Sunday, February 2, 2020

Australian scientists  say the world (including Australia's nearest neighbours in South East Asia) will follow in Australia's lead and go for zero emissions, if only Australia will lead the way  

by Ganesh Sahathevan

SapuraKencana’s West Berani tender rig was awarded a one-year contract with ConocoPhillips in February to drill offshore Indonesia.Australian scientists believe the Australian Government can convince   East and South East Asian countries to eventually cease oil and gas exploration and production.

Australia's ABC had just reported:

More than 270 scientists have signed an open letter to Australia's leaders calling on them to abandon partisan politics and take action on climate change.
The scientists, who have expertise in climate, fire and meteorology, are calling for urgent action to reduce Australia's greenhouse gas emissions and for Canberra to engage constructively in international agreements.

She (Professor Nerile Abram) said Australia must dramatically strengthen emissions reduction targets and move beyond fossil fuels.

"The Government's narrow-minded focus on adaptation and resilience simply does not go far enough," she said.

She said Australia could wield great authority and leverage globally if it changed its policies.

"If we led by example and immediately strengthened our own emissions reduction commitments, and if we linked our own crisis with those escalating around the world, we could be a great catalyst for stronger international action," she said.

Now remember, these scientists see themselves influencing Australian Government policy in order to influence the world.

This writer cannot recall the last time Australia influenced anything in South East Asia ( foreign aid excepted).
That Australia is then going to influence how the economies of Malaysia, Indonesia, Thailand, Brunei and Vietnam all of which  have large upstream and downstream oil and gas industries is hard to imagine, but then Australian academics have begun to exhibit a talent for imagination. Note that tiny Singapore which has no natural resources is probably  the region's largest oil and gas economy, given the volume physical and paper  oil and gas that is traded in that country.


See also 

Wednesday, January 22, 2020

Garnaut's zero emissions policy failed to account for national oil companies (unless Garnaut 's models assume an invasion of China,Russia, the Mid East,South East Asia etc to seize and shut-down their oilfields)

by Ganesh Sahathevan

Continuing with series on Ross Garnaut's prophesy and his demands that Australia go for zero emissions by 2025 (or sooner). See first:

Economist Ross Garnaut failed to account for Australia's massive, proven capacity as a global climate sink, and the probability of catastrophic bushfires that can arise from mismanaging that asset: Government cannot ignore basic carbon accounting if it wants to combat climate change

Natural Resource Governance Institute states:
National oil companies (NOCs) produce approximately 55 percent of the world’s oil and gas, pumping out an estimated 85 million barrels of oil equivalent per day. The World Bank has estimated that they control up to 90 percent of global oil and gas reserves, thereby serving as gatekeepers for international oil companies’ access to hydrocarbons. 

The statement is not hard to understand given that most of the Top 10 oil producers in the world are national oil companies.

1) Saudi Aramco – 10,963,091bbl/day

The Saudi Arabian Oil Company, better known as Saudi Aramco, is the world leader in oil production with a production rate of over 10 million barrels of oil per day (mbbl/day).
The company has the world’s second-largest proven crude oil reserves with 261.5 billion barrels of oil equivalent (BBOe), which accounts for about 10% of the world’s crude oil supply.
Saudi Aramco is also one of the largest and most profitable companies in the world, with a net income of $111.1bn in 2018.

2) Rosneft – 42,17,780bbl/day

Russian integrated energy company Rosneft is the second-largest producer of oil in the world, as well as the world’s largest publicly-traded petroleum company, with a production rate of over 4.2mbbl/day.
The company’s proven hydrocarbon resources are around 41BBOe, with a number of exploration operations increasing Rosneft’s resources in recent years.
Rosneft is the third-largest company in Russia, and accounts for over 40% of Russia’s crude and condensate production. These production levels are expected to continue through to 2021, bolstered by a number of discoveries and projects launched in 2018.

3) KPC – 3,412,203bbl/day

The state-owned Kuwait Petroleum Company (KPC) is the third-largest producer of oil in the world, with a production rate of over 3.4mbbl/day.
The company produces approximately 7% of the world’s total crude oil, with proven reserves of about 111BBOe.
At the end of 2018, KPC announced an investment plan worth approximately $115bn, as part of its intention to increase oil production to 4mbbl/day by 2020.

4) NIOC – 3,256,486bbl/day

The National Iranian Oil Company (NIOC) is an important company in the oil and gas market despite US-imposed sanctions on Iran, with a production rate of over 3.2mbbl/day.
While the sanctions placed on Iran due to the country’s nuclear programme have deterred overseas investments in Iranian oil and gas, the NIOC continues to invest in exploration projects to utilise the 200 undeveloped oil and gas fields in the country.

5) CNPC – 2,981,246bbl/day

The state-owned China National Petroleum Company (CNPC) is the largest producer of oil in East Asia, with a production rate of just under 3mbbl/day.
CNPC is also one of the largest oil and gas companies by revenue, with revenues of $326bn The company ranked #4 in Forbes’ Global Fortune 500 from 2017-2019.
The company’s international diversification in recent years has contributed to its influence in the global energy market, even with the ongoing trade dispute between China and the US.

6) ExxonMobil – 2,294,701bbl/day

As a member of “Big Oil,” American energy company ExxonMobil is one of the world’s most influential companies and the largest producer by oil in the US, with a production rate of 2.3mbbl/day.
ExxonMobil is also one the world’s largest companies by revenue, with revenues of $244.3bn.
The company has recently expanded its global portfolio through a number of overseas exploration and production projects, in addition to increased production in the US.

7) Petrobras – 1,987,950bbl/day

Brazilian multinational Petroleo Brasiliero, better known as Petrobras, is the largest producer of oil in South America with a production rate of just under 2mbbl/day.
Petrobras is one of the most influential companies in the oil and gas industry, ranking at #73 in the 2018 Global Fortune 500.
While the company has struggled with corruption scandals and debt woes in recent years, Petrobras has shown signs of recovery and is involved in a number of planned exploration and production projects.

8) ADNOC – 1,973,135bbl/day

With a production rate of just under 2mbbl/day, the UAE’s state-owned Abu Dhabi National Oil Company (ADNOC) is a significant player in the Organization of the Petroleum Exporting Countries (OPEC).
The company works with overseas contractors and multinationals to expand the UAE’s offshore industry. Recently, this includes initiating exploration bidding rounds for blocks in the UAE and awarding a number of contracts to develop offshore oil and gas in the country.

9) Chevron – 1,830,537bbl/day

American multinational Chevron was one of the “Seven Sisters” that dominated the global oil and gas industry from 1940-1970 and continues to be an influential company in modern markets, with a production rate of 1.8mbbl/day.
In April 2019 Chevron signed a deal to acquire hydrocarbon exploration company Anadarko for $50bn, but this merger deal is likely to be terminated following Occidental Petroleum’s acquisition of Anadarko in May 2019.

10) Pemex – 1,813,360bbl/day

State-owned petroleum company Petroleo Mexicanos, better known as Pemex, is one of the largest companies in Latin America with a production rate of 1.8mbbl/day.
Although Pemex has had problems with debt in recent years, the company has invested in a number of operations over 2018 to mitigate its financial woes and boost its crude output.

Note that Exxon and Chevron rely heavily on good relations with national oil companies in order to access reserves outside the United States.These remain a significant part of their production.

The extent of state involvement and control gets clearer once the the ownership and business of the Top 250 Energy companies as ranked by Platts is analysed.

How a zero emissions policy, indeed any level of "de-carbonisation" of the Australian economy is going to influence of or affect the output of any of the above is hard to understand, unless of course one lives in one of Garnaut's economic models.

The degree of irrelevance is more stark when one considers that Australian policies  are not likely to matter to NOCs in the neighbourhood

1. China

China is the biggest oil producer in the region by a substantial margin, accounting for nearly 4 million barrels of oil per day. It is responsible for almost half of Asia's total production and announced in 2019 that it would increase capital investment in oil production by 20%. China hopes to increase its output by 50% to 6 million barrels per day by 2025 to become more energy independent, as the country imports roughly 10 million barrels per day to meet domestic demand.


  • The biggest oil producers in Asia are China, India, and Indonesia.
  • China accounts for almost half of the total production in Asia and imports additional oil to meet domestic demand.
  • Malaysia, Thailand, and Vietnam are also among the largest oil producers in Asia.
  • Overall oil production in the Asia Pacific is declining because new discoveries are not enough to offset the lost output from aging oilfields.
  • Demand remains strong, however, with the Asia Pacific consuming 35% of the world's oil production.
The oil industry in China is led by several of the largest energy companies in the world: China Petroleum and Chemical Corporation, known as Sinopec; China National Offshore Oil Corporation, or CNOOC; and PetroChina. These three companies combine to produce more than two-thirds of the country's total annual production.

2. India

India accounts for production of about 2.5 million barrels per day. While production growth has steadied in recent years, oil consumption in India continues to grow by leaps and bounds. India ranks as the third-largest oil importer in the world after U.S. and China.
Oil production in India is dominated by the state-owned enterprise, Oil and Natural Gas Corporation, which accounted for roughly 75% of domestic production. Cairn India Limited, the Indian subsidiary of the British oil and gas company, Cairn Energy PLC, is the second-largest contributor to India's oil market.

3. Indonesia

Indonesia comes in behind India with the production of about 835,000 barrels per day. In the 1990s, when production was at a high, Indonesia produced between 1.5 million and 1.7 million barrels per day. Since that period, however, production has followed a nearly unbroken downward trend to the current level. In 2009, the combination of declining production in aging oil fields along with rising domestic demand compelled Indonesia to exit the Organization of Petroleum Exporting Countries (OPEC), of which it had been a member since 1962.
PT Chevron Pacific Indonesia, a subsidiary of the American energy giant Chevron Corporation, is Indonesia's biggest oil producer, accounting for an estimated 40% of production, while Indonesia's state-owned energy company, PT Pertamina, is responsible for an additional 25%. Foreign oil companies including Total SA, ConocoPhillips, and CNOOC are also significant producers in the region.

4. Malaysia

Malaysia produces about 661,000 barrels of oil per day, most of which is extracted from offshore fields. Over the course of more than two decades since 1991, production in the country fluctuated between 650,000 and 850,000 barrels per day. According to the Energy Information Association, the recent downward production trends can be attributed largely to declining output at aging oil fields. The Malaysian government is responding by encouraging investment in recovery technology and new field development.
Petroliam Nasional Berhad, also known as Petronas, is Malaysia's state-owned energy corporation. It controls all oil and gas resources in the country and is responsible for development of those assets. International integrated oil and gas companies, such as Exxon Mobil Corporation, Murphy Oil Corporation, and Royal Dutch Shell PLC, are involved with Petronas in oil production activities in Malaysia, including partnerships in enhanced oil recovery projects at aging oil fields.

5. Vietnam

Vietnam has maintained oil production volumes between 300,000 and 400,000 barrels per day since 2000 and daily production in 2018 amounted to just over 300,000 barrels. In 2011, offshore exploration and drilling activities raised Vietnam's proven oil reserves from 600 million barrels to 4.4 billion barrels, rocketing it into third place in Asia after China and India. Industry analysts expect further discoveries as exploration of Vietnam's offshore waters continues.

80.5 Million

The number of barrels of oil produced each day globally.
Vietnam's state-owned oil and gas company, PetroVietnam Gas Joint Stock Corporation, is involved in all oil production in Vietnam via its production subsidiary, PetroVietnam Exploration Production Corporation, and its joint ventures with international oil companies. Chevron, Exxon Mobil, and the Russian company, Zarubezhneft OAO, are several of the largest international producers operating in Vietnam.

6. Thailand

Oil production in Thailand has been steady around 250,000 barrels daily for the past decade. However, when it began oil production in 1980, the country generated only 1,300 barrels per day. Despite this growth, Thailand must import large quantities of oil to meet domestic demand.
Chevron is the main oil producer in Thailand. It operates Thailand's largest oil field, Benjamas, and has investments in many other important production sites in the country. Thailand's state-owned oil company, PTT Exploration and Production, is the country's second-largest oil producer. Other international companies involved in oil production in Thailand include Coastal Energy Company and Salamander Energy PLC.

Monday, January 27, 2020

ASX companies worth $500 Billion could seek a safe haven re-listing on the Singapore Exchange :Climate litigation and crusading judges a toxic mix, raises judicial risk in Australia to worrying levels

by Ganesh Sahathevan

The SGX says that with listed companies diversifying into mineral, oil and gas activities, it is timely to review the sector's listing rules to ensure they remain relevant for the market and investors.

The SGX says that with listed companies diversifying into mineral, oil and gas activities, it is timely to review the sector's listing rules to ensure they remain relevant for the market and investors.PHOTO: REUTERS

Mining, oil, gas and coal companies listed on the Australian Stock Exchange worth approximately $300-$500 Billion could seek a safe haven from the threat of climate litigation heard before Australian judges who seem to be increasingly inclined to play activist rather than judge.

De-listing from the ASX and re-listing on the SGX coupled with incorporation offshore could well place Australian listed companies outside the reach of judges like Brian Preston, Chief Judge of the Environmental Court  who is also an "Expert Group" member of the climate change advocacy group Climate Principles Group , and who somewhat predictably decided against a coal mining project in NSW.

The danger of judicial or J-Factor risk, to borrow a term from distress debt investing is likely to grow given the recent trend by even senior Australian judges to involve themselves in public debate.

The upcoming case of McVeigh v REST  which is expected to be heard before the Federal Court in July this year is being given much publicity and while the orders McVeigh seeks  would seem strange to any investment professional, the courts may well decide in favour of MCVeigh in keeping with current popular sentiment for large companies to be made accountable for climate change.

A decision against REST may then force other superannuation funds, which collectively control approximately 40% of the ASX, to force listed companies to make disclosures about "climate risk".The compliance burden would be great, and in many instances impossible to comply with.If Brian Preston's judgment is followed companies and super funds would have to start  provisioning for changes in the climate at some point in the future, based on the assumption that the climate will change, that the planet will get hotter, that catastrophes will follow, and that they will be held responsible if not be adversely impacted by the change. 

Given the above scenario it would be simpler for Australian companies to simply de-list from the ASX and re-list on the SGX.While the Singapore Government has signalled action on climate change, it is not proposing to dismantle its oil and gas industriesImportantly unlike their Australian counterparts, Singapore's judges have never shown a tendency to be activists. 

It would therefore make sense to manage assets and seek capital out of Singapore; additionally the Singapore Government offers tax and other incentives to companies willing to make Singapore their regional or global headquarters.
Any impairment caused Australian assets by climate activism can be better managed from a Singapore base, where access to Asian capital may well provide the flexibility to shutter mines, and re-open when the political and judicial environment changes.
The German experience suggests that the costs of any climate activism will be too great for the Australian economy to bear.
Not only is the Australian economy smaller and more volatile (given the reliance on commodities), a growing social security bill means that tax revenues from large mining companies will always be needed to fund government expenditure.


(Note: The figure of USD 300-500 Billion is an estimate based on the total market capitalisation of the ASX in 2019 ,which was then estimated at USD 1.3 trillion). It is assumed that mining oil and gas companies, as well as those in related industries  comprise approximately 30-50% of the total .


The Rocky Hill Land and Environment Court decision-Did the Court ignore the basic rules of causation?

January 07, 2020

by Ganesh Sahathevan

BJP portrait

Justice Brian J. Preston

As reported by the ABC:

Gloucester Resources Limited took the NSW Planning Minister to court over the matter of his disallowing the Rocky Hill coal mine after his delegate, the Independent Planning Commission, rejected the company's application for the Rocky Hill mine in late 2017.
The company argued the development would have created 170 jobs, with the mine expected to produce 21 million tonnes of coal over 16 years.
However Chief Judge Brian Preston ruled the negative impacts of the mine outweighed its economic and other public benefits.In his words:

"...... the [greenhouse gas] emissions of the coal mine and its coal product will increase global total concentrations of [greenhouse gases] at a time when what is now urgently needed, in order to meet generally agreed climate targets, is a rapid and deep decrease in emissions".

As one can readily see from the above statement,there are a number of assertions, indeed declarations made by the Chief Judge which cannot actually be proven.

First, the precise mechanism via which which greenshouse gases from the mine and its coal product will feed into the atmosphere need to be established.Preston said nothing about that.

Then , even if the above could be safely assumed,  Rocky Hill if operational  is just one mine, so how its greenhouse gas emissions "will increase global total concentrations" is hard to comprehend.

How and when greenhouse gas emissions from its coal products "will increase global total concentrations"is even harder  to comprehend.The Chief Judge has again said nothing about causation expect to declare that Rocky Hill will produce something "bad" at a time when reduction of that thing "is now urgently needed, in order to meet generally agreed climate targets".

Any junior lawyer can tell you that nothing gets taken to court if one cannot prove causation, regadrles of how obvious causation might seem.

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