Random Notes  

Mobjectivist has done a post of his own on the loss of Richard Smalley.

The Sydney Morning Herald has some follow on comments about the AGL takeover of Southern hydro and accompanying restructuring. Crikey also had a look at the windfall gain the New Zealand government has made from this transaction.

The Age's Stephen Bartholomeusz had a typically thoughtful column on Saturday on the $3 billion-plus in capital to be raised by two forthcoming energy sector floats, Spark Infrastructure and SP Ausnet.

This represents a major selldown of equity, but not control, by the two biggest Asian investors in Australia over the past decade, the Singapore Government-owned Singapore Power and Hong Kong billionaire Li Ka-shing's Cheung Kong (CKI).

Add to that this morning's reported $1.425 billion purchase of Southern Hydro by AGL, which in turn has announced a demerger and the departure of CEO Greg Martin, and you have another flurry of deals over assets that were, in the main, first broken up and privatised by the Kennett Government.

With three $1 billion-plus energy sector deals and a major demerger going down at the moment, the only way to understand the flurry of activity is to refer back to Crikey's world famous power sell off list, which tracks every power sector deal and many of the advisers since 1992. The detail around the four big deals are not totally clear so the entries are as follows:

October 2005: AGL pays $1.425 billion for Southern Hydro's renewable business of 737mW of power across Victoria, NSW and South Australia.

November 2005: AGL to demerge its energy and infrastructure businesses after Southern Hydro acquisition.

November 2005: Hong Kong conglomerate CKI to float 50% of Victorian and South Australian electricity distribution businesses in a $1.5 billion-plus raising through a float of Spark Infrastructure.

November 2005: Singapore Power to raise more than $1.5 billion though the partial float of its largely Victorian gas and electricity assets in a partial float to be called SP Ausnet.

The real challenge will be trying to work out who has made and lost money on these latest deals, most of which relate to assets sold in the original $30 billion Kennett government sell off of Victoria's gas and electricity assets. For instance, the record on Southern Hydro is as follows:

November 1997: Infratil and NZ company Contact Energy pay $391 million for Southern Hydro, Victoria's small hydro power outfit.

1999-2000: Alliant Energy Corporation (AEC) trading as Alliant Energy Australia (AEA) progressively bought Southern Hydro and now owns each of the three partner companies that form the Southern Hydro Partnership, having bought the Contact Energy share in 1999 and the Infratil share in 2000.

March 2003: Alliant Energy sells Southern Hydro to government-owned Kiwi utility Meridian for $550 million which was close to what they paid in 1999 and 2000 to another Kiwi company Contact Energy and utility company Infratil.

Has the New Zealand taxpayer really made close to a $1 billion capital profit on today's deal with AGL?

On a bizarre note, Chinese / Kiwi "gnat" King Win Laurel is reportedly following up their failed Telstra bid with a $US450 billion offer to buy Exxon Mobil. The Oil Drum also has some notes on Russian investment in Nigeria.

Rigzone reports tha Japanese are taking a less hardline stance with China over oil and gas in the east china sea.

The Energy Blog has some comments on the slightly misleading news recently that Chinese oil consumption (or to be exact, demand growth) had "dropped" by 14% (meaning it fell from 19% to 5%). Jim also points out that Chinese coal production jumped over 10% during the past year. I suspect we're all in for a lot more global warming than anyone imagines. Except perhaps Lawrence Livermore laboratories, who are forecasting a 14.5 degree median temperature rise over the next 200 odd years, which presumably means everything dies.

Bala said the most drastic changes during the 300-year period would be during the 22nd century in which precipitation change, an increase in atmospheric precipitable water and a decrease in sea ice size are the largest when emissions rates are the highest. During the model runs, sea ice cover disappears almost completely in the northern hemisphere by the year 2150 during northern hemisphere summers.

"We took a very holistic view," Bala said. "What if we burn everything? It will be a wake up call in climate change."

As for the global warming skeptics, Bala said the proof is already evident. "Even if people don't believe in it today, the evidence will be there in 20 years," he said. "These are long-term problems."

He pointed to the 2003 European heat wave, and the 2005 Atlantic hurricane season as examples of extreme climate change. "We definitely know we are going to warm over the next 300 years," he said. "In reality, we may be worse off than we predict."

Back at RigZone, they are reporting that BP is looking at building a "super rig" to exploit the Liberty field offshore northern Alaska. They also have a report on the "fuels paradise" that is Canadian tar sands. I always tend to think that if increasing supply involves massive investments for offshore polar oil or tar sand extraction that the peak must be close.

Americans' love affair with the automobile is a key driver for global gasoline demand. Each man, woman and child in Dallas, for example, travels an average of 28.3 miles by car every day, according to federal estimates. Add surging consumption from China and elsewhere, and the pursuit of new oil reserves is white hot.

Companies working the sands have tripled production since 1999 and now produce 1.1 million barrels a day, nearly all of it for U.S. markets in the Midwest and Rocky Mountain states.

An additional million barrels a day will be in the market within five years. By 2015, the rate could rise to as much as 3 million barrels a day; by 2030, as much as 6 million.

Indeed, the extraction of oil from the sands is now so vast that it has become Canada's biggest source of greenhouse gases. The strip mines from which the oil-soaked dirt is removed are a spreading bruise on the landscape and in the skies. They gobble up miles of forest and prairie with sulfur piles, pipelines and tailing ponds.

"Industry and government are kind of going on a hope and a prayer ... that we don't cross the tipping point of ecological destruction," said Dan Woynillowicz, an environmentalist with the Pembina Institute in Calgary.

TreeHugger points out that at least the danger of global warming is slowly starting to penetrate the mass american psyche, with Oprah Winfrey devoting a show to the subject. Deltoid has a couple of posts performing the valuable public service of concisely debunking the global warming denial industry, while noting that Federal environment minister Ian Campbell has had the sense to declare that the global warming debate is really over (which was true about 5 years ago really). Its a shame he can't convince the rest of his party to do something about it.

Emerging from a bushwalk through the Tarkine forest in northwest Tasmania, Environment Minister Ian Campbell told The Australian that argument about the causes and impact of global warming had effectively ended.

“There is a very small handful of what we call sceptics who, in the face of seeing all of the evidence about carbon increases and all of the evidence about impacts on the climate, would still say that it’s only natural variability that is causing it,” Senator Campbell said.

“On global warming, I have spent an enormous amount of my time getting to understand the problem and getting to understand the solutions, and I think the Australian Government owes it to the public to tell it like it is - it is a very serious threat to Australia.”

Senator Campbell said he agreed broadly with the contention promoted recently in environmental scientist Tim Flannery’s book The Weather Makers that Australia and other industrialised nations need to take urgent action to avert environmental disaster.

Sustainablog points out the green buildings are more valuable than their primitive energy wasteful counterparts.

SafeHaven has an article on "trading the oil bull" that predicts the current downtrend will end at US$55 per barrel. I always find technical analysis to be basically gibberish - what if the US economy goes into recession and everyone else follows - does your (garish) chart reading help in that situation ? On the other hand, I'm a cynical enough trader to simply watch for medium term trends and ride them while they last, and I've been watching patiently for this latest correction to end while keeping an eye on the economy in general.



Green Car Congress has a post noting that Exxon's production is dropping even though their drilling organization has developed an optimization process that consistently reduces the time required to drill oil and gas wells by up to 35%.

And to close on a dispiriting note, a collection of links to posts on the decline of western civilisation. Deconsumption points to ex-Reagan speechwriter Peggy Noonan's article in the Wall Street Journal that declares that the US is no longer governable, and that "the wheels are coming off the trolley and the trolley off the tracks." (I still have a lot of respect for the various members of the paleo-con community who are least vaguely in touch with reality, as unpleasant as that is these days, rather than simply entering the wingnut denial state). Steve also has a little entreaty to some sections of the scientific community. SW looks at Senator Harry Reid's brief moment of triumph in search of the truth about the Iraq war.

To close, there is a movie out called "Blowin In The Wind" that looks at the use of depleted uranium weapons in military exercises in Australia. I always wonder why on earth would anyone approve this sort of thing ? Surely you can conduct a decent exercise using regular munitions (which are probably a lot cheaper to make as well) with the added benefit of not giving our soldiers "gulf war syndrome" and leaving a trail of radioactive dust behind to afflict the local townspeople. What's the point of it ?

Blowin' In The Wind is the latest film from two-time Academy Award nominee, David Bradbury - arguably Australia's most contentious and provocative documentary filmmaker.

It examines the secret treaty that allows the US military to train and test its weaponry on Australian soil. It looks at the impact of depleted uranium (DU) weapons and the far reaching physical and moral effects on every Australian.

This film shocked, angered and surprised large audiences recently when shown at the Sydney and Brisbane Film Festivals.