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January 18, 2012

Energy Data Highlights

Retail gasoline price 1/16/2012: $3.391/gal up$0.009 from week earlier up$0.287 from year earlier Retail diesel price 1/16/2012: $3.854/gal up$0.026 from week earlier up$0.447 from year earlier Crude oil futures price 1/13/2012: $98.70/bbl down$2.86 from week earlier up$7.30 from year earlier Natural gas futures price 1/13/2012: $2.670/mmBtu down$0.392 from week earlier down$1.737 from year earlier Weekly coal production 1/7/2012: 21.251 million tons up2.057 million tons from week earlier up0.205 million tons from year earlier

Natural Gas/ Power News

EIA Storage Release 1/12/12 (Actual): -95 Previous Week: -76 Bcf +13.4% Change from 1 Year Ago +17.0 % Change 5-year Average

Big natural gas discovery in offshore Mozambique for Anadarko Anadarko Petroleum Corp. on Tuesday said it has made another significant discovery of natural gas in offshore Mozambique with the success of its seventh appraisal well in the Rovuma basin area . The new appraisal well, Lagosta-2, further reaffirms the value of the discovery area, which has already yielded successful wells at Lagosta and Camarao. Lagosta-2 is 4.4 miles north of the Lagosta well and 5.3 miles south of Camarao. http://fuelfix.com/blog/2012/01/17/big-natural-gas-discovery-in-offshoremozambique-for-anadarko/ Natural Gas Nears Decade Low Natural-gas futures fell to the lowest level in nearly a decade Tuesday, extending for the sixth day a selloff driven by mild winter temperatures across the U.S. Without a sustained run of cold weather to spur an increase in gas-fired heating, U.S. stockpiles of the fuel are expected to hold near the record levels hit late last year. That prospect has traders betting on lower prices amid still-increasing production, highlighting the effect new domestic drilling is having on the U.S. energy market. "We've got too much supply, and the temperatures are not cold enough, and the economy is not improving fast enough to have an impact," said Peter Beutel, president of trading adviser Cameron Hanover. Natural gas for February delivery fell 18.2 cents, or 6.8%, to settle at $2.488 a million British thermal units on the New York Mercantile Exchange, the lowest settlement since March 5, 2002. Prices have fallen 17% since the beginning of 2012, and are down 44% from a year ago. http://online.wsj.com/article/SB1000142405297020455590457716671342584532 8.html?mod=WSJ_Commodities_LEFTTopNews Obama Discovers Natural Gas Last week the White House issued its latest report on jobs and it includes a section on "America's Natural Resource Boom." The report avers that a few years ago there were widespread "fears of a looming natural gas shortage," but that "the discovery of new natural gas reserves, such as the Marcellus Shale, and the development of hydraulic fracturing techniques to extract natural gas from these reserves has led to rapidly growing domestic production and relatively low domestic prices for households and downstream industrial users.".. To the best of our knowledge, this is the first time the White House has favorably mentioned the Marcellus Shale, the natural gas reservoir below Pennsylvania, West Virginia and other Northeastern states. And now he's taking credit for this soaring production. As the White House report puts it: "Of the major fossil fuels, natural gas is the cleanest and least carbonintensive for electric power generation. By keeping domestic energy costs relatively low, this resource also supports energy intensive manufacturing in the United States. In fact, companies like Dow Chemical and Westlake Chemical have announced intentions to make major investments in new facilities over the next several years." http://online.wsj.com/article/SB1000142405297020454240457715945196233268 4.html?mod=WSJ_Opinion_AboveLEFTTop

EEX to launch OTC clearing for NBP Gas Futures The European Energy Exchange ( EEX) will expand its product portfolio and offer clearing for bilaterally concluded transactions on the National Balancing Point ( NBP) from 29 February 2012. From this date, EEX participants can register UK NBP forward transactions conducted off exchange at EEX for clearing and nomination purposes. Clearing of OTC transactions is provided by European Commodity Clearing AG (ECC), which also assumes full settlement of the transactions including physical fulfilment. http://www.commodities-now.com/commodities-now-news/power-andenergy/9678-eex-to-launch-otc-clearing-for-nbp-gas-futures.html Shale gas adds to refiners' light-end woes The U.S. natural gas industry, reborn through the shale gas revolution, has emerged as another source of pain for beleaguered oil refineries as natural gas liquids (NGLs) grab market share from petroleum in America. As the market for liquid fuels in the United States has declined in recent years, petroleum has borne more of the brunt, losing share to biofuels and, increasingly, NGLs. This is starting to hurt. Already battered by dreadful margins for making gasoline, refineries' main product, they are now being attacked in the specialty market for petrochemicals feedstocks as well as in the cutthroat propane business. http://www.commodities-now.com/commodities-now-reports/power-andenergy/9675-shale-gas-adds-to-refiners-light-end-woes.html Canadian Natural Gas Tumbles Mild U.S. Weather, Ample Supplies Canadian natural gas fell, tracking a decline in New York futures, as mild U.S. weather tempered demand and increased production pared the need for imports of the fuel. http://www.bloomberg.com/news/2012-01-17/canadian-natural-gas-tumbles-mildu-s-weather-ample-supplies.html European gas demand has record fall in 2011: Societe Generale European gas demand fell by 11% in 2011, its largest ever year-on-year decline, European bank Societe Generale said in a research note. Europe had mild temperatures in 2011 which reduced demand for gas for domestic heating. In the UK, 2011 was the second warmest on record, the Met Office said. SocGen expects gas demand to rise 2.5% in 2012 but for levels before the 2008 financial crisis to be met only in 2018. http://www.platts.com/RSSFeedDetailedNews/RSSFeed/NaturalGas/88089 42 RWE May Reconsider Nabucco Pipeline RWE AG could scrap its plans for the proposed Nabucco pipeline, which aims to transport natural gas from the Caspian region to central Europe via Turkey, the German energy giant's chief executive said. While still keen to import Caspian gas to Europe, RWE favors options "that keep our own financial exposure limited," Chief Executive Jrgen Grossmann said in an interview. RWE, which has been badly hit by the German retreat on nuclear power, could support other pipelines that have competed with Nabucco, he noted. Mr. Grossmann's comments mark the first concrete signal from a member of the Nabucco consortium that the

pipeline, which would run from Turkey's eastern border to Austria, may not be built, despite years of preparation. http://online.wsj.com/article/SB1000142405297020446800457716627379213712 2.html?mod=WSJ_Commodities_LEFTTopNews Green/ Alternative Energy News Renewable Energy Tests U.S. IPO Market in First Deal of 2012 Renewable Energy Group Inc., the biodiesel maker that hasnt posted an annual profit since 2008, will test investor demand for new shares in the first U.S. initial public offering this year. The Ames, Iowa-based company, which turns ingredients including soybean oil into biodiesel for cars and trucks, plans to raise as much as $108 million offering 7.2 million shares for $13 to $15 each today, according to a regulatory filing. Renewable will use the proceeds to buy a factory it is currently leasing and to invest in new processing technologies. The biodiesel maker is one of at least eight companies that have scheduled dates to complete U.S. offerings so far this year, even as those that went public in 2011 fell an average of 5.9 percent through Jan. 13, data compiled by Bloomberg show. Renewable is attempting the first biofuel IPO since June, when Kior Inc. raised $162 million and then lost more than 30 percent of its value. http://www.businessweek.com/news/2012-01-18/renewable-energy-tests-u-s-ipomarket-in-first-deal-of-2012.html

World Future Energy Summit Highlights Renewables, Sustainability The annual World Future Energy Summit opened today in Abu Dhabi with a call from UN Secretary-General Ban Ki-moon for support of his Sustainable Energy for All Initiative. Ban used the conference as the global launching pad for 2012 as the International Year of Sustainable Energy for All, a designation mandated by the UN General Assembly. Globally, one person in five lacks access to modern electricity and three billion people rely on wood, coal, charcoal or animal waste for cooking and heating. "This is the right time for this initiative," said the secretary-general. "Across the world we see momentum building for concrete action that reduces energy poverty, catalyzes sustainable economic growth, and mitigates the risks of climate change. Achieving sustainable energy for all is both feasible and necessary. My initiative will help us meet these objectives simultaneously. It can be a triple win for all." http://www.ens-newswire.com/ens/jan2012/2012-01-16-02.html

Calls For Cost Of Green Energy To Be Revealed Plans to expand renewable energy sources will cost families 400 a year by 2020, a leading think tank has warned. Policy Exchange accuses Energy Secretary Chris

Huhne of "misleading" the public by suggesting bills may go down as a result of the Government's drive for green energy. The think tank has called on ministers to be "more transparent" and believes the Government's green targets should be "renegotiated". http://news.sky.com/home/politics/article/16151485

Crude Oil News

OPEC Daily Basket Price 1/17/2012 112.24 (OPEC Daily Basket Price 1/16/2012 111.71)

Oil Rises to Three-Day High in New York as Iran Tension Counters Economy Oil rose to the highest level in three days in New York as speculation supplies from Iran will be disrupted countered concern that economic growth will slow. Iran called on Saudi Arabia to be more wise and responsible after the kingdom said it could make up for any supply loss resulting from a European ban on imports of Iranian crude. The International Energy Agency reduced its 2012 global oil demand forecast, after consumption fell in the fourth quarter for the first time since 2009, warning it may cut estimates further. Only Saudi Arabia is currently in a position to plug the gap from Iran, said Carsten Fritsch, an analyst at Commerzbank AG in Frankfurt. This fact should lend support to the oil price for the time being. http://www.bloomberg.com/news/2012-01-18/oil-rises-to-three-day-high-in-newyork-as-iran-tension-counters-economy.html

Brent Flat, Strong Data Offsets Europe Debt Worry Oil was flat on Wednesday, as optimism prompted by positive economic data from China was eroded by recurrent worries about European debt problems. Asian shares, the euro and base metals held steady after the positive data, although market participants have now shifted focus to Europe with Portugal testing investor confidence in a debt sale, and as talks of a default by Greece resurface. Front-month Brent crude 6 cents higher at $111.59 a barrel earlier Wednesday, after touching an intraday peak of $112.16. U.S. oil gained 27 cents $100.98 a barrel. "Oil markets are still rallying on positive data, particularly from China, and expectations of more easing by the country to ensure steady growth," said Natalie Robertson, an analyst at ANZ. http://www.cnbc.com/id/46031196 Crude Prices Rise 2% Oil futures finished above $100 a barrel, lifted by brisk economic growth in China and steps toward an Iranian oil embargo in Europe. Light, sweet crude for

February delivery settled up $2.01, or 2%, to $100.71 a barrel on the New York Mercantile Exchange. Brent crude on the ICE futures exchange recently traded up 10 cents, or 0.1%, to $111.44 a barrel. China's economy grew 8.9% in the fourth quarter, helping to ease concerns about an oil demand slowdown from the world's second-largest crude consumer. Although the figure was smaller than a year ago, it came in above many analysts' expectations and remains well above rates in the U.S. and Europe. "If you ask me, 8.9% is still pretty good growth," said Peter Donovan, vice president at oil options brokerage Vantage Trading in New York. "If the bearish thing you're seeing is growth of 8.9%, is that so bearish?" The oil market has increasingly turned to China and other emerging markets to support demand and prices in recent years, as the country continues to enjoy brisk growth despite weakness in the U.S. and Europe. That growth has helped feed surging demand for automobiles and energy, and has made China the second-largest oil consumer after the U.S. http://online.wsj.com/article/SB1000142405297020455590457716665090454751 4.html?mod=WSJ_Commodities_LEFTTopNews

IEA Slashes Oil-Demand Forecast The International Energy Agency Wednesday took an ax to its oil-demand forecast, after consumption fell in the fourth quarter of 2011 for the first time since the tail end of the credit crunch. The agency, which represents major energy-consuming countries, warned of, "the rising likelihood of a sharp economic slow down, if not outright recession," that creates the very real possibility of zero oil-demand growth in 2012. "The data is supportive of our view that the oil price should move lower in the first half of 2012," said analysts at Bernstein Research in a note to clients. The IEA warned of multiple risks to oil supply, not least looming sanctions against Iranian crude exports that could cause significant oil supply difficulties for European refiners. However, the IEA also noted that Western sanctions are unlikely to have a meaningful effect until the middle of the year and will probably be flexible enough to avoid a severe oil-market reaction. "At least a portion of Iran's 2.5 million barrels a day of crude exports will likely be denied to [Organisation for Economic Cooperation and Development] refiners during second half 2012, although more apocalyptic scenarios for sustained disruption to Strait of Hormuz transits look less likely," it said. http://online.wsj.com/article/SB1000142405297020455590457716827358422201 2.html?mod=WSJ_hp_LEFTWhatsNewsCollection

Oil demand falls for first time since 2009 Oil demand is falling for the first time since the 2008-09 global financial crisis as a result of a mild winter, high crude prices and the European economic crisis, according to fresh estimates from the International Energy Agency. The industrialised nations watchdog said oil demand dropped by 300,000 barrels a day in the final quarter of 2011. Such a fall is rare: over the last decade, oil demand has posted drops only in the financial crisis of mid-2008 to mid-2009. The

IEA revised down its outlook for growth in 2012 to 1.1m b/d from 1.3m b/d amid signs of weakness in the world economy. http://www.ft.com/intl/cms/s/0/32edf5a0-41b1-11e1-a58600144feab49a.html#axzz1jickRYpN Iran Warns Saudis Not to Raise Oil Output Iran warned Saudi Arabia not to deliver more oil to world markets in compensation for any loss in Iran's oil exports if they are hit by sanctions, following a pledge by Riyadh to boost output if needed. An Iranian threat to retaliate against sanctions by blocking the Strait of Hormuz, a strategic route in the world's largest oil-producing region, has already pushed crude prices higher. "We invite Saudi officials to further reflect on and consider" their pledge to make up for any cut in Iranian oil exports, Iran's Foreign Minister Ali Akbar Salehi said, in comments carried by state news agency IRNA. http://online.wsj.com/article/SB1000142405297020446800457716687049994701 2.html?mod=WSJ_Commodities_LEFTTopNews

EU sets deadline for Iran oil embargo European Union member states are coalescing around a July 1 deadline fully to implement an embargo against Iranian oil imports, a timescale that would align the bloc with US plans to impose related restrictions. Meanwhile, European diplomats also reported fresh momentum in efforts to sanction Irans central bank a campaign that has largely been overlooked amid the headlong rush toward an oil embargo. http://www.ft.com/intl/cms/s/0/d49e0bc8-4121-11e1-b52100144feab49a.html#axzz1jickRYpN

Japanese finance minister again says Iranian crude imports will fall Japan's Finance Minister Jun Azumi Wednesday reiterated the view that his country's crude oil imports from Iran would decrease further, as a general trend. Azumi's comments, made at a press conference in Tokyo Wednesday, follow his meeting last week with US Treasury Secretary Timothy Geithner for talks on a stepping up of sanctions in response to Iran's nuclear program. After last week's meeting and again Wednesday, Azumi said Japan's Iranian crude oil imports had fallen by 40% over the past five years and now accounted for just 10% of the nation's total intake. http://www.platts.com/RSSFeedDetailedNews/RSSFeed/Oil/7050392 Enbridge considering additional Bakken crude pipeline capacity: shippers Enbridge is considering options to expand its crude pipeline capacity in the US' Bakken region in addition to company projects already proposed and under way, shippers said Tuesday. Shippers said Enbridge presented the potential options at a shippers meeting in Denver, Colorado, on January 10. By working on other projects

to debottleneck existing pipelines on Enbridge's main line, Enbridge should be able to ship additional Bakken crude, shippers said. http://www.platts.com/RSSFeedDetailedNews/RSSFeed/Oil/3896567 Recent Rig Counts Date of Cou Change from Prior nt Prior Count Count -20 +250 -5 6 Jan 12 6 Jan 12 Novembe r 2011 Change from Last Year +287 +34 +62 Date of Last Year's Count 14 Jan 11 14 Jan 11 December 2010

Area U.S. Canada

Last Count

13 Jan 1987 12 13 Jan 12 611

Internatio Decemb 1180 nal er 2011

http://investor.shareholder.com/bhi/rig_counts/rc_index.cfm 6 to 10 Day Outlooks Temperature

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8 to 14 Day Outlooks Temperature

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