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112 MARCH 2016
G LOBA L MARKE T P L AC E
Elsewhere in oil and gas . . .
› For many companies in the US, deferred completions –
known as DUCs, for drilled-but-uncomplete – provide a
way of waiting out the current doldrums in their business while
remaining poised to rapidly increase production when oil and
natural gas prices start back up. By some estimates there are
upwards of 4,000 drilled wells across the country producing
nothing, but ready to be tapped quickly.
This well backlog could account for as much as 500,000
barrels of oil a day, about the same amount that Iran is
expected to send into the global market when it completes its
compliance under the recent nuclear deal by the end of this
year. Thus the “underground storage” strategy could work
against producers releasing abundant new supplies on signs
of higher prices.
While some analysts believe any revival-dampening impact
would be small and short-lived, because this new form of
adaptation to market conditions is new to the industry, no one
can be sure.
› Another pragmatic approach to persistent low oil and
gas prices is that of Mitsui & Co Ltd. As reported by Jess
McHugh of the International Business Times (1 January), the
second-largest trading firm in Japan by market value seeks to
diversify its assets by picking up shares in struggling energy
companies.
“If we wait for oil demand to recover it will take about three
years,” Mitsui CEO Tatsuo Yasunaga told the Financial
Times. “It is good timing to find distressed assets that small
and mid-sized players may be pressured to sell off.”
Mitsui does, however, “want to avoid conflicting with the oil
majors,” according to Mr Yasunaga.
Automot i ve
Volkswagen faces fines up to $37,500 each
on 580,000 vehicles sold in the US, but
prosecutors bring no criminal charges
In the first litigation filed against Volkswagen AG by the
US in the emissions-control cheating scandal, the Justice
Department on 4 January sued the German automaker in
federal court in Detroit on charges that it installed “defeat
devices” to dupe emissions tests in 580,000 diesel-powered
vehicles sold in the US. The subterfuge, which Volkswagen
has acknowledged, added to air pollution even as car buyers
paid a premium to reduce the environmental impact of their
driving.
But, despite a pledge by the Justice Department in September
to go after executives responsible for corporate wrongdoing,
prosecutors stopped short of filing criminal charges and did
not single out any individuals. This came as a surprise to
many observers, as – while regulators in India, South Korea,
Germany and elsewhere across the globe are conducting their
own investigations, as are attorneys-general in all 50 American
states – the Justice Department had been seen as the only
government agency that might hold company executives
personally accountable.
Even so, as noted by the Wall Street Journal, the civil
lawsuit reaffirms allegations made by regulators last year
and significantly ramps up pressure on the company by
putting the case before a federal judge and formally seeking
court-ordered penalties. The suit, filed on behalf of the
Environmental Protection Agency (EPA), seeks sanctions
that could total more than $18bn, although what Volkswagen
ultimately pays would be up to the judge. ING analysts said
they expect Volkswagen will seek to settle the matter out
of court. (“US Sues Volkswagen Over Emissions Scandal,”
5 January)
Volkswagen also owns the brands Audi, Porsche and
Lamborghini. The 4 January lawsuit covers vehicles with two-
litre engines that were the subject of initial EPA allegations in
September, as well as three-litre engines that were the focus
of separate charges by the agency in November. The three-
litre engines were included in some Audi and Porsche diesel-
powered models.
The Justice Department said it would seek to move the suit
filed in Detroit to a federal court in California, suggesting
it could be consolidated with related cases. That litigation
includes scores of lawsuits by owners of diesel-powered
vehicles – who in some cases spent $6,000 more than
they would have for a gasoline-fuelled model – seeking
compensation for the declining resale value of their cars.
› Michael Brune, executive director of the Sierra Club,
the New York-based environmental organisation, had
a suggestion for Volkswagen on avoiding such troubles in
the future. “Now it’s time that Volkswagen focus on building
clean electric vehicles that don’t make our families sick and
our air dirty,” Mr Brune told Smart Grid News (5 January).
“You can’t cheat on tailpipe emissions tests if there are no
tailpipes.”
Steel
A decision by Ohio-based AK Steel to raise
prices in a depressed market inspires some
cautious optimism
In a conspicuously counter-intuitive move, at least one
American steel company has raised its prices on several
products. As reported by Alex Nixon of the Pittsburgh Tribune-
Review, AK Steel (West Chester, Ohio) said on 9 December
that it was removing a 4 per cent discount from stainless
steel sheet, pipe and tube. The company also set higher
prices for non-stainless flat rolled steel products and upped
its automotive stainless steel by $40 a ton. (“AK Steel bucks
trend by raising prices,” 25 December)