Government could help build natural gas demand

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July 22, 2011

(Fuel Fix, Houston Chronicle) - The U.S. may have a 100-year supply of natural gas locked underground, but how much of it gets extracted hinges on what the federal government does to promote the fuel, energy experts told a Senate panel July 19.

Congress could drive demand for natural gas by encouraging utilities to retire coal-fired power plants. Proposed environmental laws putting a price on carbon dioxide emissions and other regulatory changes could bolster the move to gas, said Howard Gruenspecht, acting administrator of the government's Energy Information Administration.

But senators at the Energy and Natural Resources Committee hearing signaled they are skeptical that tremendous U.S. gas supplies can and will be commercially recoverable at today's relatively low prices. Sen. Jeff Bingaman, D-N.M., noted that the U.S. has been through several boom-and-bust cycles with gas, including in the early 2000s, when once-rosy predictions about supply were replaced by concerns of shortages.

 

Bloomberg donates $50 million to anti-coal campaign

(The Washington Post) - New York Mayor Michael Bloomberg will donate $50 million to the Sierra Club to support its nationwide campaign to eliminate coal-fired power plants.

Sierra Club executive director Michael Brune said the gift from Bloomberg Philanthropies, spread out over four years, will go toward the group's Beyond Coal campaign, which has helped block the construction of 153 new coal-fired power plants across the country since 2002. Brune said the group will use the money "to identify the oldest, dirtiest coal-fired power plants, retire them and replace them with clean energy."

As mayor of New York, Bloomberg has pushed for environmentally friendly policies such as investing in renewable energy and making the city's taxi fleet more efficient. But this is his largest financial contribution to an environmental effort, and the donation will significantly swell the Sierra Club's $80 million annual budget.

 

Heat wave drives up Northwest natural gas prices; some top $10

(Bradenton Herald, FL) - With even higher temperatures still to come, natural gas prices skyrocketed by more than a dollar at Northeast delivery points July 20, while considerably more modest gains permeated the rest of the market, according to Natural Gas Intelligence. Some of the highest quotes were topping $10 per million Btus, with prices July 20 averaging $9.13 at a key delivery point into New York City.

Hot forecasts and prospects of continued heavy power plant loads for air conditioning propelled the cash market higher at all points in North America, but most of the gains outside the Northeast were relatively small, single-digit advances.

With New York City anticipating highs around 100 degrees by the end of the week, it was clear that Northeast traders were stocking up in advance as dollar-plus increases dominated.

 

Critic challenges Pennsylvania study's job and tax numbers

(Reuters) - A study funded by the natural gas drilling industry said Pennsylvania's economy will get a $12.8 billion boost from drilling this year, more than double the amount from 2009, while reaping nearly 140,000 jobs.

The study by current and former Pennsylvania State University researchers avoided two contentious issues -- lack of a state tax on extracted gas and possible water pollution. One industry critic said the study vastly overstated job creation and economic benefits. Pennsylvania does not tax gas from the well, but the report shows the industry paid $573 million in other state and local taxes in 2009, and just over $1 billion last year.

Sharon Ward, executive director of the Pennsylvania Budget and Policy Center, disputed the $1 billion tax revenue figure. She said state Revenue Department figures show it to be about $219 million. She also disputed the contention that the industry has created 139,889 jobs. She noted that number includes ancillary workers, such as restaurant wait staff and lawyers. She said the industry's core employment was about 19,000.


Penn State study predicts booming Marcellus production

(Philadelphia Inquirer) - An updated Pennsylvania State University economic study of the Marcellus Shale gas boom is even more bullish than past reports, projecting that Pennsylvania could supply a quarter of the nation's natural gas by 2020.

The industry-sponsored study, released July 20, says Marcellus production is outpacing predictions made only a year ago. The study is likely to generate considerable controversy. Anti-drilling activists said past Penn State reports overstated the jobs created by gas development and failed to count the cost of potential environmental problems of drilling.

The study says Marcellus producers are drilling fewer wells than predicted a year ago, but the horizontal wells are more productive because the laterals are reaching greater distances. Last year, Marcellus production averaged 1.3 billion cubic feet per day. By 2020, the researchers predict the Marcellus Shale will generate 17 billion cubic feet of gas a day.

 

Encana looking at overseas shale gas deposits

(Reuters) - Encana said July 21 it is eyeing a return to the international arena after spending much of the past decade winnowing its widespread oil and gas businesses into a tightly focused North American natural gas producer.

Randy Eresman, chief executive of Canada's largest gas producer, said his company is in the early stages of looking abroad for shale gas deposits where it can apply technologies it has honed in North America. He said the skills gained in exploiting shale gas deposits at home will give Encana an edge should it again venture overseas.

The move would be an about-face for a company which for most of the past decade has narrowed its focus to concentrate on producing unconventional natural gas in North America. Encana, once Canada's largest oil and producer, sold off its oil production in the North Sea, its Gulf of Mexico operations, exploration and producing properties in South America and, in 2009, completed its transformation into a gas-focused producer.

 

Kitimat LNG looking for more customers for Phase 2

(Vancouver Sun) - Developers of the proposed Kitimat LNG terminal on the B.C. coast are "aggressively" drumming up support for a second phase, a partner said July 21. The project has regulatory approvals to build a 700-million-cubic-feet-per-day, single-train plant in the harbor town. Until now, proponents have talked about a second train only as a possible future expansion.

But in a conference call to discuss Calgary-based Encana's second-quarter earnings, midstream and marketing vice president Renee Zemljak said the Kitimat LNG partners want to build both trains. "We are at this time trying to secure enough off-take markets to make a positive FID (final investment decision) on both Phases 1 and 2."

"The economics of the project significantly increase if you actually do both phases," Zemljak said. Project partners include Encana, 30%; Apache (the operator), 40%; and EOG Resources, 30%. Apache has said the estimated $3.5 billion first phase is undergoing front-end engineering and design to better nail down costs in advance of a sanctioning decision later this year.

 

Maryland wants landowners to know their rights 

(Legal Newsline) - Maryland Attorney General Douglas Gansler has announced a campaign aimed at protecting western Maryland landowners from what he calls "high-pressure sales tactics" by natural gas drilling speculators.

Speculators are seeking mineral rights in the Marcellus Shale. Landowners should know their legal rights and potential risks from leasing their land to energy companies interested in drilling for natural gas using hydraulic fracturing, Gansler said July 19. "Fracking poses significant risks to the land and the groundwater beneath it," he said.

"Every landowner needs to be armed with accurate knowledge of these risks in order to safeguard his or her legal rights when being asked to lease mineral rights." The attorney general's office has produced and distributed two documents designed to inform and educate landowners. They are available at http://www.oag.state.md.us/Environment/MS_leasing.pdf.

 

Explosion shuts down Bison gas line in Wyoming

(Casper, WY, Star-Tribune and Calgary Herald) - A TransCanada subsidiary has declared a force majeure after shutting down its 6-month-old Bison natural gas pipeline following an explosion in central Wyoming. Deliveries along the 300-mile line have stopped while the company's subsidiary - Bison Pipeline - looks into how the line leaked a yet unknown quantity of gas just outside of the city of Gillette.

The line exploded July 20, shaking nearby homes and echoing at least 30 miles away but not causing any injuries or property damage, officials said. The blast ripped open a 60-foot section of the line and shot several pieces of 30-inch-diameter pipe around the bluffs at about 7:30 p.m.

The Bison pipeline, which has a capacity of 407 million cubic feet of gas per day, was transporting 365 million cubic feet a day at the time of the rupture, TransCanada spokesman Terry Cunha said. It's not yet clear what caused the pipeline to explode, and there's no clear timeline for when the company will rebuild the line and get it back into use, Cunha said.

 

Cheniere hopes to have LNG export terminal online in 2015

(New Orleans City Business) - Cheniere Energy is moving along with plans for the $6.5 billion natural gas liquefaction facility it wants to build in southwest Louisiana by 2015, pending long-term customer contracts and a final investment decision. The LNG export terminal would provide an outlet for the Haynesville Shale play in northwest Louisiana and other gas fields.

If customer contracts, regulatory approval and financing proceed on schedule, Cheniere expects to begin construction in early 2012, with initial operations in 2015. The plant will be capable of processing close to 1 billion cubic feet of gas a day for export aboard LNG tankers.

The liquefaction facility will allow Cheniere to export LNG in addition to the terminal's existing facilities that handle import deliveries. The company wants to turn the facility into a bidirectional operation, to be available for whatever the market needs.

 

NWT minister says Ottawa needs to help Mackenzie project

(Postmedia News) - Ottawa needs to ink a financial deal with backers of the Mackenzie Valley natural gas pipeline project by the end of the year, the Northwest Territories' Bob McLeod said following Shell's decision to leave the partnership.

McLeod, the territorial industry minister responsible for energy, said July 18 sponsors of the $16.2 billion project linking natural gas from the Arctic Circle to markets in Alberta and the United States need the federal government's assurance it will backstop the long-delayed project for it to go forward.

He said the Mackenzie venture wants a deal similar to the $18 billion in federal loan guarantees available for the Alaska gas pipeline. McLeod said companies need assurances from Ottawa before committing to another two years of engineering and geotechnical work for the project, ahead of a final investment decision. Imperial Oil, the Mackenzie project leader, said it is in the process of re-engaging talks about a fiscal framework, a deal the federal government has so far publicly rejected.

 

Gazprom signs another LNG supply deal with India

(The Economic Times) - Gazprom said July 20 it had signed a memorandum to supply the Indian Oil Corp. with an average 330 million cubic feet of natural gas a day as LNG for up to 25 years. This is the fourth gas deal that Gazprom, the world's largest gas producer, has signed with Indian companies this year.
Last month, Gazprom signed memorandums to supply LNG long term to Gas Authority of India Ltd., Gujarat State Petroleum Co. and Petronet LNG Ltd., which together could be worth more than $90 billion. The deals could total as much as 1 billion cubic feet of gas a day.

Gazprom will ship LNG to India from its existing Sakahlin-2 offshore gas fields and from new sites in Russia and abroad.

 

Russia adopts zero-rate oil and gas tax breaks

(Reuters) - Russian President Dmitry Medvedev has signed into law several oil and gas tax breaks, including scrapping the extraction tax for gas produced in the Yamal Peninsula for conversion to LNG. The exemption is crucial for French-major Total, which this year bought a $4 billion stake in Russian independent gas producer Novatek and its Yamal LNG project.

The Arctic project in northwest Siberia could come online in 2018, depending on a final investment decision. Its planned capacity is an average 2 billion cubic feet of gas per day. The Yamal tax break would apply until production reaches almost nine trillion cubic feet of gas and 150 million barrels of condensate.

Russian oil and gas companies, among the nation's most heavily taxed industries, have been pleading for tax cuts to spur new and far-flung deposits into production. Among the new tax breaks is a zero tax rate for oil produced at the Black Sea and Okhotsk Sea for the first 150 million and 210 million barrels, respectively. ExxonMobil and Chevron both have joint drilling deals in the Black Sea with state oil company Rosneft.

 

Energy agency believes gas-vs.-oil price disparity could last decades

(Philadelphia Inquirer) - Since the federal government deregulated natural gas prices in the 1980s, the prices of crude oil and natural gas have moved more or less in tandem.

But in the past three years, the prices have become unhinged, in great part because of the boom in shale gas production.

When the two fossil fuels are compared on the basis of energy equivalency, natural gas is a bargain compared with oil. A dollar spent on natural gas buys more than three times the energy that a dollar spent on crude oil buys. The U.S. Energy Information Administration believes the disparity could last for decades.

"We think we will have relatively reasonable natural gas prices over the long term," said Philip Budzik, an analyst with the EIA. But some believe that new demand for natural gas will invariably drive up prices. "I suspect volatility will continue, and that the oil-vs.-natural gas price relationship will eventually move back to normal," said Donald Marron, director of the Urban-Brookings Tax Policy Center in Washington.

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