Turning from diesel to hydrogen trains

The Oilholic finds himself on the road again; this time roughly 570 miles east of London in Salzgitter, Germany, at a research and testing facility of rail transport solutions provider Alstom. 

The French company's testing yard is abuzz for a (relatively) new reason – one of it's most popular Coradia series trains, namely the reliable diesel work-horse the Coradia Lint 54, is about to undergo a transformation like none other.

Meet the 'Coradia iLint', a full emission-free train that runs on Hydrogen powered fuel cells (see above). It only emits steam and condensed water, and no  carbon. To get a perspective, the Oilholic was given a demonstration ride on the train over a one mile track, before its due to enter service on German public transport this year. 

For all intents and purposes, it was a smooth ride and the quietest ever rail journey this blogger has been on. In fact, were it not for the wheel friction din and movement vibration, you wouldn't hear a thing. You'd imagine reducing pollution, also means minimising noise pollution and the Coradia iLint certainly fits that box.

The interior was that of a normal train in service across European public transport networks, meaning no clunky hydrogen tanks in eyesight or internal variations. (Click image below to enlarge and get a glimpse)

According to Alstom, the prototype is powered by an electrical traction drive. Electrical energy is generated onboard in fuel cells and stored in batteries.

The fuel cell provides electrical energy by combining hydrogen stored in the train's tanks onboard with oxygen from the environment, releasing good old H2O. 

While on the test track the train touched 80 km/h, out in the real world Alstom insists it would match the performance of a Coradia diesel unit, including comparable acceleration, braking and maximum speed (of 140 km/h) with the same travel range and passenger capacity as its hydrocarbon fuelled variant. 

Two things spring to mind; first being safety and the second being the infrastructure needed to power up the new train. On the first point, an Alstom spokesperson claimed that high pressure hydrogen reservoirs are actually safer than petrol tanks in comparable hazard situations, a point also made by Japanese automaker Toyota, which has been on its own hydrogen powered vehicle pathway since 2015 via its Mirai model. The technology has been rigourously tested, both mobility providers insist. 

As for the infrastructure needed, Alstom says it is offering the "complete package" consisting of the train itself and its maintenance, and also the whole hydrogen fuelling infrastructure, taking care of all rolling stock and hydrogen related matters, leaving operators to concentrate on their "core competencies."

The company's message chimes with that of other proponents of Hydrogen – intelligent energy management coupled with emissions free mobility.

And to make the point – a Toyota Mirai pulled up alongside the Coradia iLint (see above), with perfect timing. That's all from Salzgitter, as its time to ride the Mirai around Northern Germany and beyond! Keep reading, keep it 'crude', even if the next few posts are going to about hydrogen!

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© Gaurav Sharma 2018. Photo 1: Alstom's Coradia iLint. Photo 2: Glimpses of exterior, roof, interior and driver's cabin of the Coradia iLint. Photo 3: Coradia iLint and Toyota's Mirai hydrogen fuelled car © Gaurav Sharma May 2018.

Crude talk in H-Town

As the Oilholic prepares to say yet another goodbye to Houston, one cannot but help wondering why the new found pragmatism here over the possible direction of the oil price is not reflected elsewhere in the oil market.

Brent is currently within touching distance of $80 per barrel, while the West Texas Intermediate is firming up above $71 per barrel. 

Having spent a whole week deliberating with market participants out here in America's oil capital, including physical traders, few seem to think the oil price can sustain three figures, even if it gets there.

The sentiment was echoed by several delegates at the Baker McKenzie Oil & Gas Institute 2018 with most there, including leading legal and financial advisers, dismissing a sustainable return to a three-figure oil price. In fact, most are advising their clients not to get carried away, and mark a return to the profligacy of the sort we saw in the US oil patch when the price was last in three figures back in 2014.

Their clients, i.e. representatives of leading oil companies and project sponsors also share the sentiment, and while appreciative of relatively higher oil prices, are in no mood to get carried away.

Yet with Venezuelan production heading to a historic dive below 1 million barrels per day, US President Donald Trump's withdrawal from the Iran nuclear deal and the general geopolitical malaise in the Middle East, hedge funds and money managers are piling in to the futures market in the hope of extending a rally largely supported by OPEC's output cuts.

Plenty of food for thought, but the oil market is in real danger of overstretching itself! And on that note, that's all from Houston folks. Time for the ride home to London. Keep reading, keep it 'crude'!

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© Gaurav Sharma 2018. Photo: View of downtown Houston, Texas, USA from Burnett Street on the outer edge of town. © Gaurav Sharma, May 2018.

Thoughts From Baker McKenzie’s Oil & Gas Institute 2018

Earlier today, the Oilholic was delighted to attend the Baker McKenzie 2018 Oil & Gas Institute; an event that grows bigger by the year, and has become a true 'crude' fixture in Houston.

From Big Oil getting to grips with Big Data to capital raisings in mature jurisdictions, emerging market legal considerations to mergers and acquisitions - there was plenty on the agenda to for everyone. Of course lurking in the background to it all is the direction of the oil price and US President Donald Trump's re-imposition of sanctions on Iran, the Israeli-Iranian tussle in Syria, OPEC and all the rest. It's pushed Brent crude above $77 per barrel and WTI above $71. 

While every US shale player would gladly accept the current prices; quite like the Oilholic, few at the Institute felt the elevated prices would last. Given there are several variables in the equation - including, but not limited to, what OPEC would do next month, what sort of levels US producers are likely to record, how many Iranian barrels are likely to be knocked off the market, etc. - getting carried away by the bulls would not be a good idea. 

To quote, Jim O'Brien, Chair of Baker McKenzie's Global Energy, Mining & Infrastructure Practice Group and one of the architects of the Institute, the US oil patch is "feeling good" about itself at the moment, but at the same time there is a fair degree of realism that a return to $100 prices is unlikely.

In fact, one of the key takeaways from the Institute was how oil and gas players, both large and small, were aiming to achieve breakeven at prices as low as $30. 

Underpinning that drive would be digitisation across the board enabled by big data, AI, automation and robotics coming together to bring about the kind of process efficiencies capable of making a tangible difference to the operating expenditure of oil and gas companies. Touching on this very subject was a keynote speech by Paulo Ruiz Sternadt, boss of Siemens-owned Dresser-Rand. (Full Forbes report here)

Representatives of Baker McKenzie, BP, Accenture, Shell and many others also touched on the topic. LNG, employment diversity and private equity in the business were other subjects under discussion, as was the topic of investing in Mexico (Forbes post here) and the latest developments in Saudi Arabia. All in all, another interesting afternoon of deliberations. But that's all for the moment from Houston folks. Keep reading, keep it 'crude'!

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© Gaurav Sharma 2018. Photo: Delegates at the Baker McKenzie 2018 Oil & Gas Institute in Houston, Texas, USA © Gaurav Sharma 10 May, 2018.

In Houston Town To Trump's Iranian Frowns

The Oilholic is back in Houston, Texas for another round of events and networking. However, getting stuck in one's hotel room watching CNN on a sunny Texan afternoon certainly wasn't part of the plan.

Of course, with US President Donald Trump taking on himself to single-handedly tearing up the Iran Nuclear deal, there was little choice but add to the afternoon news-watchers ranks. 

And with customary aplomb, the Donald annulled the US end of a "very bad deal" with Tehran at 2pm Eastern. It's something he had always criticised, and had promised he'd annul if he won the Presidency. So, the Oilholic wonders, why is the market surprised? 

Here are one's thoughts on what the President's move could mean for the global supply and demand dynamic via a Forbes post. In fact, Moody's Analytics reckons Trump's sanctions have the power to knock off 400,000 barrels per day (bpd) of Iranian crude off the global market. 

But given the President's move is unilateral, unlike Barack Obama's multilateral sanctions, the volume would be less than half of what his predecessor managed inflict on the Iranian before they came to the table (i.e. 1 million bpd).

Of course, both leading up to and in the hours after Trump's announcement, both Brent and WTI fell by as much as 3% only to gain 2%, before ending the day firmly on a bullish note. While this blogger is not offering investment advice, a bit of caution is advised.

The Oilholic, for the moment is minded to stick to his average Brent price forecast range of $65-75 per barrel. These are early days, much needs to unfold here. But that's all for the moment from Houston folks. Keep reading, keep it 'crude'!

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© Gaurav Sharma 2018. Photo: Billboard in Houston, Texas, USA © Gaurav Sharma, May 2018. 

Oil to touch $300/bbl? Are you having a laugh Pierre?

You have to hand it to hedge fund managers. At the sight of the slightest uptick in crude prices, whether driven by geopolitics, OPEC's shenanigans or dare we say – actual supply and demand dynamics – hedge funds and money managers tend to pile in with long calls in the hope of extending the rally. 

However, when it's a case of all of the above market factors, some tend to get overexcited. Pierre Andurand, whose Andurand Capital Management is often bullish on oil and has been down on its luck for the first quarter of 2018 (according to Bloomberg), is certainly among the excitable creatures.

Earlier this week, in a succession of now deleted tweets, Andurand quipped that concerns over the rise of electric vehicles was keeping investment in upstream oil projects muted thereby extending their lead times over fears of peak demand. 

"So paradoxically these peak demand fears might bring the largest supply shock ever. If oil prices do not rise fast enough, $300 oil in a few years is not impossible," he added. 

Having grabbed the attention of the crude markets, the tweets, of course, were subsequently deleted with no explanation. The Oilholic has an explanation – perhaps rational thinking returned? 

Perhaps a realisation that OPEC's lowering of output has to end at some point? Or perhaps a realisation that the US rig count continues to rise in tandem with American barrels? Or even perhaps a realisation that much of oil demand – as the International Energy Agency notes – is driven by petrochemicals and aviation. In fact, even if one in every two cars is electric, oil demand would still rise. 

Anyway, why should rationality get in the way of a provocative tweet. Or make that a deleted provocative tweet. 

For the record, the Oilholic reiterates his average oil forecast range of $65-75/bbl for Brent for 2018, which is a tad higher than that of many fellow bears in the range of $60-70/bbl, given there still is plenty of oil in the market, and the crude mix of light and heavy is keep the global pool well supplied.

To provide, some content the Brent front month contract closed just shy of $75/bbl on Friday (see chart above, click to enlarge), still in its painfully dull range, albeit lurking near the highest level since November 2014. So only another $225 to stack up in a matter of years Pierre, if the bears get your bullish fever! That's all for the moment folks! Keep reading, keep it ‘crude’!

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