Printer-friendly versionSend by email

(Bloomberg; Feb. 10) - Political constraints and concerns that production gains at shale fields aren't sustainable will hinder development of LNG export plants in the United States, former ExxonMobil chief Lee Raymond said. "There is going to be a big debate in the U.S. as to whether or not they're going to permit the export of liquefied natural gas," Raymond said in an interview in Oslo Feb. 9. "Even if you get past the politics, you have to test whether or not the resource base is sufficient."

"It's going to be a little while before people are really confident that there is going to be a sufficient amount of gas for 30 years to support the construction of an LNG plant," said Raymond, who stepped down in 2005. "I'm frankly not sure that we have enough experience with shale gas to make the kind of judgment you'd have to make. ... If you build any LNG, from a producer's point of view, you can only do that ... if you're assured that you have a long-term competitive supply because these are huge investments."

The U.S. is not the only country with shale rock, though "just because it has the name shale on it doesn't mean it's something that would be economic to try to develop," Raymond said. Production of shale gas in China, however, would be a "real game changer," he added. "China is run by engineers, it's not run by politicians. ... They're technically competent and they approach things in the same way a good engineering group at a major oil company would approach things."

Pennsylvania adopts drilling well fee, new rules

(The Associated Press; Feb. 9) - Gov. Tom Corbett is expected to sign a sweeping bill that could force Pennsylvania's booming natural gas industry to help pay for a wide range of state and local government programs, toughen safety standards and limit the ability of local officials to keep drilling out of their towns. The bill would require municipalities to allow drilling in all zones, including residential, but would allow them to apply zoning standards on lighting, noise and structures.

The 174-page bill was negotiated among Republicans and unveiled Feb. 6. It passed the Senate Feb. 7, 31-19, and the House Feb. 8, 101-90, largely along partisan lines. Pennsylvania is the largest gas-producing state that doesn't impose some type of levy on the activity. Democrats complained bitterly that the bill asks the industry to pay a meager price for extracting a valuable natural resource, while it strips municipal officials of the kind of authority to control drilling that even towns in Texas enjoy.

Republicans insist the bill strikes a balance between cultivating an enormous economic boost and protecting the environment. As soon as the governor signs the bill, counties will have 60 days to decide whether to impose a 15-year, declining fee on wells. The fee would fluctuate with the price of gas and inflation and would be roughly equivalent to a 3 percent tax, Republicans said. Democrats said it would reflect a 1 percent rate. The fee would start at between $40,000 and $60,000 per well, declining to between $5,000 and $10,000.

Sierra Club deals with fallout from gas producer donations

(Politico; Feb. 7) - Is $26 million worth the reputation of a venerable, 1.4 million member environmental group? The Sierra Club may be about to find out. Last week's revelations about the 120-year-old organization's hushed financial marriage to the natural gas industry - and its just-as-secretive divorce - have left some long-time supporters feeling angry, betrayed or misled.

The Sierra Club quietly accepted $26 million in donations from gas industry interests from 2007 to 2010, particularly the CEO and subsidiaries of Chesapeake Energy, at the same time that the group's national leaders were talking up gas as a cleaner, greener "bridge fuel" alternative to coal. "I think it betrays all the grass-roots volunteers," said Kate Bartholomew, a gas activist who is also a member of the executive committee that oversees the Sierra Club's statewide chapter in New York.

New York state anti-fracking activist Walter Hang, president of the environmental data service Toxics Targeting, called the disclosure "incredibly embarrassing. ... It basically looks like they're shilling for the No. 2 natural gas producer in America." On the other hand, some greens are lauding the Sierra Club's current leadership for coming clean. And some hope the group, finally unburdened of its secrets, will be liberated to become a full ally in the fight against hydraulic fracturing used to produce shale oil and gas.

Sierra Club files objection to LNG exports

(Reuters; Feb. 7) - The Sierra Club is challenging plans to export LNG from a terminal in Maryland, continuing its fight against the gas industry's push to sell the nation's abundant shale gas abroad. The group filed a formal objection with the Energy Department against Dominion's Cove Point export project, arguing that LNG exports would raise prices for consumers and expand use of "destructive" drilling techniques to extract shale gas.

"Liquefied natural gas is not only the dirtiest and most polluting form of gas, but it also requires an increase in fracking; a process we know to be unsafe and dangerous," Deb Nardone, director of the group's natural gas reform campaign, said in a statement.

The group called on the government to undertake an environmental review that weighs the effects of drilling for shale gas, an assessment that has not been included in previous evaluations of gas export terminals.

The question of LNG exports has become an increasingly hot button issue as some lawmakers raise concerns that exports could make natural gas more expensive for U.S. households and manufacturers. Gas industry groups contend, however, that exports are needed to maintain strong domestic production, especially as the current gas glut forces companies to cut back on output. The Sierra Club has challenged two other terminals and said it plans to actively oppose all planned export projects.

N.J. activists hand out 'Fracky' awards to protest shale gas

(New Jersey Newsroom.com; Feb. 8) - The red carpet was rolled out in front of the statehouse in Trenton, N.J., Feb. 8 as anti-natural gas drilling activists handed out the first "Fracky" award to the American Petroleum Institute for what they charge is its role in endangering the environment. The oil and gas industry association won, the activists declared, for "spinning the benefits of fracking so hard that some people actually believe that gas is a bridge fuel to renewable."

The other nominees for were Gov. Chris Christie (for delaying a ban on drilling in New Jersey), El Paso Pipeline Co. and Cabot Oil & Gas. Each nominee was chosen because of some practice the protesters found objectionable. The activists were also protesting one of several regional workshops by the American Petroleum Institute in Trenton discussing the development of hydraulic fracturing.

"Today the fossil fuel industry wins the Fracky at great cost to our air, water and forests," David Pringle, campaign director of the New Jersey Environmental Federation, said.

BG Group sees strong potential for U.S. LNG exports

(Bloomberg; Feb. 9) - The U.S. will be able to supply about 9 percent of global LNG output by the end of the decade, according to BG Group. The U.K.'s third-largest gas producer said the U.S. will have the capacity to export more than 2 trillion cubic feet of gas a year - almost 6 billion cubic feet a day - from 2020 as hydraulic fracturing boosts domestic supplies. Global LNG output is seen at about 23 tcf a year by then, based on estimates from Wood Mackenzie.

BG Group has secured capacity to export LNG from proposed U.S. terminals in Sabine Pass, La. (Cheniere Energy) and its own Lake Charles, La., facility, according to Chief Executive Officer Frank Chapman.

The divergence between forecast supply and demand will create a "tight LNG market outlook," Chapman told reporters Feb. 9 after BG reported fourth-quarter earnings.

Increased shale gas supply, its discount to oil, shorter shipping distances to Asia through the Panama Canal, and existing infrastructure will result in a "robust U.S. export margin," making LNG exports both "practicable and competitive," Chapman said.

South Korea signs up to buy more LNG from Qatar's RasGas

(Bloomberg; Feb. 9) - Ras Laffan Liquefied Natural Gas Co., one of two Qatari producers of the fuel, will boost LNG supplies to Korea Gas Corp. by 100 billion cubic feet a year under a 20-year agreement. Deliveries under the agreement are set to begin in 2013, the Qatari company known as RasGas said. The deal will increase total LNG dedicated to Kogas under long- term agreements to more than 430 billion cubic feet per year.

Under the agreement, RasGas will also ship additional "incremental" volumes of LNG to Kogas from 2012 to 2016. "The price is quite good," Ibrahim Ibrahim, economic adviser to Qatar's emir, said at the signing, where the sale price wasn't disclosed. "It's way different from the prices in other markets because the market in the Far East, as you know, the gap is huge between the Far East and Europe and, of course, if you put in the States, it's even bigger."

Qatar tries to sell its LNG at a price that is equal to oil on an energy-equivalent basis, Ibrahim said. "Oil parity, we said, is something we want to achieve," he said. "We have achieved it once or twice but we are working for it."

Japanese utility signs 16-year LNG deal with BP

(Bloomberg; Feb. 10) - Chubu Electric Power, the third-largest utility in Japan, has agreed to buy an average 24 billion cubic feet of gas a year from BP over 16 years starting with Japan's fiscal year 2012-2013. The LNG deliveries represent about 5 percent of Chubu's purchases last year.

Mikio Inomata, a spokesman for Chubu, said the company traditionally buys LNG directly from project owners rather than portfolio suppliers. He declined to disclose what price the company will pay in its agreement with BP. "We believe the price is very competitive in the Japanese market," he said.

Chubu agreed last year to buy a similar volume of LNG from BG Group over 21 years, starting in April 2014, Inomata said. Buying from companies insulates customers from a supplying country's fuel export policies, since companies can choose from several of their own LNG plants to make the deliveries, he said.

Indonesia negotiating with Sempra
to take back LNG production

(Jakarta Post; Feb. 8) - Upstream oil and gas regulator BPMigas said Feb. 7 the Indonesia government is currently negotiating with U.S.-based Sempra Energy to take back much of the almost 180 billion cubic feet of gas a year allocated to the company from the Tangguh LNG plant.

BPMigas' deputy for operations Rudi Rubiandini said the government aims to take over as much LNG as possible from the company to re-allocate the gas amid mounting pressure from domestic buyers for more gas supply. "We are negotiating with Sempra on the future of the LNG allocation; however, we will ensure that we comply with all clauses in the contract, including penalty payments and other details," he said. According to BPMigas, the Tangguh LNG plant sent 55 cargoes to the U.S. in 2011.

Sempra receives an LNG allocation from the Tangguh LNG plant in Papua, which is operated by BP. Under the contract between the government of Indonesia and Sempra, the government is allowed to divert half of the allocation to other parties for a diversion fee of 50 U.S. cents per million Btu. The plant opened in 2009 and has the capacity to handle an average 1 billion cubic feet a day of gas, with plans to expand the facility to 1.5 bcf a day. It is one of three LNG export plants in Indonesia.

Keystone pipeline could get added
to Senate highway bill debate

(Reuters; Feb. 8) - The contentious Keystone XL oil pipeline could become part of the debate on the Senate floor over highway funding legislation, an influential Republican senator said Feb. 8. Republicans in Congress want to grant a permit to TransCanada's $7 billion project, cutting out President Barack Obama, who last month said the pipeline's route needed more study before his administration could approve it.

But to fast-track the stalled Alberta-to-Texas pipeline, Republicans need to first try to attach the issue to must-pass legislation and gather enough support in the Democratic-controlled Senate. John Thune, a senator from South Dakota who is the chairman of the Senate Republican Conference, told reporters the issue could rise again as the full Senate discusses the highway bill.

"My guess is that there will be an effort to amend the highway bill to include the Keystone provision," Thune said. The pipeline has become an election issue, used by Republicans to criticize Obama. Environmental groups oppose it because of the oilsands production it would carry. The Senate Finance Committee briefly discussed a proposal to link Keystone to the highway bill Feb. 7. The provision was withdrawn after Max Baucus, the panel's Democratic chairman, argued it "would take down the bill."

More Oil & Gas News Roundups >