Saturday, April 09, 2005

Oil News in April

ChervonTexaco to become UnocalChevronTexaco

ChervonTexaco said today that it had agreed to buy Unocal, a large independent American oil company, in a cash and stock transaction valued at $16.8 billion, in a move that expands its global reach and could ignite a wave of takeovers of mid-tier producers.

The deal is the oil industry's largest in three years, and it gives ChevronTexaco many undeveloped reserves in Azerbaijan, Indonesia and the Gulf of Mexico at a time when oil companies are having trouble finding new prospects. It also ends months of speculation over the future of Unocal.

The deal comes at a time when giant oil companies are flush with cash, thanks to record crude prices, but short of fresh opportunities to develop fields. That has led some, like BP in Russia, to seek growth through acquisitions rather than through exploration.

With talks extending late into Sunday night, ChevronTexaco beat Eni of Italy, Europe's fourth-largest oil company, and the Chinese state-owned oil company CNOOC after Unocal put itself up for sale in an auction earlier this year. The takeover interest in Unocal, based in El Segundo, Calif., near Los Angeles, helped push its stock price up by nearly 50 percent since the beginning of the year.

ChevronTexaco, the second-largest American oil company after ExxonMobil, will pay $4.4 billion in cash and issue 210 million shares for Unocal, valuing the company at $62 a share, which is 3.7 percent lower than its market value on Friday. It will also assume $1.6 billion of Unocal debt.

Today, Unocal's shares dropped $4.75, or 7.4 percent, to close at $59.60 on the New York Stock Exchange. ChevronTexaco's shares fell $2.33, or 3.9 percent, to $56.98.


chart 2

The industry base is consolidating, not growing. The seven sisters are now four black widows.

IMF Warns of Permanent Oil Shock

MF warns on risk of ‘permanent oil shock’
By Javier Blas in London
Published: April 7 2005 20:02 | Last updated: April 7 2005 20:02

oil price upThe world faces “a permanent oil shock” and will have to adjust to sustained high prices in the next two decades, the International Monetary Fund said on Thursday in the starkest official warning yet about the long-term outlook for energy supplies.

Predicting surging demand from emerging countries and limited new supplies from outside the Organisation of the Petroleum Exporting Countries after 2010, Raghuram Rajan, IMF chief economist, said: “We should expect to live with high oil prices.”


The IMF forecast in its World Economic Outlook that crude would cost $34 a barrel in 2010 in today's money and would rise to $39-$56 a barrel in 2030. The predicted prices are well above market and oil industry expectations. They are also much higher than the latest long-term forecast from the International Energy Agency, the oil watchdog, of real oil prices of $27 a barrel in 2010 and $34 a barrel in 2030.

“The shock we see is a permanent shock that is going to continue... and countries need to adjust to that,” said David Robinson, deputy IMF chief economist.

Opec will need to increase production further to balance the oil market in the second half of the year, the US government said.

The IMF called on emerging countries in Asia, which this year would account for 40 per cent of the increase in oil demand, to curb their fuel subsidies. Several countries in the region, including China, Indonesia and Malaysia, have recently increased petrol prices in an attempt to reduce consumption.

The IMF based its forecast on a sharp rise in global oil demand, particularly from increased vehicle ownership in China, and non-Opec production reaching a plateau around 2010.

It expects oil demand to grow at a yearly rate of 2.1m barrels a day above the 1.5m b/d the market considers sustainable to reach 138.5m b/d in 2030.


But the IMF's report paints a gloomy picture for energy consumers: “With global dependence on oil production from Opec countries rising, much would depend on Opec supply response; most likely however, there would be growing upside risk to prices.” It estimates that the cartel, which controls 40 per cent of global oil production, would need to invest about $350bn to 2030 in new installations.

Pretty picture, no? Note no mention of AMERICA reducing our oil appetites...

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