The year is wrapping up literally in a few hours here in the U.S. So, why not look back at the biggest oil and gas — OK, and ethanol — stories of 2009. In a year, where a barrel of crude touched a low of $32.70 in January and then subsequently rose to $82 in October before backing off slightly. Today, crude oil for February delivery is just below $80.
In short, it’s been a volatile year. Throw in a recession — and the weak demand for fuel that comes with it — and you get a year filled with bankruptcies, mergers and a great shifting of resources. So, here are some of the biggest energy stories of 2009, not in any particular order. Feel free to add ones you think I missed.
ExxonMobil buys XTO Energy: We waited all year for Exxon to do something with its cash. And bam! It finally happens. Exxon announced in December it would acquire independent oil and gas producer XTO Energy in a $31 billion all-stock purchase, the company’s biggest purchase in more than a decade. Exxon also agreed assume $10 billion in debt as part of the deal.
Any acquisition this big that involves Exxon is sure to make any top stories list. But there’s another reason: unconventional natural gas. XTO is a major player in unconventional gas and Exxon’s acquisition is one giant bet that nat gas will be the world’s go-to power source.
China’s energy appetite: The country and its insatiable thirst for energy resources came up in dozens of BNET Energy posts in 2009 whether it was its continued purchase of gas from sources like Chevron’s Gorgon LNG project, its loans-for-fuel deals with countries in South America, its success in the Iraq oil auction or its attempts to snap up Kosmos Energy. And the trend will surely continue into 2010.
Refiner Valero Energy gets into ethanol: We’re not talking small potatoes here. Valero Energy, the largest independent U.S. refiner, bought up last March seven ethanol plants and a development site from bankrupt VeraSun for $477 million — a ridiculous 70 percent discount. The purchase translates into about 780 million gallons of ethanol a year Valero won’t have to buy from outside companies to meet the federal Renewable Fuels Standard.
And it’s actually turned out to be a moneymaker. The company earned $22 million on operating income in the second quarter from its ethanol segment. That number more than doubled in the third quarter, which is good news for any refining business right now. Valero is its eyes on more ethanol plants. The company announced it would buy Renew Energy’s 110 million gallon per year plant for $72 million. That deal could be scuttled by a motion filed with the U.S. Bankruptcy Court by ALL Fuels & Energy out of Iowa, which claims it was the highest bidder.
Valero wasn’t the only company to take advantage of these bargain basement ethanol prices. Philadelphia-based oil refiner Sunoco jumped into the ethanol-producing business in May with its $8.5 million bid for a Northeast Biofuels plant, which originally cost $200 million to build back in 2006. Ethanol producer Green Plains Renewable Energy also got into the mix. The company bought two plants in Nebraska for $123.5 million from AgStar Financial Services, a lending group that purchased that from VeraSun.
Iraq’s Oil Auctions: Iraq opened its door just a smidgen to foreign firms this year, giving oil companies access to the country’s resources for the first time in nearly four decades. The country held two auctions, which allowed international and national oil companies to bid on contracts to produce oil.
The first auction in July received poor reviews after only one contract was secured by BP and its consortium partner China National Petroleum Co. BP was the only firm willing to lower its per barrel fee to $2, the maximum amount Iraq’s oil ministry said it would pay. The auction in December produced two contracts. Once again, China — as part of a consortium with minority partner Total – snapped up one of the development contracts. Royal Dutch Shell and Petronas of Malaysia were awarded right to develop the Majnoon oil, one of the world’s largest remaining untapped oil fields.
Chevron, partners give final OK to Gorgon LNG plant: Chevron and its partners ExxonMobil and Royal Dutch Shell gave the thumbs up to its $37 billion Gorgon liquefied natural gas venture. The final investment decision to build the massive facility located in Western Australia was made only after Australia’s government assumed any long-term liability for potential damages incurred from carbon storage, a key feature of the project.
Climate legislation: There isn’t a bill, yet. But the House passed its version in June and the Senate has made a few attempts including the recent triapartisan compromise bill from Sens. John Kerry, D-Mass., Lindsey Graham, R-S.C., and Joseph Lieberman, I-Conn. Lobby efforts from environmental groups as well as oil, gas and coal have ramped up to new heights. And even the U.S. Chamber of Commerce has gotten into the act, with its call for a Scopes-like Monkey Trial on global warming and the exodus of companies from the business organization that followed.
EPA’s endangerment finding: The Environmental Protection Agency deemed greenhouse gas emissions a danger to human health and welfare, a finding that has vast implications for the regulation of carbon dioxide and the businesses that emit it. If approved by the Office of Management and Budget, the EPA will likely issue rules to regulate greenhouse gas emissions under the authority of the Clean Air Act. This means the EPA — not Congress — would be writing the rules for emitters of greenhouse gases. And that does not make the oil and gas industry happy.
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