EDITOR: | June 21st, 2013 | 1 Comment

Gas hunt in PNG; Phosphate headache in Tunisia; Commodities hangover at Morgan Stanley

| June 21, 2013 | 1 Comment
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Looking for a new oil and gas frontier? Look no further than Papua New Guinea.

Gas was discovered there nearly 30 years ago, but there was no domestic market. Years went by as deals were negotiated to build a gas pipeline to Australia; but now the urgency has gone out of that as the state most likely to benefit, Queensland, has suddenly become awash with coal-seam gas projects, with enough forecast output to support three planned liquefied natural gas plants at Gladstone (and, of course, all its domestic gas demand).

Instead the hope now for PNG is LNG. The PNG LNG project, led by ExxonMobil, will be in production next year and is expected to produce 9 trillion cubic feet of gas over its life. That gas will be piped nearly 700km to an LNG plant near the Papua New Guinea capital of Port Moresby and the end product exported to utilities in China, Taiwan and Japan.

But the big players want more. ExxonMobil has been in talks with InterOil Corp (NYSE:IOC) over development of the latter’s Elk and Antelope fields in Gulf province while Osaka Gas is spending $204 million to buy from Australia’s Horizon Oil (ASX:HZN) a 40% stake in the latter’s gas project in Western province. There will be another $130 million due under that deal once an LNG project gets government approval. Osaka is Japan’s second largest gas company with 7 million customers

And, according to the Australian Financial Review, France’s Total is also looking to get into LNG projects by working with Sydney-based Oil Search (ASX:OSH) — which is already one of ExxonMobil‘s partners in the LNG project now under development. Oil Search owns the P’nyang field which is seen as providing more gas for the Port Moresby LNG plant.

And another big player, Royal Dutch Shell, has yet to hook up with anyone in PNG but is looking hard, the newspaper says.

So far 15 million cubic feet of gas has been discovered in Papua New Guinea. And, of course, there are many prospects yet to be drilled.

PHOSPHATE: Tunisia is the fifth largest phosphate exporter in the world. In recent years, ever since the ‘Arab Spring’ sprung into life, the main concern has been about the potential for unrest to disrupt those exports. So far, those fears have been groundless: indeed, the government’s Groupe Chimique Tunisien (Tunisian Chemical Group) has announced it will by October re-open its phosphate mine in the Meknassi region which can mine 6 million tonnes of ore a year.

Now an Australian company, Celamin Holdings (ASX:CNL) has announced a tripling of its phosphate resource at the Chaketma project in Tunisia. This now stands at 93 million tonnes of rock phosphate at a grade of 20.3%.

But it is not politics or civilian unrest that has cast a cloud over Tunisia’s phosphate industry. Press reports have been following the pollution controversy surrounding Groupe Chimique Tunisien and its phosphate refining near the coastal town of Gabes. There has been mounting unease over the alleged pumping of toxic waste from the plant into the Mediterranean Sea. The reports cite rising infertility and numbers of miscarriages and habitat damage.

This is a serious issue: last year, phosphate accounted for 25% of the national economy.

MARKET COMMENTARY: Well, it was a bad day on Wall Street and in London on Thursday (although Friday’s sessions in Asia showed some bounce-back).

But it was not a good look for commodities. Nickel finished on the London Metal Exchange at $13,628/tonne (remember when it hit $50,000/tonne?) and copper closed at $6738/tonne (remember when it was $10,000?).

Now, according to The Financial Times, Morgan Stanley is planning big cuts in its commodity operations, a sign the financial firm thinks we’re in for a drawn-out commodity dip. As the newspaper reminds us, several other banks including Credit Agricole and UBS have closed their commodities businesses almost entirely.

Morgan Stanley is shutting down its sections that deal with agriculture, dry freight and Australian electricity and reduce activity in European power and gas.


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Comments

  • Charlene

    very interested in the development of Queensland’s resources – thanks for the update Robin.

    July 4, 2013 - 9:04 AM

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