Texas drought could limit water for fracking operations

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Latest Oil and Gas News: 
June 13, 2011

Texas drought could limit water for fracking operations

(Bloomberg) - The worst Texas drought since records were kept 116 years ago may crimp an oil and natural gas drilling boom as government officials ration water supplies crucial to hydraulic fracturing. In the driest areas, officials are warning residents and businesses to cut usage from rivers, lakes and aquifers. The shortage is forcing drillers to go farther afield to buy water from farmers, irrigation districts and municipalities, said Erasmo Yarrito Jr., the state's overseer of water supplies from the Rio Grande River.

Concern over water is especially acute in southern Texas's Eagle Ford Shale area because drilling there is more water-intensive than other regions, said Robert Mace, a deputy executive administrator of the Texas Water Development Board. Fracking a single Eagle Ford well requires as much as 13 million gallons of water, enough to supply the cooking, washing and drinking needs of 40 adults for an entire year.

The water crisis in Texas highlights a continuing debate over water supplies and hydraulic fracturing. The Eagle Ford's peculiar geology means it takes three to four times as much water to fracture as the Barnett Shale near Forth Worth, Mace said.

Critics line up in opposition to U.S. LNG exports

(Pittsburgh Tribune-Review) - Legendary Texas oilman, corporate raider and natural gas advocate T. Boone Pickens believes that exporting U.S. natural gas overseas is a mistake - and a national security issue.

If we do it, Pickens said, "we're truly going to go down as the dumbest generation," adding, "It's bad public policy to export natural gas." Several U.S. natural gas producers and LNG terminal operators are pushing for government approval to export gas overseas for higher profits on the international market, a move that could drive up prices in the United States, opponents say.

Paul Cicio, president of the Industrial Energy Consumers of America, said the Department of Energy did not address the potential "cumulative effect" on U.S. gas supplies and prices in its recent decision to allow LNG exports from a Gulf Coast terminal. "This is bad policy," said David Schryver, executive vice president of the American Public Gas Association, which represents 700 public gas companies in 36 states.

Report says natural gas an easy way to cut power plant emissions

(The Financial Times) - The U.S. could cut its carbon dioxide emissions by 8% with minimal additional capital investment, simply by making more use of existing gas-fired power plants, according to a study from the Massachusetts Institute of Technology.

The report, "The Future of Natural Gas", released June 9, argues that the opening up of new shale reserves "fundamentally enhances the nation's long-term gas supply outlook", creating a competitive advantage for American manufacturers and making it easier to cut emissions.

The U.S. has a large base of gas-fired power plants that are used at only about half their potential full output. If they were run at maximum capacity, and old inefficient coal-fired plants taken off the grid, U.S. greenhouse gas emissions from power generation could be cut by 20% and from the country as a whole by 8%, the MIT study concluded.

Pennsylvania Legislature in final weeks of natural gas debate

(The Associated Press) - Accusing the government of being unable to protect the environment or public health, more than 200 people rallied June 7 in the Pennsylvania Capitol for tougher laws -- if not an outright ban -- on natural gas drilling as pressure builds on lawmakers to approve a levy on the booming industry.

The rally comes on the heels of an announcement by two more Republican lawmakers in the GOP-controlled Legislature that they're sponsoring bills to impose a tax or fee on Marcellus shale gas production.

It appears likely that lawmakers will force floor votes on a tax or fee proposal by trying to attach amendments to unrelated bills as lawmakers rush to finish the state budget before their June 30 adjournment deadline. Meanwhile, many at the rally seemed uninterested in a tax and favored an outright ban on drilling.

Industry pays travel for supporters to attend fracking hearing

(Scranton, PA, Times Tribune) - It sounds like a pitch for an overnight getaway: an all-expenses-paid trip to the Pittsburgh area, including airfare or bus transportation, meals and lodging.

In an effort to pack a June 14 federal public hearing with natural gas drilling supporters, an oil and gas industry public relations group is offering those incentives to area landowners to encourage them to travel to Washington, Pa., to speak up for drilling.

The public meeting is for people to talk about hydraulic fracturing with members of the Natural Gas Subcommittee of the Secretary of Energy Advisory Board. The subcommittee was convened in May at the request of President Obama to provide recommendations on how to improve the safety and reduce the environmental impact of hydraulic fracturing in shale formations.

Pennsylvania will consider new rules for pipelines

(Scranton, PA, Times Tribune) - More natural gas drilling means the need for more pipelines to get the gas to market. And maybe the need for more rules.

Pennsylvania's Wyoming County commissioners will consider staff revisions to the subdivision and land-development ordinance to regulate natural gas pipelines and development near them. It addresses everything from risk-mitigation measures to landscaping, buffering and screening to improve aesthetics.

The changes would include that new buildings must be at least 100 feet away from existing and proposed pipelines, and that land uses with high on-site populations like schools and hospitals must be at least 500 feet away. There currently are no such setbacks.

LNG execs see continued market in Northeast U.S.

(Platts) - Despite U.S. shale gas supply growth, imported LNG will still find a home in the Northeast, even if it is largely seasonal, said gas forum panelists June 7 in Boston. Though Repsol's LNG import terminal in New Brunswick, Canada, and GDF Suez's Boston terminal are located near the Marcellus, Utica and Frederick Brook shales, they feed separate portions of the Northeast market, said Repsol vice president Vince Morrissette. "There's enough room for shale and LNG in the Northeast," he said.

Local storage and quick regasification rates allow LNG terminals to ramp up quickly to full capacity during peak seasonal periods. "LNG played a critical role in the Northeast and still does," said GDF Suez vice president of sales Joseph Murphy.

Further, demand in the region from power generation growth through new plants -- including 4 gigaqwatts in New England alone by 2013 -- and fuel switching from oil to natural gas is expected to eat up much of the shale supply growth as well, leaving a niche for LNG imports to occupy.

Anadarko reaches deal on natural gas drilling in Utah

(Reuters) - Anadarko Petroleum's plan to develop a huge natural gas field in Utah cleared a key hurdle by reaching an air quality agreement with the federal government, the Interior Department said June 8. A final decision by the BLM is expected by the end of the year.

The project in the Greater Natural Buttes Area involves drilling up to 3,675 new gas wells to produce more than 6 trillion cubic feet of gas over 10 years. The project was proposed in 2006 but has been delayed over air quality concerns.

Working with the Interior Department and EPA, Anadarko agreed to several air pollution control technologies, including a pilot project to evaluate using natural gas-fueled drilling rigs to mitigate emissions. Parts of Utah sometimes have some of the highest winter time ozone levels in the country, due to a sharp increase in drilling, according to the department.

Exxon pays $1.7 billion for two gas producers

(Reuters) - ExxonMobil has bought privately held natural gas company Phillips Resources and related company TWP Inc. for $1.7 billion last week, picking up about 317,000 acres for exploration in the Marcellus shale basin. The action highlights the importance Exxon is placing on natural gas after last year buying XTO Energy, adding one of the leading developers of shale gas and a resource base of 45 trillion cubic feet of gas equivalent.

Exxon, already the largest producer of natural gas in the United States, said Phillips and TWP had proved reserves of 228 billion cubic feet equivalent of natural gas. The companies produce about 50 million net cubic feet per day of natural gas.

Exxon has said it is taking a long-term view of natural gas markets, betting that power generation in developing countries like China and India will cause demand for the cleaner-burning fuel to surge in coming years.

Exxon announces major Gulf of Mexico discoveries

(Wall Street Journal) - With a trio of big oil and gas finds, ExxonMobil is making its first major splash in the U.S. Gulf of Mexico in decades. The company June 8 unveiled three discoveries that are likely to turn it into one of the biggest producers of oil and gas in the region.

The finds contain a combined 700 million barrels of oil equivalent. Only three fields in the Gulf have more recoverable oil, says Mohammad Rahman, an analyst with energy consultancy Wood Mackenzie.

The discoveries underscore Exxon's changing strategy. For decades the company believed that big oil fields in exotic locales provided more bang for its buck than the U.S. Gulf. But growing barriers to foreign investment and onerous tax regimes in oil-rich countries have made the area more attractive, even though finds there tend to be smaller, harder to access and quick to deplete.

Shell makes plans for second floating LNG project

(Reuters) - Shell plans to install a second floating LNG project at the Greater Sunrise gas field in the Pacific as it steps up production in the region to feed rising demand in Asia, a senior executive said June 13.

"As soon as Australia and East Timor reach an agreement, we can move very quickly," Neil Gilmour, general manager of FLNG at Shell Upstream International, said at the Reuters Global Energy and Climate Summit. East Timor is locked in a dispute with Australia's Woodside Petroleum and partners over developing the Greater Sunrise gas field, which straddles Australian and East Timorese waters.

Other areas where the floating LNG technology could be used include Indonesia, East Africa, Southern Europe and Brazil, Gilmour said. Shell owns 100% of its first floating LNG project at the Prelude gas field in the Browse Basin, about 120 miles offshore Australia. The project will be able to produce an average 500 million cubic feet of gas per day aboard the largest floating object in the world -- longer than four soccer fields and about six times heavier than the largest aircraft carrier.

Malaysia may hurry to beat Shell with first floating LNG ship

(Platts) - Malaysia's Petronas is planning to make a final investment decision on a floating LNG facility by the end of the year, in a move that could make it first to market with floating LNG production in early 2015, the state-owned company's chief executive said June 8.

That would put Petronas at least a year ahead of scheduled first production from Shell's recently approved Prelude floating LNG facility in Australia.

The project would be 100% owned by Petronas and located in western Malaysia, with a capacity of about 160 million cubic feet per day.

Korean shipyard to building floating LNG storage

(The Korea Herald) - Hyundai Heavy Industries announced June 12 that it would build the world's first floating LNG storage and re-gasification unit. A floating storage and re-gasification unit, or FSRU, is a vessel for storing LNG at sea. It is connected to land-based facilities by pipelines, through which re-gasified LNG is transferred.
According to the company, it was awarded a $500 million contract for two LNG-FSRUs from the Norway-based LNG supplier Hoegh LNG. The two LNG-FSRUs, the first of which will be delivered to Hoegh LNG in the second half of 2013, will be able to store almost 3.5 billion cubic feet of gas each, the company said.

The shipbuilder added that a new design would allow the vessels to stay at sea for up to 10 years without maintenance. According to the company, the cost of building an LNG-FSRU is about half that of onshore facilities.

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