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www.platts.

com December 2011

2012 Global Energy Outlook

Causes of Arab Discontent Unresolved


page 4

European Power: Recovery Postponed


page 23

Innovation and Inspiration: Energizing


Change in the Industry and the Economy
page 102
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Publisher’s Note
The 2011 Global Energy Outlook issue of Platts Insight—a key resource for short-
and long-term planning—draws on the first hand knowledge and expertise of just
a few of the 250 Platts editorial thought leaders from across the globe. In the fol-
lowing pages they discuss and identify key issues from 2011 and uncover potential
pitfalls and opportunities for 2012.
Don’t miss the inside story on this year’s Platts Global Energy Awards winners.
While the panel of eight Global Energy Awards judges consider the nominees’ finan-
cial performance, they also go beyond that metric to carefully consider a company’s
other performance indicators including customer focus, community involvement,
integrity and leadership before granting one of these prestigious awards.
Patsy Wurster
This year’s Global Leader’s Section showcases many of this year’s Global Energy
Awards finalists who are making major advances in their local communities and
across the world through exceptional leadership and innovation.
The 2011 Platts Top 250 Global Energy Company RankingsTM are also featured
in this issue. Each year, Platts ranks the world’s top energy companies by financial
performance, identifies who’s up and who’s down and provides a breakdown of
the Top 250 by industry and region, while providing commentary on trends and
movement within the list, including the fastest growing companies over a three
year period.
If you’d like to learn more about Insight and see the editorial calendar for the
2012 issues, visit our web site at www.events.platts.com.
Patsy Wurster
Publisher, Platts Insight

Guest Editor’s Note


Apocalypse Now
The world survived the 2008/09 financial crisis—or did it? Heading into 2012 and
the OECD is struggling to avoid another recession that could see energy demand
once again plummet and the current massive debt burden become structural. This
uncertainty leaves energy sector investment plans in the balance as the expectation
of steady growth in demand is once again replaced by possible contraction.
Uncertainty is by no means restricted to the demand side. Yemen and Syria were
both on the brink of civil war as the conflict in Libya wound down. In North Af-
rica and the Middle East the aspirations of the Arab Spring have yet to be met. The
Ross McCracken region that is home to the bulk of the world’s remaining conventional crude oil
supplies remains politically fragile.
And amidst all the doom and gloom, energy prices remain high, at least for oil and
coal. These internationally traded commodities are sustained by the Asian growth
story—the belief that the scale of Asia’s expansion is so great that any slump in
OECD demand will be but a drop in the ocean. But, at the same time, Asia’s growth
will cause shortages of everything from oil to bread and land.
Natural gas on the other hand is a different dish. Following US footsteps, the rest
of the world, from Jakarta to Warsaw to Johannesburg, is succumbing to shale gas
fever. This last development, while less dramatic than the political upheaval of the
Arab Spring or the economic cataclysm of the financial crisis, is no less important.
It is a salutary reminder that for all the apocalyptic predictions that have been
made down the years, whether for food, metals, energy or indeed the weather, none
have been proved right. Technological change has always bested the Malthusians.
At a time when policy is so driven by Cassandra-esque forecasts, perhaps someone
should take stock of the record of such predictions. It ain’t good.
Ross McCracken
Editor, Platts Energy Economist

December 2011 insight 1


Inside
1 Publisher’s Note 40 Russia Embraces Asian
Patsy Wurster
Energy Demand
1 Guest Editor’s Note Nadia Rodova
Ross McCracken
46 Winners and Losers Emerge
4 Causes of Arab Discontent Unresolved for Renewable Energy
Tamsin Carlisle
David R. Jones
8 The New ‘Normals’ of US Oil
John Kingston 52 Petchem Markets Adjust
13 Shale Replaces LNG as Gas to Changing Feed Slate
Jim Foster
Consumers’ Savior
William Powell
59 New Era for Renewables Finance
18 Recession Proof Coal Swami Venkataraman and Andrew Giudici
James O’Connell
64 Asia Forges Ahead (Platts Top 250
23 European Power: Recovery Postponed Global Energy Company Rankings™)
Henry Edwardes-Evans
Ross McCracken
28 Prices and Profits: US Shale Gas
Bill Holland 102 Innovation and Inspiration:
34 Climate, Kyoto and National Security: Energizing Change in the Industry
the Outlook for Durban and the Economy
Frank Watson Patsy Wurster

Authors

Tamsin Carlisle Henry Jim Foster Bill Holland David R. Jones John Kingston
Edwardes-Evans

Ross McCracken James O’Connell William Powell Nadia Rodova Swami Frank Watson
Venkataraman
Tamsin Carlisle has written about the oil and gas industry for more than 20 Henry Edwardes-Evans has a bachelor of arts degree from Oxford University,
years from bases in the Middle East and Canada. She joined the Dubai of- where he studied English Literature. As a trainee journalist at Financial Times
fice of Platts as a senior editor in June, 2011, following a three-year stint in Business, he worked on a number of energy-related publications before be-
Abu Dhabi heading energy coverage for The National, an English-language ing appointed editor of EC Energy Monthly in 1996. Henry launched and edited
daily newspaper launched in the UAE capital in April, 2008. Previously, the FT newsletter Power in East Europe, which subsequently became Platts
Tamsin was the Calgary-based correspondent for Dow Jones News- Energy in East Europe. In 2000, he took over editorship of FT’s flagship energy
wires and the Wall Street Journal, reporting on such issues as the rise newsletter, Power in Europe, now Platts Power in Europe, developing power
of Canada’s oil sands sector and the country’s emergence as the biggest plant trackers and managing three other highly-regarded Platts newsletter
source of US oil imports. titles – Energy in East Europe, Power UK and Power in Asia.

2 insight December 2011


Jim Foster is a senior editor of global petrochemical analytics at Platts. He in Poland and China. He holds a master’s degree in European studies from
has been with the company for more than 8 years, covering daily electricity, the London School of Economics and his undergraduate degree is from the
aromatics and styrenics markets before leading the petrochemical analytics University of East Anglia.
initiatives. He earned a bachelor’s degree from Auburn University in 1994 and
completed his MBA from the University of Phoenix in 2009. James O’Connell, international coal managing editor, joined Platts Metals
in 2001, covering global precious metals trading. He joined the coal team
Andrew Giudici joined Standard & Poor’s in 2003 and has held a number of in early 2007, leading reporters in Europe and Asia producing news for the
positions there. As a director in the Utilities, Infrastructure and Project Finance global coal, electrical and steel industries. He previously worked for Irish
Ratings group, he is responsible for determining new and maintaining existing broadcaster RTE. He holds a BA in English and History and a Higher Diploma
ratings on a portfolio of independent power providers, Public-Private Partner- in Applied Communications from the National University of Ireland.
ships and project finance transactions. Prior to this, Andrew was a team leader
in Structured Finance where he was responsible for managing credit ratings William Powell is the editor of Platts International Gas Report, a fortnightly
on a $1 trillion portfolio. Before joining Standard & Poor’s, Andrew worked for with a strong focus on markets and politics. He has worked for Platts since
Citigroup as part of the corporate workout team. He holds a BS in economics 2001, where he has managed the real-time European news and markets
from Oneonta State University and an MBA from St. John’s University. team, and has been writing about gas markets since the mid-1990s. Before
Platts he held senior positions at Financial Times Energy, Argus Media and
Bill Holland has been covering shale for six years as an associate editor Heren Energy. He is a Russian speaker and a graduate of London University.
for Platts’ Gas Daily. In addition to shale developments, Bill also covers
corporate finance, bankruptcies and mergers & acquisitions in the oil and Nadia Rodova, managing editor of Platts Moscow office, joined Platts in 2004
gas industries. A graduate of St. Joseph’s University in Philadelphia with to cover energy markets in Russia and the post-Soviet area. She previously
degrees in English and Philosophy, Holland has also done MBA studies at worked for the Australian Broadcasting Corporation and a number of economy-
Hood College in Frederick, Maryland. Prior to becoming a reporter and editor focused publications in Russia. She holds a Higher Diploma in Finance from Rus-
at newspapers, television stations and online news services in Florida, he sia’s Financial Academy and in Journalism from the Moscow State University.
served 15 years in the US Navy as an aviator and deck officer.
Swami Venkataraman is a director in Corporate and Government Ratings
David R. Jones is Platts’ global renewable energy editor, based in London. An
with Standard & Poor’s, and a member of the Utilities, Energy, and Project
environmental journalist with 20 years’ experience, David edited newsletters
Finance Ratings Group. He joined S&P Indian affiliate CRISIL in 1997 and has
on US state and local government, medical waste management, oil pollution,
worked since 1999 in both the New York and San Francisco S&P offices. He
and solid waste before joining Platts in 2001 to cover coal and energy policy.
is a Chartered Financial Analyst, holds a B.Tech from the Indian Institute of
John Kingston, Platts’ global director of oil, manages a staff of almost 80 Technology and an MBA from the Indian Institute of Management.
editors covering the world’s oil industry. He has been with Platts for 22
years, including stints as managing editor of Platts Oilgram Price Report and Frank Watson, managing editor of Platts Emissions Daily, is a financial jour-
editor-in-chief of Platts Oilgram News. Prior to joining Platts, John worked for nalist and editor specializing in energy markets. He has headed up the global
American Metal Market and for newspapers in New Jersey and Virginia. He emissions team at Platts since May 2008, having held the position of Europe
is a graduate of Washington & Lee University. Editor on emissions markets since August 2005. Frank developed Platts’ cov-
erage of the emerging EU Emissions Trading Scheme, UN Clean Development
Ross McCracken, editor of Energy Economist, joined Platts in 1999 to run the Mechanism and Joint Implementation schemes, covering regulatory policy
European and West African crude desk. He was previously an editor with an under the EU ETS and Kyoto Protocol, producing independent over-the-
Oxford University-based political and economic consultancy, and has taught counter price assessments, market commentary and analysis.

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December 2011 insight 3


Arab spring

Causes of Arab
Discontent Unresolved
Tamsin Carlisle, Senior Editor

The Arab Spring arrived late and has still to blossom


into a summer of prosperity and freedom. Instead, the
revolutionary fervor that quickly toppled two dictators and,
with much more difficulty, has lately ousted a third,
continued to crest in ragged waves across the Middle East
and North Africa well into the fall of 2011.

In Tunisia and Egypt, the Arab oil producing region. Although the
Spring may be running out of steam, MENA region encompasses an ethnic,
sapped by harsh post-revolutionary cultural, economic and political mosa-
economic realities, continuing politi- ic of seldom appreciated diversity, the
cal uncertainty and old-guard resis- general picture that emerges is one of
tance to institutional reform. In Lib- troubling volatility.
ya, the economy is broken, although
probably not irreparably so. The Risk Premium
country’s crude exports remain all With the notable exception of Lib-
but halted as its oil wells struggle to ya, most of the recent upheaval in the
return to life and its refineries sputter. MENA region has been concentrated
In terms of oil and broader economic outside of the major oil producing
output, Syria and Yemen are out for states. Nonetheless, with the issues that
the count, while political discontent triggered the recent uprisings largely
continues to rumble in Arab states as unresolved, the risk of further disrup-
diverse as Bahrain, Jordan, Morocco, tions to Persian Gulf and North Afri-
Algeria, Kuwait and Sudan. can oil supplies cannot be discounted.
Outside the Arab region, the Iranian As Libya’s unrest escalated into civil
reform movement has, for the mo- war, it came as no surprise that the
ment, been cowed. But sanctions are price of the physical crude oil bench-
biting and Iran’s key hydrocarbon sec- mark Dated Brent crude climbed back
tor is clearly struggling. Tehran’s irasci- towards $130 per barrel, its highest
bility towards Riyadh is undiminished level since July 2008. Saudi Arabia
and casts a wide, intransigent shad- and other Gulf Arab OPEC exporters
ow over the world’s most important responded (eventually) with higher

4 insight December 2011


2012 global energy outlook - Arab spring

output. Saudi Aramco even made to curb inflation and guard against
available a new blended light, sweet overheating are more than sufficient
crude, custom designed as a substitute to account for the decline. All these
for the 1.6 million b/d of Libyan light, factors would appear to presage a peri-
sweet crude that had disappeared od of falling oil demand in developed
from the market. economies and slower demand growth
Yet, although no European refi nery in the critically important Chinese
ran short of crude—even as the con-
flagrated earthquake, tsunami and ... the market viewed Saudi output increases
nuclear disasters in Japan boosted as reducing the kingdom’s spare oil production
demand for oil from Asia—the mar-
ket viewed Saudi output increases capacity, thereby making global oil supplies
as reducing the kingdom’s spare oil
production capacity, thereby making more rather than less vulnerable to further
global oil supplies more rather than disruptions.
less vulnerable to further disruptions.
Abdalla el-Badri, the OPEC secretary- market. By September, the prospect
general, has estimated the oil price of a double-dip global recession and
premium due to the Arab Spring at an outright drop in world oil demand
$16 to $20/b. At a September press loomed larger than at any time in the
briefi ng in Dubai, when the Liby- past three years.
an confl ict appeared to be winding And yet, oil prices remained surpris-
down, he was unsure whether that ingly robust, with Dated Brent crude
risk premium had started to decline. still in triple digit territory to the end
International crude prices have of September. The US benchmark,
trended downward during the sum- West Texas Intermediate, hovered at
mer and fall of 2011, but intensifying a significantly lower level in the mid
concerns about Europe’s debt crisis $80s per barrel, but the yawning gap
and stubbornly high US unemploy- between Brent and WTI is predomi-
ment, combined with Beijing’s efforts nantly the result of local distortions in

1. Oil prices and the Arab Spring.


Dated Brent ($/b)
130
Protests and demonstrations erupt across
Libyan capital Tripoli
the Middle East and North Africa, 2/25/11
falls to rebels, 8/24/11
120

Self immolation of
110 Algerian market trader
sparks unrest in Tunisia
12/19/10
Egyptians protest against post-Mubarak
100
military government, 9/16/11

Unrest spreads in Libya, Yemen close to


90 leading to anti-Qadafi rebellion civil war, 9/24/11
2/16/11
Sanctions-hit Syrian
80 Egyptian government announces government continues
that president Hosni Mubarak violent crackdowns on
Tunisian president Ben Ali
is standing down, 2/11/11 protests, 9/26/11
flees to Saudi Arabia
70 1/16/11
Nationwide protests Last pro-Qadafi supporters
erupt in Egypt, 1/25/11 fight on in Sirte, 10/18/11
60
10/2010 12/2010 2/2011 4/2011 6/2011 8/2011 10/2011
Source: Platts

December 2011 insight 5


2012 global energy outlook - Arab spring

North American physical crude mar- uprising, namely the region’s wide-
kets due to infrastructure constraints spread and growing youth unemploy-
around the key pricing hub of Cush- ment, ingrained institutional corrup-
ing, Oklahoma. tion resulting in social inequity and
As of Fall 2011, international oil the disenfranchisement of a large por-
prices seemed poised between two tion of the region’s native and immi-
opposing forces: downward pressure grant populations.
from the deteriorating global eco- The IMF wrote in April: “The un-
nomic outlook balanced by upward folding events make it clear that re-
pressure from lingering concerns forms, and even rapid economic
about MENA-region unrest. If any- growth as seen periodically in Tuni-
thing, the bearish global situation sia and Egypt, cannot be sustained
unless they create jobs for the rap-
... the most troubling problem on the horizon idly growing labor force and are ac-
companied by social policies for the
is the short-term failure of MENA-region most vulnerable. For growth to be
governments to address the root causes sustainable, it must be inclusive and
broadly shared, and not just captured
of the Arab uprising by a privileged few. Endemic corrup-
tion in the region is an unacceptable
seemed to be carrying the day, but a affront to the dignity of its citizens,
reversal due to further MENA oil ex- and the absence of transparent and
port disruptions later in the year or in fair rules of the game will inevitably
2012 cannot be ruled out. undermine inclusive growth.”
To start with, it is unclear how quickly Surging food and fuel prices in
Libyan oil will return to the market, as fi rst-half 2011 were seen as especial-
credible information on the extent of ly destabilizing for the region. The
damage to the country’s oil sector infra- IMF noted that various MENA region
structure has been slow to emerge. Pre- countries including Saudi Arabia,
liminary anecdotal reports of only mi- Bahrain, Kuwait, Oman, the UAE,
nor damage to facilities in and around Algeria and Yemen, had introduced
Benghazi, the rebel stronghold in east- both temporary and permanent fis-
ern Libya, were somewhat reassuring, cal measures that amounted to state
but did not paint a comprehensive pic- hand-outs aimed at quieting politi-
ture of the situation across the country. cal disaffection. For the most part,
A large question mark also hung they would do little to alleviate the
over Syrian crude supplies as interna- region’s core problem of youth unem-
tional sanctions were enacted against ployment, it predicted.
the discredited regime of strongman Essentially, that means unrest
Bashir al-Assad. For similar reasons, a in the region could escalate at any
decline in Iranian oil output was on time. Even the Saudi regime’s ability
the cards. An offsetting regional fac- to pay off potential protesters faces
tor was early Iraqi progress in bringing limitations, especially if the global
new crude supplies to market as large economy deteriorates and takes oil
development projects led by interna- prices with it. Against this, lower
tional oil companies gathered momen- oil prices would ease the budgetary
tum. However, Iraq’s precarious infra- strain faced by MENA-region oil im-
structure is likely to cause bottlenecks porters such as Jordan, Tunisia and,
sooner rather than later. in recent years, Egypt. On balance,
the risk premium attributable to the
Root Causes Arab Spring and continuing political
However, the most troubling prob- volatility in the MENA region seems
lem on the horizon is the short-term likely to stay firmly in place for the
failure of MENA-region governments foreseeable future, however brief
to address the root causes of the Arab that may be. ■

6 insight December 2011


oil

The New ‘Normals’


of US Oil
John Kingston, Director of News, Platts

The focus on spreads is coming off the trading floor and into
the boardroom. Investment decisions are being taken on the
basis that the price difference between crude oil benchmarks
West Texas Intermediate and Dated Brent and between crude
oil and natural gas will stay wide. These investments are long
term and assume that current conditions represent a new and
stable “normal”. The reality may be more fleeting.

Spreads are something traders talk boil down to the question of whether
about all the time, in their own unique it’s better for a utility to burn natural
lingo. For example, “Novy-Deck” is gas and create electricity, or just buy
trader shorthand for the spread be- electricity generated elsewhere, and
tween a November price and a Decem- serve part of its customer base with
ber price; the “up-down” represents the purchased watts.
the price difference between the same Spreads don’t always stay in nice
petroleum product, one priced at the neat ranges, whether they are energy
US Gulf Coast and the other in the spreads or financial instruments. The
US Atlantic Coast. (One end is at the collapse in 1998 of hedge fund Long
“up” end of the Colonial Pipeline; the Term Capital Management was easily
other at the “down” end. Get it?) It’s the most vivid example of a company
all very esoteric. whose business plan was based on a
Some spreads are easier to under- simple idea: spreads always come back.
stand as a physical difference rather It bet a lot of money on that belief,
than just trader talk. For example, and then watched it all evaporate as
the ethanol business talks about “the markets chose to go their own way.
crush spread”; the relative value of Markets do that sometimes.
crushing corn into ethanol and sell- In the last two to three years, en-
ing it into the fuels market versus ergy markets have been getting to
keeping it as a kernel and selling it to grips with two spreads that long ago
feed pigs and cows. The “spark spread” stopped doing what they’re “sup-
has several defi nitions, but they all posed” to do. But no longer is the talk

8 insight December 2011


2012 global energy outlook - oil

just about numbers on a whiteboard Canadian oil sands. Chicago, the fi nal
at the front of a trading room, or on terminus of the Capline, has plenty of
a flashing screen from an exchange. Bakken and Canadian crude to fi ll its
Now, those spreads are causing signifi- refi neries.
cant investment decisions to be made And you can see it in the numer-
around them, with long-term impacts ous pipeline projects planned to carry
on supply lines. In essence, companies crude away from Cushing and down
with physical assets, not just traders, to the US Gulf Coast, none more
are starting to bet on a new normal, controversial than the Keystone XL
but one that might just as well prove pipeline. The section between the Ca-
transitory. nadian border and Cushing—before
it heads to the Gulf of Mexico—has
Key Spreads become a cause célèbre of the environ-
The two spreads in question are mental movement.
the Brent to West Texas Intermedi- The Brent-WTI spread has most
ate spread, historically with WTI at clearly been a boon to the US rail in-
a premium but blown out earlier this dustry. The precise amount of crude
year to well over $20/barrel in favor being railed from Canada’s oil sands
of Brent; and the crude to US natural and the Bakken in North Dakota and
gas spread, where the enormous gap Montana to various markets isn’t cer-
between the two is starting to have tain. But at the Platts Pipeline con-
an impact on consumption patterns ference in September, Daniel House
and is spurring the construction of of Musket Corp. listed six projects in
billion-dollar facilities to take advan- just the next 12 months expected to
tage of the difference. come online with 300,000 b/d of rail
The reasons for the shift behind capacity from the Bakken, shipped to
Brent-WTI are well-known: lots of … well, wherever. (That’s one of the
new oil production from Canadian points that rail’s backers make, that
oil sands and the Bakken Shale for- the product can go wherever there’s a
mation, heading into the NYMEX rail line.)
contract delivery point of Cushing, It’s also a boon to US Midwest refi n-
Oklahoma, with inadequate pipeline ers, who are able to refi ne crude based
capacity to take it any further beyond. on the price of WTI and sell products
Combine that with a wave of recur- that bear no such burden. So Cush-
ring outages in the North Sea and the ing-based oil is cheap, but products
loss of Libyan output, and you have made from it get sold at prices more in
the formula for Brent-WTI to begin line with Brent, the global oil bench-
2011 at about $4/b, and be at $27/b mark. The Cushing crude market may
by the time September was coming to be cut off from much of the rest of the
a close. world; the products market, connect-
The gap between those two crudes ed to the Gulf Coast by the Magellan
has had a physical impact that can be pipeline, is not.
seen in a number of ways. You can see So, for example, cracking margins for
it in trains pulling more than 100 rail a barrel of WTI refined in the US Mid-
cars coming out of the Bakken field continent, according to Turner Mason
in North Dakota, fi lled with crude on models and Platts data, averaged more
their way to a destination other than than $30/b for July and August, a fig-
Cushing, trying to stay away from ure so high it’s almost laughable. The
those depressed prices. You can see it cracking margin for Light Louisiana
in the once mighty Capline, a pipe- Sweet crude in the US Gulf during that
line that used to carry crudes from period? About $3.70/b.
all over the world up from the Gulf Those sorts of opportunities have
of Mexico to Chicago, now carrying spurred a few refi nery expansions,
almost nothing but products such as which on the surface don’t appear to
diluents needed for the production of be that big. But they’re coming against

December 2011 insight 9


2012 global energy outlook - oil

a background of other refi neries shut- Natural Gas Versus Crude


ting or threatening to shut (for ex- A lot of traders in 2009 bet that
ample, Sunoco and ConocoPhillips in natural gas and crude would get back
the Philadelphia area.) Given that, it’s to a more “normal” relationship, and
notable that both Valero (at its McKee that it too would be “back to stay.”
refi nery in Texas, one of the biggest It didn’t happen. Measuring natural
refi neries consuming WTI from Cush- gas at the NYMEX Henry Hub deliv-
ing) and Tesoro (at Mandan, North ery point as a percentage of WTI and
Dakota, not far from the heart of the Brent prices reveals a double-digit
Bakken) both announced expansions figure through the fi rst two months
this year. of 2009. But then it began its long
What’s going to end this spread? As slide. For the fi rst nine months of this
recently as September, analysts were year, that percentage was a little less
expecting this gigantic Brent-WTI than 4.5% for natural gas to WTI, and
spread to stick around awhile. It could about 3.75% for Brent.
even get wider; Citi analysts predicted As a result, 2011 will go down as
in July that it could hit $40/b some- the year in which a few companies
time in 2012. But that all changed in started to put their cash down on that
November. In a rapid series of events, spread staying wide. The list of pet-
the Obama Administration delayed a rochemical producers looking to add
decision on the Keystone XL Pipeline ethylene cracking capacity, using the
until early 2013, and just a few days steady and cheap supply of ethane
later, ConocoPhillips sold its 50% coming from shale gas plays, got lon-
stake in the Seaway crude pipeline be- ger as the months went by. Williams
tween Cushing and the Gulf Coast to … Dow Chemicals … Phillips … and
Enbridge Energy Partners. more—all of them announced an in-
With that development came the tent to expand.
news that the Seaway line would be But the most intriguing declaration
reversed, and would carry crude from was the June announcement by Shell
Cushing to the US Gulf. That will that it intended to build an ethylene
give an exit for some of the Cushing cracker in the Appalachian region, us-
inventories, and it’s making predic- ing ethane coming out of the Marcel-
tions of a $40 Brent/WTI spread look lus Shale as a feedstock. That’s Appa-
way off the mark. The spread—al- lachia, where the steel mills all closed,
ready narrowing in part because of where the coal mines were losing out
the movement of oil by rail at a level to cleaner coal in other parts of the
far beyond what anybody had pre- country and the world, in short a re-
dicted—immediately plummeted and gion that had no blue-collar future.
in mid-November had fallen to near And now three states in the general
the $9/b level. vicinity of Pittsburgh—Pennsylvania,
Will this kill the revival in railcar oil? West Virginia and Ohio—are vying
Panelists on the rail forum at the Platts to become the home of a new pet-
Pipeline conference earlier this year rochemical plant in a region whose
said, “no”. They argued that the start- manufacturing days were supposed
up of pipeline capacity to move crude to be behind it.
out of Cushing to the Gulf Coast won’t It’s a development whose founda-
kill their business, even if the Brent/ tion can be found in an otherwise
WTI spread narrows. The growth in nondescript chart on the Energy In-
US liquids and Canadian oil sands just formation Administration’s data page,
appears too relentless for there to be among numerous other categories.
enough pipeline capacity to handle all It has the title of “US Net Imports of
that growth; they’re obviously biased, Naphtha for Petrochemical Use.” And
but they were unanimous in their be- it’s the one category—so far—where
lief that rail is back to stay. That belief you can see the “shale gale” in the US
is now being put to the test. muscling aside petroleum.

10 insight December 2011


2012 global energy outlook - oil

If the price of naphtha and ethane mense. The Sasol plant didn’t come
were both zero, there’s no debate: an with an announced price tag, but a
ethylene cracker would use naphtha plan by Sasol and Talisman Energy to
as a feedstock, because it has preferen- build a GTL plant in western Canada
tial qualities. The chart shows the US could cost $10 billion for a little less
turning its back on naphtha as a feed- than 100,000 b/d of capacity, though
stock. What you don’t see, but which the estimated cost could also be as
everybody knows, is that it’s ethane low as $6 billion.
replacing it. And it’s the economics All GTL projects produce a zero sul-
driving that chart of imports that is fur liquid that is to be blended with
also driving the ethylene expansion distillates such as jet fuel and diesel.
in the US, seeking to use that ethane So comparing the costs of a GTL plant
as a competitive edge against non-US with the cost of a refi nery, which
crackers, who are mostly stuck with makes distillates as well as lower-
higher-priced naphtha as a feedstock. priced products such as gasoline or
There’s other anecdotal evidence fuel oil, is a telling point of reference.
of gas replacing petroleum here and And here’s what it tells: if the Talis-
there; using Compressed Natural Gas man joint venture is built and costs
in trash trucks seems to be the cur- the higher end of the construction es-
rent rage. But the fi rst Gas-to-Liquids timate, that’s about $100,000 per bar-
plant to be announced in the US in rel of capacity. Meanwhile, in sales of
September—a Sasol plant in Louisi- US and UK refi neries this year, that
ana—may be part of a new wave of corresponding figure, according to
GTL projects, which, if successful, Raymond James, has been as low as
could see an enormous displacement about $1,300/b, and no higher than
of petroleum by natural gas. $3,375/b.
It has been a big year for GTL. Shell How is that possible? Cheap natural
fi nally opened its giant Pearl GTL gas … if it stays cheap. But the fact
plant in Qatar, placing a bet that the that companies are even considering
cheap gas it gets from that country’s building GTL plants, when refi neries
enormous supplies, combined with can be had for a fraction of the cost,
the elevated price of oil, could make shows that there clearly are people
its multi-billion dollar investment out there who see the gas-to-crude
pay off. But the costs of GTL are im- spread as a new normal. ■

1. US naphtha imports for petchem use.


thousand b/d

220

170

120

70

20
Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11
Source: EIA

December 2011 insight 11


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gas markets

Shale Replaces LNG as


Gas Consumers’ Savior
William Powell, Editor, International Gas Report

Japan has been sucking in LNG to replace lost nuclear


output, driving spot prices for natural gas back up to
parity with long-term oil-indexed contracts—a level too rich
for Europe. Instead, Europe is turning to shale to reverse
its addiction to gas imports, in an attempt to emulate the
glorious isolation in which North America finds itself—
a low-priced gas island amidst rising global markets.

2011 has been a remarkable year for that consumers in the US and Canada
the normally steady-state world of gas continue to enjoy some of the lowest
in Europe and Asia. The upsets began natural gas prices in the world. A lack of
with revolution in major gas export- liquefaction capacity prevents produc-
ing countries in North Africa, followed ers from capturing arbitrage opportuni-
by a major upheaval in global coal, gas ties elsewhere—a problem that may be
and carbon markets in the aftermath addressed. The operator of at least one
of the catastrophic tsunami in Japan, of the US’s near-idle LNG import termi-
and ended with a series of encouraging nals is seeking permission to re-engi-
shale well results in Poland and the UK. neer it to take Henry Hub gas, liquefy it
These could have a dramatic impact on and export it abroad.
European pipeline projects and the se-
curity of supply debate that hinges on Spot LNG
European dependence on Russian gas. The drama being played out in Eu-
Russia, meanwhile, has just started up rope and Asia concerns the rise in cross-
the first of its Ukraine bypass pipelines, basin trade in LNG. This has created an
bringing gas directly to Germany for almost genuinely competitive market
the first time. as spot cargoes from the Atlantic Basin
There has been little of comparable and the Middle East undercut the deliv-
interest on the other side of the globe. ered cost of pipeline gas in Europe.
For North Americans, another year of Until March 11, there was little dif-
splendid isolation from the global mar- ference: Japan and Korea were paying
ket is drawing to a close with another roughly the same for Atlantic LNG as
seemingly in the cards. An endless European customers, plus or minus the
stream of unconventional gas means cost of shipping from one basin to the

December 2011 insight 13


2012 global energy outlook - gas markets

other. Both spot markets were offering This is not a battle Europe can win.
prices much lower than those prevail- There is no pipeline gas in Japan or Ko-
ing under European or Japanese long- rea to speak of, nor are there competi-
term contracts. tive markets in gas supply. High-priced
However, the disaster in Japan in cargoes add to the weighted average
March quickly put the price of spot cost of gas that is clawed back from util-
LNG for delivery in Asia on an upwards ities, which in turn can pass the cost on
trend, to the point where it has exceed- to their customers.
ed the equivalent price of European spot The buyer in Europe has to hedge ex-
gas. Even nuclear plants that were not posure differently. Storage is one solu-
hit by natural forces suffered, as Japan’s tion: a cargo of LNG that is bought in
nervous—and now retired—prime min- October for delivery in November to
ister told major Japanese utility Chubu make use of ship-or-pay terminal ca-
to close down its 3.5 GW Hamaoka pacity might be vaporized and injected
plant—a decision based on the precau- into storage and not be withdrawn un-
tionary principle. The effect of Japan’s til the peak demand days of January.
nuclear closures sent buyers scrambling Other cargoes are taken to Zeebrugge.
for replacement oil, coal and LNG. But The terminal has been reconfigured so
the structure of integrated upstream that it can reload an empty vessel for
LNG projects does not allow much flex- redelivery to Asia. Traders say this cir-
ibility for disasters on this scale, leading cumvents the Qatari policy of not sell-
to a shortage of spot gas. ing cheap spot LNG into oil-indexed
By end-September, spot deliveries Asia, since the cargo has initially been
for December at Japanese and Korean “sold” to Europe.
ports were approaching or exceeding
prices based on long-term contracts Precautionary Principle
indexed to oil. Some companies have Europe itself was not immune to the
been able to increase their contractual precautionary principle. German Chan-
purchase rights, in the same way they cellor Angela Merkel shut down seven of
exercised their downward quantity Germany’s oldest nuclear plants with al-
clauses when there was an oversupply most immediate effect following Japan’s
of gas on the market. Fukushima disaster. The closure of the

1. US gas prices: the influence of shale.


$/MMBtu
16

14

12

10

11/07 3/08 7/08 11/08 3/09 7/09 11/09 3/10 7/10 11/10 3/11 7/11
Source: Platts

14 insight December 2011


2012 global energy outlook - gas markets

others in 2022 is costing operators €32 out, no one player can manipulate the
billion ($45 billion) at net present value oil price, the unspoken assumption be-
and 0% interest rates in foregone profits, ing that between the two of them Nor-
according to preliminary calculations by way’s Statoil and Gazprom could send
a senior economist at the OECD Nuclear prices very high by withholding a modest
Energy Agency, Jan Horst Keppler. amount from the market. As it stands, the
But the gains for gas could be consid- shrinking discount of spot prices to term
erable. Nuclear’s replacement with wind, could well vanish and even turn into a
coal and gas will require some juggling premium, if there are enough cold snaps
with the country’s carbon emissions tar- or supply reductions over the winter.
gets and the willingness of German tax- Still recovering from recession, rather
payers—still groaning under the weight than bemoan it as a catastrophe, gas
of the government’s commitment to traders in Italy felt some relief when the
support the euro—to pay for expensive Green Stream pipeline from Libya was
and intermittent sources of renewable taken out of action in March as a result
energy. Gas is cheaper than wind and of Libya’s civil war. The effect was not to
lower in emissions than coal. But that is choke off supply in Italy, as would have
not a problem for now, at least. happened at a time of economic prosper-
Heavily encumbered with gas that ity, but rather to allow some of the over-
they do not need, but must nevertheless supply to be absorbed at a higher price
pay for under their long-term contracts, than otherwise would have been the case.
Europe’s gas merchants have sought an Norway’s Statoil has acceded to re-
end to oil indexation, but to little effect quests from its buyers to move more of its
and, as winter approaches, they might long-term gas to spot market indexation,
be glad of this as spot prices rise again. but has also reduced exports to Europe,
The oil link has long been a bone of con- especially through the Langeled pipeline
tention, but mainly with regulators and that brings Ormen Lange gas to the UK,
economists at one step removed from as analysts say it is pursuing a “value not
the market and unable to appreciate just volume” strategy. Gazprom’s position is
how illiquid the gas market is in conti- different. So far it has rejected requests
nental Europe. for direct contract renegotiation. It sees
It is much safer to hedge gas price ex- the acquisition of downstream assets in
posure against very heavily-traded and the power sector as a means to capture
highly-transparent oil product markets. more of the gas value chain, and it is
As Russia’s Gazprom is fond of pointing in talks with German utility RWE on a

2. European gas continues to follow crude.


$/MMBtu $/b
13 130
125
12
120
115
11
110
10 105
100
9
95
90
8
85
Zeebrugge gas Dated Brent ($/b)
7 80
1/11 2/11 3/11 4/11 5/11 6/11 7/11 8/11 9/11
Source: Platts

December 2011 insight 15


2012 global energy outlook - gas markets

deal of this kind. On a similar theme, the UK economy would be significant,


Algerian gas supplier Sonatrach is taking reducing energy bills and improving
equity in a customer, Spain’s Gas Natu- the country’s balance of payments and
ral, which also finds itself in a relatively its tax revenues. Compressed natural gas
weak negotiating position. filling stations might even start to dot
Another major German utility, E.ON, the landscape.
suffering under the weight of its multi-bil- This is, of course, dependent on the
lion euro take-or-pay gas commitments, is extent to which drilling is allowed to
being forced to restructure and develop its proceed. Cuadrilla does not expect to
business outside Europe. E.ON’s gas unit submit a development plan to the gov-
Ruhrgas itself might be sold off, perhaps ernment until the middle of next year.
to a pension fund for which a low, but The anti-shale lobby is likely to object,
secure rate of return will be acceptable. raising environmental concerns that
Ruhrgas would live out the remainder could impact on UK regulation of the
of its days as a closely-regulated pipeline nascent industry.
company, while its commercial assets and The story in Poland and Ukraine is if
liabilities are incorporated under E.ON. anything more exciting. In addition to
all the other benefits there would be
Shale Upheaval considerable satisfaction in no longer
But while utilities and external suppli- being dependent on Russian gas. Just as
ers grapple with competition between Gazprom makes another bid for control
LNG and pipeline gas, September saw over the country’s vast pipeline network,
two companies, one in Poland and one Ukraine has signed a slew of memoranda
in the UK, announce successes with with companies like ExxonMobil, Shell,
shale gas. It is too early to make any firm Eni and Halliburton, covering shale and
predictions about the production rates other types of gas. At the same time
and costs as not enough wells have been it has started up the first of the Nord
drilled, but on the face of it, the volume Stream pipelines to bring gas direct to
of gas in place is enough to justify opti- Germany under the Baltic Sea, bypass-
mism about both countries’ security of ing all transit states.
supply, and even possibly their neigh- Politics and gas have long gone hand
bors’ security of supply too. in hand where Russia and its former sat-
Cuadrilla is sitting on almost 6 Tcm ellites are concerned: if self-sufficiency
of resources in northwest England, it in gas allowed Ukraine to reform its en-
believes, which at a 15% recovery rate ergy sector along market-oriented lines,
is not far short of 1 Tcm. If the cost of then that truly would mark the end of
production is low enough, the impact on the old order. ■

3. Non-oil linked gas prices.


$/MMBtu
20
UK National Balancing Point Japan-Korea Marker (spot LNG)
18

16

14

12

10

6
1/11 2/11 3/11 4/11 5/11 6/11 7/11 8/11 9/11 10/11
Source: Platts

16 insight December 2011


2012 Edition

WORLD ENERGY

HARNESS THE GLOBAL ENERGY LANDSCAPE


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presents core components of the global energy market in INFORMATION AND A LIST
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coal

Recession Proof Coal


James O’Connell, Managing Editor, International Coal

OECD economies appear to be on the brink of another


recession. Shares are plummeting; currencies and countries
are in turmoil; ratings downgrades are a near-weekly event.
Yet some commodities are proving remarkably resilient,
not least thermal coal. Indian rather than Chinese demand
is the driver, while Indonesian talk of a ban on coal with
a low calorific value, if implemented, would throw
export markets into turmoil.

If the Asian growth story is crucial ports it power stations demand. At the
to understanding oil markets, it is same time, there is the return of Japan
even more fundamental for thermal to the physical coal market to consider,
coal. Asian growth is taken as a con- as well as nascent Indonesian plans to
stant by analysts. Even with coal in regulate the amount of low calorific
seemingly terminal decline as part value coal it is prepared to export. All
of the US and European power mix, in, it doesn’t seem a bad call.
bankers Credit Suisse were prepared
recently to declare that “any weak- Chinese Imports
ness in Atlantic demand conditions, China’s thermal coal supply picture
resulting from a US/EU recession, has altered radically in the last decade
can be readily soaked up by Pacific from a production base of about 1.4 bil-
demand—with India and South East lion mt in 2002 to output of over 3.3
Asian growth and Japanese recovery billion mt in 2010. Despite this growth,
playing their part alongside Chinese it still cannot produce enough, turn-
domestic thermal supply constraints.” ing to seaborne markets and the two
This statement assumes that Asian exporting mammoths of Indonesia and
demand for coal is essentially detached Australia in particular to fill the gap.
from the general economic path of the Consumption has grown over the same
world economy. It assumes that China period from 1.3 billion mt in 2002 to
can maintain its rapid rate of economic over 3.45 billion mt in 2010. Indeed, as
growth, alongside its demand for ther- Credit Suisse suggests: “China’s supply
mal coal, in the midst of OECD reces- constraints are the industry’s ‘unfix-
sion, and that India can meet its utility able’ decade-long problem.”
and port development targets. This in- This is despite China’s major rede-
frastructure is critical to the country’s velopment programs, for example the
ability physically to receive the coal im- way it has consolidated a sprawling

18 insight December 2011


2012 global energy outlook - coal

industry dominated by thousands of likely to shift China from being a net


undersized coal mines. From 10,000 importer, the trend of growth could
small mines each producing less than be reversed over the next couple of
300,000 mt a year of coal just two years and should stem any future in-
or three years ago, the country now crease in Asian prices.” Barclays does
has less than 3,000 mines each with stress that this is a short to medium-
a minimum output of 1 million mt/ term forecast, with the likelihood that
year. This program is set to continue Chinese imports will start to increase
until 2015 when China plans to have from mid-decade, but it is interesting
ten companies each producing over 1 that China is not the main motor of
billion mt/year and a further ten with Asian coal demand when it comes to
output in excess of 500 million mt, to- the seaborne market.
gether accounting for just under two-
thirds of domestic output. Indian Demand
The efficiencies this should deliver In contrast, India is beset by domestic
suggest one means of lessening the production and infrastructural issues.
country’s import dependence. Imports Production is stagnant for the most
will continue to play a key role, but run- part and, while there is an abundance
away growth will be limited by China’s of material—the 2009 Geological Sur-
ability to boost domestic output. China vey of India’s coal inventory estimated
has swung from a net exporter of sev- a 277 billion mt resource—only 40%
eral million tons in 2008 to a net im-
porter of over 100 million mt in 2009 China has swung from a net exporter of several
and about 140 million mt in 2010.
But Societe Generale in early Octo- million tons in 2008 to a net importer of over
ber said it believes Chinese coal im- 100 million mt in 2009 and about
ports could fall back below 100 mil-
lion mt in 2012 and could be as low 140 million mt in 2010.
as 90 million mt. This compares with
an annualized rate of 156 million mt or 106 billion mt are proven reserves.
based on 104 million mt of imports Alongside quantity, India has quality is-
in the year to August. The most re- sues with domestic coal having a lower
cent trade data (September 2011) also calorific value than that of major coal
shows that China is not immune to exporters like South Africa, Indonesia
the travails of the global economy. Its and Australia. Poor communication
September trade surplus fell to $14.5 between the rail sector and miners,
billion from $17.8 billion in August, shortages of rail wagons and major de-
and while exports remain at a tradi- lays in granting mining licences means
tional historic high, analysts are sug- that domestic production is falling well
gesting this could be further evidence short of target.
of a slowing rate of growth. Recognizing these problems early
Barclays Capital suggests that “while on, and the likelihood of dependence
demand is likely to be greater than on imported coal, the current genera-
supply in 2012, we do not expect Chi- tion of new power plants have been
nese coal imports to exceed this year’s located at or close to major seaports.
levels and would also expect a declin- Quoting government targets, Standard
ing trend in overall net imports from Chartered suggests that “India hopes
here on.” It adds: “While Chinese coal to grow its power generation capacity
demand is set to continue to experi- by 14% per annum till 2012, increas-
ence significant growth (another 300 ing its capacity from 170 GW in 2010
GW of power generating capacity by to 220 GW in 2012 (Standard Char-
2015), the investment in domestic tered forecast 198 GW). If India meets
production and transportation infra- even half of its power generation tar-
structure could outpace that growth gets, the thermal coal market would
in the coming years. While this is un- face huge problems.”

December 2011 insight 19


2012 global energy outlook - coal

By the end of the 2011-12 fiscal year, India’s south west coast.
the government expects to add over 14 The company hopes to complete
GW of incremental thermal capacity, all the paperwork for the Carmichael
much of this coal-fired. For the 2010-11 mine deal by end-2012 in order to be-
fiscal year, the target was 13 GW and the gin operations in 2014. In ten years
success rate was 60%, or 9 GW. Even if time, this should be a 60 million mt/
below target, this equates to additional year mine; output until then is esti-
thermal coal demand of 40 million mt. mated at 7-8 million mt/year. The proj-
India’s problems have been a long ect is expected to have a total mine life
time coming. In late 2010, the Aus- of 150 years.
tralian Bureau of Agricultural and GVK Power and Infrastructure con-
Resource Economics concluded that: sortium have also hit the headlines
“Assuming India sources 60% of the with a $1.3 billion investment in the
coal it requires from its own mines, it Hancock group. The deal involves three
would still need to build an additional thermal mines in Australia’s Galilee ba-
106 million tons of coal capacity in the sin and a rail and port project. Recent
indications from the company suggest
... the bigger picture is India’s first real M&A a total spend of $6 to 7 billion over the
lifetime of the project. GVK is looking
successes overseas and the integrated model to sell off minority stakes in some of its
units to offset some of the costs of the
that is being adopted by India’s private developers. acquisition. Like Adani, the mines are
expected to come online in 2014, pro-
next five years. This is double Austra- ducing about 30 million mt of coal a
lia’s planned expansion over the same year within a short period of time.
period and over two-thirds of Indone- Meanwhile, Lanco Infratech has in-
sia’s planned growth.” vested around $750 million to secure
At the time, India’s state-led initia- access to export-grade thermal coal in
tives to acquire properties overseas were Western Australia with the acquisition
going badly. Despite a huge war chest, of Griffin Coal. It has run into some lo-
India was being beaten to the punch cal trouble recently with its decision to
every time by a swifter moving, usually conclude a unilateral coal supply con-
Chinese-led consortium. However, that tract with the Bluewaters power plant.
has changed with major private compa- The office of Western Australia premier
nies like Adani, GVK and Lanco Infrat- Collin Barnett has said it could with-
ech seizing the initiative and commit- hold export licenses, if Lanco Infratech
ting to invest tens of billions of dollars fails to live up to its promises.
in Australian and Indonesian projects There are always likely to be some
at various stages of development. This teething problems with such huge
investment is crucial to delivering the projects, but the bigger picture is In-
coal imports India needs. dia’s first real M&A successes overseas
Adani’s acquisition of a 99-year lease and the integrated model that is being
for the Australian port of Abbot Point adopted by India’s private developers.
for $2 billion in May, in addition to the Mundra port and its associated special
$10 billion laid out for its Carmichael economic development zone are major-
Coal Mine and Rail project, was a huge ity owned by Adani. The port, the larg-
leap forward. Industry experts are also est privately-operated port in India, is
delighted that it is showing its state- expected to handle around 20 million
owned and private consortia compatri- mt of coal imports this year, up 30%
ots the way forward by adopting an in- on 2010 figures. An estimated 9 GW of
tegrated model, retaining control of all additional power capacity is slated to
stages of the logistics chain from mine come on-line around Mundra over the
to port to power plant. Adani even next couple of years, providing the fi-
owns the Capesize vessels on which the nal link in the chain. India continues
coal will be transported to Mundra on to produce about 10% less electricity

20 insight December 2011


2012 global energy outlook - coal

than it currently requires, suggesting its The producers that could benefit from
adventures in the M&A market—eco- the Powder River Basin perspective
nomic slowdown or not—look unlikely could be Arch Coal, Cloud Peak Energy
to conclude anytime soon. and Peabody Energy.
From the US east coast, Alpha Natural
Indonesian Coal Ban Resources and CONSOL Energy both
Adani is also investing $1.6 billion have export terminal capacity advan-
in a port and rail project in Indonesia, tages, with Dahlman Rose adding that
where the current topic of debate is the the latter also has a “low production
possible implementation of an export cost position.” Additional freight costs
ban on thermal coal with a low heat- must be factored in and it will take lon-
ing value. The Indonesian energy au- ger for vessels to reach their destination,
thorities are still in the process of con-
sulting coal market players regarding ... [Indonesia’s] ban could remove in the region
a proposed regulation requiring mine
owners to improve the value of their of 120-130 million mt of coal a year from the
coal through upgrading technologies; market ... at least temporarily throwing
the regulation could ultimately result
in a ban on the export of coal below a the entire seaborne trade into disarray
certain heating value.
In September, ASX-listed Realm Re- but set-tonnage contracts pegged to a
sources said that the Indonesian energy daily thermal coal assessment process
ministry had circulated an advanced could improve the financial risk man-
draft of a proposed decree on “Value agement. For now though, Indonesian
Added Upgrading of Minerals and Coal coal producers are lobbying the govern-
through Processing and Refining Activ- ment to implement any future ban in
ities.” In its current form, the proposed stages and for a staggered introduction
regulation states that by January 2014 of the coal upgrading requirement.
it will no longer be possible to export
Indonesian coal with a calorific value Japan’s Return
of 5,100 kcal/kg GAD. This ban could Adding to the supply-demand pres-
remove in the region of 120-130 mil- sure over the next six to twelve months
lion mt of coal a year from the market, will be Japan’s return to the market as
roughly half the country’s total ex- its coal-fired plants ramp back up to ca-
ports, at least temporarily throwing the pacity after the natural disaster it suf-
entire seaborne trade into disarray. fered in March 2011. A late August re-
It would also, of course, present op- port from Deutsche Bank estimates that
portunities for producers based else- the short-term fuel replacement mix
where. Investment bank Dahlman Rose could see a nuclear-compensation fac-
& Co. said in a late third-quarter report tor comprising 59% LNG and 35% coal,
that: “buyers looking to replace the with the remainder consisting of heavy
lower Btu [Indonesian] coal could turn fuel oil and crude oil.
to the [US-based] Powder River Basin Deutsche Bank estimates an addi-
(8,400 to 8,800 Btu/lb), which could tional consumption requirement of
begin to bring on export terminal ca- 1.6 million mt/month of coal based
pacity in that time frame.” on a worst-case scenario of the af-
Additionally, Dahlman Rose “expects fected nuclear reactors remaining off
South African coal to be bid away to line, although it does indicate that
Asia even more, raising the price in the the full realization of this scenario
Atlantic Basin and benefiting export- is unlikely. From a seaborne or total
ers from both the Appalachian regions global production stand-point, even
(11,500 to 13,000 Btu/lb) as well as the an additional Japanese utility require-
Illinois Basin (10,500 to 11,500 Btu/ ment of 12-15 million mt in the short
lb).” This heating value would be more term would place further pressure on
akin to higher quality Australian coal. Asia’s supply side. ■

December 2011 insight 21


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power

European Power:
Recovery Postponed
Henry Edwardes-Evans, Editor, Platts Power in Europe

Europe’s utilities face rising costs for new power plants,


a lack of demand and a shrinking contestable market—hardly
a recipe for investment. The EU’s Large Combustion Plant
Directive will close a large chunk of base load capacity,
a process to be followed by a succession of nuclear
shutdowns. Recession is masking a looming capacity crisis.

With European banks at the center of lions of smart meters in the period to
a second economic crisis in four years, 2020. This vital first stage in an intel-
there is little for central power plant de- ligent local grid encompassing distrib-
velopers to do except debate eurozone uted energy systems is going to shake
woes until a recovery comes along. the sector up, opening the way to new
Utilities can formulate plans and argue entrants frustrated for so long by verti-
positions, but in the end they are help- cally-integrated oligopolies.
less in the face of forces beyond their The steady growth in renewables and
control. Demand, feedstock prices, creeping demotion of thermal plant to
carbon prices, market design, access to a supporting role have helped the EU
funding, technology choice—nothing towards its climate change goals. Reces-
is going their way. sion has eased the supply concerns that
Yet this is only one side of the sto- had been building during the boom
ry—the deregulated side, where mar- years. With EU demand still well be-
ket signals are so discouraging. On the low 2008 levels, reserve margins are
regulated side, Europe is undergoing comfortable, nuclear availability has
an engineering revolution. Subsidized been impressive over the summer de-
wind and solar power have boomed, to spite Germany’s enforced closures, and
the extent that spot power markets are member states are making efforts to im-
frequently driven by the weather rather prove energy efficiency.
than demand.
Renewables are not the only regulat- Imminent Closures
ed success story. There is steady invest- However, serious problems begin to
ment in transmission and distribution emerge when the observer lifts his or
networks, subsea interconnection is her gaze beyond the next year or two
strengthening and several EU member as nuclear and coal plant closures be-
states are committed to rolling out mil- gin to accelerate from 2013. The Large

December 2011 insight 23


2012 global energy outlook - power

Combustion Plant Directive and com- Certainly there is a growing con-


pulsory auctioning of carbon allow- sensus that the market must work
ances under Phase 3 of the EU’s Emis- out ways to reward gas plant flex-
sions Trading System is going to push ibility given the projected growth in
a fair amount of coal and oil plant off intermittent sources. The European
the bars in short order—at least 12 GW Wind Energy Association reports that
in Germany, and 12 GW in the UK. the EU is on track to meet 15.7% of
This is by around 2015. Then, in 2018, its electricity demand from wind by
four big nuclear plants in the UK are 2020. This would see some 230 GW of
due to come offline and Germany’s full wind plant operating by 2020 under
nuclear fleet is going to be closed by a conservative baseline scenario, up
the early 2020s, with no direct replace- from today’s 84.3 GW (meeting 5.3%
ments in sight. or 182 TWh of demand).
With new coal capacity a near-impos- The association’s expectation is that
sibility until carbon capture and stor- nearly 60 GW of wind capacity will be
age is viable, that leaves gas-fired plant, added over the next five years. This, it
wind, solar and biomass with the lion’s notes, is more conservative than three
share of balancing central plant clo- independent market assessments, by
sures to 2020-2025. As Platts’ new plant EER (62.2 GW over the next five years),
data shows, combined cycle capacity— MAKE Consulting (66.2 GW) and BTM
with all consents granted—vastly out- Consult (85.2 GW). Add solar PV, bio-
ranks all other technologies, but the mass co-firing and resurgent hydro to
amount in construction has inevitably complete the dynamic picture for re-
slowed this year because of a shrinking newables, the contribution of which
contestable market and poor margins. pushed beyond 20% of German ener-
The element of trepidation in taking gy production in first-half 2011, while
a final investment decision on gas-to- wind alone covered 17.2% of Spanish
power projects was summed up by Stat- demand over the same period.
kraft’s Jurgen Tzschoppe as work got
underway on the Norwegian utility’s Decarbonization Cost
Knapsack II CCGT in July: “How much Continuing this trend is going to be
new capacity will Europe need? Will expensive given the steep capital cost
more ambitious CO2 targets be set, or hikes seen in recent projects. German
will Europe be content with an aging, offshore wind developer WPD in late
inefficient power plant fleet as a bridge September applied for European In-
to a renewable future? Our expecta- vestment Bank funds to support its Bu-
tion is that in the future, the market tendiek project. WPD is seeking €450
will reward providers that offer flexible million ($608.37 million) towards the
capacities, and will not discriminate €1.29 billion cost of the 288 MW facil-
against investments already made at ity—or €4,479 per kW installed. That
this stage,” he said. compares with €3,000/kW installed for

1. Platts year ahead base power assessment (€/MWh).


70
70

60 65

60
50
55

50
40 Jun-11 Jul-11 Aug-11 Sep-11
United Kingdom Netherlands France Germany Spain
30
Sep-09 Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11
Source: Platts

24 insight December 2011


2012 global energy outlook - power

Vattenfall’s 300 MW Thanet offshore to be delayed by one to two years af-


wind farm, which became fully opera- ter leaks in boiler welds occurred dur-
tional in September 2010. ing the pickling process, when acids are
Much of the hike relates to risk and used to clean the boiler walls.
cost of capital. New CCGT investment Walsum is one of several plants in con-
costs ranged between €400-1,000/kW struction where T24 steel, supplied by
installed pre-crash. Now, whether it be Vallourec-Mannesmann, is used in the
nuclear or offshore wind, solar PV or in boiler membrane walls. Hitachi Power
future coal with CCS, everything costs Europe is the boiler supplier at Walsum
at least €3,000/kW, often much more. and at new German units at Moorburg,
Utilities are reluctant to take on this Wilhelmshaven and Boxberg, all of
level of risk. which are experiencing delays of one
A temporary suspension in Septem- sort or another. Separately, RWE’s two
ber this year of just one project—RWE’s 800 MW units at Hamm-Uentrop have
1,600-MW Eemshaven coal-fired plant had their fair share of boiler problems
in the Netherlands—posed a genuine (EPC contractor: Alstom), and these are
threat to the company’s overall finan- now scheduled to come online in 2013,
cial position. Some €2.9 billion had having been due mid-2011/early 2012.
already been sunk into construction But what would nuclear developers
before a legal intervention halted cer- TVO and EDF give to limit their new
tain works from continuing. As one project delays in Finland and France to
analyst commented, “a €2.9 billion one or two years? Both are now push-
stranded asset is not small fry for a €15 ing beyond four. On July 20, EDF said
billion market cap company.” Luckily it would start selling power from its
for RWE, the project now seems back 1,650 MW EPR nuclear unit at Flaman-
on track, but this is by no means an ville-3 in 2016, two years past the 2014
isolated example. date for commercial operation that the
To regulatory risk can be added tech- utility announced last year and four
nology risk. West European efforts to years after the original online date.
diversify gas/wind-heavy newbuild That is almost as long as the delay to
programs with the addition of some TVO’s Olkiluoto 3 plant in Finland.
coal-fired MWs have been beset by In July, contractor Areva-Siemens re-
boiler issues this year. In May, Austria’s ported O-3 completion in 2012, with
EVN announced a delay in the com- commissioning taking eight months
missioning of the 790 MW Walsum thereafter and regular operation only
plant, initially expected for mid-2011. in second-half 2013. Construction
The company expects commissioning work began in late 2005.

2. West Europe: in construction or permitted.


Status Type GW Number

AD CCGT 35.7 60
UC CCGT 15.1 25
AD Coal 1.5 3

UC Coal 14.9 16

AD Offshore wind 14.5 58

UC Offshore wind 2.6 9

AD Other 16.0 285

UC Other 15.0 126

AD - advanced development, all consents granted; UC - under construction


Source: Platts Powervision

December 2011 insight 25


2012 global energy outlook - power

EDF said its EPR was now estimated ada lining up $2 billion, the US $3.5
to cost €6 billion versus €5 billion in billion and the EU potentially €4 billion
the 2010 estimate and €3.3 billion in via the NER-300 auction of CO2 allow-
2005. In Finland, Areva’s provisions ances, having already disbursed some
on O-3 take total potential losses to €1.05 million through the European
€2.7 billion on a €3.2 billion contract. Economic Recovery Program. However,
Somewhat late in the day, EDF is to in- even with support from these funds,
troduce “a new approach to organiza- project developers say national govern-
tion” of the Flamanville-3 project that ments must contribute to the €1 billion-
includes improved scheduling, regular plus cost of a 300 MW demonstration if
public site meetings to assess progress, they are to be built.
new management and oversight prac- “If we only have these [EU] funds I’m
tices, and new coordinating commit- not sure projects are going to go ahead,”
tees with contractors. This would give Alstom Power’s Joan MacNaughton
“valuable feedback and a tried and test- said at a Platts CCS conference in Lon-
ed approach to organization for future don earlier this year. Even in the UK,
EPR reactors, particularly in the United where support was strongest, “we have
Kingdom,” where the company plans to a commitment to support three more
build four EPRs. On current form, 2022 projects [beyond Scottish Power’s Lon-
might be seen as the earliest date for a gannet], but that funding is under re-
new UK reactor to come into service, view,” she said.
given EDF’s 2018 target date. And the cost estimates are rising.
One developer told Platts that his large
No Appetite for Risk continental project with underground
Moreover, a lot can happen in ten storage plans was now estimated to cost
years, and many in the world of finance €1.5 billion. At present he could expect
believe no new nuclear will be built in around €500 million from subsidies in
the UK without direct, unequivocal a best case scenario. “This is not the
state support—something the current 50/50 split we’ve looked for,” he said.
government refuses to countenance. “Unless the utility can see a big pot of
Even the utilities are wobbling. Scottish gold at the end of this, it will not invest
and Southern Energy in late Septem- in these conditions.”
ber dropped out of the NuGeneration Overall, Europe is about to lose
nuclear consortium, selling up its 25% swathes of central baseload capacity
stake to partners GDF Suez and Iberdro- because of tougher air quality laws, en-
la. “SSE has concluded that, for the time forced nuclear closures and the creep-
being, its resources are better deployed ing decrepitude of a veteran coal fleet.
on business activities and technologies The economic malaise is masking a
where it has the greatest knowledge looming capacity squeeze because de-
and experience,” the company said. It mand remains below historic peaks.
is putting all its efforts into wind power Wholesale prices in the contested
with flexible gas as backup. market indicate a mild recovery, but
Another no-go area for banks is car- remain insufficient to cover the capi-
bon capture and storage, creating tal costs and risks of nuclear, coal and
headaches for those trying to get pre- CCS options.
commercial demonstrations up and Developers and national governments
running. European proponents of CCS have done their best to communicate
now acknowledge that at best, four to the need for low carbon investment to
six demonstrations will be up and run- complement renewables, but there ap-
ning by 2015, down from the original pears to be little appetite amongst the
dozen (the EIB is currently looking at banks to hear the message. This leaves
13 proposals ahead of EU funding deci- the European power sector in a holding
sions in 2012). pattern waiting for economic recovery,
The EU, the US and Canada have led while the threat of renewed recession
the way with public funding, with Can- hangs overhead. ■

26 insight December 2011


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shale gas

Prices and Profits:


US Shale Gas
Bill Holland, Associate Editor, Gas Daily

Despite warnings that the US shale gas industry is a giant


Ponzi scheme, major oil companies continue to make major
investments. It’s certainly true that US natural gas prices have
fallen—the product of shale gas’s own success—but profits
and costs vary widely between plays and are dependent
on a number of variables. Key to the debate over future
profits is whether decline rates are linear or hyperbolic.

Reading the headline news about the “shale gale” that is an alleged game
shale gas (and now shale oil) out of the changer for US energy are just drilling
US, one could not be faulted for think- until they can unload their positions
ing there’s more than just a little schizo- on the next available sucker.
phrenia in the public perception of And then the New York Times quotes a
shale plays. Consider: in June, the New source saying shale gas is “just like En-
York Times, which is no friend to the en- ron,” the ultimate put-down in the US
ergy industry, but equally no slacker in energy industry. With, or rather despite,
the fact gathering business, ran a series this warning, Anglo-Australian mining
of articles relaying the doubts of some company BHP Billiton a month later
investment analysts, US Energy Infor- paid $12.1 billion for Houston-based
mation “officials” (turned out to be an shale oil and gas producer Petrohawk
intern) and petroleum researchers. Energy, another takeover of a shale in-
Shale is a “Ponzi scheme,” the head- dependent by a deep-pocketed major.
line blared—after billions of dollars What’s going on?
have been spent on investments in
joint ventures and mergers and acqui- Production Boost
sitions, such as ExxonMobil’s $41 bil- What is undeniable is that something
lion takeover of Fort Worth shale gas has changed in US gas and oil produc-
producer XTO Energy. Unconventional tion, a change that became evident in
shale wells are more expensive than ad- 2008 for gas and in 2009 for oil, accord-
vertised, sources said, they won’t recov- ing to US Energy Information Adminis-
er as much gas (or oil) as claimed, and tration data. By 2010, the US was produc-
the smaller independents who began ing more gas than ever before, 21.5 Tcf a

28 insight December 2011


2012 global energy outlook - shale gas

year, a 19% increase over 2005, and, af- in demand that could double prices in
ter years of decline, onshore oil produc- both the winter heating season and the
tion had increased 5% over 2005 levels, summer hurricane season. Those pric-
to 2 billion barrels a year. es have gone, begging the question of
Shale is the driver for both. In 2008, whether shale gas can survive its own
the EIA said shale accounted for 11% of success. Can producers coax enough
the 20.1 Tcf of gas produced in the US, natural gas out of the dense, imperme-
with 7% of that production replacing able shales to make money when prices
retiring conventional gas and 4% add- seem stuck around $4/Mcf precisely be-
ing to the US gas supply. In 2009, over- cause of shale gas’s success?
all US gas production grew 2% to 20.5 Simply getting the hydrocarbons out
Tcf; 17% of that gas was from shale. of the ground doesn’t necessarily mean
The shale gale repeated itself in 2010, immediate profits, or indeed ever prof-
according to other estimates, shale ac- its. But in the price environment in
counted for 25% of the 21.5 Tcf pro- which shale evolved, the link between
duced that year. increased production and profits was
For oil, US onshore production con- clear. This is a link that some wish fi-
tinued a decades-long decline until nancial analysts—with their laser-focus
2009. While the EIA does not yet pro- on production and reserve growth—
duce separate shale oil production vol- would now break.
umes, most of the increase in output Energy consulting firm Wood Mack-
in 2010 is coming from North Dakota’s enzie’s Global head of Consulting, Neal
Bakken Shale. The state’s mineral agen- Anderson, said in August that after $90
cy reports that, in 2010, Bakken wells billion in joint ventures and acquisi-
produced 100 million barrels of oil, tions, these stock analysts should stop
double that seen at the birth of the play pumping up the prospects of shale. “The
three years ago, almost single-handedly equity analyst community has played
boosting US onshore oil production to a key role in helping fuel the shale gas
2 billion barrels/year, a 108 million bar- M&A market, acting as chief cheerlead-
rel gain since 2005. er for shale gas plays,” he wrote in the
Oil & gas Financial Journal in August.
Prices and Profits “Their enthusiasm for reserve bookings
The natural gas revolution brought on and production growth has only recent-
by extracting gas from shale formations ly been replaced with a focus on value,
was born in a US market chronically namely an analysis of which companies
short of natural gas. Prices ranged from are actually making money, as opposed
$6/Mcf to $8/Mcf with annual spikes to recycling money.”

1. Annual US natural gas production.


Tcf
25
Total gas Shale gas
20

15

10

2006 2007 2008 2009 2010


Source: EIA, 2010 data analysts estimates

December 2011 insight 29


2012 global energy outlook - shale gas

Anderson said the irony of the multi- US independents have a decided edge
billion M&A market for shale gas is that in that most were first movers in par-
money isn’t being made by big compa- ticular plays and leased large amounts
nies swooping in and taking out small- of acreage at prices well below those
er firms, it’s being made by the smaller paid by the supermajors and national
firms that got into the shale plays first. oil companies such as Norway’s Statoil
According to his analysis, operators are and China’s CNOOC that came later to
making less than 10% profits on shale the game. While the ExxonMobil-XTO
plays as they increasingly bid up the merger pushed prices to $10,000/acre
price for the service they need—hydrau- in some plays (Statoil and Reliance in
lic fracturing—to get the gas flowing. the Marcellus for instance), the sell-
But unlike Wood Mackenzie’s nation- ers, Chesapeake and Atlas (later pur-
wide analysis, a deeper look by FBR Cap- chased by Shell), paid a fraction of that
ital’s research department shows that amount, often less than $50/acre. In
profits, like the individual geology of the Marcellus, which even for dry gas
shale plays, varies widely. While some remains profitable, finding and devel-
plays tread water at $4/Mcf gas, others opment costs for the pioneers—Range
still pay out. Some plays make money Resources, Chesapeake, EQT—are all
for their operators at prices as low as $3/ less than $1/Mcf.
Mcf, but some won’t begin to pay out Drilling vertically is the fi xed cost
until gas prices get above $5/Mcf. At $6/ to shale exploration and is a function
Mcf everybody sees a comfortable mar- of depth. Because the barely profitable
gin, while some will see profits that are (or money-losing for some) Haynesville
double or triple their costs. Shale in Louisiana is 4,000 to 6,000 ft
deeper than other shales, its well costs
Shale Variables are higher, often much higher. A $3
There are numerous variables that million Barnett well that is roughly
feed into this profit equation for shales: comparable to a $5 million Marcellus
leasing costs, lifting costs, location and well becomes a $10 million well in the
hedging programs. The two latter fac- Haynesville, owing to the time and ex-
tors are particularly important and can pense of drilling another mile deeper.
result in realized prices well above the Increasing drilling efficiency reduces
US nationwide proxy of the NYMEX fu- costs. Shale drillers have become ever
tures contract. better at quickly sinking wells, drill-

2. US oil production.
Billion barrels
2,500,000
Onshore Offshore

2,000,000

1,500,000

1,000,000

500,000

2005 2006 2007 2008 2009 2010


Source: EIA

30 insight December 2011


2012 global energy outlook - shale gas

ing out horizontal laterals and fracking to their realized sales prices. But, as gas
those horizontal spokes, so much better prices stay below $5/Mcf and remain
that in most plays the pipeline and pro- stable there, it is becoming harder and
cessing infrastructure struggles to keep harder to find customers willing to lock
up. In the Marcellus Shale hundreds of in higher futures prices.
drilled wells are reported to be awaiting Shale gas critic Art Berman, quoted
completion (fracking) or connection to extensively by the New York Times and
a pipeline each quarter. others, uses 2009 well data from both
Location narrows profits in the the Haynesville and the Barnett shales
Haynesville and the Barnett when (and operators Chesapeake and Dev-
compared with the Marcellus. Most on) to show that the promise of shale
Marcellus gas can be sold into the high- is wildly overestimated by producers.
er-priced markets of the urban north- Shale gas wells produce at very high
east US, while Texas and Louisiana gas rates for the first 12-18 months of their
competes with conventional and off- lives, but then decline rapidly. Flows
shore gas at highly liquid trading hubs are often reduced 66% from the initial
such as the Houston Ship Channel and production rate to an inflection point.
Henry Hub. Prices in the northeast US, What happens at that point is where
particularly the New York city-gates, critics like Berman and producers part
are routinely $1/Mcf higher than the ways. Berman says the 2009 data shows
day’s NYMEX futures price for delivery that the decline of the well post inflec-
to Henry Hub). tion is along a linear slope, constantly
Hedging—locking in futures prices and inexorably down, until after 10
with buyers through swaps and col- years the well is played out.
lars—also helps shale producers keep Since the fi rst year’s high rate pays
their realized prices high. The US’ top for the well, the shape of the tail deter-
shale producer and number two natural mines it estimated ultimate recovery
gas producer, Chesapeake Energy, has (EUR) over its life, and thus the even-
been particularly adept at keeping its tual profitability of the project. Ber-
realized prices higher than the NYMEX man’s linear tail results in EUR’s that
benchmark. The company adds mil- are half, by his calculation, what shale
lions of dollars to the well head price producers are telling themselves and
of its gas through hedging, although their investors.
sharp reversals in prices, as occurred Berman’s views have been well
in 2008 when gas prices plunged from known in the industry for years and he
record highs, can deeply dent the com- is a frequent speaker on the conference
pany’s results when it has to mark its circuit, but when his analysis found a
books to market every quarter. nationwide audience in the New York
For Chesapeake and other indepen- Times, the “news” prompted US politi-
dents, hedging routinely adds $1/Mcf cians to call for the US Securities and

3. US shale plays—internal rates of return


$4/Mcf $5/Mcf $6/Mcf Projected change in rig
count through 2015
Haynesville Gas 5.50% 4.30% 26.80% 26.80%
Barnett Gas 13.60% 24.30% 37.60% -55% to 25
Fayetteville Gas 32.50% 58.80% 95.30% -10% to 25

Marcellus Dry Gas 62.20% 123.30% 226.20% +100% to 100

Marcellus Wet Gas 70.10% 120.40% 196.10% +100% to 100

Eagle Ford Wet Gas 60.60% 101.40% 159.50% +705% to 166

Source: Company reports via FBR Research

December 2011 insight 31


2012 global energy outlook - shale gas

Exchange Commission to investigate (although they exist) in Texas’ Barnett


the reserve reporting and production and Arkansas’ Fayetteville. Haynes-
numbers of shale gas producers. The ville profits are the thinnest; again, a
SEC launched a “fact finding” probe function of the extra vertical length
this summer that involved subpoenas Haynesville wells require before they
for data from several small US indepen- can turn to the horizontal plane and
dents. The subpoenaed firms pledged to penetrate the shale.
cooperate fully. US gas producers know that low natu-
The shale gas independents don’t ral gas prices make their current efforts
think they have anything to hide. unprofitable in some locations. They
Where Berman and others think old are beginning to shift more and more
well data shows a linear drop, they of their rigs to wetter, oilier prospects
point to mounds of data on shale wells such as South Texas’ Eagle Ford Shale
dating back a decade. These, they say, and shale oil plays in the Rocky Moun-
show that the production decline is tains that appear similar to the wildly
hyperbolic, not linear. Instead of drop- successful Bakken Shale of North Dako-
ping off at a constant rate after the ta. Chesapeake plans to have 75% of its
initial flush of high production, the spending and drilling rigs redeployed to
decline curve bends slightly up from the liquid plays. Gas liquids and crude
linear and trails off slowly over the get sold at much higher prices than the
next 20-30 years, justifying their EUR associated gas.
numbers and projected profits. After The remaining rigs drilling for gas
all, they say, the well pays for itself in will be focused on wells that hold
the fi rst year. Every other year after is cheap leases in places like the Haynes-
pure profit. ville Shale to create the minimal pro-
They are also happy to note that duction necessary for compliance with
many of Berman’s predictions have lease terms. Drillers in currently mar-
been wrong. Gleefully, they point out ginal plays like the Haynesville view
that, in 2008, Berman predicted that continued drilling as a purchase of a
production from the Barnett Shale gas future and a cheap way to maintain
would top out at 6 Tcf. The play has their claim to billions of cubic feet of
produced 9.6 Tcf worth of gas through gas that can be booked as reserves.
this year and still produces 5.6 Bcf/d. This suggests that the recovery in US
onshore oil production has some legs.
Liquid Focus Announcing the change in direction
Healthy profits are being made at during a conference call in first-quarter
$4/Mcf gas prices in the Marcellus (a 2011, Chesapeake CEO Aubrey McClen-
combination of cheap leases, lower don was characteristically ebullient:
costs and proximity to high-priced “We are going to do for oil what we have
markets), but those profits get slimmer done for natural gas,” he declared. ■

4. Exponential, hyperbolic and harmonic declines.

b=1
b=.5
b=.1
exp

Harmonic
Flowrate

Hyperbolic
Exponential
Time
Source: Fekete Associates, Calgary

32 insight December 2011


emissions

Climate, Kyoto and


National Security:
the Outlook for Durban
Frank Watson, Editor, Emissions Daily

A key question for the climate talks in Durban is the future


of the Kyoto Protocol. As it exempts developing economies
from legally binding emissions targets, some developed nations
believe it has outlived its usefulness. More action is needed,
they argue, but they are reluctant to act alone. In the
meantime, levels of atmospheric carbon continue to rise,
suggesting adaptation rather than prevention will become
the order of the day.

South Africa’s busiest port, Durban, mate adaptation funding for poorer
will get busier than usual in November countries by 2020.
and December when thousands of lob- Among the varied components of the
byists, climate negotiators, green cam- Durban talks, such as climate funding,
paigners and the world’s press converge carbon markets, forest protection mea-
on the city. Heads of state and their sures and agreement on how to monitor
top negotiators will once again gather and report emissions fairly, is a crucial
under the UN umbrella in an attempt stand-out issue for this year’s gather-
to thrash out an accord to protect the ing; the future of the landmark Kyoto
world’s climate from rising greenhouse Protocol. Kyoto was an offshoot of the
gas emissions. UN Framework Convention on Climate
The challenges at Durban are as great Change—the pact signed by more than
as they have ever been. Only limited 190 countries in 1992 in a bid to pre-
progress was made in Copenhagen in vent “dangerous anthropogenic inter-
2009, and again in Cancun in 2010, ference with the climate system.”
with countries formalizing various By the mid-1990s it was clear that
pledges to cut emissions according to the efforts being made internationally
their capabilities, and agreeing to pro- under the UNFCCC were insufficient,
vide up to $100 billion per year in cli- and a group of 37 industrialized na-

34 insight December 2011


2012 global energy outlook - emissions

tions agreed at a meeting in 1997 in 1990 levels, a temperature rise of up


Kyoto, Japan, to go further and set a to 2ºC above pre-industrial levels will
collective, legally-binding greenhouse be difficult to avoid,” the report said. A
gas emissions reduction target of 5.2% seemingly innocuous 2ºC global tem-
for the period 2008-12, against a 1990 perature hike could be pushing the
baseline. However, Kyoto covered only boundaries of what is safe, according to
around 27% of global emissions, leav- scientists. “Such a temperature increase
ing China, India and other fast devel- will pose serious security risks that
oping major economies free of binding would increase if warming continues,”
emissions reduction obligations. It was the report continued.
also never ratified by the US—largely Food and fresh water insecurity fea-
because of those exemptions. tured prominently as agents that could
Kyoto’s first commitment period ex- spur internal and cross-border conflict.
pires at the end of 2012, and no agree- “Unmitigated climate change beyond
ment has yet been made to renew it. 2ºC will lead to unprecedented security
A powerful negotiating block of fast scenarios as it is likely to trigger a num-
emerging economies—Brazil, South ber of tipping points that would lead
Africa, India and China, the so-called to further accelerated, irreversible and
BASIC group, want to preserve Kyoto’s largely unpredictable climate changes,”
theme of binding targets for industrial- the report warned.
ized countries only. In stark contrast, “Climate change is best viewed as a
Japan, Canada and other big industrial- threat multiplier which exacerbates
ized economies do not. existing trends, tensions and instabil-
For its part, Europe has pledged a ity. The core challenge is that climate
20% emissions cut by 2020 and has change threatens to overburden states
said it will go deeper to 30%, if other and regions which are already fragile
industrialized nations take on compa- and conflict prone. It is important to
rable targets. Given these vastly dif- recognize that the risks are not just of
fering stances on how to address cli- a humanitarian nature; they also in-
mate change, observers are watching clude political and security risks that
to see what the big emerging econo- directly affect European interests,” the
mies can offer to persuade Europe to report said.
keep Kyoto alive. Europe is not alone in recognizing
these threats. The US Department of
National Security Defense is already building climate
To understand Europe’s willing- change into its strategic planning, and
ness to restrict the carbon emissions US Navy officials in 2010 said they
of its own industries, it is necessary to were factoring in significant sea level
look back to 2007 when the European increases this century into their coastal
Council asked the European Commis- infrastructure projects. Just one exam-
sion and the EU’s High Representative, ple of why this issue matters to the US
then Javier Solana, to conduct a joint military is the tiny Indian Ocean island
assessment of the threat to EU nation- of Diego Garcia—a low-lying island
al security posed by climate change. hosting a strategic airstrip which could
The report they handed back to the be lost to rising sea levels.
Council in the spring of 2008 pulled A widespread understanding of the
no punches. The dossier spelled out perils of a world with 2ºC or more of
the clear threats posed by the rising warming was a key factor in the in-
global atmospheric concentration of clusion of a formal agreement at the
CO2, based on analysis of leading sci- Cancun talks to keep this temperature
entific study. increase as the maximum permissible
“The findings of the Intergovernmen- limit. The agreed texts also include the
tal Panel on Climate Change demon- possible consideration of a more strin-
strate that even if by 2050 emissions gent upper limit of 1.5ºC of warming,
would be reduced to below half of based on newer scientific information.

December 2011 insight 35


2012 global energy outlook - emissions

Durban Goals ambition growing over time.”


The threat of climate change is being ◆ The second goal is to define the rules
taken seriously at the highest levels of for a review of national climate ac-
government, but the negotiations under tion measures that countries agreed
the UN process have become mired in to engage in under the Cancun
political horse-trading because of differ- Agreements, starting in 2013. The
ences in opinion over matters such as rules need to be decided on prior
historic liability for CO2 emissions and to 2013, and the review would then
the various capabilities of governments consider the adequacy of the efforts
to deal with the problem at the same of countries at that time with re-
time as safeguarding economic growth. spect to the science.
At the same time, any CO2 emissions ◆ The third goal is clarity on climate
cuts in Europe are being eclipsed by ris- finance, where the UN hopes to see
ing emissions elsewhere, particularly in approval on the design of a Green
China where the rate of GDP growth Climate Fund, as well as a ramping
has been close to double digits for up of climate finance to the $100
years. That’s why efforts have to be co- billion a year by 2020 that was
ordinated at a global level, says the UN. agreed to under the Cancun Agree-
At a meeting in New York Septem- ments in 2010.
ber 19, UNFCCC Executive Secretary ◆ The fourth goal is to make operable
Christiana Figueres spelled out four a new technology transfer mecha-
goals for the upcoming talks: nism, again agreed to in Cancun, as
◆ First, she said, progress must be well as the Adaptation Committee
made on the political question of a which is the body that UNFCCC
second commitment period under signatory countries have developed
the Kyoto Protocol and a “clear deci- to oversee climate adaptation ef-
sion on how the global collective ef- forts around the world.
fort to reduce emissions will go for- Given the range of actors and inter-
ward and how that will be done in ests involved, whether agreements can
a transparent manner, with greater be reached is another matter. Envi-

1. Globally averaged marine surface annual mean data.


CO2 (ppm)
400

390

380

370

360

350

340

330

320

310
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2001 2004 2006 2008 2010

Source: US National Oceanic & Atmospheric Administration

36 insight December 2011


2012 global energy outlook - emissions

ronmental groups agree that progress vious UN climate negotiations. “I do


could be made on a number of issues. hope negotiators will not be able to
Wendel Trio, director of Climate Ac- sell the Climate Fund as progress for
tion Network Europe, sees little chance the third COP in a row as they did it
of big breakthroughs this year, but he already in both Copenhagen and Can-
does see potential for movement on key cun,” he said.
topics. “I believe there are three issues
which will be crucial in the Durban Carbon Market Outlook
conference. The future of the Kyoto Whether a new post-Kyoto deal is
Protocol is for sure one of these,” he struck or not, or whether the treaty is
said. “Developing countries, as indicat- amended or abandoned altogether, fos-
ed once again recently in the declara- sil fuels will remain the main means of
tion from the BASIC ministers, will put meeting growth in global energy de-
a lot of pressure on the EU to agree to a mand. Oil, natural gas and coal repre-
second commitment period.” sent abundant sources of stable, reliable
“For the big developing countries, energy, even if their combustion has cre-
keeping the Kyoto Protocol is the easi- ated a global environmental problem.
est way to ensure the firewall between Renewables have proven effective in
developed and developing countries, providing clean energy, but mostly re-
and they assume that if the EU keeps it quire subsidies in the form of generous
alive, some other, less important, coun- feed-in tariffs that, in the long term,
tries will follow: Norway, Switzerland, are considered unsustainable. Nuclear
Ukraine, New Zealand and potentially energy provides the dependable high
also Australia. Although the last is do- voltage baseload power that many in-
ing everything it can to not be put in dustrialized and advancing economies
that position,” said Trio. need, but raises an entirely different set
“The EU is willing to go for a second of environmental concerns, as high-
commitment period although it is dis- lighted in March this year by Japan’s
cussing whether that should be a po- Fukushima crisis and previous atomic
litical agreement only, without calling disasters elsewhere.
for ratification but keeping the rules, In terms of making the cost of car-
or whether the EU should give their bon explicit, governments still appear
support to amending the Kyoto Proto- to favor market-based approaches to re-
col and going for a ratification of these ducing emissions, while providing safe,
amendments, while already applying secure, reliable energy; carbon markets
what is agreed,” he said. could see major growth as a result. Even
Trio’s other key issues for Durban in the absence of a post-Kyoto pact, the
are climate adaptation and finance. value of the global carbon market has
“It is clear that historically adaptation surged from $11 billion in 2005 to $142
has had less attention than mitigation billion in 2010, although this phenom-
and the African countries are doing ev- enal growth trend came to a grinding
erything they can to make Durban all halt in 2010, in part because of climate
about adaptation. South Africa as COP policy uncertainty over the post-2012
[Conference of Parties] president, with era, according to the World Bank.
all its geopolitical interests, will have to The central attraction of cap-and-
show they support this, so one can ex- trade is its ability to deliver emissions
pect progress to be made on issues such reductions at lowest cost. “Put a price on
as national Adaptation Plans, the Ad- carbon and unleash the forces of clean-
aptation Committee and loss and dam- tech innovation,” say its advocates. But
age,” he said. even this most business-friendly of en-
On the finance side, Trio expects vironmental policy tools still has its de-
movement on climate funding, al- tractors within some economic sectors
though he said agreement to provide and regions. Critics argue that regional
funding for poorer countries has al- attempts to put a price on carbon tend
ready been vaunted as progress in pre- to distort competition between regions,

December 2011 insight 37


2012 global energy outlook - emissions

forcing regulators to tweak the rules to Global reinsurance group Swiss Re


prevent businesses from moving their says economic losses from climate-
operations into areas where carbon is related disasters are on the rise, with
yet to be priced. insured losses alone jumping from $5
Carbon emissions cap-and-trade pro- billion to $27 billion over the last 40
grams are already under way in Europe, years. “Without further investments
America (regionally), and New Zealand. in adaptation, climate risks could cost
China is proposing a carbon trading some countries up to 19% of annual
system for several cities and provinces, GDP by 2030 and set back years of de-
which may be expanded to become a velopment gains,” the company warns.
nationwide program in 2015. Similar ef- Business Europe, a major lobby group
forts are under way in Australia, South representing 20 million companies in
Korea and other major economies. 35 countries, supports the EU carbon
The world’s second largest carbon trading system, but is keen to ensure
market, the UN’s Clean Development that companies’ competitiveness is
Mechanism, is subject to policy uncer- maintained. The group has said it wants
tainty after 2012, although the mech- a “truly global and balanced climate
anism’s main life support-machine agreement, including the world’s major
continues to be demand for its carbon emitters,” as well as “facilitation, reform
offset credits from the EU Emissions and expansion of the Kyoto Protocol’s
Trading System, which is enshrined in flexible mechanisms (Clean Develop-
EU law until 2020 and beyond. ment Mechanism and Joint Implemen-
Nevertheless, it is clear that countries tation) to make a contribution to climate
are moving at different speeds, and at protection.” Business Europe has said
the European level, the waters have that climate change can only be success-
been further muddied by a lawsuit fully tackled if the EU’s major economic
brought against the European Commis- partners get involved, and that the EU’s
sion by the US aviation industry over current 20% emissions reduction target
the EU’s move to include CO2 emissions by 2020 should not be increased “in the
from flights originating outside of the absence of international progress.”
EU in its carbon trading program, as Durban, then, may see some small
well as similar opposition among Chi- steps toward a new global climate pro-
nese aviation companies. tection deal, but the scale of the chal-
At the corporate level, responses to lenge should not be underestimated:
the climate issue are equally disparate, despite worldwide efforts, the global
reflecting the still fragmented nature atmospheric concentration of CO2 is on
of international climate policy. Where the rise. In 2008-2009, the world suf-
cap-and-trade has been enacted, com- fered the worst global economic down-
panies buy and sell carbon credits to turn in living memory, cutting demand
help meet CO2 reduction targets. Other for everything from power to cement,
nations have opted for carbon taxes, steel and bricks—all of them CO2 in-
voluntary targets or other emissions re- tensive industries.
duction measures. Yet globally this severe recession
In the short-term, most companies af- didn’t even make a dent in the rising
fected by climate policy are still focused global CO2 trend, according to global
on bottom line impacts from carbon CO2 data published by the US National
taxes or cap-and-trade. But for some Oceanic and Atmospheric Administra-
sectors, longer-term financial liabilities tion. It is hard to avoid the conclusion
may be incurred from direct physical that reducing global CO2 levels will re-
climate impacts. Major global reinsur- quire coordinated international action
ance groups, for example, are already by governments, industry and civil soci-
grappling with the economic implica- ety, on a level hitherto unseen. Whether
tions of climate change for their sec- world leaders can show that level of am-
tor, in view of their rising exposure to bition, while public finances are severely
large-scale climate related “loss events.” stressed, remains doubtful. ■

38 insight December 2011


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Russia

Russia Embraces Asian


Energy Demand
Nadia Rodova, Managing Editor, Moscow

Russia, the world’s largest producer of oil and second largest


producer of natural gas, is increasingly looking to the rapidly
developing Asian region to diversify its export markets and
develop its own remote eastern regions. The country’s
ambitious plans require an amenable business environment
capable of stimulating massive investment, but long-term
confidence in Russia’s policy stability remains elusive.

Russia’s crude production is forecast in the first half of the year.


to grow nearly 1% year-on-year to 10.18 As a major hydrocarbons producer,
million barrels/day in 2011, strength- Russia is also one of the world’s biggest
ening further the country’s position exporters of both oil and gas, sending
as the world biggest producer of crude nearly half of its entire output to inter-
oil. However, maintaining this output, national markets, mainly Europe. But it
or indeed expanding it, remains prob- is Asia that is the epicenter of future de-
lematic as the country’s traditional pro- mand growth. Moscow is seeking to ex-
ducing regions decline. To compensate, ploit the geographical proximity of its
Moscow is focusing on the develop- new production basins to Asia’s rapidly
ment of new areas, such as East Sibe- developing markets.
ria, the country’s Far East and offshore
reserves in the Arctic. Russia’s authori- Eastern Pipelines
ties hope that these new provinces will In late 2009, Russia commissioned
allow production to plateau at today’s the fi rst 2,757-kilometer section of
levels for the next ten years. the East Siberia-Pacific Ocean pipe-
Russia is also the world’s second-big- line, through which it currently sends
gest gas producer. Gas output is expect- 600,000 b/d of crude oil to Asian mar-
ed to reach a record 671 Bcm in 2011, kets: 300,000 b/d via ship from the Pa-
up 3.1% year-on-year, breaking the pre- cific coast and 300,000 b/d to China
vious record high of 665 Bcm achieved through a spur pipeline. ESPO supplies
in 2008. According to Russia’s economy are to grow to 1 million b/d once the
ministry, internal and international de- second 2,045-kilometer leg of the route
mand for gas recovered at a robust rate is completed by end-2012, two years

40 insight December 2011


2012 global energy outlook - Russia

earlier than initially planned. ects in the Far East is such that South
This will support Russia’s bid for Stream [a proposed gas pipeline across
ESPO blend to become a regional Asian the Black Sea to Europe estimated to
benchmark. The grade is proving popu- cost around $20 billion] is a medium-
lar with refiners throughout Asia, but sized project in terms of investments,”
has also been sold into Hawaii and the Gazprom deputy CEO Alexander Med-
US West Coast. ESPO now trades at a vedev said in September.
higher price than Urals, Russia’s main But it is LNG that will really help
export blend, making access to the pipe- Russia diversify its gas export markets.
line attractive to producers. Having ini- Gazprom hopes to capture about 14%
tially traded at a discount, ESPO traded of the world LNG market by 2030. The
at a record high premium of $6.30/bar- company is considering the construc-
rel to Platts front-month Dubai crude in tion of new LNG capacity at the exist-
September. ESPO crude benefits from a ing Sakhalin 2 project, boosting output
so-called through tariff, which is signif- by 5 million mt/year from 9.6 million/
icantly lower in comparison with stan- mt currently. In addition, the list of
dard tariffs on other Russian pipelines, new LNG facilities at various stages of
for example those to Europe. planning and development includes a
In the gas sector, the state-run gas 7.5 million mt/year LNG plant within
monopoly Gazprom is also shifting its the giant Shtokman field in the Barents
focus to Asia-Pacific and hopes to see Sea, the 15 million mt/year Yamal LNG
the region account for 13% of its total project in the north and a 10 million
pipeline exports by 2030. Currently all mt/year plant near Vladivostok on the
Russian pipeline gas goes to Europe. The Pacific coast.
EU will remain Russia’s main market Gazprom sees the eastbound projects
for pipeline gas, taking more than 30% as all the more attractive because Chi-
of total Russian gas exports by 2030, na’s demand for gas is forecast to ex-
but “the scale of our business and proj- ceed that in Europe by 2030. The com-

1. Russia’s near-term crude oil output and exports.


Forecast
2012 2013 2014 2010-14, %
Low Low Low Low
2011 growth Base growth Base growth Base growth Base
2010 (estimate) scenario scenario scenario scenario scenario scenario scenario scenario
Crude output,
million mt 504.9 509.1 498 510 498 510 495 510 98 101
Crude exports,
million mt 250.3 244.5 220.6 244.6 217.6 243.6 213.6 243.6 85.3 97.3
Source: Ministry for Economic Development

2. Russia’s near-term gas output and exports.


Forecast
2012 2013 2014 2010-14, %
Low Low Low Low
2011 growth Base growth Base growth Base growth Base
2010 (estimate) scenario scenario scenario scenario scenario scenario scenario scenario
Crude output,
Bcm 649 671 682 697 706 725 716 741 110.3 114.2
Crude exports,
Bcm 177.9 198.2 200.2 211.8 219.2 233.1 223 240.7 125.4 135.3
Source: Ministry for Economic Development

December 2011 insight 41


2012 global energy outlook - Russia

pany has intensified talks on future gas Pyongyang as a result of its controver-
supplies with China, South Korea, and sial nuclear program.
Japan, among other Asian countries. The Fukushima nuclear disaster is
Gazprom has inked an agreement also expected to increase gas demand
to supply 30 Bcm/year of Russian gas in Japan over the long term and has
to China’s CNPC and hopes to agree a already done so this year. Japan is the
price formula for the gas by year’s end. world’s biggest purchaser of LNG and
However, the talks are proving difficult the largest customer of Russia’s only
and the partners have already missed a LNG plant on Sakhalin Island. Given
July deadline for signing the final con- potential demand in Asia for both LNG
tract. Under an initial memorandum and pipeline gas, Gazprom is spending
of understanding signed in 2006, the billions of dollars exploring the hard-
two companies agreed to build two gas to-access reserves in Russia’s eastern
pipelines, dubbed the Altai system, for regions and offshore Sakhalin Island
shipments of 30 Bcm/year of gas from in an effort to secure a resource base to
western Siberia and 38 Bcm/year from supply the region.
eastern Siberia.
Another eastbound project under The Northern Sea Route
discussion is the supply of up to 12 Possibly the most challenging new
Bcm/year of gas to South Korea. The area for development is the Arctic,
talks with Seoul, which fi rst started in which Russia sees as a key area of oil
2004, gained momentum this year, af- and gas production growth. Moscow
ter Pyongyang agreed to consider the estimates initial recoverable resources
construction of a gas pipeline across in the region at 100 billion mt of oil
North Korea to South Korea. However, equivalent, of which about 80% is gas.
the project remains fraught with po- The Arctic, with its harsh and chal-
litical risk, owing to the difficult re- lenging climate, ice-covered waters and
lationship between South and North constantly changing weather, could
Korea, as well as UN sanctions on also become a key transport route, re-

3. Arctic sea routes.

North Pacific J APAN


Ocean Bering Sea
Sea of
Northwest Passage Okhotsk

UN I TED
S TATES
Chukchi
Sea East
Siberian
Beaufort Sea Northern Sea Route
Sea
CANADA Laptev
Sea
Arctic Ocean
R US S IA

Hudson
Bay Kara
Sea
Baffin
Bay

Davis Strait Barents


Sea
G R EEN LAN D Greenland
Sea
Labrador Norwegian
Sea Denmark Strait Sea
I C ELAN D N O RWAY F IN LAN D

Source: UNEP

42 insight December 2011


2012 global energy outlook - Russia

ducing significantly voyage distances executive vice president of Russia’s biggest


between Europe and the Pacific basin. shipper Sovcomflot said in late Septem-
“We intend to turn it into one of the ber. The tanker made the transit through
key trade routes of international sig- an icebound section of the route from
nificance and scale, which will be able the Novaya Zemlya island in the Arctic
to compete with traditional interna- Ocean to Cape Dezhnev, the northeast-
tional corridors,” Russia’s Prime Minis- ern-most point of Eurasia on the Chukchi
ter Vladimir Putin said at a forum on Peninsula, in a record seven days.
the Arctic in late September. This is The entire route from Murmansk on
“the shortest route between the major the Barents Sea to Thailand—the desti-
markets of Europe and the Asia-Pacific nation for the cargo of gas condensate—
regions, practically one-third shorter took 26 days, at least ten days less than
than the traditional southern route the time it would have taken via the
[via the Suez canal]” and it “should traditional Suez Canal route. Novatek
compete with others in transportation estimates that the use of the Northern
costs, safety and quality,” he said. Sea Route will save the company 10-
But it is easier to say than do. Estab- 15% on transport costs. However, this
lishing the Northern Sea Route as a safe, excludes expenditure on the ice-break-
commercial maritime route requires ers that are to take tankers through the
large-scale investment in a range of ice-bound section of the route.
challenging technologies. Safe passage Russia’s authorities appear ready to
requires the agreement of internation- subsidize its ice-breaking services to
ally-accepted rules and regulations con- make the route economic. The state-run
cerning shipping standards and navi- Rosatom agency, the nuclear ice-break-
gation; a reliable satellite-based system ers’ owner, has implemented more flex-
for monitoring ice flows and ships, and ible service fees, making transport costs
the development of ports, airports and “comparable” with the costs for taking
oil spill response and rescue services the traditional route via the Suez Canal,
all along the route. It remains unclear according to Ambrosov. Even so, pas-
at the moment where the money to sage is only likely to be possible for be-
achieve this will come from. As a first tween four and six months of the year.
step, Russia’s budget allows for Rb38 bil-
lion ($1.21 billion) until 2014 for the Internal Challenges
construction of three nuclear and six However, in addition to the push
diesel ice-breakers for the route till 2020. into more remote areas, Russia’s oil
The Northern Sea Route is becoming and gas industry faces another chal-
more navigable as the Arctic ice cover lenge closer to home. According to
recedes and thins. Independent Russian analysts at UBS, “Whatever the global
gas producer Novatek last year sent the economic situation is, there are some
first Aframax tanker across the Arctic in critical points in Russia’s internal pol-
what was the first ever voyage by a large icy, and fi rst of all lack of confidence
vessel along the Northern Sea Route to that the authorities are able to main-
prove that commercial navigation in tain stable rules of the game for any
the region is possible. Novatek expects reasonable period of time.”
to take the final investment decision for The stability of the business environ-
the $15-20 billion LNG project on the ment is crucial for new projects that un-
northern Yamal Peninsula by end-2012 like the declining old fields are mainly
and build the first LNG train, with ca- located in remote, undeveloped regions,
pacity of 5 million mt/year, in 2016. requiring massive investments in infra-
This year, a 162,000 dwt Suezmax tank- structure and cutting-edge technology.
er made the transit, registering two new “The high tax burden is not as crucial
records. “We sent the biggest tanker that as stability; give us at least five years of
has ever sailed through this route, and stability,” a top-ranked official within a
it passed the route faster than any other western oil major told government rep-
tanker previously,” Evgeny Ambrosov, an resentatives recently at a roundtable.

December 2011 insight 43


2012 global energy outlook - Russia

Based on past practice, even if an in the US and other countries. Rosneft


agreement on a project’s fiscal terms sealed the deal, after a similar deal with
is reached, it cannot be relied upon to BP, which included a $16 billion share
persist as the government has shown swap, failed, owing to a conflict between
a willingness to change the terms if it BP and its Russian shareholders in the
needs to raise more money. Govern- TNK-BP joint venture.
ment expenditure remains heavily de- In addition, Russia’s Bashneft is consid-
pendent on oil and gas revenues. The ering extending an invitation to India’s
business climate is also suffering from ONGC to participate in the development
noticeably increasing corruption, bu- of its giant Trebs and Titov oil project
reaucracy, selective justice and high in northwestern Timan-Pechora region.
ONGC is also discussing the possible
Under the current tax regime virtually all purchase of a 25% stake in Bashneft.
Greater cooperation with internation-
offshore projects are unattractive for al majors means that Russian compa-
nies can share the exploration risk and
development. Although the government has gain precious experience in developing
signaled that it is ready to provide the hard-to-access reserves. It will also help
Russia’s oil companies expand interna-
necessary support, it remains to be seen tionally as the agreements with foreign
companies often envisage joint projects
if these intentions will be realized, in third countries.
and whether they will be sustained. But the presence of a foreign partner
is not always a guarantee of success, ac-
and often ineffective state involvement cording to analysts with Renaissance
in the economy, as well as constantly Capital bank, who note lengthy delays
changing regulations. to the Shtokman gas project in the Bar-
But the potential still outweighs the ents Sea being undertaken by Gazprom,
risk. There is also clear evidence of im- Total and Statoil and the failed strategic
proved investor sentiment toward the partnership between Lukoil and Cono-
Russian oil and gas sector as increasing coPhillips. In February, ConocoPhillips
number of foreign majors are willing to completed the sale of its entire 20%
invest. Russia still offers lower risks and stake in privately-owned Lukoil, which
“a safer environment than a number of it had owned since 2004, because the
other oil and gas producing countries,” US major decided the “better opportu-
France’s Total CEO Christophe de Mar- nities” in Russia were reserved for state-
gerie said in April, referring to the re- run companies Gazprom and Rosneft.
cent upheavals in the Middle East and Capital-intensive projects, for which
North Africa. Russian and foreign companies com-
Total bought a 12.09% stake in No- bine their efforts, need to win govern-
vatek in April and is currently finaliz- ment support and secure special tax in-
ing the purchase of a 20.5% stake in centives. Under the current tax regime
Novatek’s Yamal LNG project. Novatek virtually all offshore projects are unat-
is likely to invite at least two more for- tractive for development. Although the
eign partners to Yamal LNG, with the government has signaled that it is ready
likes of Shell, ConocoPhillips, Exxon- to provide the necessary support, it re-
Mobil and investors from Asia and the mains to be seen if these intentions will
Middle East, including Qatar, said to be realized, and whether they will be
have expressed interest. sustained. Even with Russia’s vast ener-
Moreover, in August, ExxonMobil gy resources and geographical proxim-
teamed up with Russia’s biggest oil pro- ity to the world’s fastest growing energy
ducer Rosneft to develop offshore reserves markets, many questions remain over
in Russia’s Arctic and southern Black Sea. the speed and scale of development of
The partnership should also see Rosneft the country’s more remote hydrocar-
take part in some of ExxonMobil projects bon resources. ■

44 insight December 2011


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renewables

Winners and Losers


Emerge for
Renewable Energy
David R. Jones, Editor, Platts Renewable Energy Report

The sorting out has begun for the renewables industry,


with some companies thriving while others fall by the
wayside. At the same time, renewable energy is gaining
in competition with nuclear power, but faces tough
challenges from natural gas.

Renewable energy over the past de- economic times and volatile debt mar-
cade has enjoyed phenomenal success, kets since the financial crisis first hit in
with sectors like wind and solar power 2008. Some renewables sectors appear
expanding installed capacity at rates of poised for continued success, although a
30-50% each year. Wind turbine mak- new bout of financial instability casts a
ers, solar panel manufacturers, biomass pall over the industry. “Despite the cur-
pellet producers and other supply-chain rent situation, the general sense is that
companies, along with project develop- renewables are still doing pretty well,”
ers, have shared in the good times, with said IHS Senior Analyst Marianne Boust.
plenty of prosperity to go around. “Projects are still getting built. But there
Renewables have developed in major are regional discrepancies.”
industrial countries like Germany, Japan Some mature markets, like those in the
and the United States as part of larger EU, continue to grow, fueled by policies
energy mixes, a variable-output comple- requiring EU member states to secure a
ment to baseload power sources such as set amount of their energy from renew-
coal and natural gas. But heading into able resources by 2020. The targets differ
2012, renewable energy is entering a new from country to country, but “the over-
phase, with winners and losers emerg- all support is there,” Boust said. Even
ing both within renewable energy sec- EU members with shaky economies like
tors and as part of larger energy markets. Greece, Ireland, Italy and Portugal will
Renewables are no longer just one energy maintain their support for renewables,
source among many; some have become she said. Indeed, she added, Greek poli-
direct competitors with fossil fuels. cy-makers view renewable energy as an
Renewable energy, bolstered by long- important source of jobs and economic
term government support policies in development amid a slumping economy.
many countries, has weathered tough Along with steady growth in Euro-

46 insight December 2011


2012 global energy outlook - renewables

pean renewable strongholds like Ger- ern US have made rapid progress toward
many, new markets are also opening up meeting their near-term RPS goals, and
in east Europe and Central Asia. Wind wind build-out is expected to slow down
power capacity could expand 400-600 as a result ... This dynamic, if combined
MW annually in countries like Poland, with the potential expiration of the wind
Romania and Turkey, according to IHS PTC at the end of 2012, may result in a
analyst Marc Muhlenbach. In contrast, sharp decline in wind project develop-
the US renewables market has stalled, ment,” according to the study, Regulatory
particularly the wind-power industry, And Political Headwinds May Slow Renew-
and could spiral downward in 2012. able Energy Growth.
The key federal renewables policy—the Wind project activity and orders for
Production Tax Credit, which provides 2013 and beyond “are scant because of
an inflation-adjusted 1.9¢ tax credit for the lack of a predictable business envi-
electricity generated from renewable ronment, causing layoffs and even bank-
sources—is set to expire at the end of ruptcies in American manufacturing
2012. With cost-cutting high on the plants and the supply chain,” the Ameri-
agenda of many US federal lawmakers, can Wind Energy Association warned.
the PTC might not be renewed, which “These struggles for US wind manufac-
could send the nation’s renewables de- turers will only worsen if Congress were
velopment, particularly wind-farm con- to allow the tax credit to expire.”
struction, into a tailspin. As a result, the US wind energy indus-
This would continue the boom-and- try, once the world leader, now ranks No.
bust cycle that has plagued the US wind 2 in installed capacity behind China. Like
industry for years as Congress periodically other Asian countries, China has emerged
allows the PTC to expire, only to renew it as a key center for renewables generation
after US wind power development sputters capacity and technology manufactur-
and halts. “Six months ago, we wouldn’t ing—though warning signs are flashing
have doubted it would be extended,” for the booming Chinese market too.
Boust said. “Now we’re not so sure.”
Without a broad federal renewables The Solar PV Shakeout
policy, the industry relies on state re- Perhaps no renewables sector better
newable portfolio standards requiring illustrates the industry’s winners and
electricity retailers to obtain a portion of losers than solar photovoltaics. On the
their power from renewable energy. Yet one hand, plunging prices for PV equip-
as a September analysis by Standard & ment have made solar energy more af-
Poor’s notes, “many utilities in the west- fordable than ever for consumers—and

1. US PV installations, 2010-Q2 2011.


Installations (MWdc)
400
Residential Non-Residential 360.8
350 Utility
314.3
300
268.0
250
186.5 187.3
200
152.0
150

100

50

Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011


Source: Platts

December 2011 insight 47


2012 global energy outlook - renewables

more lucrative for developers, who can sources without government subsidies.
maintain attractive pricing for rooftop Yet, at the same time, PV manufacturers
systems even as US states and EU coun- like Solyndra, Evergreen Solar and Spec-
tries cut their incentive programs. PV trawatt have gone bankrupt, while others
panel prices are dropping so quickly, the like SolarWorld and Solon have shuttered
Standard & Poor’s analysis points out, their solar module factories. PV supply is
“that the price of $1 per watt, recently far outpacing demand. Plummeting pric-
predicted for 2015, now looks likely by es are the result not just of technological
the end of 2011.” advance but of producer profit margins,
In Europe, the cost of generating elec- creating the paradox noted by S&P that
tricity from PV has plummeted 50% “the bankruptcies were caused by falling
over the past five years. In a variation panel prices, which is actually positive
of Moore’s Law for personal-computer for the future prospects of solar power.”
price reductions, over the last 20 years, S&P cites China’s propping up of its
the price of PV modules has dropped large PV producers through cheap fi-
20% every time the cumulative sold nancing—even in the face of excess
volume of PV modules has doubled, the industry supply—as a key element in
European Photovoltaic Industry Associa- equipment price reductions. US Sena-
tion notes. “Importantly, there is a huge tor Ron Wyden has charged the Chinese
potential for further generation cost de- government with illegally subsidizing
cline: around 50% until 2020,” accord- its domestic PV industry in violation of
ing to a 2011 EPIA study. “The cost of PV international trade rules. However, S&P
electricity generation in Europe could has voiced strong doubts as to whether
decrease from a range of 0.16-0.35 €/ Chinese banks will be willing to sustain
kWh in 2010 to a range of 0.08-0.18 €/ the country’s PV producers indefinitely,
kWh in 2020, depending on system size noting that companies like JA Solar are
and irradiance level.” already starting to cut output.
As a result, the US and European mar- Despite the industry shakeout, entre-
kets continue to thrive. US grid-connect- preneurs continue to target opportu-
ed PV installations in second-quarter nities upstream in PV production. For
2011 grew 69% over the same period in instance, Qatar Solar Technologies said
2010, bringing the country’s installed October 4 that it planned to construct
solar capacity to more than 3.1 GW. In a $1 billion polysilicon production fa-
addition, new territories for PV are sur- cility in Qatar. The plant, scheduled to
facing; the state of New Jersey’s com- open in the second half of 2013, would
mercial PV installations exceeded Cali- manufacture 8,000 metric tons per year
fornia’s for the first time in 2011. of high-purity, solar-grade polysilicon
“The US remains poised to install 1,750 for use in PV modules.
MW of PV in 2011, double last year’s to-
tal, enough to power 350,000 homes,” ac- Renewables vs Conventional Fuels
cording to the US Solar Energy Industries The March catastrophe at Japan’s Fu-
Association. Further expansion is likely kushima nuclear complex triggered
through the largest PV initiative to date renewed opposition to nuclear power
in America, set to be conducted by Solar- in Europe. Under a policy in Germany
Strong, that would double the number of issued by the conservative coalition
residential solar PV installations in the US government in June, all nuclear power
to 320,000 arrays. plants will be closed within ten years,
On a global scale, the PV market has and renewables’ share in the nation’s
reached a cumulative installed capac- electricity supply is to double from the
ity of 40 GW, with 16.6 GW of capacity current 17% to 35% by 2020.
added in 2010. And in sunny climates Though much of Germany’s power
like the southern Mediterranean, PV shortfall will be replaced by natural
power generation is rapidly approaching gas and coal in the short term, offshore
the long-sought grid parity at which it wind power is also set to benefit. Off-
can compete with conventional power shore wind farm operators will see their

48 insight December 2011


2012 global energy outlook - renewables

guaranteed above-market rate of €0.15/ tablished the target of bringing 22 GW of


kWh cut only from 2018, three years solar PV capacity on line by 2022, though
later than the government planned, and local content requirements have discour-
a so-called sprinter bonus for projects aged the entry of some foreign producers.
up and running by 2015 will remain in The federal government has also es-
place beyond 2015. tablished a similar program for biomass
Two other major industrial powers, expansion, and wind energy currently
Japan and Italy, are also turning away amounts to about 13 GW of capacity,
from nuclear power and slowly towards with further expansion planned. Com-
renewables in the wake of the Fukushi- bined with solar power and small hydro-
ma accident. Italian voters this year re- power programs created by the country’s
jected an effort by the government to re- powerful state governments, India ap-
sume nuclear plant construction, while pears primed to retain its position as a
the Japanese government has pledged to leader in clean-energy growth.
make renewable energy a cornerstone of China in recent years has leapfrogged
its post-Fukushima energy strategy. to the top ranks of renewable energy
In the US, renewable energy is increas- markets, surpassing the US in installed
ingly locked into direct competition wind capacity that now exceeds 42
with natural gas. Though on a techni- GW. IHS’ Muhlenbach said China re-
cal side the two energy sources continue mains the “powerhouse” of wind ener-
to be used in complementary fashion, gy growth with “more mature markets
with baseload gas balancing out variable approaching saturation.” However, the
sources like wind and solar, the shale Chinese market, particularly for wind
gas boom has forced down US gas pric- energy, could be headed for a slowdown.
es. Utilities that once viewed renewable Market analysts V/B Research reported
energy supplies as a hedge against vola- in October that financing for Chinese
tile gas prices have less incentive to buy wind projects had fallen 14% to $6.3 bil-
power from wind farms or to finance lion quarter-on-quarter based on fears
solar PV installation. “There’s stiff com- of over-expansion. “The decline is a di-
petition from conventional sources” for rect consequence of measures taken by
renewables in US markets, Boust said. China’s government to curb the coun-
try’s rapid expansion of wind capacity.
Looking Ahead There are growing concerns regarding
New renewables markets are emerging over-supply of turbines in the domestic
in developing countries as governments market and the fact that large amounts
in Bangladesh, the Philippines, South of constructed wind capacity remains
Africa, Thailand and the Pacific Islands unconnected to the grid,” V/B Research
set policies designed to cut their reliance said. “In response, the central govern-
on fossil fuels. In addition, a new type of
renewable energy market is set to begin
in Scandinavia next year: Norway and Key trends in renewable energy
Sweden in January will launch the first
cross-border system for trading green ◆ A focus on energy security makes
energy certificates.
At the same time, burgeoning renew- renewable energy more attractive
ables markets in Brazil and India are on ◆ Solar PV producers struggle even as the
course for further expansion. In Brazil,
the renewables industry, which racked up technology approaches grid parity
sales for 2.7 GW of generation capacity as ◆ More non-energy companies invest
part of two federal power auctions in Au-
gust, stands to make further gains with in renewable energy projects
new electricity auctions in 2012. India, ◆ Concerns grow about availability
too, is committed through national pro-
grams to major renewables expansion. Its of rare earth metals
National Solar Mission initiative has es-

December 2011 insight 49


2012 global energy outlook - renewables

ment has imposed heavy cuts to wind climate change to encompass energy se-
installation targets and asserted control curity. Cyprus, for example, accelerated
over approval of projects smaller than 50 its solar energy development this year
MW, which had previously been the pre- following an accident that crippled the
serve of local authorities.” island nation’s main source of power, a
And as markets change, both com- plant at a naval base.
mercial and political perspectives on re- In Israel, demands are growing for ex-
newable energy continue to evolve. Such panding wind and biomass power as dis-
corporate giants as Siemens, GE and Mar- ruptions in gas supplies from neighboring
tifer in the recent year have committed Egypt have left the country scrambling
major resources to renewable energy as to meet power-production requirements,
project developers and equipment pro- while Bangladesh, with few energy re-
ducers. More non-energy companies are sources—save for the some of the world’s
entering the renewables field; German greatest solar radiation—plans to use PV
conglomerate BayWa is acquiring renew- to meet its goals for village electrification.
ables companies to add to its broader cor- In addition, concerns about the avail-
porate roster; while Google said in June it ability of rare earth metals are a source
planned to create a $280 million fund in of major discussion in the wind industry,
partnership with PV developer SolarCity Muhlenbach said. Though not especially
to finance residential solar projects. rare, many rare earths vital for producing
In the political arena, commitments wind turbines, solar panels and batteries
to renewables development are broaden- are currently almost solely available from
ing from concerns about pollution and China, which has demonstrated its will-
ingness to withhold rare earth deliveries to
Japan in a dispute unrelated to the metals.
Emerging markets for renewable energy Changes in technology are taking hold.
New types of wind turbines are being de-
◆ veloped that are designed to take advan-
The Philippines: A law approved in June tage of areas with low wind speeds com-
establishes national goals for renewables pared with prime wind spots, Muhlenbach
said. “They’re moving toward longer ro-
development tors and larger towers,” he said.
◆ Thailand: A newly-elected democratic Continued growth in established renew-
ables markets, along with openings in de-
government appears set to continue veloping countries, show that clean-ener-
the country’s solar PV growth gy has yet to enter a period of cut-throat
◆ Bangladesh: A new national policy looks competition, either among renewables
project developers or in battles for mar-
to use solar power to expand electricity kets with other energy resources. There are
still plenty of energy production contracts
supplies to villages to support a broad market encompassing
◆ Pacific Islands: With some countries many types of resources, even with energy
use stagnating or falling in most countries
spending 30% of their GDP for generator as the global economic slump drags on.
fuel, solar, biomass, wind and geothermal However, the split between PV equip-
ment producers and developers, as well
resources all offer opportunities as the clash between renewable resources
◆ South Africa: The country’s first tender and conventional fuel sources in secur-
ing shares of utilities’ energy mixes, indi-
for renewables gives independent power cate that the renewables industry could
producers the chance to challenge the be undergoing fundamental change. Re-
newable energy, long considered a win-
power-market dominance of the country’s win situation for utilities, developers
state-owned utility Eskom and national economies, is increasingly
becoming a zero-sum game. ■

50 insight December 2011


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petrochemicals

Petchem Markets
Adjust to Changing
Feed Slate
Jim Foster, Senior Editor, Platts Petrochemicals Analytics

US olefin production is undergoing a step change as lighter


feedstocks from the numerous North American shale gas plays
make their way into the slate. Inexpensive Natural Gas Liquids
are pushing naphtha feedstocks aside, leading some observers
to tout these developments as a renaissance for the US
petrochemicals industry.

While a renaissance certainly appears natural gas has trended lower while
to be underway in US petchems, not crude has trended higher. That decou-
everyone is raising a glass and toast- pled relationship between crude and
ing the growing influence abundant natural gas has pushed olefins produc-
ethane is having in the US olefins mar- ers in the US to use natural gas as their
kets. The change in feedstock is impact- preferred feedstock.
ing output, shifting prices for a whole Historically, US crackers used 70%
range of petrochemical products, to the ethane feedstock and 30% naphtha, ac-
extent that international trade patterns cording to a report by Chemical Mar-
are changing. ket Resources Inc. The shale gas plays
Butadiene buyers have recently faced have changed the feedstock dynamics
record-high prices—when they have to 87% ethane and 13% naphtha. That
been able to find any material at all in change in feedstocks has reduced pro-
a seemingly perpetually-tight spot mar- pylene production in crackers by more
ket. Domestic US propylene prices have than 50%. It has also tightened supplies
climbed so high that the US export mar- of crude-C4s and butadiene in the US.
ket for polypropylene has been decimat- The effect tightening butadiene sup-
ed. And even those who could benefit the plies have had on US markets is evident
most from a switch to lighter feedstocks in the pricing. The US spot butadiene
could see margins shrink as ethane prices price climbed to record highs in June
start to decouple from natural gas. this year—nearly $2,000/mt (about
The abundance of shale gas in the 60%) above the previous record set
United States has already caused natu- during the energy run-up of 2008. The
ral gas prices to decouple from crude; situation was similar around the globe,

52 insight December 2011


2012 global energy outlook - petrochemicals

with both Asian and European butadi- supplies to remain limited and prices
ene prices hitting record levels as sup- to remain relatively strong when com-
plies tightened. At the time, tight bu- pared with historic norms because of
tadiene supplies were exacerbated by a the shift in feedstocks.
significant run-up in the price of natu- With US butadiene consumers facing
ral rubber, boosting demand for syn- high prices, production options once
thetic rubber downstream. thought unprofitable are starting to be
Even with that higher demand, US discussed. In August, TPC Group an-
butadiene derivative production has nounced it was performing a detailed
been scaled back because of a lack of engineering study of on-purpose butadi-
feedstock. One US butadiene buyer es- ene production. TPC’s plan would utilize
timated the amount of butadiene be- an existing idled dehydrogenation unit
ing consumed in the US at just over 1.8 at the company’s Houston plant. The
million mt annually. “That’s what we’re unit would use butane as the primary
using because that’s what is available to feedstock, an NGL found in the US shale
use,” the source said. “What would the gas plays, which could provide an abun-
demand be if there was more material dant, low-cost feedstock for the plant.
available? I don’t know. The [butadi- One US-based butadiene trader,
ene] derivative rate in the US is near though, said the process could be ex-
60% now. In the past we’ve run at 70%. pensive. “The problem is it costs a lot,”
There’s a chance that those derivative he said of on-purpose butadiene pro-
rates would climb 10 percentage points duction. “It takes a lot of butane—about
if there was more material available.” 2 pounds for each pound of butadiene.
His estimate puts the total butadi- But if butane prices fall because of shale
ene consumption capacity in the US gas, this is possible.”
at near 3 million mt annually. A 70% Butane can also be used in gasoline
derivative rate would put US butadiene blending, Michael Bloesch, TPC’s vice
demand near 2.15 million mt annu- president of strategic initiatives, said.
ally—about 300,000 mt above what is But there could be less demand from
currently available. that market, resulting in more on-
Since reaching the record highs in purpose butadiene feedstock. “We see
June, global butadiene prices have likely less gasoline blending in the fu-
been correcting lower. However, most ture,” Bloesch said. “That makes the
market participants expect butadiene natural home for butane as a cracker

1. US Ethylene/Propylene prices.
100
Ref Grd Propylene Dlvd Houston Ethylene FD USGC Cts/Lb
90

80

70

60

50

40

30

20

10

1/09 3/09 5/09 7/09 9/09 11/09 1/10 3/10 5/10 7/10 9/10 11/10 1/11 3/11 5/11 7/11
Source: Platts

December 2011 insight 53


2012 global energy outlook - petrochemicals

feed, for exports or for our process.” 4 million mt per year of new ethylene
The cracker feed option for butane is production has been announced in re-
less likely in the current low-cost eth- sponse to the shale gas plays. These in-
ane environment, making exports or clude 1 million mt/yr for Braskem in
converting butane domestically more Mexico, 1 million mt/yr from a new Dow
likely. The TPC project will produce Chemical cracker, about 900,000 mt/yr
600 million pounds (272,158 mt) a year from Nova in Canada, 450,000 mt/yr
of material, and could be expanded if from an expansion at Formosa Plastics,
demand increases, Bloesch said. The 300,000 mt/yr from Dow restarting a St.
feasibility report on the project is ex- James cracker and 230,000/yr mt from
pected to be completed in early 2012. debottlenecking at Westlake.
There also is a possibility that butadi- There is also the potential for three
ene demand in the US may not recover other new crackers to bring the total of
to historically normal levels, a butadi- new ethylene capacity in the US to 7 mil-
ene trader said. “Demand destruction is lion mt/year, according to the CMR re-
real in the butadiene market,” he said. port. US domestic demand for ethylene
“Tire plant closures are a concern.” derivatives was just below 32 million mt
Some of the butadiene demand is also in 2010 with nearly 4.8 million mt (14%)
being eroded by recycling, he added. exported, according to the report.
“A lot of [the demand destruction] is in By 2016, that demand is expected
efficiencies in the regrind market,” he to climb to 39.3 million mt. “There is
said. “Butadiene at $4,000 a ton is a real enough capacity to meet domestic de-
incentive for regrind.” He also said he mand and still have some exports,” ac-
has seen ABS (acrylonitrile butadiene cording to the CMR report. “Therefore,
styrene) producers losing market share essentially 100% of the new ethylene
to polystyrene and expandable polysty- capacity will be for derivative exports.”
rene. And there has been a drop in buta- When polyethylene in the US gets long
diene going into the SBL (latex) market. the US is expected to dominate the
“We hear of it, but we have not seen Latin American polyethylene market,
it,” Bloesch said of demand destruction. Bauman said.
ABS has the most substitutions and SBL In December, high density polyethyl-
might suffer if there is a drop-off in pa- ene (HDPE) cargoes moving from South
per coating. But SBR (styrene butadiene Korea to Chile spiked nearly 300% year-
rubber) and PBR (polybutadiene rub- on-year to 2,296 mt. South Korean pro-
ber) do not have many substitutions, ducers also moved 667 mt of low den-
Bloesch said. sity polyethylene (LDPE) and 108 mt
of linear LDPE to Chile over the same
International Markets period, compared with none for either
Another possible source for butadiene grade in December 2009, according to
would be foreign markets, said Robert Platts research. Parcels moving from
Bauman, a consultant with Polymer South Korea to Peru also climbed in De-
Consulting International. “South Ko- cember, with 1,723 mt of HDPE exports
rea is known for its exports. If I were compared with 123 mt in the same
in Korea, I’d be looking at what short- month of 2009. South Korean produc-
ages there will be in the US and focus ers also sold 125 mt of LDPE to Peru in
on those,” Bauman said. December, compared to none in 2009.
As butadiene prices in the US climb, Those opportunities, though, could
Korean polyethylene producers could dry up for Korean exporters as US poly-
be faced with limited export opportu- ethylene production ramps up during
nities to Latin America, Bauman said. the next three to five years. Instead,
The switch to lighter feed stocks—the Korean producers could cut polyethyl-
reason for the tightening butadiene ene production, and focus on export-
supply—will result in a dramatic in- ing butadiene to the US, Bauman said.
crease in ethylene production. “Korea’s strategy could be responding
According to the CMR report, nearly to those shortages in the US,” Bauman

54 insight December 2011


2012 global energy outlook - petrochemicals

said. “Most likely, the crude C4s and will be needed to replace the capacity
other heavies are going to be sourced lost to the NGL shift. At a 3% growth
from outside the US. There’s an oppor- rate for propylene derivatives, another 2
tunity there.” million mt/year of new propylene capac-
As of now, there are no official plans ity will be needed to meet 2015 projected
for South Korean producers to increase propylene derivative demand.
butadiene production to fill export Tightening propylene feedstock
demand to the US, according to one could push polypropylene prices high
US-based butadiene trader. “That cer- enough to make some consumers con-
tainly is an interesting idea,” he said. “I sider switching to HDPE for injection
haven’t heard of that happening—but molding and thermoforming, and pos-
it is feasible. But it will depend on how sibly polystyrene and polyethylene
they are committed to C4 and propyl- terephthalate (PET) for thermoforming,
ene. There certainly is a shortage of C4s according to the CMR report. The over-
globally at this point.” all drop in polypropylene demand from
A South Korean butadiene produc- swapping to HDPE, polystyrene and
er said he expects Asian producers to PET could total 12% the report said.
shift from ethylene to heavier materi- A US-based polymer and resin distribu-
als as the Latin American opportuni- tor said polyethylene certainly could see
ties dwindle. “Korean crackers are no an uptick in demand from higher poly-
[longer] competitive with C2 and C3 propylene prices. Polystyrene, though,
[because of] US and Middle East gas ex- was unlikely to be impacted. “I’m re-
traction, especially ethylene,” the Ko- ally not expecting polystyrene demand
rean producer said. “[The] polyethylene to increase,” the distributor said. “But
spread is so poor that many crackers polypropylene certainly can expect to
are just expecting compensations from lose out to polyethylene. There is some
mixed C4 and butadiene.” talk that polystyrene could be a more
It’s more likely that polymers from stable-priced product ... But I think that
Asia will be shipped to the US, he said. might have been overstated.”
“In my view [Asian producers] will The more likely scenario, he said,
move more butadiene from Korea to was that stronger propylene and poly-
the US for a while,” he said. “But as propylene prices would result in more
time goes on they will find out that to on-demand propylene production in
move polymers is more efficient than the US. “We’ve already heard of some
to move monomers. Butadiene is a gas announcements,” he said. “Dow has
monomer. Its logistics cost is high, and announced. But announcing doesn’t
there is limited shore storage in the US.” mean doing. We can believe those proj-
ects are happening when they start
Propylene Shortages Expected moving the dirt.”
The shift to lighter feed stocks reduc- Dow said it will construct a propane
es the amount of propylene available dehydrogenation (PDH) plant in the US
in US markets. Also, a larger percentage at its Freeport, Texas site. It is scheduled
of propylene is being produced at re- to start production in 2015. The compa-
fineries, which potentially could be di- ny is also considering a second propyl-
verted into the gasoline pool instead of ene plant to start up in 2018. “PDH eco-
to petrochemical plants. The tightness nomics are very profitable right now,”
in the US propylene market, relative the resin distributor said. “If you’re us-
to the ethylene supply, is illustrated in ing a new technology, there is money to
the growing premium propylene com- be made producing through PDH.”
mands over ethylene. Since the start of The news of Dow’s PDH plant plan
2009, there have been only a few brief was followed by the company signing
periods where ethylene prices were a definitive agreement to sell its global
higher than propylene. polypropylene business to Braskem for
According to the CMR report, about 1.5 $340 million. The divestiture of the
million mt/yr of new propylene capacity polypropylene business was consistent

December 2011 insight 55


2012 global energy outlook - petrochemicals

with Dow’s long-term strategic business verting methane to propylene (MTP)—


model, chairman and CEO Andrew Liv- though that option seems unlikely,
eris said. “We are dampening volatility according to Bauman. “Lurgi is doing
and putting our propylene into high- MTP in Trinidad,” Bauman said. “It
value end uses,” Liveris said. “You can makes sense there. I don’t think it
assume that by doing this deal, we are makes sense in the US. There is a lot of
liberating ourselves to do that. We are water involved, creating a lot of garbage
taking what we make into our value- water.” The MTP process would make
added, high-end uses like acrylics and more sense in regions with less strin-
epichlorohydrin and propylene oxide.” gent environmental regulations, Bau-
man suggested, specifically citing Chi-
Polypropylene Exports Hit na, the Middle East and Latin America.
Higher propylene and polypropylene Jerry Oliver, vice president of sales and
prices in the US will also impact trade business development for Air Liquide—
flows, the resin distributor said. “In which owns Lurgi—said MTP technol-
North America—and remember, this is ogy is feasible and being considered in
a North American issue, not global— North America. The company already
polypropylene [production rates] will has already constructed four gas-based
be hurt by this,” he said. “And the US methanol plants globally, including
material is going to have to compete one in Malaysia, as well as the one in
with the Middle East, Europe, and Asia.” Trinidad. The capacity of those plants—
According to CMR, about 15% of poly- about 5,000 mt/day—is enough to feed
propylene production is for export. And a 500,000 mt/year MTP unit.
as domestic prices climb, production The company has two coal-based MTP
of polypropylene for export will drop. plants in China. One is mechanically
“Polypropylene exports (about 1 million complete but still being commissioned.
mt/year) will decrease dramatically due to The other is operational, though not at
the high cost of propylene,” according to full capacity because the coal gasifica-
the CMR report. “This will tighten global tion does not provide enough feedstock
supply and raise Asian export prices.” to run at 100% capacity.
Another option to offset the cut in Gas-based production of metha-
propylene production would be con- nol, which would be used to feed the

2. Ethane decouples from natural gas.


250
Natural Gas Ethane

200

150

100

50

1/09 3/09 5/09 7/09 9/09 11/09 1/10 3/10 5/10 7/10 9/10 11/10 1/11 3/11 5/11 7/11
Source: Platts

56 insight December 2011


2012 global energy outlook - petrochemicals

MTP process, does produce significant the US in 2016,” Bauman said. “Prices
amounts of water—estimated to be be- are going to be low. Margins are going
tween 900,000 and a million mt an- to be tight. High-priced production will
nually. However, Oliver stressed that have to be cut.”
the water should not be considered There could also be competition from
“garbage water.” The feasibility of us- other regions as the shale gas revolu-
ing MTP in the US or Canada will de- tion spreads globally. “The last time
pend on feedstock advantages, not the there was something similar [in scale]
generation of water, Oliver said. With was the very first oil crisis, in the 1970s.
natural gas priced between $4 and $5/ That was a turning point. The Middle
MMBtu, MTP would provide a signifi- East finally realized what they had—
cant feedstock advantage, Oliver said. and they realized they didn’t need to
“How long are we going to stay [at that be selling (oil) for $4 a barrel.”
price]?” Oliver asked. “As long as you At that time, oil companies started to
have the advantage, and can sustain flock to the Middle East, just to ensure
that for three to four years, these proj- oil supply, Bauman said. “Mobil placed
ects can work.” a PE plant in the Middle East—just as a
Propane dehydrogenation (PDH) is courtesy to the Saudi government—so
linked to a crude oil feedstock price. they could be guaranteed they had ac-
Crude oil will in turn drive the price cess to oil. At the time, it was Mobil’s
of propylene. “Propylene prices appear most valuable property.”
to be tied to crude, since the classical The step-change US petrochemical
production technologies (FCC, naph- companies face because of shale gas
tha crackers and PDH) are fed by crude could be as big as those seen in the
based/crude related feedstocks, accord- energy industry in the 1970s, he said.
ing to Ingo Litzenberger from Air Liq- “(Shale gas) may be as big, once it ma-
uide. “With regard to PDH, which lives tures. People here are only focusing on
from the spread between propane and the US. There is also shale gas in North
propylene, the feedstock costs [pro- Africa, Eastern Europe, Latin America.
pane] are about 80% of the production The US is going to be the source of tech-
cost, whereby for MTP the feedstock nology for those plays.”
costs [natural gas] are only about 25%. A new cracker could be built in Po-
Consequently, MTP is favored by high land to feed ethylene and polyethyl-
crude price scenarios, whereby PDH is ene into Europe, Bauman said. That
favored by low crude prices.” would result in higher-priced facilities
in Europe being shut down. There al-
Shale Goes International ready was a threat to the higher-priced
While butadiene and propylene could European polyethylene production
experience tightness because of the shift from lower-cost Middle East supplies.
to lighter feedstocks, the abundance of The higher-priced production units
ethylene and polyethylene may become will likely start to shut down between
just as problematic for olefins produc- 2017 and 2020, Bauman said. “That’s
ers, consultant Bauman said. While when we expect to see the real inter-
natural gas prices have decoupled from national impact.”
crude oil prices, which makes the shale As more countries explore for shale
gas plays attractive as a low-cost energy gas—and fi nd the same benefits and
source, ethane prices have also been de- concerns currently being experienced
coupling from natural gas. in the US—the need for on-purpose
That decoupling is expected to shrink butadiene and propylene is expected
margins as demand for ethane pushes to increase, TPC’s Bloesch said. The re-
up its price relative to natural gas, eat- sult of the global shale gas plays would
ing into the cost advantage that US eth- be “net less butadiene and propylene,”
ylene and polyethylene producers seek he said, resulting in a “strengthening
from shale. “I certainly wouldn’t want of on-purpose butadiene [and propyl-
to be in the polyethylene business in ene production]. ■

December 2011 insight 57


‡…‘‰‹œ‹‰–Š‡–ƒ”•‘ˆ ͜͞
 –Š‡
Ž‘„ƒŽ‡”‰› †—•–”›

Congratulations to the 2011 Award of Excellence Winners.


Each year Platts Global Energy Awards honors select groups of companies for their strategic
contribution to energy. Finalists in categories that have the potential for making a significant
impact on the new energy economy by creating new jobs and paving the way for the next best
technological solutions will receive the Award of Excellence in 2011.

The 2011 Award of Excellence winners are:

Operational Excellence Leading Technologies Principal Sponsor


Rising Star Award - Company Sustainable Technology Innovation
C3 of the Year
CoaLogix DB Sediments GmbH
Element Markets, LLC GreenVolts
On-Ramp Wireless LanzaTech Co-Sponsors
Prometheus Energy Group Lennox Industries Inc.
SeaMicro Petra Solar
SolarReserve PyroPhase
SolarReserve
Space-Time Insight / California ISO
SPG Solar, Inc.
Virent Enery Systems, Inc.

720-548-5478 • www.GlobalEnergyAwards.com
solar

New Era for


Renewables Finance
Swami Venkataraman and Andrew Giudici, Directors,
Standard & Poor’s Ratings Services

Capital cost declines have brought the wind and solar


industries much closer to grid parity, but the renewables
sector faces a plethora of risks in the next few years,
including the expiry of subsidies and the need for new
sources of capital. Given these conflicting pulls, growth
will almost certainly slow in 2012 and longer-term
growth rates for renewables remain somewhat murky.

Brisk growth in renewable energy ing or have expired—the Department


over the past several years brought of Energy loan guarantee program,
the 2010 installed base of new renew- which ended September 30; Produc-
able electricity to 55 GW in the US, up tion Tax Credits for wind generation,
from 23 GW at the end of 2006. Capi- which expires end-2012 and may
tal costs have declined sharply. Wind not be renewed; and the US Treasury
turbines have fallen to about $1,000 cash grant for Investment Tax Cred-
per kilowatt (kW) from $1,500-2,000/ its. While the elimination of the cash
kW a few years ago. Solar panel prices grant does not remove the ITC itself
are decreasing with such rapidity that a for solar projects, it makes access to
price of $1 per watt, recently predicted tax equity a major factor in fi nancing
for 2015, now looks likely by end-2011. as opposed to the ease of using the
Yet, despite this enormously positive cash grant. Other forms of policy sup-
long-term economic trend, renewable port, such as state incentives and Re-
energy may see turbulence over the newable Portfolio Standards, may also
next year or two. be called into question.
The foremost challenge arises from In Europe, political commitment
the bleak fi scal forecast for the US and to renewable energy remains strong,
Europe. The current environment of mainly due to the EU’s 20% by 2020
budget austerity and sovereign debt target for renewables. However, the
crises make it difficult to sustain sub- experiences in Spain, the Czech Re-
sidies for renewable energy. In the public, and Italy indicate the risks of
US, three major incentives are expir- a backlash to generous subsidies. If the

December 2011 insight 59


2012 global energy outlook - solar

sovereign debt crisis spreads or wors- this year. Changes in Italian regula-
ens, it is possible that renewable subsi- tion is certainly a factor, but falling
dies may be affected as countries enact panel prices still imply strong rates
austerity measures. Feed-in tariffs in of return for projects. Instead, panel
the Canadian province of Ontario also demand is sluggish, owing to a lack
barely survived a threat of elimination of access to fi nance. However, not all
in recent elections. developments are negative for renew-
ables. Post Fukushima, Japan passed
Muted Demand Response a law requiring 20% of its energy to
Wind and solar demand in 2011 have come from renewables by 2020. This is
not responded to falling capital costs. expected to create ongoing demand of
While some have speculated that ongo- 3 GW per year. Germany’s decision to
ing price declines prompted buyers to shut down all nuclear reactors by 2022
postpone orders to get even better pric- is positive, but only incrementally be-
es later, many other factors are at work. cause its current solar run rate is very
Utility scale projects in the US need strong and because much of the nu-
to negotiate Power Purchase Agree- clear capacity needs to be replaced by
ments and obtain permits, which takes other base-load options.
time. The impact of falling prices has Another positive for demand has
indeed been observed in recent util- been rooftop installations, where fall-
ity requests for proposals where PPA ing panel prices have offset declining
prices for solar PV have reached $100/ state-level incentives in the US. Today,
MWh and lower. Many utilities in the rooftop systems are competitive in
western US (and in the Northeast for about 12 to 15 US states and are rapidly
solar) have made rapid progress toward approaching parity in several others
meeting their near-term RPS goals, as panel prices fall. However, installed
and demand is lower as a result. Slower costs for rooftops will decline more
economic growth in the US and Eu- slowly than utility scale projects, owing
rope has meant slower growth in pow- both to lower volumes and significant
er demand that, in conjunction with start-up and marketing costs in each
low natural gas prices, have depressed US state or European country, as well as
demand for renewables that might be the need to comply with literally hun-
expected as a result of portfolio targets dreds or even thousands of local build-
in a growth environment. ing and fire codes. Awareness of solar’s
In Europe, Italy and Germany will competitiveness has also lagged among
both be much smaller solar markets retail customers.

1. Historical sources of tax equity.


$ billions
8
Tax Equity Projected Tax Equity
7
Treasury Grant Projected Incr. 2011 grant
6

2005 2006 2007 2008 2009 2010 YTD 2011 2011 est 2012 est
Source: Standard & Poor’s

60 insight December 2011


2012 global energy outlook - solar

Falling Capital Costs ing falling capital costs, with global ca-
Excess supply and economies of scale pacity at 10 GW to 15 GW compared
are responsible for this tremendous de- with installations at only 4 GW to 5
cline in wind and solar capital costs. GW per year since the 2008 financial
For solar panels, pricing from Tier 1 crisis. Turbine prices have declined to
manufacturers (the highest priced tier) about $1,000 per kW today from about
reached about $1.20 per watt in the $1,500 to $2,000 per kW, partially also
second quarter of 2011, compared with due to improving turbine efficiencies.
almost $4 per watt in early 2008 and Chinese producers have also entered
$1.75 per watt as recently as the fourth this market, although they don’t yet
quarter of 2010. Low prices may be bad dominate it like solar panels.
for panel manufacturers, but only par-
tially, as this decline helps solar genera- New Financial Architecture
tion approach grid parity. The expiry of incentives, turmoil in
However, are these declines sustain- European banking markets and the
able? Chinese manufacturers have been need for new sources of capital will
the primary driver of price declines. force renewable energy developers to
They have expanded production capac- seek new sources of tax-friendly, com-
ity enormously and continue to fully petitive financing. Tax equity investors,
utilize their plants despite lack of de- generally large financial institutions or
mand. Global production capacity is utilities, have played a critical role in
currently about 30 GW, while 2011 de- the growth of the US renewable indus-
mand is expected to be about 15 GW.
Although a few small players have gone If the decline in panel prices was driven mainly
bankrupt (Solyndra, Evergreen Solar,
and Spectrawatt) and others have cut by economies of scale and not accompanied
output (QCells, REC), production has
consistently and substantially out- by an industry-wide accumulation of inventory
stripped demand in 2011, resulting in a fueled by cheap, state-directed bank lending,
large increase in inventories across the
supply chain, mainly in China. This such price declines might be sustainable.
massive increase in working capital has
been financed by Chinese banks. try over the last decade because project
The generous access to virtually ze- developers generally do not have the
ro-cost debt is being used by Chinese appetite to fully utilize the tax benefits.
solar companies to achieve economies The financial crisis sharply reduced the
of scale, offer extended credit terms taxable income of banks and financial
to customers to augment their already institutions, in addition to eliminating
industry-leading cost positions, and to some prominent players. The American
gain market share. If the decline in pan- Recovery and Reinvestment Act in 2008
el prices was driven mainly by econo- introduced the 1603 cash grant that al-
mies of scale and not accompanied by lowed project developers to monetize
an industry-wide accumulation of in- their ITCs in the form of direct cash
ventory fueled by cheap, state-direct- grants from the treasury. The program
ed bank lending, such price declines has been very successful, accounting
might be sustainable. However, assum- for over 50% of tax equity in the US.
ing such bank lending must eventually Besides relieving developers from
stop (a normally rational assumption), having to look for tax equity, the cash
the production cuts and bankruptcies grant also allows developers to avoid
that will accompany such action will cash sweeps of 90-95% typically associ-
likely stabilize or raise prices. Some pro- ated with tax equity structures. This al-
duction cuts are already beginning to lows developers to access the high-yield
be seen at companies such as LDK Solar bond and institutional loan markets to
and JA Solar. raise debt at the parent level (with cash
The wind turbine business is also see- distributions from projects used to pay

December 2011 insight 61


2012 global energy outlook - solar

debt service), dramatically expanding broad class of investors.


the pool of capital available to spur ad- The renewable industry has argued
ditional project development. that the exclusion of renewables from
However, the cash grant program MLPs was simply a matter of the histori-
looks unlikely to be extended beyond cally undeveloped state of the renew-
the end of 2011. Some cash-rich corpo- able industry when MLPs were first cre-
rations, notably Google, have become ated. Similarly, the ongoing malaise in
tax equity investors and more could real estate is causing REITs to evaluate
enter, although their expected rates of adding other asset classes, such as pow-
return will likely be greater than those er assets. However, both structures need
of banks. legislative changes at the federal level,
In the larger scheme of things, ac- highly unlikely in the near future.
cess to tax equity for renewable proj-
ects would benefit from standardiza- Debt Financing for
tion in a manner similar to low-income Renewable Projects
housing financing investments. The A combination of Basel III expecta-
low-income housing industry is well tions (which raise capital requirements
established, the cash flow profiles and for longer tenor loans), and the ongo-
risk-reward tradeoffs are well under- ing sovereign-linked banking crisis of
solvency and liquidity in Europe has
Securitization has the potential to emerge caused a number of banks to withdraw
entirely from project financing. Even
as a very large and cost-effective source availability of construction financing
has been affected, and the terms for
of capital that might revolutionize distributed long-term, take-out financing are oner-
rooftop solar generation. ous. Projects are being delayed or aban-
doned, contributing to the lack of de-
stood, and transaction structures have mand response to reduced prices. This
become highly standardized over the is especially critical since European
years. This attracts many more inves- banks have been the mainstay of solar
tors (than just banks) and also keeps project financing (including in the US).
pricing attractive given an adequate There has been talk about Chinese
supply. Renewables are yet to achieve banks lending to projects that use Chi-
the stability and standardization re- nese solar panels or wind turbines, al-
quired to attract non-financial inves- though there has not been much evi-
tors in large numbers. dence that it has actually occurred as
The renewable industry has also ex- yet. Chinese banks are already overex-
pressed its wish that renewable assets tended through providing inexpensive
be included as a category in which Mas- credit for panel manufacturers’ capital
ter Limited Partnerships and Real Estate expansion and working capital needs,
Investment Trusts are allowed to invest. and currently appear unwilling to
MLPs, which are currently allowed to make long-term loans to projects on a
invest in oil and gas infrastructure as- non-recourse basis.
sets and REITs, which generally own This outlook for bank lending necessi-
buildings and rental property, would tates the creation of a broader project fi-
not only be able to monetize tax ben- nance market for solar with institutional
efits by passing them along to their investors. Large solar PV projects are em-
members, but could also provide a low- inently financeable through the project
er cost of capital because they are non- finance bond markets though accep-
taxable entities themselves. Both invest tance of a new asset class may be slower.
in long-lived physical assets that gener- To the extent that perceived technology
ate steady cash distributions, a profile risks may be hampering a large-scale
that contracted renewable projects are project finance bond market for solar
well placed to meet. Both are often pub- power, insurance-based structures have
licly listed and can raise capital from a been proposed, some of which indem-

62 insight December 2011


2012 global energy outlook - solar

nify the project for panel degradation take agreements include annual esca-
risk while other proposals would also as- lators, which will increase the rate for
sume certain operational risks. solar electricity each year. While the
escalator protects the transaction from
Solar Securitization rising prices, it also adds risk that fu-
Securitization has the potential to ture PPA or lease rates could exceed the
emerge as a very large and cost-effective then-prevailing retail rate. If retail rates
source of capital that might revolution- fall significantly below the PPA or lease
ize distributed rooftop solar generation. price, off-takers may attempt to rene-
Over time, as tax incentives decline, gotiate their agreements, which could
contractual receivables as a percent of lessen future cash flows.
system value will increase in compari- Operation and Maintenance services
son with tax benefits. For example, if are usually provided by solar compa-
the ITC declines to 10% in 2016, then nies that have developed computerized
receivables will provide 70% of a sys- monitoring software to track the per-
tem’s value by 2016, with 10% from formance of each solar system. While
the ITC and 20% from depreciation. most solar systems do not require sig-
Solar then becomes a cash flow-driven nificant upkeep, problems do arise that
investment instead of a tax-driven one, need to be addressed on a periodic ba-
well-suited for securitization. sis. Because of the size and scope of the
Leases and PPAs with various off- collateral pool supporting most solar
takers would be aggregated and used securitizations, there are only a hand-
as collateral for a structured security. ful of companies that can handle such
Securitization could result in lower fi- a diversified portfolio.
nancing costs for high-yield companies The lack of large companies that can
because investors do not rely on the provide O&M services on a national
creditworthiness of the issuing entity level increases the credit risk profile of
to recover their investments. Rather, the transaction because it may be dif-
the collateral pool generates cash flows ficult to replace the original provider in
that are used to pay interest and princi- a short period of time. As such, it is im-
pal obligations. portant to assess the O&M fee to ensure
One of the key credit risks in solar that it would be sufficient to attract a
securitization is offtaker creditworthi- new provider in a period of distress.
ness. Traditional mortgage analysis Solar securitizations benefit from
could be used to determine the default geographically dispersed assets, which
probability for each residential PPA or reduce the transaction’s overall oper-
lease agreement. Evaluating a residen- ating risk. However, many securitiza-
tial off-takers’ credit statistics provides tions may include a ramp-up feature,
insight into their ability to make their which allows the collateral pool to de-
PPA or lease payments, while a property velop over time. While this feature is
evaluation provides insight into the off- not uncommon in some asset classes,
taker’s financial incentive to stay in the there is risk that the collateral pool may
home. For example, if a borrower only not be as well diversified as originally
has a small amount of equity in his or expected. This could occur if certain
her property, he or she may have little installations become uneconomical as
incentive to stay in the home if prices state and federal incentives are not re-
deteriorate. The creditworthiness of newed. Somewhat mitigating this risk
small businesses and commercial enti- is the fact that proceeds that would
ties are determined using traditional have been used to purchase additional
credit analysis. PPAs or leases would be used to repay
In order to incentivize an off-taker debt if installations cease. However,
to enter into a long-term PPA or a lease concentration risk would increase be-
agreement, many issuers will sell so- cause the transaction would rely on a
lar power at a 10% or greater discount smaller number of off-takers to meet its
from prevailing utility rates. Many off- debt service obligations. ■

December 2011 insight 63


top 250 global energy companies

Asia Forges
Ahead
Ross McCracken, Editor,
Platts Energy Economist

Platts Top 250 Global Energy


Company Rankings™ reviewed.

2010 was a year of recovery, but for Urbanization across non-OECD Asia-
some more than others. Oil may have Pacific is one of the key driving forces
bounced back, but the energy com- behind the region’s rapid growth in en-
plex as a whole was marked by distinct ergy consumption, so it is no surprise
disparities between commodities and that in the Platts 250 Asian companies
regions. But if there is one consistent are once again to the fore.
factor, it is that Asia steals the show. However, companies’ ability to ben-
Whether coal, gas, oil or electricity, re- efit from Asia’s growth depends on
cession or boom, Asia-Pacific’s rate of location, activity type and market.
consumption growth outstrips all other While crude, coal and to some extent
regions by a substantial margin. LNG benefit from international pric-
At the heart of this is one of the ing—and thus from Asian growth—gas
world’s largest mass migrations in his- and power markets are more regionally
tory, from countryside to city. Even if based. Higher feedstock prices make
China’s population growth may have profits for some, but represent costs
slowed, it expects to add 16 million to others. In Asia too, the impact of
urban dwellers a year out to 2020, cre- growth in energy demand is differenti-
ating huge new demand for energy. ated. Oil refiners and power producers
often find themselves caught between
the rock of international feedstock pric-
Platts Top 250 Global Energy es and the hard place of regulated do-
mestic markets.
Company Rankings™ measures
financial performance by ex- Recovery and Decline
amining each company’s assets, World oil demand in 2010 grew by
revenue, profits and return on 3.1% on year to 87.382 million bar-
invested capital. All ranked com- rels a day, surpassing its former peak
panies have assets greater than in 2007 and more than reversing the
(US) $3 billion. The underlying previous two years of contraction. Ris-
data comes from S&P Capital ing demand was accompanied by rising
IQ, a Standard & Poor’s business prices: Platts’ physical crude benchmark
(like Platts, a division of The Mc- Dated Brent averaged $79.50/barrel in
2010, its second-highest annual average
Graw-Hill Companies).
ever and a big step up from the $61.67/b

64 insight December 2011


top 250 global energy companies

average seen in 2009. Asia saw the fast- But the runaway gas markets were,
est on-year growth in demand, at 5.3%, first, spot LNG prices in the Asia-Pacif-
as opposed to Europe’s anemic 0.1%. ic market, which increased 46.2% on
World gas consumption jumped by year from an average of $5.28/MMBtu
7.4% on year in 2010 to 3,169 billion in 2009 to $7.72/MMBtu in 2010, and
cubic meters, also reversing the con- second, long-term oil-linked gas con-
traction of 2009 and reaching a new tracts. Although these rose less than
peak. Although demand rose in all re- spot prices, they achieved the highest
gions, the pricing picture amply dem- absolute values, averaging, in Europe,
onstrated the benefits to consumers of $9.0058/MMBtu in 2010, up from
gas-to-gas competition, and by contrast $7.4038/MMBtu in 2009.
the benefits of its absence to producers. World coal consumption jumped
It also illustrated the almost complete 7.6% on year to 3,555.8 million tons of
disconnection of the US gas market oil equivalent (mtoe) in 2010, driven
from trade in LNG and thus the sever- by Asian demand. While this is also an
ing of international gas price transmis- all-time global high, the regional varia-
sion mechanisms. tion is stark. Coal consumption in Eu-
In the US, gas prices at Henry Hub av- rope is in long-term decline. Although
eraged $4.09/MMBtu over 2009, rising to consumption rose by 4.4% in 2010, and
only $4.4/MMBtu in 2010 as supply from steam coal prices delivered to Northwest
shale plays kept overall gas supply well Europe jumped 39.6%, coal use remains
above demand. This has caused a shift well below pre-financial crisis levels.
in drillers’ attention from shale gas itself A similar trend is emerging in newly
to liquids production. By contrast, gas gas-rich North America. US steam coal
prices at the UK National Balancing Point prices on NYMEX averaged $61.60/
jumped from an average of $4.775/MMB- short ton over 2010, up 26.3% from
tu in 2009 to $6.575/MMBtu in 2010. 2009. But again, while North Ameri-

1. Fastest growing Asia companies.


3-year Platts
Rank Company Country Industry CGR % Rank
1 Cairn India Ltd India E&P 116.5 120
2 PTT Aromatics & Refining Plc Thailand R&M 49.6 217
3 YTL Power International Bhd Malaysia DU 48.9 209
4 China Resources Power Holdings Co Ltd Hong Kong IPP 42.4 149
5 YTL Corp Bhd Malaysia DU 40 227
6 China Yangtze Power Co Ltd China IPP 35.8 112
7 GD Power Development Co Ltd China IPP 32.7 180
8 Shanxi Xishan Coal and Electricity Power Co Ltd China C&CF 29.5 192
9 Shanxi Lu'an Environmental Energy Development Co Ltd China C&CF 29.1 159
10 Reliance Infrastructure Ltd India EU 28.8 232
11 Adaro Energy Tbk Pt Indonesia C&CF 28.7 238
12 Huaneng Power International Inc China IPP 28.1 127
13 Yanzhou Coal Mining Co Ltd China C&CF 28.1 100
14 China Longyuan Power Group Ltd China IPP 26.9 247
15 Banpu Pcl Thailand C&CF 26.3 151
16 CNOOC Ltd Hong Kong E&P 26.2 15
17 China Coal Energy Co Ltd China C&CF 25.1 97
18 Reliance Industries Ltd India R&M 24.7 24
19 Bumi Resources Tbk Pt Indonesia C&CF 24.5 226
20 Gail (India) Ltd India GU 23.1 109
Fastest Growing is based on a three year compound growth rate (CGR) for revenues. The compound growth rate (CGR) is based on the companies revenue
numbers for the past four years (current year included). If only three years of data was available then it is a two year CGR. All rankings are computed from
data assessed on June 1, 2011.
Source: S&P Capital IQ/Platts

December 2011 insight 65


top 250 global energy companies
Platts Return on
Rank Assets Revenues Profits invested capital 3-year Industry
2011 Company State or country Region $ million Rank $ million Rank $ million Rank ROIC % Rank CGR% code
1 Exxon Mobil Corp Texas Americas 302,510 5 341,578 2 30,460 2 18 13 -2 IOG
2 Chevron Corp California Americas 184,769 13 189,607 6 19,024 6 16 20 -2 IOG
3 Gazprom OAO Russian Federation EMEA 330,261 2 118,401 12 32,443 1 13 39 14 IOG
4 PetroChina Co Ltd China Asia/Pacific Rim 254,914 8 220,177 5 21,034 3 12 41 21 IOG
5 Total SA France EMEA 206,640 11 189,153 7 14,234 7 13 35 1 IOG
6 Royal Dutch Shell plc United Kingdom EMEA 322,560 4 368,056 1 20,127 5 11 54 1 IOG
7 ConocoPhillips Texas Americas 156,314 15 175,752 8 11,358 8 12 46 1 IOG
8 China Petroleum & Chemical Corp China Asia/Pacific Rim 153,143 16 281,981 4 10,788 9 11 49 17 IOG
9 OJSC Rosneft Oil Company Russian Federation EMEA 93,829 21 61,942 25 10,400 10 14 30 9 IOG
10 Lukoil Oil Company Russian Federation EMEA 84,017 27 104,956 15 9,006 12 13 34 9 IOG
11 Statoil ASA Norway EMEA 119,203 19 89,523 17 6,473 16 12 47 0 IOG
12 Petrobras-Petroleo Brasilier Brazil Americas 328,193 3 125,937 10 20,779 4 9 84 8 IOG
13 E.ON AG Germany EMEA 219,815 10 125,833 11 9,007 11 9 78 11 EU
14 Repsol YPF SA Spain EMEA 97,241 20 74,779 20 6,319 17 11 56 2 IOG
15 CNOOC Ltd Hong Kong Asia/Pacific Rim 50,464 47 27,280 52 8,175 14 24 6 26 E&P
16 Eni SpA Italy EMEA 189,590 12 132,663 9 8,507 13 8 89 4 IOG
17 RWE AG Germany EMEA 133,828 18 68,593 21 4,454 24 10 67 7 DU
18 JX Holdings Inc Japan Asia/Pacific Rim 77,058 28 114,941 13 3,719 30 10 61 9 R&M
19 Endesa SA Spain EMEA 89,990 24 40,157 34 5,560 21 10 60 20 EU
20 TNK-BP Holdings Russian Federation EMEA 30,881 91 40,280 33 6,540 15 26 4 6 IOG
21 Oil & Natural Gas Corp Ltd India Asia/Pacific Rim 42,881 59 25,888 56 4,943 22 18 14 7 E&P
22 China Shenhua Energy Co Ltd China Asia/Pacific Rim 52,454 39 22,165 64 5,729 20 14 32 23 C&CF
23 Ecopetrol SA Colombia Americas 37,626 66 22,613 63 4,389 25 98 1 23 IOG
24 Reliance Industries Ltd India Asia/Pacific Rim 68,061 32 58,508 27 4,247 26 9 83 25 R&M
25 Centrica plc United Kingdom EMEA 31,732 85 35,405 37 2,957 36 19 11 11 DU
26 Scottish and Southern Energy plc United Kingdom EMEA 35,314 73 44,738 30 2,376 43 15 25 23 EU
27 Occidental Petroleum Corp California Americas 52,432 40 19,045 69 4,569 23 12 45 0 IOG
28 PTT Plc Thailand Asia/Pacific Rim 41,195 61 61,784 26 2,702 37 9 77 8 IOG
29 Gazprom Neft JSC Russian Federation EMEA 32,064 83 30,301 46 3,148 33 12 42 14 IOG
30 Marathon Oil Corp Texas Americas 50,014 50 67,113 23 2,568 40 8 92 4 IOG
31 Exelon Corp Illinois Americas 52,240 41 18,644 71 2,563 41 10 66 0 EU
32 GDF Suez France EMEA 265,503 7 113,751 14 6,216 18 4 183 21 DU
33 National Grid plc United Kingdom EMEA 76,388 29 22,647 62 3,409 31 7 104 8 DU
34 Enel SpA Italy EMEA 241,628 9 96,872 16 5,911 19 4 187 19 EU
35 Surgutneftegaz Russian Federation EMEA 46,682 53 17,640 77 3,894 28 9 73 0 IOG
36 Hess Corp New York Americas 35,396 72 33,862 40 2,125 47 10 72 2 IOG
37 BG Group plc United Kingdom EMEA 50,299 49 17,166 81 3,383 32 10 71 9 IOG
38 Iberdrola SA Spain EMEA 134,725 17 40,976 32 3,866 29 5 157 20 EU
39 Dominion Resources Inc Virginia Americas 42,817 60 15,197 88 2,963 35 11 57 -1 DU
40 Imperial Oil Ltd Canada Americas 21,246 127 23,494 59 2,197 46 17 18 0 IOG
41 AK Transneft OAO Russian Federation EMEA 50,767 45 11,759 111 4,033 27 10 68 20 S&T
42 Indian Oil Corp Ltd India Asia/Pacific Rim 40,850 62 67,824 22 1,724 55 7 114 14 R&M
43 EnBW Energie Baden-Wuerttemberg AG Germany EMEA 50,668 46 23,664 58 1,576 60 8 91 6 EU
44 Suncor Energy Inc Canada Americas 72,439 31 35,692 36 2,673 38 5 166 27 IOG
45 Sasol Ltd South Africa EMEA 22,925 120 17,305 79 2,256 45 14 28 8 IOG
46 Apache Corp Texas Americas 43,425 58 12,183 109 3,032 34 9 76 7 E&P
47 CEZ As Czech Republic EMEA 31,822 84 10,548 120 2,575 39 13 36 4 EU
48 Vattenfall AB Sweden EMEA 87,594 26 31,458 43 1,914 52 5 174 14 EU
49 Southern Co Georgia Americas 55,032 37 17,456 78 2,040 49 6 133 4 EU
50 NextEra Energy Inc Florida Americas 52,994 38 15,317 87 1,957 50 6 124 0 EU
Notes: C&CF = coal and consumable fuels, DNR = data not reported, DU = diversified utility, E&P = exploration and production, EU = electric utility, GU = gas utility, IOG = integrated oil and gas, IPP = independent
power producer and energy trader, R&M = refining and marketing, S&T = storage and transfer. All rankings are computed from data assessed on June 1, 2011.

66 insight December 2011


top 250 global energy companies
Platts Return on
Rank Assets Revenues Profits invested capital 3-year Industry
2011 Company State or country Region $ million Rank $ million Rank $ million Rank ROIC % Rank CGR% code
51 Coal India Ltd India Asia/Pacific Rim 18,015 140 11,057 117 2,392 42 31 2 13 C&CF
52 Devon Energy Corp Oklahoma Americas 32,927 80 9,940 126 2,333 44 10 62 -4 E&P
53 OMV AG Austria EMEA 37,964 65 31,405 44 1,240 83 6 132 5 IOG
54 Tatneft OAO Russian Federation EMEA 20,281 129 15,664 86 1,563 62 11 52 10 E&P
55 Formosa Petrochemical Corp Taiwan Asia/Pacific Rim 15,761 149 23,336 61 1,348 75 12 44 -6 R&M
56 SK Innovation Co Ltd Korea Asia/Pacific Rim 27,005 101 47,147 28 989 98 7 116 1 R&M
57 Gas Natural SDG SA Spain EMEA 65,195 34 26,432 54 1,617 58 4 198 25 GU
58 NTPC Ltd India Asia/Pacific Rim 30,228 93 12,638 105 2,059 48 8 99 14 IPP
59 Public Service Enterprise Group Inc New Jersey Americas 29,909 95 11,793 110 1,557 63 9 80 -3 DU
60 Kansai Electric Power Co Inc Japan Asia/Pacific Rim 89,986 25 33,044 42 1,469 67 3 215 1 EU
61 EDP Energias De Portugal SA Portugal EMEA 58,216 36 19,081 68 1,453 69 4 186 9 EU
62 Bashneft OJSC Russian Federation EMEA 14,991 154 13,341 98 1,429 70 13 37 58 E&P
63 Fortum Oyj Finland EMEA 31,580 87 8,478 138 1,750 54 9 85 12 EU
64 EDF France EMEA 345,880 1 87,746 18 854 109 1 241 3 EU
65 YPF SA Argentina Americas 11,402 183 11,084 116 1,453 68 28 3 15 IOG
66 Chesapeake Energy Corp Oklahoma Americas 37,179 68 9,366 128 1,774 53 6 125 6 E&P
67 Saudi Electricity Co Saudi Arabia EMEA 50,905 44 7,437 150 608 138 12 43 10 EU
68 Entergy Corp Louisiana Americas 38,685 64 11,488 112 1,270 81 6 120 0 EU
69 Valero Energy Corp Texas Americas 37,621 67 81,342 19 923 103 4 188 -5 R&M
70 Idemitsu Kosan Co Ltd Japan Asia/Pacific Rim 30,994 90 43,656 31 724 125 5 142 -2 R&M
71 Canadian Natural Resources Canada Americas 44,050 57 12,730 104 1,687 56 5 173 5 E&P
72 Compania Espanola de Petroleos SA Spain EMEA 16,500 146 29,818 47 854 110 8 88 1 IOG
73 Edison International California Americas 45,530 56 12,409 108 1,304 80 5 148 -2 EU
74 Tokyo Gas Co Ltd Japan Asia/Pacific Rim 22,523 123 18,316 72 1,139 88 7 111 1 GU
75 Veolia Environnement SA France EMEA 74,064 30 46,841 29 814 112 2 226 2 DU
76 Inpex Corp Japan Asia/Pacific Rim 32,995 79 11,251 114 1,535 64 5 140 -8 E&P
77 Chubu Electric Power Co Inc Japan Asia/Pacific Rim 65,635 33 27,808 51 1,009 95 2 220 -1 EU
78 PG&E Corp California Americas 46,025 54 13,841 97 1,113 89 5 164 1 DU
79 Eletrobras-Centrais Electricas Brasileiras SA Brazil Americas 92,721 22 16,191 84 1,327 78 2 225 7 EU
80 Polski Koncern Naftowy Orlen SA Poland EMEA 18,609 137 28,284 49 803 115 7 109 9 R&M
81 TonenGeneral Sekiyu Corp Japan Asia/Pacific Rim 11,163 189 28,617 48 511 157 17 17 -8 R&M
82 American Electric Power Co Inc Ohio Americas 50,455 48 14,427 92 1,214 86 4 189 3 EU
83 Cia Energetica de Minas Gerais Brazil Americas 21,180 128 7,596 147 1,333 76 10 64 10 EU
84 Duke Energy Corp North Carolina Americas 59,090 35 14,272 93 1,317 79 3 210 4 EU
85 Husky Energy Inc Canada Americas 30,076 94 18,074 75 1,166 87 5 161 5 IOG
86 Murphy Oil Corp Arkansas Americas 14,233 160 23,401 60 798 116 9 81 8 IOG
87 Encana Corp Canada Americas 35,152 74 8,827 133 1,492 65 5 151 -25 E&P
88 SNAM Rete Gas SpA Italy EMEA 28,423 98 4,679 185 1,489 66 8 87 25 GU
89 Consolidated Edison Inc New York Americas 36,146 70 13,325 99 1,003 96 5 175 1 DU
90 Tenaga Nasional Bhd Malaysia Asia/Pacific Rim 24,469 109 9,772 127 1,032 93 7 113 9 EU
91 S-Oil Corp Korea Asia/Pacific Rim 9,285 202 18,141 74 619 134 13 33 11 R&M
92 MidAmerican Energy Holdings Co Iowa Americas 45,668 55 11,127 115 1,238 84 4 193 -3 DU
93 Federal Grid Co of Unified Energy System JSC Russian Federation EMEA 31,163 88 3,721 202 1,946 51 7 108 20 EU
94 Enersis SA Chile Americas 27,792 99 12,596 106 991 97 5 149 10 EU
95 CLP Holdings Ltd Hong Kong Asia/Pacific Rim 23,065 119 7,513 149 1,329 77 7 106 5 EU
96 Woodside Petroleum Ltd Australia Asia/Pacific Rim 20,196 131 4,193 194 1,575 61 10 70 4 E&P
97 China Coal Energy Co Ltd China Asia/Pacific Rim 18,592 138 10,708 119 1,038 92 7 107 25 C&CF
98 Galp Energia SGPS SA Portugal EMEA 13,153 165 18,936 70 594 141 9 82 4 IOG
99 KazMunaiGas Exploration and Production JSC Kazakhstan EMEA 9,830 194 4,149 195 1,597 59 19 10 8 E&P
100 Yanzhou Coal Mining Co Ltd China Asia/Pacific Rim 11,207 187 5,235 176 1,354 74 15 22 28 C&CF
Notes: C&CF = coal and consumable fuels, DNR = data not reported, DU = diversified utility, E&P = exploration and production, EU = electric utility, GU = gas utility, IOG = integrated oil and gas, IPP = independent
power producer and energy trader, R&M = refining and marketing, S&T = storage and transfer. All rankings are computed from data assessed on June 1, 2011.

December 2011 insight 67


top 250 global energy companies
Platts Return on
Rank Assets Revenues Profits invested capital 3-year Industry
2011 Company State or country Region $ million Rank $ million Rank $ million Rank ROIC % Rank CGR% code
101 PTT Exploration and Production Plc Thailand Asia/Pacific Rim 11,286 185 4,617 186 1,357 73 17 16 15 E&P
102 Cenovus Energy Inc Canada Americas 22,810 121 12,898 103 987 99 6 138 -20 IOG
103 Turkiye Petrol Rafinerileri AS Turkey EMEA 8,712 210 17,168 80 483 163 17 19 5 R&M
104 Novatek OAO Russian Federation EMEA 10,197 192 3,914 198 1,358 72 19 12 24 E&P
105 Enbridge Inc Canada Americas 31,095 89 15,040 89 964 100 4 197 8 S&T
106 CPFL Energia SA Brazil Americas 12,659 170 7,100 152 908 104 11 51 9 EU
107 Polska Grupa Energetyczna SA Poland EMEA 18,727 136 6,932 155 1,012 94 8 102 -4 EU
108 Transcanada Corp Canada Americas 48,096 52 8,018 142 1,265 82 3 212 -3 S&T
109 Gail (India) Ltd India Asia/Pacific Rim 8,886 207 7,727 145 885 105 14 31 23 GU
110 PPL Corp Pennsylvania Americas 32,837 81 8,521 137 955 101 5 170 9 EU
111 Empresa Nacional de Electricidad SA Chile Americas 12,896 169 4,888 182 1,088 90 12 48 12 IPP
112 China Yangtze Power Co Ltd China Asia/Pacific Rim 24,231 110 3,287 209 1,236 85 8 86 36 IPP
113 FirstEnergy Corp Ohio Americas 34,805 76 13,253 100 784 118 4 199 1 EU
114 Alpiq Holding AG Switzerland EMEA 21,663 125 14,539 90 655 129 5 152 2 EU
115 Polish Oil And Gas Co SA Poland EMEA 12,485 173 7,205 151 831 111 10 65 9 IOG
116 Anadarko Petroleum Corp Texas Americas 51,559 42 10,842 118 761 120 2 223 -1 E&P
117 Progress Energy Inc North Carolina Americas 33,054 78 10,190 123 860 108 4 195 4 EU
118 BP plc United Kingdom EMEA 272,262 6 297,107 3 -3,719 249 -3 249 1 IOG
119 Spectra Energy Corp Texas Americas 26,686 103 4,945 180 1,043 91 6 136 1 S&T
120 Cairn India Ltd India Asia/Pacific Rim 10,285 191 2,262 227 1,394 71 15 24 117 E&P
121 Plains All American Pipeline LP Texas Americas 13,703 161 25,893 55 505 160 5 139 8 S&T
122 Peabody Energy Corp Missouri Americas 11,363 184 6,860 156 777 119 11 59 14 C&CF
123 Eletropaulo-Metropolitana Eletricidade de Sao Paulo SA Brazil Americas 7,193 228 5,726 171 796 117 22 7 11 EU
124 Xcel Energy Inc Minnesota Americas 27,388 100 10,311 122 752 121 4 181 1 DU
125 GS Holdings Corp Korea Asia/Pacific Rim 26,037 104 37,107 35 448 174 3 211 16 R&M
126 Public Power Corporation SA Greece EMEA 23,293 114 7,825 144 751 122 5 150 4 EU
127 Huaneng Power International Inc China Asia/Pacific Rim 34,464 77 15,672 85 533 152 3 218 28 IPP
128 OMV Petrom SA Romania EMEA 12,106 177 5,932 165 701 128 10 63 15 IOG
129 Sempra Energy California Americas 30,283 92 9,003 130 749 123 4 190 -8 DU
130 Acea SpA Italy EMEA 9,173 205 3,340 208 868 107 18 15 0 DU
131 Tokyo Electric Power Co Inc Japan Asia/Pacific Rim 182,065 14 64,048 24 -14,881 250 -13 250 -1 EU
132 Mol Hungarian Oil and Gas Co Hungary EMEA 24,194 111 21,041 65 509 159 4 204 18 IOG
133 Interregional Distribution Grid Companies Holding JSC Russian Federation EMEA 7,128 229 134 250 1,618 57 25 5 EU
134 Ultrapar Participacoes SA Brazil Americas 8,199 216 25,085 57 452 172 8 98 29 S&T
135 DTE Energy Co Michigan Americas 24,896 107 8,557 136 630 132 5 171 0 DU
136 Kyushu Electric Power Co Inc Japan Asia/Pacific Rim 51,522 43 17,729 76 343 193 1 238 0 EU
137 Korea Electric Power Corp Korea Asia/Pacific Rim 92,035 23 34,611 39 -63 246 0 245 11 EU
138 Eskom South Africa EMEA 36,058 71 10,080 124 539 151 2 222 21 EU
139 Cosmo Oil Co Ltd Japan Asia/Pacific Rim 19,442 134 33,065 41 345 191 3 209 -8 R&M
140 Osaka Gas Co Ltd Japan Asia/Pacific Rim 17,693 142 14,163 94 548 148 4 191 -1 GU
141 Canadian Oil Sands Trust Canada Americas 7,243 227 3,162 213 881 106 14 29 -1 E&P
142 Hindustan Petroleum Corp Ltd India Asia/Pacific Rim 15,385 152 30,484 45 375 183 4 196 11 R&M
143 Bharat Petroleum Co Ltd India Asia/Pacific Rim 14,805 155 27,254 53 360 187 4 192 4 R&M
144 Caltex Australia Ltd Australia Asia/Pacific Rim 5,639 240 18,163 73 308 201 9 75 -1 R&M
145 Power Assets Holdings Ltd Hong Kong Asia/Pacific Rim 11,921 179 1,334 242 925 102 10 69 -6 EU
146 Tractebel Energia SA Brazil Americas 8,111 217 2,421 225 715 127 14 26 10 IPP
147 Sunoco Inc Pennsylvania Americas 13,297 163 34,915 38 257 218 4 178 -6 R&M
148 Moscow United Electric Grid OJSC Russian Federation EMEA 8,361 214 3,743 201 575 145 13 38 42 EU
149 China Resources Power Holdings Co Ltd Hong Kong Asia/Pacific Rim 18,391 139 6,248 163 631 131 5 167 42 IPP
150 Noble Energy Inc Texas Americas 13,282 164 2,904 217 725 124 8 95 -2 E&P
Notes: C&CF = coal and consumable fuels, DNR = data not reported, DU = diversified utility, E&P = exploration and production, EU = electric utility, GU = gas utility, IOG = integrated oil and gas, IPP = independent
power producer and energy trader, R&M = refining and marketing, S&T = storage and transfer. All rankings are computed from data assessed on June 1, 2011.

68 insight December 2011


top 250 global energy companies
Platts Return on
Rank Assets Revenues Profits invested capital 3-year Industry
2011 Company State or country Region $ million Rank $ million Rank $ million Rank ROIC % Rank CGR% code
151 Banpu Pcl Thailand Asia/Pacific Rim 6,385 234 2,123 232 804 114 16 21 26 C&CF
152 Origin Energy Ltd Australia Asia/Pacific Rim 23,272 117 8,302 140 595 140 3 208 11 IOG
153 Hong Kong & China Gas Co Ltd Hong Kong Asia/Pacific Rim 9,344 201 2,492 224 718 126 11 58 11 GU
154 El Paso Corp Texas Americas 25,270 105 4,616 187 806 113 4 205 0 S&T
155 Energy Transfer Partners LP Texas Americas 12,150 176 5,885 167 617 135 6 134 -5 S&T
156 Tohoku Electric Power Co Inc Japan Asia/Pacific Rim 49,594 51 20,386 66 -402 248 -1 248 -2 EU
157 NRG Energy Inc New Jersey Americas 26,896 102 8,849 132 477 165 3 216 14 IPP
158 ONEOK Partners LP Oklahoma Americas 7,920 220 8,676 135 473 168 8 94 14 S&T
159 Shanxi Lu'an Environmental Energy Development Co Ltd China Asia/Pacific Rim 4,519 246 3,219 212 516 155 22 8 29 C&CF
160 Southwestern Energy Co Texas Americas 6,017 239 2,611 222 604 139 15 23 28 E&P
161 Companhia Paranaense de Energia Brazil Americas 11,272 186 3,999 197 583 144 8 97 9 EU
162 Datang International Power Generation Co Ltd China Asia/Pacific Rim 32,433 82 9,116 129 372 184 2 231 23 IPP
163 RusHydro JSC Russian Federation EMEA 23,279 116 14,002 96 351 188 2 228 106 EU
164 Neste Oil Oyj Finland EMEA 9,582 200 14,470 91 308 200 5 143 -4 R&M
165 Showa Shell Sekiyu KK Japan Asia/Pacific Rim 14,687 156 27,989 50 190 235 4 194 -9 R&M
166 Esso Saf France EMEA 5,326 241 16,942 82 199 234 9 79 5 R&M
167 AES Corporation Virginia Americas 40,511 63 16,647 83 -86 247 0 247 7 IPP
168 CenterPoint Energy Inc Texas Americas 20,111 132 8,785 134 442 175 4 201 -3 DU
169 Terna SpA Italy EMEA 15,492 151 2,064 234 628 133 6 126 6 EU
170 Cimarex Energy Co Colorado Americas 4,358 250 1,713 239 575 146 19 9 4 E&P
171 Nexen Inc Canada Americas 22,616 122 5,799 169 569 147 3 207 -4 E&P
172 Enel Green Power SpA Italy EMEA 18,880 135 2,856 218 609 137 5 156 9 IPP
173 ONEOK Inc Oklahoma Americas 12,499 172 13,030 102 335 195 4 177 -1 GU
174 Verbund AG Austria EMEA 16,234 147 4,306 192 540 150 5 169 2 EU
175 Wisconsin Energy Corp Wisconsin Americas 13,060 167 4,202 193 454 171 6 128 0 DU
176 Korea Gas Corp Korea Asia/Pacific Rim 22,520 124 20,020 67 184 237 1 234 17 GU
177 A2A SpA Italy EMEA 17,773 141 7,975 143 415 176 4 202 -5 DU
178 Chugoku Electric Power Co Japan Asia/Pacific Rim 34,850 75 13,055 101 21 244 0 244 0 EU
179 Talisman Energy Inc Canada Americas 24,976 106 6,763 157 406 177 2 224 -4 E&P
180 GD Power Development Co Ltd China Asia/Pacific Rim 23,107 118 6,126 164 361 186 4 203 33 IPP
181 Gasunie Netherlands EMEA 15,979 148 2,205 229 611 136 5 158 6 GU
182 Thai Oil Pcl Thailand Asia/Pacific Rim 4,835 244 10,352 121 293 206 8 100 7 R&M
183 Iberdrola Renovables SA Spain EMEA 37,165 69 3,018 214 485 162 2 227 33 IPP
184 Red Electrica Corp SA Spain EMEA 11,911 180 1,906 235 525 153 7 105 11 EU
185 CONSOL Energy Inc Pennsylvania Americas 12,071 178 5,163 179 347 189 6 130 13 C&CF
186 Empresa De Energia De Bogota SA Colombia Americas 6,479 232 502 248 589 142 11 55 27 GU
187 Companhia De Transmissao De Energia Eletrica Paulista Brazil Americas 4,375 248 1,332 243 480 164 14 27 20 EU
188 Cheung Kong Infrastructure Holdings Ltd Bermuda Asia/Pacific Rim 8,264 215 362 249 647 130 8 90 15 EU
189 Light SA Brazil Americas 6,056 238 3,843 200 340 194 11 53 14 EU
190 Tata Power Co Ltd India Asia/Pacific Rim 8,832 208 4,009 196 460 170 7 112 19 EU
191 Hellenic Petroleum SA Greece EMEA 9,866 193 11,414 113 242 220 5 162 0 R&M
192 Shanxi Xishan Coal and Electricity Power Co Ltd China Asia/Pacific Rim 4,456 247 2,546 223 397 178 12 40 29 C&CF
193 Newfield Exploration Co Texas Americas 7,494 226 1,883 237 523 154 9 74 2 E&P
194 Edison SpA Italy EMEA 23,743 112 14,066 95 28 243 0 243 8 IPP
195 Acciona SA Spain EMEA 29,478 96 8,433 139 225 228 2 232 -8 EU
196 CMS Energy Corp Michigan Americas 15,616 150 6,432 160 363 185 4 200 0 DU
197 Northeast Utilities Massachusetts Americas 14,522 158 4,898 181 388 180 4 176 -6 EU
198 Elia System Operator SA Belgium EMEA 8,489 212 1,265 245 541 149 8 93 10 EU
199 AGL Energy Ltd Australia Asia/Pacific Rim 9,263 204 6,431 161 346 190 5 145 21 DU
200 SCANA Corp South Carolina Americas 12,968 168 4,601 188 376 182 5 165 0 DU
Notes: C&CF = coal and consumable fuels, DNR = data not reported, DU = diversified utility, E&P = exploration and production, EU = electric utility, GU = gas utility, IOG = integrated oil and gas, IPP = independent
power producer and energy trader, R&M = refining and marketing, S&T = storage and transfer. All rankings are computed from data assessed on June 1, 2011.

December 2011 insight 69


top 250 global energy companies
Platts Return on
Rank Assets Revenues Profits invested capital 3-year Industry
2011 Company State or country Region $ million Rank $ million Rank $ million Rank ROIC % Rank CGR% code
201 Powergrid Corp Of India India Asia/Pacific Rim 17,191 143 1,896 236 588 143 4 184 23 EU
202 Cameco Corp Canada Americas 7,920 221 2,111 233 512 156 8 96 -3 C&CF
203 Abu Dhabi National Energy Co PJSC United Arab Emirates EMEA 31,595 86 5,681 172 277 214 1 236 36 DU
204 NiSource Inc Indiana Americas 19,939 133 6,422 162 295 205 3 213 -7 DU
205 Pioneer Natural Resources Co Texas Americas 9,679 198 1,803 238 475 167 7 110 1 E&P
206 Electric Power Development Co Ltd Japan Asia/Pacific Rim 24,772 108 7,587 148 234 223 1 235 3 IPP
207 Santos Ltd Australia Asia/Pacific Rim 14,676 157 2,167 230 486 161 5 172 -3 E&P
208 Canadian Utilities Canada Americas 9,720 197 2,642 221 476 166 5 141 3 DU
209 YTL Power International Bhd Malaysia Asia/Pacific Rim 11,203 188 4,333 191 390 179 5 168 49 DU
210 Shikoku Electric Power Co Inc Japan Asia/Pacific Rim 16,986 145 7,064 153 282 212 3 217 -1 EU
211 UGI Corp Pennsylvania Americas 6,374 235 5,591 173 261 217 7 103 1 GU
212 Kinder Morgan Inc Texas Americas 28,908 97 8,191 141 -41 245 0 246 -8 S&T
213 Brookfield Infrastructure Partners LP Bermuda Americas 13,109 166 634 247 467 169 5 153 EU
214 Enagas SA Spain EMEA 9,819 195 1,322 244 449 173 6 123 7 GU
215 Ameren Corp Missouri Americas 23,515 113 7,638 146 139 240 1 240 0 DU
216 NHPC Ltd India Asia/Pacific Rim 11,707 181 1,093 246 510 158 5 155 15 IPP
217 PTT Aromatics & Refining Plc Thailand Asia/Pacific Rim 5,055 243 8,902 131 206 231 6 137 50 R&M
218 Energias Do Brasil SA Brazil Americas 8,085 218 2,973 215 344 192 6 118 4 EU
219 Tauron Polska Energia SA Poland EMEA 8,524 211 5,210 177 291 209 5 147 EU
220 Pinnacle West Capital Corp Arizona Americas 12,363 175 3,264 210 330 197 5 163 -3 EU
221 Grupa Lotos SA Poland EMEA 6,453 233 6,663 159 230 224 6 129 14 R&M
222 Energen Corp Alabama Americas 4,364 249 1,579 240 291 208 11 50 3 E&P
223 International Power plc United Kingdom EMEA 23,289 115 5,280 175 229 225 1 233 13 IPP
224 OGE Energy Corp Oklahoma Americas 7,669 224 3,717 203 295 204 6 120 -1 DU
225 Essar Energy plc United Kingdom EMEA 12,474 174 10,006 125 202 233 2 221 200 R&M
226 Bumi Resources Tbk Pt Indonesia Asia/Pacific Rim 8,773 209 4,370 190 311 199 5 159 24 C&CF
227 YTL Corp Bhd Malaysia Asia/Pacific Rim 15,244 153 5,320 174 274 215 2 219 40 DU
228 Rabigh Refining & Petrochemical Co Saudi Arabia EMEA 12,600 171 12,503 107 56 242 1 242 168 R&M
229 AES Elpa SA Brazil Americas 7,791 222 5,778 170 222 230 5 143 11 EU
230 Hokkaido Electric Power Co Japan Asia/Pacific Rim 20,207 130 6,756 158 143 239 1 239 0 EU
231 Hokuriku Electric Power Co Japan Asia/Pacific Rim 17,002 144 5,896 166 228 227 2 229 1 EU
232 Reliance Infrastructure Ltd India Asia/Pacific Rim 8,436 213 3,220 211 334 196 5 146 29 EU
233 EOG Resources Inc Texas Americas 21,624 126 5,853 168 161 238 1 237 12 E&P
234 Alliant Energy Corp Wisconsin Americas 9,283 203 3,416 207 308 202 5 160 0 DU
235 El Paso Pipeline Partners LP Texas Americas 6,177 237 1,344 241 378 181 7 117 130 S&T
236 Fortis Inc Canada Americas 13,321 162 3,643 205 311 198 3 214 11 EU
237 MDU Resources Group Inc North Dakota Americas 6,304 236 3,910 199 244 219 6 127 -3 DU
238 Adaro Energy Tbk Pt Indonesia Asia/Pacific Rim 4,743 245 2,771 220 267 216 8 101 29 C&CF
239 Pepco Holdings Inc District of Columbia Americas 14,480 159 7,039 154 139 240 2 230 -9 EU
240 Integrys Energy Group Inc Illinois Americas 9,817 196 5,203 178 224 229 4 180 -20 DU
241 Mosenergo Ao Russian Federation EMEA 9,143 206 4,867 183 290 210 4 185 23 EU
242 AGL Resources Inc Georgia Americas 7,518 225 2,373 226 234 222 7 115 -2 GU
243 QEP Resources Inc Colorado Americas 6,785 230 2,246 228 283 211 6 119 7 E&P
244 MVV Energie AG Germany EMEA 5,230 242 4,544 189 187 236 6 122 14 DU
245 NSTAR Massachusetts Americas 7,934 219 2,917 216 238 221 6 135 -4 DU
246 EVN AG Austria EMEA 9,678 199 3,706 204 279 213 4 179 7 EU
247 China Longyuan Power Group Ltd China Asia/Pacific Rim 11,485 182 2,135 231 303 203 4 182 27 IPP
248 BKW Energie AG Switzerland EMEA 7,704 223 2,798 219 229 226 6 131 0 EU
249 Atmos Energy Corp Texas Americas 6,764 231 4,790 184 206 232 5 154 -7 GU
250 Atco Ltd Canada Americas 10,571 190 3,426 206 291 207 3 206 6 DU
Notes: C&CF = coal and consumable fuels, DNR = data not reported, DU = diversified utility, E&P = exploration and production, EU = electric utility, GU = gas utility, IOG = integrated oil and gas, IPP = independent
power producer and energy trader, R&M = refining and marketing, S&T = storage and transfer. All rankings are computed from data assessed on June 1, 2011.

70 insight December 2011


top 250 global energy companies

can coal use rose 5.3% over 2009, it re- Three re-entrants to the top ten in
mained 9.5% below 2007 levels. 2010 included ConocoPhillips—now
In Asia, the story is very different. the subject of an innovative demerger
Consumption rose by 9.1% on year to into upstream and downstream busi-
2,384.7 mtoe, reaching its highest-ever nesses—which moved up from 24th
level. Average Chinese steam coal prices place to seventh. Meanwhile Russia’s
at Qinhuangdao leapt 31.6% in 2010 to OJSC Rosneft Oil Company and Lukoil
$115.42/metric ton. Oil Company rose from 14th and 11th
places, respectively to take the ninth
Top Ten and tenth spots.
The entry of German multi-utility E.ON dropped back to 13th from
E.ON AG to the top ten in 2009— sixth, and Brazil’s Petrobras-Petroleo
the only non-Integrated Oil and Gas Brasilier fell from fourth in 2009 to
(IOG) company to do so in the last 12th in 2010. But the biggest omis-
five years—proved fleeting. The oil and sion from the top ten was UK major BP.
gas giants reasserted their dominance Ranked second in 2009, BP dropped to
of the top ten rankings, taking all ten 118th on account of the cost of the Ma-
spots despite a stricken BP dropping far condo oil spill in the US Gulf of Mex-
from sight. On the back of higher oil ico. Although in dollar terms its asset
prices, the top ten companies brought base expanded, as did its revenues, BP’s
in a combined $178.874 billion in prof- profits were wiped out. The company
its, a 20.4% increase from 2009, but posted a loss for 2010 of $3.719 billion.
still down from the bumper year of
2008, when profits hit an all-time high Here Come the Russians
of $214.042 billion. Although the year-to-year changes
US giant Exxon Mobil Corp retained in the top ten companies can be small,
the top spot in 2010, while Chevron the big trends can be seen from longer-
Corp moved up from ninth in 2009 term comparisons. In 2006, the top ten
to second place as it boosted its re- consisted of five west European inte-
turn on invested capital (ROIC) to grated oil and gas companies, three US
16% from 10.2% in the previous year. majors, PetroChina and Petrobras. In
Gazprom OAO, PetroChina Co Ltd, 2010, there were still three US majors
Total SA and the China Petroleum & but now two Chinese and three Russian
Chemical Corp took third, fourth, companies, with only two European
fi fth and eighth places, respectively, companies remaining.
while Royal Dutch Shell climbed from But among the top 20, there were
tenth to sixth. still eight European companies, includ-

2. Fastest growing Americas companies.


3-year Platts
Rank Company State or country Industry CGR % Rank
1 El Paso Pipeline Partners LP Texas S&T 130.3 235
2 Ultrapar Participacoes SA Brazil S&T 28.7 134
3 Southwestern Energy Co Texas E&P 27.7 160
4 Suncor Energy Inc Canada IOG 27.5 44
5 Empresa De Energia De Bogota SA Colombia GU 27.2 186
6 Ecopetrol SA Colombia IOG 23.4 23
7 Companhia De Transmissao De Energia Eletrica Paulista Brazil EU 20.2 187
8 YPF SA Argentina IOG 14.9 65
9 Peabody Energy Corp Missouri C&CF 14.5 122
10 Light SA Brazil EU 14.3 189
Fastest Growing is based on a 3 year compound growth rate (CGR) for revenues. The compound growth rate (CGR) is based on the companies revenue
numbers for the past four years (current year included). If only three years of data was available then it is a two year CGR. All rankings are computed from
data assessed on June 1, 2011.
Source: S&P Capital IQ/Platts

December 2011 insight 71


top 250 global energy companies
Asian companies in 2011 Top 250
Platts Return on
Top Rank Assets Revenues Profits invested capital Industry
Asia 2011 Company State or country $ million Rank $ million Rank $ million Rank ROIC % Rank code
1 4 PetroChina Co Ltd China 254,914 8 220,177 5 21,034 3 12 41 IOG
2 8 China Petroleum & Chemical Corp China 153,143 16 281,981 4 10,788 9 11 49 IOG
3 15 CNOOC Ltd Hong Kong 50,464 47 27,280 52 8,175 14 24 6 E&P
4 18 JX Holdings Inc Japan 77,058 28 114,941 13 3,719 30 10 61 R&M
5 21 Oil & Natural Gas Corp Ltd India 42,881 59 25,888 56 4,943 22 18 14 E&P
6 22 China Shenhua Energy Co Ltd China 52,454 39 22,165 64 5,729 20 14 32 C&CF
7 24 Reliance Industries Ltd India 68,061 32 58,508 27 4,247 26 9 83 R&M
8 28 PTT Plc Thailand 41,195 61 61,784 26 2,702 37 9 77 IOG
9 42 Indian Oil Corp Ltd India 40,850 62 67,824 22 1,724 55 7 114 R&M
10 51 Coal India Ltd India 18,015 140 11,057 117 2,392 42 31 2 C&CF
11 55 Formosa Petrochemical Corp Taiwan 15,761 149 23,336 61 1,348 75 12 44 R&M
12 56 SK Innovation Co Ltd Korea 27,005 101 47,147 28 989 98 7 116 R&M
13 58 NTPC Ltd India 30,228 93 12,638 105 2,059 48 8 99 IPP
14 60 Kansai Electric Power Co Inc Japan 89,986 25 33,044 42 1,469 67 3 215 EU
15 70 Idemitsu Kosan Co Ltd Japan 30,994 90 43,656 31 724 125 5 142 R&M
16 74 Tokyo Gas Co Ltd Japan 22,523 123 18,316 72 1,139 88 7 111 GU
17 76 Inpex Corp Japan 32,995 79 11,251 114 1,535 64 5 140 E&P
18 77 Chubu Electric Power Co Inc Japan 65,635 33 27,808 51 1,009 95 2 220 EU
19 81 TonenGeneral Sekiyu Corp Japan 11,163 189 28,617 48 511 157 17 17 R&M
20 90 Tenaga Nasional Bhd Malaysia 24,469 109 9,772 127 1,032 93 7 113 EU
21 91 S-Oil Corp Korea 9,285 202 18,141 74 619 134 13 33 R&M
22 95 CLP Holdings Ltd Hong Kong 23,065 119 7,513 149 1,329 77 7 106 EU
23 96 Woodside Petroleum Ltd Australia 20,196 131 4,193 194 1,575 61 10 70 E&P
24 97 China Coal Energy Co Ltd China 18,592 138 10,708 119 1,038 92 7 107 C&CF
25 100 Yanzhou Coal Mining Co Ltd China 11,207 187 5,235 176 1,354 74 15 22 C&CF
26 101 PTT Exploration and Production Plc Thailand 11,286 185 4,617 186 1,357 73 17 16 E&P
27 109 Gail (India) Ltd India 8,886 207 7,727 145 885 105 14 31 GU
28 112 China Yangtze Power Co Ltd China 24,231 110 3,287 209 1,236 85 8 86 IPP
29 120 Cairn India Ltd India 10,285 191 2,262 227 1,394 71 15 24 E&P
30 125 GS Holdings Corp Korea 26,037 104 37,107 35 448 174 3 211 R&M
31 127 Huaneng Power International Inc China 34,464 77 15,672 85 533 152 3 218 IPP
32 131 Tokyo Electric Power Co Inc Japan 182,065 14 64,048 24 -14,881 250 -13 250 EU
33 136 Kyushu Electric Power Co Inc Japan 51,522 43 17,729 76 343 193 1 238 EU
34 137 Korea Electric Power Corp Korea 92,035 23 34,611 39 -63 246 0 245 EU
35 139 Cosmo Oil Co Ltd Japan 19,442 134 33,065 41 345 191 3 209 R&M
Notes: C&CF = coal and consumable fuels, DNR = data not reported, DU = diversified utility, E&P = exploration and production, EU = electric utility, GU = gas utility, IOG = integrated oil and gas, IPP = independent
power producer and energy trader, R&M = refining and marketing, S&T = storage and transfer. All rankings are computed from data assessed on June 1, 2011.

ing three utilities, just one less than in sector. Of the top ten fastest-growing
2006. US representation dropped from companies, three are Russian: RusHy-
six to three, while Russia had four com- dro JSC, Bashneft OJSC and Moscow
panies in the top 20 compared with United Electric Grid OJSC, with RusHy-
three in 2006. China is represented by dro recording a giant three-year CGR of
three companies compared with only 106.1%. There are now 15 Russian com-
two five years earlier. panies in the top 250, compared with
The entry of Russian companies into 11 in 2009 and nine in 2006.
the ranks of the world’s top energy en- Mighty Gazprom’s position remains
terprises is a striking feature of the 2010 pre-eminent in natural gas, based on its
list, and features not only oil and gas, huge production volumes and monop-
but also electricity industry compa- oly grip on Russia’s gas pipelines and
nies as a result of privatization in the exports. However, it may one day have

72 insight December 2011


top 250 global energy companies
Asian companies in 2011 Top 250 (continued)
Platts Return on
Top Rank Assets Revenues Profits invested capital Industry
Asia 2011 Company State or country $ million Rank $ million Rank $ million Rank ROIC % Rank code
36 140 Osaka Gas Co Ltd Japan 17,693 142 14,163 94 548 148 4 191 GU
37 142 Hindustan Petroleum Corp Ltd India 15,385 152 30,484 45 375 183 4 196 R&M
38 143 Bharat Petroleum Co Ltd India 14,805 155 27,254 53 360 187 4 192 R&M
39 144 Caltex Australia Ltd Australia 5,639 240 18,163 73 308 201 9 75 R&M
40 145 Power Assets Holdings Ltd Hong Kong 11,921 179 1,334 242 925 102 10 69 EU
41 149 China Resources Power Holdings Co Ltd Hong Kong 18,391 139 6,248 163 631 131 5 167 IPP
42 151 Banpu Pcl Thailand 6,385 234 2,123 232 804 114 16 21 C&CF
43 152 Origin Energy Ltd Australia 23,272 117 8,302 140 595 140 3 208 IOG
44 153 Hong Kong & China Gas Co Ltd Hong Kong 9,344 201 2,492 224 718 126 11 58 GU
45 156 Tohoku Electric Power Co Inc Japan 49,594 51 20,386 66 -402 248 -1 248 EU
46 159 Shanxi Lu'an Environmental Energy Development Co Ltd China 4,519 246 3,219 212 516 155 22 8 C&CF
47 162 Datang International Power Generation Co Ltd China 32,433 82 9,116 129 372 184 2 231 IPP
48 165 Showa Shell Sekiyu KK Japan 14,687 156 27,989 50 190 235 4 194 R&M
49 176 Korea Gas Corp Korea 22,520 124 20,020 67 184 237 1 234 GU
50 178 Chugoku Electric Power Co Japan 34,850 75 13,055 101 21 244 0 244 EU
51 180 GD Power Development Co Ltd China 23,107 118 6,126 164 361 186 4 203 IPP
52 182 Thai Oil Pcl Thailand 4,835 244 10,352 121 293 206 8 100 R&M
53 188 Cheung Kong Infrastructure Holdings Ltd Bermuda 8,264 215 362 249 647 130 8 90 EU
54 190 Tata Power Co Ltd India 8,832 208 4,009 196 460 170 7 112 EU
55 192 Shanxi Xishan Coal and Electricity Power Co Ltd China 4,456 247 2,546 223 397 178 12 40 C&CF
56 199 AGL Energy Ltd Australia 9,263 204 6,431 161 346 190 5 145 DU
57 201 Powergrid Corp Of India India 17,191 143 1,896 236 588 143 4 184 EU
58 206 Electric Power Development Co Ltd Japan 24,772 108 7,587 148 234 223 1 235 IPP
59 207 Santos Ltd Australia 14,676 157 2,167 230 486 161 5 172 E&P
60 209 YTL Power International Bhd Malaysia 11,203 188 4,333 191 390 179 5 168 DU
61 210 Shikoku Electric Power Co Inc Japan 16,986 145 7,064 153 282 212 3 217 EU
62 216 NHPC Ltd India 11,707 181 1,093 246 510 158 5 155 IPP
63 217 PTT Aromatics & Refining Plc Thailand 5,055 243 8,902 131 206 231 6 137 R&M
64 226 Bumi Resources Tbk Pt Indonesia 8,773 209 4,370 190 311 199 5 159 C&CF
65 227 YTL Corp Bhd Malaysia 15,244 153 5,320 174 274 215 2 219 DU
66 230 Hokkaido Electric Power Co Japan 20,207 130 6,756 158 143 239 1 239 EU
67 231 Hokuriku Electric Power Co Japan 17,002 144 5,896 166 228 227 2 229 EU
68 232 Reliance Infrastructure Ltd India 8,436 213 3,220 211 334 196 5 146 EU
69 238 Adaro Energy Tbk Pt Indonesia 4,743 245 2,771 220 267 216 8 101 C&CF
70 247 China Longyuan Power Group Ltd China 11,485 182 2,135 231 303 203 4 182 IPP
Notes: C&CF = coal and consumable fuels, DNR = data not reported, DU = diversified utility, E&P = exploration and production, EU = electric utility, GU = gas utility, IOG = integrated oil and gas, IPP = independent
power producer and energy trader, R&M = refining and marketing, S&T = storage and transfer. All rankings are computed from data assessed on June 1, 2011.

a challenger in the form of private gas eight companies primarily focused on


company Novatek OAO, which is opera- oil in the top 250 as well as two gas and
tor of the planned Yamal LNG project. five power sector companies.
Novatek has moved up from 126th
position in 2009 to 104th in 2010. Prof- Returns and Growth
its rose from $854 million to $1,358 The ROIC rankings are revealing. The
million with an impressive ROIC of oil majors and big European utilities
19% in 2010—the twelfth-highest may dominate in terms of asset base,
ROIC out of the entire top 250. It is revenues and profits, but when it comes
also the 34th fastest-growing company to return on invested capital only
based on its three-year CGR. Includ- one OECD-based company makes the
ing AK Transneft OAO, the country’s frame—the US E&P company Cimarex
oil pipeline monopoly, Russia now has Energy Co, which is a new entrant to

December 2011 insight 73


top 250 global energy companies

the list with an overall ranking of 170. cal Co and Thailand’s PTT Aromatics &
Instead, this is where Latin America Refining Plc. A fourth—El Paso Pipeline
really makes its mark. Top of the board Partners LP—is from the oil and gas
is Colombia’s rejuvenated Ecopetrol SA storage and transportation segment.
with a staggering ROIC of 98%. Argen- There are three such companies among
tina’s YPF SA is third with an ROIC of the top 50 fastest-growing companies,
28%, while Brazil’s Eletropaulo-Metro- as well as four refining and marketing
politana Eletricidade de Sao Paulo SA is businesses, compared with five E&P
seventh ranked with an ROIC of 22%. and three IOG companies.
Russian and Chinese companies are The E&P companies lead the IOGs.
also well represented, while Kazakh- The E&P companies posting the fast-
stan’s oil and gas company KazMun- est growth are Cairn India Ltd, with a
aigas Exploration and Production JSC three-year CGR of 116.5%, followed by
takes the tenth spot with an ROIC of Russia’s Bashneft (57.9%) and then Tex-
19%. Coal India Ltd, newly listed in an company Southwestern Energy Co.
2010, is second with an ROIC of 31%. (27.7%). Close on their heels are China’s
Distinct trends also emerge from the CNOOC Ltd (26.2%) and Russian gas
top 50 fastest growing companies, the player Novatek (23.6%). By contrast, the
leader of which is Essar Energy plc. Al- fastest-growing IOG is Canada’s Sun-
though Essar Energy is incorporated in cor Energy Inc, with a three-year CGR
the UK, the credit for its three-year CGR of 27.5%. The only other two IOGs to
of 199.5% has to go to India, as this is make it into the top 50 fastest-growing
an Indian-owned and led company. companies are Colombia’s Ecopetrol
Out of the top 50 fastest growers, 40 are (23.4%) and PetroChina (20.6%).
from outside the OECD compared with
36 in 2009. And while the oil industry C&CF
is out in front in terms of absolute size, Chinese companies increasingly dom-
when it comes to growth it is Electric inate the coal and consumable fuels
Utilities, Independent Power Producers category, reflecting a number of factors.
and Coal & Consumable Fuels compa- First, China has the largest and most
nies that dominate the top 50 list of rapidly-expanding coal industry in the
fastest growers. world. Second, the industry is undergo-
That said, oil companies still make ing a state-led process of consolidation
up six of the top ten spots. Perhaps sur- that is pushing smaller operations into
prisingly, three of these are oil and gas major conglomerations. And third, as
refining and marketing companies—all the country’s coal imports continue
non-OECD and all export-orientated. to increase, Chinese companies are
They are India’s Essar Energy, Saudi looking to expand beyond their own
Arabia’s Rabigh Refining & Petrochemi- borders for supplies. While there were
three Chinese companies in the C&CF
top ten in 2009, there are now five, the
3. #1 in Asia by industry. two new entrants being Shanxi Lu’an
Environmental Energy Development
Industry Company Country Platts Rank 2011
Co Ltd. and Shanxi Xishan Coal and
IOG PetroChina Co Ltd China 4 Electricity Power Co Ltd.
E&P CNOOC Ltd Hong Kong 15 Another new entrant is Coal In-
R&M JX Holdings Inc Japan 18 dia, which in 2010 undertook a mas-
C&CF China Shenhua Energy Co Ltd China 22
sive initial public offering which was
more than 15 times oversubscribed.
IPP NTPC Ltd India 58
As India’s primary coal producer in
EU Kansai Electric Power Co Inc Japan 60 the world’s third largest coal market,
GU Tokyo Gas Co Ltd Japan 74 this puts the company second behind
DU AGL Energy Ltd Australia 199 only China Shenhua Energy Co Ltd. It
All rankings are computed from data assessed on June 1, 2011.
also puts it 51st in the overall rankings.
Source: S&P Capital IQ/Platts In addition, Thailand’s Banpu Pcl has

74 insight December 2011


top 250 global energy companies

emerged in the C&CF group at number the list altogether, following a net in-
six, reflecting the company’s expan- come loss of $931.8 million in 2010.
sion into China, Laos and Indonesia. The company is likely to re-emerge in
The emergence of these companies has 2011, but in a new guise, if a proposed
pushed Indonesia’s Adaro Energy Tbk merger with Exelon is completed.
and Bumi Resources Tbk Pt out of the There are now four Chinese compa-
top 10 C&CF companies, while the US’s nies in the IPP top ten compared with
Patriot Coal Corp has also dropped out two in 2009. This group shows the larg-
to be replaced by Consol Energy Inc. est change in composition with the new
In terms of growth, there are eight entrants including China Yangtze Pow-
C&CF companies in the top 50 fastest er Co. Ltd in third, Datang Internation-
growing list. They are all Asian; five from al Power Generation Co. Ltd in eighth
China, two from Indonesia and Thai- and Enel Green Power SpA in tenth
land’s Banpu. Adaro Energy and Bumi place. In addition to Constellation En-
Resources may have dropped out of the ergy, the UK’s International Power Plc
top ten C&CF companies, but they can has dropped out of the top ten.
still claim to be amongst the fastest- The picture is different when it comes
growing energy companies in the world. to growth rather than absolute size. If
western Europe dominates the top
Utilities rankings for EUs, Russia has the fast-
The Electric Utilities category remains est growth in the form of RusHydro
dominated by the European giants. Of JSC, Moscow United Electric Power
the top ten, eight are European and Grid, Mosenergo Ao and the Federal
two American. While there have been Grid Company of Unified Energy Sys-
slight changes in relative positions, the tem JSC. India’s Reliance Infrastructure
group remains largely as in 2009. How- Ltd and Power Grid Corp of India are
ever, two companies have disappeared also amongst the fastest growing EUs.
from the top ten—France’s EDF and US There are no US companies in the fast-
company NextEra Energy Inc—with est-growing top ten, but Europe contin-
the latter performing well but just be- ues to provide opportunities. The UK’s
ing edged out into 11th place. Replac- Scottish and Southern Energy plc and
ing them are Germany’s EnBW Energie Spain’s Iberdrola SA and Endesa SA are
Baden-Württemberg AG and the US’s present, while South Africa’s Eskom
Southern Co. completes the leader board.
Nuclear giant EDF has dropped from There are seven IPPs in the fastest-
22nd in the overall Platts’ rankings in growing top 50 companies, with six
2009 to 64th in 2010, the third year in coming from China. The non-Chinese
a row it has slipped. While still rank-
ing top in terms of assets, the decline in
the company’s financial performance 4. Fastest growing Asian companies by industry.
reflects €2.9 billion ($3.9 billion) in
non-recurring risks and impairments Industry Company Country 3-year CGR % Platts Rank 2011
in 2010, owing to deterioration in inter- IOG PetroChina Co Ltd China 20.6 4
national power and gas market condi- GU Gail (India) Ltd India 23.1 109
tions. Most of the impairments relate to EU Reliance Infrastructure Ltd India 28.8 232
the US and Italian markets, but EDF is
C&CF Shanxi Xishan Coal and China 29.5 192
also struggling with cost and construc- Electricity Power Co Ltd
tion overruns with its new model nu-
IPP China Resources Power Hong Kong 42.4 149
clear reactor at Flamanville in France. Holdings Co Ltd
In the IPP sector, the results are much
DU YTL Power International Bhd Malaysia 48.9 209
more internationally diversified. India’s
R&M PTT Aromatics & Refining Plc Thailand 49.6 217
NTPC Ltd has moved to the top of the
leader board, while the US’s Constel- E&P Cairn India Ltd India 116.5 120
lation Energy Group Inc has dropped Fastest Growing is based on a 3 year compound growth rate (CGR) for revenues. All rankings are computed from data
assessed on June 1, 2011.
from first in 2009 to disappear from Source: S&P Capital IQ/Platts

December 2011 insight 75


top 250 global energy companies

company is Spain’s Iberdrola Renovables cal 2010. Other Japanese companies


SA with a three-year CGR of 33.0%. A dropping down the rankings include
notable absence from the growth list Tohoku Electric Power Co, which fell
are Chilean IPPs, with companies such from 119th to 156th and Chugoku
as AES Gener SA and Colbun SA, which Electric Power Co, which dropped from
were represented in 2009, failing to 134th to 178th.
maintain their places in 2010. By contrast, Japan’s oil and gas com-
panies performed well. JX Holdings was
Asian Leaders the shining star, rising from 129th in
The number of Asian companies in 2009 to 18th in 2010. Idemitsu Kosan
the top 250 continues to rise, reaching Co Ltd increased its ranking from 144th
70 in 2010, up from 67 in 2009 and 56 to 70th. Tokyo Gas Company Ltd upped
in 2006. In addition, despite having its place in the list from 108th to 74th.
more companies represented, the aver- For China, most change was seen
age ranking of Asian companies has also within the power sector. The number of
improved from 135.2 in 2006 to 134.9 in Chinese companies in the top 250 was
2009 and 131.3 in 2010 (a lower number the same in 2010 as in 2009, but the
denotes a higher ranking). Asian compa- Shenzhen Energy Group, Huadian Pow-
nies are not just increasing in number, er Intl Corp and Shenergy Co. Ltd were
but are increasing their rankings relative displaced by Shanxi Lu’an Environmen-
to their international peers. tal Energy Development Co., Shanxi
Within Asia, the average ranking of Xishan Coal and Electricity Power Co.
Japanese companies overall has im- and China Longyuan Power Group. In
proved from 145.9 to 132.1. This partly the oil sector, PetroChina moved up
reflects the Japan Petroleum Explora- from seventh in the rankings to fourth,
tion company dropping out of the top and CNOOC from 29th to 15th. The
250, but the improvement is notable biggest mover, however, was China
given the sharp fall in the ranking of Yangtze Power Co., which jumped from
the Tokyo Electric Power Co (Tepco) 163rd in 2009 to 112th in 2010.
which was ranked 54th in 2009, but By contrast, India saw three new com-
131st in 2010. panies join the top 250 list—the newly-
This is the result of the financial im- listed Coal India, oil and gas producer
pact of the Fukushima nuclear disaster Cairn India Ltd and the IPP company
in March 2011 and Japanese reporting NHPC Ltd. As in Japan, the oil sector
of financial data based on fiscal years also gave India its strongest movers.
running from April-March. Tepco re- The Indian Oil Corp Ltd jumped from
corded a loss of $14,881 billion in fis- 78th in 2009 to 42nd in 2010, while

5. Fastest growing EMEA companies.


3-year Platts
Rank Company Country Industry CGR % Rank
1 Essar Energy plc United Kingdom R&M 199.5 225
2 Rabigh Refining & Petrochemical Co Saudi Arabia R&M 167.5 228
3 RusHydro JSC Russian Federation EU 106.1 163
4 Bashneft OJSC Russian Federation E&P 57.9 62
5 Moscow United Electric Grid OJSC Russian Federation EU 42.4 148
6 Abu Dhabi National Energy Co PJSC United Arab Emirates DU 35.8 203
7 Iberdrola Renovables SA Spain IPP 33 183
8 Gas Natural SDG SA Spain GU 24.8 57
9 SNAM Rete Gas SpA Italy GU 24.8 88
10 Novatek OAO Russian Federation E&P 23.6 104
Fastest Growing is based on a 3 year compound growth rate (CGR) for revenues. The compound growth rate (CGR) is based on the companies revenue
numbers for the past four years (current year included). If only three years of data was available then it is a two year CGR. All rankings are computed from
data assessed on June 1, 2011.
Source: S&P Capital IQ/Platts

76 insight December 2011


top 250 global energy companies

the Hindustan Petroleum Corp Ltd rose such as China and India. By contrast,
from 174th to 142nd. the 2010 figures for North America are
The improvement in oil companies flattered by hefty write-downs in 2009
vis-à-vis EUs and IPPs largely reflects the by companies such as Chesapeake, Dev-
difference between being on the cost or on Energy and Talisman, all of which
profit side of rising feedstock prices. But bounced back to profitability in 2010. ■
in terms of revenue growth, Asia comes
out on top. Taking all Asian companies
in the top 250 into account, revenues S&P Capital IQ, a brand of the McGraw-Hill Companies
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6. Top 50 fastest growing companies.


3-year Platts 3-year Platts
Company CGR % Rank Company CGR % Rank
1 Essar Energy plc 199.5 225 26 China Longyuan Power Group Ltd 26.9 247
2 Rabigh Refining & Petrochemical Co 167.5 228 27 Banpu Pcl 26.3 151
3 El Paso Pipeline Partners LP 130.3 235 28 CNOOC Ltd 26.2 15
4 Cairn India Ltd 116.5 120 29 China Coal Energy Co Ltd 25.1 97
5 RusHydro JSC 106.1 163 30 Gas Natural SDG SA 24.8 57
6 Bashneft OJSC 57.9 62 31 SNAM Rete Gas SpA 24.8 88
7 PTT Aromatics & Refining Plc 49.6 217 32 Reliance Industries Ltd 24.7 24
8 YTL Power International Bhd 48.9 209 33 Bumi Resources Tbk Pt 24.5 226
9 Moscow United Electric Grid OJSC 42.4 148 34 Novatek OAO 23.6 104
10 China Resources Power Holdings Co Ltd 42.4 149 35 Ecopetrol SA 23.4 23
11 YTL Corp Bhd 40 227 36 Gail (India) Ltd 23.1 109
12 Abu Dhabi National Energy Co PJSC 35.8 203 37 Powergrid Corp Of India 23 201
13 China Yangtze Power Co Ltd 35.8 112 38 Scottish and Southern Energy plc 22.9 26
14 Iberdrola Renovables SA 33 183 39 Mosenergo Ao 22.9 241
15 GD Power Development Co Ltd 32.7 180 40 China Shenhua Energy Co Ltd 22.8 22
16 Shanxi Xishan Coal and Electricity Power Co Ltd 29.5 192 41 Datang International Power Generation Co Ltd 22.7 162
17 Shanxi Lu'an Environmental Energy Development Co Ltd 29.1 159 42 GDF Suez 21.2 32
18 Reliance Infrastructure Ltd 28.8 232 43 Eskom 21.1 138
19 Ultrapar Participacoes SA 28.7 134 44 AGL Energy Ltd 20.6 199
20 Adaro Energy Tbk Pt 28.7 238 45 PetroChina Co Ltd 20.6 4
21 Huaneng Power International Inc 28.1 127 46 Iberdrola SA 20.3 38
22 Yanzhou Coal Mining Co Ltd 28.1 100 47 Federal Grid Company of Unified Energy System JSC 20.3 93
23 Southwestern Energy Co 27.7 160 48 Endesa SA 20.2 19
24 Suncor Energy Inc 27.5 44 49 Companhia De Transmissao De Energia Eletrica Paulista 20.2 187
25 Empresa De Energia De Bogota SA 27.2 186 50 AK Transneft OAO 20.1 41
Fastest Growing is based on a 3 year compound growth rate (CGR) for revenues. All rankings are computed from data assessed on June 1, 2011.
Source: S&P Capital IQ/Platts

December 2011 insight 77


top 250 global energy companies
7. Top 50: Who’s Up, Who’s Down.
Platts Platts Platts Platts
rank rank rank rank
2011 2010 Company State or country 2011 2010 Company State or country
1 1 Exxon Mobil Corp Texas 26 23 Scottish and Southern Energy plc United Kingdom
2 9 Chevron Corp California 27 33 Occidental Petroleum Corp California
3 3 Gazprom OAO Russian Federation 28 35 PTT Plc Thailand
4 7 PetroChina Co Ltd China 29 25 Gazprom Neft JSC Russian Federation
5 5 Total SA France 30 53 Marathon Oil Corp Texas
6 10 Royal Dutch Shell plc United Kingdom 31 26 Exelon Corp Illinois
7 24 ConocoPhillips Texas 32 28 GDF Suez France
8 8 China Petroleum & Chemical Corp China 33 39 National Grid plc United Kingdom
9 14 OJSC Rosneft Oil Company Russian Federation 34 21 Enel SpA Italy
10 11 Lukoil Oil Company Russian Federation 35 20 Surgutneftegaz Russian Federation
11 27 Statoil ASA Norway 36 70 Hess Corp New York
12 4 Petrobras-Petroleo Brasilier Brazil 37 30 BG Group plc United Kingdom
13 6 E.On AG Germany 38 32 Iberdrola SA Spain
14 40 Repsol YPF SA Spain 39 64 Dominion Resources Inc Virginia
15 29 CNOOC Ltd Hong Kong 40 41 Imperial Oil Ltd Canada
16 16 Eni SpA Italy 41 36 AK Transneft OAO Russian Federation
17 12 RWE AG Germany 42 78 Indian Oil Corp Ltd India
18 129 JX Holdings Inc Japan 43 48 EnBW Energie Baden-Wuerttemberg AG Germany
19 15 Endesa SA Spain 44 69 Suncor Energy Inc Canada
20 17 TNK-BP Holdings Russian Federation 45 38 Sasol Ltd South Africa
21 18 Oil & Natural Gas Corp Ltd India 46 194 Apache Corp Texas
22 19 China Shenhua Energy Co Ltd China 47 37 CEZ As Czech Republic
23 34 Ecopetrol SA Colombia 48 43 Vattenfall AB Sweden
24 13 Reliance Industries Ltd India 49 50 Southern Co Georgia
25 42 Centrica plc United Kingdom 50 47 NextEra Energy Inc Florida

Source: S&P Capital IQ/Platts

8. Leaders in coal and combustible fuels. 9. Leaders in diversified utilities.


OVERALL Platts OVERALL Platts
rank rank
Rank Company State or country 2011 Rank Company State or country 2011
1 China Shenhua Energy Co Ltd China 22 1 RWE AG Germany 17
2 Coal India Ltd India 51 2 Centrica plc United Kingdom 25
3 China Coal Energy Co Ltd China 97 3 GDF Suez France 32
4 Yanzhou Coal Mining Co Ltd China 100 4 National Grid plc United Kingdom 33
5 Peabody Energy Corp Missouri 122 5 Dominion Resources Inc Virginia 39
6 Banpu Pcl Thailand 151 6 Public Service Enterprise Group Inc New Jersey 59
7 Shanxi Lu'an Environmental Energy Development Co Ltd China 159 7 Veolia Environnement SA France 75
8 CONSOL Energy Inc Pennsylvania 185 8 PG&E Corp California 78
9 Shanxi Xishan Coal and Electricity Power Co Ltd China 192 9 Consolidated Edison Inc New York 89
10 Cameco Corp Canada 202 10 MidAmerican Energy Holdings Co Iowa 92

REGIONAL Industry Platts


REGIONAL Industry Platts rank State or rank
rank State or rank Region 2011 Company country 2011
Region 2011 Company country 2011
Americas 5 Dominion Resources Inc Virginia 39
Americas 5 Peabody Energy Corp Missouri 122
Asia/Pacific Rim 19 AGL Energy Ltd Australia 199
Asia/Pacific Rim 1 China Shenhua Energy Co Ltd China 22
EMEA 1 RWE AG Germany 17

Source: S&P Capital IQ/Platts Source: S&P Capital IQ/Platts

78 insight December 2011


top 250 global energy companies

10. Leaders in electric utilities. 11. Leaders in exploration and production.

OVERALL Platts OVERALL Platts


rank rank
Rank Company State or country 2011 Rank Company State or country 2011
1 E.On AG Germany 13 1 CNOOC Ltd Hong Kong 15
2 Endesa SA Spain 19 2 Oil & Natural Gas Corp Ltd India 21
3 Scottish and Southern Energy plc United Kingdom 26 3 Apache Corp Texas 46
4 Exelon Corp Illinois 31 4 Devon Energy Corp Oklahoma 52
5 Enel SpA Italy 34 5 Tatneft OAO Russian Federation 54
6 Iberdrola SA Spain 38 6 Bashneft OJSC Russian Federation 62
7 EnBW Energie Baden-Wuerttemberg AG Germany 43 7 Chesapeake Energy Corp Oklahoma 66
8 CEZ As Czech Republic 47 8 Canadian Natural Resources Canada 71
9 Vattenfall AB Sweden 48 9 Inpex Corp Japan 76
10 Southern Co Georgia 49 10 Encana Corp Canada 87

REGIONAL Industry Platts REGIONAL Industry Platts


rank State or rank rank rank
Region 2011 Company country 2011 Region 2011 Company State or country 2011
Americas 4 Exelon Corp Illinois 31 Americas 3 Apache Corp Texas 46
Asia/Pacific Rim 12 Kansai Electric Power Co Inc Japan 60 Asia/Pacific Rim 1 CNOOC Ltd Hong Kong 15
EMEA 1 E.On AG Germany 13 EMEA 5 Tatneft OAO Russian Federation 54

Source: S&P Capital IQ/Platts Source: S&P Capital IQ/Platts

12. Leaders in gas utilities. 13. Leaders in independent power producers.

OVERALL Platts OVERALL Platts


rank rank
Rank Company State or country 2011 Rank Company State or country 2011
1 Gas Natural SDG SA Spain 57 1 NTPC Ltd India 58
2 Tokyo Gas Co Ltd Japan 74 2 Empresa Nacional de Electricidad SA Chile 111
3 SNAM Rete Gas SpA Italy 88 3 China Yangtze Power Co Ltd China 112
4 Gail (India) Ltd India 109 4 Huaneng Power International Inc China 127
5 Osaka Gas Co Ltd Japan 140 5 Tractebel Energia SA Brazil 146
6 Hong Kong & China Gas Co Ltd Hong Kong 153 6 China Resources Power Holdings Co Ltd Hong Kong 149
7 ONEOK Inc Oklahoma 173 7 NRG Energy Inc New Jersey 157
8 Korea Gas Corp Korea 176 8 Datang International Power Generation Co Ltd China 162
9 Gasunie Netherlands 181 9 AES Corporation Virginia 167
10 Empresa De Energia De Bogota SA Colombia 186 10 Enel Green Power SpA Italy 172

REGIONAL Industry Platts REGIONAL Industry Platts


rank State or rank rank State or rank
Region 2011 Company country 2011 Region 2011 Company country 2011
Americas 7 ONEOK Inc Oklahoma 173 Americas 2 Empresa Nacional de Electricidad SA Chile 111
Asia/Pacific Rim 2 Tokyo Gas Co Ltd Japan 74 Asia/Pacific Rim 1 NTPC Ltd India 58
EMEA 1 Gas Natural SDG SA Spain 57 EMEA 10 Enel Green Power SpA Italy 172

Source: S&P Capital IQ/Platts Source: S&P Capital IQ/Platts

December 2011 insight 79


top 250 global energy companies

14. Leaders in integrated oil and gas. 15. Leaders in refining and marketing.

OVERALL Platts OVERALL Platts


rank rank
Rank Company State or country 2011 Rank Company State or country 2011
1 Exxon Mobil Corp Texas 1 1 JX Holdings Inc Japan 18
2 Chevron Corp California 2 2 Reliance Industries Ltd India 24
3 Gazprom OAO Russian Federation 3 3 Indian Oil Corp Ltd India 42
4 PetroChina Co Ltd China 4 4 Formosa Petrochemical Corp Taiwan 55
5 Total SA France 5 5 SK Innovation Co Ltd Korea 56
6 Royal Dutch Shell plc United Kingdom 6 6 Valero Energy Corp Texas 69
7 ConocoPhillips Texas 7 7 Idemitsu Kosan Co Ltd Japan 70
8 China Petroleum & Chemical Corp China 8 8 Polski Koncern Naftowy Orlen SA Poland 80
9 OJSC Rosneft Oil Company Russian Federation 9 9 TonenGeneral Sekiyu Corp Japan 81
10 Lukoil Oil Company Russian Federation 10 10 S-Oil Corp Korea 91

REGIONAL Industry Platts REGIONAL Industry Platts


rank rank rank State or rank
Region 2011 Company State or country 2011 Region 2011 Company country 2011
Americas 1 Exxon Mobil Corp Texas 1 Americas 6 Valero Energy Corp Texas 69
Asia/Pacific Rim 4 PetroChina Co Ltd China 4 Asia/Pacific Rim 1 JX Holdings Inc Japan 18
EMEA 3 Gazprom OAO Russian Federation 3 EMEA 8 Polski Koncern Naftowy Orlen SA Poland 80

Source: S&P Capital IQ/Platts Source: S&P Capital IQ/Platts

Where the Numbers Came From


16. Leaders in storage and transfer.
This 10th annual survey of global energy companies by
OVERALL
Platts Energy Insight magazine measures companies’ financial
Platts performance using four metrics: asset worth, revenues, prof-
rank
Rank Company State or country 2011 its, and return on invested capital (ROIC). All companies on
1 AK Transneft OAO Russian Federation 41 the list have assets greater than US$3 billion. The underlying
data comes from the Capital IQ, a Standard & Poor’s business,
2 Enbridge Inc Canada 105 which is, like Platts, a division of The McGraw-Hill Compa-
3 Transcanada Corp Canada 108 nies. This year, in addition to recognizing the best financial
4 Spectra Energy Corp Texas 119 performances of the year, we also include the list of Fastest
5 Plains All American Pipeline LP Texas 121
Growing Companies in the Top 250 list based on the three
year compound growth rate (CGR) for revenues. The CGR was
6 Ultrapar Participacoes SA Brazil 134 calculated by using the Capital IQ data over the past four
7 El Paso Corp Texas 154 years (current year included).
8 Energy Transfer Partners LP Texas 155 Because the survey is global, and because all countries
9 ONEOK Partners LP Oklahoma 158
do not share a standard financial reporting standard, the
data used is from the full year of 2010. Since then, material
10 Kinder Morgan Inc Texas 212 changes in a company’s financial health may have occurred,
and any evaluation should take that into account. Data for US
companies in the tables came from SEC Form 10K.
The company rankings are derived by adding each compa-
REGIONAL Industry Platts ny’s numerical ranking for asset worth, revenues, profits, and
rank rank
2011 Company
ROIC. The overall rank of 1 is assigned to the company with
Region State or country 2011
the lowest total, 2 to the next lowest and so on.
Americas 2 Enbridge Inc Canada 105 ROIC figures—widely regarded as a driver of cash flow and
EMEA 1 AK Transneft OAO Russian Federation 41 value—were calculated using the following equation:
ROIC = [(Income before extraordinary items) – (Avail-
able for common stock)] ÷ (Total invested capital) x 100
Source: S&P Capital IQ/Platts “Income before extraordinary items” is net income less
preferred dividends and “Total invested capital” is the sum
of total long-term debt, preferred stock (value), minority
interest, and total common equity.

80 insight December 2011


top 250 global energy companies
17. Leaders by financial indicator. 18. Leaders by region.
ASSETS Platts THE AMERICAS Platts
rank Industry rank
Rank Company Assets, $ million 2011 Rank Company State or country code 2011
1 EDF 345,880 64 1 Exxon Mobil Corp Texas IOG 1
2 Gazprom OAO 330,261 3 2 Chevron Corp California IOG 2
3 Petrobras-Petroleo Brasilier 328,193 12 3 ConocoPhillips Texas IOG 7
4 Royal Dutch Shell plc 322,560 6 4 Petrobras-Petroleo Brasilier Brazil IOG 12
5 Exxon Mobil Corp 302,510 1 5 Ecopetrol SA Colombia IOG 23
6 BP plc 272,262 118 6 Occidental Petroleum Corp California IOG 27
7 GDF Suez 265,503 32 7 Marathon Oil Corp Texas IOG 30
8 PetroChina Co Ltd 254,914 4 8 Exelon Corp Illinois EU 31
9 Enel SpA 241,628 34 9 Hess Corp New York IOG 36
10 E.On AG 219,815 13 10 Dominion Resources Inc Virginia DU 39

REVENUES Platts
rank
Rank Company Revenues, $ million 2011
1 Royal Dutch Shell plc 368,056 6 ASIA / PACIFIC RIM Platts
2 Exxon Mobil Corp 341,578 1 Industry rank
Rank Company State or country code 2011
3 BP plc 297,107 118 1 PetroChina Co Ltd China IOG 4
4 China Petroleum & Chemical Corp 281,981 8 2 China Petroleum & Chemical Corp China IOG 8
5 PetroChina Co Ltd 220,177 4 3 CNOOC Ltd Hong Kong E&P 15
6 Chevron Corp 189,607 2 4 JX Holdings Inc Japan R&M 18
7 Total SA 189,153 5 5 Oil & Natural Gas Corp Ltd India E&P 21
8 ConocoPhillips 175,752 7 6 China Shenhua Energy Co Ltd China C&CF 22
9 Eni SpA 132,663 16 7 Reliance Industries Ltd India R&M 24
10 Petrobras-Petroleo Brasilier 125,937 12 8 PTT Plc Thailand IOG 28
9 Indian Oil Corp Ltd India R&M 42
PROFITS Platts
rank 10 Coal India Ltd India C&CF 51
Rank Company Profits, $ million 2011
1 Gazprom OAO 32,443 3
2 Exxon Mobil Corp 30,460 1
3 PetroChina Co Ltd 21,034 4
EUROPE, MIDDLE EAST, AFRICA Platts
4 Petrobras-Petroleo Brasilier 20,779 12 Industry rank
5 Royal Dutch Shell plc 20,127 6 Rank Company State or country code 2011
6 Chevron Corp 19,024 2 1 Gazprom OAO Russian Federation IOG 3
7 Total SA 14,234 5 2 Total SA France IOG 5
8 ConocoPhillips 11,358 7 3 Royal Dutch Shell plc United Kingdom IOG 6
9 China Petroleum & Chemical Corp 10,788 8 4 OJSC Rosneft Oil Company Russian Federation IOG 9
10 OJSC Rosneft Oil Company 10,400 9 5 Lukoil Oil Company Russian Federation IOG 10
6 Statoil ASA Norway IOG 11
RETURN ON INVESTED CAPITAL Platts 7 E.On AG Germany EU 13
rank
Rank Company ROIC, % 2011 8 Repsol YPF SA Spain IOG 14
1 Ecopetrol SA 98 23 9 Eni SpA Italy IOG 16
2 Coal India Ltd 31 51 10 RWE AG Germany DU 17
3 YPF SA 28 65 Note: C&CF = coal and consumable fuels, DU = diversified utility, E&P = exploration and production,
4 TNK-BP Holdings 26 20 EU = electric utility, GU = gas utility, IOG = integrated oil and gas, IPP = independent power producer
and energy trader, R&M = refining and marketing, S&T = storage and transfer
5 Interregional Distribution Grid Companies Holding JSC 25 133 Source: S&P Capital IQ/Platts
6 CNOOC Ltd 24 15
7 Eletropaulo-Metropolitana Eletricidade de Sao Paulo SA 22 123
8 Shanxi Lu'an Environmental Energy Development Co Ltd 22 159
9 Cimarex Energy Co 19 170 More on the Web
Find each company’s profile and view all the data on our web site:
10 KazMunaiGas Exploration and Production JSC 19 99
www.platts.com/Top250Home.aspx
Source: S&P Capital IQ/Platts

December 2011 insight 81


SPECIAL ADVERTISING SECTION

2011 GLOBAL ENERGY LEADERS


Capgemini is proud to be the princi-
pal sponsor of the Platts Global Energy
Awards. Each year, the awards cer-
emony is a unique occasion when the
leading energy and utilities companies
convene with important stakeholders
from government, academia and profes-
sional services to celebrate the most successful projects and people of the year.
2011 has been a trying time for the industry, certainly with the Fukushima reactor accident
and the Arab spring creating uncertainties on oil and gas supply. In the latest Capgemini
European Energy Markets Observatory (EEMO) report, key ndings show that although the
Fukushima accident is leading to increased safety features for existing reactors, delays in new
reactor construction projects and nuclear phase-outs in some countries, global nuclear energy
development will still continue, however at a slower pace.
The report also nds that energy consumption growth in developing countries, plus the
Fukushima accident, together with the slow-down of the needed investments made by utili-
ties will have negative consequences on the security of energy supply and greenhouse gas
emissions in Europe. Additionally, the report shows that in the longer term one can expect
increased energy prices and even more severe consequences on supplies if regulators and
governments don’t set the right framework to encourage investments of €1.1 trillion by
2020 in the EU. However, as in 2009, these issues may be mitigated by a second economic
slowdown that would lead to decreased electricity and gas consumptions. For a copy of the
abstract report, please visit: www.capgemini.com/eemo.
Capgemini is committed to the Energy and Utilities industry and the challenges that it
faces. In addition to supporting the Platts Global Energy Awards, we support the industry
through a variety of research and conference programs, addressing the most important topics
of the market, including:

■ Capgemini produces an on-going program including in-depth studies and surveys that
are recognized as valuable thought leadership by our clients, with topics such as Nuclear
Energy, Sustainability, Smart Metering, Smart Grid and Integrated Oil Operations
■ The 13th edition of our European Energy Markets Observatory, published with our part-
ners: Société Générale Global Research, VaasaETT and CMS Bureau Francis Lefebvre is an
annual report that tracks the progress in establishing an open and competitive electricity
and gas market in Europe as well as the progress on security of supply and the European
Union Climate-Energy package objectives
■ Our industry experts present our thoughts and points of view at major conferences worldwide
■ We collaborate with industry-leading partners, including Oracle, SAP, Itron, Landis + Gyr,
GE Energy and others

I wish to convey Capgemini’s sincere congratulations to all nominees and winners of the
2011 Platts Global Energy Awards for their leadership and commitment to serving their
employees, customers, business partners and shareholders.
Warmest Regards,
Colette Lewiner
Global Sector Leader, Energy, Utilities and Chemicals
Capgemini

December 2011 insight 83


SPECIAL ADVERTISING SECTION

Marc S. Gerken, P.E.


President and CEO
American Municipal Power, Inc

Project Development
American Municipal ■ Aggressive generation asset development effort

Power, Inc designed to diversify power supply portfolio and


reduce market exposure underway. AMP has -
American Municipal Power, Inc (AMP) is the non- nanced $5.027 billion to date for these projects.
prot wholesale power supplier and services provider ■ Generation asset development effort underway will
for 129 members, including 128 member municipal add more than 1,400 MW of generation capacity
■ AMP’s portfolio of owned/controlled generation
GLOBAL LEADERS PROFILE

electric communities in Ohio, Pennsylvania, Michigan,


Virginia, Kentucky and West Virginia and the Dela- will be approximately 20% renewable by 2015
ware Municipal Electric Corporation. AMP is head- ■ Largest deployment of new run-of-the-river hydro-
quartered in Columbus and its members serve more electric generation in the country today
than 620,000 customers. — Four projects under construction at existing dams
AMP’s strong management team has been consis- on the Ohio River will add more than 300 MW of
tently recognized by rating agencies and financial renewable energy generation
entities for the leadership and stability they bring — Two additional projects in the licensing and per-
to the organization. President/CEO Marc Gerken, mitting phases
Sr. Vice President/CFO Robert Trippe, Sr. Vice ■ Largest equity-owner of the 1,600 MW Prairie State
President Jolene Thompson, Sr. Vice President Energy Campus, a coal generation facility under
Pamala Sullivan and General Counsel John Bentine construction in Illinois incorporating state-of-the-art
combined have 92 years of experience with the emissions control technologies
organization. ■ AMP Fremont Energy Center, a 707 MW (red)
The 20 member AMP Board of Trustees, comprised natural gas combined cycle plant will begin com-
of municipal ofcials from member communities, mercial operation early in 2012
is actively engaged in policy-making and provides ■ Additional wind solar and landll gas being pursued
strong leadership to the organization.
Project Financing
Organizational Growth ■ AMP has been awarded Clean Renewable Energy
■ Since 2000, membership grew from 83 members in Bonds (CREBs) in each year the bonding authority has
three states to 129 members in seven states been available, receiving a total of $172.9 million since
■ System peak increased from approximately 2006. Allocations validate AMP’s position of provid-
2,100 MW to more than 3,000 MW ing a range of energy options to members and being
■ Energy sales increased from 5.8 million MWh to leaders in the deployment of renewable generation
11.6 million MWh ■ Public power leader in the use of Build America
■ Energy sales revenue increased from $231 million to Bonds, to date issuing nearly $2.9 billion to fund
$787 million project construction

Financial Strength Energy Efciency


■ Since 2000, all AMP project nancing and entity rat- In 2011, AMP launched a comprehensive energy ef-
ings have been in the “A” category ciency program called Efciency $mart. AMP partnered
■ AMP works to maintain these ratings through its with the Vermont Energy Investment Corporation to
member credit scoring program, sound nancial create a program specically tailored to the unique needs
practices and relationship management of its municipal electric community members, with non-
■ AMP’s nancial strength and strong management contiguous service territories, located in multiple states.
have been consistently recognized by rating The program currently has 48 participating communi-
agencies. ties, with 6.4 million MWh of load and growing.

84 insight December 2011


SPECIAL ADVERTISING SECTION

Andrew Liveris
CEO
The Dow Chemical Company

partners to successfully bring them to market.


The Dow Chemical From alternative energies, to high-tech application,

Company Dow has already commercialized a wide variety of


projects, including the DOW POWERHOUSE™ Solar
The Dow Chemical Company (Dow) connects Shingle; Dow Energy Materials, a lithium-ion battery
chemistry and innovation with the principles of component provider; and patented PASCAL™ tech-
sustainability to help address many of the world’s nology, a polyurethane foam insulation technology
that improves energy efciency of refrigerators and

GLOBAL LEADERS PROFILE


most challenging problems, such as the need for clean
water, renewable energy generation and conservation, freezers by up to 10%.
and increased agricultural productivity, Dow provides As one of the world’s largest industrial con-
solutions through its “Human Element,” more than sumers of energy with an annual global energy
50,000 women and men who believe passionately that consumption of about 600 trillion British Thermal
together, science and humanity can solve anything. Units (BTUs), Dow has developed novel ways to
Dow’s diversied industry-leading portfolio of spe- efciently produce, distribute and consume energy.
cialty chemicals, advanced materials, agrosciences and Setting clear and challenging goals with fearless
plastics businesses deliver a broad range of technolo- transparency and accountability, Dow has achieved
gy-based products and solutions to customers in ap- monumental success in energy and greenhouse gas
proximately 160 countries and in high growth sectors (GHG) reductions, including:
such as electronics, water, energy, coatings and agri-
culture. Since 2005, Dow has pursued a transforma- ■ A 38% reduction in energy intensity since 1990;
tional corporate strategy centered on a strong portfolio ■ Saving more than 1,800 trillion BTUs (1994 to
of joint ventures and market facing businesses. CEO 2010)—the energy equivalent to powering all the
Andrew Liveris has oriented Dow’s innovation engine residential buildings throughout the state of Cali-
to address key megatrends that will drive growth for fornia for more than one and a half years;
the company, including health & nutrition, consumer- ■ Preventing more than 95 million metric tons of car-
ism, transportation & infrastructure, and energy. bon dioxide (CO2) emissions, a GHG, from entering
Under Liveris’ leadership, Dow has become a the atmosphere;
true pioneer as a science and technology solutions ■ Reducing absolute GHG emissions by more then
provider for energy efciency, energy management 25%; and
and sustainability; and has repeatedly demonstrated ■ Adding more than $9.4 billion of combined energy
willingness to commit Dow’s signicant resources to savings to the company bottom line.
leverage business opportunities and address society’s
greatest needs. Dow’s approach to energy management is a unique-
Dow understands that the key to a sustainable ly orchestrated corporate effort based on recognized
enterprise lies in our ability to collaborate with all energy management best practices and shared goals.
stakeholders, bring different perspectives together, For Liveris and Dow, sustainability is not seen as sim-
think creatively and take action on potential solutions. ply another item on a corporate checklist. Instead, sus-
Through a global workforce, manufacturing more tainability is central to the company’s mission, vision,
than 5,000 products at 188 sites around the world, and values. Sustainability is an adjective that is applied
Dow is looking to not only develop innovative solu- across Dow’s global enterprise: sustainable operations,
tions, but to work in collaboration with customers and sustainable solutions, and sustainable opportunities.

December 2011 insight 85


SPECIAL ADVERTISING SECTION

Colette Lewiner
Global Sector Leader, Energy,
Utilities and Chemicals
Capgemini

Why is Capgemini’s Smart Energy Services Unique?


Capgemini Capgemini’s Smart Energy Services are real, in
With around more than 115,000 people in 40 the market now, and already making a difference
countries, Capgemini is one of the world’s fore- for utilities around the world. Our expertise and our
most providers of consulting, technology and resources are unmatched in the industry. In fact, only
outsourcing services. The Group reported 2010 Capgemini Smart Energy Services:
global revenues of EUR 8.7 billion. Together with ■ Has extensive utilities industry experience with an
unequaled track record for successful innovation
GLOBAL LEADERS PROFILE

its clients, Capgemini creates and delivers business


and technology solutions that fit their needs and and delivery.
drive the results they want. A deeply multicultural ■ Leads the industry in the delivery of smart energy

organization, Capgemini has developed its own solutions in mass deployment and production
way of working, the Collaborative Business Expe- ■ Offers a unique, turn-key solution called Managed

rienceTM, and draws on Rightshore®, its worldwide Business Services, which has a usage-based pricing
delivery model. model
With EUR 915 million revenue in 2010 and What also makes Capgemini’s Smart Energy Servic-
12,000 dedicated consultants engaged in Energy, es different from any other organization is our long-
Utilities and Chemicals projects across Europe, standing commitment to working collaboratively with
North America and Asia Pacific, Capgemini’s our clients to deliver unique—and ultimately, success-
Energy, Utilities & Chemicals Global Sector serves ful—results. In fact, collaboration is central to the Cap-
the business consulting and information technol- gemini philosophy and a pillar of our service delivery.
ogy needs of many of the world’s largest players From strategy development through implementation,
of this industry. More information about our ser- our clients benet from our tailored approach. For
vices, offices and research is available at more information about Smart Energy Services, please
www.capgemini.com/energy. visit www.capgemini.com/smartenergy.

86 insight December 2011


>Insight to Power Your Business
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Utilities Executive Study
High-level perspectives reveal the
industry’s most important issues.

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This year’s study revealed that the Top 5 most critical issues facing the are especially concerned
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 Environmental Regulation is a lack of clear
 Infrastructure Transmission and Security environmental
 Non-environmental Regulation
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 Pricing/rate issues

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SPECIAL ADVERTISING SECTION

Aubrey K. McClendon
Chairman of the Board and CEO
Chesapeake Energy Corporation

Chesapeake Energy Natural Gas Advocate


Chesapeake has long been the industry’s most out-
Corporation spoken advocate for the use of natural gas as a solu-
tion to the country’s energy, economic and security
Chesapeake Energy Corporation was co-founded challenges. Its key message is that natural gas is clean,
in 1989 by its CEO, Aubrey K. McClendon, and affordable, abundant and American.
former President and COO, Tom L. Ward. Today To help deliver this message, Chesapeake provided
Chesapeake is the second-largest producer of natural funding to form the American Clean Skies Founda-
GLOBAL LEADERS PROFILE

gas, a Top 15 producer of oil and natural gas liquids tion, a Washington, D.C.-based think tank dedicated
and the most active driller of new wells in the US. to educating the public about natural gas, renewable
Headquartered in Oklahoma City, the company’s energy and energy efciency. Chesapeake is also very
operations are focused on discovering and develop- active in America’s Natural Gas Alliance (ANGA),
ing unconventional natural gas and oil elds on- which includes 35 of the nation’s largest independent
shore in the US. Chesapeake owns leading positions natural gas producers. Through the recent creation of
in the Barnett, Haynesville, Bossier, Marcellus and the Chesapeake NG Ventures Corporation (CNGV),
Pearsall natural gas shale plays and in the Granite the company plans to invest at least $1.0 billion over
Wash, Cleveland, Tonkawa, Mississippi Line, Bone the next 10 years to stimulate market adoption of
Spring, Avalon, Wolfcamp, Wolfberry, Eagle Ford, compressed natural gas (CNG), liqueed natural gas
Niobrara, Three Forks/Bakken and Utica unconven- (LNG), and advanced gas-to-liquids (GTL) processes.
tional liquids plays. The company has also verti-
cally integrated its operations and owns substantial Community Minded
midstream, compression, drilling, trucking, pressure In every community where Chesapeake operates,
pumping and oileld service assets. With more than the company is committed to building partnerships in
12,000 employees and an enterprise value of approx- education, community development, social services
imately $35 billion, Chesapeake intends to continue and health. In 2011, Chesapeake has committed over
leading the industry in developing greater supplies $30 million to charitable giving. Chesapeake sets high
of US unconventional natural gas and liquids in the standards in service and strongly encourages em-
years ahead. ployees to do the same. During the 2011 United Way
campaign for Central Oklahoma, the company and its
Operations Strategy employees set a new contribution record, giving more
Through strong leadership, investment in technol- than $5.5 million. Additionally, Chesapeake employ-
ogy and an aggressive land acquisition program ees donated more than 32,000 volunteer hours in 122
in unconventional natural gas and liquids plays, communities across all the company’s operations.
Chesapeake has captured America’s largest natu-
ral gas and liquids resource base. Chesapeake is
the only producer to have #1 or #2 positions in the
Haynesville, Marcellus, Barnett, and Bossier shale
Statistics
Net Acres (in millions): 15.0
plays. Additionally, Chesapeake now owns leading
positions in 12 of the Top 15 unconventional liquids- Q3 2011 Daily Production (mmcfe/d): 3,329
rich plays in the US. Q3 2011 Proved Reserves (tcfe): 17.7
Chesapeake’s strategy is also focused on advanta- Q3 2011 Risked Unproved Resources (tcfe): 111
geous joint venture agreements with world-class YTD Revenues (in millions): $8,908
partners and executing a sophisticated commodity YTD Adjusted Net Income (in millions): $1,670
hedging strategy that consistently delivers cash gains Market Capitalization (in millions): $20,655
and increases overall natural gas and oil price realiza-
Employees: 12,000
tions for Chesapeake.

88 insight December 2011


SPECIAL ADVERTISING SECTION

Gerard M. Anderson
Chairman, President and CEO
DTE Energy

and rose as high as 70% by the end of 2010, an


DTE Energy ■
increase of 71%.
An Ambitious Ramp-up Through 2010, 210 Michigan-based jobs had been
DTE Energy’s energy efciency campaign created by six independent contractors under
launched in June 2009, and set the pace to far contract with DTE Energy.
surpass the energy savings goal outlined in the
Customer-Focused Program
Michigan legislature PA 295, also known as the
The strategic vision of the DTE Energy energy
GLOBAL LEADERS PROFILE

“clean, renewable and efcient energy act.” Per PA


optimization program continues to focus on providing
295, electric utilities were required to save more in
a program that enables customers to actively control
2010—0.5% of sales, representing a 67% increase in
energy usage and thus save money on their energy
energy savings from 2009. Gas utility requirements
bill. We also aspire to deploy the best-operated energy
also increased dramatically in 2010 as the energy
efciency program in North America.
savings target increased 150% from 2009 to 0.25% of
Long term, we want to build a program that
sales. For DTE Energy’s gas and electric utilities, the
provides the following vision or “True North”:
spending limits increased only 33%, dramatically
■ All customers believe DTE helps them be more
less than the savings requirements, making 2010
energy efcient—customers believe and know that
more challenging from a nancial perspective.
DTE is there helping them with their energy bills
■ 100% employee ambassadors—our employees
Extraordinary Results
Throughout 2010, DTE Energy continued to build across the company know the programs and are
on its 2009 momentum. Early in 2010, the team put energy efciency advocates privately and publically
■ Flawless execution—our programs are designed
into place new measures around customer cycle time,
customer satisfaction and customer participation. with the customer in mind and are executed with-
The team focused on simplifying the marketing out defects and achieve customer specications
■ All policy makers enthusiastically support DTE’s
messages and application processes. Among them
were the development of an online application for EO program—our regulatory relationship is fully
DTE Energy’s HVAC program, the inclusion of aligned, our lings transparent and error free and
gauges on the company’s website to update the we spend our money prudently in the eyes of the
status of program funding, and the launch of a customer, legislators and policy makers
■ Maximize surcharge ROI for customer—we provide
Facebook page. Also, the team introduced Neigh-
borhood Energy Savings Outreach, a campaign that programs that are truly valuable to the customer, pro-
touched over 10,000 Detroit homeowners, helping vide real savings and nancial benet, and the utilities
them implement simple energy-saving measures and in DTE earn their incentive each and every year.
educating them in ways they could save even more.
Company Prole
Here are some key achievements in 2010: DTE Energy (NYSE: DTE) is a Detroit-based
■ DTE Energy spent 7% less than the budgeted diversied energy company involved in the develop-
amount while exceeding electric and gas savings ment and management of energy-related businesses
relative to its plan by 19% and 29% respectively. and services nationwide. Its operating units include
■ Program participation grew dramatically in 2010. Detroit Edison, an electric utility serving 2.1 million
Overall, 117,000 DTE Energy customers were customers in Southeastern Michigan, MichCon, a
directly served, an increase of 160% from 2009. natural gas utility serving 1.2 million customers in
Customers purchased 3.2 million discounted CFL Michigan and other non-utility, energy businesses
bulbs (a 52% increase from 2009) and recycled about focused on gas storage and pipelines, unconventional
23,000 appliances (a 144% increase from 2009). gas production, power and industrial projects, and
■ Program awareness started at 41% after launch energy trading.

90 insight December 2011


SPECIAL ADVERTISING SECTION

Lewis Hay, III


Chairman and CEO
NextEra Energy, Inc

Delivering For Our Investors


NextEra Energy, Inc NextEra Energy continues to provide a strong track
NextEra Energy, Inc is a leading clean energy record of outperformance compared with our peers
company with 2010 revenues of more than $15 bil- and the broader market. For the ve years ending on
lion, nearly 43,000 megawatts of generating capac- December 31, 2010, we delivered a total shareholder
ity, and approximately 15,000 employees in 28 states return of 48%, outpacing both the S&P 500 Index’s
and Canada. Headquartered in Juno Beach, Fla., our 12% and the S&P Electric Utilities Index’s 20%.

GLOBAL LEADERS PROFILE


principal subsidiaries are NextEra Energy Resources
LLC, which together with its afliated entities is the Solid Growth Opportunities
largest generator in North America of renewable From 2011 through 2014, we plan to invest approxi-
energy from the wind and sun, and Florida Power & mately $19 billion in substantial growth opportunities
Light Company (FPL), which serves approximately at both of our principal businesses. At FPL, these in-
4.5 million customer accounts in Florida and is one clude major capital projects to modernize and upgrade
of the largest rate-regulated electric utilities in the our electric grid, and at NextEra Energy Resources,
country. Through our subsidiaries, NextEra Energy these include a series of new renewable energy proj-
collectively operates the third largest US nuclear ects harnessing the wind and sun.
power generation eet.
A Culture of Innovation
Strong Customer Focus We are proud to be helping drive our industry into
Providing great value to our customers permeates the next era. Here are just a few examples of innova-
everything we do at NextEra Energy, and nowhere tion in action at our company.
■ Energy Smart Florida: FPL is investing in smart grid
is this more evident than in what we have accom-
plished at FPL in 2010 and 2011. We are affordable— technologies, including 4.5 million smart meters, to
providing residential customers with monthly bills help keep service reliability high and give custom-
that are the lowest of all 55 utilities in Florida and ers more information to better manage their energy
more than 20% below the national average. We are use and costs.
■ Power plant modernizations: FPL recently tore
reliable—delivering FPL customers service reliability
that is 38% better than the national average. And we down two 1960s-era fossil power plants, one at Cape
are clean—with a carbon dioxide emissions rate that Canaveral and one in Riviera Beach. The modern-
is 36% below the industry average. ized plants that will replace them will be 33% more
fuel efcient than the old units, and will provide an
Operational Excellence estimated $850 million to $950 million in net savings
At NextEra Energy, we had our best-ever year in to customers over the life of these projects.
2010 for fossil and hydro reliability, our second best ■ Nuclear “uprates”: Nuclear power produces about

year ever for wind reliability, and our best year ever in 20% of FPL’s electricity output—safely, reliably
terms of safety. At FPL, our transmission and distribu- and affordably—with none of the air emissions that
tion reliability kept the company in the top quartile contribute to smog or climate change. We expect the
of utilities nationwide when ranked by annual min- modernization (or “uprate”) work being done at our
utes without power, and our cost position continued four nuclear units in Florida—which will add about
to be in the top decile as measured by cost per retail 450 MW to our portfolio without expanding the
kilowatt hour. At NextEra Energy Resources and its plants’ footprints—will save FPL customers about
subsidiaries, we maintained top quartile or better $4.8 billion in fuel costs over the life of the plants.
performance at our generating facilities both in reli-
ability, as measured by forced outage rate, and in cost, For more information about our companies, visit
as measured by operation and maintenance (O&M) these websites: www.NextEraEnergy.com,
expenses per megawatt hour produced. www.NextEraEnergyResources.com, www.FPL.com.

December 2011 insight 91


SPECIAL ADVERTISING SECTION

Chuck Davidson
Chairman and CEO
Noble Energy, Inc

In the deepwater GOM, Noble Energy received


Noble Energy, Inc the industry’s rst permit to resume drilling after
Noble Energy, Inc, founded in 1932, is one of the the moratorium was lifted. The company also led the
nation’s leading independent energy companies development of a subsea containment system and co-
engaged in worldwide oil and gas exploration and ordinated the participation of 24 companies to satisfy
production. The company’s project inventory is com- new requirements. Growth in their GOM program
prised of a large number of low-risk developments, is highlighted by multiple discoveries at Galapagos,
scheduled for rst production in early 2012. Looking
GLOBAL LEADERS PROFILE

multiple long-term growth projects, and an extensive


set of high-impact exploration opportunities. With a forward, the company has identied several dozen
strong balance sheet, a disciplined capital investment deepwater prospects for future exploration activity.
philosophy and a diversied asset portfolio, Noble
Energy has the ability to continue delivering differen- International
tial growth and value for its stakeholders. The company’s two international core areas are off-
Noble Energy’s corporate purpose is “Energizing the shore West Africa and in the Eastern Mediterranean. In
World, Bettering Peoples Lives.” In addition to nding West Africa, Noble Energy is exploring offshore Equa-
and producing hydrocarbons, the company is commit- torial Guinea and Cameroon. Its Aseng project will
ted to being a responsible corporate citizen and a posi- begin oil production before year end followed by rst
tive force in the community. Noble Energy conducts its production from its Alen project in 2013. In the Eastern
business with integrity, respect, and high standards of Mediterranean, the company continues to sell natu-
health, safety and environmental stewardship. ral gas to Israel from its Mari-B eld. In 2009, Noble
Energy discovered Tamar, an 8.4 Tcf natural gas eld
US Onshore offshore Israel. The Tamar eld was the largest off-
Noble Energy’s domestic business consists of shore natural gas discovery of the decade until Noble
operations onshore, with key assets in the DJ basin Energy discovered Leviathan, a 16 Tcf eld offshore
(Colorado and Wyoming) and the Marcellus shale Israel, in 2010. The company is actively developing the
(Pennsylvania and West Virgina), and offshore in the Tamar eld and expects to commission the project in
deepwater Gulf of Mexico (GOM). Activity in the DJ late 2012. With respect to Leviathan, development and
basin is focused on liquid-rich projects through verti- commercialization options are being evaluated.
cal and growing horizontal drilling programs. Their Noble Energy continues to look globally for attrac-
current horizontal program includes over 85 wells, tive prospects that may grow into additional core
more than double their 2010 well count. areas including prospects offshore Nicaragua and
In late 2011, Noble Energy established a new sig- offshore Senegal.
nicant position in the Marcellus shale through the
formation of a strategic partnership. The company Noble Energy Statistics
acquired 314,000 net acres and 50 MMcf/d of existing
■ Employees: 1,700
net production through an innovative joint venture
structure. In addition to the Marcellus position, the ■ 2010 Reserves: 1.1 BBoe
company’s onshore portfolio includes a number of ■ 2015 Reserves Outlook: 1.6 BBoe
natural gas opportunities such as the Haynesville ■ 2011 Production: 224 MBoe/d
shale of East Texas/North Louisiana and the Piceance ■ 2015 Production Outlook: 350 MBoe/d
basin of Western Colorado.

92 insight December 2011


SPECIAL ADVERTISING SECTION

José Sergio Gabrielli de Azevedo


CEO
Petrobras

industry: the pre-salt area, which potentially ranks


Petrobras Brazil among the countries with the largest oil and gas
Founded in 1953, Petrobras is a publicly traded reserves in the world.
corporation operating in an integrated manner in In the Lula and Cernambi elds, and in the Iara,
the following segments of the oil, gas, and energy Guará and Parque das Baleias blocks alone, the recov-
industry: exploration and production; downstream, erable volume is estimated between 8.1 and 9.6 billion
marketing, transportation and petrochemicals; barrels of oil equivalent (boe). This amount, added to
the right to explore a volume of 5 billion boe acquired

GLOBAL LEADERS PROFILE


distribution; natural gas, energy and biofuels. In
October 2010, the company completed a global through the Transfer of Rights Agreement, may more
public offering of common and preferred shares that than double the current Petrobras reserves. Prospect-
resulted in a capital increase of $70,005 billion. The ing at a depth of 5,600 meters from the surface of the
proceeds were allocated to pay for the Transfer of sea, cutting through a 2,000-meter-thick layer of salt,
Rights Agreement and to nance the Business Plan. and operating at a distance of nearly 230 km off the
The volume of proved oil and gas reserves and the coastline, the company had 100% success rate in all
ongoing success rate in the company’s exploration wells drilled in the Santos Basin pre-salt area.
results have afforded Petrobras a prominent position In the rst half of 2011 Petrobras invested US$ 1.06
and growth in the industry and the company is cur- billion in international activities aimed at growing
rently the global leader in exploration and production production in the deep water regions. The company
in deep and ultra-deep waters. In Brazil, Petrobras has currently operates on ve continents and in 25 coun-
the leadership in all segments of the value chain and tries, focusing principally on the United States and on
the company’s growing production is fully supported the west coast of Africa.
by its discoveries. This dominant position combined In 2010, Petrobras invested US$ 402.2 million in
with the strong local demand in one of the fastest social, environmental, cultural, and sports projects
growing global markets enhances the company’s in Brazil and abroad. Since 2006, Petrobras has been
logistical synergies and credit quality. listed on the Dow Jones Sustainability World Index
The 2011-2015 Business Plan provides for invest- (DSJI), the most important of its category, recognition
ments of $224.7 billion. Of this total, $213.5 billion are of the company’s socio-environmental responsibil-
being allocated to projects in Brazil and a further $11.2 ity and commitment. It should be pointed out that
billion to overseas activities. The focus will be on the the company has been a signatory to the UN’s Global
Exploration and Production segment, which will get Compact since 2003.
$127.5 billion (Brazil and International), for a total of
57% of the investments. Of this amount, 45 billion will
be set aside to develop the pre-salt alone. The oil and
natural gas production projected for 2015 is expected
Statistics of the 1st semester of 2011
to top at 3.9 million boed. ■ net prot of $13.2 billion
The proved oil and natural gas reserves amounted ■ EBITDA reached $19 billion
to 15.985 billion boe in 2010, according to the SPE ■ average oil and gas production of
criterion. Petrobras maintains its goal of increasing re- 2.6 million barrels per day
serves at a faster pace than production and of reaching
■ 16 reneries
a minimum 100% Reserve Replacement Index (RRI).
In 2010, the RRI was 229%. ■ 130.2 thousand square kilometers of exploration areas
Petrobras, the global leader in exploration and ■ 132 production platforms
production in deep and ultra-deep waters, made one ■ 8,477 service stations
of the biggest discoveries in recent times in the oil

December 2011 insight 93


SPECIAL ADVERTISING SECTION

Ron Bertasi
CEO
Prometheus Energy

Prometheus Energy ing, food manufacturing, ore processing and commer-


cial laundry. Prometheus’ clear commercial thinking
Group enabled the establishment of exible solutions tailored
to its customers’ needs, including the industry’s rst
Integrated Fuel Solutions private label equipment leasing program.
Prometheus Energy is one of the largest and fastest Prometheus Energy’s commercial innovation is
growing suppliers of liqueed natural gas (LNG) to matched by its technical innovation. The company
the industrial sector in North America. Prometheus is a world leader in developing innovative solutions
GLOBAL LEADERS PROFILE

provides turnkey fuel solutions to convert industrial for unconventional gas sources, including a landll
users of diesel, propane and other crude-derived fuels gas-to-LNG plant and a are-gas-to-LNG plant. Pro-
to clean, domestic, secure LNG, resulting in reduced metheus Energy designed and operates the world’s
fuel cost and environmental footprint. The company rst coal mine gas-to-LNG plant through its joint ven-
is a pioneer in the development of the industrial LNG ture entity, LNG Silesia, in Katowice, Poland, produc-
market and is vertically integrated from production ing high quality LNG from gas that was historically
through distribution, onsite storage, and vaporization. vented to the atmosphere.
This rapid commercial and technical innovation was
Building Natural Gas Downstream achieved under an experienced leadership team by a
Prometheus Energy is the leader in the emerging skilled and committed staff.
downstream market for LNG as an industrial fuel.
Historically, large energy consumers without access About Prometheus Energy Group
to pipeline gas have had little choice but to utilize Prometheus Energy Group has more than 50
diesel, propane, heating oil and other fuels derived employees with ofces in Redmond, WA, Houston,
from crude oil. As a result, these companies have TX, and through its joint venture entity, LNG Silesia
suffered from high and volatile fuel prices and have Sp.zo.o, Katowice, Poland. Prometheus Energy is
not been able to enjoy the substantial economic and privately held by Shell Technology Ventures Fund 1
environmental benets of natural gas. No off-pipeline BV and Black River Asset Management LLC, a wholly
downstream market existed for natural gas supply to owned but independently managed subsidiary of
industrial companies. Cargill. For more information, please visit
Prometheus Energy is leading the development of www.PrometheusEnergy.com.
the emerging natural gas downstream for the off-
pipeline industrial market, with delivered volumes up
more than 400% over last year. Prometheus provides
customized turnkey solutions: proprietary storage and Statistics
vaporization equipment packages, full requirements ■ Began operations in 2008.
fuel supply, and complete operations and mainte-
■ Developed the rst conversions of industrial fuel users
nance services. The result for industrial companies? to LNG in numerous industrial sectors, ranging from
Lower fuel costs, reduced fuel price volatility, en- drilling rigs to industrial laundry.
hanced environmental prole, and increased competi- ■ A world leader in developing technical solutions for un-
tiveness. The result for the gas industry? A new, large, conventional gas sources, including are gas-to-LNG and
and attractive downstream market. coalmine gas-to-LNG plants.
■ Supply LNG across North America from a mix of owned
Strategic Thinking, a New Mindset and contracted supply sources.
The company’s innovative approach has led to
■ Growing rapidly, with delivered volumes up more than
numerous rst-of-their-kind conversions of industrial 400% over last year.
fuel consumers to LNG, in sectors as diverse as drill-

94 insight December 2011


SPECIAL ADVERTISING SECTION

Antonio Brufau
Chairman and CEO
Repsol

Considered one of the most innovative projects of


Repsol its kind the Kaleidoscope Project has had a profound
Repsol is an international integrated oil and gas impact, not only for the results it has obtained, but
company with 43,000 employees, operating in over because it has changed the way in which innovation is
30 countries and representing over 70 nationalities. viewed within the oil and gas industry.
Headed since 2004 by Antonio Brufau, Repsol is the
leader in rening and marketing in Spain and Argen- Socially Responsible
Applying the company’s core values of integrity,

GLOBAL LEADERS PROFILE


tina, one of the ten largest private oil companies in the
world, the largest private energy company in Latin and respect for the environment and its sustainabil-
America, and a leading LNG marketer. ity, Repsol has compiled a catalogue of emissions
Since 2004, Repsol has focused its upstream activity opportunities (CERO) in which the company identi-
in offshore areas including Brazil, The Gulf of Mexico fies opportunities to reduce internal gas emissions,
and the West Coast of Africa. Repsol will see rst pro- including projects classed as “Clean Development
duction from its world-class discoveries in Venezuela Mechanisms” (CDMs). Repsol has broken new
and Brazil in 2012/2013, generating cash that will fuel ground in Latin America with two projects which
further exploratory work. have been awarded CDM project status; the recov-
Repsol’s position as an integrated oil and gas ery of flare gas at the Lujan de Cuyo refinery in
company has been bolstered with the expansion and Argentina and a project to switch from residual fuel
modernization of its reneries. Considered the biggest to oil LPG and/or LNG in South America. Repsol
industrial investment in the history of Spain, the in- has been certified as best-in-class for its climates
vestment in Cartagena puts Repsol’s rening portfolio change strategy and in 2011 was named the world’s
amongst Europe’s most efcient. most transparent oil company by the Dow Jones
At the end of 2010, Repsol Brasil formed an alliance Sustainability Index.
with Sinopec to jointly develop exploratory activity,
creating one of the biggest private energy companies Investors in Modern Energy
in Latin America with a value of $17.777 billion. Repsol is committed to the development and invest-
ment in new sources of energy, laying the ground-
Technology Driven work for a future where oil companies diversify into
Repsol uses the latest-generation science and tech- new forms of energy. Repsol has recently launched its
nology for the discovery and extraction of oil and gas biggest ever research and growth plan into alternative
deposits beneath the ultra deep waters of Brazil and energy, producing results in offshore wind, biofuels
the US Gulf of Mexico. Launched in 2007, the Kaleido- and electric cars amongst others. In terms of renew-
scope Project was set up with the goal of developing able energy and biofuels, Repsol has made signi-
algorithms and software capable of processing seismic cant progress in the last year, with its acquisition of
prospecting images 15 times quicker than existing SeaEnergy Renewables’ offshore wind unit and the
technologies within the industry. Its successor, Phoe- creation of the world’s largest commercial jatropha
nix, is currently under development. project for biodiesel.

December 2011 insight 95


SPECIAL ADVERTISING SECTION

Ahmed A. Subaey
RD & CEO
S-OIL Corporation

has ideally positioned to capitalize on recent business


S-OIL Corporation environment changes as well as to emerge as an oil
rener that can readily lead the future of the industry.
S-OIL Corporation is an integrated rening &
marketing company and a reliable supplier of petro- S-OIL was proudly awarded “Downstream Opera-
leum, petrochemical and lube products to over thirty tions of the Year 2009” by Platts, named as one of
countries around the world. Since its establishment in “Global 500” by Fortune, and selected as a member of
1976, S-OIL has shown outstanding performance by Dow Jones Sustainability Index World for 2 consecu-
tive years while maintaining the highest credit ratings
GLOBAL LEADERS PROFILE

realizing operational excellence and sound nancial


structure, and has continuously strived to achieve among Asian reners from S&P and Moody’s. On
its overarching mission of “Sustainable Protable top of this, in Nov. 2011, the company received two
Growth.” Renowned for a successful joint venture awards from the President of Korea including “Presi-
between Aramco Overseas Company, a wholly owned dential Award for CEO of the Year” for excellence
subsidiary of Saudi Aramco, and Korean Airline, S- in sustainable management as well as “Presidential
OIL has been able to ensure the stable import of crude Award for CSR of the Company.”
oil as well as steady supply of petroleum products. Furthermore, S-OIL has embarked on a new journey
S-OIL operates three CDUs with aggregate process- in 2009 by establishing a Strategy Framework which
ing capacity of 656 MB/D and a large-scale Bunker-C consists of three strategic directions, which are “Fur-
Cracking Center, which consists of various conversion ther Investment in Rening Business,” “Integration
processes such as Hydrocracker, RFCC, RHDS, etc., with Petrochemical Business,” and “Renewable Ener-
through which most of residual crude is upgraded gy Business” along with Strategic Imperatives that col-
into light and/or low sulfur products. In addition, lectively serve to meet the expectations of our C.E.O.
S-OIL produces basic raw materials for petrochemi- (Customers, Employees, and Owners & Stakeholders).
cal industry, and in 2011, S-OIL strengthened its very As the rst step to meet the Strategic Direction, the
existence in the petrochemical industry by complet- company acquired a 33.4% stake in HK Silicon in 2011
ing the construction of #2 Aromatics Complex with (US$ 265 million), a solar PV poly-silicon producer,
investment amount of US$ 1.3 bil. Particularly, the which gave a solid platform to enter into renewable
company successfully held the inauguration ceremony energy business.
for the completion of the project with presence of over Equipped with this solid strategy framework,
1,000 distinguished VIPs from home and abroad in- S-OIL will relentlessly pursue to materialize a well-
cluding the very exceptional attendance of H.E. Presi- diversied business portfolio that can lead the waves
dent of Korea and H.E. the Minister of Petroleum and of change. In the end, such strengths will enable S-OIL
Mineral Resources Al-Naimi of Saudi Arabia as well to break through the ever-changing business environ-
as CEOs of global major oil companies. S-OIL now ment encompassing the entirety of the horizon of the
runs the world’s largest single-location PX production energy industry.
complex with production amount of 1,700 KTA, which
contributes to generating almost a quarter of the Statistics
company’s bottom-line. On top of this, S-OIL has a full ■ Revenue : US$ 17,765 Million (2010)
line-up of API Group-III to Group-I lube base oils with
■ Location : Seoul (Head Ofce) / Ulsan (Renery)
daily production capacity of 30,000 barrels, which is
the 2nd largest single-renery capacity in the world. ■ Renery Capacity : 656,000 Barrel per Day
Meanwhile, S-OIL has been a forerunner of imple- ■ Key Businesses : Oil Rening, Petrochemical Product
menting export-oriented marketing strategy, export- Manufacturing, Production of Lube
ing about 60% of the rened products to over 30 coun- Base Oil, Poly-silicon business
tries. Equipped with optimized renery conguration ■ Employees : 2,589 persons (as of Dec. 31, 2010)
that is able to ll product spectrum with high value-
■ Sales Volume : 192,006 thousand barrels (2010)
added ones and diversied marketing strategy, S-OIL

96 insight December 2011


SPECIAL ADVERTISING SECTION

Kevin Smith
CEO
SolarReserve

gonaut Partners, Nazarian Enterprises, Credit Suisse,


SolarReserve and Cobra Energy Investments LLC.
Headquartered in Santa Monica, California, Solar-
Reserve develops utility-scale solar power plants that The Crescent Dunes Solar Energy Project:
provide continuous electricity to large populations SolarReserve broke ground on its lead CSP project,
just like conventional power plants but without any the Crescent Dunes Solar Energy Plant, located near
harmful emissions. SolarReserve’s technology features Tonopah, Nevada on September 1, 2011. This 110 MW
project, which will use SolarReserve’s CSP technology

GLOBAL LEADERS PROFILE


a proven solar thermal power tower technology with
integrated energy storage that is capable of delivering with integrated storage, will be the nation’s rst com-
clean, predictable power on-demand, day or night. mercial scale solar power tower with fully integrated
SolarReserve’s game-changing, US-developed tech- energy storage, and the largest of its kind in the world.
nology solves intermittent electricity generation, a major The project will create over 600 direct jobs during
problem with most renewable energy generators that the peak construction period, equivalent to in excess
can only generate when the sun is shining or the wind of 1.5 million man-hours for construction activities at
is blowing. A SolarReserve plant generates electricity the project site. It will also generate about 3,700 indi-
anytime it’s needed, day or night, 24-hours per day. rect induced jobs within the supply chain, and once
SolarReserve holds the exclusive worldwide license completed more than 50 full-time operational jobs.
to the molten salt, solar power tower technology de- During operations, the plant will expend more than
veloped by Pratt & Whitney Rocketdyne, a subsidiary $10 million per year in salaries and operating costs,
of United Technologies Corporation. The technology and is forecasted to generate $47 million in total tax
was successfully demonstrated in California under a revenues through the rst 10 years of operation. Un-
US Department of Energy-sponsored pilot project in der the project’s unique development agreement with
the late 1990s. Nye County, SolarReserve has committed to lling
Since its formation in late 2007, SolarReserve’s 90% of the construction jobs with Nevada residents,
team of power project professionals have assembled utilizing both union and non-union subcontractors.
a concentrated solar power development portfolio of As part of the project nancing, SolarReserve is
more than 25 projects featuring its licensed solar power joined as investors in the project by ACS Cobra, a
technology with potential output of more than 3,000 worldwide leader in the engineering and construction
megawatts in the United States and Europe; with early of power plants and thermal solar facilities, and the
stage activities in other international markets including equity capital practice of Santander, a global nancial
the Middle East, North and South Africa, Australia, services and banking leader. The project also closed
China, India and Latin America. SolarReserve is also on a $737 million in project debt with a loan guarantee
developing 1,100 MW of photovoltaic projects across from the US Department of Energy.
the Western United States, and is actively acquiring
new sites to add to the pipeline in the US and overseas.
SolarReserve’s experienced management team has Statistics
previously developed and nanced more than $15 ■ Project Portfolio: 110 MW CSP in construction,
billion in solar, wind, natural gas, oil, nuclear, and 4,000 MW of CSP and PV in development
biomass-red electricity generating facilities located
■ Power Purchase Agreements: 310 MW under contract
in the US and in more than a dozen countries around
or awarded with total revenues in excess of $3.5 billion
the world.
■ Employees: 55
Investors: ■ Capitalization: $217 million
Primary investors include: US Renewables Group, ■ Active Markets: United States and 12 countries
Good Energies, Citi Sustainable Development Inves- internationally
tors, PCG Clean Energy and Technology Fund, Ar-

December 2011 insight 97


SPECIAL ADVERTISING SECTION

Ronald L. Sargent
Chairman and CEO
Staples Inc

■ Product Innovation: In the Staples Global ECO-Easy


Staples Inc Challenge, engineering teams from across the world
Staples is the world’s largest ofce products company, compete to invent and create innovative products
with over $25 billion in sales and 90,000 associates, which improve efciency like this year’s winner a
serving in 26 countries throughout North and South saving surge protector design.
■ Global Green IT: Australia and New Zealand teams
America, Europe, Asia and Australia.
Staples’ pursuit of excellence in energy is evident by implemented green IT solutions and innovations in-
cluding removal 38 servers and consolidating server
GLOBAL LEADERS PROFILE

delivering programs such as the latest lighting tech-


nology upgrades, portfolio-wide rollout of efciency services to a central data center, reducing CO2
improvement campaigns, stores recommissioning and emissions by approximately 47.7 tons annually and
building control optimization, and transportation ef- raising the data center temperature by two degrees,
ciency improvement programs. Staples was recog- reducing power consumption.
nized as an EPA ENERGY STAR Partner of the Year Communication
and ENERGY STAR Leader in 2011, one of only a few The Energy Management Awareness program
to achieve these awards in the same year. internally and externally leverages events, media,
Staples innovative program leverages SMART Grid press releases, speaking engagements, videos, website,
technology, real-time automated demand response newsletters, awards and magazine articles.
technology, advanced lighting controls, Green IT, and ■ Earth Day Event: Event company-wide celebrations
HVAC optimization technologies. Staples’ communi- with t-shirts, sustainability pledge, videos, recy-
cation program recognizes that to achieve and sustain cling, and energy awareness posters.
efciency improvements, it requires people, process, ■ Sustainability and Energy Videos: Staples produces
and technology to be aligned. videos on energy management, solar, sustainability,
and ENERGY STAR.
Operational Excellence ■ Staples Energy On-Line Website: Staples launched
Staples demonstrates operational excellence by de-
an internal website to distribute energy tips, knowl-
livering efciency in every aspect of their business and
edge exchange, videos, email help, and general
scaling it across the entire supply chain.
information on energy.
■ Process Excellence—Staples completed a nation-
Through Staples Soul, the company continues to de-
wide roll-out of the kWh reduction campaign across
ne itself not just through its strong earnings growth
their distribution center portfolio, achieving an 8%
and prot margin, but also by its impact on the local
reduction in consumption.
and global communities it serves.
■ Treasure Hunts—Staples rolled-out the “Treasure
Staples is a leader in corporate sustainability for
Hunt” process at its Distribution centers, and iden-
over a decade, and continues to aggressively move
tied and initiated implementation of 38% energy
their program forward in innovative ways.
savings at the rst site at the Orlando DC.
■ ENERGY STAR National Building Competition:
Statistics
Staples participated in the EPA ENERGY STAR Build-
■ Despite an exceptional business growth, exceeded their
ing Challenge reducing consumption 25%, from 62
target to achieve 7% absolute reduction in their carbon
to 75 favorable score at its retail store in Roswell, GA. footprint by 2010 against a 2001 baseline.
Staples also implemented its own challenge in Atlanta. ■ Reducing energy consumption by 38% at the Orlando
Distribution Center through process excellence programs.
Innovation
■ 34 solar installations through North America just passed
Staples leads through energy-related innovation.
30 million kWh for total solar production.
■ SMART GRID Utilization: Staples has shown leader-
■ One of the top 10 retailers to make the Corporate Social
ship incorporating SMART GRID data as a key com-
Responsibility Index list.
ponent of the distribution center energy program.

98 insight December 2011


Congratulations to Dick Kelly
of Xcel Energy Inc.
Finalist for the 2011 Global Energy
Lifetime Achievement Award
Dick Kelly rose from meter reader to
chairman and CEO of Xcel Energy in a
distinguished career spanning 43 years. We
congratulate him on his many accomplishments
and thank him for his leadership and commit-
ment to the company and the industry.

With a strong financial foundation, a growth


strategy that gets results, dedication to
operational excellence and a commitment
to clean, reliable, reasonably priced energy,
Xcel Energy is built to last.

ResponsibleByNature.com
global energy awards

Innovation and
Inspiration: Energizing
Change in the Industry
and the Economy
Patsy Wurster, Director, Platts Global Energy Awards and Publisher, Platts Insight

Energy 2011: Surviving a Year help ensure that additional sources of


of Surges and Slumps energy are ready to power the economy
In a year of energy-market gyrations, once a restored economy intensifies its
the global energy industry in 2011 was energy requirements.
jolted by a series of surprises. Soar- Throughout the volatility of 2011,
ing midwinter heating-oil demand the global energy industry rose to the
strained supplies along the blizzard- challenge. Its companies, communities
stricken American East Coast. Uncer- and individuals persevered in meeting
tain Mideast oil shipments amid the their day-by-day task of satisfying the
Arab Spring uprisings sent world oil world’s voracious appetite for energy—
prices above $120 a barrel. Increased and in pursuing their long-range chal-
anxieties about nuclear power fol- lenge of planning to meet future ener-
lowed the Fukushima Daiichi accident gy demand.
and radiation leak. With its Global Energy Awards for
The prolonged economic slump in 2011, Platts this year again recog-
the advanced manufacturing nations nizes the leaders and visionaries who
helped restrain oil and natural-gas de- are shaping the industry’s future. Ev-
mand and thus prevented a long-lasting ery category in the competition saw a
price spike, even as emerging markets spirited contest, often making it very
recovered strongly. Yet energy agencies difficult for our judges to choose an
began to foresee that an eventual eco- eventual winner. With its wide array
nomic recovery might send oil prices of breakthough technologies and in-
soaring again—with some analysts genious innovations, the competition
warning of an eventual oil-price shock, illustrated that the global energy in-
as supplies might once again threaten dustry remains driven by the spirit of
to fall short of relentless global de- innovation—a reassuring prospect, as
mand. The balance between supply and the industry will need to summon its
demand remains delicate—underscor- finest minds and its most creative tech-
ing the industry’s need for continued nologies to fulfill its mission of fueling
innovation and productivity gains, to a re-energized global economy.

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CEO Of The Year lithium-ion batteries for electric vehi-


Andrew Liveris cles and innovative building-integrated
Dow Chemical solar energy systems. Dow has commit-
United States ted $100 million to an Energy Intensity
A clear winner emerged in the al- Improvement Fund, and has funded
ways-crowded category for the leading nearly 40 projects worldwide that will
energy-industry CEO this year. Rec- reduce the company’s energy use and
ognizing his success in fulfilling Dow greenhouse-gas emissions.
Chemical’s strategic business goals, and The company’s environmental com-
applauding his thought leadership on mitment was underscored by its recent
far-sighted issues in public policy, this inclusion in the Dow Jones Sustain-
year’s award hails the achievements of ability Index for the 11th time, and by
Andrew Liveris. its inclusion in the Carbon Disclosure
Now serving as the president of the Leadership Index for the sixth time. A
International Chemical Company As- new Dow collaboration with The Na-
sociation (ICCA), Liveris is the world- ture Conservancy aims to show that
wide voice of the chemical industry. He protecting the environment is part of a
has earned global renown—including a far-sighted business strategy.
top-level White House appointment— Liveris this year published “Make it
as a champion of business success and in America: The Case for Reinventing
job creation through renewed industri- the Economy,” on reinvigorating man-
al competitiveness. ufacturing to strengthen the long-term
Liveris has driven Dow’s transforma- health of the US economy. In addition
tion, through a strategic plan launched to his service on the President’s Export
in 2005, from a commodity chemicals Council, Liveris was named last sum-
player to a high-performance science mer by President Obama as co-chair of
and technology solutions provider. the new Advanced Manufacturing Part-
Under Liveris’ guidance, the 114-year- nership, an alliance of industry, uni-
old company—manufacturing more versities, and the federal government
than 5,000 products at 188 sites in 35 to invest in emerging technologies and
countries—is an industry pacesetter in competitiveness.
innovation, with an annual R&D bud- Liveris’ outstanding commitment to
get of $1.7 billion. public service, as well as business suc-
Dow’s ambitions have broadened cess, has led to his recognition as CEO
under Liveris’ leadership. Dow’s 2009 of the Year.
acquisition of Rohm and Haas, a pre-
mier specialty-chemical company, has Rising Star of the Year—Individual
provided Dow with substantial cost Arno Harris
synergies. Expanding its portfolio of Recurrent Energy
joint ventures, Dow’s plans for Sadara, United States
an initiative with Saudi Aramco, will Through his leadership roles at Recur-
create one of the world’s largest inte- rent Energy and within the solar indus-
grated chemical facilities. Liveris has try, Arno Harris is helping shape the fu-
also directed Dow’s plans to invest ture of clean energy in North America.
more than $500 million in new ef- Under Arno’s leadership, Recurrent En-
forts for ethane cracking and ethylene ergy has since 2006 become a leading
supply on the US Gulf Coast, with an solar developer in North America. By at-
additional $4 billion in future invest- tracting talented professionals from the
ments in that region. conventional energy industries, and by
Liveris has intensified Dow’s focus motivating them with a vision of solar
on energy efficiency and sustainability, at multi-gigawatt scale, Arno has dem-
with the company poised to become onstrated industry-leading vision.
a key driver of renewable and alterna- The global electronics giant Sharp
tive energy solutions. The company has Corporation in 2010 agreed to acquire
made major investments in building Recurrent. With Sharp’s financial

December 2011 insight 103


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strength and technological leadership, In the academic realm, she served as


Recurrent gained a partner that could a Professorial Lecturer in Energy Law
support its internal expertise in devel- for 20 years at the George Washing-
opment, permitting, engineering and ton University Law School, and she
project finance. Recurrent remains an has published hundreds of articles
independent subsidiary of Sharp, with and law texts on a variety of energy-
its own leadership, but also with a net- industry issues.
work that allows it to execute quickly Sheila was the first woman to serve
on its vision for distributed generation as the president of the Federal Energy
and utility-scale solar. Bar Association. She is the Treasurer of
Recurrent has navigated the acquisi- the United States Energy Association,
tion successfully, and is pursuing even and she serves on the Advisory Board
larger projects that are driving the of the North American Energy Stan-
mainstream adoption of solar power. dards Board. She has also served as the
Arno has shifted the company’s focus Federal Circuit Representative of the
away from rooftop installations and Standing Committee on the Federal Ju-
commercial power agreements to focus diciary; the President of the Women’s
on utility-scale solar. Council on Energy and the Environ-
Through his service on the board of ment; and the President of The Thomas
the Solar Energy Industries Association More Society of America.
(SEIA), Arno’s advocacy of renewable Listed by the National Law Journal
energy sources is helping shape a new among the nation’s top 20 energy at-
vision of a sustainable and affordable torneys, Sheila has been named as one
energy future. of “50 Key Women in Energy World-
wide” and as Woman of the Year for
Lifetime Achievement Award the Women’s Council on Energy and
Sheila Hollis Environment. She was the first woman
United States selected to deliver the “Dean of the Oil
A pioneer in the practice, teach- and Gas Bar” lecture for the Center
ing and application of law and en- for American and International Law’s
ergy policy, Sheila Hollis has worked Institute for Energy Law. She has also
tirelessly for almost 40 years in gov- received the Paul Nordstrom Service
ernment, academic and professional Award from the Energy Bar Association
organizations to promote a strong, re- and its charitable foundation, recogniz-
silient energy policy. ing exemplary long-term public ser-
A charter member of the US Govern- vice. Sheila will receive the Outstand-
ment’s Senior Executive Service at age ing Graduate Award of the University
30, she became the first director of the of Denver’s International Law Center in
Office of Enforcement for the Federal 2012, and she will deliver a paper at the
Energy Regulatory Commission, serv- 40th Anniversary Commemoration of
ing from 1977 to 1980. the founding of the University of Den-
As a lawyer in private practice, she ver’s Law Journal.
has chaired the American Bar Asso-
ciation’s 11,000-member Section of Lifetime Achievement Award
Environment, Energy and Resources, Richard Kelly
and she chaired the Board of Edi- United States
tors of the ABA Journal from 2007 to Dick Kelly, the retired Chairman and
2010. Sheila has also served as the CEO of Xcel Energy—an electric and
chair of the American Bar Associa- natural-gas utility operating in eight
tion Fund for Justice and Education. states, with its headquarters in Minne-
She serves as Chair of the ABA’s Gavel apolis—spent his entire 43-year career
Awards Committee, and she is a del- in the energy business. Recognized for
egate to the World Justice Program, his leadership in environmental stew-
developing rule-of-law principles in ardship and corporate citizenship, he
environmental law. is the son of an employee at the Public

104 insight December 2011


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Service Company of Colorado, where grid” technologies. In Minnesota, Xcel


Dick started as a summer meter reader is testing renewable technologies, in-
during college, before joining the com- cluding electric cars, along the Energy
pany’s auditing department. Innovation Corridor between Minne-
Moving up through the ranks, he de- apolis and St. Paul.
veloped a deep understanding of the Beyond his service to Xcel, Dick has
energy business. As a rising executive, served on the boards of the Electric
Dick was instrumental in completing Power Research Institute, the Nuclear
the two mergers that created Xcel En- Energy Institute, and the National
ergy. He also played an important role Advisory Council of the National Re-
in resolving the 2003 bankruptcy of newable Energy Laboratory. From June
NRG Energy, an Xcel subsidiary and, at 2010 to June 2011, he was chairman of
the time, the third-largest independent the Edison Electric Institute. Dick also
power producer in the world. served as a member of the National Ad-
Under Dick’s leadership, Xcel estab- visory Council of the National Renew-
lished a national reputation for envi- able Energy Laboratory.
ronmental stewardship. The company
today is the nation’s No. 1 provider of Lifetime Achievement Award
wind energy, and it ranks in the Top 10 Art Rosenfeld
for solar capacity. Since 1998, the com- United States
pany has voluntarily made investments Dedicating his 35-year career to the
to reduce air-pollution emissions, and pursuit of energy efficiency, Art Rosen-
the company recently announced plans feld has helped build the foundation
to further reduce emissions in Colo- of California’s energy policy—and the
rado, enabling it to meet Colorado’s world’s knowledge of energy efficien-
carbon-reduction goal of 20% by 2020. cy—by promoting the idea that using
Thanks to the company’s ambitious energy more efficiently is cheaper and
energy conservation effort, custom- smarter than building additional power
ers since 1992 have conserved energy plants. Art has earned renown through-
equivalent to the output of 13 medium- out the energy industry for his dedica-
sized power plants. tion to maximizing efficiency and pro-
Under Dick’s leadership, Xcel made tecting the environment.
strong efforts to further the viability Art received his Ph.D. in Physics in
of renewable energy. The company is 1954 at the University of Chicago, serv-
now actively pursuing research on ad- ing as the final graduate student of No-
vancing wind energy through new en- bel Laureate Enrico Fermi. Joining the
ergy-storage technologies, including a Department of Physics at the Univer-
wind-to-hydrogen demonstration proj- sity of California at Berkeley, Art rose to
ect that is operating in Colorado and a eventually oversee the Nobel Prize-win-
project in Minnesota that stores wind ning particle physics group at Lawrence
power in large batteries. Berkeley National Laboratory, where he
In solar energy, Xcel is a found- served until 1974. He then changed his
ing member of the Solar Technology research focus to the efficient use of en-
and Acceleration Center in Colorado, ergy, forming the laboratory’s Center
which tests and demonstrates ad- for Building Science, which he led until
vanced solar technologies. The com- 1994. He is now the laboratory’s Distin-
pany also conducted a demonstra- guished Scientist Emeritus.
tion project at its Cameo Generating The author of almost 400 scientific
Station that connects thermal energy and technical papers, Art has served as
from a parabolic-trough concentrating Senior Advisor to the U. S. Department
solar plant with the steam cycle of the of Energy’s Assistant Secretary for En-
coal-fi red plant. ergy Efficiency and Renewable Energy,
Xcel has also made significant in- as well as Commissioner on the Cali-
vestments in SmartGridCity, a pilot fornia Energy Commission. He is the
project in Colorado that tests “smart co-founder of the American Council

December 2011 insight 105


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for an Energy Efficient Economy; the ty, low-power, single-box cluster com-
University of California’s Institute for puter. SeaMicro’s innovations integrate
Energy Efficiency; and the Washing- various parts of the computing process
ton-based Center for Energy and Cli- into a single system, helping SeaMicro’s
mate Change Solutions. technology deliver computing while it
Art’s scientific achievements have consumes just a small fraction of the
earned him the Szilard Award for Phys- electricity of traditional systems. Re-
ics in the Public Interest (1986); the Car- ducing servers’ electricity consumption
not Award for Energy Efficiency from will be all the more important amid the
the US Department of Energy (1993); shift to “cloud computing,” which puts
and the Berkeley Citation (2001) from a greater emphasis on servers.
the University of California. In 2006, SeaMicro’s sales have been doubling
he received the Enrico Fermi Award, every quarter and, based on existing
the oldest and one of the most presti- sales and projections, the company
gious science and technology awards may be the fastest-growing hardware
given by the US government. In 2008, company in the history of Silicon Val-
The Economist magazine awarded him ley. The company has won quick rec-
its “Innovator of the Year” award in the ognition for its innovative approach—
field of Energy and Environment. In including being named as a “Top Ten
2010, he was voted into the National Clean Tech Company” by the Wall
Academy of Engineering. This year, he Street Journal.
received the Global Energy Prize from Based in Sunnyvale, California, Sea-
Russian President Medvedev in recogni- Micro was backed by venture-capital
tion of his advances in the area of en- firms, several leading public companies,
ergy efficiency. and the largest grant awarded by the US
In March 2010, Art won a singular Department of Energy—a $9.3 million
distinction: More than 50 influential merit-based grant—as part of the fed-
leaders in the field of energy efficiency eral stimulus package (the “American
proposed naming a new unit of mea- Recovery and Reinvestment Act.” Sea-
surement to characterize electricity Micro also was awarded a merit-based
savings. Named “the Rosenfeld,” one grant from the state of California.
unit is equal to 3 billion kilowatt-hours
per year, representing the electrical Energy Producer of the Year
output of one 500-megawatt coal-fired Petrobras
power plant. Brazil
Continuing its outstanding record of
Rising Star Award—Company energy exploration and oil production,
SeaMicro Petrobras has won broad recognition in
United States the industry for its remarkable advanc-
An innovator in computer hardware, es in making oil discoveries in so-called
SeaMicro is emerging as an innovator “pre-salt reservoirs.” The company has
with an extremely strong position in a developed advanced technologies to
critical part of the energy industry: the speed wells in these areas into produc-
field of reducing energy consumption. tion, with output in those pre-salt ar-
A four-year-old company, SeaMicro has eas already at 150,000 barrels a day. By
developed technology that reduces, by 2020, production in pre-salt areas is
as much as 75%, the power consumed projected to be the equivalent of 40%
by computer servers—a part of the of Brazil’s total oil output.
information-age electronic backbone Petrobras drilled 52 wells in pre-salt
that already devours more than 2.5% areas since between 2005 and 2010,
of all the electricity produced in the with a success rate of 88% last year.
United States. Costs are dropping as the company
To achieve such energy savings, Sea- gains experience and scale in this ef-
Micro re-envisioned how a server works, fort: The first well drilled in the pre-
conceiving of it as an ultra-high-densi- salt areas required 15 months and $240

106 insight December 2011


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million—but the most recent wells took assure consumers that they can gain
just 80 days and $80 million. ready access to those fuels.
More than 1,000 offshore wells are An enhanced fueling infrastructure
likely to be drilled, with total output will help overcome concerns that CNG
likely to reach an eventual peak of more and LNG supplies will not be available.
than 6 million barrels a day. Explora- CNGV’s new $150 million investment
tion in the pre-salt areas is the founda- will speed the construction of LNG
tion of Petrobras’ strategic vision for fueling stations along Interstate high-
2020: to be one of the five largest inte- ways—increasing the number of sta-
grated energy companies in the world. tions to 74 by 2012, and between 250
Downstream, to meet growing de- and 300 locations over time. That will
mand, four refineries are being built in be about one-fifth of the number need-
Brazil, and more than $70 billion will ed for a complete coast-to-coast LNG
be invested in refineries in the next refueling network.
four years—along with $16 billion for Once the market reaches a “tipping
upgrading quality in existing refiner- point,” consumers will be willing to
ies. Petrobras has been accomplishing switch to such natural-gas-fueled vehi-
its increased output while maintaining cles—and manufacturers will adapt to
string health, safety and environmen- supply that new market. Chesapeake’s
tal standards, earning the company a drive for CNG- and LNG-powered ve-
place in the Dow Jones Sustainability hicles could thus lead to increased ve-
Index since 2006. hicle manufacturing—and hence new
jobs—even as reduced US dependence
Industry Leadership of the Year on high-cost imported oil makes US en-
Chesapeake Energy Corporation ergy supplies more secure.
United States Chesapeake’s new initiative could be
The increased use of plentiful, rela- a game-changer for the US economy,
tively clean-burning natural gas has energy policy and foreign policy—a
the potential to reshape the American leadership initiative that has earned the
economy and society—and Chesa- company this year’s award for Industry
peake Energy Corporation is position- Leadership.
ing itself to help lead the transition
toward a greater use of natural gas as Downstream Operations of the Year
the fuel for motor vehicles. By reducing Gail India Limited
the nation’s dependence on gasoline— India
and thus high-cost imported oil—such Fueling the world’s second-most-pop-
an effort to promote the use of com- ulous nation will require vast amounts
pressed natural gas (CNG) and lique- of energy, delivered in an environmen-
fied natural gas (LNG) to fuel vehicles tally sustainable way—and Gail India
could help the United States approach Ltd. is growing to meet that challenge.
energy independence. Having started as a gas transmission
To fulfill Chesapeake’s recently an- company, Gail has continued expand-
nounced “Energy Independence Ini- ing its network of natural-gas pipelines
tiative”—which calls for increased and has organically developed into an
domestic oil and natural gas liquids integrated energy company in the hy-
production and investments in “green drocarbon sector. For its prodigious ef-
energy” fuels through advanced gas- forts, fast-paced growth and increasing
to-liquid (GTL) processes—Chesapeake profitability, Gail has won recognition
has created the Chesapeake NG Ven- in the category of “Downstream Opera-
tures Corporation (CNGV). The com- tions of the Year.”
pany will invest $1 billion to stimulate Almost three-quarters of gas trans-
the adoption of CNG, LNG and GTL missions in India flow through Gail’s
fuels—and the first step in that process pipelines, in a market where natural gas
is investing in a nationwide corridor of seems destined to be an ever-more-im-
CNG and LNG fueling stations, to re- portant fuel. As Gail approaches a pan-

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India presence, it has been diversifying plant in Texas—position Southern as


from transmissions into the areas of liq- a significant innovator in renewable
uefied petroleum, gas processing plants energy, as well.
and an expanding petrochemical plant. It takes self-confidence to expand a
Recognizing that a growing popula- utility’s commitment to nuclear ener-
tion and intensifying urbanization will gy in the wake of the Fukushima Dai-
require more clean-burning fuel sup- ichi accident in Japan, but Southern
plies, Gail has imaginative plans to tap is pushing forward with its plans to
into a new source of natural gas: urban build two new, state-of-the-art nuclear
landfills. Pursuing a partnership with units that will start generating power
the municipality of Delhi, Gail has ear- in 2016. Another large-scale project
marked 10 acres for a pilot project for is a 582-megawatt coal gasification
the extraction of landfill gas—a pilot plant, which will remove 65% of the
project that, if successful, could be rep- carbon dioxide from coal before it is
licated across India. burned as a fuel.
Along with increasing fuels supplies, As befits a company that has in-
Gail’s landfill-gas initiative could help tensified its environmental efficien-
restrain the rate of global warming, by cy—generating 40% more electricity
capturing methane gas that would oth- over the past decade, while reducing
erwise be released into the atmosphere. emissions by 70% —Southern has
Gail’s efforts to convert waste plastics consistently invested in environmen-
into fuel could also capture a potential- tally imaginative technologies. The
ly valuable resource. National Carbon Capture Center in
Already a fast-growing enterprise, Alabama is uniting industry, gov-
Gail and its urban landfill-gas project ernment and university scientists in
seems to epitomize the spirit of innova- the search for ways to reduce carbon
tion and zeal for growth that seem like- emissions in the atmosphere. While
ly to give Gail a first-mover advantage in working toward a breakthrough in
many areas. The company’s ambitions that complex area, Southern is help-
for growth are optimistic, but Gail’s ing consumers reduce their electricity
imaginative efforts to diversify its oper- use through “smart meters” as well as
ations give it a good chance of continu- load-management and conservation
ing its brisk recent pace of expansion. programs.
A well-diversified, financially strong
Power Company of the Year utility that strives to deliver customer
Southern Company satisfaction as well as shareholder val-
United States ue, Southern Company continues to
A well-managed company with a take the kind of energy-supply and en-
strong financial base, Southern Com- vironmental-protection measures that
pany has the operational acumen and have earned it 2011’s award as “Power
the economic resources to fulfill its Company of the Year.”
broad-scale ambitions—and thus has
solid credentials to claim the 2011 Commercial Technology of the Year
award in the category of “Power Com- GlassPoint
pany of the Year.” United States
Southern’s well-diversified power- An innovative approach to maximiz-
generation base includes the full range ing the extraction of hard-to-reach oil
of sources for energy production: coal, deposits—using low-cost solar tech-
oil, hydropower and nuclear, along nologies—is the factor that made
with newer technologies like solar GlassPoint the winner in the closely
and biomass. The company maintains contested category of “Commercial
its traditional reliance on coal, yet its Technology of the Year.” GlassPoint
newest ventures—a 30-megawatt so- has devised a way to use cost-competi-
lar photovoltaic plant in New Mexico tive techniques to harness solar power,
and a 100-megawatt biomass-fueled rather than to use costly carbon-based

108 insight December 2011


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fuels, to create steam for injection into engineering ingenuity. Shell Internation-
oil wells in the process of Enhanced Oil al succeeded in that construction feat by
Recovery (EOR). completing the Pearl GTL project, in the
Natural gas is often purchased for Persian Gulf off the coast of Qatar, which
EOR’s steam-injection process: As shipped its first product in June 2011.
much as 60% of the operating cost of The scale of the project challenged the
a heavy oil field is typically for natural capabilities of even one of the world’s
gas for EOR. Reducing that cost while foremost construction operations. The
accomplishing the same goal—extract- Pearl GTL effort, a joint effort by the
ing more of a field’s underground oil company and Qatar Petroleum, has
deposits—increases the efficiency of oil the capacity to produce 260,000 bar-
production. Moreover, using solar pow- rels of oil-equivalent per day. The wide
er rather than natural gas is a hedge range of its products includes cleaner-
against the risk of gas-price increases, burning diesel and kerosene, base oils
while allowing that gas to be used for for top-tier lubricants, naphtha, and
other purposes. normal paraffin that is used to produce
GlassPoint’s development of innova- detergents. The Pearl plant will produce
tive “glasshouse” architecture allows it enough fuel per day to power more
to use lightweight, low-cost, prefabri- than 160,000 automobiles, and enough
cated components. More effective pro- synthetic base oil per year to make lu-
tection for the reflective mirrors within bricants for 225 million cars.
the durable “glasshouse” reduces main- At its peak, the Pearl project required
tenance and repair costs. Better still, more than 52,000 people—exhausting
the ability to use mass-manufactured the capacity of the local workforce and
components that can be assembled requiring laborers to be brought in from
on-site reduces installation costs and more than 50 countries. Since some of
speeds the installation process. the workforce had no experience in
In an era when oil deposits are in- the oil and gas industry—and, in some
creasingly difficult to extract, EOR cases, no experience at all in construc-
seems destined to play an ever-more- tion—the company created a train-
important role: Worldwide, the $20 ing center, which largely focused on
billion market for EOR will be essential workplace safety and supervisors skills.
to maximizing the use of the world’s fi- Maintaining Shell’s strong safety cul-
nite oil resources. The US Department ture helped the Pearl project achieve a
of Energy has estimated that the full record-breaking 77 million man-hours
use of EOR could produce an additional worked without any injuries leading to
240 billion barrels of recoverable oil, lost work-time.
which might otherwise sit untapped. Organizing a construction project
GlassPoint’s new solar-powered tech- at this vast scale—drilling a total dis-
niques to boost EOR could thus con- tance of 97 miles below the sea floor,
tribute to increasing long-term US oil with wells using enough steel to build
production, allowing precious natural two-and-a-half Eiffel Towers, with a
gas to be used for other purposes, and control room hosting 200 computer
reducing American dependence on servers using 12 million lines of soft-
costly foreign imports of oil. ware code—was an engineering chal-
lenge of the first magnitude. Yet the
Construction Project of the Year Pearl GTL project bested the indus-
Shell International try’s usual well-drilling time of about
Netherlands 75 days, completing the 22 Pearl GTL
Building the world’s largest gas-to-liq- wells in an average of 45 days (with one
uids (GTL) plant—with fully integrated well completed in just 28 days).
production that extends from drilling For its mastery of scale, skill and
gas at an offshore gas field to producing speed, Shell International’s vast project
finished products that are immediately merited this year’s “Construction Proj-
ready for market—requires vast scale and ect of the Year” award.

December 2011 insight 109


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Engineering Project of the Year improved safety and reliability of the


Areva systems that monitor critical systems
United States and initiate an automatic reactor shut-
Ensuring the safety of a nuclear pow- down in case of any early detection of
er plant requires exacting standards problems. Now that the feasibility and
and allows a zero margin for error. A safety of an analog-to-digital upgrade
critical safety-improvement program— project have been proven, other nucle-
the first-ever modernization of a US ar power plants can follow the example
nuclear power station’s instruments of Areva, helping extend the life of the
and controls (I&C) systems, changing reactors that contribute to the US elec-
them from analog to digital technolo- tricity supply.
gies—was a project of such critical im-
portance that its successful completion Community Development Project
won the “Engineering Project of the of the Year
Year” award for Areva Inc. Gas Natural Fenosa
Like almost all nuclear power plants, Spain
Unit 1 of the Oconee Nuclear Station An innovative community-outreach
in Greenville, SC—owned by Duke En- initiative in Argentina by Gas Natural
ergy—was built in an era when analog Ban—a local subsidiary of Spanish-
controls were considered state-of-the- based Gas Natural Fenosa—illustrates
art technology. Now that digital con- that community-focused efforts are
trol are replacing analog—and now that not just the civic-minded thing to do
analog is approaching obsolescence, as in the short term: They can also be a
fewer manufacturers and suppliers can sound business strategy to boost prof-
provide replacement parts—conversion itability for the long term. Gas Natu-
to digital is essential as the US nuclear ral’s design of a socially inclusive busi-
industry seeks to extend the useful life ness model—offering a hand up, not
of its reactors. a handout, that helps transform the
Areva in 2010 became the first and everyday lives of the poor—won over-
only supplier to receive US Nuclear whelming support among our judges
Regulatory Commission (NRC) approv- in the category of “Community Devel-
al for a full plant-specific application of opment Project of the Year.”
a safety-related digital I&C system. The Gas Natural found that reaching out
Oconee project was its first such effort, to the impoverished Cuartel V neigh-
and thus it was a precedent-setter for borhood, on the outskirts of Buenos
the American nuclear industry. Aires, provided a way to deliver en-
Thanks to Areva’s highly skilled ergy supply to an under-served com-
engineering team and precise project munity—while also creating a loyal,
management, Duke Energy in June bill-paying customer base. Cuartel V
2011 completed the full-scope modi- had subsisted for decades with almost
fication of its Reactor Protection Sys- no drinking-water systems, sewage
tem and Engineered Safeguards Pro- networks or gas-distribution pipelines.
tection System (RPS/ESPS) at Oconee Residents long relied on bottled gas for
1. With the success of that upgrade their energy needs, enduring its vastly
to digital technologies, Duke Energy higher costs—and its occasional safety
will soon pursue similar upgrades problems—because gas connections
at the two additional reactors at the were unavailable.
Oconee power station. Gas Natural, in collaboration with
Because of the careful regulatory the nonprofit Fundacion Pro-Vivenda
safeguards under which nuclear pow- Social, invested about $1.7 million to
er must operate, Areva worked closely build a gas-distribution network that
with the NRC staff, holding weekly now serves more than half of the dis-
consultations to review progress, diag- trict. Cuartel V’s families have ben-
nose potential problems and address efited not just from the dramatically
questions. The result of the project is lower cost of piped-in gas, but also by

110 insight December 2011


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the ability to heat their houses and by pany has now grown to be the Number
the increase in neighborhood hous- Three player by capacity in the global
ing values. offshore wind industry.
The 20,000 or more residents of Cu- The company’s expertise and econo-
artel V now are steady customers of mies of scale are driving down the costs
Gas Natural, which enjoys an expand- of wind projects across the entire val-
ed service territory that has increased ue chain. Offshore wind poses greater
the company’s revenues. Moreover, operational challenges than onshore
neighboring areas, seeing the im- wind—another area where E.ON has
proved quality of life in Cuartel V, gained significant experience, as the
have asked for additional natural-gas operator of the world’s largest onshore
services, as well—opening up further wind farm: a 781.5-megawatt facility in
revenue opportunities. Roscoe, Texas. Yet E.ON is making far-
Gas Natural’s corporate reputation sighted investments in hardware and
has also been strengthened, as the efficiency-focused operational tech-
company’s inclusive business model niques that may soon make offshore
in Cuartel V is the subject of a chap- wind power a critical part of the world’s
ter in a book by two Harvard Business energy supply.
School professors, “Business Solutions The environmental benefits of ex-
for the Global Poor,” and has been fea- panding offshore wind are increasing-
tured at a Harvard conference on best ly significant. The 60 turbines E.ON’s
practices in corporate social responsi- Robin Rigg offshore wind farm, com-
bility. Corporate reputation is an in- pleted in 2010 in a challenging tidal
tangible asset that enhances a compa- location off the coast of the UK, have
ny’s value, and Gas Natural’s efforts in a capacity of 180 megawatts, displacing
Cuartel V have succeeded in building 230,000 tons of greenhouse-gas emis-
up the company’s reputational capital sions per year. E.ON is now building
as well as expanding its base of reli- the far larger London Array, which will
able customers. be the world’s largest offshore wind
project when completed in 2013, gen-
Green Energy Generator of the Year erating 1 gigawatt—enough to meet
E.ON Climate & Renewables the needs of 750,000 homes—while
Germany displacing 1.9 million tons of green-
Planning for new energy-generation house-gas emissions per year.
capacity requires long-term investment In a world thirsting for increased
and continuous refinement of techno- energy supplies, it takes strategic fore-
logical know-how—especially when sight and operational stamina to be
dealing with newer energy systems. a pioneer in developing innovative
E.ON Climate & Renewables has had technologies. E.ON has demonstrated
the perseverance to pursue a promis- admirable staying-power in this fast-
ing, renewable energy source with vast growing sector of the energy industry,
potential: wind power, especially in and its imaginative efforts have earned
rugged offshore settings. More than this year’s award for “Green Energy
96% of the world’s operational offshore Generator of the Year.”
wind installations are located in Euro-
pean waters, and the Dusseldorf-based Petrochemical and Blendstock
E.ON has delivered a remarkable 46% Company of the Year
of that capacity. Braskem
It can take a decade or more to take Brazil
an offshore wind farm through the In a bold leap of innovation,
planning, design, permitting, con- Braskem opened the world’s fi rst
struction and grid-connection stages, “green ethylene” plant in September
but E.ON has committed more than 2010 in Triunfo, Brazil—using sugar
$1.4 billion to this fast-growing seg- cane to produce a projected 200,000
ment of the energy market. The com- tons of “green plastic” each year. This

December 2011 insight 111


global energy awards

advance in “sustainable chemistry” is sions—to make fuel-grade ethanol.


potentially transformational, usher- By developing a genetic modification
ing in an era of green plastic in a tradi- system to create a gas-fermentation
tional industry where making break- microbe, LanzaTech has made a dra-
through innovations has sometimes matic advance along the biotechnolo-
proven to be difficult. gy frontier, with a potentially transfor-
Using a renewable and affordable raw mational impact on the world’s energy
material, Braskem’s production of green industries.
plastic at the Triunfo plant will help LanzaTech’s technique avoids what
meet the growing demand for plastic— has been, until now, a major prob-
especially in the developing world—in lem for ethanol: the fact that it has
a way that is both economically viable been made mostly by using corn or
and socially responsible. Using plenti- other foodstuffs—and thus diverting
ful sugar cane as an alternative to tra- food that is desperately needed by the
ditional fossil-fuel feedstocks will help world’s increasingly hungry popula-
reduce some of the pressure on global tion. That food-or-fuel choice has put
oil and gas supplies. upward pressure on world food prices
The idea of “green plastics” is a rela- and causing food shortages in impov-
tively new one, and Braskem has ac- erished nations. LanzaTech’s technol-
tively reached out—in both its home ogy may help avoid that serious moral
market of Brazil and international- dilemma.
ly—to stakeholder groups to discuss As shown in a pilot project now
the positive aspects of sustainable under way at a steel mill in China,
chemistry. Propelling its message of LanzaTech’s process can convert even
greater sustainability, Braskem has highly contaminated industrial emis-
pro-actively pursued stakeholder- sions into usable fuel. Preventing the
engagement programs with employ- emission of such contaminants will
ees, clients, suppliers, consumers, the reduce a factor that aggravates climate
news media policymakers and finan- change, while using waste for trans-
cial analysts. portation fuels—instead of draining
This advance into sustainable chem- the world’s fi nite oil and gas sup-
istry reinforces Braskem’s reputation plies—could help ease future fossil-
for far-sighted planning and its culture fuel shortages.
of accountable corporate governance. In the ethanol market, in particular,
The company, formed in 2002 as part LanzaTech’s waste-gas-to-ethanol pro-
of a major restructuring of the Brazil- cess could potentially produce nearly
ian petrochemical industry, has been 11 billion gallons of ethanol just from
attentive to building a strong corporate steel-mill gases in China. If used in
reputation, even as it has continued to other countries and other industries—
generate impressive growth and ample like petrochemicals, refining, coal and
margins. The investment in environ- the paper industry—the environmen-
mental responsibility through the new tal and economic benefits could be
Triunfo plant enhances Braskem’s re- revolutionary.
nown among advocates of a “greener” Capturing value from what has
plastics industry. long been seen as a waste product,
LanzaTech’s innovation suggests that
Sustainable Technology of the Year advanced technology can indeed
LanzaTech contribute to energy security, avoid
United States aggravating climate change, and pro-
In a technical breakthrough that mote green growth and create green-
holds great promise for sustainability, collar jobs. By harnessing biotechnol-
LanzaTech has used a clever technique ogy in the most imaginative of ways,
to convert a waste product—waste LanzaTech is the strong winner in this
gas, which would otherwise add to year’s competition for “Sustainable
the problem of greenhouse-gas emis- Technology of the Year.”

112 insight December 2011


global energy awards

Energy Efficiency Program of the Year with new conservation methods that
Ontario Power Authority are in the pre-commercial stage, OPA
Canada has made an investment of $23 mil-
The most cost-effective kilowatt is lion and has leveraged that sum to
the one that’s never generated in the gain more than $100 million in fund-
first place. The Ontario Power Author- ing from other sources. By combining
ity (OPA), through the “saveONenergy” far-sighted investment and persua-
initiative that began in 2004, has helped sive arguments for energy conserva-
create a culture of conservation in Cana- tion, OPA’s successful conservation
da’s most populous province, persuading and efficiency efforts have created a
consumers to reduce their individual en- win-win outcome: saving consumers
ergy use to help reduce overall electricity money in the short term, while steer-
demand. The public-education program ing Ontario toward a coal-free future
has been a key part of OPA’s far-reaching for the long term.
effort to reduce peak demand and thus
to avoid having to build additional pow- Energy Efficiency Program of the Year
er plants in the province. Staples Inc
Having invested $1.7 billion in United States
conservation programs, OPA saved Creating a corporate culture that fo-
ratepayers an estimated $3.8 billion cuses on energy awareness requires a
in avoided costs between 2006 and sustained effort, and Staples has mo-
2010. By 2016, that savings is likely to bilized a years-long campaign to per-
amount to about $6 billion, if the cam- suade all its stakeholders that energy
paign continues to help OPA avoid un- efficiency is good for the environment
needed supply-infrastructure spend- and good for society—and also good
ing. OPA met its 2007 interim target of for the company’s bottom line. The
reducing electricity use by 1,350 mega- world’s largest office-supplies company
watts, with peak demand reduced by has pursued a comprehensive program
1,700 megawatts since 2006. of adopting advanced technologies and
OPA’s program is demonstrating that encouraging energy-conscious behav-
reduced electricity use can simultane- ior, and it has reaped benefits that have
ously save consumers money on their both reduced its environmental impact
electric bills, protect ratepayers from and rewarded its shareholders.
excessive construction costs and re- Through a far-reaching “Staples Sus-
strain greenhouse-gas emissions. Per- tainability Program” that champions
suading the public to join the saveO- sustainability and reduces waste, the
Nenergy pledge—vowing to use energy company has put energy efficiency at
more wisely, to make well-informed the heart of its operations. Its agenda
choices about electricity use and to has included the adoption of “smart
retire inefficient appliances—will be a grid” technologies, advanced lighting
critical factor in helping OPA keep its controls, heating and air-conditioning
promise to shut down Ontario’s coal- optimization techniques, automated
burning power plants and thus be coal- demand-response technologies and
free by 2014. The province has emerged “green IT” initiatives. In environmen-
as North America’s energy-efficiency tal terms, Staples exceeded the goal it
leader by adopting aggressive energy- set when it became one of the first US
conservation targets, aiming to reduce companies to make a public commit-
peak-demand energy use by 7,100 ment to reduce its carbon footprint: By
megawatts and 28 terawatt-hours an- 2010, the company reduced its carbon
nually by 2030. use by more than the 7% target (mea-
Along with the public-education sured against a 2001 baseline), even as
initiative, OPA has paid for ambitious the business grew by more than 200%.
energy-efficiency programs through Positive environmental results have
dedicated funds for innovation and translated into smart savings. Across its
advanced technology. Experimenting US facilities, Staples had been spend-

December 2011 insight 113


global energy awards

ing more than $82 million per year 600,000-net-leasehold-acre tract in


for electricity and natural gas, but the the Eagle Ford Shale project in South
efficiency program gained incremen- Texas. The second—for $1.3 billion in
tal efficiencies of $3.8 million per year cash plus future drilling carries—al-
(and a total impact, measured against lows CNOOC to acquire a 33.3% inter-
the baseline, of $13.2 million per year). est in Chesapeake’s 800,000-net-lease-
The savings have gone straight to share- hold-acre tract in the Denver Julesburg
holders’ bottom line, delivering about and Powder River basins in Colorado
2 cents per share of increased earnings. and Wyoming.
The benefits of increased efficiency The transactions are the largest-ever
are not just financial: Staples finds that Chinese purchase of US energy assets.
employee morale is higher and the cus- They give Chesapeake a strong busi-
tomer experience has been enhanced ness partner, additional capital to ac-
by the improved efficiencies, and the celerate drilling in those resource-rich
visible energy-and-environment cam- areas, and added cash-flow to pursue
paign has added reputational value for its strategic fi nancial objective of re-
a company whose image is one of in- purchasing some of its outstanding
novation and reinvestment. By enhanc- debt. It gives CNOOC an active in-
ing its corporate reputation through terest in a specific, high-profi le and
positive public-relations moves—like probably very productive assets—plus
championing the federal “Energy Star” growth in its long-term reserves, eas-
program and sponsoring competitions ing China’s fears of having little access
to motivate students, entrepreneurs to energy supplies.
and employees to find even more ways CNOOC’s deals with Chesapeake
to save energy—Staples has reinforced also go a long way to make up for the
a maxim of the corporate-responsibility embarrassment that China suffered in
movement: that doing the right thing 2005, when an American political up-
to strengthen society is often synony- roar prevented CNOOC from moving
mous with doing the right thing to forward with an $18.5 billion offer to
strengthen corporate profitability. acquire Unocal. To prevent such a US
outcry this time, the new Chesapeake-
Deal of the Year CNOOC deals were carefully structured
Chesapeake Energy Corporation and thoroughly explained to lawmak-
United States ers, who seemed to appreciate the deals’
In a dramatic stroke of energy diplo- potential to create American jobs, pro-
macy, Chesapeake Energy Corpora- vide additional tax revenues and in-
tion—the largest independent oil pro- crease US oil production at a time of
ducer in the United States—reshaped the concerns about the flow of energy sup-
contours of international energy explo- plies from overseas.
ration with two landmark deals with the The deals represent a coup for Chesa-
same partner: CNOOC, the state-owned peake and its CEO, Aubrey K. McClen-
China National Offshore Oil Corpora- don, as the firm has singlehandedly
tion. Because of the historic nature of transformed US-China energy coop-
these two transactions and the joint eration—and helped strengthen over-
ventures that will follow, Chesapeake— all US-China economic relations. Sel-
which is also this year’s award-winner dom does a single set of transactions
for Industry Leadership—has also been have such a serious commercial, dip-
awarded the prize for “Deal of the Year.” lomatic and energy-policy impact. For
The two agreements for oil and nat- its pioneering efforts to create an in-
ural-gas drilling tracts, signed in Octo- ternational partnership that may have
ber 2010 and February 2011, give rich wide-ranging energy and economic
rewards to both partners. The fi rst— implications for years to come, Chesa-
for $2.2 billion in cash, plus future peake has certainly eclipsed all other
drilling carries—allows CNOOC to ac- competitors in the 2011 award category
quire a 33.3% interest in Chesapeake’s for “Deal of the Year.” ■

114 insight December 2011


Duane Morris congratulates
partner and pioneer
SHEILA SLOCUM HOLLIS
on being named a finalist for the
2011 Platts Global Energy
Lifetime Achievement Award.

We join with other global


energy leaders in honoring
you for your key role in the
formation and implementation
of energy law and policy.

In the sphere of Energy, Environment and Resources, change is a constant. For more information, please contact:
Events in recent years underscore how quickly and acutely these changes affect STEPHEN L. TEICHLER
businesses, governmental bodies and consumers. Duane Morris, as both advisor Duane Morris LLP
and advocate, guides clients through complex legal, financial, practical and political 505 9th Street, N.W.
issues. Duane Morris LLP, a full-service law firm with more than 700 attorneys in Washington, DC 20004
offices across the United States and around the world, offers innovative solutions P: 202.776.7830
to the legal and business challenges presented by today’s evolving global markets. slteichler@duanemorris.com

Duane Morris – Firm and Affiliate Offices | New York | London | Singapore | Los Angeles | Chicago | Houston | Hanoi | Philadelphia
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insight
Advertiser Index
AES Gener . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116 Fortune . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Ambient . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Mansfield Oil Company . . . . . . . . . . . . . . . . . . . . . . 12
American Municipal Power, Inc . . . . . . . . . . . . . . 84 NextEra Energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
Areva . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 Noble Energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
C3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Peabody Energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Cairn India Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Petrobras . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
Capgemini . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82, 86, 87 PJM Interconnection . . . . . . . . . . . . . . . . . . . . . . . 101
Chesapeake Energy. . . . . . . . . . . . . . . . . . . . . . . 88, 89 Prometheus Energy Group . . . . . . . . . . . . . . . . . . . . 94
CN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 Repsol . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
Dow Chemical . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85 SAIC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . back cover
DTE Energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90 S-OIL Corp . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
Duane Morris . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115 SolarReserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
Elster . . . . . . . . . . . . . . . . . . . . . . . . inside back cover Staples Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98, 99
Entergy Corp . . . . . . . . . . . . . . . . . . inside front cover Xcel Energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101

116 insight December 2011


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