[CAMWEST-discuss] Total, Shell Chief Executives Say `Easy Oil' Is Gone (Update1)

Danny Hannan danny_hannan at yahoo.com
Mon Apr 9 23:46:38 UTC 2007

Yellow cake (refined uranium ore) hits US$250/kilogramme.  There has been minimal increase in production of nuclear power over the last 10 years  and nuclear power produces only 6% of the worlds energy (BP 2006) yet the price of uranium is escalating to supply that meagre market.  Most planned new reactors are only replacing those that have already had there design lives extended.  What happens if the demand grows due to major increases in the usage of nuclear power?  This puts another lie to John Howard and his nuclear future.
April 9 (Bloomberg) -- Uranium prices rose 19 percent to a record $113 a pound at a U.S. auction because of increasing demand for the fuel used in nuclear power plants, industry consultant TradeTech LLC said. 
Mestena Uranium LLC, a uranium producer based in Corpus Christi, Texas, offered 100,000 pounds of yellowcake at last week's auction, TradeTech said. Yellowcake is the concentrated oxide of uranium, formed in the milling of uranium ore. 
``The competition between utilities, traders and funds has increased,'' Peter Wood, a TradeTech representative based in London, said in a telephone interview today. The percentage jump, from $95 a pound a week earlier, was the biggest since prices were first reported in 1968, Denver-based TradeTech said in its weekly Nuclear Market Review. 
Uranium prices have surged 57 percent this year, according to TradeTech. That's more than any of the industrial metals traded on the London Metal Exchange, such as nickel, or precious metals, including gold. Concerns that the use of fossil fuels is increasing global warming and the potential scarcity of oil and natural gas is spurring international demand for nuclear power. 
``Last year, the uranium price increased by approximately 70 U.S. cents a week,'' Greg Barnes, an analyst at TD Newcrest Inc. in Toronto, said today in a note to clients. ``So far this year, the spot price has increased by $2.73 a week.'' 
Privately held Mestena Uranium, which has a mine in Texas, produces about 1 million pounds a year of the radioactive metal, according to the U.S. Energy Information Administration. 
Supply Disruptions 
Potential disruptions in uranium supplies have helped raise prices. Energy Resources of Australia Ltd., which produces more than 10 percent of the world's uranium, said on April 2 that its Ranger mine may have as much as a third less output next year because of heavy rainfall. 
Cameco Corp., the world's biggest uranium miner, has said that a flood in October at its Cigar Lake uranium project will delay production from the unfinished Canadian mine until 2010, two years later than expected. 
Shares of Saskatoon, Saskatchewan-based Cameco rose 95 cents, or 1.8 percent, to C$54.06 on the Toronto Stock Exchange. They have gained 25 percent in the past year. 
Shares of USEC Inc., a seller of uranium fuel enrichment services, rose $1.08, or 6.2 percent, to $18.61 in New York Stock Exchange composite trading, the highest closing price since the Bethesda, Maryland-based company first sold shares to the public in 1998. The shares have risen 47 percent in the past year.

danny_hannan at yahoo.com 

----- Original Message ----
From: Danny Hannan <danny_hannan at yahoo.com>
To: jonhol2 at netscape.net; camwest-discuss at nicku.org
Sent: Friday, 6 April, 2007 10:08:19 AM
Subject: [CAMWEST-discuss] Total, Shell Chief Executives Say `Easy Oil' Is Gone (Update1)

Thought you people would like some more doom and gloom, it's a while since I sent some.  This is straight from the horses mouth so to speak.
By Stephen Voss and Tara Patel
April 5 (Bloomberg) -- The days of so-called ``easy oil'' are over, making it harder to meet demand without complicated and expensive projects, the heads of two of Europe's largest oil companies said today. 
The International Energy Agency, an adviser to energy importing nations, estimates oil supply will have to rise 39 percent to 116 million barrels of oil a day by 2030 from about 86 million barrels a day now to meet world demand. 
Meeting such targets with conventional oil sources will be ``extremely difficult,'' Christophe de Margerie, the chief executive officer of Total SA, Europe's third-largest oil company and its largest refiner, said at a conference in Paris today. New supply will be based on ``huge high-tech'' projects. 
Jeroen van der Veer, the chief executive officer of Royal Dutch Shell Plc, Europe's largest oil company, said countries no longer seek Shell's help with conventional reserves, such as onshore oil or gas that's cheaper to develop than offshore fields. 
``We can't expect profits in easy oil,'' Van der Veer said at the same conference. ``If there is easy onshore oil, people don't need Shell.'' He said there are enough opportunities for international oil companies to invest in complex, large oil and gas projects using new technology. 
Costs Rising 
Explorers are pushing further offshore as technology improves and fields onshore and in shallow water run dry. Oil companies are expected to increase exploration spending by 9 percent worldwide this year, according to Lehman Brothers Holdings Inc. Spending on exploration in deep water will rise 44 percent to $18 billion by 2011 from $12 billion this year, a report by consultants Douglas- Westwood Ltd. said yesterday. 
Paris-based Total said today it would be pumping 240,000 barrels a day by mid-April from a new field in Angola called Dalia, about 135 kilometers (83 miles) offshore in waters as deep as 1,500 meters, or nearly a mile down. 
Developing that field cost $4.6 billion, an increase of 53 percent from the $3 billion spent to develop another offshore Angolan field called Girassol, de Margerie said today. By comparison, costs for Usan, a 160,000-barrel-a-day project off Nigeria, will cost $7 billion, he said. 
South Africa's Sasol Ltd. is due to ship its first cargo of synthetic diesel made from Qatari natural gas this month. Shell began a larger gas-to-liquids project in February called Pearl, which aims to produce 140,000 barrels a day. Price escalation may push the final cost for Pearl to as much as $18 billion. 
Capital Spending 
Shell's capital spending will reach as much as $23 billion, about 10 percent more than last year, the company said in February. Total expects to spend $16 billion this year, 75 percent of that on exploration and production, up from $15 billion in 2006. 
Shell booked drilling rigs last year at 30 percent below market rates, saving $300 million on rig hires, Van der Veer said today. 
Total, which has had fields seized in Venezuela and is considering an Iranian gas project as that nation faces sanctions for its nuclear program, said reduced access to fields hurts. 
``Governments need to take their share of the responsibility'' de Margerie. ``Don't come crying when we are facing a shortage. We're going to face huge challenges to bring additional capacity on stream.'' 
International oil companies like Shell, Total and Exxon Mobil Corp. are facing stiffer competition from various state-run oil companies, including those of China and India, when bidding for exploration rights in producing nations such as Nigeria. 
``The world has changed'' in terms of competition ``between international oil companies and national oil companies,'' said Mohamed Meziane, the chief executive and president of Algerian state-run oil company Sonatrach. 
International oil companies are focusing on areas where their technology give them advantages over cash-rich state companies. 
The Shell and Total executives said their companies were both investing in techniques to capture and store carbon dioxide emissions, which would make coal projects more environmentally acceptable, particularly in China.
This quote from a Lehman Brothers report tells the rest of the story:  “Beyond 2007, the supply/demand balance (for oil) looks increasingly tight and we conclude that there is more risk of a supply shortfall than a surplus toward 2010.”  (Lehman Brothers 2006)

While it's a big hit in the pocket for every one as all costs will rise including interest rates, it will be a boon to cycling and other human powered transport.

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