h t t p : / / w w w. t e h r a n t i m e s . c o m / e c o n o m y
ENERGY 3
JUNE 14, 2009
TEHRAN TIMES INTERNATIONAL DAILY
LONDON (Bloomberg) — The Organization of Petroleum Exporting Countries said oil production rose for a second month in May, weakening compliance with quotas, as the group lowered its forecast for global oil demand in 2009. The 11 OPEC members bound by production quotas, which exclude Iraq, pumped 25.903 million barrels a day in May, an increase of 118,800 barrels a day from April, the Vienna-based organization said in its monthly oil report on Friday, citing secondary sources that include estimates from analysts and news organizations. Oil’s 42 percent rally since April has encouraged some OPEC members to backtrack on record output cuts announced through the end of last year after prices slumped. OPEC pledged to adhere with targets more closely at a meeting in Vienna on May 28 as world demand shrinks. Angola, Venezuela and Nigeria increased output the most in May, the report said. “In light of the considerable challenges the world economy and commodity market, particularly the oil market, have undergone, the worst appears to be behind us,” the secretariat said in its report. “Prices have not only remained steady, but have even moved higher.” OPEC, which supplies about 40 percent of the world’s oil, implemented 75 percent of planned output cuts of 4.2 million barrels a day, compared with 77 percent in April, based on data in the report. The International Energy Agency on Thursday said the producer group complied with 74 percent of the reductions.
OPEC says it pumped more oil in May, cuts world demand forecast
lion barrels. ‘Settling down’ “World oil demand appears to be settling down,” the secretariat said in the report. “Industrial production activities are steadying and in some parts of the world have even improved slightly.” The IEA raised its global oil-demand forecast for the first time in 10 months on Thursday on signs that the economic slowdown is abating. The adviser to 28 nations increased its global oil demand estimate for this year by 120,000 barrels a day to 83.3 million barrels a day. OPEC reduced the forecast for demand for its crude as global consumption shrinks. The group estimates it will need to produce 28.6 million barrels a day in 2009 to balance global supply and demand, 2.2 million barrels a day less than last year. Last month it estimated that it would need to pump 28.8 million barrels a day. OPEC left its forecast for oil supply from outside the group unchanged at 50.52 million barrels a day, 210,000 barrels a day more than in 2008. Indonesia left the producer group this year. OPEC’s 12 remaining members are Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela.
Exelon to add 1,300 megawatts of nuclear generation
NEW YORK (Bloomberg) — Exelon Corp., the largest U.S. operator of nuclear power plants, plans reactor upgrades that will add 1,300 to 1,500 megawatts of generating capacity by 2017, equivalent to building a new unit. New turbine parts, generator coils and improved metering will increase reactor efficiency by as much as 20 percent, the Chicago-based company said on Friday in a statement. The upgrades will increase the generating capacity of Exelon’s fleet of 17 reactors by as much as 9.4 percent. They will cost about $3.5 billion, said Kathleen Cantillon, a company spokeswoman. “With these uprates, we will be able to produce the equivalent output of a new advanced nuclear reactor, and we’ll bring it to market in a timeframe commensurate with the fastest new construction,” Charles Pardee, Exelon’s chief nuclear officer, said in the statement. The process began last week with improvements that increased the capacity of the Quad Cities nuclear plant near Cordova, Illinois, by 38 megawatts, Exelon said. Other plants currently being upgraded include Limerick and Peach Bottom in Pennsylvania and Dresden and LaSalle in Illinois. Improvements at the five plants account for about 25 percent of the total capacity increase. The higher nuclear capacity will reduce Exelon’s reliance on fossil-fuel-burning plants and help it meet its goal of eliminating the equivalent of its 2001 carbon output by 2020, Pardee said. Exelon directors are scheduled to discuss the company’s hostile $6.4 billion takeover bid for NRG Energy Inc. on June 30. NRG, based in Princeton, New Jersey, has repeatedly rebuffed the offer, which would create the largest U.S. power producer. Exelon rose 45 cents to $50.58 in New York Stock Exchange composite trading. The stock has dropped 9 percent this year.
Economic confidence Oil traded above $73 a barrel on Thursday for the first time in seven months on increasing optimism about an economic recovery and as a weaker dollar encouraged investment in commodities. Confidence in the world economy rose for a third month as U.S. job losses slowed and global production improved, a Bloomberg survey of users showed this week.
The benchmark crude price used by OPEC, derived from the cost of oil produced by each of its 12 members, averaged $56.98 in May, about 14 percent higher than April, and was at $70.87 on Thursday, OPEC said in its report on Friday. That’s the highest average in seven months. The 12 OPEC members, including Iraq, pumped 28.271 million barrels a day last month, compared with
28.136 million barrels a day in April, according to the report. As the global economy stabilizes, OPEC said it is expecting the decline in oil demand to slow. The group forecasts that consumption will shrink by 1.89 percent this year, or 1.62 million barrels a day, to 83.8 million barrels a day. Last month, it estimated global demand would shrink 1.83 percent, or 1.57 million barrels a day to 84.03 mil-
Oman oil revenues tumble 51% Jan.-Apr., spending up
China stops 2 hydropower dams; cites environment
BEIJING (AP) — China’s environment ministry has suspended construction of two ambitious hydropower dams in the upper Yangtze River region, saying the projects were illegal because they were started without necessary environmental assessments. The announcement, carried widely in state media Friday, is an unusually aggressive move by the Ministry of Environmental Protection, whose local bureaus answer to local governments despite it being upgraded to a full ministry last year. The dams are part of an estimated 200 billion yuan ($30 billion) project involving hydropower stations along the Jinsha River tributary in southwestern China which environmentalists have said would damage the region’s biodiversity. Two large state-owned power companies, Huadian Power and Huaneng Power, started blocking the middle reaches of the river in January without approval from the ministry, it said in a notice on its Web site late Thursday. “To protect the management of the environment ... and to punish the violation of the environment and illegal acts regarding the environment, the environmental ministry decided to suspend the construction projects in the middle reaches of the Jinsha River,” spokesman Tao Detian said in the statement. Tao said additional environmental reviews would be needed for the hydropower projects to go ahead. Hydroelectric power is viewed as a relatively clean alternative to the heavily polluting coal-fired plants that are China’s main source of energy. But some critics have questioned the potential environmental and social impact of so many huge projects. The Beijing News newspaper quoted an unidentified person who works for a hydropower project at a large power company as saying it was the first time the environment ministry has responded so strongly to hydropower. China plans to build 12 hydropower projects along the 1,423-mile (2,290-kilometer) Jinsha River that flows from northern Qinghai province to Yunnan and Sichuan provinces. The electricity output from the stations is estimated to equal the output from the massive Three Gorges Dam in central China. Dams have big impacts on communities both upstream and downstream, and the companies should take into consideration the ecology of the Lijiang area, Tao said in the statement. Lijiang is an important tourism and trekking area in southwestern China. MUSCAT (Reuters) — Non-OPEC producer Oman posted a 50.5 percent drop in net oil revenues in the first four months of 2009 as oil prices weakened, but raised spending by 7.2 percent, official data showed. States in the world’s biggest oil-exporting region, heavily reliant on income from oil and gas exports, have witnessed sharp drops in earnings this year as oil prices tumbled to the mid-$30 a barrel range. Oman sold its oil at an average price of $44.59 per barrel January to April, the data showed, down 49.4 percent from the same period last year. Net oil income in the first four months slid to 999 million Omani rials ($2.6 billion) from 2.02 billion rials in the yearearlier period, while total revenues declined 31 percent to 2.07 billion rials, data from the Ministry of National Economy showed. But Oman increased total expenditure to 1.97 billion rials in the first four months of 2009, up 7.2 percent compared to the same period last year, the data showed. Spending on oil production rose to 238 million rials, up 15 percent from the year-earlier period. Output from the country’s ageing oilfields has been sliding in recent years and Oman is investing in new exploration techniques to help boost production. The Persian Gulf Arab state pumps around 760,000 barrels per day and says it is targeting output of 800,000 bpd in 2009. Spending on civil projects, including the construction of roads, schools and hospitals, climbed 12.5 percent to 266 million rials, the ministry’s data showed, while defence and security expenditure rose 5.5 percent to 563.6 million rials. Oman posted a surplus of 101 million rials in the first four months of 2009, compared to a 1.16 billion rial surplus in January to April 2008, the ministry bulletin said. Oman had projected a $2.1 billion budget deficit for 2009 based on an average oil price of $45 a barrel.
Cuba’s energy woes in focus at oil partners
Venezuela’s president called for increased cooperation among Cuba and other Caribbean nations buying his country’s oil under highly preferential terms, putting politics over economics as he met Friday with neighbors looking for more cheap fuel. Cuba already benefits from Venezuela’s largesse more than any other member of the Petrocaribe pact that has boosted the South American nation’s influence in the region. But higherthan-expected energy use this year has prompted Cuban officials to threaten Saturday morning blackouts and forced vacations just as the sweltering summer season begins. “What would have become of our poor economy if this mechanism hadn’t been there when a barrel of an oil cost more than $140?” Cuban Vice President Esteban Lazo asked the gathering. “All of us in the Caribbean have triumphed.” Leaders of 18 nations in the Petrocaribe pact heard promising news during the one-day summit on the island of St. Kitts. “Petrocaribe will be strengthened - independent of the international situation, independent of the price of oil,” Venezuelan President Hugo Chavez said as he arrived. During the meeting, Chavez called the pact a geopolitical and social “offensive for unity” and said Venezuela is open to accepting other nations. In Cuba, the program is building new refineries and expanding existing ones that will raise the island’s refining ability to 350,000 barrels daily, he said. “When you turn 85, Fidel, you’ll know what your present is,” Chavez said, referring to former Cuban president Fidel Castro, whose 83rd birthday is next month. Chavez made no concrete promises about increased oil sales, but wrapped up the summit by calling on member nations to collaborate on everything from bauxite production to agriculture. “We’ve been detaching ourselves from dependency on the north,” Chavez said, referring to the U.S. The plan promotes Chavez’s vision of regional independence from the United States, and the lure of cheap oil has drawn countries friendly to Washington as well as the Venezuelan’s leftist allies. Despite political tensions, Venezuela remains the third-largest supplier of crude oil to the United States. St. Kitts and Nevis Prime Minister Denzil Douglas said that with world oil prices fluctuating, his country “has benefited greatly from the security of supply under the terms and conditions of Petrocaribe.” Cuban officials reported that energy consumption overshot projections by 3 percent in the first quarter and they are struggling to rein in use. Air conditioners have been stilled at government offices, and some work hours shortened. Tellers at an Old Havana bank cooled themselves with hand-held fans this week. Clerks at shops along Havana’s waterfront swapped their uniforms for cooler clothes and still sweated as temperatures inside and out hit the mid-80s Fahrenheit (about 30 degrees Celsius). “The measures have been successful,” Cuban Basic Industries Vice Minister Juan Manuel Presas said this week. He estimated national energy consumption fell 10 percent in early June, averting the need for Saturday morning blackouts. Cuba produces about half of its fuel and depends on Venezuela for the rest. That aid has eased once-dramatic power and transport shortages on the island of more than 11 million people - an improvement symbolized by a fleet of new buses from China and Belarus. Falling petroleum prices have hurt oil-rich Venezuela over the past year. Though rebounding prices reached an eight-month high Thursday - touching $73.23 a barrel on the New York Mercantile Exchange - they remain 50 percent below last July’s peak. Venezuela established the Petrocaribe pact in 2005 to give allies fuel on easy terms: long-term loans and the option to pay with services or goods such as rice, bananas and sugar. Venezuelan officials at the summit said their country had financed about $3 billion of the 94 million barrels of fuel sold to neighbors since the pact was formed in 2005. With oil prices above $50 a barrel, member nations must pay 60 percent of their oil bills to Venezuela within 90 days and the rest over the next 25 years at 1 percent interest. If oil prices rise to $80 a barrel, only half must be paid up front. Cuba gets oil under an agreement made before Petrocaribe was formed. Few of the terms have been revealed, but Cuba apparently pays most of what it owes by sending Cuban doctors, sports trainers and other specialists to Venezuela. Venezuelan economist Asdrubal Oliveros said if oil prices don’t rise more, “it would be hard for me to believe that Venezuela would substantially increase those shipments to the detriment of its clients that pay.” Still, Oliveros said Chavez’s political ties with communist-ruled Cuba are so important that Venezuela might increase oil shipments to the island while reducing shipments to other nations. Venezuela’s state oil company, Petroleos de Venezuela SA, increased oil shipments to Cuba by nearly a third in 2008 over the previous year, to 115,000 barrels of oil and oil products daily. Venezuela has increased oil shipments to 120,000 barrels a day to other Petrocaribe members, Venezuelan Oil Minister Rafael Ramirez said Thursday in St. Kitts. “We’re guaranteeing supply,” he said. (Source: Associated Press)
Qatar eyes new LNG markets
DUBAI (Trade Arabia) — Saturation in the British gas market until 2014 will force top LNG exporter Qatar to look for other markets as it brings a major plant on line later this year, a top Qatargas executive said recently. Qatargas, one of two majority-state owned producers in the Persian Gulf state, is considering re-selling gas earmarked for Britain in Asia, Europe or the U.S., Faisal Al Suwaidi said. Qatargas had a signed a deal to supply Britain with production from trains 4 and 5, each of which have a production capacity of 7.8 million tons per year. “In case the UK can’t take all this quantity (of train 4), most likely we will have to divert it,” Al Suwaidi said. “We feel that the UK market will be oversupplied between now and 2014.” “This will get worse when we start train 5, which will happen before the end of the year.” The combined capacity of trains 4 and 5 could meet up to 20 percent of Britain’s gas needs.