Natural gas makes inroads against coal

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Latest Oil and Gas News: 
July 1, 2011

(Natural Gas Week) - The age of coal may not be over, but the fuel is losing market share to natural gas at U.S. power plants. "Electric power producers are developing more confidence in the long-term supply outlook for natural gas than they have shown in at least 40 years," said a report in the June 27 issue of Natural Gas Week.

"A combination of higher construction and operating costs for coal plants, higher emissions of carbon dioxide and various toxic products, carbon capture sequestration expenses and expectations of low natural gas prices well into the future don't bode well for the coal industry," said the report. Additional power-sector demand boosted U.S. gas consumption 3 billion cubic feet per day in 2009, 2.5 bcf per day in 2010 and 2.5 bcf per day in the first three months of this year.

"Environmental pressures are stressing coal-plant economics," the report said. Coal continues to lose market share to natural gas, Barclays Capital coal analyst Michael Zenker was quoted in the news report.


Plentiful gas, low prices, good for industry, consumers

(Kansas City Star) - Natural gas prices, once considered the most volatile of any commodity, could be headed for years or even decades of stability, helping the economy and household budgets.

That's great news for industries that rely heavily on natural gas, from fertilizer and petrochemicals to steel, and for consumers, who could get a break on winter heating bills. The petrochemical industry is considering investing $16 billion in new and refurbished plants since domestic natural gas prices have made it competitive with foreign companies. "It is ... a game changer," said Kevin Swift, an economist for the American Chemical Council.

Electric utilities are expected to build more plants that use natural gas, which burns more cleanly than oil and coal, and a recent Black & Veatch survey found that utility executives now view gas as the most "environmentally friendly" technology, replacing nuclear energy in the top spot.


Industry attacks N.Y. Times reporting on shale gas reserves

(The Oklahoman) - New York Times articles questioning whether the industry has overhyped the productivity and economic potential of shale gas has created a furor among oil and gas executives as well as academic officials who study the industry.

"Are you telling me some reporter at The New York Times knows more about the natural gas business than 25 companies and their engineers? I don't think so," said Texas billionaire T. Boone Pickens, who has amassed much of his fortune through his ability to analyze and predict developments and price movements in the oil and gas industry.

Aubrey McClendon, CEO of Chesapeake Energy, sent an email to employees, stating: "The Times story was obviously motivated by an anti-natural gas agenda." ExxonMobil, the largest natural gas producer in the U.S., blasted the Times' journalistic standards in a blog entry June 27: "The Times questions the value of our country's vast shale gas resources with little more than anonymous sourcing, two-year-old emails and analysis unsupported by fact."


Congressman questions 'optimistic estimates' of shale gas

(Bloomberg) - A congressman has asked the U.S. Energy Information Administration to re-evaluate the nation's natural gas resources after a report questioned whether drillers can economically extract shale gas. Rep. Ed Markey, of Massachusetts, said June 27 he wants the EIA, which tracks and analyzes energy data, to justify "optimistic estimates" of the potential for shale gas production using hydraulic fracturing.

"We need to know whether the natural gas located underneath the surface is a real source of fuel for the next generation, or a speculative bubble hyped by the oil and gas industry and echoed by the federal government's energy experts," Markey said.

The New York Times has reported that some EIA employees "apparently have deep reservations" about projections of recoverable natural gas resources, Markey said. He has asked the EIA to provide information on its data and how it calculates the gas resources.


Lawmakers want federal agencies to look into natural gas industry

(The New York Times) - Federal lawmakers have called on several agencies, including the Securities and Exchange Commission, Energy Information Administration and Government Accountability Office, to investigate whether the natural gas industry has provided an accurate picture to investors of the long-term profitability of their wells and the amount of gas the wells can produce.

The calls for investigations came amid growing questions about the environmental and financial risks surrounding natural gas drilling and hydraulic fracturing. Members of the House Committee on Natural Resources said they hope to hold a hearing in the next several weeks to discuss natural gas drilling.

Sen. Benjamin Cardin, of Maryland, sent a letter to the GAO, the investigative arm of Congress, asking it to look into questions about the environmental impacts of hydrofracking, the accuracy of reserves estimates and industry regulation. Reps. Carolyn Maloney and Jerrold Nadler, both of New York, have asked the SEC to look into production estimates and how companies book gas reserves.


Panel chair says more money needed for fracking research

(Reuters) - The U.S. government should spend more money researching how to make natural gas drilling safer, the chair of a federal panel looking into shale drilling said June 28. The Obama administration requested only $24 million for the 2012 budget to research and analyze fracking, said John Deutch, a former CIA director who is leading a Department of Energy panel on improving the safety of hydraulic fracturing.

It means only a small amount of money will go to research on safer ways to exploit a resource that already provides about 25% of U.S. natural gas and could provide more in coming years. By comparison, the president requested $3.2 billion for the 2012 budget in energy efficiency and renewable energy.

Daniel Yergin, chairman of energy consultants IHS CERA, who is also on the federal panel, said: "The number (fracking research budget) is very low given the high degree of importance and high degree of public interest."


U.S. gas production highest in six years

(Dow Jones) - U.S. natural gas output in the Lower 48 states in April reached a new high for the era in which producers are tapping huge reserves locked in shale formations, according to government data released June 29.

Gross natural gas production rose by 1.1% in April to 69.05 billion cubic feet a day, the highest level recorded in at least six years, the Energy Information Administration said.

Drilling activity in the Haynesville Shale formation propelled Louisiana to a 2% increase in output over March, the agency said. And the EIA said production in the Marcellus Shale, which underlies Pennsylvania and several neighboring states, also helped push output higher.


EPA working on air quality regulations for gas drilling, fracking

(Aspen Daily News, CO) - EPA head Lisa Jackson said June 28 her agency is working on air quality regulations for areas impacted by natural gas production and hydraulic fracturing.

"You are going to have huge smog problems where you never had them before," she said. "These are rural areas. ... There is a lot of activity around those wells and that has an impact on air quality - and we know it already. The EPA will soon be coming out with regulations to deal with the air quality around natural gas production."

The regulations are expected to come at the conclusion of an ongoing two-year EPA study into fracking. She added that keeping groundwater safe from fracking pollution means keeping natural gas companies in line, and monitoring how they protect drinking water while drilling. "If you get a bad operator in there," she said, "someone who is not responsible, who is not seeing how important it is to get this right, they can contaminate an aquifer."


Gas driller sues W.Va. city over fracking ban

(Charleston, W.Va., Daily Mail) - A natural gas company is suing the city of Morgantown, W.Va., for tens of millions of dollars over a recent decision by city officials to ban hydraulic fracturing used in producing gas from the Marcellus Shale.

Charleston-based Northeast Natural Energy filed the suit last week, accusing Morgantown officials of dealing a "death blow" to gas drilling in the area, violating the state constitution and depriving the company of its property rights. Morgantown Mayor Bill Byrne said city official only acted because state lawmakers had failed to do anything to regulate Marcellus Shale development.

Northeast said it had already invested $7 million on its site when the city council voted last week to ban hydraulic fracturing in Morgantown and within a mile of its borders. The city has already won one round in the legal battle. A circuit court judge June 24 denied Northeast's request for a restraining order to keep Morgantown from enforcing the ban.  


N.J. Legislature votes to ban fracking

(The Associated Press) - The New Jersey Legislature June 29 passed a ban on hydraulic fracturing. The ban passed 33-1 in the state Senate and 58-11 in the Assembly. It's now up to Gov. Chris Christie to decide whether to sign or veto the largely symbolic measure.

Should he sign it, New Jersey would be the first state in the country to ban fracking. Experts say there's hardly any natural gas under New Jersey - and certainly not enough to drill for.

Natural gas drilling has become a contentious political and policy issue for states that sit over the Marcellus Shale, stretching from Tennessee to New York. In Pennsylvania, energy companies have been rushing to lock up land rights for drill wells while officials debate how to regulate the industry. In New York, there's a moratorium on fracking.


2 Marcellus wells could produce 30 million cubic feet/day, each

(Buffalo News) - Two unexpected gushers in northeastern Pennsylvania are helping to illustrate the enormous potential of the Marcellus Shale natural gas field. Each of the Cabot Oil & Gas wells in Susquehanna County is capable of producing 30 million cubic feet per day - believed to be a record for the Marcellus.

"There was definitely excitement among the team that planned out these wells and executed their completion," said Cabot spokesman George Stark.

Drilling companies knew the Marcellus held a lot of gas. They just had to figure out a way to get it out, and they say they're getting better at it all the time. Operators say they have a greater understanding of the complicated geology of the Marcellus, allowing them to land their drill bits in the sweet spot of the formation.


Pennsylvania legislators delay drilling fee decision until fall

(Delaware County Daily Times, PA) - Republican legislative leaders said June 28 they are putting off the effort to impose an impact fee on natural gas drilling in Pennsylvania until the fall session, after Gov. Tom Corbett's commission on Marcellus shale drilling wraps up.

House Democrats, who planned to force an impact fee into the budget with the help of a small number of moderate Republicans, have withdrawn their amendments, apparently conceding defeat.

Senate President Joseph Scarnati, who authored the impact fee proposal that advanced the furthest this session, said the Senate would wait until the fall session to take up the issue. His bill would impose a $10,000 per-well annual fee, with the revenue being distributed between local governments and infrastructure and environmental initiatives.


Shale gas could help Alberta petrochemical industry

(Edmonton Journal) - A growing flood of shale gas across North America, and the potential to collect large amounts of off-gases - the byproducts of oilsands upgrading - could boost Alberta's petrochemical industry over the next few years by providing new feedstock for existing plants and fueling plans for new ones. The new supplies would help replace the lost production from Alberta's older, conventional gas plays.

"Cheaper gas is a game changer, and it will be a boost to local firms like Agrium, Sherrit and the oilsands producers, which all use natural gas," said Neil Shelly, executive director of Alberta's Industrial Heartland, a group that represents local municipalities.

However, there is another side to the story. Alberta's conventional natural gas production is falling sharply. Nova Chemicals must now import ethane from North Dakota for its polyethylene plants for the first time in its history. Its plant at Joffre needs 180,000 barrels per day of ethane, and 45,000 barrels will be coming from the U.S. under a recent deal.


New Brunswick resources minister wants gas to stay in province

(The Daily Gleaner, Fredericton, New Brunswick) - The majority of natural gas found in shale rock in New Brunswick should remain here for the benefit of the provincial economy rather than be exported to the U.S., said Natural Resources Minister Bruce Northrup. "I'm not sure what the percentages will be," he said. "But we want to use the majority of it here in New Brunswick and then export the rest of it."

Tom Alexander, New Brunswick's general manager for SWN Resources Canada, which is exploring for shale gas in the province, said if the government implemented a policy that required half the shale gas found to remain in the province, it wouldn't scare his company off but it might slow down development.

"If you limit the amount of gas that can go out of the province, then potentially you limit the rate at which you can develop the source of gas," Alexander said.


Chevron has 90% of Gorgon LNG pre-sold on long-term deals

(The Financial Times) - Some 90% of Chevron's share of Gorgon gas has been presold to Japanese and South Korean customers under long-term agreements, while Exxon has struck a deal with PetroChina for its share of production from the $43 billion Western Australia LNG project. Chevron is half-owner and operator, with minority stakes held by Exxon and Shell.

Gorgon's first gas deliveries are expected in 2014; initial capacity is set at 2 billion cubic feet of gas per day. Gorgon may be the biggest but there are at least a dozen more Australian LNG projects either under construction or in advanced planning. The frantic pace of investment has been spurred by rising energy demand in Asia, led by China, Japan and South Korea.

Craig McMahon, a Perth-based analyst with Wood Mackenzie, is skeptical whether all the projects being planned in Australia will reach fruition and believes some competing ventures will merge.


Qatar boosts LNG shipments to Japan

(Wall Street Journal) - Qatar, the world's largest LNG exporter, is poised for a sharp rise in the value and volume of its exports this year, benefiting from the troubles in Japan's nuclear industry and surging demand for energy in Asia. Japan's power companies have agreed to buy an average 500 million additional cubic feet of gas per day from Qatar over the next year and are in talks to purchase even more.

Mostly as a result of greater Asian demand, Qatar's LNG exports are expected to rise to an average of almost 10 billion cubic feet per day this year. Qatar is already exporting around 60% of its LNG to Asia.

LNG prices have risen in the Asian market this year, reflecting the higher demand. Asian spot LNG prices averaged $11.60 per million British thermal units in May, up nearly 30% from $9 per million BTUs in January this year, according to the latest data based on official import statistics calculated by IHS CERA.


Indonesia wants to move up date for floating LNG project

(Reuters) - Indonesia aims to bring a floating LNG project off the Timor Island online by 2016, two years earlier than expected, an official from the country's oil and gas regulator said June 29.

"The official date is 2018, but we are looking to accelerate that to 2016," Agoes Sapto Rahardjo, senior manager of LNG at BPMigas told Reuters. An earlier start date puts Indonesia in race with Australia and Malaysia to be the first country to produce LNG from a floating plant. Shell expects to go online with its first floating LNG plant offshore Australia by 2017.

The Indonesian floating LNG project would have a capacity to process about 350 million cubic feet of gas per day.


Tokyo utility plans to use more gas to replace nuclear power

(Channel News Asia) - The new president of Tokyo Electric Power plans to put LNG at the center of the embattled utility's future strategy following the crisis at its Fukushima nuclear plant. Toshio Nishizawa said LNG-powered electrical generation would be at the core of an upcoming 10-year power supply plan to be compiled by the autumn.

Nishizawa said TEPCO will in the future rely less on nuclear power, which currently provides 30% of its capacity. The utility is currently only using four of its 17 nuclear reactors. All six at the Fukushima Daiichi plant are out of action, and four are offline at its Fukushima Daiini complex following the March 11 earthquake and tsunami.

Nishizawa also expressed willingness to participate in an Australian project to secure about 20% of its annual LNG consumption.


Equatorial Guinea will double LNG output

(Bloomberg) - Equatorial Guinea will build a second LNG plant at a cost of $4 billion to maybe double its output, the head of the state-owned gas company said.

The West African nation's second LNG plant will produce between 250 million and 600 million cubic feet of gas a day, said Antonio Ndong Ondo, director general of Sonagas. Capacity will depend upon discovered reserves early next year when Sonagas and partners Noble Energy and Ophir Energy decide on the investment.

Equatorial Guinea, tucked into the Gulf of Guinea, currently exports about 500 million cubic feet of gas a day. The second LNG plant may start producing by 2016, Ndong said. The nation has about 8.5 trillion cubic feet of proved natural-gas reserves, according to Sonagas.


Anadarko looks to prove up reserves for Mozambique LNG

(Platts) - A joint venture led by Anadarko Petroleum is targeting a final investment decision in 2013 on a proposed offshore Mozambique LNG project, minority partner Cove Energy said June 27.

According to a statement released after UK-based Cove's annual general meeting, sufficient volumes of gas have been discovered in offshore Mozambique's Windjammer, Barquentine and Lagosta fields to prompt Anadarko to mobilize a full team to pursue the LNG project.

Appraisal drilling is currently under way, focused on proving sufficient resources to lay the foundations for the first LNG train. Anadarko has previously said it believes the finds have combined reserves of at least 3 trillion cubic feet of gas, enough to underpin commercial LNG development.


Turkmenistan-China gas line in full operation

(The Associated Press) - The full length of the 5,370-mile natural gas pipeline linking Turkmenistan with southern China has begun operations, helping boost supplies to Chinas booming industrial zones, a report said June 30.

The $22 billion pipeline passes through 15 of China's provinces to reach the Pearl River Delta region, near Hong Kong, the official Xinhua News Agency reported. Construction of the pipeline wrapped up earlier this month. Gas started flowing through an initial segment in 2009. Additional branch lines will be completed next year.

The pipeline will provide up to 3 billion cubic feet of gas per day, helping reduce China's reliance on heavily polluting coal. China has been courting Central Asian former Soviet bloc members like Turkmenistan as part of its push to further diversify and expand its access to the energy resources needed to power its fast-growing economy.


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