India Ganging Up On China

Jim Brown
 
Printer Friendly Version

India's Oil & Natural Gas Corp (ONGC) the country's largest explorer, and Indian Oil Corp are about to see their acquisition budget expand up to 500% over the current level.

Indian oil companies have not been able to compete on a level playing field with China because of limited resources. China understands peak oil and the impact it will have on their rapidly growing population. For the last five years China's oil companies have been expanding its reach around the world and buying up all the reserves they can find using their almost unlimited budget as national oil companies.

Indian companies have seen themselves outbid on almost every major project by the aggressive China companies. The Indian government is poised to change the rules to allow oil companies to spend up to 50-billion rupees ($1.1 billion) on acquisitions without government clearance. The state run companies are limited to 10-billion rupees at present.

Granted this is pocket change for China, the country that spent $32 billion on energy acquisitions last year and $65 billion since 2005, but it is a step in the right direction for India. India's oil ministry has proposed creating a sovereign fund using $256 billion in foreign exchange reserves and dedicate the fund to buying energy assets overseas.

Gulf Oil Spill

The U.S. Coast Guard has started using controlled burns to ignite the floating oil in the gulf in hopes of reducing the amount of crude that he heading towards shore. The slick is now 600 sq miles and growing with bad weather heading in that direction. The last time a controlled burn was used was in 1995 on a spill in the San Jacinto River.

The BP technicians are still trying to close the valves on the blowout preventer on the ocean floor. Reportedly they have succeeded in closing them some but not completely using the robot subs. They are rushing to construct a dome that will be lowered over the leaking pipes in hopes of collecting the oil in the dome and piping it to the surface for removal. That dome and the effort will take 3-4 weeks to implement. It has never been done at this depth.

The government has started its investigation into the explosion and fire on the rig. The parties involved include the Interior Dept, Homeland Security, U.S. Coast Guard and the Minerals Management Service. The group along with Obama's Energy Czar, Carol Browner, and the senior management of BP were scheduled to meet on Wednesday.

Transocean's GSF Development Driller III arrived on the site on Monday and they are preparing to commence drilling operations on the first relief well. BP estimates it will cost them $100 million to complete the relief well but it could take several months.

Royal Dutch Shell reported a 49% increase in Q1 profits thanks to higher prices and higher production rates. Shell reported net income of $4.9 billion. Shell said production rose +6% to 3.59 million barrels of oil equivalent per day.

Shell also said it added 350 million barrels of reserves in the gulf in 2009-2010. The CFO said Shell was looking to fast track development of these reserves with expectations of 150,000 bpd of production.

There are going to be so many rigs drilling in the gulf it is going to look like a steel Manhattan. They may have to put in traffic cop to direct traffic.

The problem will be in getting the rigs. There are 14 rigs currently drilling off the coast of Brazil and Petrobras wants to add another 24 rigs. That is going to put a premium on day rates and on supply despite the dozens of rigs currently in line for construction at various shipyards. It takes a long time to construct a rig and an equal amount of time to move it around the world, add the equipment, engines, pumps, etc and to staff it with experience personnel. I believe Transocean is in the right place at the right time and our investment in RIG will pay off nicely as long as they can keep them from sinking.

Jim Brown

This newsletter is only one of the newsletters produced by OilSlick each day. The investment newsletter is also produced daily and contains the current play recommendations in the energy sector. Stocks, options and futures are featured. If you are not receiving the "Play Newsletter" please visit the subscribe link below to register.

Subscribe to Energy Picks Newsletter

Archives:200920102011201220132014201520162017