Results - The leading French independent power supplier Poweo achieved sales revenues of EUR 26 million for the third quarter of 2005, up 206% year-on-year from EUR 8.5 million. Net profit for Q3’05 was not available. The company reiterated its commitment towards a 100,000 client base target before the end of this year, but a Poweo spokesman said that its initial target of 7,000 dual power and gas contracts would be difficult to reach. “The main difficulties lie in the French gas market itself which, despite liberalisation, is still hard to enter,” he said.
Poweo has signed 1,500 gas supply contracts and 700,000 electricity supply contracts, the majority as part of dual power/gas offers, since the company launched in 2002. It now accounts for nearly half of the eligible power market that has actually switched supplier. France’s eligible market in power and gas currently comprises industrial and commercial clients only. The domestic market is set to open in July 2007.
Poweo has two long-term gas supply contracts in place, with BP and Italy’s ENI. A spokesman said these run for “several years” and are at the buyer’s nomination, but further details were not available at the time of publication. Poweo does not currently trade on France’s nascent gas hubs (PEGs).
Results – Spain’s Enagas has reported net profit of EUR 149.1 million for the first nine months of 2005, up 24.1% year-on-year. Revenue increased 16.3% to EUR 518.4 million, the gas network operator said. The improved result was due to the high volume of LNG regasified in the first nine months of 2005, along with the significant number of assets being put into operation and the company’s operating cost management strategy, Enagas said.
Demand for gas increased 19.3% to 275,243 GWh in the first three quarters of 2005, of which Enagas transported 89.8% (247,040 GWh). Demand from the liberalised sector accounted for 84.9% of total gas transported, compared with 81.9% for the same period in 2004. 30.1% of total demand in Q1-Q3 ’05 was for electricity generation, up from 20.6% in the previous year.
Enagas said that it had put total investments worth EUR 290.5 million into operation since the start of the year. In Q3 ’05 the company had invested in the enlargement of the Tivissa and Baneras compression stations, the splitting of the Arbos-Tivissa gas pipeline and construction of the Cartagena-Lorca pipeline.
Results - BP’s third quarter profits were up strongly by 16% year-on-year, but growth has slowed on hurricane damage to production facilities. Replacement cost profit (i.e. profit after inventory losses) was USD 4.41 billion (EUR 3.68 billion). Profits had grown by 29% year-on-year in the second quarter.
High oil and gas prices kept the company’s exploration and production results high, up 36% year-on-year to USD 6.535 (replacement cost profit). But production for the quarter was down 2% year-on-year because of hurricanes in the Gulf of Mexico.
BP’s gas production was down 5.5% year-on-year to 7,841 million cubic feet per day (222 Mm3/day), while crude oil production managed to edge up by nearly 1%. The company’s average realization for gas was up sharply however, to USD 4.75/mcf from USD 3.66/mcf in the third quarter of 2004.
BP’s UK and European gas sales volumes were notably lower, although global volumes were up. In the UK, where BP took the decision to exit the industrial and commercial market last year, sales volumes were down 13.5% to 3,858 million cubic feet per day. In the rest of Europe, where sales are still relatively low, they were down sharply from 485 mmcf/day in Q3 ’04 to 300 mmcf/day in Q3 ’05.
UK gas production was also down 8% year-on-year, to 831 mmcf/day in the third quarter, outstripping the global decline in volumes. Exploration and production profits for the UK were up 23% to USD 939 million. The company registered a loss of USD 17 million in the gas, power and renewables sector, a better result than in the fourth quarter of 2004, when the loss was at USD 90 million, but worse than in the second quarter this year, when the sector made a profit of USD 124 million. It attributed the losses this quarter to high upstream prices putting pressure on marketing margins.
According to new tax accounting standards, BP has reported “fair value losses” of USD 53 million on embedded derivates relating to North Sea gas contracts. This basically accounts for the price differential between fixed-price contracts and the wholesale price of gas during the period.
Results - Norsk Hydro, Norwegian energy and metals conglomerate, beat analysts’ expectations to report a 69% year-on-year rise in net profit for the third quarter. Profit hit NOK 4.18 billion (EUR 532 million).
“Hydro’s third-quarter results are the company’s best quarterly results ever. The continued high oil price is the main reason for the improvement,” said the company’s c.e.o. Eivind Reiten.
Oil and gas production levels nudged up year-on-year over the third quarter to 541 barrels of oil equivalent per day (boed) but are down by 2% over the first nine months of the year.
Hydro has also revised its production target for 2005 downwards by 10,000 boed to 565,000 boed. It says there is “significant uncertainty related to production from certain partner-operated fields during the fourth quarter of 2005, due to delayed build-up of production after shut-downs and delayed start-up of new fields.” Hydro also says planned maintenance shutdowns will have a minor impact on oil production levels in the fourth quarter of 2005. The Urd and Kristin fields are expected to start production in the fourth quarter of 2005.
Inquiry - The European Commission has opened an in-depth inquiry into the acquisition by Denmark’s state-owned gas incumbent Dong of Danish power utilities Elsam, Energi E2, Copenhagen Energy and Frederiksberg Elnet. The Commission said it was concerned that “the transaction could impede competition in Danish gas and electricity markets, due to the companies’ strengthened position on these markets.” The Commission said the results of its first phase investigation indicated that the merger would remove Elsam and E2 as competitors of Dong from gas storage/flexibility markets and gas supply markets. In addition, the Commission argued, the transaction is also likely to remove Dong as a potential competitor from electricity markets in Denmark. Dong has some activities related to wind electricity generation and supply of electricity and heat. The merger would also risk impeding the development of a liquid wholesale market for natural gas, it said.
The Commission now has until 6th March 2006 to take a final decision on the merger. It emphasised that its decision to start an in-depth review does not prejudge the final decision in this case.
Regulation - The European Commission has delayed for the second time its decision over German utility E.ON Ruhrgas International’s bid to buy gas businesses from Hungary’s MOL by 15 working days, from 29th November to 20th December. In July the EC said it would investigate the EUR 2.1 billion deal, involving E.ON buying four gas units from MOL, over possibly “significant competition concerns at all levels of the gas and electricity supply chain in Hungary”.
The deal, struck in November 2004 and approved by Hungary’s Energy Office in June 2005, had E.ON purchasing 75%-minus-one-share stake in MOL’s wholesale, marketing and trading, storage and transmission businesses. E.ON would also buy MOL’s 50% stake in Panrusgáz, a MOL-Gazprom joint-venture in gas trading as part of E.ON’s strategy to expand into eastern and central Europe’s energy markets.
The Commission was to announce its decision on 17th November but delayed it to 29th November. E.ON would not comment on the delay and MOL were unavailable.
Transit - India and Romania have agreed to cooperate in gas and oil exploration and refining, with India’s state-owned Oil and Natural Gas Corp and Indian Oil Corp both reportedly expressing interest in investing in the Nabucco gas pipeline project, reports say.
India’s Minister for Petroleum and Natural Gas Mani Shankar Aiyar met Romania’s Minister for Economy and Commerce Ioan Seres in New Delhi and agreed to confirm the projects outlined for cooperation as were lain out in July, The Hindu newspaper reported.
Opportunities in exploration and production (E&P), refining, pipeline and research and development in the Black Sea region existed for Indian companies, while Romanian companies could participate in upstream activities in India and in the Bay of Bengal, in particular, Mr Aivar reportedly said.
Nabucco is to take natural gas from the Caspian region and the Middle East to the European Union (EU) and is to be built from 2007-2010, to take 90 million cubic metres per day.
E&P - Gaz de France Deutschland and BASF-affiliate Wintershall have successfully struck gas in the North German basin near Breinermoor and Ostfriesland, the companies said in a statement on Tuesday
Subsequent tests yielded promising flow rates from the Leer Z4 well, although total volume capacity has not yet been confirmed. The results of a production test revealed that commercial production from the ‘tight’ gas reservoir was possible through the implementation of highly sophisticated techniques, as tight gas is trapped in extremely low-permeable (tight) formations. Production is expected to come on stream as early as spring 2006.
Despite technical challenges in exploring tight gas reservoirs, both Gaz de France and Wintershall believe there is potential for additional drilling projects of tight gas in Lower Saxony and further potential of tight gas reservoirs in the Ostfriesland region.
Regulation - Italian oil and gas major Eni and its 100% owned local distributor Italgas have been fined over EUR 100,000 by the Italian energy regulator for providing a substandard administrative service, according to the regulator. The inquiry into both companies, which started in May 2005, concluded that Eni had violated standards in client billing and its information on payment instalments. Both Eni and Italgas were fined for providing the energy authority with inaccurate information. Eni was fined EUR 77,468.52, for the three violations, while Italgas was fined EUR 25,822.84. The investigations confirmed that there were delays in regular invoice delivery, miscommunications with instalment payments and erroneous statements about the number of services requested by customers of Italgas Più.
Prices - Spain’s Ministry of Industry and Energy (MIE) has raised gas tariffs in the country’s regulated market by an average of 9.56%, according to reports. The price hikes range from 5.67% for domestic customers using less than 2,325 kWh yearly - equal to 51% of the domestic sector – and 18.27% for industrial customers with interruptible contracts. The average price increase for industrial customers will be 13.38%. The Ministry of Industry and Energy adjusts gas tariffs on a quarterly basis, taking into account the cost of crude oil and the EUR-US$ exchange rate.
Other factors influencing the MIE decision were a surge in demand due to last winter’s colder than average temperatures, a protracted drought in Spain causing a fall in hydropower electricity generation and the temporary shutdown of several nuclear power plants in Spain for repairs and maintenance.
Finance - Ukraine’s state-owned natural gas monopoly Naftogaz Ukrainy is to secure a EUR 3 billion loan with Credit Suisse First Boston (CSFB) for gas projects, reports say. Naftogaz chairman Oleksiy Ivchenko said the deal would be agreed “soon”, in the next few weeks, Ukrainian Journal reported. CSFB would not comment on the deal. In mid-September Naftogaz signed a MoU with French bank Societe Generale Corporate & Investment Banking (SG CIB), a five-year agreement allowing Naftogaz to draw on up to EUR 2.5 billion through a framework provided by SG CIB.
The deal was to support Naftogaz in its plans to increase transportation volumes, hydrocarbon production, exports to other European countries and in exploration projects in Ukraine, SG CIB said. Shell also says it is engaged in a $50-100 million gas exploration project with Naftogaz.
Naftogaz reportedly plans to spend $3-4 billion over three years on modernising existing gas pipelines and possibly build a new pipeline from Turkmenistan across the Caspian Sea to Azerbaijan and Georgia and across the Black Sea to Ukraine, bypassing Russia in the process and lessening Ukraine’s dependency on Russian gas.
Naftogaz, Ukraine’s largest company, operates gas sales, oil and gas transportation, gas production and storage, and currently transits over 80% of Russian natural gas to Europe.
Lobby - A delegation representing the UK energy industry have visited Brussels for two days of talks to lobby the European Commission over issues affecting the UK gas and power sector.
The visit, spearheaded by the Major Energy Users’ Council (MEUC), was in order to address a number of issues of concern to the UK energy industry, including the lack of market opening in a number of EU states, the high cost of UK electricity and gas, possible fuel shortages, the shrinking number of suppliers and “dithering” over new nuclear build, the MEUC said.
The delegation is supported by Ofgem, energywatch, Centrica, RWE npower, British Energy, the Association of Electricity Producers and the Energy Intensive Users’ Group among others.
Andrew Bainbridge, MEUC’s director general, said: “There will be a lot of lobbying by suppliers and trade bodies but this is the first time professionals from all sides of the industry have come together to present their views.”
E&P - Drilling on the Prometheus prospect in the UK’s southern gas basin has been completed with no hydrocarbon find, part-owner Endeavour International said. Endeavour held a 22.5% working interest in the Prometheus well at a cost of approximately US$3.5 million (EUR 2.9 million). The main stake-holder was Centrica with 40%. Wham Energy owned 20% and Antrim Resources 17.5%.
“Obviously we are disappointed with the results of the well, but it is only the second in a 10-well drilling campaign over the next two years,” said John Seitz, co-chief executive officer.
Storage - Ineos Enterprises, an arm of chemicals manufacturer Ineos Chlor, one of the UK’s biggest gas buyers, has applied to have sole use of a small storage site it owns at Holford in Cheshire. The salt cavity (Holford H165) has been used as diurnal storage by National Grid for the last 20 years but the contract will come to an end in November.
The cavern has a capacity of 50 GWh (by comparison, the smallest medium duration site used for trading is Hole House farm, with 300 GWh space).
The facility has a wide range of deliverability rates depending on the level of working gas in the cavity, in a range of 7.5-75 GWh/day. Due to the small size, Ofgem has recommended exemption from third party access (TPA).
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