Oil Refinery Blast Kills Four People
A blast at an oil refinery in Wales has killed four people and seriously injured another worker.
Investigators are trying to work out what caused the explosion at the Chevron oil refinery in Pembroke which occurred at 6.20pm last night. The explosion killed four contractors working on site and another suffered serious burns.
The explosion was in a 730 cubic metre storage tank where the contractors were carrying out maintenance work.
The general manager of the plant, Greg Hangii, said it was “utterly devastating” and added “The loss of our co-workers has come as a huge shock to us all. Our thoughts and deepest sympathy go out to their families. We will ensure that all employees and contractors are fully supported throughout this difficult time”.
Mr Hangii said that Chevron would do everything it could to work out what caused the tragic accident so that lessons could be learnt for the future.
The Welsh First Minister, Carwyn Jones said “I am shocked to learn of the accident at the Chevron refinery in Pembroke”.
Meanwhile the Welsh Secretary, Cheryl Gillan sent her condolences to the families of those who lost their lives and said “We’ve been in contact with Chevron and Milford Haven Port Authority and asked to be kept fully informed about the investigation into this tragic event”.
She added that it was important “to understand how this tragedy occurred”.
Chris Davies the Assistant Chief Fire Officer, said there was no health risk for members of the public as a result of the accident. He said “We can confirm that any material released into the atmosphere as a result of the blast was immediately dispersed. The wind was blowing off shore, away from residential areas”.
The refinery was sold to Valero Energy in March but has yet to change hands. It’s one of the largest refineries in Europe and around 1,400 people are employed there.
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BP Rosneft Deal Collapses
In January BP announced a joint venture with the Russian energy company Rosneft but the deal between the two companies has now collapsed.
Attempts have been made over the last few weeks to save the deal but it’s eventually collapsed. The end of the agreement is also the end of plans the two companies had to explore for oil in Russia’s Arctic waters.
Part of the problem involved BP’s current Russian partners and Rosneft and BP were unable to come up with an agreement which suited all parties. Four billionaire partners in TNK-BP argued in a London court that the deal between BP and Rosneft dishonoured an agreement they already had with BP. BP and the four thought the deal could work if it was done through their joint venture TNK-BP but Rosneft wasn’t happy with the four billionaires joining the deal.
It’s unclear what effect the collapse of this deal with have on BP’s hopes of exploring the Arctic for oil. However, talks are still ongoing between the two energy companies so it remains to be seen what, if any, deals emerge from these.
The chief executive of BP group, Bob Dudley, said in a statement “BP remains committed to Russia, to working constructively with Alfa-Access-Renova (AAR) in TNK-BP and to our existing good relationship with Rosneft”.
Talks are still ongoing between Rosneft and BP with the focus on finding a way of buying out the Russian oligarchs from TNK-BP. There are a number of points still to be discussed including whether or not to let one of the men, Mikhail Fridman have a share of the equity in BP and Rosneft.
Chairman of the Alfa Group, Mr Fridman said “AAR … sees significant benefit to developing cooperation with Rosneft within the framework of the TNK-BP shareholder agreement, and we plan to continue discussions about potential collaboration among BP, Rosneft and AAR”.
In the meantime as the agreement between BP and Rosneft has now collapsed the Russian oil giant is now able to look at partnerships with other oil giants including Shell and ExxonMobil.
BP had hoped the Rosneft deal would help improve its fortunes after the Gulf of Mexico oil spill last year.
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IEA Urges Middle East Oil Producers To Increase Supplies
As fuel prices remain high, the International Energy Agency (IEA) has urged oil producers in the Middle East to increase supplies to help keep prices down.
The IEA wants Middle East oil producers to increase oil production to keep fuel prices down and prevent any damage to the global economy. If countries such as Saudi Arabia increase production the IEA said it would use “all tools that are at the disposal of its members” to help.
The IEA request came at the quarterly meeting of the governing body of the IEA. It’s thought the request will put pressure on OPEC countries when they next meet in 3 weeks.
Members of the IEA said in a statement “The governing board urges action from producers that will help avoid the negative global economic consequences which a further sharp market tightening could cause, and welcomes commitments to increase supply. Additional increases in prices at this stage of the economic cycle risk derailing the global economic recovery and are neither in the interest of producing nor of consuming countries”.
After two weeks of falling crude oil prices they have started to go up again. Crude oil prices are still “at elevated levels” due to political uncertainty in oil producing countries, market fundamentals and future forecasts.
One reason believed to be behind the rise in oil prices is the drop in the amount of stored oil in US refineries but the dollar has also been strong recently which has helped to increase prices.
It’s easy to see how oil prices can affect petrol prices but high oil prices also affect businesses and there’s concern that if prices continue to rise we’ll end up with another global recession. High fuel prices have a detrimental effect on transport businesses with much of their costs being made up with the cost of fuel. Add that to increases in business electricity prices and business gas prices and businesses begin to suffer and that’s why there’s a call for OPEC to increase output.
However, there’s also concern that we have reached or about to reach peak oil – the point at which the world can no longer produce any more oil.
It’s been suggested that OPEC will agree to increase production but there are members of OPEC who suggest that high oil prices are nothing to do with how much oil is being generated and that it’s down to speculators.
It’s therefore just a matter of waiting to see if OPEC countries agree to increase oil production. Even if they do though, it seems likely that we will be stuck with high fuel prices for some time.
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BG Group Profits Not Helped By Higher North Sea Oil & Gas Taxes
Higher North Sea oil and gas taxes and unrest in North Africa and the Middle East has meant profits at BG Group have fallen by almost £600m.
The UK oil and gas company, BG Group, has not just put its drop in profits down to higher taxes and conflicts around the world however; the group also said it had temporarily closed two platforms in the North Sea for repairs and maintenance and this had also affected profits.
BG Group announced that pre-tax profits for the first quarter were £1.4 billion, down from £2 billion for the same period last year.
The chief executive of BG Group said “It was a challenging quarter for our exploration and production operations with civil unrest in North Africa, flooding in Australia, an increase in UK tax and a shut down in the North Sea”.
Utility Exchange reported last week that British Gas may not re-open some of its gas platforms after being closed for maintenance. Like BG Group, British Gas blames the new North Sea oil and gas tax which was introduced by the Chancellor, George Osborne, in the budget in March.
BG Group said the Chancellor’s changes had meant their tax rate had risen from 42% to 45%. However, the company has said it expects this to fall as they move forward, largely because the company plans to generate profits in areas other than the North Sea.
But the drop in profits for BG group was not just down to increased taxes. The Everest and Lomond platforms were temporarily shut down while repair work was carried out and this led to a 5% fall in production volumes. These two platforms are now back on stream so again improvements should be seen in the next quarter.
Utility Exchange has reported in the past on the unrest in North Africa and the Middle East and its effect on oil and gas production. However, there are positives for BG group with a new oil discovery in Brazil and an increase in production at Lula Sul to 25,000 barrels a day. The group will also be investing $10 billion in the South American country over the next ten years with plans for 550,000 barrels of oil a day by 2020.
The increase in oil prices over the last six months has also helped BG Group and if Japan turns increasingly to gas imports then BG Group will also profit from higher gas prices. Utility Exchange has already reported on how this move towards gas will affect wholesale prices and therefore business gas prices. The expectation is that prices will increase which should prove to be good news for BG group.
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Expert Says North Sea Tax Could Cost Offshore Oil & Gas Industry Over £50m
An energy expert has said that the new North Sea tax imposed by the Chancellor in the March Budget could cost the offshore industry over £50 million.
Professor Alex Kemp, Professor of Petroleum economics at Aberdeen University, said the North Sea tax which should generate £10 billion from the oil and gas industry over the next five years could damage the offshore industry for years to come.
Utility Exchange reported recently that North Sea oil and gas producers warned that the new tax could mean thousands of jobs are lost. These claims had been dismissed by some as “scare-mongering” but Prof Kemp’s report now adds weight to their claims.
While the Prime Minister has backed Mr Osborne’s new tax, he said they would continue to talk with representatives from the oil and gas sector. However, Mr Osborne is being pressed to look at Professor Kemp’s report.
Prof Kemp said the number of new offshore developments in the North Sea could be cut by over 35% in the next 30 years and that this was down to the new North Sea tax. He said there were around 400 undeveloped fields in the North Sea and companies may now decide they are not economically viable. In fact, Utility Exchange reported recently that Statoil had stopped work on its North Sea projects as a result of the new tax.
Professor Kemp said UK oil and gas production could drop by 2.25 billion barrels because of the new tax. Furthermore, he said that if the cost of a barrel of oil was at $90 then the total expenditure in the offshore industry would fall by £52.2 billion over the course of the next 30 years.
Professor Kemp said “We are talking about a lot of oil and gas that will not be produced here that we would then have to input”.
He added “If we leave things as they are this effect will go a long way into the future – it will not just be with us for a few years before everything goes back to normal. I am concerned that the Budget only looks at the next five years, with a plan to get as much money out of the industry as possible”.
The economics director at Oil and Gas UK, Mike Tholen, said “This kind of impact is wholly expected following the sudden change which resulted in producers paying between 62-81% tax on UK oil and gas production. The tax change has damaged the industry’s confidence and trust in the tax regime and that trust will take a long time to rebuild”.
He added “Oil and Gas UK can only work with the government to find ways to minimise the effects on investment, production, energy security and jobs”.
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Oil Reaches Two And A Half Year High As BP Looks Set To Resume Gulf Of Mexico Drilling
Crude oil has hit its highest prices for two and a half years as concerns grow over continuity of supplies amid the conflict in Libya and BP looks set to resume drilling in the Gulf of Mexico.
US crude has risen to $108.74 this morning (Monday), the highest it’s been since September 2008 and Brent crude has risen to $119.54 – just 2 cents off its highest level reached in February.
While Saudi Arabia had previously said the West had nothing to worry about because they would increase production, the Iranians, currently chairing Opec, said they will not increase oil production.
On Friday the Iranian oil minister said an emergency meeting to discuss increasing production was not needed. It means rising prices are likely to hit business utilities and increase the cost of business power.
The rising shares in the Asian markets helped to increase oil prices. Shares rose in the Asian stock markets to their highest in 3 years.
Meanwhile BP could return to the Gulf of Mexico to continue deepwater drilling. Regulators in the United States have given BP authorisation to begin work on 10 wells. These were stopped after the Deepwater Horizon disaster last April.
If it’s true that BP is to re-start its deepwater drilling there’s likely to be a lot of anger from the public. The worst oil spill in US history is still affecting the local population and is likely to do so for some years to come.
Prosecutors in the US are still thinking about chasing BP managers with manslaughter charges, while BP said it had provided detailed plans and promised to meet strict safety standards if allowed to re-start drilling.
Elsewhere, Rockhopper has said it believes there are 155m barrels of oil in place at its Sea Lion Field off the Falklands. As a result shares in Rockhopper Exploration have increased almost 8% in early trading.
Desire Petroleum has said that it will review all of its financial options so that it can start drilling for oil again in the Falklands later this year. Despite having drilled five of its six options without finding oil the company believes it will find oil.
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Shell Sells Stanlow Oil Refinery To Essar Energy
The oil giant Shell is to sell the second biggest oil refinery in Britain to the growing Indian energy company, Essar Energy.
Shell is set to offload its Stanlow oil refinery in Cheshire to Essar Energy in a deal estimated to be worth £700 million. The refinery produces around a sixth of the petrol in the UK and represents 15% of production from UK refineries.
The refinery in Ellesmere Port will be sold for £217 million and the contents of the refinery, i.e. the crude oil, refined products and other stock, will be sold separately for around £500 million.
The refinery employs around 960 workers, all of whom will be kept on after the sale and will also keep their final salary pension scheme.
Essar Energy plans to increase production at the refinery by investing in the plant to enable it to make petrol from “heavy” oil rather than the more expensive “sweet” oil. Production will increase from 220,000 barrels a day to 300,000 barrels. The chief executive of Essar Energy, Mr Naresh Nayyar, said the plant currently operates at around 75% of its total capacity.
Essar will use storage depots next to the refinery to store petrol sent from refineries currently under construction in India.
The general manager of the refinery, Frank Wilson, said “This deal serves Stanlow’s future well given Essar’s commitment to investment and intent to increase site throughputs. It can only benefit staff, business partners and the local community and region”.
Western oil multi-nationals are increasingly getting out of the refinery business because, they argue, of the low margins. Recently, PetroChina bought Grangemouth refinery in Scotland from Ineos, the chemical company and Total is also looking at selling off its Lindsey oil refinery.
The deal is set to be completed in the second half of this year.
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Oil Industry Warns Thousands Of Jobs Threatened By Chancellor’s North Sea Oil & Gas Tax
North Sea oil and gas producers have warned that thousands of jobs could be lost as a result of the tax imposed by the Chancellor in the Budget yesterday.
The oil industry said tens of thousands of jobs could be lost in the UK as a result of the tax introduced by the Chancellor yesterday. The tax will help to pay for the cut in fuel duty – also announced in the Budget.
The economics director of Oil and Gas UK, Mike Tholen, said the North Sea oil and gas tax will damage long term energy security.
There are concerns that the oil companies will simply add the tax Mr Osborne has imposed on oil and gas producers on to the price of petrol although the Chancellor said he would watch the price of fuel “like a hawk” to ensure companies don’t pass on the tax to drivers.
Oil and Gas UK said that the tax on the industry would result in job losses and lost production. As a result the UK would have to import even more oil.
Speaking to the BBC Mr Tholen said “What you see is the UK’s reputation as a global player in oil and gas industry falter because of this. Many companies from abroad are looking at whether to invest in the UK, to help us get the new oil and gas reserves out of our waters. What we see is that image yet again shattered because of the tax change”.
He said there was concern that investment in North Sea Oil and Gas would now fall with jobs and technology lost adding “we will undoubtedly see our nation less well off when it comes to energy security in the years ahead”.
The oil and gas industry employs around 500,000 people across the country and Mr Tholen said “there will be tens of thousands of those who will not now have jobs in the future because of this”.
The managing director of Centrica Energy, Mike Hanafin, said the new tax “could have a chilling impact on future investment in the North Sea”. Meanwhile the shadow chancellor, Ed balls, said it was right to cut fuel duty but it may not mean motorists end up paying lower petrol prices because oil companies may increase prices. He said “Can George Osborne guarantee they won’t just push that straight back up at the pumps? No he can not”.
The LibDem Chief Secretary to the Treasury, Danny Alexander said North Sea oil companies were separate from those selling fuel at pumps so pump prices were unlikely to go up. Even the chief executive of Oil and Gas UK, Malcolm Webb said the new tax would not “affect the consumer at the pump at all”.
The Chancellor said the government would introduce what he called a fair fuel duty stabiliser which would be paid for by the supplementary tax on North Sea oil and gas. As Utility Exchange reported yesterday, the Chancellor explained that if the price of oil fell below $75 a barrel or a similar figure, then the fuel duty escalator would be reintroduced and the new oil tax would be reduced too.
It remains to be seen what effect the new oil and gas tax will have on jobs in the industry and if oil companies simply pass the new tax on to motorists through increased pump prices.
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Chancellor Announces Cut In Fuel Duty To Help Families And Businesses
In a surprise move the Chancellor, George Osborne, announced in the budget today that because high oil prices are affecting both families and small businesses, he would not only postpone the next planned fuel duty increase but he would also cut the present duty on petrol by 1p from 6pm this evening.
Small businesses have been calling for some kind of assistance on the cost of fuel for some time and the Federation of Small Businesses (FSB) has been advocating a fuel duty stabiliser because, as Utility Exchange reported recently, the FSB argues rising fuel costs are holding back small business growth. However, the cut in the current duty by 1p from this evening was a surprise.
Under the current fuel duty escalator scheme, the fuel duty rise in April would have resulted in an increase of almost 5p a litre to record fuel prices. However, George Osborne said the fuel duty rise for April would be put back until next year and the 2012 increase would be delayed until the following year. He also announced that the fuel duty escalator would be cancelled for the rest of this Parliamentary term.
However, the Chancellor announced the introduction of a “fair fuel stabiliser” which would be paid for by increasing the supplementary charge on North Sea oil. He explained “If the oil price sustains a fall below $75 – and we will consult on the precise figure – we will reintroduce the escalator and reduce the new oil taxation in proportion”. In other words there will be no fuel duty escalator when oil prices are high and no extra oil tax when oil prices are low.
Motoring organisations have welcomed the help for drivers and small business owners. The director of the RAC Foundation, Professor Stephen Glaister said “Thirty four million drivers will welcome this, as will hauliers”. Meanwhile the president of the AA, Edmund King said “this action has probably stopped a summer of discontent”.
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FSB Says Rising Fuel Duty Is Holding Back Small Business Growth
The rise in fuel duty over the last few months is holding back small business growth and the Federation of Small Businesses (FSB) is worried it’s affecting those sectors vital for economic growth.
Over a thousand people replied to the FSB’s Voice of Small Business survey and initial results reveal that rises in fuel duty will have a negative impact on around 79% of small businesses.
According to the results business in the manufacturing, construction and transport industries are severely affected by rising fuel costs. The FSB is worried that despite manufacturing being one of the few sectors showing signs of growth, further increases in fuel prices could start to hit and damage economic recovery.
In the past the FSB has said that the rise in fuel duty will cost small firms as much as £2,000 over the next six months. This is an extra cost on top of their planned outgoings.
The problem is that small businesses find it harder to absorb these additional costs. Consequently, the only way they can deal with these extra costs is by freezing wages, increasing prices or making people redundant.
The FSB is worried that a rise in fuel duty will damage the manufacturing sector which provides £133 billion to the economy and employs around two and half million people. Therefore the FSB wants the Government to think again about the planned 1p a litre rise in fuel duty when the Budget is announced later this week. As well as reversing the planned fuel duty rise, the FSB wants the Government to introduce a fuel duty stabiliser – this would adjust fuel prices when oil prices rise or fall so that petrol remains at a more constant price.
The opposition wants a cut in VAT on fuel but the FSB believes that while a reduction in VAT would cut the price at the pump it won’t help to stop fuel prices rising rapidly, whereas a fuel duty stabiliser would.
There are arguments that a fuel duty stabiliser is too complicated to implement but in a report entitled “A Fuel Duty Stabiliser – is it really that complicated?” the FSB showed that a stabiliser is simple, affordable and environmentally friendly.
A fuel duty stabiliser would mean businesses would be more able to plan ahead because the cost of fuel would be stabilised and businesses would be able to plan for the future and include known fuel costs in their plans.
The Budget will be delivered this week so it remains to be seen what measures George Osborne, the Chancellor, will announce to deal with rising fuel costs and help small businesses.