Apache Discovers High-Quality Shale Gas in BC By Adam Currie

Apache (NYSE:APA), one of three companies planning a $4.5 billion liquefied natural gas terminal (LNG) in Kitimat, announced the discovery of what it believes is a new world-class shale gas reservoir in British Columbia’s under-explored Liard Basin.

The company estimates that the discovery, unveiled last week, hosts enough natural gas to justify doubling the size of the Kitimat terminal the company is currently proposing.

Apache,  part of a consortium called the Pacific Trail Pipelines Limited Partnership, which includes EOG Resources (NYSE:EOG) and Encana (TSX:ECA), is set to build a $4.5-billion-plus liquefied natural gas (LNG) terminal in Kitimat capable of producing 5 million tonnes of LNG a year, with the potential to expand to 10 million tonnes a year. First exports from the terminal are anticipated for late 2015 to early 2016.

Test wells impressive

Apache, the second-largest independent US oil and natural gas producer by market value, has described its new discovery as the highest-quality shale gas reservoir in North America. Tests suggest the play holds 48 trillion cubic feet (Tcf) of marketable gas within its Liard Basin properties. Last week the company released detailed resource estimates of its oil and liquids portfolio.

The Liard Basin is located in Northeast BC, west of the Horn River basin. Most drilling activity is taking place in the central part of the basin, 110 kilometers northwest of Fort Nelson. The company has drilled three wells, with analysts suggesting that these wells alone could supply US needs for almost two years. The entire find contains enough gas to match Canada’s entire current output for nearly a decade.

“This is probably the best shale gas reservoir in the world,” said John Bedingfield, Apache’s vice president of worldwide exploration, at a company presentation last week.

Competitive edge

The find has given Apache a notable competitive edge. To put the find into perspective for investors, the combined marketable gas portfolio of the Horn River Basin, one of the three largest shale gas basins in BC, is 78 Tcf; Apache’s find is almost two thirds that size.

Bill Mintz, director of public affairs at Apache, confirmed that the Liard discovery provides the firm with enough gas to meet the needs of any future expansion at its proposed LNG terminal. The possibility of an expanded plant at Kitimat is now a very real possibility as the Liard find is easily able to provide the additional 5 million tonnes of LNG supply.

The proposed facility is a unique project designed to export a secure supply of Canadian LNG from new, unconventional plays in BC to the Asia-Pacific region. The initiative will include LNG storage and marine on-loading, and the export terminal will be served by Pacific Trail Pipelines Limited Partnership’s natural gas transmission pipeline system, which will run from Summit Lake to Kitimat. The 463 kilometer underground line will provide the terminal with both a direct connection to the Spectra Energy (NYSE:SE) transmission pipeline system and access to natural gas supplies in BC.

Market game-changer

The Liard find is bound to have a profound effect on the natural gas market, and once again highlights the potential of high-quality plays evident across Canada. D-34-K, one of the Apache wells, “is one of the best shale wells we have seen in any play,” according to Steven Farris, president of Apache. “Our analysis indicates that the formation characteristics are remarkably consistent across this large basin.”

From a market perspective – and it might be too premature to provide overall estimates – Apache has said that it believes wells in the Liard could be profitable at a well-head price of US$2.57 per thousand cubic feet, not far from current price levels.

While this news is good for the company and for other natural gas explorers in the region, some analysts argue that a play of this magnitude could have a very real negative impact on the market.

“The good news is; they’ve discovered lots of natural gas up in northeastern British Columbia and you guys should be exporting that gas for many years to come,” said Gordon Currie, oil and gas analyst at Salman Partners. “The bad news is that they have identified a lot of gas in northeastern B.C. and elsewhere and it has seriously depressed the price of the commodity.”

Challenges remain

Despite this concern, the announcement is sure to result in a surge of exploration companies sourcing land positions within the area. With that comes multiple challenges: the Liard is one of the most remote natural gas reservoirs in North America, and tapping it will require substantial investment aimed at infrastructure, as well as navigating and overcoming first nations concerns.

“It really seems to be the challenges are stakeholder-involved,” said Robert Fitzmartyn, managing director of institutional research with FirstEnergy Capital. There are “a lot of big issues there.”

Source: Resource Investing News

Low natgas prices drive US gas rig count to new 13-yr low

* Gas-directed rig count falls to lowest since Sept. 1999
    * Horizontal rig count drops for fourth straight week
    * Oil drilling rigs slip 9 after 25-year high last week

    NEW YORK, June 15 (Reuters) - The U.S. natural gas drilling
rig count fell this week to its lowest level in nearly 13 years
as low gas prices continued to squeeze producer margins and
force some to slow dry gas operations.	

 The gas-directed rig count fell by three to 562, its seventh
drop in eight weeks and the lowest since September 1999 when
there were 561 gas rigs operating, data from Houston-based oil
services firm Baker Hughes showed on Friday.	

 The nearly steady drop in dry gas drilling over the last
eight months -- the gas rig count is down 40 percent since
peaking last year at 936 in October -- has raised expectations
that producers were finally getting serious about stemming the
flood of record gas supplies.	

 Baker Hughes also reported that horizontal rigs, the type
often used to extract oil or gas from shale, fell for a fourth
straight week, dropping 15 to 1,162. While the count has
declined recently, it is still not far below the all-time high
of 1,193 set four weeks ago.

  Dry gas drilling has become largely uneconomical at current
prices, but drillers have moved rigs to more lucrative shale oil
and shale gas liquid plays which still produce plenty of
associated gas that ends up in the market after processing.	

  Rising output from shale has made it difficult to slow
overall dry gas production.	

    OIL DRILLING HITS NEW HIGH
    The oil-directed rig count fell by nine this week to 1,405,
retreating from the 25-year high it posted last week, Baker
Hughes data showed.

 Despite the decline, there were 42.7 percent more rigs
drilling for oil this week, compared to last year when only 984
oil-drilling rigs were operational.	

GAS PRODUCTION SLOWS, STILL NEAR RECORD HIGHS
    Steady declines in dry gas drilling and planned output cuts
by several key producers finally seems to be slowing output.	

Recent U.S. Energy Information Administration data showed
gross gas production in March fell for a second straight month.
Output hit a record high of 72.74 bcf per day in January but has
declined in three of the last four monthly reports.	

 Analysts, however, have said that cuts so far are not enough
to reduce supplies significantly, noting production in 2012 was
expected to set a record high for a second straight year.	

  On Tuesday, the EIA trimmed its estimates for growth of
domestic natural gas production this year to 3.4 percent, while
demand will grow by 4.1 percent.
    The Baker Hughes report had little impact on gas prices.
    Front-month natural gas futures on the New York Mercantile
Exchange, which were down 1.5 cents at $2.48 per mmBtu
just before the Baker Hughes data was released, slipped slightly
 to the $2.47 area after the report.
    Baker Hughes estimates that the number of rigs drilling for
natural gas in the United States will be at 534 by the end of
2012, down 275 for the year.	

 (Reporting By Joe Silha, Eileen Houlihan and Selam
Gebrekidan;editing by Sofina Mirza-Reid)

Opec: Shale gas no threat to us

Vienna – Opec oil producers are not worried about the shale revolution. They might need to re-run their numbers.

The United States imported 4.5 million barrels per day (bpd) of Opec crude last year, 20% of the cartel’s exports and about half the country’s import needs.

But thanks to new technologies like hydraulic fracturing now sucking away on North American soil, the continent is already self sufficient in natural gas, and is eyeing an even bigger landmark – Opec-free oil supplies.

The US was the fastest-growing non-Opec oil producer in 2011 for the third year in succession, the annual BP statistical review released on Wednesday said.

US oil production is up 1 million bpd since 2006 to 7.84 million bpd, consumption is down 1.85 million to 18.84 million.

“In 1990, North American reserves and production were falling but thanks to unconventionals, proved reserves have risen 68% since then,”  ConocoPhillips CEO Ryan Lance told an audience of Opec ministers on Wednesday.

“North America could become self sufficient in oil as well (as gas) by 2025,” he said at a conference before Opec’s policy-setting meeting in Vienna.

State oil company Saudi Aramco, the world number-one oil producer, has acknowledged the North American boom in shale, tar sands and other so-called unconventional production, but its prediction in November was far less explosive, at 6.6 million bpd – still well short of US needs, and not until 2035.

And Opec ministers gathering to decide output policy caps took a relaxed view of the threat that shale oil might pose.

“Oil from the Middle East will always find a home,” said Kuwaiti Oil Minister Hani Hussein. “And we have to wait to see more research to get a better idea about the impact of  shale oil development.”

“No, I’m not worried at all, they are only projections,” agreed Rafael Ramirez, his Venezuelan counterpart. He scoffed at the idea that “shale oil will come to the rescue of consumers, allowing them to shake off the yoke of Opec”.

But the US government’s Energy Information Administration has repeatedly torn up its forecasts as shale and oil sands change the game at pace.

So should Opec fret a little more?

“In some ways they should. Not because North America may become self sufficient, but for the reasons why,” said Paul Stevens, a senior research fellow at the Chatham House Royal Institute of International Affairs in London.

“Given the changes in technology involved, if that is applied elsewhere then the assumption that all future increase in global demand will be filled by Opec is called into question.”

Stevens makes an important point. Unconventional oil reserves are spread in a different pattern from traditional ones. Even resource starved world number one oil importer China has some, and non-Opec Russia appears to have the biggest of them all.

“If I was an Opec minister I would be concerned,” he said. “This could be significant.”

Price stutter 

The recent sharp drop in US oil prices from above $100 a barrel in March to near $80 today could yet slow the march of the unconventional producers and – ironically as Opec hawks call for production cuts to send it back up – buy members some time.

Top exporter Saudi Arabia might even be tempted at some point, as it has done in the past, to use its production muscle to force down prices to retain market share by making higher cost production uneconomic.

Operating costs of Canadian tar sands – the most marginal of current unconventional production – is about $60 a barrel. Most analysts agree that a fall to that level would start to impact production there and push new projects into the future.

The state-of-the-art US Port Arthur refinery extension, run jointly by Saudi Aramco and Shell, is designed to use for Saudi crude is also “a foot in the door for Saudi into the US market for the long run” according to a Middle East-based executive of a major international oil company.

He said Opec, and Middle East producers in particular, will increasingly have to look east for their markets in future.

At its 161st meeting, the 52-year-old Organisation of Petroleum Exporting Countries that has survived the offshore drilling boom and any number of price slumps maintains its confidence.

“That’s good,” said secretary general Abdullah al-Badri of the prospect for US oil self-sufficiency. “We want everybody to be self sufficient.

“But there will be a place for Opec oil whatever happens.”

Source: fin24

U.S. Enjoys Shale Gas Boom of Enough Fuel for Century

America’s “unconventional” gas boom continues to amaze.

Between 2005 and 2010 the country’s shale-gas industry, which produces natural gas from shale rock by bombarding it with water and chemicals in a technique known as hydraulic fracturing or “fracking,” grew by 45 per cent a year. As a proportion of America’s overall gas production, shale gas has increased from four per cent in 2005 to 24 per cent today.

America produces more gas than it knows what to do with. Its storage facilities are rapidly filling, and its gas price — because prices for gas, unlike oil, are set regionally — has collapsed. Last month it dipped below $2 per million British thermal units, less than a sixth of the pre-boom price and too low for producers to break even.

Those are problems most European and Asian countries, which respectively pay roughly four and six times more for their gas, would relish. America’s gas boom confers a huge economic advantage. It has created hundreds of thousands of jobs, directly and indirectly, and it has rejuvenated several industries, including petrochemicals, where ethane produced from natural gas is a raw material.

The gas price is likely to rise in the next few years because of increasing demand. Peter Voser, CEO of Royal Dutch Shell, an oil firm with big shale-gas investments, expects it to double by 2015.

Yet it will remain below European and Asian prices, so the industry should still grow. America is estimated to have enough gas to sustain its current production rate for more than a century.

This is astonishing. Barely five years ago America was expected to be a big gas importer. Between 2000 and 2010 it built infrastructure to “re-gasify” more than 100 billion cubic metres of imported liquefied natural gas. In 2011, however, American LNG imports were less than 20 bcm. Efforts are now underway to convert idle re-gasification terminals into liquefaction facilities in order to export LNG. Plans for a terminal in Sabine Pass, La., are expected to be approved in June.

The shock waves of America’s gas boom are being felt elsewhere. Development of Russia’s vast Shtokman gas field in the Barents Sea, a $40-billion project which was intended to supply America with LNG, has stalled. Qatari LNG, once earmarked for America, is going to energy-starved Japan. A bigger change is expected, however, with large-scale shale-gas production possible in Argentina, Australia, China and several European countries, including Poland and Ukraine.

America’s shale-gas boom has been fuelled by a coincidence of factors: “open access” pipeline regulation, which inspired wildcat exploration, and abundant drill-rigs and other infrastructure, as well as strong property rights, whereby landowners own the rights to minerals beneath their holdings.

Few of these conditions exist elsewhere. Europe has a good pipeline network, which in theory is open to all, but the pipes get tied up years in advance. European landowners typically do not own the minerals under their land, so they have little incentive to encourage exploration. Also Europe is crowded, so its NIMBYs are noisy.

China has a different sort of problem: a shortage of water, of which millions of gallons can be required to frack a single well. The Argentine government’s recent decision to grab control of the country’s largest oil firm, YPF, will scare off the foreign investment its shale industry needs.

Such hurdles will make the pace, and perhaps the scale, of America’s boom hard to equal, and even a big increase in supply might not bring down the European gas price much. Unlike the price in America, it is tied to the price of oil, thanks to long-term Russian and Norwegian export contracts.

Shale-gas producers also face opposition from greens, who object to the industry’s heavy water usage and a small risk that fracking could lead to contamination of aquifers and even to earthquakes. There is also a risk that large amounts of methane, a powerful greenhouse gas, could escape during shale-gas exploration and production.

The IEA estimates that shale-gas production emits 3.5 per cent more than conventional gas, and 12 per cent more when it involves venting excess gas. France and Bulgaria have banned fracking, and American and Australian anti-frackers are also rallying.

The greens have a case, but they exaggerate it. So long as well shafts are properly sealed, there is hardly any risk that fracking will poison groundwater. By eliminating venting, methane emissions can be kept to an acceptable minimum.

Source: The Herald Chronicle

Oil, Gas Rig Counts Move Apart

In its weekly release, Houston-based oilfield services company Baker Hughes Inc. ( BHI ) reported a rise in the U.S. rig count (number of rigs searching for oil and gas in the country). This can be attributed to an increase in the tally of oil-directed rigs, partially offset by cutbacks in natural gas rig count.

In particular, the natural gas rig count dropped for the sixth time in 7 weeks to touch a near 13-year low, while oil drilling jumped to another 25-year high.

The Baker Hughes rig count, issued since 1944, acts as an important yardstick for drilling contractors such as Transocean Inc. ( RIG ), Diamond Offshore ( DO ), Noble Corp. ( NE ), Nabors Industries ( NBR ), Patterson-UTI Energy ( PTEN ), Helmerich & Payne ( HP ), etc. in gauging the overall business environment of the oil and gas industry.

Analysis of the Data

Weekly Summary: Rigs engaged in exploration and production in the U.S. totaled 1,984 for the week ended June 8, 2012. This was up by 4 from the previous week’s count and represents the first increase in the past 3 weeks.

The current nationwide rig count is more than double that of the 6-year low of 876 (in the week ended June 12, 2009) and significantly exceeds the prior-year level of 1,855. It rose to a 22-year high in 2008, peaking at 2,031 in the weeks ending August 29 and September 12.

Rigs engaged in land operations climbed by 3 to 1,914, while offshore drilling was up by 1 to 49 rigs. Meanwhile, inland waters activity remained steady at 21 units.

Natural Gas Rig Count: The natural gas rig count decreased for the sixth time in 7 weeks to 565 (a drop of 23 rigs from the previous week). As per the most recent report, the number of gas-directed rigs is at their lowest level since September 10, 1999 and is down approximately 40% from its 2011 peak of 936, reached during mid-October.

The current natural gas rig count remains 65% below its all-time high of 1,606 reached in late summer 2008. In the year-ago period, there were 879 active natural gas rigs.

Oil Rig Count: The oil rig count was up by 28 to 1,414. The current tally – the highest since Baker Hughes started breaking up oil and natural gas rig counts in 1987 – is way above the previous year’s rig count of 969. It has recovered strongly from a low of 179 in June 2009, rising nearly 8 times.

Miscellaneous Rig Count: The miscellaneous rig count (primarily drilling for geothermal energy) at 5 was down by 1 from the previous week.

Rig Count by Type: The number of vertical drilling rigs fell by 8 to 572, while the horizontal/directional rig count (encompassing new drilling technology that has the ability to drill and extract gas from dense rock formations, also known as shale formations) was up by 12 at 1,412. In particular, horizontal rig units – that reached an all-time high of 1,193 in May this year – decreased by 6 from last week’s level to 1,177.

To Conclude

As mentioned above, the natural gas rig count has been falling since the last few months, 369 rigs in fact (or 40%) from the recent highs of 934 in October 28.

Is this bullish for natural gas fundamentals? The answer is “no,” if we look at the U.S. production and the shift in rig composition.

With horizontal rig count – the technology responsible for the abundant gas drilling in domestic shale basins – currently close to its all-time high, output from these fields remains robust. As a result, gas inventories remain at elevated levels – up some 32% above the benchmark five-year average levels.

Hamstrung by this huge surplus, natural gas prices have dropped more than 53% from 2011 peak of $4.92 per million Btu (MMBtu) in June to the current level of around $2.30 (referring to spot prices at the Henry Hub, the benchmark supply point in Louisiana). Incidentally, prices hit a 10-year low of $1.82 during late April.

To make matters worse, a near-record mild weather across most of the country curbed natural gas demand for heating, leading to an early beginning for the stock-building season. The grossly oversupplied market continues to pressure commodity prices in the backdrop of sustained strong production.

This has forced several natural gas players to announce drilling/volume curtailments. Exploration and production outfits like Ultra Petroleum Corp. ( UPL ), Talisman Energy Inc. ( TLM ) and Encana Corp. ( ECA ) have all reduced their 2012 capital budget to minimize investments in development drilling.

On the other hand, Oklahoma-based Chesapeake Energy Corp. ( CHK ) – the second-largest U.S. producer of natural gas behind Exxon Mobil Corp. ( XOM ) – and rival explorer ConocoPhillips ( COP ) have opted for production shut-ins to cope with the weak environment for natural gas that is likely to prevail during the year.

However, we feel these planned reductions will not be enough to balance out the massive natural gas supply/demand disparity, and therefore we do not expect much upside in gas prices in the near term. In other words, there appears no reason to believe that the supply overhang will subside in 2012.

With natural gas unlikely to witness a durable rebound in prices from their multi-year plight and at the same time crude prices trading in the $80-$90 a barrel range, energy producers are boosting liquids exploration to take advantage of this trend. As a result of movement of rigs away from natural gas towards oil, the tally of liquids-directed rigs has climbed to another 25-year high.

Source: NASDAQ

Grist for the Jobs Creation Discussion

A new post up at Grist takes issue with the 9.2 million jobs our industry supports.

It says we come by the 9.2 million jobs number falsely, that we deviously include “indirect” or “induced” positions in the total. It says we’re not transparent about our jobs. For good measure, it takes a shot at Energy Tomorrow.org and its distinctive icon. Now, we might let the other stuff slide, but the icon – that we’ll defend!

Seriously, we’re not part of the food fight Grist wants to have – trying to pit oil and natural gas industry jobs in this country against green energy jobs. We don’t knock green energy or its technologies. The oil and natural gas industry invested  $71 billion in that area from 2000 to 2010 – nearly as much as the rest of U.S. private industry combined ($74 billion) and nearly twice as much as the federal government ($43 billion) over the same period.

The fact is America needs all sources of energy going forward, and green energy is important in an all-of-the-above strategy. We wish Grist felt the same way about oil and natural gas – which supply more than 60 percent of the energy we use now and are projected to supply nearly as much in 2035.

Likewise, America needs every single job that’s created, supported or induced. Every one of them is a paycheck for an American worker. In the case of oil and gas, that’s 9.2 million jobs that probably wouldn’t exist without our industry, which contributed nearly a half-trillion dollars to the U.S. economy in 2010.

We’ve discussed job modeling before, but there’s nothing devilish about including indirect and induced jobs. Virtually every employment study uses them, including this fairly significant one advanced not too long ago by the White House.  Economists (if not some blog sites) recognize that job creation has dynamic effects. Exhibit “A” is the job creation from energy going on North Dakota, Pennsylvania, Texas and other energy states.

As for transparency, Grist must not have looked very hard at our websites. Again, there’s this detailed breakout of the 9.2 million jobs our industry supports. And there’s this detailed analysis of those 9.2 million jobs. No camouflage, no sleight of hand.

Even better news? Our industry can do more. A study by the Wood Mackenzie energy consulting firm found that with the kind of pro-energy policies API recently recommended to both political parties, our industry could create 1 million new U.S. jobs in the next decade. Here’s how it looks in a chart:

Now, about Grist’s digs at our website and icon. We admit it: Energy Tomorrow.org is a happy place. We’re talking about jobs, tax revenues for government and energy security for America. What’s not to smile about? And the icon is a leaf – representing the origin of America’s oil and natural gas riches. We like it.

Source: Energy Tomorrow Blog

Romania Shale-Gas, Mine Projects on Hold in 2012, Ponta Says

Romania wants to put shale-gas exploration and gold-mining projects on hold until after a general election this year as it balances improving environmental rules with energy needs, Prime Minister Victor Ponta said.

Ponta’s government, backed by a coalition of Social Democrats and Liberals, will attempt to assess environmental conditions and would look over Chevron Corp. (CVX) (CVX)’s plan to explore for shale gas in the country should it win elections, said Ponta. He became premier on May 7 in a political shakeup and will try to win his first four-year team in October or November.

“I want to seriously discuss this issue next year, while keeping environment protection in mind, on the one hand, and Romania’s interest in ensuring additional energy resources, on the other hand,” Ponta said in a June 6 interview in Bucharest. “Legitimate environment and business development interests unfortunately got caught up in political campaigning.”

Romania is trying to find new energy resources to cut its reliance on Russian gas imports and compensate for a natural decline in domestic production as the nation has been extracting gas and oil for more than a century. Its Black Sea territory may also hold additional resources after OMV Petrom SA (SNP) and Exxon Mobil Corp. (XOM) (XOM) have announced a potential discovery in a deep-water well.

Romania’s month-old government called for an immediate moratorium on shale-gas extraction in its governing program until European studies show the impact of hydraulic fracturing on the environment.

European Bans

The process, which uses a mixture of water, sand and chemicals to open fissures in shale rocks to release gas and oil, has already been banned in France and Bulgaria on environmental grounds. It’s also been suspended in the U.K. and the German state of North Rhine-Westphalia.

Chevron, the second-largest U.S. energy company by market value, received the licenses to explore for unconventional oil and gas in Romania from the previous government of Prime Minister Emil Boc. A few thousand people protested in March in the northeastern town of Barlad against Chevron’s plans to extract shale gas through hydraulic fracturing.

Greenpeace and four other non-government organizations filed a complaint and threatened to sue the Romanian government if it didn’t cancel Chevron’s licenses, saying the shale gas production may harm the environment and local residents.

Gold Mine Decision

The Bucharest-based government is also expected to make a decision regarding a gold-mining project in the town of Rosia Montana, in the center of the country. Gabriel Resources Ltd. (GBU)’s, the majority owner of the stalled project, needs an environmental permit to start work at the mine.

Ponta said his government’s stance on the project remains unchanged. The company needs to meet the highest environmental standards and guarantees, allow the state to hold a higher share in the project and disengage itself from political lobbying before going ahead with gold extraction, he said.

“When these conditions are met, we can go ahead without a problem,” Ponta said. “I want investments and jobs in Romania but these three conditions are mandatory.”

Romania pledged to the International Monetary Fund and the European Union under a precautionary agreement to sell 15 percent stakes in natural-gas grid operator Transgaz SA (TGN) and natural-gas company Romgaz SA and 10 percent stakes in hydro- power generator Hidroelectrica SA and nuclear-power operator Nuclearelectrica SA this year.

Free Prices, Taxes

“I am convinced that we will keep to the schedule,” Ponta said. “Of course it’s a bad period, but we will try to adapt to current market conditions. The only problem is finding a reasonable price, otherwise we will enter into electoral debates over this subject, which is in no one’s interest.”

Romania undertook to free regulated natural gas and electricity prices starting from this year and is committed to tax the “exceptional part of the profits” coming from price increases after the liberalization, Finance Minister Florin Georgescu said in an interview on June 5. The nation’s biggest oil company OMV Petrom, majority-owned by Austria’s OMV AG (OMV), and state-owned Romgaz are the two biggest gas producers in Romania.

“The Romanian authorities have to negotiate with OMV in order to conclude when it’s better to implement this law: at the beginning of 2013 or in the second half of next year,” Georgescu said.

OMV’s investments in its Romanian unit Petrom will depend on the country’s “fiscal stability and regulation,” Chief Executive Officer Gerhard Roiss said in an interview for Ziarul Financiar on June 5. Roiss said that any change in the Romanian taxing system will affect the investment plan of Petrom, the country’s biggest oil company, according to the newspaper.

Source: Bloomberg

CNPC sees China’s gas consumption trebling by 2030

(Reuters) – China’s annual natural gas consumption will more than treble by 2030, the president of major gas producer China National Petroleum Corp (CNPC) said, giving a forecast lower than an estimate by energy consultant Wood Mackenzie.

Zhou Jiping told an international gas conference on Thursday that consumption would reach 550 billion cubic metres (bcm) a year by 2030.

Wood Mackenzie released a forecast on Wednesday, at the same conference in Kuala Lumpur, that demand was likely to increase to more than 600 bcm by 2030 from just over 150 bcm now.

But both forecasts suggested that imports would remain a major part of China’s growing natural gas use, with Zhou saying domestic production was expected to surpass 200 bcm by 2020 and rise to 300 bcm by 2030.

“Our gas demand will go up rapidly through 2030, with an annual growth of about 8 percent,” Zhou said.

CNPC accounts for 75 percent of China’s total gas production and its reserves.

The company’s domestic gas output will reach 120 bcm in 2015 and 160 bcm in 2020, Zhou said, adding he expected natural gas to account for 10 percent of primary energy sources by 2020 from 5 percent now.

In a report released on Tuesday, the International Energy Agency said it expects global gas demand to rise 17 percent to 3,937 billion cubic metres in 2017, with China more than doubling its consumption to 273 billion cubic metres. The figures signalled a rapid surge in global demand that may be difficult to meet.

Gas prices in Asia far surpass those in the United States on the New York Mercantile Exchange.

SHALE GAS FOCUS

Zhou said curbing imports and meeting demand in China will require more efforts to boost shale gas production.

“We see great potential but also great challenges (in shale gas)… In the near term we will focus on shale gas evaluation and technology and pilot program to make preparations for large scale development in the future,” Zhou said.

The Wood Mackenzie report said China would have to rely on unconventional supplies such as coal-bed methane, coal-to-gas, as well as imports of both piped and liquefied natural gas (LNG) as its exploitation of shale gas reserves will be slower than expected.

Source: Reuters

The Shale Revolution and Swing States

Good article on energy and politics from the Financial Times today [subscription requried]:

The shale revolution is spreading into eastern Ohio, bringing with it the possibility of reviving an economy that has faltered since industrial jobs left the region. But along with that promise, the shale wave is also bringing with it an increasingly intense brand of election-year politics. … Paul Sracic, at Youngstown State University, says the intense focus on shale development has the potential to make energy a big issue in what is the country’s key swing state.  “Blue-collar voters were never that sold on environmental issues, and if some Democrats come across as not keen on economic development, it could lose them support here in Ohio,” he said. … Already, the boom in gas production in neighbouring Pennsylvania’s Marcellus Shale has created an estimated 2,000 jobs in the past 18 months in businesses providing services and equipment such as steel pipes. Vallourec of France has invested $650m to open a new steel mill in Youngstown. “We haven’t seen the Republicans using it as a wedge issue, but I can see it becoming one,” Professor Sracic said. “Ohio is going to be very, very close and little things can mean a lot.”

The article also discusses API’s Vote4Energy project, more on that:

A Vote4Energy is not a vote for a person, or a party, or even a philosophy, but rather, it is a vote for America and its future.  We are an energy-rich nation. We have more oil and natural gas than anyone thought possible even 20 years ago: more potential energy than many oil-exporting nations in the Mideast, and more than most countries in the world. When we look at all our domestic energy options – fossil fuels, nuclear energy, renewable and alternative energy sources such as biofuels – we see a nation with an abundance of opportunity for growth.

Election coverage is often quite silly, but the promise of energy as the foundation for building America’s future is quite serious.  So we encourage folks in Ohio, Pennsylvania, and every other state to Vote4Energy this year.

Source: The Energy Tomorrow Blog

IEA releases rules for shale gas operations

Over the past decade, natural gas production in the United States has exploded, with the nation becoming the world’s top producer of the hydrocarbon.

The U.S. was able to accomplish this, even though Russia has natural gas reserves six times the size of its own, largely through the use of hydraulic fracturing – commonly known as fracking – to access shale gas .

However, the proliferation of fracking has caused a bit of a public backlash in many parts of the U.S., particularly in the northeast and midatlantic states, which hold the Marcellus shale, a vast unconventional gas play.

Fracking involves sending millions of gallons of water mixed with sand and chemicals thousands of feet down wells to literally fracture shale rock, releasing previously inaccessible stores of natural gas. This process has sparked fears of potential groundwater contamination, either through the fracking fluid or natural gas entering aquifers.

While a number of studies have come out showing that the technique can be safely used, an Environmental Protection Agency preliminary draft analysis of data from last December linked fracking with groundwater contamination in Wyoming. While industry insiders point out that the incident was very unique, the public perception that “fracking equals danger” remains.

In part to combat these social and environmental issues, the International Energy Agency released a report titled, ” Golden Rules for a Golden Age of Gas .”

“The technology and the know-how already exist for unconventional gas to be produced in an environmentally acceptable way,” IEA executive director Maria van der Hoeven said in a release. “But if the social and environmental impacts are not addressed properly, there is a very real possibility that public opposition to drilling for shale gas and other types of unconventional gas will halt the unconventional gas revolution in its tracks. The industry must win public confidence by demonstrating exemplary performance; governments must ensure that appropriate policies and regulatory regimes are in place.”

The report emphasizes the importance of transparency for the industry. According to the Golden Rules, communities where drilling will take place need to be brought into the loop before operations begin.

“Simply providing information to the public is not enough; both the industry and the public authorities need to engage with local communities and other stakeholders and seek the informed consent that is often critical for companies to proceed with a development,” reads the report. “Operators need to explain openly and honestly their production practices, the environmental, safety, and health risks and how they are addressed.”

Additionally, drillers should continuously measure and monitor the environmental effects of their operations, according to the report. While oil and gas companies may be confident that they are not contaminating groundwater, having such processes in place could serve to quell public fears and save the company time and money in the long run.

According to the IEA, using the Golden Rules would likely increase the cost of a typical shale gas well by about 7 percent. The agency notes that for larger operations applying these rules could ultimately result in lower operating costs.

“If this new industry is to prosper, it needs to earn and maintain its social license to operate,” said IEA chief economist and the chief author of the report Fatih Birol said. “This comes with a financial cost, but in our estimation the additional costs are likely to be limited.”

These rules could be potentially vital for the industry, especially if IEA estimates of natural gas production hold up.

According to the agency, global natural gas production will triple in the 25-year period between 2010 and 2035, reaching nearly 56.5 trillion cubic feet. In addition, the agency expects worldwide demand for the hydrocarbon to increase by 50 percent over the same period.

Source: NASDAQ

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