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This Week in Energy: Hugo Chavez, Fracking Ban & Saudi Arabia's Gas Discovery

New York gets its moratorium on fracking; if you can spell “shale” you can get a job in the skilled-labor starved industry; the death of Hugo Chavez isn’t likely to lead to any changes in energy policy or any particular optimism on the part of foreign investors; Saudi Arabia hits gas in the Red Sea and a sneak preview of our Premium offerings this week from Oilprice.com…

After two failed attempts, the New York Assembly has now succeeded in passing a two-year ban on hydraulic fracturing, which will be lifted in May 2015 after the state concludes an ongoing safety and health study. The previous attempts at imposing a moratorium on fracking in 2010 and 2011 were both vetoed.

Specifically, the state is waiting for a health assessment that is reviewing the medical histories of people who live close to wells that are undergoing hydraulic fracturing. The state is also waiting for a study from the Environmental Protection Agency (EPA) on the effects of hydraulic fracturing on drinking water. There are also concerns that fracking could render farmland unusable. That said, the state may still issue fracking permits before the moratorium is lifted, based on preliminary determinations from the Health Department.

At the same time as fracking gets temporarily stuck in New York, elsewhere, there is a severe shortage of skilled labor for unconventional oil and gas operations, which experts say is putting $100 billion in projects at risk. The biggest shortage of skilled labor is being experienced by new petrochemical, refining and export projects servicing the shale industry. Analysts predict that the shale boom would double labor costs by 2020 for skilled workers—particularly for scientists and engineers. Speaking at an energy conference this week, as reported by Bloomberg, ConocoPhillips CEO Ryan Lance quipped that the only requirement to get a job in this sector today is the ability to spell “shale”.  

Who’s head-hunting most ferociously? Try the petrochemicals industry. Chevron Phillips will need some 10,000 engineers and construction workers for its new ethylene plant and two plastics factories near Houston. Dow Chemical and Exxon Mobil Corp. will also be looking for thousands of workers for new ethylene plants on the drawing board. Also look to Ohio, where 500 newly drilled wells in the Utica shale will need countless new workers, who will have to be trained specifically for the task at hand. 
We would be remiss if we didn’t discuss the death of Venezuelan President Hugo Chavez, though we don’t foresee any change in energy policy as a result of a handover of power. In our Premium Newsletter this week, Southern Pulse offers its insight into how this will play out in terms of domestic politics and what we can expect from the horse-jockeying that has already been underway for some time. Here we will simply note the effect (or lack of) that this will have on the country’s energy industry.

Foreign investors in Venezuela should neither be concerned nor optimistic about a change of power in Venezuela. Chavez’s successor will stay the course on energy for political survival. Chavez has long been viewed as an enemy to Western foreign investors and we see no chance that his successor would attempt at any time in the near future to change the country’s energy policies in a way that would restore investor confidence.  In fact, the opposite may be true. A new leader may have to resort to increased resource nationalism rhetoric to bolster support and enable the state-owned oil company to serve as a socialist tool.  The existing regulations require foreign investors to partner with the state-owned oil company, which must retain a 60% share in any JV, while the foreign partner provides 100% of the investment capital. This will remain in place for the immediate to medium-term. What we will see right now is a period of bet-hedging, while major investors (like China) hold off until the dust settles on the domestic political scene. After all, this was not a revolution, just the natural death of a leader who will most likely be succeeded by a fellow party member.

Elsewhere, Saudi Arabia seems to be getting nervous about the increasing scale of shale activities globally and what this means for its status as the world’s largest oil producer. With that in mind, it was with much popping of the champagne corks that the country’s largest oil exporter, Saudi Aramco, announced that it had discovered natural gas in the Red Sea.

Earlier this week, Aramco announced the successful drilling of its first well in the shallow waters of the Red Sea, with plans now to drill in deeper waters. Until now, Saudi Arabia—unlike its neighbor, Qatar—has had difficulty finding gas deposits in its territorial waters. But with help from Shell, Red Sea drilling is now being realized, apparently to much success.

In our special report for readers this week we dip into Oil & Energy Insider and take a look at the Intelligence notes section. There are 4 very interesting reports which you can see by taking a 30 day free trial to Oilprice.com Premium

This week in our Premium Newsletter, trader Dan Dicker offers up his next stock tip and we bring you an in-depth look at our liquefied future and the opportunities to be found in LNG technology, from floating facilities that are all the rage to a potential shift in LNG transport to seaborne tankers and away from overland pipelines. You can start a 30 day free trial by clicking here

For those of you interested in investment opportunities in the energy sector I thought I’d also put down part of Dan Dicker’s Investment report from today:

An Energy Company that Continues to Excite Me

There’s no doubt that the energy sector has been a virtual minefield this year. With the Dow Jones Industrial Average hitting fresh highs, you would think just about any energy company would be doing well, but some are performing spectacularly while others are in a deep funk.

I’ve done a lot to tell you how I try to separate the wheat from the chaff, the great potential runners like Anadarko and EOG resources and avoiding the slowpokes like Devon energy, BP and SandRidge. 

One name that continues to excite me was xx xx  I was talking to a fellow trader yesterday about xx xx and specifically cited its mostly ignored but, I believe, game-changing investment in the Leviathan offshore project in the Mediterranean Sea off of the Israeli coast. This morning, xx xx released a report showing just how spectacularly this project is moving along. With the recent moderation in xx xx shares over the past several days bringing the price below xx, I am reiterating my recommendation. Now would be a great time to either begin or increase your exposure to xx xx.

Leviathan has been much ignored because it is almost entirely natural gas and will affect only the markets surrounding the Eastern Mediterranean; Turkey, Italy and Greece. But here's the thing: Europe isn’t the US and Natural gas is good in these markets, spectacularly so: Italy and Greece are two of the more expensive local markets in Europe with prices almost three times higher than here in the U.S. With natural gas dependency in Europe almost two-thirds tethered to Russian and Norwegian supplies, a new player for substantial natural gas reserves could be a game changer. This could adjust the power in southern Europe away from the less reliable Russians and, surprisingly, toward the less-favored Israelis. Imagine what that the geopolitical implications would be in that area.
And xx xx is at the center of it. It is an exciting prospect that no other energy company shares.

To read the full report and to find out which company Dan is talking about try a 30 day free trial to Oil & Energy Insider. There is no risk on your part  Click here for more info.

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