The Weekly Wrap: September 24, 2010

Petrobras generates $70 billion in share issue. Petrobras finally made its long-anticipated share offering yesterday, announcing the sale of $70 billion of stock in the largest share issue in world corporate history. Despite earlier concerns over mounting debt, investors were attracted to the Brazilian energy company due to its enormous offshore oil fields, which at 50 billion barrels are the largest discovered in the western hemisphere since the 1970s; assuming oil prices stay above $45 a barrel, Petrobras could join the ranks of Saudi Aramco as one of the world’s leading oil producers, according to the Financial Times Lex Column. The biggest winner in the deal is the Brazilian government, which will increase its stake in Petrobras from 40 to 45 percent in exchange for the exclusive rights to 5 billion barrels of oil. All eyes are now focused on how Brazil will manage to balance its rapid economic growth with the potentially harmful economic effects that come with being a major oil exporter, though the country’s finance minister confidently pronounced that Brazil will avoid the "oil curse" that has plagued other exporters.

Moscow hosts dialogue on Arctic oil and gas. Three years after a Russian submarine planted a Russian flag on the seabed beneath the North Pole, an international conference met this week in Moscow to discuss rival claims to the Arctic Ocean’s potentially lucrative oil and gas resources. The stakes from the dialogue are high, as the U.S. Geological Survey has estimated that 90 billion barrels of oil and 1.7 trillion cubic feet of natural gas could lie under the Arctic’s surface, about a quarter of the world’s reserves of both resources. As Arctic sea ice continues to shrink, these resources will become more accessible, and the countries bordering the region have begun to assert sovereignty over areas with no discernible geographic boundaries. Russia has been at the forefront of the push to carve up the region, first through the flag-planting episode and now by spending $64 million to prove that the disputed Lomonosov Ridge, an undersea mountain range near the North Pole, is Russian territory. The area lies outside the 200-mile range established by a U.N. convention, but Moscow is intent on its claim. Yesterday, Russian Prime Minister Vladimir Putin urged delegates from Canada, the United States, Norway, and Denmark to come to a deal on dividing Arctic energy resources. Whatever the outcome of the talks, the Arctic looks likely to remain at a focal point of geopolitical jockeying for years to come.

World’s largest offshore wind farm opens. On Wednesday, Swedish utility giant Vattenfall officially inaugurated its Thanet wind farm, consisting of 100 wind turbines off the coast of Kent in southeast England. The turbines, which generate enough electricity to power 200,000 homes, are located seven miles offshore and spread out over a 35 square mile area. The completion of this project brings the United Kingdom’s power generated from wind power to 5 gigawatts, enough energy to power all the homes in Scotland, while moving Britain further towards the European Union target of generating 15 percent of its energy needs from renewables by 2020.

Ghana and China ink oil and gas deal. The government of Ghana this week signed a series of deals accepting a total of $15 billion in loans from Chinese state banks, with $3 billion of the funding earmarked for infrastructure improvements in Ghana’s burgeoning oil and gas sector. Ghana is set to export its first oil later this year, and speculation arose of a Chinese loan offer following a dispute between Ghana and Texas exploration firm Kosmos Energy over the sale of lucrative Ghanaian oil leases. The loans will be repaid to Beijing through commodity exports, following a similar loans-for-resources model that China has deployed throughout Africa.

Save the incandescent! House Republicans Joe Barton, Michael Burgess, and Marsha Blackburn introduced a bill this week that would roll back impending regulations designed to replace the venerable incandescent light bulb with more energy-efficient compact fluorescent light bulbs, or CFLs. Under regulations adopted by the 2007 Energy Independence and Security Act, beginning in 2012 all light bulbs sold in the United States must meet minimum efficiency standards, which are likely to push retailers to gradually stop selling incandescents in favor of CFLs. Congressman Barton and others supporting the bill have raised concerns of job losses, citing the closure this month of the last General Electric incandescent light bulb production facility in the U.S. the shuttering. Most CFL production, by contrast, takes place in China.

Oil rebounds amid new economic optimism. A rally in stock prices this week sent crude oil prices back up above the $75 mark this week, closing at $76.50 a barrel in New York on Friday. Favorable reports of business capital spending from the Commerce Department, combined with a falling dollar — it’s at a six-month low — contributed to the gains, the highest in two weeks. But high American inventories seem set to put a cap on the price rise, with most analysts this week agreeing that oil will hover around the $75 marker. "King Abdullah said he wanted $75 oil," Adam Sieminski, chief energy economist at Deutsche Bank AG in Washington, told Bloomberg. "It’s good to be king. When you’re Saudi Arabia and have the ability to put oil on the market and take it off in the quantities you want, you can pretty much have what you want." OPEC, not surprisingly, announced that it would increase crude shipments later this year.