultural land.

Santos insists that is false and gas is a safe, low-carbon alternative to coal for providing energy, with eastern Australia potentially having enough gas to supply it for a century.

The five LNG trains already sanctioned, with more planned, represent a quantum change in eastern Australian natural gas demand,” Mr Baulderstone told the Opportunities and Challenges for Australian Gas conference on Monday.

Provided natural gas development activity is allowed to proceed at the right pace, and the market is willing to pay the increased cost of extraction, there is sufficient gas in Eastern Australia to meet this demand.”

But he added that it was not viable to develop much of the gas reserves to meet the new demand at current Australian gas prices of about $4 a gigajoule.

Australian gas prices were some of the cheapest in the developed world, Mr Baulderstone said.

Comparatively modest price increases driven by this anticipated stronger demand will make the development of extensive additional resources economic for the first time.”

Domestic users would be able to absorb such increases as gas prices had been flat for a decade and a rise was long overdue, he said.

He predicted prices would move to $6 to $9 a gigajoule.

Industrial customers like Rio Tinto, BHP and Xstrata have benefited greatly over the past decade from basically flat east coast Australian gas prices while their commodity prices (iron ore, copper, silver, coal) have increased in some instances nearly ten fold during the same period,” Mr Baulderstone said.

Santos is heavily invested in CSG through the $US16 billion ($A15 billion) Gladstone Liquefied Natural Gas (GLNG) project it is leading and is also developing shale gas projects in the Cooper Basin in central Australia.

It is also close to finalizing a $924 million bid for NSW-based Eastern Star Gas, which controls NSW’s largest CSG resource.

Even if the development of Santos’ CSG business in NSW was a third of the size of our Queensland project, $2 billion would be added to NSW state revenues and over 1,000 direct jobs would be created,” he said.

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A Grim Warning For The Global Economy..

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by Joe Weisenthal

From the OECD (via Bloomberg), a prediction of mediocre growth and a call for “bold action.”

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Bold decisions are needed from the G20 leaders meeting in Cannes this week to get the global economy back on track, said OECD Secretary-General Angel Gurría.
An important first step has already been taken with the debt and banking crisis rescue plan announced by EU leaders on October 26 2011, but these measures must be implemented “promptly and forcefully”, he added.
Presenting a special Briefing Note ahead of the Cannes Summit, Mr Gurría said without decisive action the outlook is gloomy. The OECD projects GDP growth to remain weak in the advanced G20 economies over the next two years while the pace of activity in the major emerging markets is likely to be lower than in the pre-crisis period.

The near-term outlook

  • Uncertainties regarding the short-term economic outlook have risen dramatically in recent months. A number of events, notably related to the euro area debt crisis and fiscal policy in the United States, are likely to dominate economic developments in the coming two years. In an “events-free” scenario and in the absence of comprehensive policy action to resolve current problems, real GDP is projected to grow by about 3.9% this year, 3.8% in 2012 and 4.6% in 2013 on average in G20 countries.1 This average masks a wide divergence among country groupings, and emerging-market economies are much more buoyant, despite some softening. In the euro area, a marked slowdown with patches of mild negative growth is likely. Growth is also projected to remain weak in the United States, with a gradual pick-up from 2012 towards the end of the projection period. Unemployment is set to remain high in many advanced countries.
  • A better upside scenario can materialize if the policy measures that were announced at the Euro Summit of 26 October are implemented promptly and forcefully. These measures go in the right direction and could help restore confidence and create positive feed-back effects that could trigger a scenario of stronger growth.
  • In contrast, the outlook would be gloomier if the commitments made by EU Leaders fail to restore confidence and a disorderly sovereign debt situation were to occur in the euro area with contagion to other countries, and/or if fiscal policy turned out to be excessively tight in the United States. OECD analysis suggests that a deterioration of financial conditions of the magnitude observed during the global crisis (between the latter half of 2007 and the first quarter of 2009) could lead to a drop in the level of GDP in some of the major OECD economies of up to 5% by the first half of 2013.
    Appropriate policy responses
  • To resolve the euro area crisis, it is important to clarify and implement fully and decisively the measures announced on 26 October to break the link between sovereign debt and banking distress, to deal with Greece, to ensure that the sovereign debt crisis does not spread to other European countries and to secure appropriate capitalization and funding for banks. Detailed information is needed on how the package will be implemented.
  • In the advanced G20 economies, interest rates should remain on hold or, where possible, be reduced; notably in the euro area. Central banks should continue to provide ample liquidity to ease financial market tensions. Further monetary relaxation, including through unconventional measures, would be warranted if downside risks intensify. In the emerging-market economies, the stance of monetary policy should be guided by the outlook for growth and inflation, which remains comparatively high.
  • Strong, credible medium-term frameworks for fiscal consolidation and durable growth are needed to restore confidence in the longer-term sustainability of the public finances and to build budgetary space to deal with short-term economic weakness. Those advanced economies with sounder public finances can provide additional counter-cyclical support.
  • Structural reforms are essential to boost the growth potential of G20 countries, to tackle high unemployment and to rebalance global demand. In view of weak growth in the near term and impaired fiscal positions in most advanced economies, priority should be given to reforms that offer comparatively strong short-term activity gains and facilitate longer-term fiscal consolidation.
  • In Cannes, G20 leaders will discuss an Action Plan with bold commitments for mutually reinforcing macroeconomic policies and structural reforms. In 2008, G20 leaders rose to the challenge with a clear and coherent plan and we avoided a second Great Depression. Today, the adoption and implementation of the Action Plan is just as imperative to restore confidence through decisive actions in specific countries and regions.

The projections reported in the Briefing Note are preliminary and will be updated in the OECD Economic Outlook No. 90 to be released on 28 November 2011.

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