Will Cheap Natural Gas Change US Steel Production?

Cheap natural gas unleashed from previously unreachable shale sources could eventually provide a boost to U.S. steel manufacturers, but the benefits have not shown up in their bottom lines just yet.

A recent Credit Suisse Research Institute report, entitled “The Shale Revolution,” said ongoing development of shale natural gas “is set to unleash significant capital spending” that stands to benefit the steel industry and others in the long term. For one thing, steel piping is a key component in the exploration process, as it can take thousands of feet of pipe to reach underground shale rock formations. In addition, any future rebound in domestic manufacturing that occurs as a result of inexpensive, abundant natural gas could also increase demand for steel. Finally, steel companies could benefit in the long run if cheap natural gas lowers the cost of energy inputs.

“In terms of demand, steel will play an important part in both oil and gas infrastructure, including many specialist applications,” the report said. “On the supply side, steelmakers would benefit from using natural gas in the steel-making process, with potential material cost savings and margin enhancement if they can retain them.”

For now, though, the potential remains largely theoretical. An abundance of domestic shale resources has pushed natural gas prices down, and rig counts have actually been declining since late last year. The U.S. continues to import large amounts of steel, and new capacity is coming online domestically, creating oversupply issues that have kept steel prices weak.

Foreign competitors enjoy large steel inventories and low labor costs, making it likely that steel imports will continue. That is among the reasons industry players are cautious about domestic growth projections.

At the same time, large steel companies have made several significant investments in the United States recently. A $750 million plant built by North Carolina-based Nucor Corp is scheduled to start operating later this year in Louisiana. Austrian steelmaker Voestalpine AG plans to build a roughly $700 million plant to make an intermediate material for steel in Texas, and Vallourec SA’s V&M Star spent $650 million on an Ohio plant to supply tubular steel pipes specifically for oil and gas development.

The industry itself is hopeful about the potential natural gas holds.

“Natural gas is a game changer for our industry,” American Iron and Steel Institute (AISI) President and CEO Thomas Gibson told The Financialist in an email. “The industry is developing new options and technologies for the production of steel as a result of natural gas availability.”

The steel industry is vulnerable to unforeseen economic pressures, such as rising energy costs, and some manufacturers have opted to explore alternative production methods, such as using natural gas instead of coal. Either energy source can be used to purify, or remove oxygen, from iron ore – a key ingredient in steel. Coal was the industry go-to method, but that’s changing as natural gas from shale sources becomes a cheaper option than coal.

“As an energy-intensive industry, the domestic steel industry’s international competitiveness depends on our ability to capitalize on the discovery and development of North America’s shale resources,” said Gibson, of the AISI. “Our industry consumes large amounts of natural gas and will benefit from the increased supply resulting from shale production, which keeps gas both reliable and available at a low cost.”

For the time being, the U.S. holds a competitive advantage in producing shale gas. The Boston Consulting Group expects U.S. natural gas to be about 50 to 70 percent cheaper than in other large developed economies such as Japan, China and Europe.

“The ability for Europe and China to get mass quantities over the next few years is unlikely, so the U.S. will have the advantage,” said Hal Sirkin, a senior partner in BCG’s Chicago office. Sirkin said it would take “many years” before other countries were able to mass-produce shale gas.

Sirkin said it is too early to anticipate what will happen with steel industry investments, partly because the prices of iron ore remain volatile. One thing, however, seems certain.

“There’s clearly going to be a reduction in steel production costs,” Sirkin said.

Oil Company Exposure to Egypt and Libya

With protests forcing shutdowns at key oil shipping ports in Libya and violent political upheaval roiling Egypt, Credit Suisse energy analysts assessed which oil and gas companies’ operations are most exposed to conditions in the two North African countries.

The energy companies most exposed in terms of value to Egypt and Libya are Vienna-based OMV, Houston-based Apache Corp., Spanish oil giant Repsol, Italian multinational ENI and British natural gas company BG Group, Credit Suisse integrated oil and gas analysts wrote in a note this week entitled “North African Summer: Egypt, Libya and the Companies.” Of the 13 major energy companies Credit Suisse analyzed, the ones that rely on Egypt for the highest percentage of their total oil and natural gas output are Apache and BG Group, which have an estimated 20 percent and 18 percent of total production in the country, respectively. OMV and Repsol have the highest production exposure to Libya, with operations in the country representing 11 percent and 10 percent of their respective total production.

But just because companies source a great deal of production from Egypt and Libya doesn’t mean that operations in those countries account for an equally large chunk of their income. “While the share of production to the group is high, these countries are somewhat lower profit areas for these corporates,” Credit Suisse’s energy analysts wrote. Libya, for example, has very high tax rates that reduce the cash flow to oil companies with operations there, they noted. The ratio between production and cash flow is not equal in Egypt, either. BG only earned 15 percent of its net income from Egypt last year despite the fact that 20 percent of its natural gas production took place in the country, the analysts noted.

Even in net asset value terms, however, Apache has the most exposure to Egypt, with the country accounting for 17 percent of the total estimated net asset value for this year. OMV has the most exposure to Libya, with its operations there accounting for 22 percent of its total estimated net asset value.So far, the biggest impact of the unrest in the region has been on Libyan oil exports. The OPEC member has the largest proven oil reserves in Africa, estimated at roughly 47 billion barrels, according to the United States Energy Information Administration. Production has fallen by 1 million barrels per day to just 600,000 barrels per day since the end of June, when oil workers began striking. The strike has mainly impacted oil export infrastructure in the eastern part of the country, including the area around the Sirte Basin, which contains 75 percent of Libya’s commercial oil reserves, Credit Suisse commodities analysts wrote in a recent note, “Commodities Advantage: Fundamentals in the Driver’s Seat.”

Egypt is the largest non-OPEC oil producer, producing about 720,000 barrels of oil each year. But the country’s role as an energy transit route is more important than its actual production levels, Credit Suisse energy analysts pointed out, as the government operates both the Suez Canal and the Suez-Mediterranean pipeline. Three million barrels per day of oil – about 2.5 percent of the world’s crude oil trade – and 1.5 trillion cubic feet of natural gas moved through these transit points in both directions last year. But even the revolution in 2011 that resulted in the overthrow of former President Hosni Mubarak didn’t do much to disrupt operations, and the current unrest hasn’t either. But Credit Suisse oil company analysts pointed out that turmoil does tend to impact things like getting permits approved and customers paying the bills on time. “It is fair to assume that the current uncertainties may somewhat delay payments to oil companies,” analysts wrote.

But Credit Suisse cautioned that the bigger concern when it comes to Egypt is the prospect of unrest there exacerbating problems in Libya and other neighboring countries. “It is worth mentioning the effect that the current unrest in Egypt may have on neighboring Middle East and North African countries, especially Libya, which has already been seeing disruption to oil production amidst oil sector protests,” analysts wrote. “If the conflict continues in Egypt, the number of people trying to cross into Libya may prove another issue for the Libyan government to deal with.” The bank’s commodity analysts went one step further, saying that Libya’s continued instability and proximity to Egypt “present a large upside risk to oil markets,” meaning that the situation threatens to drive oil prices higher.

Brent crude oil prices had already been heading north for reasons other than the Middle East unrest, Credit Suisse commodity analysts said in a recent note entitled “Fundamentals in the Driver’s Seat.” “After disappointing output from the North Sea and strangely low Urals availability in Europe, cuts in Nigeria and Algerian loading schedules have in the last few weeks been compounded by a sharp deterioration of Libya’s supplies.” How long that particular deterioration lasts – and whether or not it will get worse – remains unclear.

The Three Wheel Revolution

Millions of urban dwellers around the world have adopted the scooter as their primary means of negotiating the crowded streets and limited parking of 21st-century cities. Given the scooter’s popularity everywhere from Rome to Bangkok, it may seem like changing to the vehicle’s design would be a fool’s errand. But three-wheeled scooters first designed in 2006 are finally starting to make headway in the North American market after garnering a dedicated following in Europe. While these three-wheelers may look a bit like a lunar module for the urban set, they combine the nimble steering and fuel economy of standard two-wheelers with the balance and stability of an automobile.

In hindsight, adding a third wheel may seem like an obvious way to give riders better balance. But creating a design that provided more stability without sacrificing a scooter’s capacity to tilt and turn was inherently complicated. Piaggio engineers came up with a patented suspension and steering system that does exactly that, allowing drivers to turn as they would in a standard two-wheeled scooter, but with a reduced chance of tilting too far and losing control. A locking system also kicks in when the scooter is at a full stop, so riders don’t have to bring their feet to the ground to stabilize the vehicle.

The market has been getting more crowded since Piaggio launched the three-wheeled MP3. In 2007, Can-Am, the Canadian manufacturer of recreational vehicles, added its own twist to the three-wheel concept with the Spyder, a motorcycle crossover with a front-end, two-wheel Y-axis powered by a 100-horsepower engine. Italian scooter-maker Quadro Vehicles first entered the fray in 2010, but recently introduced an on- and off-road scooter. In May, French automaker Peugeot released the Metropolis, a three-wheeler powered by a 400 cc engine.

These companies are betting on the same trend as Piaggio ­– namely, that three-wheeled scooters will benefit from a growing demand for a safe and fuel-efficient way to commute in congested cities. According to Piaggio, the U.S. scooter market grew by 8 percent in 2012 to 34,000 vehicles. With more brands introducing three-wheelers into the market, The Financialist highlights the new designs that could reshape urban commutes around the world.

Companies join forces to bring VVER to UK

According to Fortum, the trio of companies are to begin preparatory work towards a Generic Design Assessment (GDA) of a VVER-type power plant and site licensing. First commercial contracts have been signed by the parties.

The agreement is supported by a memorandum of understanding on cooperation in the nuclear power industry signed in Moscow by UK energy minister Michael Fallon and Rosatom head Sergei Kiriyenko. At the same time, Rolls-Royce signed a contract with Rosatom which will see the UK company undertake engineering and safety assessment work on Rosatom's VVER technology ahead of its potential entry in the GDA process.

The GDA forms part of the approval process for new reactor projects in the UK, and allows regulators to assess the safety, security and environmental implications of new reactor designs, separately from applications to build them at specific sites. The UK's first GDA process began in 2007, when four designs were submitted for initial consideration by UK regulators. Areva's EPR became the first reactor design to complete the GDA process and receive a Design Acceptance Confirmation and Statement of Design Acceptability in December 2012. Earlier this year, a GDA was begun for Hitachi-GE's Advanced Boiling Water Reactor (ABWR).

The companies bring together various experiences and expertise. Rosatom's VVER reactors currently operate in 11 countries. Finnish nuclear utility Fortum brings to the table its experience of construction, operation and maintenance of VVERs at the Loviisa plant, which has operated for over 30 years, while Rolls-Royce contributes expertise as a provider of technology and services to the nuclear industry as well as knowledge of the UK licensing regime and its network of suppliers as a leading engineering company. Rosatom has been working closely with Rolls-Royce since the two companies signed a memorandum of understanding in 2011.

Rosatom has long expressed an interest in the potential new build market offered by the UK, where eight sites have been approved as suitable for new build. EDF has already earmarked two of them - Hinkley Point C and Sizewell C - as potential sites for EPRs, while ABWRs are proposed for Horizon's sites at Oldbury and Wylfa.

Fortum executive vice president Matti Ruotsala said that the UK provided a "really interesting opportunity." although the company emphasised that it has not yet made any investment decisions related to UK new build.

Fallon said that he welcomed the agreements signed by the three companies, adding that all reactor technologies adopted in the UK must meet the "stringent and independent" regulatory standards required in the UK and the EU.

Land of the tomb raiders- Bulgaria is trying to claw back tens of thousands of ancient artefacts plundered from its historic sites in a £25m-a-year export racket

Real-life vampires, giant rock vaginas, ancient sites to rival those of Greece and Rome – Bulgaria’s archaeologists are putting their country on the map of world history, but first they have to stop the mafia stealing its treasures.

The illegal diggers come at night with shovels and sacks, hunting through the places where they know the professionals have been. They’re looking for the tonnes of ancient artefacts that lie hidden in Bulgaria’s soil.

In the past two decades, Bulgarian law enforcement agencies say this plunder has turned into a €30m-a-year industry for local gangs, putting it a close third behind drugs and prostitution. The artefacts – gold Roman coins, ancient Greek silver, Thracian military helmets – wind up with falsified documents in auction houses in Europe and North America, or increasingly with wealthy Arab and Asian collectors.

“You cannot put a value on what is lost because the real loss is information,” says Professor Bozhidar Dimitrov, director of the National Museum of History in Sofia, who has spearheaded efforts to reclaim lost relics. “Even if we recover them, we don’t know where they were originally found, so our understanding of the history is gone.”

Police say there are 300 criminal treasure-hunting gangs in Bulgaria at present, but as many as 50,000 people are thought to be involved in illegal digging in some form. Entire villages have been known to take part in some impoverished corners of Bulgaria.

Belatedly waking up to the scale of the problem, Bulgarian authorities are trying to claw back some of their lost history from around the world.

“The record so far belongs to the Canadians,” said Prof Dimitrov. “A couple of years back, they returned 21,000 artefacts in one go.

“The Italians had so much to return that the minister of culture became worried about the cost of the shipment, so he ordered his entire delegation to carry two extra bags of luggage when they came here. He himself showed up at my office with two huge suitcases full of priceless artefacts.”

Prof Dimitrov’s huge office looks more like a Bond villain’s than that of a historian: wood-panelled walls and a long window staring up at the Vitosha mountains. “It was designed to intimidate guests”, he says between chain-smoked cigarettes – the museum was formerly the residence of Communist dictator Todor Zhivkov, who ruled Bulgaria for 35 years up to 1989.

The Communist legacy is part of the reason why only a quarter of Bulgaria’s treasures are thought to have been discovered so far. Trapped behind the Iron Curtain for half a century, Bulgaria had few tourists, which meant minimal investment in archaeology and preservation.

 This was followed by a decade of political confusion and economic crisis after the fall of Communism, when organised crime groups had almost completely free rein.

“In the Nineties, the police could stop only about 10 per cent of the stuff leaving the country,” estimates Prof Dimitrov. “Things have improved a lot. Now they get about 70 to 80 per cent. The police show up all the time with new hordes they have seized from shops in Sofia.”

As if to prove the point, the professor cuts the meeting short to receive the deputy director of the police, who says he has 2,000 artefacts to hand over, discovered in the basement of a local antiques store.

Historical discoveries have been one of the few bright spots for Bulgaria’s beleaguered economy in recent years, helping to convince the authorities of the need to protect their heritage.

Archaeologist Nikolay Ovcharov – nicknamed “Bulgaria’s Indiana Jones” – has just started the final excavations at Perperikon, a 7,000-year-old sacred site deep in the Rhodope mountains whose highlight is a walk-in vagina.First discovered in the 1980s when ethnographers interviewed local villagers, Perperikon was in ancient times as famous as the oracle at Delphi in Greece, a place of wild bacchanalian rituals to the goddess Dionysus, and, according to legend, the birthplace of the Greek prophet Orpheus, which counted Alexander the Great among its visitors.

“It rivals Machu Picchu,” says Prof Ovcharov. “Bulgarian archaeology has enormous potential. It can change the way people think about this country. It can give us national pride as well as bringing in a lot of wealth.”

 One of the most extraordinary aspects of Perperikon is a nearby fertility shrine – a 10-metre vulva carved in the rock, leading into a womb-like cave. Around midday at the right time of year, a phallus-shaped ray of sunlight reaches an altar deep in the cave.

“It felt very unusual standing in a vagina,” says Prof Ovcharov, remembering the moment he first saw the cave in 2002. “It was so unique. It still makes my hair stand on end.”

The big surprise for Bulgaria’s historians has been the global interest in its vampires.

A grave unearthed in the Black Sea resort of Sozopol last year turned up a skeleton with an iron stake through its rib cage. It belonged to a famous 14th-century pirate named Kirov, whose job was to attack the ships of illegal Venetian traders. He was later made governor of the town.

Locals believed the souls of evil men did not ascend to heaven and instead left their graves at night to drink the blood of the living. Although Kirov was given an aristocrat’s burial, locals evidently thought him a nasty piece of work, and snuck in after the funeral to drive a stake through the body in order to keep his soul from escaping. They pulled out his teeth, too, just to be safe.

The discovery reached the press almost by accident. Prof Dimitrov was sneaking a cigarette outside Sozopol’s town hall just after the grave was found and some journalists came up to tease him about his heavy smoking. He only mentioned the vampire to deflect attention.

“Suddenly, it became a huge international sensation,” he says at his office, lighting another cigarette. “Vampires are very common here – we’ve already found more than a hundred – so we hadn’t thought to publicise it. I didn’t know there was a vampire movie with Brad Pitt and that they were so popular. It was featured in over 1,200 publications. That’s more than covered the fall of our Communist dictator.”

The vampire has proved a great pull for tourists, and drawn further attention to the astounding discoveries being made in Sozopol.

In 2010, a marble box containing a tooth and bits of skull were found on an adjacent island which are said to be relics of St John the Baptist. Foreign experts dated them to the first century AD and said the DNA belonged to a Middle Eastern man, making the claims plausible enough to attract coach-loads of pilgrims.

Another site in the town has uncovered the ruins of Roman baths alongside a Greek temple to the God Poseidon and a medieval church – a rare chance to see the evolution of worship in a single spot.This is not so surprising for Bulgaria, a country whose strategic location at the crossroads of Europe and Asia has made it one of the world’s most sought-after territories throughout the ages. Greeks, Romans, Thracians, Byzantines and Ottomans all fought countless wars to gain control of its fertile lands – a bitter irony given the controversial emigration of young Bulgarians over the past two decades.

Not all are happy with the government’s efforts to control the trade in historical artefacts, however. Bulgaria’s small shopkeepers complain about restrictions on selling any pre-twentieth century objects.

“The police can shut me down for having just one old coin,” says Constantine Georgiev, owner of a small bric-a-brac store in Sofia. “But this just means the trade in antiques is controlled by around 10 very rich guys with political connections. No one goes after the big mafia bosses because they can afford the bribes.”

Efforts to increase sentences for illicit smugglers have started to change attitudes towards a crime that was not taken too seriously in the past.

“Many used to see it as a fun adventure,” says Prof Dimitrov. “The men dig while the women do a barbecue. You had police and even priests taking part.”

Indeed, a 41-year-old priest from the northern city of Vratsa was busted in 2010 after conducting over 1,000 illegal sales of ancient coins and jewellery over the internet.

 But despite these efforts, experts say that widespread corruption and the high demand from overseas means Bulgaria’s treasures will continue to disappear into private collections, while authorities face a relentless challenge trying to protect over 40,000 known archaeological sites across the country.

“We lobbied for an amnesty a few years back so that private owners could declare what they had on the condition it was not sold or exported. That was one of the first laws that was overturned when GERB [a right-wing Bulgarian political party] took power in 2009,” says Prof Ovcharov. “Rich collectors are a powerful lobby.”

Strain of HIV virus found in monkeys is cleared by vaccine

A vaccine designed to tackle SIV, the monkey equivalent of HIV, may have successfully cleared the virus from infected animals, paving the way for research into a HIV vaccine for humans. 

It was previously thought that both the human and simian immunodeficiency viruses could be managed with antiretroviral therapies, but not eradicated.

However, a study published in the science journal Nature showed that of 16 monkeys exposed to the virus who were injected with a vaccine, nine appeared to be able to clear their body of the disease.

US researchers from the Vaccine and Gene Therapy Institute at Oregon Health and Science University are now hoping to use a similar approach to test for a vaccine equivalent in humans.

The team examined a strain of the virus called SIVmac239, which is up to 100 times more deadly than HIV.

Researchers first inoculated monkeys with the vaccine and then exposed them to SIV. The virus did not spread in over half of the inoculated monkeys, which usually die within two years of being infected.

The vaccine used a modified version of the cytomegalvirus (CMV), which belongs to the herpes family, to sweep through the monkey body and encourage the immune system to fight off SIV.

After being exposed to the virus, some monkey bodies began to respond by searching out and destroying signs of SIV. They remained clear up to three years after first being inoculated.

Prof. Louis Picker told the BBC: “It's always tough to claim eradication - there could always be a cell which we didn't analyse that has the virus in it. But for the most part, with very stringent criteria... there was no virus left in the body of these monkeys.”

However, he said the team were still trying to determine why the vaccine was only successful in nine monkeys.

“It could be the fact that SIV is so pathogenic that this is the best you are ever going to get", he explained.

“There is a battle going on, and half the time the vaccine wins and half the time it doesn't.”

Now, the team want to examine if the same technique could be developed and made safe enough to be successful in humans. Clinical human trials could start within two years if the vaccine is approved and the team receive permission from regulatory bodies, Prof Picker added.

Double nuclear by 2040 says Exxon

Exxon Mobil's 2013 Outlook for Energy bases its findings on data from 100 countries across the globe, looking at 15 demand centres and 20 fuel types. It also takes into consideration the technology and policy issues underpinning the world's energy situation, Exxon Mobil technology advisor David Khemakhem explained to delegates at the World Nuclear Association's Annual Symposium. Latest figures indicate that, with world population anticipated to be close to 9 billion by 2040, energy demand will continue to increase. Electricity demand will drive that growth.

Exxon's figures suggest that world nuclear capacity could be set to double to help meet that demand, as the cheapest form of low-CO2 electricity generation: other options such as onshore wind and solar photovoltaics have significant knock-on grid costs, Khemakhem remarked.

Exxon Mobil's figures spurred a lively and wide-ranging debate amongst Khemakhem's fellow speakers in a panel discussion on energy and nuclear power. Ron Cameron, head of nuclear development at the OECD Nuclear Energy Agency (NEA), led a call for greater transparency over prices across the energy sector. Growth in renewables of the scale seen in recent years had been made possible through subsidies, but the way subsidies had been handled in some countries had been an "economic disaster", he said. Consumers were effectively being asked to pay for the transition into renewables, he said, pleading for the hidden costs of renewables to be made clear, with no disconnect between wholesale cost of electricity and the price. "Affordability is an issue," he remarked.

Nuclear should be seen as complementary to rather than in competition with renewables, the panellists felt. Nuclear could play a vital role in providing affordable baseload power to support the intermittent nature of many renewables, in the absence of a truly effective and affordable means of storing electricity. Energy policy, climate change, and carbon trading expert Bryony Worthington, representing The Weinberg Foundation, urged the nuclear industry not to waste any energy "talking down" renewables, and pointed to the emergence of new third-party advocates opening up the nuclear debate to new audiences.

Also on the panel, moderated by MZ Consulting president Milton Caplan, were Areva UK CEO Robert Davies, UX Consulting Company senior vice president Jonathan Hinze and energy strategist John Licata. All joined in enthusiastically in a lively discussion on the shape the nuclear generation sector may take in the coming decades, from large-capacity reactors to the role of smaller reactors such as SMRs and the need for energy security, with Licata drawing on his own experience and analysis of the effects of "superstorm Sandy", which left large areas of the eastern USA without power in October 2012.