China expands gas storage to accommodate growing production

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March 28, 2011

(Upstream) - China plans to produce 16 billion cubic feet a day of natural gas by 2015, double its 2009 domestic production. And to accompany that new production, the nation is moving to build 1 trillion cubic feet of gas storage capacity by 2015, a massive increase from the current capacity of less than 70 billion cubic feet.

The largest gas storage facility under construction is a PetroChina project estimated to cost about $3 billion. The underground cavern in the northwest is designed to hold 420 bcf. Expanded production facilities in the province also are under construction, scheduled for completion in 2012 with a daily capacity of 3.5 bcf.

The nation's target of 16 bcf per day of production capacity by 2015 breaks down as more than 11 bcf from conventional gas fields, 2 bcf from coal-bed methane and almost 3 bcf from coal-to-gas projects.

Shell may spend $1 billion a year on China shale gas exploration

(News reports) - Shell plans to spend $1 billion a year over the next five years on shale gas in China if exploration currently under way proves successful, CEO Peter Voser told Reuters. Shell is drilling 17 wells in China, including those for tight gas and shale gas, in regions such as Sichuan, China's most prolific gas province.

Inspired by the massive success of unconventional gas - coal-seam methane, tight gas and shale gas - in the United States, China has over the past year embarked on an exploration campaign for shale gas, part of Beijing's goal to boost use of cleaner-burning fuel and cut coal.

"It's too early to say that shale gas is a game changer (in China), but I have great expectations. We are drilling 17 wells this year. That will give us a sense of magnitude of what's available here," Voser said. Shell is spending $400 million on unconventional gas exploration in China this year. China does not have any shale gas production yet, but has a rough target to pump some 10% of its total gas output from shale by 2020.

Chevron forecast for strongest LNG growth this decade

(Zawya, Dubai, United Arab Emirates) - Chevron will be the world's fastest growing LNG producer this decade, beating Qatar's growth rate, according to Evaluate Energy. Between 2010 and 2020, the energy giant will add more than 2 billion cubic feet per day of capacity, beating Qatar, which will add an estimated 1.5 bcf per day to its existing capacity.

Woodside Petroleum will add an estimated 1 bcf day in capacity by 2020, according to Evaluate Energy, a global oil and gas data firm. Others adding close to 1 bcf per day by 2020 include ConocoPhillips, ExxonMobil, Shell, BG Group and Gazprom.

Qatar, however, will remain the world's largest LNG producer in 2020, followed by Algeria's Sonatrach, Shell and ExxonMobil, Evaluate Energy said. Chevron is estimated to move up to sixth place.

Asian spot LNG prices closed last week at $11.60

(Platts) - Post-earthquake Asian spot LNG prices finished up last week at $11.60 per million Btus (roughly 1,000 cubic feet). Japan's Tohoku Electric last week purchased three to five cargoes per month for delivery across April through June, with the shipments priced between $10.40 and $11.50.

Tokyo Electric Power Co. continued to hunt for 10 shipments to make up for lost nuclear and thermal capacity after the massive earthquake in Japan on March 11 took out a combined 10 GW of power generation.

Meanwhile, Platts was quoting the average price paid for LNG from the Middle East (known as Platts FOB ME) at $9.80 per million Btus at the end of last week, up 25 cents from the start of the week.

Second, smaller LNG project proposed at Kitimat, B.C.

(Calgary Herald)

(Toronto Globe and Mail)

(Calgary Herald and Toronto Globe and Mail) - A joint venture of a Houston company and the Haisla First Nation in British Columbia has submitted a proposal to export LNG to Asia through the West Coast port at Kitimat, B.C.

The BC LNG Export Co-operative's proposal to the National Energy comes as Kitimat LNG is pursuing final design on its $4.7 billion project, with capacity of 700 million cubic feet per day. Export Co-op, meanwhile, wants to build a 125 million cubic foot capacity facility at an estimated cost of $360 million to $450 million.

The BC LNG model is far different from what Kitimat LNG has proposed. Instead of being owned by gas producing companies with major reserves, it would be a co-operative that would liquefy gas for a fee for members (gas sellers and buyers). The co-op would build its liquefaction plant on a barge and ground it on shore - with limited onsite LNG storage capacity. Producing the LNG and loading a tanker would take the better part of a month; in that time, the co-op's second tanker could make the three-week round-trip transit to Asian markets.

Maryland lawmakers may ban shale drilling for two years

(Washington Post) - The Maryland General Assembly may do what no other state in the region has done: Before a single well has been drilled, it may ban hydraulic fracturing. House members last week passed a bill that would essentially place a moratorium on shale gas drilling until the Department of the Environment completes a two-year study to determine whether it endangers drinking water and public health.

Under the proposed law, Maryland would levy a tax on the companies of $10 per leased acre to pay for its study, estimated to cost $1 million by its completion in August 2013. The money would help the state Department of the Environment, which lost staff to budget cuts, hire workers to conduct the study.

A companion bill in the state Senate is expected to face a tougher road to passage as gas industry lobbyists work against it. Senators are scheduled to take up the issue before the legislature adjourns April 11.

Pennsylvania cities ready for impact fee on shale gas drilling

(Pittsburgh Tribune-Review) - If Pennsylvania Gov. Tom Corbett pursues an "impact fee" on Marcellus shale gas drillers, municipal officials say, it should happen quickly and they should control how to spend their share.

"We need it now," said Mary Ann Stevenson, manager of Mt. Pleasant in Washington County. "It's difficult for the taxpayers. I'm consumed by the drilling industry. Our zoning officer is consumed by it. It's had a big impact that way."

Corbett said he is open to the idea of imposing a fee on drillers -- an apparent reversal of a campaign promise he made not to authorize new taxes or fees, particularly one on natural gas extraction. "I think he's passing the buck to save his own hide," said Murrysville Council President Joan Kearns. "He said he would not pass any new taxes, so he's passing it on to the local governments to make us do it."

Pennsylvania governor holds firm against gas production tax

(Philadelphia Inquirer) - As new taxes go, a levy on natural gas drilling in Pennsylvania would seem like a pretty easy political sell. Two-thirds of voters support the idea, several polls show. Politicians are desperate for money to plug a $4 billion budget gap and prevent deep cuts in the college system and other programs.

Every other major natural gas producing state has some sort of tax, and some of the biggest drillers have said they won't oppose one here, so long as it's reasonable.

However, Gov. Tom Corbett, who signed a no-tax pledge during his campaign last year, is firm in his opposition to a tax. "The governor absolutely does not subscribe to the notion that because everybody else collects a severance tax, we should as well," Patrick Henderson, Corbett's energy executive, said.

Even so, the tax question is sure to keep boiling in Harrisburg this year, as Pennsylvania continues to wrestle with the consequences of a booming energy industry entering a recession-ravaged state.

Ohio likely next battleground in shale drilling debate

(Cleveland Plain Dealer) - Geologists, energy experts and gas well drillers are hopeful that shale riches will soon be more available now that Ohio Gov. John Kasich favors - and the legislature is considering - allowing drilling companies on state park land to reach those deposits.

But some environmentalists are fearful that hydraulic fracturing, crucial for successfully tapping that Utica Shale deposit, might damage not only park lands but also the environment in general.

Meanwhile, the Ohio Department of Natural Resources is busy preparing for the expected wave of new drilling on the state's eastern end. The confluence of all these movements over the next six months promises to put Ohio front and center in a debate about the cost and value of natural gas and oil drilling in the United States, particularly when drillers use fracking to produce the hydrocarbons.

Mayors object to oilsands Keystone pipeline

(Environment & Energy Daily) - TransCanada's much-debated Keystone XL pipeline proposal that would nearly double U.S. imports of crude from the Canadian oilsands is taking heat from 25 mayors who warn the project "will undermine the good work being done" on a local level to reduce emissions.

"Increasing our dependence on environmentally destructive, high-carbon fuels such as tar sands oil sends the wrong message to our communities and citizens who work hard to lessen our dependence on oil, using innovative conservation, efficiency and other measures," the mayors said in their letter to Secretary of State Hillary Rodham Clinton, whose department is beginning a supplemental environmental review of the pipeline.

The line could carry as much as 900,000 barrels per day of crude from the oil sands to U.S. refineries on the Gulf Coast. Among the signatories to the letter, who asked Clinton to ensure the supplemental review is "thorough and detailed," were the mayors of Des Moines, Iowa; Salt Lake City, Utah; Tallahassee, Fla.; and Durham, N.C. - none of which are on the pipeline route.

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