Maryland regulators want utilities to use more natural gas

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Latest Oil and Gas News: 
October 4, 2011

(Baltimore Business Journal; Sept. 30) - Maryland energy regulators are requiring Baltimore Gas and Electric and other utilities to solicit proposals for new natural gas power plants in the state.

The Public Service Commission order moves forward a long-delayed debate over energy regulation in the state and the need for new power generation. BGE and other electricity distribution companies in the state must issue a request for proposals for power plants by Oct. 7, the commission ruled last week.

The commission found there is insufficient power generation in the state to meet peak demand on hot summer days, and the state also depends too heavily on coal power, commissioners wrote. Proposals for projects within the territories of BGE and Pepco in the Washington, D.C., area, must include a 20-year deal in which utilities agree to buy power from the facilities, and must be no larger than 1,500 megawatts.

Pennsylvania governor proposes new fees, rules for gas drillers

(Reuters; Oct. 3) - Pennsylvania Gov. Tom Corbett Oct. 3 announced plans for new levies and stricter rules for natural gas drilling, which has been blamed by some for contaminating local water supplies. Corbett proposes to slap a potential $160,000 "impact fee" on each well drilled, which would be used to improve infrastructure and promote the use of natural gas vehicles in the state.

"Estimates show that this impact fee will bring in about $120 million in the first year, climbing to nearly $200 million within six years," Corbett said. Each well will be subject to a fee of up to $40,000 in the first year, $30,000 in the second year, $20,000 in the third year and $10,000 in the fourth through tenth years, the statement said.

The proposals were put forward by the Marcellus Shale Advisory Commission, which Corbett formed in March. Under the recommendations, the minimum distance of drilling sites from private water wells will increase from 200 feet to 500 feet and to 1,000 feet from public water systems. The required distance from streams, rivers and ponds will increase to 300 feet from the current 100 feet. The penalty for civil violations, such as spills or contaminating water supplies, will double to $50,000.

Projects planned to monetize N.D. gas and reduce flaring

(Platts; Oct. 3) - About $3 billion worth of infrastructure projects are on the drawing boards in North Dakota's Bakken Shale play to monetize the natural gas produced in association with oil, which otherwise would be lost to flaring, operators and state officials said.

About 134 million cubic feet of gas per day is flared in North Dakota - almost one-third of the state's production - because of the lack of infrastructure to take the gas away or otherwise monetize it, Bruce Hicks, assistant director of the Oil and Gas Division of the North Dakota Industrial Commission said. A number of midstream companies have projects under way to capture the gas produced in association with Bakken oil, he said.

Justin Kringstad, director of the North Dakota Pipeline Authority, said gas infrastructure projects being proposed or built in the play "to the tune of $3 billion" include new gas processing plants and expansions to existing plants, two natural gas liquids pipelines and adding compression on the North Dakota intrastate gas system.

B.C. looks at possible link between fracking and earthquakes

(Calgary Herald; Sept. 30) - B.C.'s energy regulator says it will investigate a link between hydraulic fracturing and new earthquake activity in the province's northeastern corner. B.C. Oil and Gas Commission spokesman Hardy Friedrich said a recent examination of seismic survey data showed the Horn River Basin area near Fort Nelson warranted a closer look.

Since 2009, there have been 31 earthquakes in the Horn River Basin, an active gas extraction area. Before 2009, the area had not experienced any recorded earthquake activity, Friedrich said. The earthquakes ranged in size from 2.5 to 3.5 on the Richter scale, which typically means they can be felt but rarely cause damage. Three of the earthquakes took place as hydraulic fracturing for shale gas was under way.

"There hasn't been a link between the hydraulic fracturing and anomalous seismic activity, but we wanted to take a proactive approach," Friedrich said. The plan is for the oil and gas commission to work with the Pacific Geoscience Centre, which monitors and researches earthquakes.

Vt. gas utility can charge current customers for future expansion

(Rutland Herald, VT; Oct. 4) - Plans to expand Vermont's natural gas system took a step forward Sept. 30 when state energy regulators narrowly approved a controversial method for funding the build-out of new pipelines that could eventually carry natural gas into Addison County.

The state's Public Service Board said Vermont Gas Systems could take $4.4 million annually from its existing customers and put it in an "expansion fund" to help pay for the extension of the company's gas network to areas without service. Vermont Gas hopes to someday expand the natural gas network into Rutland County and connect to the national system near Lake George, N.Y.

The expansion project, estimated to cost $60 million to $70 million, is not close to being built. Vermont Gas hasn't filed a permit application with the Public Service Board, but the board's approval of the fund is a key development, state officials said. One board member, John Burke, voted against the plan and wrote a dissenting opinion. Burke said ratepayers in northwestern Vermont shouldn't have to pony up what amounts to venture capital that Vermont Gas should get from other sources.

New Gulf Coast LNG import terminal opens for business

(Platts; Sept. 30) - Though the newly opened Gulf LNG import terminal near Pascagoula, Miss., could serve a growing demand from Southeast power generators, it also will find itself competing with a number of shale gas plays in the region, market watchers said. The terminal, with capacity to handle an average 1.5 billion cubic feet of gas per day, is owned by El Paso, Crest Group and Angola's national oil company Sonangol. It is the second new LNG import terminal to open this year on the Gulf Coast.

The Pascagoula Expansion Project, a 26-inch diameter pipeline connecting the terminal to the Mobile Bay lateral - and from there to interstate pipelines Florida Gas Transmission and Transcontinental Gas Pipe Line - was placed into service last week, ready to move 810 million cubic feet of gas per day from the LNG terminal, according to Transco spokesman Christopher Stockton.

Because of its proximity to the gas-hungry Florida market, and the outlook for growth in the Southeast, Greg Hopper, managing director with consultant Black & Veatch, said Gulf LNG has a prime location. But a Southeast gas marketer said the region is already well served following numerous expansions and additions to the pipeline grid aimed at moving growing shale supplies in Louisiana and Texas to the Southeast: "Shale gas is coming in heavy."

Enbridge talks about getting into LNG export business

(Reuters; Oct. 4) - Enbridge said Oct. 4 it is in talks with potential producers to export liquefied natural gas from Canada, joining a lengthening list of North American companies looking to tap thirsty markets in Asia. Enbridge would be interested in existing projects being developed in Canada, said executive vice president Al Monaco.

"We would certainly be interested in LNG exports, right from the midstream pipeline side, right up to the LNG export facility itself," Monaco said at the company's investor day in Toronto. "We are in discussions with potential producers. That is probably a little bit longer term," he added.

Enbridge would consider buying into an existing project, Monaco said. "There are a couple of projects out there being developed right now ... and we'll be looking to put proposals together to see whether or not we can add some value to those projects."

Qatar may buy into Australia LNG ventures

(Upstream; Oct. 3) - Qatar is reportedly looking to buy into Australia's expanding liquefied natural gas sector as it looks to head off the biggest threat to its position as the world's No. 1 LNG exporter. The move is being seen by market watchers as an attempt by the Middle East nation to gain greater control over LNG supplies vital to Asian economic growth.

By 2020, Australia may eclipse Qatar as the world's largest LNG exporting country. Australia is now the fourth-largest LNG exporter and is already China's biggest supplier. Qatar Petroleum might join in a bid to control at least some of the supply coming from the world's fastest growing producer of LNG.

"The motivation would clearly be strategic. Australia will be their biggest competitor in the Asian market. ...They'd be primarily interested in gaining long-term market share," said Dubai-based energy economist Robin Mills. "There would also be a value of information. Just by being in the market, Qatar would gain valuable info about the competitiveness of the projects and about pricing."

Coal-bed methane producer in India wants $13 for gas

(The Economic Times; Oct. 3) - India's Reliance Industries has sought approval to sell coal-bed methane gas at about $13 per million British thermal units, more than double the rate at which domestically produced gas is sold at present.

Reliance on Sept. 16 submitted to the Oil Ministry a formula for pricing coal-bed methane it plans to produce from the Sohagpur block in Madhya Pradesh. The pricing formula is the same as the one at which RasGas of Qatar sells LNG on a long-term contract to India.

Great Eastern Energy is selling the coal-bed methane it produces from its Raniganj block in West Bengalat $6.79 per million Btus, while domestically produced natural gas in India is priced at $4.20 to $5.73. The natural gas Reliance produces from its eastern offshore KG-D6 fields is priced at $4.20 for five years ending March 31, 2014.

TransCanada CEO flies along oilsands pipeline route

(Calgary Herald; Oct. 1) - As the final hours of public hearings on one of North America's largest energy projects were set to begin, TransCanada CEO Russ Girling was flying in a helicopter 200 feet above the route of his company's planned oil pipeline through Nebraska. The controversy over the Nebraska leg of the line centers on an aquifer in farmland the pipeline would bisect.

Girling wanted to see for himself why state officials, environmental groups and some ranchers, farmers and other landowners are so fearful that a potential oil spill along the pipeline could poison the source of 80% of Nebraska's drinking water. Nebraska's top three elected officials are against the pipeline. It's a conflict the company never foresaw. "We didn't expect the aquifer to become a major controversial issue," Girling said.

"I wanted to be on the ground and understand every aspect of that concern," the CEO said of his flight before the public hearing in Nebraska, adding he's now fully satisfied the fears are unwarranted. The State Department, which will decide the fate of the Keystone XL proposal, scheduled a round of public hearings in six states along the route. A final hearing will occur in Washington Oct. 7 before an expected decision by the end of the year.

Chevron tries solar power to boost oil field production

(The Wall Street Journal; Oct. 1) - Chevron is enlisting the sun to help drain the sludge-like dregs of crude from an aging Coalinga, Calif., oil field. Historically, oil companies have used natural gas to create the energy for steam to soften and move the oil, but Chevron wants to try a vast stretch of solar panels.

Chevron and its partner, BrightSource Energy, in late August began making steam from the sunlight that drenches the San Joaquin Valley in what is by far the largest such facility in the world. Chevron has spent a little more than $28 million, but BrightSource has lost at least $40 million on the project and disclosed it will lose much more. For a proving ground, Chevron picked Coalinga, where oil has been produced since 1887 and the remaining crude is nearly solid at its natural temperature.

The project uses more than 7,000 mirrors hoisted on steel pylons, each 7 feet by 10 feet, to track the sun and beam its rays onto a 300-foot tower, generating steam that is shunted into the oil field. Harnessing the sun to generate steam costs more upfront than using a gas-fired generator. Key will be how well the mirrors track the sun, how reliably they generate steam and how expensive the infrastructure is to maintain.

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