An ‘Atlas’ of e-learning for a contact sport

The Oilholic has had the pleasure of visiting quite a few E&P facilities over the years from offshore rigs to onshore gas fields. Going back roughly a decade, it wasn't uncommon [and still isn't] to see roughnecks in hard hats being given instructions ranging from operational to health and safety by a superior.

The mode of communication usually involved barking verbal instructions in highly colourful language with bulky printed training manuals on-hand containing everything from evacuation routes to rules and regulations. All of this has changed and rather dramatically, if one may add. What started as a slow, but sure, transformation at the turn of the millennium came in the form of former roughnecks and rig engineers imparting their wisdom for the benefit of budding on-site professionals via training courses using the electronic medium.

 

By 2006-07, e-learning provided by specialist providers had gained considerable traction in what is largely a contact sport. Among the stalwarts, in this relatively young but highly competitive market, is a part private equity-owned, part employee-owned educator headquartered in Aberdeen, Scotland called Atlas.

 

The firm came on the Oilholic's radar back in 2011 at the 20th World Petroleum Congress in Doha.  A further look into Atlas, at the suggestion of a banking sector contact, revealed a client portfolio of some of the biggest names in the business for a company which is less than 20 years old. IOCs aside, strikingly enough, this blogger found that a number of NOCs had also availed Atlas' service to give their workforces – as the educator's motto states – the "knowledge to perform."

 

For the sake of a crude analogy, the Oilholic quipped to Kevin Short, Director of Sales at Atlas, if they'd in fact become the Rosetta Stone of the oil & gas business. "I don’t think it is that simple, although our e-learning courses and industry solutions are indeed multi-linguistic," he laughs.

 

For Short, it's more about creating, marketing and selling virtual learning solutions aimed at "improving efficiencies while minimising operational and legislative risk". This could range from e-training courses for employees moving dangerous goods by air to a simple training solution for evacuating an E&P facility.

 

"There are industry standard courses available from our library; but more often than not, you'll find clients ordering bespoke solutions or an altered version of an existing training solution to suit their specific needs," Short explains.

 

There is no mystique about what Atlas provides and the company continues to record double-digit growth on an annualised basis, much to the delight of its PE owners [HG Capital] one assumes. Peer-to-peer contact and reviews have certainly been of immense help in achieving this – both in terms of retaining clients and bagging new ones. Over the years, Atlas has expanded to Dubai, Kuala Lumpur and Houston.

 

Understandably, the firm keeps abreast of new emerging techniques in the E&P sector, unconventional prospection activity and allied health and safety issues to come-up with e-learning options for clients.

 

However, the Oilholic put one caveat to Short – pros from Aberdeen who have gained expertise for better parts of four decades, especially on the health and safety front in wake of the Piper Alpha tragedy (1988), are also on the educating circuit from Dubai to Calgary and in great demand. So is Atlas toughing it out with them too?

 

"In a sense, perhaps yes. But in terms of the broader picture no! That's because we also work with some of these professionals a lot of the time and hire them as what we call 'Subject Matter Experts' to work on fresh concepts for courses and bespoke solutions for clients. What's good for them is good for Atlas and by default good for the commissioning client."

 

When it comes to fishing these guys out – networking, events, headhunting those with industry reputation and project-based demand all play a part. Such expertise has helped the company put together its patented Atlas Knowledge Centre – a 3,000 page grab of all of the company's core content. Akin to a virtual oil & gas knowledge encyclopaedia, it is made available to subscribers serving as a "refresher" or instant help-guide to learners.

 

But what about converting new clients around the e-learning viewpoint? Short says competency is key here. "We can help companies by ensuring that their recruits not only just sit the course but based on the information that's been given to them, they become competent to handle the tasks at hand. It is not just about providing reading and reference material but rather ensuring that the candidate is learning."

 

Atlas also has an advisory board to help it test run pilot courses and provide constant feedback. Last time the Oilholic checked, there were around 53 companies on board for such an exercise. Finally, the company is also rather careful in being shall we say 'electronic platform neutral'.

 

"If a client wants an e-learning solution to work on a BlackBerry we wouldn't urge them to adopt an Android OS system, or Apple OS. Ultimately, that's their call. We have a young team here who will tailor a course to the clients' IT requirements and subsequently licence it to them, rather than it being the other way around." A wise line to take indeed! That’s all for the moment folks! Keep reading, keep it 'crude'!

NOTE: November 1, 2013 - To read this blogger's interview with Atlas CFO Graeme Park for CFO World click here.

 

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© Gaurav Sharma 2013. Photo: Atlas HQ, Energy Park, Aberdeen, Scotland © Gaurav Sharma, October 2013.

Dissecting & summarising PM methodologies

Projects in all sectors of the economy, large or small, need careful planning and consideration. Over the years, project management has evolved considerably to become a crucial standalone genre of management studies.

Perhaps unsurprisingly, literature on the subject has mushroomed. Industry veteran and UCL academic Peter Morris has lent his thoughts via Reconstructing Project Management, which though intentioned as an academic text - is not bland and dry like some other titles vying with it for attention.

In a book of over 300 pages split into four parts and 22 chapters, Morris has offered his take on project management techniques, modes and methodologies drawing on lessons from the past, current discourse and ongoing trends to chart the road ahead. Part I of the book (Constructing Project Management) discusses the history of modern project management and how it evolved into a standalone discipline.

Invariably among the sub-components, oil & gas projects come into view and the author does justice to the sector by flagging it up early on in one of the chapters. He then moves on to the development of project management methodology and standards such as, but not limited to PERT, CPM, APM, PMBOK, etc. In order to contextualise and substantiate his thoughts, there are case studies aplenty.

Moving on to Part II (Deconstructing Project Management), Morris discusses management principles, governance and most importantly the impact (and facets) of risk, governance, people and procurement.

Part III (Reconstructing Project Management) sees the author come into his element, offering his take on the context and character of project management as we know it (or we think we know it) and join the dots to organisational performance. The final Part IV of the book contains a summary and the author's concluding thoughts.

Overall, it’s a good read and a written work likely to retain its value for another couple of decades if not more. The only caveat the Oilholic would like to flag up as an industry observer (and not a practitioner) is that this book is not the meatiest volume out there on project management.

For an outside-in look, what’s here is more than sufficient but some practitioners may beg to differ and demand more detail. Nonetheless, there is strength and uniqueness in brevity too when it comes to tackling such a detailed subject. Hence, this blogger is happy to recommend it to those interested in or involved with project management.

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© Gaurav Sharma 2013. Photo: Front Cover - Reconstructing Project Management © Wiley 2013

On Abu Dhabi’s ‘spot’ chaps, ADNOC & INR

It's good to spot a traditional dhow on millionaire's yacht row at the marina here in Abu Dhabi. Though a millionaire or some tour company probably owns the thing! Switching tack from spot photography to spot crude oil trading – the community here in the UAE is in bullish mood, as is the national oil company – ADNOC.

With the spot Brent price in three figures, and above the US$110-level last time this blogger checked, few here (including the administration), have anything to worry about. The Oilholic has always maintained that a $80 per barrel plus price keeps most in OPEC, excluding Venezuela and Iran and including the Saudis and UAE happy. Short-term trend is bullish and Egyptian troubles, Libyan protests plus the US Federal Reserve's chatter will probably keep Brent there with the regional (DME Oman) benchmark following in its wake, a mere few dollars behind.

Furthermore, of the three traders the Oilholic has spoken to since arriving in the UAE, American shale oil is not much of a worry in this part of the world. "Has it dented the (futures) price?? An American bonanza remains…well an American bonanza. The output will be diverted eastwards to importing jurisdictions; they have in any case been major importers of ADNOC’s crude. What we are seeing at the moment are seasonal lows with refiners in India and China typically buying less as summer demand for distillate falls," says one.

In fact, on Wednesday, Oil Movements – a tanker traffic monitor and research firm – said just that. It estimates that OPEC members, with the exception of Angola and Ecuador, will curtail exports by 320k barrels per day or 1.3% of daily output, in the four weeks from August 10 to September 7.

Meanwhile, ADNOC is investing [and partnering] heavily as usual. Recently, it invited several IOCs to bid for the renewal of a shared licence to operate some of the Emirate's largest onshore oilfields. The concession (on Bu Hasa, Bab, Asab, Sahil and Shah oilfields), in which ADNOC holds a 60% stake, is operated by Abu Dhabi Company for Onshore Oil Operations (or ADCO) subsidiary.

Existing partners for the remaining stake include BP, Shell, ExxonMobil, Total and Partex O&G. All partners, except Partex have been invited to apply again, according to a source. Additionally, ADNOC has also issued an invitation to seek new partners. Anecdotal evidence here suggests Chevron is definitely among the interested parties.

The existing 75-year old concessions expire in January 2014, so ADNOC will have to move quickly to decide on the new line-up of IOCs. For once, its hand was forced as the UAE's Supreme Petroleum Council rejected an application for a one-year extension of the existing arrangement. Doubtless, Chinese, Korean and Indian NOCs are also lurking around. A chat with an Indian contact confirmed the same.

Whichever way you look at it – its probably one of the few new opportunities, not just in the UAE but the wider Middle East as well. Abu Dhabi is among the few places in the region where international companies would still be allowed to hold an equity interest; mostly a no-no elsewhere in the region. But in the UAE's defence, ever since the first concession was signed by this oil exporting jurisdiction in 1939 – it has always been open to foreign direct investment, albeit with caveats attached. ADNOC is also midway through a five-year $40 billion investment plan aimed at boosting oil and gas production and expanding/upgrading its petrochemical and refining facilities.

Meanwhile, the slump of Indian Rupee (INR) is headline news in the UAE, given its ties to the subcontinent and a huge Indian expat community here in Abu Dhabi. The slump could stoke inflation, according to the Reserve Bank of India, which is already struggling to curtail it. The central bank has tried everything from capital controls to trying to stabilise the INR for a good few months by hiking short-term interest rates. Not much seems to have gone its way (so far).

Furthermore, the INR's troubles have exposed indebtedness of the country's leading natural resources firms (and others) – most notably – Reliance, Vedanta and Essar. Last week, research conducted by Credit Suisse Securities noted that debt levels of top ten Indian business houses in the current fiscal year have gone up by 15% on an annualised basis.

With the currency in near freefall, the report specifically said Reliance ADA Group's gross debt was the highest, with Vedanta in second place among top 10 Indian groups. Draw your own conclusions. On a personal level, Mukesh Ambani (Chairman of Reliance Industries Ltd, the man who holds right to the world largest refinery complex and India's richest tycoon), has lost close to $5.6 billion of his wealth as the INR's plunge has continued, according to various published sources.

Few corporate jets less for him then but a much bigger headache for India Inc, one supposes. If the worried lot fancy a pipe or two, then the "Smokers Centre" (pictured right) on the City's Hamdan Street is a quirky old place to pick up a few. More generally, should one fancy a puff of any description shape, size or type then Abu Dhabi is the city for you. What's more, the stuff is half the price compared to EU markets! For the sake of balance, this humble blogger is officially a non-smoker and has not been asked to flag this up by the tobacco lobby!

Just one more footnote to the INR business, Moody's says the credit quality of state-owned oil marketing and upstream oil companies in India will likely weaken for the rest of the fiscal year (April 2013 to March 2014), if the Indian government continues to ask them, as it did in April-June, to share a higher burden of the country's fuel subsidies.

To put this into context - the INR has depreciated by about 10% and the crude oil prices have increased by about 6% since the beginning of June, as of August 20. Moody's projections for the subsidy total assumes that there will be no material changes in either the INR exchange rate or the crude oil price for the rest of the fiscal year (both are already out of the window). That's all from Abu Dhabi for the moment folks. Keep reading, keep it 'crude'!

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© Gaurav Sharma 2013. Photo 1: A dhow on the Abu Dhabi marina, UAE. Photo 2: Smokers Centre, Hamdan Street, Abu Dhabi, UAE © Gaurav Sharma, August, 2013.

Statoil’s move & a crude view from Oslo

The Oilholic finds himself in Oslo, Norway for the briefest of visits at a rather interesting time. For starters, back home in London town, recent outages at Norway's Statoil-operated Heimdal Riser platform are still causing jitters and firming up spot natural gas prices despite the low demand. Although it’s a lot calmer than last Wednesday as order has been restored. The UK is also soaking in news that Norway's US$760 billion oil fund (the world's biggest investor), has cut its British government debt holdings by a whopping 26% to NKr42.9 billion (£4.51 billion, $7.26 billion) and increased its Japanese government bond holdings by 30% to NKr129.5 billion.

However, the biggest story in Oslo is Statoil’s decision to sell minority stakes in several key offshore fields in the Norwegian sector of the North Sea and far north to Austria's OMV. To digest all of that, the Oilholic truly needed a pint of beer – but alas that hurts here! No, not the alcohol – but the price! On average, a pint of beer at a bar on Karl Johans Gate with a view of the Royal Palace (pictured above left) is likely to set you back by NKr74 (£8.20 yes you read that right £8.20). Monstrous one says! Anyways, this blog is called Oilholics Synonymous not Alcoholics Anonymous – so back to 'crude' matters.

Chatter here is dominated by the Statoil decision to sell offshore stakes for which OMV forked-up US$2.65 billion (£1.7 billion). The Norwegian oil giant said the move freed up much needed funds for capex. Giving details, the company announced it had reduced its ownership in the Gullfaks field to 51% from 70% and in Gudrun field to 51% from 75%.

The production impact for Statoil from the transaction is estimated to be around 40,000 barrels of oil equivalent (boe) per day in 2014, based on equity and 60 boe per day in 2016, according to a company release. However, Chief Executive Helge Lund told Reuters that the company will still have the capacity to deliver on its 2.5 million barrels per day (bpd) ambition in 2020.

"But we will of course evaluate it as we go along, whether that is the best way of creating value.It will impact the short-term production...but we are not making any changes to our guiding at this stage," he added.

For OMV, the move will raise its proven and probable reserves by about 320 million boe or nearly a fifth. What is price positive for Austrian consumers is the fact that it will also boost OMV’s production by about 40,000 bpd as early as 2014.

Statoil’s consideration might be one of capex; for the wider world the importance of the deal is in the detail. First of all, it puts another boot into the North Sea naysayers (who have gone a bit quiet of late). There is very valid conjecture that the North Sea is in decline - hardly anyone disputes that, but investment is rising and has shot up of late. The Statoil-OMV deal lends more weight that there's still 'crude' life in the North Sea.

Secondly, $2.65 billion is no small change, even in terms relative to the oil & gas business. Finally, OMV is a unique needs-based partner for Statoil. The Oilholic is not implying it’s a strange choice. In fact, both parties need to be applauded for their boldness. Furthermore, OMV will also cover Statoil's capex between January 1 and the closing of the deal, which could potentially raise the final valuation to $3.2 billion in total, according to a source.

And, for both oil firms it does not end here. OMV and Statoil have also agreed to cooperate, contingent upon situation and options, on Statoil's 11 exploration licences in the North Sea, West of Shetland and Faroe Islands.

Continuing the all around positive feel, Statoil also announced a gas and condensate discovery near the Smørbukk field in the Norwegian Sea. However, talking to the local media outlets, the Norwegian Petroleum Directorate played down the size of the discovery estimating it to be between 4 and 7.5 million cubic metres of recoverable oil equivalents. Nonetheless, every little helps.

Right that’s about enough of crude chatter for the moment. There’s a Jazz festival on here in Oslo (see above right) which the Oilholic has well and truly enjoyed and so has Oslo which is basking in the sunshine in more ways than one. But this blogger also feels inclined to share a few other of his amateur photos from this beautiful city – (clockwise below from left to right, click image to enlarge) – views of the Oslofjord from Bygdøy museums, sculptures at Frogner Park and the Edvard Munch Museum, which is currently celebrating 150 years since the birth of the Norwegian great in 1863.

Away from the sights, just one final crude point – data from ICE Futures Europe suggests that hedge funds (and other money managers) raised bullish bets on Brent to their highest level in more than two years in the week ended August 13.

In its weekly Commitments of Traders report, ICE noted – speculative bets that prices will rise, in futures and options combined, outnumbered short positions by 193,527 lots; up 2.5% from the previous week and is the highest since January 2011. Could be higher but that’s the date ICE started the current data series – so there’s no way of knowing.

In the backdrop are the troubles in Egypt. As a sound Norwegian seaman might tell you – it’s not about what Egypt contributes to the global crude pool in boe equivalent (not much), but rather about disruption to oil tankers and shipping traffic via the Suez Canal. That’s all from Oslo folks. Next stop – Abu Dhabi, UAE! Keep reading, keep it ‘crude’!

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To email: gaurav.sharma@oilholicssynonymous.com

© Gaurav Sharma 2013. Photo 1: View of the Royal Palace from Karl Johans Gate, Oslo, Norway. Photo collage: Various views of Oslo, Norway © Gaurav Sharma, August, 2013.

Sights & sounds from the G8 in Enniskillen

As the G8 circus prepares to leave town, with the Lough Erne Declaration firmly signed, it is time to reflect on the town and the folks who played host to the leaders of the eight leading industrialised nations. Wherever this blogger went, asked for directions, picked-up something in a shop, had a meal or a beer, you name it – he was greeted by helpful people with welcoming smiles.

The leaders’ motorcades were met with much gusto, especially by local school children “Welcoming the G8” even when there wasn’t a leader inside the cars zipping by! Bless them! On Monday, the townsfolk got a pleasant surprise to see President Barack Obama and Prime Minister David Cameron waving to them from a vehicle in the same motorcade.

Later, the two leaders also visited Enniskillen Integrated Primary School, attended by both Catholic and Protestant children, on the outskirts of Enniskillen. It was established, as a place of reconciliation and peace, in wake of the 1987 IRA Poppy Day bombing which resulted in 12 local fatalities. The bomb may have killed and maimed but didn’t break the community here, says one resident. The town itself got a complete makeover with every building spruced-up, primed and painted, according to locals and as is apparent.

However, like any other High Street in the British Isles, Enniskillen is no exception from the economic downturn, with retailers either going under or vacating premises. Yet, instead of boarding these shops up, their glass panes had a façade of wallpaper showing people and products inside, perhaps to convey a positive illusion for cars zipping past.

The protestors were here in numbers too, and in spirit as far away as Belfast and London. Everyone from anti-poverty campaigners to food scarcity examiners, from rights and environmental groups to fair trade advocates were here in numbers. Amnesty International’s protest ‘display’ on the arms-supplying shenanigans by G8 nations was the most eye-catching one for the Oilholic.

There is one mute point though. It seems the militant element largely stayed away and most of the protesters, barring few nutcases, engaged and sent their message out peacefully. That the Lough Erne Resort is surrounded by water supplemented by miles of metal fences, multiple security checkpoints and around 8,000 security personnel, certainly ensured the G8 2013 Summit saw far fewer protestors relative to the norm in recent years.

Swimming, sailing, paddling and canoeing in the waters around Lough Erne Resort were banned for the duration of the summit, but not fishing! That’s all from Enniskillen folks which is getting back to normalcy. Before his departure back to London via Belfast, the Oilholic leaves you with some views from the G8 summit through the lens of his non-professional but supremely effective automatic camera. Click on images(s) to enlarge. Keep reading, keep it ‘crude’!
 

A 'wallpapered' shop in Enniskillen

Enniskillen Castle



Waters 'off limits' says PSNI

Police comb River Erne

 

Amnesty Intl makes its point on Syria

Police personnel from around UK make their way back home from Belfast City airport

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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© Gaurav Sharma 2013. Photos: As captioned, images from the G8 2013 summit in Northern Ireland © Gaurav Sharma, June 16-19, 2013.

The 2013 G8 summit, Syria & crude prices

There is a certain measure of positive symbolism in being here in Northern Ireland for the 2013 G8 summit. Who would have imagined when the Good Friday agreement was signed in 1998, that 15 years later the then sectarian strife-torn province would host the leaders of the eight leading industrialised nations for their annual shindig?

That point was not lost on US President Barack Obama, among the few who didn’t express apprehensions, when UK PM David Cameron announced the venue for the summit last year. Cameron wanted to send a message out to the world that Northern Ireland was open for business and based on what yours truly has seen and heard so far, that's certainly a view many share.

 

Addressing an audience of students in Belfast, Obama said, "Few years ago holding a summit of world leaders in Northern Ireland would have been unthinkable. That we are here today shows the progress made in the path to peace and prosperity [since 1998]."

"If you continue your courageous path towards permanent peace, and all the social and economic benefits that come with it, that won't just be good for you. It will be good for this entire island, for the United Kingdom, for Europe; and it will be good for the world," he added.

Here we all are in Belfast heading to a quaint old town called Enniskillen. Of course, the Oilholic won’t be making his way there in a style befitting a president, a prime minister or a gazillion TV anchors who have descended on Northern Ireland, but get there - he most certainly will - to examine the 'cruder' side of things.

It has barely been a year since the G8 minus Russia (of course) griped about rising oil prices and called on oil producing nations to up their production. "We encourage oil producing countries to increase their output to meet demand. We stand ready to call upon the International Energy Agency (IEA) to take appropriate action to ensure that the market is fully and timely supplied," the G7 said in a statement last August.

Of course since then, we’ve had the US 'Shale Gale', dissensions at OPEC and rising consumption of India and China according to the latest data. The smart money would be on the G7 component of the G8 not talking about anything crude, unless you include the geopolitical complications being caused by Syria, which to a certain extent is overshadowing a largely economic summit.

That wont be a shame because its not for politicians to fiddle with market mechanisms. Nonetheless, the Brent forward month futures touched a 10-week high close to US$107 a barrel on Monday before retreating. Despite a lull, if not a downturn, in OECD economic activity, the benchmark remains in three figures.

Syria's impact on oil markets is negligible, but a prolonged civil war there could affect other countries in the Middle East, worse still drag a few oil producers in. Yet a stalemate between Russian President Vladimir Putin and the West has already become apparent here at the G8. There will, as expected, be no agreement on Syria with the Russians supporting the Assad regime and the West warily fretting over whether or not to supply the Syrian rebels with arms.

Away from geopolitics and the G8, in an investment note to clients, analysts at investment bank Morgan Stanley said the spread between WTI and Brent crude will likely widen in the second half of 2013, with a Gulf Coast "oversupply driving the differential".

The banks notes, and the Oilholic quotes, "WTI-Brent may struggle to narrow below US$6-7 per barrel and likely needs to widen in 2H13 (second half 2013)." That’s all for the moment from Belfast folks, as the Oilholic heads to Enniskillen! In the interim, yours truly leaves you with a view of Belfast's City Hall. Keep reading, keep it 'crude'

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© Gaurav Sharma 2013. Photo: City Hall, Belfast, Northern Ireland © Gaurav Sharma, June 17, 2013

UK Oil & Gas Inc. - The Thatcher Years!

The Oilholic has patiently waited for the fans and despisers of former British Prime Minister Margaret Thatcher to quieten down, in wake of her death on April 8, 2013, before giving his humble take on what her premiership did (or in many cases didn’t) for the UK oil and gas Inc. and what she got in return.

 

Her influence on the North Sea exploration and production certainly got a mention in passing in all the tributes and brickbats thrown at the Iron Lady, the longest serving (1979-1990) and only female British Prime Minister. The world’s press ranging from The Economist to the local paper in her former parliamentary constituency – The Hendon & Finchley Times (see covers below) – discussed the legacy of the Iron Lady; that legacy is ‘cruder’ than you think.

 

In the run-up to Thatcher's all-but-in-name state funeral on April 17, the British public was bombarded with flashbacks of her time in the corridors of power. In one of the video runs, yours truly glanced at archived footage of Thatcher at a BP production facility and that said it all. Her impact on the industry and the industry’s impact itself on her premiership were profound to say the least.

 

Academic Peter R. Odell, noted at the time in his book  Oil and World Power (c1986) that, “Countries as diverse as Finland, France, Italy, Austria, Spain, Norway and Britain had all decided to place oil partly, at least, in the public sector.” A later footnote observes, “Britain’s Conservative government, under Mrs. Thatcher, subsequently decided [in 1983] to ‘privatize’ the British National Oil Corporation (BNOC) created by an earlier Labour administration.”

 

The virtue of private free enterprise got instilled into the UK oil and gas industry in general and the North Sea innovators in particular thanks to Thatcher. But to say that the industry somehow owed the Iron Lady a debt of gratitude would be a travesty. Rather, the industry repaid that debt not only in full, but with interest.

 

Just as Thatcher was coming to power, more and more of the crude stuff was being sucked out of the North Sea with UK Continental Shelf (UKCS) being much richer in those days than it certainly is these days. The UK Treasury, under her hawk-eyed watch, was quite simply raking it in. According to the Office for National Statistics (ONS) data, government revenue from the oil and gas industry rose from £565 million in fiscal year 1978-79 to £12.04 billion in 1984-85. That is worth over three times as much in 2012 real-terms value, according to a guesstimate provided by a contact at Barclays Capital.

 

Throughout the 1980s, the Iron Lady made sure that the revenue from the [often up to] 90% tax on North Sea oil and gas exploration and production was used as a funding source to balance the economy and pay the costs of economic reform. Over three decades on from the crude boom of the 1980s, Brits do wish she had examined, some say even adopted, the Norwegian model.

 

That she privatised the BNOC does not irk the Oilholic one bit, but that not even a drop of black gold and its proceeds – let alone a full blown Norwegian styled sovereign fund – was put aside for a rainy day is nothing short of short-termism or short-sightedness; quite possibly both. One agrees that both macroeconomic and demographical differences between Norway and the UK complicate the discussion. This humble blogger doubts if the thought of creating a sovereign fund didn’t cross the Iron Lady’s mind.

 

But unquestionably, as oil and gas revenue was helping in feeding the rising state benefits bill at the time – all Thatcher saw in Brent, Piper and Cormorant fields were Petropounds to balance the books. And, if you thought the ‘crude’ influence ended in the sale of BNOC, privatisation drives or channelling revenue for short-term economic rebalancing, then think again. Crude oil, or rather a distillate called diesel, came to Thatcher’s aid in her biggest battle in domestic politics – the Miners’ Strike of 1984.

 

Pitting her wits against Arthur Scargill, the National Union of Mineworkers’ (NUM) hardline, stubborn, ultra-left leader at the time, she prevailed. In March 1984, the National Coal Board (NCB) proposed to close 20 of the 174 state-owned mines resulting in the loss of 20,000 jobs. Led by Scargill, two-thirds of the country's miners went on strike and so began the face-off.

 

But Thatcher, unlike her predecessors, was ready for a prolonged battle having learnt her lesson in an earlier brief confrontation with the miners and knew their union’s clout full well based on past histories. This time around, the government had stockpiled coal to ensure that power plants faced no shortages as was the case with previous confrontations.

 

Tongue-tied in his vanity, Scargill had not only missed the pulse of the stockpiling drive but also failed to realise that many UK power plants had switched to diesel as a back-up. Adding to the overall idiocy of the man, he decided to launch the strike in the summer of 1984, when power consumption is lower, than in the winter.

 

Furthermore, he refused to hold a ballot on the strike, after losing three previous ballots on a national strike (in January 1982, October 1982 and March 1983). The strike was declared illegal and Thatcher eventually won as the NUM conceded a year later in March 1985 without any sizable concessions but with its member having borne considerable hardships. The world was moving away from coal, to a different kind of fossil fuel and Thatcher grasped it better than most. That the country was a net producer of crude stuff at the time was a bonanza; the Treasury’s to begin with as she saw it.

 

The Iron Lady left office with an ‘ism’ in the shape of 'Thatcherism' and bred 'Thatcherites' espousing free market ideas and by default making capitalism the dominant, though recently beleaguered, economic system of our time. Big Bang, the day [October 27, 1986] the London Stock Exchange's rules changed, following deregulation of the financial markets, became the cornerstone of her economic policy.

 

In this world there are no moral absolutes. So the Oilholic does not accept the rambunctious arguments offered by left wingers that she made ‘greed’ acceptable or that the Big Bang caused the global financial crisis of 2007-08. Weren’t militant British unions who, for their own selfish odds and ends, held the whole country to ransom throughout the 1970s (until Thatcher decimated them), greedy too? If the Big Bang was to blame for a global financial crisis, so was banking deregulation in the UK in 1997 (and elsewhere around that time) when she was not around.

 

Equally silly, are the fawning accolades handed out by the right wingers; many of whom – and not the British public – were actually instrumental in booting her out of office and some of whom were her colleagues at the time. Let the wider debate about her legacy be where it is, but were it not for the UK oil and gas Inc., there would have been no legacy. Luck played its part, as it so often does in the lives of great leaders. As The Economist noted:

 

“She was also often outrageously lucky: lucky that the striking miners were led by Arthur Scargill, a hardline Marxist; lucky that the British left fractured and insisted on choosing unelectable leaders; lucky that [Argentine] General Galtieri decided to invade the Falkland Islands when he did; lucky that she was a tough woman in a system dominated by patrician men (the wets never knew how to cope with her); lucky in the flow of North Sea oil; and above all lucky in her timing. The post-war consensus was ripe for destruction, and a host of new forces, from personal computers to private equity, aided her more rumbustious form of capitalism.”

 

They say that the late Venezuelan president Hugo Chavez stage-managed 'Chavismo' and bred 'Chavistas' from the proceeds of black gold. The Oilholic says 'Thatcherism' and 'Thatcherites' have a ‘crude’ dimension too. Choose whatever evidence you like – statistical, empirical or anecdotal – crude oil bankrolled Thatcherism in its infancy. That is the unassailable truth and that’s all for the moment folks! Keep reading, keep it ‘crude’!

 

To follow The Oilholic on Twitter click here.

 

To email: gaurav.sharma@oilholicssynonymous.com
 

© Gaurav Sharma 2013. Photo 1: Baroness Margaret Thatcher’s funeral cortege with military honours, April 17, 2013 © Gaurav Sharma. Photo 2: Front page of the Hendon & Finchley Times, April 11, 2013. Photo 3: Front cover of the The Economist, April 13, 2013.

US LNG exports to the UK: The ‘Stateside’ Story

The Oilholic finds himself in Chicago IL, meeting old friends and making new ones! A story much discussed this week in the Windy City is US firm Cheniere Energy’s deal to export LNG to UK’s Centrica. More on why it is such a headline grabber later, but first the headline figures related to the deal.

The agreement, inked by Centrica and Cheniere on March 25, sees the latter provide 20-years' worth of LNG shipments starting from September 2018, which according to the former is enough to fuel 1.8 million British homes.

Centrica said it would purchase about 1.75 million metric tonnes per annum of annual LNG volumes for export from the Sabine Pass Project in Louisiana. (see Cheniere Energy’s graphic on the left, click image to enlarge). The contract covers an initial 20-year period, with an option for a 10-year extension.

Centrica, which owns utility British Gas, has fished overseas in recent years as the North Sea’s output plummets. For instance, around the 20th World Petroleum Congress in 2011, it inked deals with Norway’s Statoil and Qatar Petroleum. US companies have also flirted with the export market. So the nature of the deal is not new for either party; the timing and significance of it is.

According to City analysts and their peers here in Chicago, the announcement is a ground breaking move owing to two factors – (1) it’s the first ever long-term LNG supply deal for the Brits and (2) a market breakthrough for a US gas exporter in Europe.

Additionally, it blows away the insistence by the Russians and Qataris to link longer term supply contracts to the crude oil price (hello?? keep dreaming) instead of contracts priced relative to gas market movements. As for gas market prices, here is the math – excluding the recent (temporary) spike, gas prices in the UK are on average 3 to 3.5 times higher than the current price in the US. So we’re talking in the range of US$9.75 to $10.25 per million British thermal units (mmBtu). The Americans want to sell the stuff, the Brits want to buy – it’s a no brainer.

Except – as a contact in Chicago correctly points out – things are never straightforward in this crude world. Sounding eerily similar to what Chatham House fellow Prof. Paul Stevens told the Oilholic earlier this month, he says, “Have you forgotten the politics of ‘cheap’ US gas exports landing up on foreign shores? Even if it’s to our old friends the Brits?”

The US shale revolution has been price positive for American consumers – the exchequer is happy, the political classes are happy and so is the public which sees their country edging towards “energy independence.” (A big achievement in the current geopolitical climate and despite the quakes in Oklahoma).

The only people who are not all that happy, apart from the environmentalists, are the pioneers who persevered and kick-started this US shale gas revolution which was three decades in the making. To quote one who is now happily retired in Skokie, IL, “We no longer get more bang for our bucks anymore when it comes to domestic contracts.”

Another valid argument, from some in the trading community here in Chicago, is that as soon as US gas exports gain traction, bulk of which would head to Asia and not mother England, domestic prices will start climbing. So the Centrica-Cheniere deal, while widely cheered in the UK, has got little more than a perfunctory, albeit positive, acknowledgement from the political classes stateside.

In contrast, across the pond, none other than the UK Prime Minister David Cameron himself took to the airwaves declaring, “Future gas supplies from the US will help diversify our energy mix and provide British consumers with a new long term, secure and affordable source of fuel.”

The Prime Minister is quite right – the UK would rather buy from a ‘friendly’ country. Problem is, the friendly country might cool off on the idea of gas exports, were US domestic prices to pick-up in tandem with a rise in export volumes.

That’s all for the moment from Chicago folks! More from here over the next few days; keep reading, keep it ‘crude’!

To follow The Oilholic on Twitter click here.

To email: gaurav.sharma@oilholicssynonymous.com

© Gaurav Sharma 2013. Photo: Sabine Pass Project, USA © Cheniere Energy Inc.

On another BP sale, another Chavez term & more

A not so surprising news flash arrived this week that BP has finally announced the sale of its Texas City refinery and allied assets to Marathon Petroleum for US$2.5 billion. A spokesperson revealed that the deal included US$600 million in cash, US$1.2 billion for distillate inventories and another US$700 million depending on future production and refining margins.

 

Following the Carson oil refinery sale in California, the latest deal ratchets BP’s asset divestment programme up to US$35 billion with a target of US$38 billion within reach. It is time for the Oilholic to sound like a broken record and state yet again that – Macondo or no Macondo – the oil major would have still divested some of its refining and marketing assets regardless.

 

However, for fans of the integrated model – of which there are quite a few including ratings agencies who generally rate integrated players above R&M only companies – the head of BP's global R&M business Iain Conn said, "Together with the sale of our Carson, California refinery, announced in August, the Texas City divestment will allow us to focus BP's US fuel investments on our three northern refineries."

 

Things have also picked-up pace on the TNK-BP front. On Tuesday, Reuters reported that BP’s Russian partners in the venture Alfa Access Renova (AAR) would rather sell their stake than end-up in a ‘devalued’ partnership with Kremlin-backed rival Rosneft. On Wednesday, the Russian press cited sources claiming a sale of BP’s stake to Rosneft has the full backing of none other than Russian President Vladimir Putin himself. Now that is crucial.

On a visit to Moscow and Novosibirsk back in 2004, the Oilholic made a quick realisation based on interaction with those in the know locally – that when it comes to natural resources assets the Kremlin likes to be in control. So if BP and the Russian government have reached some sort of an understanding behind the scene, AAR would be best advised not to scream too loudly.

 

Another hypothesis gaining traction, in wake of AAR’s intention to sell, is that instead of being the seller of its stake in TNK-BP, the British oil major could now turn buyer. BP could then re-attempt a fresh partnership with Rosneft; something which it attempted last year only for it to be scuppered by AAR.

 

There can be any amount of speculation or any number of theories but here again a nod from the Kremlin is crucial. Away from ‘British Petroleum’ (as Sarah Palin and President Obama lovingly refer to it in times of political need) to the British Government which reiterated its support for shale exploration earlier this week.

 

On Monday, Minister Edward Davey of UK's Department of Energy and Climate Change (DECC) expressed hopes of lifting a suspension on new shale gas exploration. It was imposed in 2011 following environmental concerns about fracking and a series of minor earthquakes in Lancashire triggered by trial fracking which spooked the nation. In near sync with Davey, Chancellor of the Exchequer George Osborne told the Conservative Party conference in Birmingham that he was considering a 'generous new tax regime' to encourage investment in shale gas.

 

In case you haven’t heard by now, Hugo Chavez is back as president of Venezuela for another six year stint. This means it will be another rendezvous in Vienna for the Oilholic at the OPEC meeting of ministers in December with Rafael Ramirez, the crude Chavista likely to be hawkish Venezuela’s man at the table. Opposition leader Henrique Capriles believed in change, but sadly for the Venezuelan economy grappling with mismanagement of its ‘crude’ resources and 20% inflation, he fell short.

 

On January 10, 2012 when Chavez will be inaugurated for another term as Venezuela's president, he will be acutely aware that oil accounts for 50% of his government’s revenue and increasingly one dimensional economy. Bloomberg puts Chinese lending to Venezuela between 2006 and 2011 at US$42.5 billion. In a staggering bout of frankness, Ramirez admitted in September that of the 640,000 barrels per day (bpd) that Venezuela exported to China, 200,000 bpd went towards servicing government debt to Beijing.

 

The country's oil production is hardly rising. Just as Chavez’s health took a toll from cancer, national oil company PDVSA has not been in good health either. Its cancer is mismanagement and underinvestment. Most would point to an explosion in August when 42 people perished at the Amuay refinery – Venezuela’s largest distillate processing facility as an example. However, PDVSA has rarely been in good health since 2003 when it fired 40% of its workforce in the aftermath of a general strike aimed at forcing Chavez from power.

 

Staying with Latin America, the US Supreme Court has said it will not block a February 2011 judgement from an Ecuadorean court that Chevron must pay US$19 billion in damages for allegedly polluting the Amazonian landscape of the Lago Agrio region. The court’s announcement is the latest salvo in a decade-long legal tussle between Texaco, acquired by Chevron in 2001, and the people of the Lago Agrio.

 

The Ecuadorians and Daryl Hannah (who is not Ecuadorian) wont rejoice as Chevron it is not quite done yet. Far from it, the oil major has always branded the Ecuadorian court’s judgement as fraudulent and not enforceable under New York law. It has also challenged it under an international trade agreement between the US and Ecuador.

 

The latter case will be heard next month – so expect some more ‘crude’ exchanges and perhaps some stunts from Ms. Hannah. That’s unless she is under arrest for protesting about Keystone XL! That’s all for the moment folks! Keep reading, keep it ‘crude’ or Elle Driver might come after you!

 

© Gaurav Sharma 2012. Photo: East Plant of the Texas City Refinery, Texas, USA © BP Plc

UK & Norway: A ‘crudely’ special relationship

Unconnected to the current systemic financial malaise in Europe, a recent visit to Oslo by British Prime Minister David Cameron for a meeting with his Norwegian counterpart Jens Stoltenberg went largely unnoticed. However, its ‘crude’ significance cannot be understated and Cameron’s visit was the first by a British Prime Minister since Margaret Thatcher’s in 1986.

Beaming before the cameras, Stoltenberg and Cameron announced an "energy partnership" encompassing oil, gas and renewable energy production. As production from established wells has peaked in the Norwegian and British sectors of the North Sea, a lot has changed since 1986. The two principal proponents of exploration in the area are now prospecting in hostile climes of the hitherto unexplored far North – beyond Shetland Islands and in the Barents Sea.

Reading between PR lines, the crux of what emerged from Oslo last week is that both governments want to make it easier for firms to raise money for projects and to develop new technologies bearing potential benefits in terms of energy security. That Cameron is the first British PM to visit Norway in decades also comes as no surprise in wake of media reports that the Norwegian sector of the North Sea is witnessing a second renaissance. So of the growing amount of oil the UK imports since its own production peaked in 1999 – Norway accounts for over 60% of it. The percentage for British gas imports from Norway is nearly the same.

"I hope that my visit to Oslo will help secure affordable energy supplies for decades to come and enhance investment between our two countries. This will mean more collaboration on affordable long-term gas supply, more reciprocal investment in oil, gas and renewable energies and more commercial deals creating thousands of new jobs and adding billions to our economies," Cameron said.

For their part the Norwegians, who export over five times as much energy as they use domestically, told their guest that they see the UK as a reliable energy partner. We hear you sir(s)!

Meanwhile, UK Office for National Statistics’ (ONS) latest production data released this morning shows that extractive industries output fell by 15% on an annualised basis in April with oil & gas production accounting for a sizeable chunk of the decline.

A further break-up of data suggests oil & gas production came in 18.2% lower in April 2012 when compared with the recorded data for April 2011. Statisticians say production would have been higher in April had it not been for the shutdown of Total’s Elgin platform in the North Sea because of a gas leak.

Elsewhere, farcical scenes ensued at the country’s Manchester airport where the airport authority ran out of aviation fuel causing delays and flight cancellations for hours before supplies were restored. Everyone in the UK is asking the same question – how on earth could this happen? Here’s the BBC’s attempt to answer it.

Finally the Oilholic has found time and information to be in a position to re-examine the feisty tussle for Cove Energy. After Shell’s rather mundane attempt to match Thai company PTTEP’s offer for Cove, the Thais upped the stakes late last month with a £1.22 billion takeover offer for the Mozambique-focused oil & gas offshore company.

PTTEP’s 240 pence/share offer improves upon its last offer of 220 pence or £1.12 billion in valuation which Shell had matched to nods of approval from Cove’s board and the Government of Mozambique. The tussle has been going on since February when Shell first came up with a 195 pence/share offer which PTTEP then bettered.

Yours truly believes Cove’s recommendation to shareholders in favour of PTTEP’s latest offer does not guarantee that the tussle is over. After all, Cove recommended Shell’s last offer too which even had a break clause attached. Chris Searle, corporate finance partner at accountants BDO, feels the tussle for control may end up with someone overpaying.

“I’m not surprised that PTTEP have come back in for Cove since the latter’s gas assets are so attractive. Of course the danger is that we now get into a really competitive auction that in the end will lead to one of the bidders overpaying. It will be interesting to see how far this goes and who blinks first,” he concludes.

Cove’s main asset is an 8.5% stake in the Rovuma Offshore Area 1 off the coast of Mozambique where Anadarko projects recoverable reserves of 30 tcf of natural gas. Someone just might end-up overpaying.

On the pricing front, instead of the Spanish rescue calming the markets, a fresh round of volatility has taken hold. One colleague in the City wonders whether it had actually ever left as confusion prevails over what messages to take from the new development. Instead of the positivity lasting, Spain's benchmark 10-year bond yields rose to 6.65% and Italy's 10-year bond yield rose to 6.19%, not seen since May and January respectively.

Last time yours truly checked, Brent forward month futures contract was resisting US$97 while WTI was resisting US$82. That’s all for the moment folks! The Oilholic is off to Vienna for the 161st OPEC meeting of ministers. More from Austria soon; keep reading, keep it ‘crude’!

© Gaurav Sharma 2012. Photo: Oil Rig in the North Sea © Royal Dutch Shell.

Out of its ‘Shell’ & into the ‘Cove’ plus ‘Providence’

Many analysts thought supermajor Royal Dutch Shell which was embroiled in a bidding war for London-listed Cove Energy for better parts of Q1 this year, would emerge out of its conservative shell and trump rival bids from Thailand’s PTTEP and a couple of interested parties from India outright.

In the end the deal was sealed by a conservative, albeit apparently successful, counter offer by Shell for the East Africa focussed E&P company. Having seen its offer for US$1.6 billion back in February trumped by PTTEP, the Anglo-Dutch major returned to the table with a bid of US$1.81 billion which matched rather than bettered the Thai state company’s offer.

On April 24, Cove’s directors accepted and recommended Shell's offer which the Oilholic thinks had much to do with Mozambique as a nation wanting Shell’s expertise as well as its investment. The possibility of a bid battle has now receded; more so as the agreement includes a break fee clause, under which Cove Energy will have to pay Shell US$18 million if it now accepts a rival bid.

An approval from the government of Mozambique is awaited as Shell eyes Cove’s main asset – an 8.5% stake in the Rovuma Offshore Area 1 in the country where Anadarko projects recoverable reserves of 30 tcf of natural gas. Shell as a company continues to be in good nick having recently announced a rise in Q1 profits while rival ExxonMobil saw its profits dip. On an annualised basis, Shell Q1 profits were up 11% at US$7.66 billion while in a strange coincidence Exxon’s profits fell 11% to US$9.45 billion. Both majors said oil prices would be ‘volatile’ in the coming months.

Talking about the luck of the Irish, London and Dublin listed Providence Resources’ quest for Black Gold off the coast of Ireland appears to be on song. The company, which dug Ireland’s first oil prospection well that might be anywhere near profitability, looks good for its 520pence plus share price on the AIM when the Oilholic last checked.

This accolade of Ireland’s first profitable oil well goes to Barryroe prospection field, some 70km off Cork, where a future full-scale extraction to the tune of nearly 4000 barrels per day – which makes a lot of commercial sense – is within relative touching distance. Providence Resources also holds drilling permits in Northern Ireland. Since Irish crude prospection has been riddled with disappointments, Providence deserves a pat on the back and its current share price for its effort.

Finally, the Oilholic is a bit miffed about being told by people that the UK now has the most expensive petrol price in the world, which it clearly does not. Yours truly knows that prices at the pump bite everyone, but we Brits aren’t the worst off.

However, to argue otherwise often results in farcically loud arguments especially with people who think the more inexpert they are, the more valid their opinion is! Thankfully, experts at Staveley Head – a provider of specialist insurance products – have some handy figures to back up the Oilholic which suggest that while UK is almost always on the list of the most expensive countries to buy petrol – it is not the most expensive (yet).

Click on their infographic - the Global Petrol Price Index (above right) - to compare the UK with the others. It would suggest that current price per litre is the highest in Norway, followed by Turkey, Netherlands, Italy and Greece. That’s all for the moment folks! Keep reading, keep it ‘crude’!

© Gaurav Sharma 2012. Photo: Shell Gas Station © Royal Dutch Shell. Infographic: Global Petrol Price Index © Staveley Head.

Oh drat! Brits ask what the ‘Frack’!

The Oilholic arrived back home from Texas last week to the sound of fellow Brits discussing ‘fracks’ and figures in favour of shale gas prospection here. All UK activity ground to a halt last year, when a couple of minor quakes majorly spooked dwellers of Lancashire where a company – Cuadrilla – was test fracking.

Fast forward to April 2012, and a UK government appointed panel of experts including one from the British Geological Survey now says, "There was a very low probability of other earthquakes during future treatments of other wells. We believe that (last year's) events are attributable to the existence of an adjacent geological fault that had not been identified. There might be other comparable faults, (and) we believe it's not possible to categorically reject the possibility of further quakes."

However, it added that while the tremors may be felt in areas where fracking is conducted, they won’t be above magnitude 3 on the Richter scale and were unlikely to cause any significant damage. The panel’s report has now been sent for a six-week consultation period.

The British Department of Energy and Climate Change (DECC) is expected to issue a set of regulations soon and ahead of that a verbal melee has ensued with everyone for or against wanting a say and environmental groups crying foul. However, there was near unanimous approval for a control mechanism which would halt fracking activity as soon as seismic levels rise above 0.5 on the Richter scale. The engineers wanted in too.

Dr. Tim Fox, Head of Energy and Environment at the Institution of Mechanical Engineers, says, “The recommendations that any shale gas operations should be more closely monitored are welcome. UK and European environmental regulations are already some of the most stringent in the world; and these proposed precautions are a good example of how to help mitigate the risk of any damage caused by seismic activity as a result of shale gas activity.”

City energy analysts also gave the panel’s conclusions a cautious thumbs-up as there is a long way to go before a meaningful extraction of the gassy stuff occurs in any case. Jim Pearce, Energy and Process Industries practice partner at global management consultancy A.T. Kearney, says, “Shale developments offer the UK an opportunity to exploit a relatively clean resource and fill the energy gap that is opening up once again as nuclear projects come under threat. If the UK is going to use gas we should look for the best available source, which is arguably shale gas. Moreover, shale developments may also provide the UK’s chemical industry with a much needed boost if ethane and other NGL’s (natural gas liquids) are also found.”

He opines that UK and the rest of Europe are falling rapidly behind on gas supply security and cost. “Our key industries will be coming under increasing threat if we do not react to the new order that shale has created. We have a great opportunity here to take the lessons learned from the US and benefit from them,” Pearce adds.

Oh what the ‘frack’, that’s surely reason enough to tolerate a few quakes providing the security of the water table is preserved and concerns over water pollution are addressed. Yikes, that’s another quaky one! Away from shale, the 30th anniversary of the Falkland Islands war between the UK and Argentina came and went earlier this month marked by remembrance services for the fallen, but accompanied by the usual nonsensical rhetoric from British and Argentine officials, more so from the latter irked by oil prospection off the Islands’ shores which it claims as its own.

Five independent British oil companies are exploring four areas for oil in Falkland Islands’ waters, but only one of these – Rockhopper – claims to have struck meaningful reserves of the crude stuff. It says it could get 350 million barrels in the Sea Lion field to the north of the islands, which it plans to bring onstream by 2016. However, analysts at Edison Investment Research noted in March that a total of 8.3 billion barrels could lie offshore. So expect each anniversary and the run up to it from here on to be accompanied by ‘crude’ rhetoric and much frothing from Buenos Aires.

When it comes to being ‘crude’, the Argentines are in a class of their own. Just ask Repsol! On Wednesday, the country’s Senate approved the controversial decision, announced last week by President Cristina Fernandez de Kirchner, to nationalise Repsol YPF thereby stripping Spanish giant Repsol’s controlling stake in YPF.

Following the bizarre but locally popular announcement last week, while its stock plummeted, rating agencies scrambled to downgrade Repsol YPF’s ratings with Fitch Ratings and Moody’s doing so in tandem. Warnings to Argentina from the Spanish government, EU Trade Commission and last but not the least Repsol itself have since followed.

Repsol wants around US$10 billion for its 57.4% stake in YPF, but Argentina has said it does not recognise that valuation. There also one more thing they don’t possibly recognise - it’s called ‘sound economics’ which often gets trumped by ‘good politics’ in that jurisdiction. A number of analysts’ notes have been doing the rounds since April 17th when Kirchner went down the route towards nationalisation. Most had the same dire forecast for Repsol, but for the Oilholic, one issued by the inimitable Stuart Joyner, head of oil and gas at Investec, stood out.

In it he notes, “The apparent decision to nationalise YPF means we move to a worst case for the value of Repsol's 57.4% stake. The Argentine Tango is the consummate dance of love, but there was little affection for the country's largest foreign investor in Buenos Aires yesterday.”

Well said sir! Meanwhile with near perfect symmetry while the Argentines were being crudely castigated, Time magazine decided to name Brazilian behemoth Petrobras' CEO Maria das Graças Silva Foster one of the most influential people in the world. That’s all for the moment folks! Keep reading, keep it ‘crude’!

© Gaurav Sharma 2012. Photo: Gas pipeline © National Geographic photo stock.