TPT November 2015

Global Marketplace

In brief . . . › With about 20 per cent of all jobs in Oklahoma tied to oil and natural gas, the state has been notably reluctant to blame those sectors for an exponential increase in earthquakes, despite years of persuasive input from scientists studying the issue. While standards are in place to prevent injection wells from being sited near known faults, only earlier this year did Oklahoma’s official seismologists declare that oil and gas drilling can cause the earthquakes. But now Mary Fallin, Oklahoma’s governor, has acknowledged a “direct correlation” between the increase in earthquakes and the state’s oil and natural gas industry. As reported in the Oklahoman (5 August), her comments at a meeting of the state Coordinating Council on Seismic Activity are some of her strongest yet on the links between the earthquakes and the injection into the ground of wastewater from drilling. The council, which does not have regulatory authority, was organised by Gov Fallin to look into the hundreds of recent earthquakes, a sharp increase from the single-digit annual frequency of the past. › Natural gas overtook coal as the leading source of electric power generation in the US this year. According to a recently released report from the research company SNL Energy (Charlottesville, Virginia), which drew upon US Energy Department data, 31 per cent of the electric power produced in April came from natural gas, 30 per cent from coal. American power companies have long switched back and forth between natural gas and coal, as dictated by commodity prices. But new regulations that restrict the emission of greenhouse gases have added pressure for a permanent withdrawal from coal. › East Africa’s fledgling oil sector took what Platts termed “a significant step forward” when the governments of oil- rich Uganda and Kenya agreed on the route of an export pipeline that will enable crude from the region to reach international markets for the first time. The formal go-ahead for the 930-mile pipeline – which will take the northern route across Uganda to the Kenyan port of Lamu, on the Indian Ocean – is anticipated for late 2016 or early 2017.  As reported from London by Platts (14 August), the long- awaited undertaking expected to provide a boost for both countries could also transform the region into a major oil hub. The announcement was welcomed by the main players in the region including London-based Tullow Oil, which is developing oil resources in both Uganda and Kenya, and its Kenyan partner Africa Oil Corporation. Total had no comment, but Platts noted that the French company has often asserted that no development work on Uganda’s vast reserves could begin until plans for an export pipeline were agreed upon. Dorothy Fabian, Features Editor (USA)

Oil and gas In its loosening of a 40-year ban on oil exports, Washington frees American energy companies to trade oil with Mexico On 14 August it was reported that Washington would permit US crude oil to be exported to Mexico – an apparent first step in the eventual overturn of a ban on all oil exports regardless of destination, in place for four decades. The lifting of the export ban in full would benefit US producers whose price for crude could then rise to match that of Brent crude, the global benchmark for oil, which usually trades at a premium to West Texas Intermediate crude (WTI), the US benchmark. The United States banned exports of crude in 1975 in a bid to promote domestic oil production and build up reserves in response to the oil embargo enacted by OPEC in late 1973. Except for exports to neighbouring Canada, oil exports from the US have been legally blocked ever since. This was a virtual non-issue in the decades when the nation was a net importer of oil. Of course, that changed over the last few years as the shale oil boom in the US set off a surge in crude oil production. Calls for lifting the ban on exports began in earnest in 2014, as sinking prices prompted oil companies to go on the offensive with Congress and the Obama administration. But until this summer no action was taken in the matter. The prospect of outright approval for the unconstrained sale of US crude was welcomed by American oil producers. While the export ban has been widely derided as a politically charged relic, the lifting of the ban has an implicit political component of its own. It presumably would enable domestic producers to export more energy products to Europe, thereby offsetting the continent’s dependence on Russian natural gas. › Viewed in that light, the significance of the initial move by the Commerce Department might be more apparent than real. The financial journalist Cyrus Sanati noted in  Fortune that the loosening of the ban allows Pemex, Mexico’s state- run oil company, to exchange its heavier and cheaper crude for lighter and more expensive US crude. Mexico’s purpose in favouring such a swap would be to boost the efficiency of its refineries which, unlike many US facilities, are unable to process heavier crude grades into such saleable products as gasoline or jet fuel. The amount to be exchanged will most likely be 100,000 barrels a day, which is the amount the Mexican government was seeking when it first approached the US about doing a deal earlier in the year. “There doesn’t seem to be a net increase or decrease in US oil supply here,” Mr Sanati wrote. “Just a swap in the grade of the oil.” (“The US Is Not Opening the Tap on Crude Oil Exports,” 17 August)

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N ovember 2015