Replies to post #1157 on The Rising Influence of Rising Affluence

[DewDiligence]

China Will Soon Be Largest Importer of Thermal Coal

[Only three years ago, China was a net *exporter* of thermal coal. This write-up should be read in conjunction with #msg-51693652.]

http://www.ft.com/cms/s/0/43cc3c94-7eec-11df-8398-00144feabdc0.html

›By Javier Blas in London and Leslie Hook in Hong Kong
June 23 2010 19:13

China is set to overtake Japan as the world’s largest importer of thermal coal as soon as this year, only three years after China became a net importer of the mineral used to fire power stations, according to an emerging industry consensus.

The speed at which Chinese coal imports are growing is surprising mining companies, traders and policymakers, who had previously not expected China to overtake Japan before 2015.

Traders and policymakers said they expected China’s thermal coal net imports to hit 105m-115m tonnes this year, level with or above Japan, which is expected to buy about 110m tonnes. China was a net exporter of coal until 2007.

Fatih Birol, chief economist at the International Energy Agency, said: “China’s imports of thermal coal could exceed Japan’s this year for the first time.”

The coal mining and trading industry largely takes the same view. Some traders believe China and Japan will be “neck and neck” this year, while others say Beijing could overtake Tokyo, based on the pace of imports so far this year.

China had net imports of 47.5m tonnes between January and May, up more than 120 per cent from 2009. If the pace is sustained, its net imports would hit 114m tonnes by December. But traders expect a slight slowdown.

The closely watched Australia Bureau of Agriculture and Resource Economics this week put China’s net thermal coal imports this year at 98m tonnes, still below Japan, but above South Korea, until now the second-largest importer.

Coal prices in the Australian port of Newcastle, the benchmark in Asia, have risen again to $100 a tonne on the back of buying by China, India and other countries. In Europe, coal prices in Rotterdam for delivery in three months – the benchmark – rose last week to $96 a tonne, the highest since November 2008.

Beijing’s appetite for imported thermal coal bodes well for mining companies such as Xstrata, the world’s largest coal exporter, PT Bumi Resources of Indonesia, Anglo American or US-based Peabody Energy. Commodities traders such as Glencore and Hong Kong-based Noble are particularly well positioned to cash in, executives said.

Greg Boyce, chief executive of Peabody, told investors recently that the world economy was at “the early stages of a long-term supercycle for coal”.

Policymakers are concerned about the impact of rising buying on global energy prices and carbon emissions. Mr Birol said China’s buying would underpin global coal prices, adding: “The increase in coal prices will increase electricity prices and increase the cost of manufacturing.”

The surge in coal imports comes on the back of rising power demand. China relies on coal to produce 80 per cent of its electricity, double the world’s average, according to IEA. The western countries’ energy watchdog forecast that China would add 500 gigawatts of new coal-fired electricity generation capacity between now and 2020, almost double Japan’s current total power generation capacity.

Yingxi Yu, commodities analyst at Barclays Capital Singapore, said that even though China was moving towards more renewable energies, “coal will remain as a primary source of fuel for the foreseeable future, simply because of the stability of supply and the fact that China is pretty rich in coal resources”.

China is already the world’s largest coal producer but domestic supplies can’t meet the growing demand. China’s efforts to consolidate small coal mines may be “keeping a lid on Chinese domestic production”, Ms Yu said.‹

[DewDiligence]

Two Eagle Ford deals were announced on Sunday…

Statoil pays $1.3B to form JV with TLM:
http://www.reuters.com/article/idAFLDE6990C320101010

Cnooc takes 1/3 stake in CHK acreage for $1.1B:
http://www.reuters.com/article/idAFTOE69A00220101011

The CHK deal is the first time a Chinese company has taken an equity stake in a US onshore asset.

[DewDiligence]

EnCana, PetroChina cancel shale-gas JV:

http://online.wsj.com/article/SB10001424052702303936704576399254120106630.html

[DewDiligence]

Chevron Commences Shale-Gas Effort in China

[The below are excerpts from CVX’s 10-K report (http://www.sec.gov/Archives/edgar/data/93410/000095012312002976/f60351e10vk.htm ), which was filed yesterday. See #msg-51693652, #msg-43984089, and #msg-61584333 for related stories.]

http://www.bloomberg.com/news/2012-02-24/chevron-starts-china-shale-gas-exploration-builds-sichuan-plant.html

›By Guo Aibing - Feb 23, 2012 11:03 PM ET

Chevron Corp. (CVX) said it began exploring for shale gas in China, holder of the world’s biggest reserves of the fuel, and expects to start a natural gas processing plant in the country next year.

“The company signed a joint study agreement to explore for gas from shale resources in the Qiannan Basin in April and commenced seismic operations in July,” the second-largest U.S. energy company said in a filing to the Securities and Exchange Commission yesterday, without identifying its partner in the project in southwestern Guizhou province.

Chevron follows rival Royal Dutch Shell Plc in exploring for shale gas in China [#msg-43984089], which has yet to commercially produce the fuel. The San Ramon, California-based company has allocated a 2012 budget that includes $28.5 billion for exploration and production in locations including Brazil, Africa and the Gulf of Mexico as U.S. oil refining margins shrink.

The company expects to start building the second phase of a gas processing plant at Chuandongbei field, China’s largest onshore energy exploration venture with a foreign producer, in 2012, according to its filing. Chevron said the first phase of the plant in southwestern Sichuan province may start next year.

In Africa, the company said the Phase 3B project at the Escravos Gas Plant in Nigeria may be completed in 2016. Chevron had expected production at the project, designed to process 120 million cubic feet of gas a day from eight offshore fields, to start next year.

In Argentina, Chevron said it expects to drill two exploratory wells this year in the Vaca Muerta formation, targeting shale gas and tight-oil deposits.
U.S., Australian Refineries

Chevron signed an agreement this month to sell its 80,000 barrel-a-day refinery at Perth Amboy, New Jersey, to a company that it didn’t identify, according to the filing. The deal is expected to close in the second quarter. Chevron shut the plant in 2008 and has been using the facility as an import terminal.

The sale follows other companies idling or selling their plants in the northeast U.S. as rising crude prices have limited profits. ConocoPhillips (COP) closed its Tranier, Pennsylvania, facility Sept. 30, while Sunoco Inc. (SUN) said Sept. 6 it was seeking to dispose of its two refineries in the state by July or shut them then if a buyer wasn’t found.

Chevron posted its biggest quarterly earnings decline in two years after its refineries lost an average of $2.2 million a day in the final three months of 2011. The shares gained 0.8 percent to close at $108.35 in New York trading yesterday.

The company said it may record a “significant” loss if its 50-percent owned Caltex Australia Ltd. (CTX) alters operations at its two refineries. Caltex said Feb. 16 it aims to complete a review of its refineries in Sydney and Brisbane in about six months and that closing the facilities is an option.

Caltex, based in Sydney, wrote down the value of the refinery assets this month by A$1.5 billion ($1.6 billion) because of Asian competition and a strong Australian dollar.

“Should the review result in a decision to significantly alter the operational role” of the Caltex refineries, “Chevron may recognize a loss that could be significant to net income in any one period,” according to the company’s filing.‹