May 19, 2012

Drumbeat: December 27, 2009


Growing chorus says oil has peaked

DALLAS, TEXAS // Jim Baldauf, a former oilman, remembers the days when it seemed like you could punch a hole in the ground just about anywhere in Texas and hit a gusher.


Now explorers in the southern US state of Texas find themselves drilling down further, and then turning horizontally for a while, and then back down again before they hit black gold. And with every passing year, the task of finding oil becomes more and more complex.


“All of the low-hanging fruit has been plucked,” said Mr Baldauf, who has 22 years in the business of oil and gas exploration. And that is not a problem unique to Texas.


As a co-founder of the Association for the Study of Peak Oil, Mr Baldauf is part of a growing chorus of petroleum industry analysts and scientists who believe global oil production is about to peak – and may have already done so. Many “peakists” believe global oil production reached its pinnacle in 2008.


Gwynne Dyer: The United States empire takes a hit in the “Noughties”

The old order is passing, the US.. dollar is on its way out as the only global currency, and the real power is shifting to mainland Asia.


Or is it? There are two trends that could slow or even stop this shift. They seemed quite distant at the start of the decade, but now they look very big and frightening. One is peak oil; the other is global warming.


Oil And Environment: A Contradiction

Among the factors in systemic collapse that should be placed far down on the list are many that might be described as environmental: pollution, global warming, and so on. The fact is that the issue of peak oil and that of the environment are mutually exclusive problems. As oil and other fossil fuels disappear, the environmental problems will also go away, even if very slowly.


By trying to raise the alarm about both issues at once, we are placing ourselves in a self-contradictory position, and our credibility is rapidly undermined. We cannot, on the one hand, wish that oil would go away so that the air will have a crystalline purity, and on the other hand complain because we have spent hours poring over the charts of global oil production and found that the cost of driving to the cottage is becoming prohibitive.


Russia’s Putin to launch Pacific oil terminal

MOSCOW (Reuters) – Russian Prime Minister Vladimir Putin will oversee on Monday the loading of the first tanker to carry Siberian oil to Asian markets from the nation’s new Pacific terminal, the government said on Sunday.


The launch will be attended by top Russian officials and oil industry chiefs in a political show aimed at showing Europe that global competition for Russian energy resources is set to rise further.


India all but shelves IPI gas pipeline project

NEW DELHI: India has almost shelved the tri-nation Iran-Pakistan-India (IPI) gas pipeline project, linking its lack of progress to the political problems with Islamabad.


“The main hurdle is Pakistan. All other issues are minor which can be resolved very easily,” The Asian Age newspaper quoted government sources as saying on Saturday.


Japan’s 2nd pluthermal nuclear power generation to begin in Ehime

TAKAMATSU — Japan’s second ‘pluthermal power generation using plutonium-uranium mixed oxide fuel will begin at the Ikata power plant in Ehime Prefecture in February, Shikoku Electric Power Co says. The operation key to Japan’s nuclear energy policy will begin Feb 24 at Ikata’s 890,000-kilowatt No. 3 reactor following the first case at the Genkai nuclear power plant in Saga Prefecture, which began in November.


Pluthermal power generation is seen as a pillar of Japan’s nuclear fuel recycling initiative but has commenced around 10 years behind schedule.


Less oil may spell problems for pipeline

The declining flow of oil from Alaska’s North Slope is creating anxiety among executives who run the trans-Alaska pipeline.


…In the 1980s, at peak oil flows, a barrel of oil made the trip from Prudhoe Bay to Valdez in four days.


Now it takes 13 days.


The slower flow causes the temperature of the hot oil to cool faster. At some point, the oil temperature will dip below the freezing point of water along certain segments, unless Alyeska reheats the oil inside the pipe.


As it gets colder, ice and wax may coat the insides of the pipeline. The colder oil might also increase the risk of buried segments of the pipeline jacking up in the ground, company officials said.


The problems have been building for decades and will only become more pressing as oil production declines further.


Russia to start eastward oil, gas shipments via Arctic in 2010

Sovcomflot, Russia’s largest shipping company, will start delivering Russian oil and gas in the eastern direction of its Arctic shipping lane in the summer, the company head said on Saturday.


At a meeting with Russian Prime Minister Vladimir Putin, Sergei Frank said Sovcomflot was planning to launch pilot shipments of Russian hydrocarbon reserves in the eastern direction of the Northern Sea Route, from the Atlantic to the Pacific via Russia’s Arctic, later this year.


“We will make such pilot deliveries in the summer,” he said.


Frank said the goal was to expand oil and gas markets for domestic energy producers and enter new ones.


Refinery worker ponders loss of livelihood

So far, the most drastic refining cutbacks in the U.S. have come in Delaware and southern New Jersey. But Anne Kohler, an analyst at Caris & Co., expects more plants to be idled in the East, on the Gulf Coast, and in Europe. She said refineries in California are likely to be spared.


Kuwait Oil Signs $724 Million Energy Contract, Al-Anbaa Says

(Bloomberg) — Kuwait Oil Co. signed a $724 million contract with South Korean SK Energy Co., South Korea’s biggest oil refiner, Al-Anbaa reported, without saying where it got the information.


Peak Oil: No Joke!

Fans of The Daily Show with Jon Stewart will be familiar with British comedian John Oliver, while British readers may also know his sidekick Andy Zaltman, who together have created a weekly audio podcast called The Bugle, in which they provide a comedic, often bawdy and satirical, perspective on the news of the day.


The Gazprom Song

Catchy tune for Gazprom, the Russian energy monopolist.
The feel-good anthem was composed and performed by Vladimir Tumayev, director of the Gazprom subsidy Spetsgazavtotrans and founder of the company football club, SOYUZ-Gazprom.


Let’s drink to you, let’s drink to us,
Let’s drink to all the Russian gas
That it never comes to an end,
Though it’s so hard to obtain
Let’s drink to you, let’s drink to us
Let’s drink to all the Russian gas
For those extracting the new sun
From down beneath the ground


Senate Confirms Norris for Federal Energy Regulatory Commission

(Bloomberg) — John Norris, a former aide to Agriculture Secretary Tom Vilsack, was confirmed by the Senate to serve on the Federal Energy Regulatory Commission.


Iran website says four killed in Tehran protests

TEHRAN (Reuters) – Four people were killed in clashes between pro-reform protesters and security forces in Tehran on Sunday in a second day of violence during a Shi’ite Muslim religious mourning ritual, an opposition website said.


The casualties were the first reported killings in protests since the immediate aftermath of a disputed election in June in which the opposition says more than 70 people died.


Tugboat Spills Fuel Oil After Hitting Same Reef as Exxon Valdez in ’89 Accident

ANCHORAGE (AP) — Two decades after the Exxon Valdez disaster, a tugboat working to prevent another oil spill in Prince William Sound ran aground on the same reef and left a three-mile sheen of fuel oil on the water.


The tug had just finished checking for dangerous ice on Wednesday and was heading back to port in Valdez when it hit Bligh Reef. It is part of the Ship Escort Response Vessel System that was created after the Exxon Valdez ran aground in 1989 and spilled nearly 11 million gallons of crude oil.


Misleading energy selling tactics need to change

George Smitherman’s resignation as Ontario’s energy minister means that promised curbs on door-to-door energy sellers will be delayed until next year.


That’s disappointing, since consumers need more protection from deceptive sales pitches.


Midwest hurt by energy dithering

Back in 2004, former Xcel Energy Chairman and Chief Executive Wayne H. Brunetti made this famous plea as political leaders contemplated carbon emission limits and other policies to fight global warming:


“Give us a date, tell us how much we need to cut, give us the flexibility to meet the goals, and we’ll get it done.”


Five years later, policymakers still haven’t set the rules Brunetti sought to unleash American industrial innovation– the force that can transform the nation into one powered by clean, renewable fuels. The indecision isn’t good for the planet or businesses. Passing strong energy and climate legislation — in particular, finally setting a price on carbon — must be a top congressional priority in 2010.


Another Reality Check for Energy Storage Investors

A detailed discussion of the individual changes would be too detailed for a blog, however the general overview is that the EIA increased market penetration for ethanol-flex fuel vehicles by almost 100%, reduced short- to medium-term penetration rates for plug-in vehicles by almost 50% and reduced long-term penetration rates for HEVs by a like amount. Apparently the EIA believes that budgets matter to most consumers and high-end electric assist vehicles will be priced out of the market for the foreseeable future.


U.A.E. Awards $20 Billion Nuclear Contract to Korea

(Bloomberg) — Korea Power Electric Corp. led a South Korean group in winning a 75 billion-dirham ($20.4 billion) contract to build four nuclear plants in the United Arab Emirates, the second-biggest Arab economy.


Canadian Hydro to acquire offshore wind facility

Canada’s largest independent wind developer is setting its sites on the Great Lakes, announcing today that it plans to erect hundreds of wind turbines offshore and have its first project generating power by the end of 2014.


Enbridge to buy solar farm

Pipeline giant Enbridge Inc. is pushing further into the renewable-energy market, announcing today a plan to purchase the largest solar power farm in Canada from U.S. solar manufacturer First Solar Inc.


Britain’s green rich list

The Copenhagen summit may have put the damper on global plans to tackle climate change — but British entrepreneurs are charging ahead regardless.


Research by Philip Beresford, author of The Sunday Times Rich List, has unveiled 20 British business people who have already made millions from going green. They range from Dale Vince, the New Age traveller turned wind-power tycoon, to the Cottingham family, which has quietly built up a fortune from insulating houses and installing energy-efficient heating. In drawing up the list, we have excluded businessmen like Sir Richard Branson, who have added environmental interests to their businesses.


An environmental pioneer surfs a long green wave

Since taking the job as UC San Diego’s first director of strategic energy initiatives in September 2008, Byron Washom has worked to turn the 1,200-acre campus into a model of sustainability, a “living laboratory.”


Projects include renewable energy, energy management, greenhouse-gas reduction, energy storage systems and greening the campus transportation fleet. The university generates 80% of its own electricity.


Air Quality Guidelines Face Unexpected Critics

California’s battle against greenhouse gases is likely to come to the Bay Area soon — with rules designed to reduce the carbon footprint of new housing and commercial development.


That is a concept you might expect to be welcome in a region known for its environmental advocacy and hostility to growth.


But some environmentalists and city planners fear that the new set of guidelines being considered by the region’s air quality regulators could have an unintended consequence, making it more difficult and more expensive for developers to construct buildings within already urbanized areas.


That would run counter to the notion that builders should be given incentives to shift future population growth from the car-dependent outer suburbs to places where public services are already available and public transit is a more viable option to get people out of their cars.


Brazil Aims to Prevent Land Grabs in Amazon

VILA DOS CRENTES, Brazil — Raimundo Teixeira de Souza came to this sweltering Amazon outpost 15 years ago, looking for land. He bought 20 acres, he said, but more powerful farmers, who roam this Wild West territory with rifles strapped to their backs, forced him to sell much of it for a pittance.


Then someone shot and killed Mr. de Souza’s 23-year-old stepson in the middle of a village road two years ago, residents said. No one has been arrested. In fact, the new police chief has no record that the crime was even investigated by his predecessor. It is hardly surprising, the chief said, considering that he has only four investigators to cover an area of rampant land-grabbing and deforestation the size of Austria.


A Book Review of Crude World: The Violent Twilight of Oil by Peter Maass, by Robert Vitalis

Oil doesn’t just make certain societies more repressive and corrupt than others. According to Maass, it goes a long way towards explaining recent wars, both conventional and unconventional. Saddam Hussein marched into Kuwait in August 1990 in a bid to “control’ more of the stuff, and the United States overthrew him in 2003 as a result of its leaders’ own obsession with securing unimpeded “access’ to this “inebriating crude’ which also led them to exaggerate the threat of Iraq’s weapons programme. Apparently they weren’t “thinking straight’. The Saudi rulers weren’t either: having paid billons to aid “the global spread of fundamentalism’, the money has come back to haunt them and the West in the form of violent jihadism.


The God Gene

Nicholas Wade’s book “The Faith Instinct” is at its best when putting us through such exercises and sidelining the by-now tiresome debates about religion as a force for good or evil. According to Wade, a New York Times science writer, religions are machines for manufacturing social solidarity. They bind us into groups. Long ago, codes requiring altruistic behavior, and the gods who enforced them, helped human society expand from families to bands of people who were not necessarily related. We didn’t become religious creatures because we became social; we became social creatures because we became religious. Or, to put it in Darwinian terms, being willing to live and die for their coreligionists gave our ancestors an advantage in the struggle for resources.


Russia refusing to take climate change seriously

Soviet industrial production accounted for about a fifth of global carbon dioxide before the Soviet Union fell apart in 1991; Russia is now at about two-thirds of that level, a recent Russian study shows.


Moreover, a huge frozen peat bog is melting and releasing greenhouse gases at a rate that may cause global warming to snowball out of control any time, according to Russian and British scientists. The bog covers the entire sub-Arctic area of Western Siberia, the size of Germany and France, and holds billions of tons of those gases.


Chinese hackers linked to ‘Warmergate’ climate change leaked emails controversy

The internet address used to post the messages is linked to several others used by the Chinese — one is a Chinese environmental institute, the Research Institute of Forest Ecology and Environment Protection, based near Beijing.


Several professors from this institute are regulars at climate change conferences where they have shared a platform with the University of East Anglia experts.


After our enquiries in Malaysia began, the suspect computer links to China were suddenly cut.


To Save the Planet, Save the Seas

Few people may realize it, but in addition to producing most of the oxygen we breathe, the ocean absorbs some 25 percent of current annual carbon dioxide emissions. Half the world’s carbon stocks are held in plankton, mangroves, salt marshes and other marine life. So it is at least as important to preserve this ocean life as it is to preserve forests, to secure its role in helping us adapt to and mitigate climate change.


Ocean noise pollution turns up with greenhouse gas emissions

The ocean is becoming a noisier place due to increased greenhouse gas emissions, California and Hawaii scientists report.


Rising atmospheric carbon dioxide absorbed by the oceans not only has increased seawater acidity but has affected its acoustics — making it more transparent to low-frequency sound, the scientists said in a study published in the journal Nature Geoscience.


Scientists said seawater sound absorption will drop by up to 70 percent this century.


Regional lake study points to faster warming

Lake Tahoe, Clear Lake and four other large lakes in Northern California and Nevada are warming faster than the surrounding atmosphere, suggesting climate change may affect aquatic environments faster and sooner.


The findings are reported in a new study led by researchers at NASA’s Jet Propulsion Laboratory in Pasadena.


Fury over ‘climate change will benefit Scots’ report

The Scottish government has been criticised for publishing a report that claims climate change could make Scots healthier and provide an economic boost by encouraging more tourism.


The study says climate change would make traditional resorts in Spain and Italy unbearably hot in the summer, prompting holidaymakers to venture further north to countries such as Scotland.


‘Storms of My Grandchildren’ by James Hansen

Most scientists rarely experience the luxury of certainty. But we expect them to speak with authority. We expect them to make impossible predictions and judge them on their accuracy. Even more, we expect them to stay above or at least outside public debates. In “Storms of My Grandchildren: The Truth About the Coming Climate Catastrophe and Our Last Chance to Save Humanity,” James Hansen gives us the opportunity to watch a scientist who is sick of silence and compromise; a scientist at the breaking point — the point at which he is willing to sacrifice his credibility to make a stand to avert disaster, to offer up the fruits of four-plus decades of inquiry and ingenuity just in case he might change the course of history.

Top 10 Energy Stories of 2009

Here are my choices for the Top 10 energy related stories of 2009. Previously I listed how I voted in Platt’s Top 10 poll, but my list is a bit different from theirs. I have a couple of stories here that they didn’t list, and I combined some topics. And don’t get too hung up on the relative rankings. You can make arguments that some stories should be higher than others, but I gave less consideration of whether 6 should be ahead of 7 (for example) than just making sure the important stories were listed.

1. Volatility in the oil markets

My top choice for this year is the same as my top choice from last year. While not as dramatic as last year’s action when oil prices ran from $100 to $147 and then collapsed back to $30, oil prices still more than doubled from where they began 2009. That happened without the benefit of an economic recovery, so I continue to wonder how long it will take to come out of recession when oil prices are at recession-inducing levels. Further, coming out of recession will spur demand, which will keep upward pressure on oil prices. That’s why I say we may be in The Long Recession.


2. The year of natural gas

This could have easily been my top story, because there were so many natural gas-related stories this year. There were stories of shale gas in such abundance that it would make peak oil irrelevant, stories of shale gas skeptics, and stories of big companies making major investments into converting their fleets to natural gas.

Whether the abundance ultimately pans out, the appearance of abundance is certainly helping to keep a lid on natural gas prices. By failing to keep up with rising oil prices, an unprecedented oil price/natural gas price ratio developed. If you look at prices on the NYMEX in the years ahead, the markets are anticipating that this ratio will continue to be high. And as I write this, you can pick up a natural gas contract in 2019 for under $5/MMBtu.

3. U.S. demand for oil continues to decline

As crude oil prices skyrocketed in 2008, demand for crude oil and petroleum products fell from 20.7 million barrels per day in 2007 to 19.5 million bpd in 2008 (Source: EIA). Through September 2009, year-to-date demand is averaging 18.6 million bpd – the lowest level since 1997. Globally, demand was on a downward trend as well, but at a less dramatic pace partially due to demand growth in both China and India.

4. Shifting fortunes for refiners

The Jamnagar Refinery Complex in India became the biggest in the world, China brought several new refineries online, and several U.S. refiners shut down facilities. This is a trend that I expect to continue as refining moves closer to the source of the crude oil and to cheap labor. This does not bode well for a U.S. refining industry with a capacity to refine 17.7 million barrels per day when total North American production is only 10.5 million bpd (crude plus condensate).

5. China

China was everywhere in 2009. They were making deals to develop oil fields in Iraq, signing contracts with Hugo Chavez, and they got into a bidding war with ExxonMobil in Ghana. My own opinion is that China will be the single-biggest driver of oil prices over at least the next 5-10 years.

6. U.S. oil companies losing access to reserves

As China increases their global presence in the oil markets, one casualty has been U.S. access to reserves. Shut out of Iraq during the recent oil field auctions there, U.S. oil companies continue to lose ground against the major national oil companies. But no worries. Many of my friends e-mailed to tell me that the Bakken has enough crude to fuel the U.S. for the next 41 years

7. EU slaps tariffs on U.S. biodiesel

With the aid of generous government subsidies, U.S. biodiesel producers had been able to put their product into the EU for cheaper than local producers could make it. In a big blow to U.S. biodiesel producers, the EU put the brakes on this practice by imposing five-year tariffs on U.S. biodiesel.

8. Big Oil buys Big Ethanol

I find it amusing when people suggest that the ethanol industry is a threat to the oil industry. I don’t think those people appreciate the difference in the scale of the two industries.

As I have argued many times before, the oil industry could easily buy up all of the assets of ethanol producers if they thought the business outlook for ethanol was good. It would make sense that the first to take an interest would be the pure refiners, because they are the ones with the most to lose from ethanol mandates. They already have to buy their feedstock (oil), so if they make ethanol they just buy a different feedstock, corn, and they get to sell a mandated product.

In February, Valero became the first major refiner to buy up assets of an ethanol company; bankrupt ethanol producer Verasun. Following the Valero purchase, Sunoco picked up the assets of another bankrupt ethanol company. If ExxonMobil ever decides to get involved, they could buy out the entire industry.

9. The climate wars heat up

There were several big climate-related stories in the news this year, so I decided to lump them all into a single category. First was the EPA decision to declare CO2 a pollutant that endangers public health, opening the door for regulation of CO2 for the first time in the U.S.

Then came Climategate, which gave the skeptics even more reason to be skeptical. A number of people have suggested to me that this story will just fade away, but I don’t think so. This is one that the skeptics can rally around for years to come. The number of Americans who believe that humans are causing climate change was already on the decline, and the injection of Climategate into the issue will make it that much harder to get any meaningful legislation passed.

Closing out the year was the United Nations Climate Change Conference in Copenhagen. All I can say is that I expected a circus, and we got a circus. It just goes to show the difficulty of getting countries to agree on issues when the stakes are high and the issues complex. Just wait until they try to get together to figure out a plan for peak oil mitigation.

10. Exxon buys XTO for $41 billion

In a move that signaled ExxonMobil’s expectation that the future for shale gas is promising, XOM shelled out $41 billion for shale gas specialist XTO. The deal means XOM is picking up XTO’s proved reserves for around $3 per thousand cubic feet, which is less than half of what ConocoPhillips paid for the reserves of Burlington Resources in 2005.

Honorable Mention

There were a number of stories that I considered putting in my Top 10, and some of these stories will likely end up on other Top 10 lists. A few of the stories that almost made the final cut:

The IEA puts a date on peak oil production

The statement they made was that barring any major new discoveries “the output of conventional oil will peak in 2020 if oil demand grows on a business-as-usual basis.”

AltaRock Energy Shuts Down

Turns out that deep geothermal, which the Obama administration had hoped “could be quickly tapped as a clean and almost limitless energy source” – triggers earthquakes. Who knew? I thought these were interesting comments from the story: “Some of these startup companies got out in front and convinced some venture capitalists that they were very close to commercial deployment” and “What we’ve discovered is that it’s harder to make those improvements than some people believed.” I am still waiting to see a bonafide success story from some of these VCs.

The biggest energy bill in history was passed

In total, $80 billion in the stimulus bill earmarked for energy was a big story, but I don’t know how much of that money was actually utilized.

The Pickens Plan derails

The website is still there, but the hype of 2008 turned into a big disappointment in 2009 after oil prices failed to remain high enough to make the project economical. Pickens lost about 2/3rds of his net worth as oil prices unwound, he took a beating in the press, and he announced in July that we would probably abandon the plan.

So what did I miss? And what are early predictions for 2010′s top stories? I think China’s moves are going to continue to make waves, there will be more delays (and excuses) from those attempting to produce fuel from algae and cellulose, and there will be little relief from oil prices.

Banks and mining shares give FTSE 100 some New Year’s Eve cheer

Miners and banks are giving the market a celebratory feel on the last trading day – or rather, half day – of the year.

With metal prices firming again, copper specialist Antofagasta is leading the way, up 18.5p to 993p. Xstrata has added 3.5p to 1115.5p while Vedanta Resources is up 12p at £26.22.

Banks, hit yesterday by renewed economic worries, have recovered, with Royal Bank of Scotland rising 0.47p to 29.55p and Barclays 2.7p better at 274.95p.

But telecoms shares are under pressure with BT down 1p at 136.2p and Cable & Wireless off 1.1p at 140.2p despite – because of? – the knighthood given to its chairman Richard Lapthorne. The company has been embroiled in a number of protests from shareholders over its remuneration schemes, and is due to split into two companies before long.

One reason for the falls could be a report that mobile phone groups could be allowed by the government to extend their 3G licences indefinately, despite protests from BT.

Meanwhile satellite group Inmarsat is down 6p at 688p despite a push from Credit Suisse which has an outperform rating on the company and has raised its price target from 600p to 740p.

Cadbury has dipped 3.5p to 791.5p despite hopes of a counter bid to Kraft’s hostile offer.

Overall the FTSE 100 is up 13.33 points at 5411.19 although it hardly needs saying that volumes are thin ahead of the holiday period restarted (and for some of course, it hasn’t ended yet).

So the index is on track for a gain on the year of around 23%, its best annual performance since 1997 when Labour came to power. But over the decade, the leading index has lost 23% since its peak of 6930 on December 31 1999, the height of the dotcom boom. Simon Denham, head of Capital Spreads, said:

Yesterday’s falls in the equity markets are being quickly wiped out this morning with the FTSE opening up and shorts are looking a little nervously over their shoulders. The last day of the year is either very, very, boring or wildly variable and we would probably only need the FTSE to climb to around 5450-60 to start some weak short covering in a thin market.

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FTSE 100 slips below 5400 but Petrofac outperforms

Leading shares broke a five day winning streak and fell back below both 5400 and their pre-Lehman level, although oil and gas services group Petrofac bucked the trend on news of a contract win in Turkmenistan.

With volumes still thin as the end of the year approached, the FTSE 100 finished 39.75 points lower at 5397.86 as banks and miners weighed on the market. The index had stood at 5416.7 ahead of Lehman’s bankruptcy in September 2008, and yesterday rose above that level for the first time since the bank’s collapse. Simon Denham, head of Capital Spreads, said:

Equity markets were pretty much in the doldrums today with most indices down marginally from the highs of yesterday. The FTSE is flirting with the 5400 level and dealers will be fearful of a break down into the old trading range which might give the bears a chance for some revenge. Banks are – once again – on the back foot and traders might be concerned that where the banks lead the others – in the end – tend to follow.

Even so, the index is set for an annual rise of more than 20%, which certainly did not seem likely when it hit a low of 3512 in March.

Petrofac was the biggest riser in the FTSE 100 yesterday, up 19p to £10.29 after it was appointed by state owned Turkmengas to help develop the South Yoloten gas field, which is situated 400km from the capital Ashgabat. The first phase of the contract is valued at around $100m, and marks the first fruits of the company’s recent attempts to build relations with Turkmengas. Analysts said the total project could be worth $4bn. Andrew Dobbing at Cazenove, who has an outperform rating on the shares, said:

This could become the largest ever contract for Petrofac, and we envisage a partner being brought in to support it – the most likely being Petrofac Emirates (the joint venture with Mubadala).

While the potential impact on Petrofac’s order backlog could be very material, only $100m has been booked so far. We sense some scepticism in the market regarding the opportunity for Petrofac’s to replicate the massive order intake achieved during 2009 and its scope to execute additional mega-contracts. This announcement strikes a blow to the credibility of both points in our view. This contract, along with several others that Petrofac is currently bidding on, could drive significant earnings upgrades in Petrofac’s engineering and construction division.

Mining companies edged lower after recent rises, as commodity prices eased in the wake of a firmer dollar. Anglo American lost 33.5p to 2695.5p while Rio Tinto closed down 48p at £33.72. But Kazakhmys climbed 5p to £13.15 as it confirmed a $2.7bn loan from the China Development Bank, partly to develop the Boschekul copper project.

Banks were under pressure, with Royal Bank of Scotland down 0.96p at 29.08p and Lloyds Banking Group 0.23p lower at 49.84p.

Elsewhere Segro slipped 0.7p to 343p as the industrial property group announced it had finally exited the retail sector by selling its stake in two shopping centres to British Land, up 2.6p at 464.9p.

The sites are at Surrey Quays in London and Clifton Moor in York, and Segro invested in the centres 20 years ago in a joint venture with Tesco. Now British Land is buying Segro’s share of the sites for £26.9m, leaving Segro free to concentrate on its flexible business space division. As for British Land, the move means the company now has five joint ventures with Tesco. Ed Woolfitt, head of trading at CFD broker Galvan Research said:

This announcement shows British Land is snapping up prime commercial property opportunities at bargain prices before recovery really kicks in. Likewise, Galvan Research believes shares in the group are worth snapping up at a bargain 464p ahead of a likely new year re-rating.

Among the mid-caps Rightmove dipped 1p to 491p despite news that New York hedge fund Tremblant Capital Group, run by Brett Barakett whose brother manages fellow fund Atticus Capital, has raised its interest in the online property company from 8.25% to 9.01%. This cements the fund’s position as the company’s biggest shareholder.

Redstone, the information and communications technology group which last month announced that offer talks had ended, was steady at 3.125p even though it reported a slump into the red. Half year figures showed a loss of £1.2m from continuing operations, compared to a £2.6m profit this time last year. It added that a return to profitability would take some time.

Finally SeaEnergy soared 7.25p to 54p after the offshore wind energy company settled a long-running dispute with the State Oil Company of the Azerbaijan Republic (Socar). The company has received a one-off payment of $4.9m and in return will withdraw from the collaborative oil and gas projects in the Caspian Sea.

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Cadbury shares climb after Takeover Panel ruling

Cadbury shares have climbed higher after the Takeover Panel gave the chocolate company three more days to muster its defence against Kraft’s hostile bid.

Under the panel’s rules, the last day Cadbury would normally be able to issue any new information is Tuesday, 12 January 2010, the so-called day 39 after the offer document is posted. But today the panel said that following representations, it has extended this to Friday 15 January for Cadbury’s “detailed estimated trading results for 2009.” The company said it was pleased shareholders would be given the chance to review the latest information before deciding on the Kraft offer.

Cadbury has added 2p to 794p, compares to Kraft’s bid price of around 748p a share. Rival bids from Hershey or Ferrero have yet to materialise.

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Segro exits retail by selling shopping centre stakes to British Land

Segro, the industrial property group, has decided to exit the retail sector by selling its stake in two shopping centres to British Land.

The sites are at Surrey Quays in London and Clifton Moor in York, and Segro invested in the centres 20 years ago in a joint venture with Tesco. Now British Land is buying Segro’s share of the sites for £26.9m. Segro’s managing director Ian Sutcliffe said:

These shopping centres were developed a number of years ago and do not represent the current focus of our business [which] is very much on flexible business space as was highlighted by our acquisiton of Brixton earlier this year.

As for British Land, this move means the company now has five joint ventures with Tesco. Segro shares have moved 0.6p higher to 344.3p while British Land is 2.5p better at 464.8p. Ed Woolfitt, head of trading at CFD broker Galvan Research said:

Today’s announcement shows British Land is snapping up prime commercial property opportunities at bargain prices before recovery really kicks in. Likewise, Galvan Research believes shares in the group are worth snapping up at a bargain 464p ahead of a likely new year re-rating.

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Petrofac outperforms weak FTSE 100 on Turkmenistan deal

Petrofac, the oil and gas services company, is outperforming a weak market after news of expanision in Turkmenistan.

The company’s shares have jumped 13p to £10.23, making it the top riser in the leading index, after it was appointed by state owned Turkmengas to help develop the South Yoloten gas field 400km from the capital Ashgabat. The first phase of the contract is valued at around $100m, and marks the first fruits of the company’s recent attempts to build relations with Turkmengas. Charlie Menegatos, senior trader at Accendo Markets said:

With the strong 16 December pre-close statement providing the foundations for the next phase of growth, and full year profit growth estimates increased by a full 5%, we believe few will bet against Petrofac improving on the new figure.

Today’s announcement adds further drivers for growth, and effectively opens up a new market for Petrofac. With 2009 results due in early March, Accendo Markets believes the factors combined paint a picture of a compelling growth play. We reiterate our buy rating for a return to year highs at £10.78, with a three week target timeframe.

Andrew Dobbing at Cazenove maintained his outperform rating on the company following the news:

The contract states that the total project value is not to exceed $4bn – thus indicating a potential maximum value of the engineering, procurement and construction work for Petrofac. Thus, this could become the largest ever contract for Petrofac, and we envisage a partner being brought in to support it – the most likely being Petrofac Emirates (the joint venture with Mubadala).

While the potential impact on Petrofac’s order backlog could be very material, only $100m has been booked so far. Thus we make no changes to our earnings forecasts which already assume rather material order intake during 2010 and 2011 – contracts which will be necessary to sustain the backlog and ensure continuity in Petrofac’s earnings in 2011 and 2012 (coverage for 2010 is already very high). We sense some scepticism in the market regarding the opportunity for Petrofac’s to replicate the massive order intake achieved during 2009 and its scope to execute additional mega-contracts. This announcement today strikes a blow to the credibility of both points in our view. This contract, along with several others that Petrofac is currently bidding on, could drive significant earnings upgrades in Petrofac’s Engineering and Construction division we believe.

Overall though the UK market has edged lower after yesterday’s commodity-fuelled gains. The FTSE 100 is currently down 6.81 points at 5430.80. Investors took profits in mining shares as commodity price eased in the wake of a firmer dollar. Rio Tinto was 60p lower at £33.60 while Anglo American drifted 36p lower to £26.95, Lonmin lost 25p to £19.16 and Kazakhmys fell 11p to £12.99.

An overnight dip on Wall Street and a near 1% fall in the Nikkei on worries about Japan Airlines going bankrupt. But volumes were light again, and the UK index is still on course for a rise on the year of more than 20%.

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Stock market ‘Santa rally’ peters out

• Becalmed FTSE 100 on track to end 2009 22% higher than a year ago
• Japanese shares hit by fears over Japan Airlines future

World stock markets appear to have run out of steam today after a bumper year for shares, suggesting the City’s ‘Santa rally’ is over.

Having gained 240 points since December 21 the FTSE 100 was effectively becalmed this morning. The blue chip index struggled to gain just 3 more points to 5441, with a measly 33.5 million shares changing hands by 9am. Energy and mining groups were among the fallers, with BG Group down 1.2% and Rio Tinto off around 1%.

The picture was mirrored on other stock markets across Europe. And earlier today Japan’s Nikkei ended the year with a 0.86% drop, dragged down by fears that Japan Airlines may file for bankruptcy.

Cameron Peacock, market analyst at IG Markets, predicted that “after yesterday’s continued run gains for European equity markets – albeit in rather thin trading conditions – investors in London may well be inclined to start taking money off the table.”

Today is the City’s last full trading session of 2009, and many traders having already closed their books for the year. On New Year’s Eve the London market will only be open until 12.30pm.

It’s been a lively year on the stock market, with the FTSE hitting a low of 3460 in early March. But unless something dramatic happens, it will end 2009 around 22% higher than it started it. That would be the best top-line performance of the decade, although not enough to wipe out the 31% plunge we saw in 2008.

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Banks and mining shares give FTSE 100 some New Year’s Eve cheer

Miners and banks are giving the market a celebratory feel on the last trading day – or rather, half day – of the year.

With metal prices firming again, copper specialist Antofagasta is leading the way, up 18.5p to 993p. Xstrata has added 3.5p to 1115.5p while Vedanta Resources is up 12p at £26.22.

Banks, hit yesterday by renewed economic worries, have recovered, with Royal Bank of Scotland rising 0.47p to 29.55p and Barclays 2.7p better at 274.95p.

But telecoms shares are under pressure with BT down 1p at 136.2p and Cable & Wireless off 1.1p at 140.2p despite – because of? – the knighthood given to its chairman Richard Lapthorne. The company has been embroiled in a number of protests from shareholders over its remuneration schemes, and is due to split into two companies before long.

One reason for the falls could be a report that mobile phone groups could be allowed by the government to extend their 3G licences indefinately, despite protests from BT.

Meanwhile satellite group Inmarsat is down 6p at 688p despite a push from Credit Suisse which has an outperform rating on the company and has raised its price target from 600p to 740p.

Cadbury has dipped 3.5p to 791.5p despite hopes of a counter bid to Kraft’s hostile offer.

Overall the FTSE 100 is up 13.33 points at 5411.19 although it hardly needs saying that volumes are thin ahead of the holiday period restarted (and for some of course, it hasn’t ended yet).

So the index is on track for a gain on the year of around 23%, its best annual performance since 1997 when Labour came to power. But over the decade, the leading index has lost 23% since its peak of 6930 on December 31 1999, the height of the dotcom boom. Simon Denham, head of Capital Spreads, said:

Yesterday’s falls in the equity markets are being quickly wiped out this morning with the FTSE opening up and shorts are looking a little nervously over their shoulders. The last day of the year is either very, very, boring or wildly variable and we would probably only need the FTSE to climb to around 5450-60 to start some weak short covering in a thin market.

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FTSE 100 slips below 5400 but Petrofac outperforms

Leading shares broke a five day winning streak and fell back below both 5400 and their pre-Lehman level, although oil and gas services group Petrofac bucked the trend on news of a contract win in Turkmenistan.

With volumes still thin as the end of the year approached, the FTSE 100 finished 39.75 points lower at 5397.86 as banks and miners weighed on the market. The index had stood at 5416.7 ahead of Lehman’s bankruptcy in September 2008, and yesterday rose above that level for the first time since the bank’s collapse. Simon Denham, head of Capital Spreads, said:

Equity markets were pretty much in the doldrums today with most indices down marginally from the highs of yesterday. The FTSE is flirting with the 5400 level and dealers will be fearful of a break down into the old trading range which might give the bears a chance for some revenge. Banks are – once again – on the back foot and traders might be concerned that where the banks lead the others – in the end – tend to follow.

Even so, the index is set for an annual rise of more than 20%, which certainly did not seem likely when it hit a low of 3512 in March.

Petrofac was the biggest riser in the FTSE 100 yesterday, up 19p to £10.29 after it was appointed by state owned Turkmengas to help develop the South Yoloten gas field, which is situated 400km from the capital Ashgabat. The first phase of the contract is valued at around $100m, and marks the first fruits of the company’s recent attempts to build relations with Turkmengas. Analysts said the total project could be worth $4bn. Andrew Dobbing at Cazenove, who has an outperform rating on the shares, said:

This could become the largest ever contract for Petrofac, and we envisage a partner being brought in to support it – the most likely being Petrofac Emirates (the joint venture with Mubadala).

While the potential impact on Petrofac’s order backlog could be very material, only $100m has been booked so far. We sense some scepticism in the market regarding the opportunity for Petrofac’s to replicate the massive order intake achieved during 2009 and its scope to execute additional mega-contracts. This announcement strikes a blow to the credibility of both points in our view. This contract, along with several others that Petrofac is currently bidding on, could drive significant earnings upgrades in Petrofac’s engineering and construction division.

Mining companies edged lower after recent rises, as commodity prices eased in the wake of a firmer dollar. Anglo American lost 33.5p to 2695.5p while Rio Tinto closed down 48p at £33.72. But Kazakhmys climbed 5p to £13.15 as it confirmed a $2.7bn loan from the China Development Bank, partly to develop the Boschekul copper project.

Banks were under pressure, with Royal Bank of Scotland down 0.96p at 29.08p and Lloyds Banking Group 0.23p lower at 49.84p.

Elsewhere Segro slipped 0.7p to 343p as the industrial property group announced it had finally exited the retail sector by selling its stake in two shopping centres to British Land, up 2.6p at 464.9p.

The sites are at Surrey Quays in London and Clifton Moor in York, and Segro invested in the centres 20 years ago in a joint venture with Tesco. Now British Land is buying Segro’s share of the sites for £26.9m, leaving Segro free to concentrate on its flexible business space division. As for British Land, the move means the company now has five joint ventures with Tesco. Ed Woolfitt, head of trading at CFD broker Galvan Research said:

This announcement shows British Land is snapping up prime commercial property opportunities at bargain prices before recovery really kicks in. Likewise, Galvan Research believes shares in the group are worth snapping up at a bargain 464p ahead of a likely new year re-rating.

Among the mid-caps Rightmove dipped 1p to 491p despite news that New York hedge fund Tremblant Capital Group, run by Brett Barakett whose brother manages fellow fund Atticus Capital, has raised its interest in the online property company from 8.25% to 9.01%. This cements the fund’s position as the company’s biggest shareholder.

Redstone, the information and communications technology group which last month announced that offer talks had ended, was steady at 3.125p even though it reported a slump into the red. Half year figures showed a loss of £1.2m from continuing operations, compared to a £2.6m profit this time last year. It added that a return to profitability would take some time.

Finally SeaEnergy soared 7.25p to 54p after the offshore wind energy company settled a long-running dispute with the State Oil Company of the Azerbaijan Republic (Socar). The company has received a one-off payment of $4.9m and in return will withdraw from the collaborative oil and gas projects in the Caspian Sea.

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