OGJ Newsletter
Conflicting views are emerging about the costs of implementing the Kyoto climate change accord.
In his state of the union address late last month, President Clinton proposed $6 billion worth of federal tax cuts and R&D spending to develop renewable energy, more fuel-efficient autos, and more energy-efficient homes (see related story, p. 33). He said that these measures would help the U.S. combat purported catastrophic global warming, which he called "our overriding environmental challenge." Clinton also repeated claims that such measures could be implemented without damaging the U.S. economy (see editorial, OGJ, Feb. 2, 1997, p. 21).
However, Energy Security Analysis Inc. (ESAI) said, "The costellipseis likely to be substantial, notwithstanding the Clinton administration's claim, disputed by its own Department of Energy/Energy Information Administration, that cost-free technology exists to achieve a substantial portion of the reductions agreed to at Kyoto."
The agreement will cost U.S. utilities alone more than $10 billion/year just for added fuel expenses, according to an ESAI study. "Those costs willellipserender trivial the $1 billion/year mitigation program of energy R&D and investment tax credits put forth in December 1997 by the Clinton administration," said ESAI. It did not include the cost of new gas-fired generating capacity, added pipeline construction, or higher gas and electricity prices in its calculations.
U.K. Environment Minister Michael Meacher says the government plans to step up its use of "green taxes" to meet environmental targets. He told a London conference, "Green taxes are the only measures likely to have sufficient impact to change people's behavior in many circumstances. Unless you hit people's pockets, they won't take the environment seriously."
Meacher added that, without stiffer taxes, the U.K. would not be able to meet ambitious plans to curb fossil fuel consumption, which some have linked to climate change. His pronouncement came shortly after colleagues in the Department of Trade and Industry imposed a moratorium on new gas-fired power schemes-the chief reason the U.K. has met emissions targets to date-as a result of pressure from the coal lobby (OGJ, Jan. 12, 1998, p. 28).
BP is forging a new alliance with environmentalists, shareholders, and consumers, while continuing its renewables push.
BP America's top executive, Steven Percy, warned an audience at the Petro-Safe '98 conference and exhibition in Houston that "people are expecting the private sector to do more than just deliver solid economic performance." He said BP has begun a program to manage its "triple bottom line"-profits, environmental performance, and social responsibility.
BP is selecting 10 business units to participate in a pilot emissions-trading program to better manage and verify trading opportunities within the company and with "external partners." BP has asked Environmental Defense Fund to help design the program and verify its results.
BP also is hiking its solar-cell production capacity, in line with its goal of boosting annual revenues from its solar business to $1 billion from $80 million within 10 years. BP opened a California plant last week that can make enough panels each year to produce 10-15 MW of electric power. Solar panel capacity at its Alcobendas, Spain, plant will rise to 10 MW from 4 MW.
As BP prepares to anchor the Schiehallion production ship in the field this week, it will be watching for boats carrying Greenpeace protesters. The group tried to prevent the ship leaving its construction yard in Belfast on Jan. 22 by blocking its path with the "survival capsule" used in a number of recent campaigns. Greenpeace set out to camp in the harbor indefinitely but left less than 3 hr later after harbor officials pointed out safety risks involved in keeping a ballasted vessel confined to dock.
The ship left the dock that afternoon and sailed for Block 204/20 in the West of Shetland area, where Greenpeace is seeking to halt development.
At presstime, a BP official said the Schiehallion ship was close to the point where it would check on weather forecasts to decide whether to begin the 3-day anchor installation process or go to Sullom Voe to wait on a suitable weather window. Asked whether Greenpeace plans to target the ship again, a Greenpeace official said only that the group will continue to campaign against oil exploration and development in the West of Shetland area.
The economic crisis in Asia will force new LNG project developers to develop new markets, according to Wood Mackenzie. The analyst says the region has an excess of LNG-potential gas and only three markets: Japan, which is mature and stagnating economically; South Korea, which is in economic crisis; and Taiwan, which is relatively small.
Japan is expected to remain the dominant LNG market, with demand rising to 60 million metric tons in 2005 and 73 million tons in 2015. The analyst says Japanese buyers are becoming increasingly sensitive to price and less concerned with geographic diversity of supply.
South Korea's crisis has hit LNG hard short term, says Wood Mackenzie. The country's economy is expected to shrink by 6% this year and to not bounce back before 2000, yet South Korea should be able to absorb long-term LNG contracts with Qatar and Oman.
Taiwan is relatively unscathed by Asia's economic woes and requires additional electricity generation capacity. This shortfall is expected to enable LNG demand in Taiwan to rise to 10 million tons in 2005.
Wood Mackenzie says the total Asian LNG market is forecast to rise to 97 million tons in 2005, assuming start-up of imports to China. This represents growth of 6%/year from 1997 demand: "While strong, this will not be sufficient to absorb 18 million tons of planned expansions and 27 million tons of planned developments that are currently under consideration."
President Clinton has again held out an olive branch to Iranian President Mohammad Khatami. In a radio message, Clinton said the U.S. regrets the estrangement of the two nations. "We have real differences with some Iranian policies, but I believe these are not insurmountable. I hope that we have more exchanges between our peoples and the day will soon come when we can enjoy once again good relations with Iran."
Iraq aims to boost oil production capacity to 6.6 million b/d by 2010, according to Saadalla Al Fathi, adviser to the Ministry of Oil in Baghdad. OPEC Bulletin reported that Al Fathi told a recent Abu Dhabi conference that to raise capacity, "...Iraq will rely on a number of options, including production-sharing and service contracts with an array of international companies."
Al Fathi said projects due for completion before U.N. sanctions were imposed on Iraq would be revived. He added that Iraq's oil export system requires repair and refurbishment, particularly the Iraq-Turkey pipeline.
"These needs were recognized in the memorandum and subsequent U.N. resolutions but were always bogged down in the sanctions committee."
The likelihood of a rapid return by Iraq to normal international exports is growing fainter, as relations between Washington and Baghdad governments have heated once again.
The merger/acquisition craze is continuing to sweep around the globe, this time revealing itself in a deal between two diversified energy firms.
Pacificorp revised its bid for The Energy Group (TEG) to $12.62/share of TEG common stock-10% higher than an offer Pacificorp made last June. The deal has been approved by both companies' boards.
The new firm will operate in the U.S., the U.K., and Australia. It will have 5 million customers, 17,000 MW of generation capacity, and more than 10 billion tons of coal reserves. The transaction is valued at $10.7 billion, including the assumption of $4.1 billion in debt.
Not long after California refiners ostensibly beat charges of price-fixing in the state's reformulated gasoline market (OGJ, Jan. 5, 1998, p. 26), the same San Diego superior court judge that found insufficient evidence in the case has granted the plaintiffs a new trial.
In his latest ruling in the class-action suit against nine refiners, Judge David Danielsen said the defendants failed to show that inter-company agreements to exchange oil and gasoline did not have the potential, if unintended, effect of fixing prices or eliminating competition.
In an official statement, codefendant ARCO said, "While we are disappointed that the court has granted the motion for a new trial, the decision only means that the judge now feels that there may be a factual issue requiring a trial. We believe that the court decided correctly last October when it found no evidence of a conspiracy to raise or restrict gasoline supplies. That opinion was in line with the findings of several governmental investigations.
"As we've said many times, the price increases that occurred following the introduction of CARB Phase 2 gasoline were the result of market forces, not a consipracy."
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