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19 июля 2012, 00:08

"All of the above" energy policy includes cow dung

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Republicans in Congress have been blunt in their assessment of the Obama administration's renewable energy policies: they are a pile of manure. But Agriculture Secretary Tom Vilsack said on Tuesday earlier this week that manure could be just the solution to some of the county's energy woes. "Using enhanced manure management techniques not only provides a new source of income for farmers, it also improves air and water quality while providing renewable electricity for hundreds of homes in the community," said Vilsack. "It's a win-win-win." President Barack Obama's support for several failed solar companies, in particular, has been a target for Republicans as the November national elections approach. Obama's Energy Department awarded $535 million in 2009 solar-panel manufacturer Solyndra, which went bankrupt last year, taking almost all of that money with it. Republicans have been eager to make "Solyndra" a watchword for failed renewable -energy policies, invoking it repeatedly in oversight hearings, as well as in advertisements for Obama presidential challenger, Mitt Romney. But the USDA did not acknowledge any of that this week, instead touting an "anaerobic digester" the agency funded last year that produces its own electricity with enough left over to sell to the grid. Anaerobic digesters work by letting manure and bacteria stew for awhile, which gives off methane that can be burned to produce electricity. Vilsack's comments came following a tour of a dairy farm in Berlin, Pennsylvania that uses the anaerobic digester. The 570 cows at the farm can generate enough manure to produce 920,000 kWh of electricity over the course of the year. And rest assured, no cows were injured in the making of that electricity at Penwood Farms. It does not sound like they were even inconvenienced. Indeed, the digester not only makes electricity, but produces high-quality bedding for the cows, "providing a resting area for more contented cows," USDA said proudly. In comparison to the federal dollars shelled out for Solyndra, those contented cows came cheap. The funding for the digester came from USDA's Rural Energy for America Program last year and totaled $528,000 in loans. Tweet

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19 июля 2012, 00:00

EIA analysis: gasoline stocks are tightening

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The physical market with the tightest fundamentals in the US now appears to be gasoline, where inventories reported by the Energy Information Administration declined last week, according to the agency's weekly report. You can read Platts analysis of it here. Tweet

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17 июля 2012, 01:40

Kansas fuel retailer starts first US sales of 15% ethanol blend

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A shockingly yellow Chevy Camaro became the first vehicle in the US commercially fueled with a blend of 85% gasoline and 15% ethanol. Jere White, executive director of the Kansas Corn Growers Association, bought the tank of so-called E15 last week at the first service station in the US to offer the blend. He paid $3.27/gallon, two cents cheaper than regular-grade gasoline. The Environmental Protection Agency said last month that service stations could start selling fuel makers' approved E15 blends, up from the previous 10% limit, as long as they have adequate plans for deterring "misfueling." That's regulatory jargon for customers who can't read warning labels prohibiting the fuel's use in anything other than light-duty vehicles made in 2001 or later. Pour it into your lawnmower, and the engine might get fried. A second filling station in Kansas will start offering the fuel later this week, but don't expect to see E15 pumps outside the Corn Belt anytime soon. Many retailers want to avoid the costs of installing new storage tanks and blender pumps, as well as possible liability issues from misfueling. Scott Zaremba, who owns both Kansas service stations, has pushed for years to give drivers more ethanol options. So adding equipment wasn't a barrier for him when it came to E15. Rather, finding the right gasoline stream kept him from offering the blend sooner. He had to source gasoline with Reid Vapor Pressure lower than the 9-psi limit required by EPA's air-quality standards for summer fuels. And that took a while, because a lot of gasoline out there relies on a 1-pound RVP wavier that EPA grants blends containing up to 10% ethanol. "That's really what prevented Scott from offering E15 the next day after EPA approved it back in June," said Matt Hartwig, spokesman for the Renewable Fuel Association. Zaremba said he suspects other pro-ethanol retailers have faced the same challenge in finding suitable gasoline to blend. The RVP restriction ends September 15. As far as liability concerns go, Zaremba's pumps have yellow stickers telling customers to only use E15 in 2001 and newer passenger vehicles or in flex-fuel vehicles. It says filling up "other vehicles, boats, or gasoline-powered equipment" could cause engine damage and violate federal law. As an added deterrent, drivers must buy at least four gallons of E15 at a time. "We're always concerned about liability issues, and we want to make sure we do it right, which we do," Zaremba said. "We've got everything labeled properly. Like any industry, we just need to make sure that we follow all the rules that were put in place to make sure that we're doing it right, and we've done that." Tweet

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16 июля 2012, 17:55

At the Wellhead: the long decline in Indonesian oil and gas output

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Indonesia at one time had so much oil that it was a significant exporter, and it was a member of OPEC. Now it's trying to reverse a decline in both output and reserves. Mriganka Jaipuriyar discusses the problem in this week's Oilgram News column, At the Wellhead. -------------------------------------------------------------------------------------------------------------------------------------- Indonesia, once an OPEC member, has seen a rapid decline in its crude oil reserves in the last decade, a fact that was highlighted in BP's 2012 annual oil and gas report, released last month.  BP's Statistical Review of World Energy 2012 showed that Indonesia's proven oil reserves declined to 4 billion barrels at the end of 2011, down from 5.1 billion barrels at the end of 2001 and 5.9 billion barrels at the end of 1991. In comparison, Malaysia's proven oil reserves rose 2.2 billion barrels from 1991 to 5.9 billion barrels at the end of 2011, and Vietnam's rose from 0.2 billion barrels in 1991 to 4.4 billion barrels in 2011. Indonesia's crude oil production, meanwhile, fell from 1.39 million b/d in 2001 to 942,000 b/d in 2011, BP's report showed. Indonesia's aging reservoirs--the country's Minas field, for example, has been in production since 1944--have made it that much more critical for the government to create a stable and encouraging environment for investment, a feat it has yet to achieve. "One of the main reasons for the decline in reserves is uncertainty surrounding regulation," an industry source with a local independent oil and gas company said. This has made investors wary to put more money into exploration, he said. It is also difficult to say who is actually controlling the industry today, the source said. In the past it was clear that the Ministry of Energy and Mines was in control, but now decisions made by the Ministry of Finance and Ministry of Commerce have an impact on exploration contracts, too. Indonesia's last significant oil discovery was the Cepu find in 2001. And it took that project a long time to get off the ground due to protracted negotiations between Indonesia's state-run Pertamina and US oil major ExxonMobil over issues like equity split and operation of the block. The two signed a production sharing contract only in September 2005, four years after the oil discovery was made.---------------------------- The partners are also now running five years behind schedule on attaining peak output of 165,000 b/d at the block. Exxon and Pertamina were originally expected to achieve this level of production in 2009 but that has been pushed back to 2014 due to delays in the award of some major EPC contracts for the development. First, Italian engineering company Saipem pulled out of a contract last June after upstream regulator BPMigas introduced new regulations which raised the cost of the work. More recently, ExxonMobil is having difficulties securing some 29 permits from the local government for the last phase of the EPC contract. BPMigas recently said that Cepu's peak production, which is key to Indonesia achieving its modest target of boosting oil production by around 50,000 b/d to 1 million b/d by 2015, may be delayed beyond 2014 due to the permit issues. Asked if the government was taking steps to reverse the declining oil reserves, the industry source said: "Who is the government? At the moment, there is no coordination [between the different ministries]. The energy ministry knows exactly what the problem is, but the finance ministry has a different goal, they have a different KPI [key performance indicator]." Indonesia's natural gas sector presents a more promising picture, although the country's rising nationalistic bent when it comes to its gas resources may end up preventing solid exploration efforts. BP's report showed that Indonesia's proven gas reserves have grown from 1.8 trillion cubic meters in 1991 and 2.6 trillion cu m in 2001 to 3 trillion cu m or 104.7 Tcf in 2011. Indonesia has also repeatedly beaten its own annual gas output targets. In 2011, the country produced an average 8.48 Bcf/d, against its target of 7.77 Bcf/d. Evita Legowo, oil and gas director general at the Ministry of Energy and Mines, recently said the government was considering a moratorium on natural gas exports. She was quick to add that the government would ensure that in doing so it does not make it economically unviable for companies to develop Indonesia's gas fields. "The Indonesian government has realized that nobody is going to develop gas to sell it at subsidized prices domestically," an industry observer with a domestic think tank said. The local industry has also accepted this, which is why the price of gas domestically has risen to $5-6/MMBtu from around $1-2/MMBtu in the last couple of years, he said. Indonesia, once the top LNG supplier to the world, has been struggling to find a policy that would strike the right balance between exports and domestic allocation. While the country may like to keep as much gas for domestic use as possible, the reality is that it needs the revenue generated from LNG and pipeline exports. And though the government has been raising domestic gas prices, they are still far from international levels. "At some point there will be an equilibrium. Significant amount of new gas will be for the domestic market, but they will not halt exports," the industry observer said.--Mriganka Jaipuriyar in Singapore Tweet

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13 июля 2012, 21:47

Banning oil and gas drilling where there isn't any oil or gas now a new political sport

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The venue for political environmental theater expanded this week with Ohio Governor John Kasich signing an executive order re-establishing the state's ban on drilling for gas and oil on Lake Erie. "I really don't see what public good that does besides making people who don't like oil and gas drilling, particularly on Lake Erie, cheer," Tom Stewart, executive vice president of the Ohio Oil and Gas Association, scoffed. "So, hurrah." The governor said the state's drilling ban would be a backstop against possible drilling on the lake "if the current congressional ban on drilling in or under the Great Lakes should be lifted." The ban was included in the Energy Policy Act of 2005 and there is no indication that law will be repealed any time soon. Kasich is not alone in making seemingly empty gestures. The New Jersey Legislature has twice in two years done so. In June this year, it adopted a bill that prohibits the state treatment plants from accepting wastewater from out of state drilling operations. Never mind the fact the nearest drilling operation is at least a three-hour drive away from New Jersey. Governor Chris Christie has not decided whether to sign the bill. In 2011, the legislature passed a bill that prohibited gas producers from hydraulically fracturing a well in the state. Never mind the fact that no one has been or is now looking for gas in the Garden State. The sponsors of the bill acknowledged that reality, but said they wanted to show solidarity with environmentalists opposed to the practice. Governor Christie vetoed the bill but imposed a year-long moratorium on fracking while the state studies the practice to see if it safe. Meanwhile, Vermont Governor Peter Shumlin in May signed a bill that bans hydraulic fracturing in the Green Mountain State. By taking that action, he said Vermont would be leading the nation by being the first in the nation to ban the practice. Shumlin didn't mention there are no producing wells in Vermont and the last effort to find any gas in the state occurred in 1984 was a bust. Tweet

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13 июля 2012, 17:13

BP bucks oil industry allies on advanced biofuels, with a boost from the US government

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Oil giant BP is betting big on biofuels, which the London-based company says could account for 30% of the world's liquid transportation fuels by 2030, sharply reducing demand for gasoline and other refined petroleum products in the process. BP is especially enthusiastic about cellulosic biofuels, which are more environmentally friendly than conventional corn-based ethanol because they are made from non-edible plants or even "dedicated energy crops" grown on marginal lands. BP plans to break ground on a major cellulosic ethanol plant in Florida later this year, and it may also convert a conventional ethanol facility in its native United Kingdom to produce the fuel.  On its website and in other marketing materials, BP says it is pushing cellulosic ethanol in order to meet surging world demand for liquid fuels, as well as to reduce motor vehicle carbon-dioxide emissions that are linked to global climate change. But the head of BP's alternative-energy division recently said that the company would not be investing in advanced biofuels fuels at all--anywhere in the world--if the US government was not requiring refiners and other entities to blend ever-increasing amounts of cellulosic ethanol into the nation's gasoline supplies. "If there were no mandates on cellulosic development, we would not be investing at all," Katrina Landis, the CEO of BP Alternative Energy, said July 10 at a renewable-energy forum in Washington. Congress passed a major energy bill in 2007 that requires increasing amounts of cellulosic ethanol to be blended into gasoline supplies over time, ratcheting up to 16 billion gallons annually by 2022. But the Environmental Protection Agency has exercised its discretion to lower the annual blending targets for cellulosic ethanol in recent years because of the technical and financial problems that companies have had in standing up advanced biofuel plants. This year, for example, EPA is requiring just 8.65 million gallons of cellulosic ethanol-- a tiny fraction of the 500 million gallons that Congress called for in the 2007 energy bill. But Landis said that as the industry develops, cellulosic biofuels will be able to compete against gasoline and other petroleum-based fuels at a relative hydrocarbon cost of $80/barrel by 2030. Right now, corn-based ethanol is more competitive with gasoline because it sells for about $50/b, Landis said. In any event, BP has become somewhat of an outlier among its oil-industry peers because of its enthusiasm for cellulosic ethanol. While BP is investing hundreds of millions of dollars to develop the fuel, two influential Washington-based trade groups that represent US oil companies and refiners are suing EPA over the blending mandate for cellulosic ethanol. The groups--the American Petroleum Institute and the American Fuel & Petrochemical Manufacturers--say EPA cannot EPA cannot legally require the oil sector to blend cellulosic ethanol into the gasoline supply if no such cellulosic ethanol yet exists. "No cellulosic biofuel has been produced in commercial quantities," Charles Drevna, AFPM's president, said in a July 10 letter to House lawmakers. "Despite this fact, EPA increased the amount of cellulosic biofuel refiners are supposed to blend into the fuel supply from 6 million gallons in 2011 to 8.65 million gallons for 2012." Ironically, BP is a member of both oil-industry trade groups that are suing the US government over the federal cellulosic mandate that BP wholeheartedly supports. BP's Landis declined to personally comment on the lawsuit, but her office issued a statement saying the mandate does not need to be scrapped or modified because EPA has the discretion to adjust it to "market-realistic values." Drevna, of the refiners' group, used his letter to suggest how many gallons of cellulosic ethanol EPA should require this year: zero. A court could conceivably grant his wish, thus eliminating BP's stated sole reason for investing hundreds of millions of dollars in cellulosic ethanol plants in Florida and the UK. Would BP pull the plug on those plants if the mandate goes away? Would other would-be cellulosic ethanol companies do the same? It's unclear at this point, and it may remain that way for a while. Tweet

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13 июля 2012, 02:30

The off-limits Iranian oil tankers, according to the US Treasury

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Looking for an oil tanker? Here are the ones the US Treasury says you should avoid. While slapping more sanctions against Iran today, the US Treasury department released a long list of ships that it said were affiliated with the Iranian government. As Platts Gary Gentile reported: The US Treasury Department said the vessels were renamed to hide their affiliation with the already sanctioned Islamic Republic of Iran Shipping Line. (A company from the United Arab Emirates), Good Luck Shipping, was named "because it acts or purports to act for or on behalf of IRISL," the Treasury Department said. The shipping line and tankers are part of an effort by Iran to circumvent US sanctions, the Treasury Department said. Identifying the company and the tankers gives warning to those that would do business with them that they are doing business directly with Iran. US financial sanctions targeting Iran's money transfer with the outside world came into force on June 28, persuading Tehran's top Asian buyers to cut back on crude volumes. European Union sanctions, which became fully effective on July 1, have a twofold effect in that they ban the import of Iranian crude into Europe but will also deny crucial insurance provision from EU insurers to non-EU shippers of Iranian crude. And now with this list, identifying those ships that are Iran-affiliated just got easier.  

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12 июля 2012, 20:22

OPEC's motto: Shhhhh! Don't mention the "S" word

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OPEC published its latest monthly oil market report on July 11. Anyone reading it might expect to find some mention of the fact that one of its members, Iran, is now under two sets of sanctions which threaten not only its oil exports but also, ultimately, the volume of crude it produces. But there was no mention of the European Union ban on the import of Iranian oil which came into full force on July 1 and which directly affects some 500,000 b/d, or of the EU ban on provision of insurance for shipments of Iranian oil, which reaches far beyond Europe. Nor was there mention of new US sanctions which came into force on June 28 and which threaten to bar from the US financial system banks of countries continuing to to do oil-related business with Iran's central bank -- unless they reduce their oil volumes from Iran significantly. Washington has already given 180-day waivers from the sanctions to Tehran's top Asian importers for having pledged or shown evidence of lower purchases of Iranian oil. These countries include Japan, India, South Korea and China. So for any assessment of the impact of sanctions on Iranian oil production and exports we have to look elsewhere. The US Energy Information Administration said in its latest Short-Term Energy Outlook on July 10 that it expected Iranian crude oil production to fall by 1 million b/d by the end of this year from about 3.6 million b/d at the end of 2011, and to drop by a further 200,000 b/d next year. It also said other OPEC producers were likely to make up for the forecast drop in Iranian production. The International Energy Agency's slightly less pessimistic forecast sees Iranian crude output capacity falling to 2.67 million b/d next year from an average level of 3.24 million b/d in 2012 if the EU and US sanctions are not lifted.   The agency estimates Iran's output at 3.2 million b/d in June, considerably higher than the EIA's 2.9 million b/d and OPEC's secondary sources-derived number of 2.963 million b/d. It says that the plunge in volumes reported by industry sources is not supported by shipping data. Indeed, the IEA says, tanker reports show that China led a rebound in imports of Iranian oil in June. The data, which the IEA points out is preliminary, suggests that China may have taken as much as 810,000 b/d of Iranian crude in June, some 300,000 b/d more than in May. China will publish detailed import data for June later this month.   July could be a different matter, the IEA continues. It says China reportedly had planned to lift 500,000 b/d of Iranian oil next month for delivery on NITC ships but balked at the Iranian shipper's pricey freight charges.   Tweet

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12 июля 2012, 17:24

Energy industry gets the answers it wanted in CFTC's swap definition

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A few may have wanted regulators to delay it forever and some questions were left unanswered, but it's hard to argue that the highly anticipated swap definition the US Commodity Futures Trading Commission approved this week was anything but a major victory for the energy industry. The industry won a regulatory exemption it had fought hard for; environmental commodities will remain outside the new regulatory regime entirely; and the CFTC's most vocal supporter of heavy regulation of energy markets voted against a final rule for the first time ever. "I don't see loopholes that people can leap through, but there's now a situation where you can say 'OK, I have some requirements, I even have some deadlines and I can move forward,'" said Bill Hederman, the director of regulatory compliance for the energy and resources practice at Deloitte & Touche, in an interview Wednesday. "I think it's time for people to move forward." In an effort to move forward, it's probably a good idea to understand what the CFTC did Tuesday when it passed its final swap definition in a 4-1 vote, nearly two years after the Dodd-Frank Wall Street Reform and Consumer Protection Act was signed into law, and why the energy industry was so involved in the process in the first place. What happened? On Tuesday, in a 4-1 vote, the CFTC approved its definition of swap, the financial products that make up part of the roughly $650 million global market the agency was given powers to regulate in the Dodd-Frank Wall Street Reform and Consumer Protection Act. The final rules, which were developed jointly with the Securities and Exchange Commission, include interpretations that will keep a variety of insurance products, consumer transactions and loan participation agreements from being defined as swaps and, in turn, subject to new CFTC regulations. Most important for the energy industry, a number of energy market transactions, including environmental commodities, peaking supply contracts, tolling agreements and many natural gas supply contracts, will not be defined as swaps. That leaves a large swath of the energy market from facing new reporting, recordkeeping and clearing rules, at least for now. What took them so long? It's a good question and one that lobbyists and lawmakers have made into a running narrative as the agency's Dodd-Frank rulemaking process has languished over the past year. How can the CFTC make new swaps rules if they haven't even defined swaps yet? CFTC officials have been quick to point out that it's all about resources and priorities. The agency couldn't afford to wait until the complex and voluminous swap definition was finalized before moving forward. If it had waited to start drafting the dozens of Dodd-Frank rules after the definition was final, the rules may not have been done before President Obama leaves the White House, even if he wins a second term this fall. What were the big wins for the energy industry? Perhaps the biggest victory is a somewhat controversial interpretation of the agency's long-standing forward exclusion, which Tyson Slocum, director of Public Citizen's energy program, called a "big loophole." "This rule falls short with energy markets," Slocum said Tuesday. The CFTC has jurisdiction over swaps and options, but not forwards. There was a great deal of worry that under the new rules, the CFTC would be classifying forwards with options as swaps. They won't be. The interpretation essentially keeps transactions in energy markets with volumetric optionality out of the swap definition. Volumetric optionality essentially means that parties to a given agreement have the option to change the volume of natural gas, electricity or other energy commodities during the course of the agreement. These include peaking supply contracts, tolling agreements and full-requirements contracts. But it could also cover common natural gas supply deals, for example, where the amount of gas purchased per month may vary, according to Andrea Kramer, the co-chair of the energy services group at McDermott Will & Emery. Numerous industry groups, including the American Petroleum Institute and the American Gas Association, lobbied the CFTC to keep these forwards from being defined as swaps. Why did Commissioner Chilton vote against the rule? In the somewhat insulated and, at times, obscure world of the CFTC, Chilton's vote against the final rule was downright shocking. Chilton, one of the most vocal supporters of derivatives reform in the agency's history, had yet to vote against CFTC final rule, so this was certainly a first. Chilton argued that the forward interpretation within the rule could become the agency's next "Enron loophole," which exempted most over-the-counter derivatives and electronic energy trading from regulation. In an eight-page formal dissent of the rule which Chilton provided to Platts Wednesday, Chilton wrote that the CFTC was ceding jurisdiction it had been granted by Congress nearly four decades ago because of industry pressure and increasing the probability of abuse in power, natural gas and other energy markets. "As I can predict with absolute certainty, bad actors (a la Amaranth) will be drawn to dark markets in search of spoils," Chilton wrote. "Less ill-intentioned or 'grey' actors may follow them in search of lower compliance costs. The Commission should not cede swaths of jurisdiction because such markets have not hitherto given rise to concerns." (Amaranth was a hedge fund whose Canadian-based trader Brian Hunter lost billions of dollars in the natural gas market.) Did anyone quote Washington Nationals 19-year-old phenom outfielder Bryce Harper during Tuesday's meeting? "Do we need Dodd-Frank?" Chilton asked at the start of Tuesday's meeting. "That's a clown question, bro." What part of this will no one remember six months from now? The issue was resolved so quietly and with so little public debate that few will likely remember there was even a possibility that environmental commodities might have been defined as swaps. Under the definition, carbon offsets, emissions allowances and renewable energy credits, will fall under the agency's forward exclusion and will not be subject to CFTC regulations. Numerous groups, including the Coalition for Emission Reduction Policy, the Environmental Markets Association and the American Wind Energy Association, had lobbied the CFTC to keep these environmental commodities from being defined as swaps. Their fight may have been relatively one-sided, however, since no CFTC official publicly said they were doing more than studying the issue. In the end, whatever support there may have been for subjecting offsets and RECs to swaps rules, never surfaced and everyone quickly moved on. What questions remain? The CFTC punted on the long-standing question over whether transactions in regional transmission organizations and independent system operators will be subject to CFTC oversight for the first time. Lawyers have argued that transactions in RTOs and ISOs, particularly financial transmission rights, could be defined as swaps, an outcome Federal Energy Regulatory Commission officials have pushed against. Rather than defining these deals as swaps or exempting them from the definition entirely, the CFTC said it will deal with this issue under a separate public interest waiver process. CFTC Chairman Gary Gensler said Tuesday that he expects that agency staff will provide recommendations on this issue "within a week." He said a separate application for exemptions for transactions between rural electric cooperatives and municipal public power providers is expected later, but said he did not know when. What comes next? "With completing this definition, the first domino in this process has been tipped over," said Hederman. A number of rules the CFTC already has finalized, such as new position limits, registration, real-time reporting, business conduct and commodity options rules, will go into effect in a matter of weeks, now that the definition is finalized. "The new swap regulatory regime is on the verge of becoming a reality," said CFTC Commissioner Mark Wetjen. Tweet

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12 июля 2012, 01:06

Oil and white noise in Ecuador, the middle of the world

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Platts' sparkling new office in downtown Houston boasts a "white noise" system that is barely discernible but muffles distracting conversations from a few cubicles away. Concentrating is easier, despite the rule of thumb that good journalism happens amid chaos and doughnut crumbs. But the system also cancels out sometimes useful information I used to overhear. About the same time as our office move, an article in a state-run Ecuadorean newspaper reminded me of how some governments develop their own virtual white-noise systems to cancel out distracting alternative opinions.   Some studies, including one here from the Revenue Watch Institute focusing on budgetary issues, have shown that a lack of transparency is often particularly acute in countries that depend on mineral wealth, including oil, natural gas and metals. The lengthy article in the state paper reveals what is says is a subversive plot by the US government to strengthen democracy in Ecuador via $4.3 million in grants through the USAID government assistance agency to local NGOs for transparency initiatives. It starts by saying this is perhaps related to US President Barack Obama's bid for reelection. I wonder if his campaign strategists know Ecuador is so key to the November elections. Or that a country can be had for a mere $4.3 million. That's a bargain. (As one of my friends there used to say:  Ecuador takes its nickname as the "Mitad del Mundo" -- middle of the world -- very seriously.) I should disclose that the reason I read this article is that my husband used to work (and still occasionally consults) for one of the NGOs -- Grupo Faro -- mentioned as trying to take down the government. Its office is in a creaky old converted house, and the founder probably still brings his mutt dog to work. Most of the people he worked with in 2006 voted for President Rafael Correa, a socialist who turned out to be in the mold of Venezuela's President Hugo Chavez. The purpose of the newspaper article is clearly to intimidate the NGOs, organizations of which Correa has long been critical. He also has been taking aim at USAID, an organization which he has the power to block from operating in the country. It mentions the founder by name, and implies USAID's workshops on transparency are a plot by the extreme right in the US. Because the article also ties the grants to Obama, I suppose the extreme right in the US would think it is a plot by the extreme left. Everyone is ganging up on tiny Ecuador, apparently. In the scheme of things, this was an article that probably few people besides those named read to the end. But it is one of many published every day in the same tone, along with constant verbal and legal attacks by Correa on NGOs, the press and anyone else who criticizes the government. Meanwhile, Ecuador still scores fairly well on a resource wealth transparency index because many of its official policies require the release of information, and its budgetary data is relatively accessible. Toeing the line on transparency -- while waging a public relations battle against it -- appears to be a common tactic in some resource-rich countries such as Ecuador and Venezuela that have joined the "21st century Socialism" movement. These tactics are transmitted on a frequency that isn't always picked up by outside observers. But they are heard loud and clear by those who are targeted. It is something that those trying to get resource-rich nations to increase their transparency might keep in mind. Tweet

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12 июля 2012, 00:29

EIA analysis: crude stocks down, product stocks up

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A lot more product in inventory, a lot less crude in inventory, and a lot less demand. That sums up this week's Energy Information Administration inventory report. You can see Platts' analysis of it here.

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11 июля 2012, 18:51

Feast to famine: Europe's diesel market remembers the feel of the lean years

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Europe's middle distillate market has long been seen as the cradle of the successful refining margin. Bolstered by legislation that has driven out sulfur and installed the road fuel as the premium product for the region, diesel demand across the continent has by far outstripped the local capacity to produce it. That's brought a world of change to the very heart of refining economics, fundamentally recasting diesel as the powerhouse for successful refiners. It has seen those who can't maximize their middle distillate production fall dramatically by the wayside. The birth pangs of that transition, as diesel emerged as the verb in oil's lexicon -- the "doing" fuel -- have sent middle distillate traders on something of a roller coaster. The global tightness in diesel drove cracks to an unheard of plus $50/b in 2008, even while crude was busy marching through the $145/b level itself. From there the only way was down. But while diesel cracks suffered in economic slowdown, they remained resolutely positive. Even in the face of economic uncertainty and new refining capacity -- the fruits of long-term capital expenditure programs that had long eyed the dearth of diesel production -- diesel continued to shoulder the pressures of oversupply. What followed, between 2009 and 2010, was the building of inventories. Both on land and at sea, the weakness of the market led to massive stock building. The US's Energy Information Administration put total middle distillate stocks at a peak of over 175 million barrels in the week of August 20, 2010, with traders seeing a further 23.5 million barrels locked into floating storage and stored on ships at sea. For many, the oversupply, the inventories, the lack of demand and the shiny new refining capacity meant the golden age of refining had ended with the ritual, inevitable slaying of the goose that laid the golden egg. Even from the safe distance of 2012, the ongoing fears over economic health and the expectations of further new-build refining capacity meant the future remained distinctly gloomy for Europe's diesel market. Imagine then, one more turn along the twisty path. Traders across the European region have been left rather stunned but what feels like a return to the old days of rampant, unquenchable diesel demand. Feast has once again turned to famine and fired a backwardation in the European region that has again ushered in whispers of potential "stock outs" and a rush to cover exposed shorts. The loss of European refining capacity has helped in that process, with something in the region of 1.8 million b/d of refining capacity stripped from Europe over the last 18 months. The fact that a fair portion of the US arbitrage flows that often catered to the incremental demand not just for the road fuel but also for the new ultra low sulfur heating oil, have been diverted to other locations has also enabled space for prices to firm. Strength in the US ULSD market has kept a lid on fresh flows coming to Europe, though there still is plenty of oil moving trans-Atlantic. And Europe is chewing through them. The backwardation has topped 75 cents a day at points, with the NWE cargo market acutely affected by the tightness. "I have never seen such a dry period," one seasoned trader at a refinery said of the situation. "This is a scenario that everyone had in mind but a month ago you could not think it would ever be possible due to the poor demand." Against that backdrop refining margins have been finding support, and refiners are seizing the opportunity to run. "We are running pretty high and most of the people I have been talking to seem to be doing so. You have to make the most of it now that they are good," the trader continued. The backwardation on the 0.1% ICE gasoil futures contract has been noted for some time. The front and second month contracts embarked on a sustained period of backwardation back in late early April, when the front month contract crossed over and ended the day $1.25/mt above the second month contract. At the time, many in the market scoffed. They suggested that the benchmark ICE gasoil contract, with 0.1% sulfur content (1000 ppm), for so long the linchpin to one of the world's most successful futures contracts, had lost touch with its core base of buyers as Europe moved toward its low sulfur future. Despite the backwardation persisting, and the front month rising at one point to take an $8/mt premium over its second month counterpart even through early May -- a month not typically associated with rampant heating oil buying -- the talk continued that gasoil is out of touch with the reality of middle distillate markets. But then, slowly, ICE's new 10 ppm futures contract began to follow suit. The new front month contract, designed one day to supplant the existing ICE gasoil contract, moved cautiously to parity with its second month counterpart on June 1.  Structurally, it wasn't the first time the two contracts had jostled with each other, with the front month and second month slipping easily between a modest backwardation and contango although never more than $3/mt separated the front month from the second month. From June 1, that changed dramatically. Starting with a modest $1/mt premium on June 6, the next working day after the UK returned from celebrating its diamond Queen, the front month contract rapidly moved above the second month, moving to a $4 premium by June 22, then a $10 difference by July 4. At the close of London's trading day, on July 11, that difference stood at $14/mt. Let's keep it in perspective: physical premiums have seen support across the Northwest European and Mediterranean markets, but remain well below the sort of levels seen when diesel was too hot to handle. Around the world, a glistening array of new refining capacity (ok, with the exception of the Port Arthur, Texas area, where Motiva's expansion remains idled because of corrosion and other problems) hungrily eyes Europe's distillate markets for any sign of strength. Armadas of new medium and long range tankers are lining up to ferry diesel to wherever Europe needs it. But even so, after three years of languishing in the doldrums, Europe's diesel appetite remains sharp enough to catch out the unwary. Tweet