Japan in talks for U.S. LNG purchases

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Latest Oil and Gas News: 
February 24, 2012

(Reuters; Feb. 22) - Japan is hoping to reach an agreement at a bilateral summit meeting slated for this spring to import LNG from U.S. projects in Louisiana and Maryland, the Yomiuri newspaper said Feb. 22. Still reeling from the Fukushima nuclear crisis that has idled nearly all of it reactors amid public safety concerns Japan has rapidly increased its LNG purchases, with imports growing to a record 10.33 billion cubic feet a day last year.

Japan requested approval to import LNG from the United States at meeting last September and hopes to start purchases as early as 2015. The Yomiuri report said Mitsubishi Corp., Chubu Electric Power and Tokyo Gas have expressed interest in taking part in the proposed Maryland and Louisiana export terminal projects.

Record U.S. natural gas supplies, thanks to new drilling techniques and shale gas production, has led to a series of export proposals all hoping to sell LNG to higher-paying, thirsty markets in Asia and Europe.

South Korea agrees to buy more LNG from Australia

(Platts; Feb. 22) - South Korea, the world's second-largest LNG buyer, agreed Feb. 22 to seek more LNG imports from Australia, Korea's energy ministry said. In return, Australia agreed to push for cooperation with South Korea to develop Australian offshore oil fields, the Ministry of Knowledge Economy, which is responsible for energy, industry and commerce, said in a statement.

The agreement was reached at a meeting of the Bilateral Resources Cooperation Committee held in Seoul, led by the Knowledge Economy Ministry and its Australian counterpart. The meeting was also attended by executives from South Korea's state-run energy companies, such as Korea Gas Corp., Korea National Oil Corp. and Korea Resources Corp., as well as from Chevron, Woodside Petroleum and mining companies BHP Billiton and Rio Tinto.

"The two sides discussed details of expanded cooperation in LNG and mineral supplies and oil development," the statement said. "The meeting is expected to allow more South Korean firms to develop natural resources in Australia as well as push for more LNG projects," it said.

Shell buys into Mozambique gas
discovery; looks toward LNG

(Bloomberg; Feb. 23) - Shell's $1.6 billion bid for Cove Energy starts a race to develop natural gas fields off Mozambique's Indian Ocean coast that may hold more than Norway's entire reserves.  Winning Cove Energy would give Shell an 8.5 percent stake in a block where Anadarko has found 30 trillion cubic feet of gas. Italy's Eni has discovered even more gas in a neighboring area. Together, there is enough gas to develop two $20 billion LNG plants to supply customers in Asia, said Deutsche Bank.

"We're a natural partner in that project," Shell CEO Peter Voser said. "We are the global leader in LNG, so this is an interesting province for us to actually further grow." Alejandro Demichelis, a London-based analyst at Bank of America, said, "This move from Shell leaves other European majors behind," adding that BP and Total are likely to want a role in Mozambique.

East Africa's fields offer a fresh source of gas supply for China and India, the world's fastest-growing major economies. Demand for LNG in Asia is rising at almost 20 percent a year, outstripping the pace of production growth, according to Sanford C. Bernstein & Co. Shell won't be the last company looking for a way into Mozambique. India's Oil & Natural Gas Corp. was among Asia producers considering a bid for Cove and a counter-offer remains possible.

Colorado citizens group offers buy-out
to block natural gas drilling

(Aspen Daily News, CO.; Feb. 23) - A citizens group this week offered $2.5 million to natural gas companies that hold leases to drill on public land in the Thompson Divide, in an attempted buy-out that could halt drilling and conserve the forested area. The group, the Thompson Divide Coalition, has spent the past three years attempting to block gas development in the area, located near Carbondale, Colo.

The coalition includes local ranchers, environmentalists and community leaders, and has garnered support from three county commissions and the Aspen Skiing Co. The coalition's cash offer would cover money the companies already have spent on pre-development work, though none have broken ground. The Thompson Divide includes 220,000 acres of federally owned land running from Carbondale to McClure Pass.

Coalition president Chuck Ogilby sent letters Feb. 21 to six companies, offering to cover the investments they've made on leases. "We believe this is a reasonable proposition," Ogilby said in a press release. "It acknowledges the investments these companies have made, and gives them a way to support an initiative that has broad community support." The proposal would allow companies to cover their expenses and extricate themselves from the public controversy spawned by widespread local opposition to gas drilling.

New York judge rules in favor of
city zoning law that bans gas drilling

(The Associated Press; Feb. 22) - A New York court decision has bolstered a movement among towns determined to prevent the controversial practice of hydraulic fracturing for natural gas within their borders. A state Supreme Court justice Feb. 21 upheld the town of Dryden's August 2011 zoning amendment banning gas drilling.

Denver-based Anschutz Exploration, which has spent $5.1 million leasing and developing 22,000 acres in Dryden, about 40 miles southwest of Syracuse, had argued state law trumped the local ban. Attorney Tom West, who represented Anschutz, said the trial-level state court decision is likely to be appealed to the mid-level Appellate Division and, if necessary, to the state Court of Appeals.

More than 50 New York communities have enacted gas-drilling bans. Attorney Helen Slottje, who helps draft such laws, said the ruling should embolden towns considering local bans. "We think it's a terrific vindication of the town's right to home rule and to decide their future," Slottje said. "It really should give the green light to communities that want to proceed down this route."

Alberta to require fracking chemical
disclosure by end of the year

(Calgary Herald; Feb. 23) - Alberta's energy regulator expects to have rules in place by the end of the year that would make companies publicly disclose the ingredients used in hydraulic fracturing fluids. The Energy Resources Conservation Board intends to make it easy to search for any provincial well on a single website and find what a company has pumped underground to force oil and gas to flow.

The move came out of a review of unconventional oil and gas rules that started in 2010 and a commitment to align Alberta regulations with Saskatchewan and British Columbia, said Cal Hill, executive manager of regulatory development for the board. Alberta has been behind other jurisdictions on forcing disclosure, a requirement that started in the U.S. after widespread concerns from environmental groups and landowners about the risks of water contamination and pollution they blame on development of shale gas.

The regulator hasn't decided whether it will join the fracfocus.ca website that went live in B.C. last month and said it is considering making disclosure mandatory only on new wells. Matt Horne of the Pembina Institute environmental group said the Alberta regulator should include new fracs on old wells in disclosure requirements. "There's a fair bit of refracking that happens to keep them flowing," Horne said.

Cabot cuts back on capital spending for natural gas drilling

(Platts; Feb. 22) - Energy industry analysts Feb. 22 applauded a decision by Appalachian producer Cabot Oil and Gas to reduce by $100 million its projected 2012 capital spending for natural gas drilling, primarily in the Marcellus Shale play.

Company officials said the producer would lower its 2012 capital expenditures 15 to 20 percent in response to the low-price environment for natural gas. Cabot recorded dramatic production growth in the past year, chiefly driven by its ramp-up in the Marcellus play. The company announced that its gas production increased to an average 561 million cubic feet per day in the fourth quarter of 2011 from 398 million cubic feet in the fourth quarter of 2010.

Gabriele Sorbara, an analyst with Caris & Company, said Cabot's decision to cut back its capital spending on gas drilling makes good economic sense. "They're a victim of their own success. It doesn't make sense for them to bring on more natural gas production," he said. Sorbara predicted that as the current earnings reporting season progresses, other gas producers would announce similar cuts to their gas drilling budgets. "The main theme this quarter will be reducing capex in dry gas plays," he said.

Electric utility customers save money with cheap natural gas

(Philadelphia Inquirer; Feb. 23) - Residential electricity prices in Pennsylvania and New Jersey continue to move downward, thanks to the low cost of natural gas. PPL Electric Utilities this week became the latest utility to reduce its default generation charge. The Allentown, Pa.-company said its electricity supply fee, which is adjusted quarterly, will decrease nearly 11 percent on March 1.

"Low natural gas prices have driven down the price of electricity in wholesale markets," said Kurt Blumenau, a spokesman for PPL, which serves a large swath of eastern Pennsylvania. Utilities in Pennsylvania adjust their supply contracts quarterly based upon a basket of long-term and short-term gas contracts.

PPL's price appears to have come in remarkably low because 10 percent of its power is set by spot market contracts, which are very cheap because natural gas is selling for its lowest price in a decade. "There's no real magic here," said Dennis Urban, PPL's senior director of rates and regulatory affairs. "It's just the structure and timing of our procurement process."

Obama announces grant program
for natural gas-fueled vehicles

(The Detroit News; Feb. 23) - President Barack Obama Feb. 23 announced a $30 million Energy Department research grant to boost the number of vehicles running on natural gas, while in the same speech warning Americans that gasoline prices will "probably keep going up" as worldwide demand for cars and oil continues to rise.

"We're launching a program that will bring together the nation's best scientists, engineers and entrepreneurs to figure out how more cars can be powered by natural gas - a fuel that's cleaner, cheaper and more abundant than oil," Obama said.

Currently, only Honda sells a compressed natural gas passenger car in the United States - the Honda Civic GX. Chrysler has said it plans to bring natural gas vehicles to the United States and General Motors sells natural gas-fueled Chevrolet Express vans.

The Energy Department grant program will "support teams focused on overcoming these barriers by developing innovative, low-cost natural gas storage technologies and methods to lower pressure in vehicle tanks and help enable the widespread adoption of natural gas."

Kinder Morgan plans to expand
Alberta-to-BC oilsands pipeline

(Calgary Herald; Feb. 21) - Kinder Morgan Energy Partners said Feb. 21 it will move ahead with planning a $3.8 billion proposed twinning of its Trans Mountain oil pipeline to connect growing Alberta oilsands production with Canada's West Coast for export, after receiving strong and binding commitments from shippers.

The company said it will decide on the expansion size by the end of the first quarter for the Alberta-to-B.C. line, which competes with Enbridge's proposed Northern Gateway pipeline. Both projects are based on a need for increased access to global markets by landlocked oilsands producers set to more than double their output from 2010 to 2020. Canadian crude is steeply discounted to international prices on each barrel exported into the U.S. market, largely due to a glut in supply and increased U.S. production.

Kinder Morgan is still determining the expansion capacity of its 715-mile line, which currently delivers 300,000 barrels of oil per day from Edmonton to Burnaby, B.C., the company said. The open season process to gauge support from shippers on the line, which began last October and closed earlier this month, was based on a 600,000 barrel-per day capacity design. A "diverse group of existing and new shippers" back the expansion, Kinder Morgan said, not naming those shippers.

Opponents win court order blocking
oilsands line to East Coast

(Montreal Gazette; Feb. 24) - The environmental group Equiterre and a citizen from Dunham, Que., have won a Quebec Court ruling that will temporarily stall the attempt by Enbridge and Suncor to ship oil from Alberta through Montreal to Portland, Maine. The $17 million Trailbreaker Pipeline project proposes to reverse the flow in two existing pipelines that now ship oil from Portland to Montreal and on to Sarnia, Ont.

The two companies want to pipe 200,000 barrels a day of Alberta oil east to Maine and then ship it by tanker to U.S. Gulf Coast refineries, providing an additional outlook for booming Alberta oilsands production.

he environmental group opposes piping "dirty oil" through Quebec, claiming it poses an environmental hazard and encourages expansion of the oilsands. Equiterre spokesman Steven Guilbeault said sections of the pipeline are 40 years old and may not be able to withstand the high pressure required to pump heavy oil. Enbridge told the National Energy Board last year that "any potential adverse environmental and social-economic effects are not likely significant and are outweighed by the benefits."

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