NEW YORK, July 17 (Reuters) - The number of rigs drilling for natural gas in the United States fell 7 this week to 665, the lowest level in more than seven years, according to a report on Friday by oil services firm Baker Hughes in Houston.
U.S. natural gas drilling rigs have been in a mostly steady decline since peaking above 1,600 in September, and now stand at 869 rigs, or 57 percent, below the same week last year.
It is the lowest natural gas rig count since May 3, 2002, when there were 640 rigs operating.
Sources noted the gas rig count decline seemed to be slowing since first falling below the 700 mark five weeks ago.
Tighter access to credit and a 70 percent slide in natural gas prices to about $3.50 per mmBtu after peaking above $13 last July have forced many producers to scale back drilling operations.
But with the natural gas drilling rig count now firmly entrenched below 700, and monthly production down four straight months through June, some analysts expect to see the supply-demand balance tighten soon.
Government data last week showed U.S. natural gas production in June had finally dropping below the same year-ago month for the first time this year. (Reporting by Joe Silha, editing by John Picinich)
Sunday, July 19, 2009
Saturday, July 18, 2009
Natural Gas Looking Plentiful
July 17 (Bloomberg) -- Natural gas futures, the worst performing commodity in 2009, may fall to seven-year lows as demand drops with the deepest recession in half a century.
Because chemical plants and power producers are burning less, gas inventories rose to 2.886 trillion cubic feet in the week ended July 10, the highest for any week in July since at least 1994, the U.S. Energy Department reported yesterday. Natural gas is down 36 percent this year on the New York Mercantile Exchange, compared with a 39 percent gain in oil.
The world’s biggest hedge funds hold their largest position against Nymex natural gas futures in seven months, betting at least $5.8 billion on lower prices, Commodity Futures Trading Commission data show. A price drop will hurt producers BP Plc and Exxon Mobil Corp. while lowering costs for power and household air conditioning this summer.
“There’s too much supply and not enough demand,” said Michael Hiley, head of energy OTC at Newedge USA LLC in New York, who expects gas to drop below $3 per million British thermal units by October. “Storage is going to be like a big balloon blown up and you can’t add any more air.”
Gas futures for August delivery to the Henry Hub in Erath, Louisiana, rose 0.1 cent to settle at $3.669 per million Btu at 2:53 p.m. today. Gas was last below $3 in August 2002, one month shy of seven years ago.
Prices on April 27 touched $3.155, the lowest since Sept. 5, 2002, on concern the supply glut will persist throughout the year. Futures rose 8.8 percent this week, after gas climbed 38.5 cents, or 12 percent, to $3.668 per million Btu yesterday.
Net-Short Positions
Hedge fund managers and other large speculators increased their net-short positions in New York futures by 5 percent in the week ended July 7 to 160,481 contracts, approaching the record 177,606 contracts in the week ended Sept. 30, the CFTC data show. Short positions are bets that prices will fall.
Inventories are 19 percent above the five-year average, according to the Energy Department. Industrial gas consumption is forecast to drop 8.2 percent this year and total demand will slide 2.3 percent to 62.1 billion cubic feet a day, the department said July 7 in its monthly Short-Term Energy Outlook.
“I wouldn’t be surprised if we get Nymex Henry Hub prices at $2-something” in the next 30 days, said Rehan Rashid, an analyst at Friedman Billings Ramsey in Arlington, Virginia. “There’s too much supply, weather is pretty nice and then the overall economy.”
Exxon Mobil pumped 10.195 billion cubic feet of gas a day during the first quarter, 49 percent of it in Europe, a public filing showed. U.S. fields accounted for 12 percent of the Irving, Texas-based company’s worldwide gas output during the quarter. Natural gas was 41 percent of its combined crude and gas production during the January-to-March period, the filing showed.
BP Production
London-based BP produced 8.767 billion cubic feet of gas a day during the first three months of the year, or 36 percent of its total hydrocarbon output, a public filing showed. U.S. wells accounted for 27 percent of the company’s global gas production. BP is the largest producer of gas from American wells, according to the Washington-based Natural Gas Supply Association.
Companies put natural gas into underground storage from April through October to have enough on hand to meet peak demand during the winter. Stockpiles have been above average levels since last August as factory shutdowns caused demand to plummet.
Winter heating demand may help reverse the price decline. Joe Bastardi, chief meteorologist at AccuWeather.com, expects the snowiest winter in more than five years along the eastern seaboard and northern plains, according to a July 15 report. Gas demand in the U.S. typically peaks in January and February.
Worst Performer
Natural gas has been the worst performer in the S&P GSCI Commodity Index this year. As it fell, copper jumped 72 percent, gold appreciated 6 percent and gasoline advanced 70 percent.
The risk is a reversal in the trend by the end of 2009 as the recession eases and industrial demand returns, according to estimates by analysts and investors compiled by Bloomberg.
Falling prices have forced drillers to cut back on exploration. U.S. gas production will fall 0.6 percent this year, according to the U.S. Energy Department estimates. Gas rigs operating in the U.S. last week fell to 672, the lowest since May 2002, according to data published by Baker Hughes Inc.
“If we continue this slowdown or cessation of drilling activity, there will be, at some point, not enough gas to go around,” said Dewey Bartlett Jr., chairman of the National Stripper Well Association, a nonprofit trade group of small energy producers. Bartlett is president and owner of Keener Oil Co. in Tulsa, Oklahoma.
Average Price
Natural gas will probably average $4.97 per million Btu this quarter, based on an average of eight analyst estimates collected by Bloomberg since May. Prices will then increase to an average $5.78 in the fourth quarter, according to the estimates.
“It’s more about declining wellhead production than anything else,” said Roger Read, an analyst at Natixis Bleichroeder Inc. in Houston, who expects gas to average $3.50 per million Btu in the third quarter and $5.50 in the fourth.
Figures from the Federal Reserve this week showed the smallest contraction in industrial production in more than a year, a sign the worst may be past for manufacturers. The New York Fed’s Empire Index rose to minus 0.6 in July from minus 9.4 a month earlier.
Industrial Production
“There are signals that industrial production in the U.S. is bottoming out in terms of year-on-year contraction, and that’s a positive sign,” said James Crandell, a commodities research analyst at Barclays Capital in New York. Crandell said gas will average $3.80 in the third quarter and $4 in the final three months. The Nymex futures markets are trading at $3.72 in the third quarter and $4.65 in the fourth, according to data compiled by Bloomberg.
The American Iron and Steel Institute’s steel production index has risen 18 percent since the end of December, when output dropped to the lowest since at least 1980. U.S. mills last week were operating above 50 percent of capacity for the first time since Dec. 1.
“The increased use from steel manufacturing in the U.S. since the beginning of July could be a green shoot that would actually turn into really good news,” said Laurent Key, a New York-based economist for Societe Generale SA who expects gas to drop to between $2.90 and $3 by October and average $3.33 in the fourth quarter. “It’s too early to talk about a recovery.”
Key said the U.S. may have the highest inventory levels of the year in October, causing prices to bottom out below $3.
Low Prices
Prices are “really, really low” because the industry has been successful in exploring for natural gas, said Bartlett of the stripper well association.
“It’s going to be a while” before the glut ends, Bartlett said. “There’s such a huge volume of gas in storage, and it’s not getting out at a decent rate.”
U.S. potential natural gas resources rose 39 percent from two years ago to 1,836 trillion cubic feet, the highest level on record, according to an industry report issued last month.
Most of the increase in potential natural gas reserves came from a reassessment of shale gas in the Appalachian basin and in the mid-continent, Gulf Coast and Rocky Mountain areas, according to a report by the Potential Gas Committee, a group of industry, government and academic volunteers.
Decades of Gas
Shale gas is locked in non-porous rock that made the reserves inaccessible until producers perfected new drilling techniques in the 1990s.
When the potential is combined with the Energy Department’s latest determination of proved gas reserves, at 238 trillion cubic feet as of year-end 2007, the U.S. has a total available future supply of 2,074 trillion cubic feet. The U.S. consumes about 23 trillion cubic feet of natural gas a year, including 6.6 trillion for electricity.
“Gas prices got to a point where it was economical to produce from shale, and everyone started up,” said Hiley of Newedge USA. “Now it’s on the market, and it’s hurting.
“I would not be surprised to see a $2 handle,” Hiley said.
To contact the reporter on this story: Margot Habiby in Dallas at mhabiby@bloomberg.net.
Because chemical plants and power producers are burning less, gas inventories rose to 2.886 trillion cubic feet in the week ended July 10, the highest for any week in July since at least 1994, the U.S. Energy Department reported yesterday. Natural gas is down 36 percent this year on the New York Mercantile Exchange, compared with a 39 percent gain in oil.
The world’s biggest hedge funds hold their largest position against Nymex natural gas futures in seven months, betting at least $5.8 billion on lower prices, Commodity Futures Trading Commission data show. A price drop will hurt producers BP Plc and Exxon Mobil Corp. while lowering costs for power and household air conditioning this summer.
“There’s too much supply and not enough demand,” said Michael Hiley, head of energy OTC at Newedge USA LLC in New York, who expects gas to drop below $3 per million British thermal units by October. “Storage is going to be like a big balloon blown up and you can’t add any more air.”
Gas futures for August delivery to the Henry Hub in Erath, Louisiana, rose 0.1 cent to settle at $3.669 per million Btu at 2:53 p.m. today. Gas was last below $3 in August 2002, one month shy of seven years ago.
Prices on April 27 touched $3.155, the lowest since Sept. 5, 2002, on concern the supply glut will persist throughout the year. Futures rose 8.8 percent this week, after gas climbed 38.5 cents, or 12 percent, to $3.668 per million Btu yesterday.
Net-Short Positions
Hedge fund managers and other large speculators increased their net-short positions in New York futures by 5 percent in the week ended July 7 to 160,481 contracts, approaching the record 177,606 contracts in the week ended Sept. 30, the CFTC data show. Short positions are bets that prices will fall.
Inventories are 19 percent above the five-year average, according to the Energy Department. Industrial gas consumption is forecast to drop 8.2 percent this year and total demand will slide 2.3 percent to 62.1 billion cubic feet a day, the department said July 7 in its monthly Short-Term Energy Outlook.
“I wouldn’t be surprised if we get Nymex Henry Hub prices at $2-something” in the next 30 days, said Rehan Rashid, an analyst at Friedman Billings Ramsey in Arlington, Virginia. “There’s too much supply, weather is pretty nice and then the overall economy.”
Exxon Mobil pumped 10.195 billion cubic feet of gas a day during the first quarter, 49 percent of it in Europe, a public filing showed. U.S. fields accounted for 12 percent of the Irving, Texas-based company’s worldwide gas output during the quarter. Natural gas was 41 percent of its combined crude and gas production during the January-to-March period, the filing showed.
BP Production
London-based BP produced 8.767 billion cubic feet of gas a day during the first three months of the year, or 36 percent of its total hydrocarbon output, a public filing showed. U.S. wells accounted for 27 percent of the company’s global gas production. BP is the largest producer of gas from American wells, according to the Washington-based Natural Gas Supply Association.
Companies put natural gas into underground storage from April through October to have enough on hand to meet peak demand during the winter. Stockpiles have been above average levels since last August as factory shutdowns caused demand to plummet.
Winter heating demand may help reverse the price decline. Joe Bastardi, chief meteorologist at AccuWeather.com, expects the snowiest winter in more than five years along the eastern seaboard and northern plains, according to a July 15 report. Gas demand in the U.S. typically peaks in January and February.
Worst Performer
Natural gas has been the worst performer in the S&P GSCI Commodity Index this year. As it fell, copper jumped 72 percent, gold appreciated 6 percent and gasoline advanced 70 percent.
The risk is a reversal in the trend by the end of 2009 as the recession eases and industrial demand returns, according to estimates by analysts and investors compiled by Bloomberg.
Falling prices have forced drillers to cut back on exploration. U.S. gas production will fall 0.6 percent this year, according to the U.S. Energy Department estimates. Gas rigs operating in the U.S. last week fell to 672, the lowest since May 2002, according to data published by Baker Hughes Inc.
“If we continue this slowdown or cessation of drilling activity, there will be, at some point, not enough gas to go around,” said Dewey Bartlett Jr., chairman of the National Stripper Well Association, a nonprofit trade group of small energy producers. Bartlett is president and owner of Keener Oil Co. in Tulsa, Oklahoma.
Average Price
Natural gas will probably average $4.97 per million Btu this quarter, based on an average of eight analyst estimates collected by Bloomberg since May. Prices will then increase to an average $5.78 in the fourth quarter, according to the estimates.
“It’s more about declining wellhead production than anything else,” said Roger Read, an analyst at Natixis Bleichroeder Inc. in Houston, who expects gas to average $3.50 per million Btu in the third quarter and $5.50 in the fourth.
Figures from the Federal Reserve this week showed the smallest contraction in industrial production in more than a year, a sign the worst may be past for manufacturers. The New York Fed’s Empire Index rose to minus 0.6 in July from minus 9.4 a month earlier.
Industrial Production
“There are signals that industrial production in the U.S. is bottoming out in terms of year-on-year contraction, and that’s a positive sign,” said James Crandell, a commodities research analyst at Barclays Capital in New York. Crandell said gas will average $3.80 in the third quarter and $4 in the final three months. The Nymex futures markets are trading at $3.72 in the third quarter and $4.65 in the fourth, according to data compiled by Bloomberg.
The American Iron and Steel Institute’s steel production index has risen 18 percent since the end of December, when output dropped to the lowest since at least 1980. U.S. mills last week were operating above 50 percent of capacity for the first time since Dec. 1.
“The increased use from steel manufacturing in the U.S. since the beginning of July could be a green shoot that would actually turn into really good news,” said Laurent Key, a New York-based economist for Societe Generale SA who expects gas to drop to between $2.90 and $3 by October and average $3.33 in the fourth quarter. “It’s too early to talk about a recovery.”
Key said the U.S. may have the highest inventory levels of the year in October, causing prices to bottom out below $3.
Low Prices
Prices are “really, really low” because the industry has been successful in exploring for natural gas, said Bartlett of the stripper well association.
“It’s going to be a while” before the glut ends, Bartlett said. “There’s such a huge volume of gas in storage, and it’s not getting out at a decent rate.”
U.S. potential natural gas resources rose 39 percent from two years ago to 1,836 trillion cubic feet, the highest level on record, according to an industry report issued last month.
Most of the increase in potential natural gas reserves came from a reassessment of shale gas in the Appalachian basin and in the mid-continent, Gulf Coast and Rocky Mountain areas, according to a report by the Potential Gas Committee, a group of industry, government and academic volunteers.
Decades of Gas
Shale gas is locked in non-porous rock that made the reserves inaccessible until producers perfected new drilling techniques in the 1990s.
When the potential is combined with the Energy Department’s latest determination of proved gas reserves, at 238 trillion cubic feet as of year-end 2007, the U.S. has a total available future supply of 2,074 trillion cubic feet. The U.S. consumes about 23 trillion cubic feet of natural gas a year, including 6.6 trillion for electricity.
“Gas prices got to a point where it was economical to produce from shale, and everyone started up,” said Hiley of Newedge USA. “Now it’s on the market, and it’s hurting.
“I would not be surprised to see a $2 handle,” Hiley said.
To contact the reporter on this story: Margot Habiby in Dallas at mhabiby@bloomberg.net.
EU Wary of Russian Natural Gas
A directive announced today by the European Union will do little to relieve the bloc's dependence on Russian natural gas -- nor should it, analysts say.
It is "pure fantasy" to think Europe could wean itself from Russian natural gas, which fulfills 25 percent of the European Union's demand, said Julian Lee, a senior energy analyst at the Centre for Global Energy Studies in London.
Rather, Europe should try to diversify the ways it gets Russian gas, adding pipelines that avoid troubled former Soviet states. Historically, Russia and Gazprom, its state-owned gas agency, have been reliable partners to the European Union, rather than a looming energy menace, analysts said.
The E.U. directive, proposed by its executive arm, the European Commission, calls for each member state to prepare itself for a disruption of its largest gas supply for at least two months during the depths of winter, when demand is at its highest.
"We have known for some time that the existing arrangements to deal with gas emergencies are insufficient," E.U. Energy Commissioner Andris Piebalgs said. "The Russia-Ukraine gas dispute in January 2009 confirmed our fears."
Many feel that the commission, which accelerated its issuing of the directive in response to the latest gas crisis, has been tardy in its proposal.
"I think this is something, frankly, that the E.U. should have done several years ago," Lee said. "And it's finally got its act together."
Nearly all Russian gas runs through Belarus and Ukraine, former Soviet states that Russia regards as within its sphere of influence. On several occasions, Russia has shut off the supply of gas to Ukraine, most recently this past January when the countries were debating gas prices.
Several eastern E.U. countries, like Slovakia and Bulgaria, that depend on Ukraine's pipelines for all their gas became innocent bystanders in the January dispute. Reports emerged of kindergartens closing for lack of heat and similar crises.
These countries can prepare for disruptions in several ways, principally by diversifying their gas pipelines or increasing their total gas storage, said Ferran Tarradellas Espuny, Piebalgs' spokesman.
"Each member state must be prepared to face such a crisis," he said.
Some supply solutions are simple to implement. Slovakia, for example, relies on Ukrainian pipelines for 97 percent of its gas, but with some minor engineering work, the east-west flow of the pipe can be reversed, allowing imports from well-supplied Germany.
While there has been broad support for improved coordination on gas, some of the Western European countries may balk at helping their peers to the east.
"The E.U.-wide sharing of existing [gas] storage may be resisted by those with plenty of storage," said Jonathan Stern, director of gas research at the Oxford Institute of Energy Studies. There could be accusations, he added, of "free riding."
Major investments needed
The European Union estimated that €150 billion ($211 billion) needs to be spent on gas infrastructure by 2030. The European Union will help fund some of this work, but much investment needs to come from individual countries and industry, according to Piebalgs.
Increasing the use of liquefied natural gas (LNG), which can be shipped in tankers, is also part of the solution; Britain recently opened its third LNG terminal. However, many of the eastern E.U. countries hardest hit by the January crisis are landlocked, and increasing LNG flow to them could call for further reliance on Turkey, Lee said. It is a "major question" how much LNG the European Union can import, Stern added.
Other steps will be more difficult. Many southeastern E.U. countries are anticipating the construction of two new gas pipelines. The first, called Nabucco, will grant gas providers like Iraq and Azerbaijan access to E.U. markets for the first time. A formal agreement among five E.U. nations and Turkey was announced Monday granting legal clearance for Nabucco, which could begin flowing by 2014.
Russia, which could supply gas to Nabucco, has also proposed a southern pipeline, called South Stream, that avoids flowing through Ukraine and Belarus. Italy has strongly supported the pipeline, and Germany has shown similar interest in another pipeline, called Nord Stream, which would flow from Russia to Germany under the Baltic Sea.
Nord Stream, in particular, will provide economic advantages to German industry, which depends dearly on Russian gas, said Jon Levy, an analyst for the Eurasia Group.
Purely from the standpoint of energy security, Europe would be smart to shift its gas infrastructure out of former Soviet states to avoid future troubles between Russia and its former dominions, Stern said.
Such a position gets strong political opposition from many E.U. leaders, who "are very careful in their approach to anything that would destabilize Ukraine," Levy said. Many European banks are deeply invested in the country and want to see it politically stable.
'The big kid in the playground'
While equal portions of blame can be doled to Ukraine and Russia for the most recent crisis, E.U. leaders have fixed on Russia because, compared to Ukraine, "It's the big kid in the playground flexing its muscles," Lee said. Plus, Russia did appear "very willing to turn [its dispute with Ukraine] into a European problem."
E.U. officials are set to hold talks tomorrow with Gazprom and its Ukrainian counterpart. The latter is asking for a multibillion-dollar loan to help pay its debts to Gazprom. Any loan will be linked to a promise no further disruptions will occur, the European Union said.
Demand for Russian gas will decline dramatically this year, largely thanks to the recession, and probably won't recover for another one to two years, Stern said. While an influx of Central Asian gas through Nabucco, which the United States has strongly supported, could be a blow to Russia's market share, the mutual economic dependence between the regions will continue for some time.
What should not be forgotten is that since the 1970s, Russia has reliably provided gas to Europe through all sorts of upheaval, Lee said.
"There's a lot of expertise and trust there," he said, "that have survived some very fundamental political differences."
Copyright 2009 E&E Publishing. All Rights Reserved.
For more news on energy and the environment, visit www.greenwire.com.
http://www.nytimes.com/gwire/2009/07/16/16greenwire-wary-eu-girding-for-disruptions-of-russian-nat-68228.html
It is "pure fantasy" to think Europe could wean itself from Russian natural gas, which fulfills 25 percent of the European Union's demand, said Julian Lee, a senior energy analyst at the Centre for Global Energy Studies in London.
Rather, Europe should try to diversify the ways it gets Russian gas, adding pipelines that avoid troubled former Soviet states. Historically, Russia and Gazprom, its state-owned gas agency, have been reliable partners to the European Union, rather than a looming energy menace, analysts said.
The E.U. directive, proposed by its executive arm, the European Commission, calls for each member state to prepare itself for a disruption of its largest gas supply for at least two months during the depths of winter, when demand is at its highest.
"We have known for some time that the existing arrangements to deal with gas emergencies are insufficient," E.U. Energy Commissioner Andris Piebalgs said. "The Russia-Ukraine gas dispute in January 2009 confirmed our fears."
Many feel that the commission, which accelerated its issuing of the directive in response to the latest gas crisis, has been tardy in its proposal.
"I think this is something, frankly, that the E.U. should have done several years ago," Lee said. "And it's finally got its act together."
Nearly all Russian gas runs through Belarus and Ukraine, former Soviet states that Russia regards as within its sphere of influence. On several occasions, Russia has shut off the supply of gas to Ukraine, most recently this past January when the countries were debating gas prices.
Several eastern E.U. countries, like Slovakia and Bulgaria, that depend on Ukraine's pipelines for all their gas became innocent bystanders in the January dispute. Reports emerged of kindergartens closing for lack of heat and similar crises.
These countries can prepare for disruptions in several ways, principally by diversifying their gas pipelines or increasing their total gas storage, said Ferran Tarradellas Espuny, Piebalgs' spokesman.
"Each member state must be prepared to face such a crisis," he said.
Some supply solutions are simple to implement. Slovakia, for example, relies on Ukrainian pipelines for 97 percent of its gas, but with some minor engineering work, the east-west flow of the pipe can be reversed, allowing imports from well-supplied Germany.
While there has been broad support for improved coordination on gas, some of the Western European countries may balk at helping their peers to the east.
"The E.U.-wide sharing of existing [gas] storage may be resisted by those with plenty of storage," said Jonathan Stern, director of gas research at the Oxford Institute of Energy Studies. There could be accusations, he added, of "free riding."
Major investments needed
The European Union estimated that €150 billion ($211 billion) needs to be spent on gas infrastructure by 2030. The European Union will help fund some of this work, but much investment needs to come from individual countries and industry, according to Piebalgs.
Increasing the use of liquefied natural gas (LNG), which can be shipped in tankers, is also part of the solution; Britain recently opened its third LNG terminal. However, many of the eastern E.U. countries hardest hit by the January crisis are landlocked, and increasing LNG flow to them could call for further reliance on Turkey, Lee said. It is a "major question" how much LNG the European Union can import, Stern added.
Other steps will be more difficult. Many southeastern E.U. countries are anticipating the construction of two new gas pipelines. The first, called Nabucco, will grant gas providers like Iraq and Azerbaijan access to E.U. markets for the first time. A formal agreement among five E.U. nations and Turkey was announced Monday granting legal clearance for Nabucco, which could begin flowing by 2014.
Russia, which could supply gas to Nabucco, has also proposed a southern pipeline, called South Stream, that avoids flowing through Ukraine and Belarus. Italy has strongly supported the pipeline, and Germany has shown similar interest in another pipeline, called Nord Stream, which would flow from Russia to Germany under the Baltic Sea.
Nord Stream, in particular, will provide economic advantages to German industry, which depends dearly on Russian gas, said Jon Levy, an analyst for the Eurasia Group.
Purely from the standpoint of energy security, Europe would be smart to shift its gas infrastructure out of former Soviet states to avoid future troubles between Russia and its former dominions, Stern said.
Such a position gets strong political opposition from many E.U. leaders, who "are very careful in their approach to anything that would destabilize Ukraine," Levy said. Many European banks are deeply invested in the country and want to see it politically stable.
'The big kid in the playground'
While equal portions of blame can be doled to Ukraine and Russia for the most recent crisis, E.U. leaders have fixed on Russia because, compared to Ukraine, "It's the big kid in the playground flexing its muscles," Lee said. Plus, Russia did appear "very willing to turn [its dispute with Ukraine] into a European problem."
E.U. officials are set to hold talks tomorrow with Gazprom and its Ukrainian counterpart. The latter is asking for a multibillion-dollar loan to help pay its debts to Gazprom. Any loan will be linked to a promise no further disruptions will occur, the European Union said.
Demand for Russian gas will decline dramatically this year, largely thanks to the recession, and probably won't recover for another one to two years, Stern said. While an influx of Central Asian gas through Nabucco, which the United States has strongly supported, could be a blow to Russia's market share, the mutual economic dependence between the regions will continue for some time.
What should not be forgotten is that since the 1970s, Russia has reliably provided gas to Europe through all sorts of upheaval, Lee said.
"There's a lot of expertise and trust there," he said, "that have survived some very fundamental political differences."
Copyright 2009 E&E Publishing. All Rights Reserved.
For more news on energy and the environment, visit www.greenwire.com.
http://www.nytimes.com/gwire/2009/07/16/16greenwire-wary-eu-girding-for-disruptions-of-russian-nat-68228.html
Friday, July 17, 2009
Natural Gas Up & Down Again
By ERNEST SCHEYDER (AP) – 16 hours ago
NEW YORK — Natural gas stockpile levels jumped last week, though the increase met expectations and demand for the fuel continues to sag, the government said Thursday.
The Energy Department's Energy Information Administration said in its weekly report that natural gas inventories held in underground storage in the lower 48 states rose by 90 billion cubic feet to about 2.89 trillion cubic feet for the week ended July 10.
Analysts had expected a boost of between 89 billion and 93 billion cubic feet, according to a survey by Platts, the energy information arm of McGraw-Hill Cos.
The inventory level was 19 percent above the five-year average of about 2.43 trillion cubic feet, and 26 percent above last year's storage level of about 2.30 trillion cubic feet, according to the government data.
Natural gas rose 18 cents to $3.463 per 1,000 cubic feet on the New York Mercantile Exchange.
Copyright © 2009 The Associated Press. All rights reserved.
NEW YORK — Natural gas stockpile levels jumped last week, though the increase met expectations and demand for the fuel continues to sag, the government said Thursday.
The Energy Department's Energy Information Administration said in its weekly report that natural gas inventories held in underground storage in the lower 48 states rose by 90 billion cubic feet to about 2.89 trillion cubic feet for the week ended July 10.
Analysts had expected a boost of between 89 billion and 93 billion cubic feet, according to a survey by Platts, the energy information arm of McGraw-Hill Cos.
The inventory level was 19 percent above the five-year average of about 2.43 trillion cubic feet, and 26 percent above last year's storage level of about 2.30 trillion cubic feet, according to the government data.
Natural gas rose 18 cents to $3.463 per 1,000 cubic feet on the New York Mercantile Exchange.
Copyright © 2009 The Associated Press. All rights reserved.
Thursday, July 16, 2009
Natural Gas and TBoone Still Going Strong
NEW YORK — The past year has been tough on T. Boone Pickens and his $60 million mission to wean America off of foreign oil.
Over the past 12 months, Pickens pressed the public to rethink its use of energy. His "Pickens Plan" called for a number of changes such as investing in wind and solar energy, rebuilding the country's electrical grid and replacing gasoline with natural gas in cars and trucks.
Pickens says he was influential in starting a national dialog on energy and helped draft legislation that would give tax incentives for natural gas-burning vehicles.
But after spending millions on television commercials and a public relations tour that took him to 74 cities and 22 town halls, his plan has run into some sizeable hurdles, most notably a crash in energy prices. As prices plunged, the Texas billionaire's hedge funds lost billions of dollars. Pickens also scrapped plans for the world's biggest wind farm, and California voters rejected a natural gas initiative he backed.
"I do wonder how long that I can continue at the pace," Pickens, 81, said Tuesday in an interview with Associated Press reporters and editors. "I know my time is limited. I'm in a hurry. I want to get this done."During the past year, Congress has approved incentive programs that will funnel billions of dollars to solar, wind and other renewable energy programs. The House of Representatives passed an energy bill that would create a cap-and-trade system for carbon dioxide emissions.
"I think we should be given credit for some part of that," he said.
When Pickens announced his plan last year at this time, oil cost more than $130 a barrel and gasoline went for more than $4 per gallon. Crude has since fallen as low as $32.70 and now trades at $62.34.
Gasoline costs about $2.61 at the peak of the driving season.
While slumping energy prices have been a silver lining during the recession, there are some fears that the urgency to build solar, and for Pickens, wind power, is now diminished. For example, the natural gas that power companies use now costs less than half of what it did last year, making it harder for wind to compete.
The Texas oil man made a big splash last year by leasing about 200,000 acres in West Texas for a massive 1000 megawatt wind farm. But he said Tuesday that the plan has fallen apart because of technical problems concerning transmission.
"We're not going to be able to do them (in Texas), at this point," he said.
Pickens said he already has 687 wind turbines on order from General Electric, and he'll probably spread them among other projects.
The Pickens Plan also calls for building fleets of cars and trucks to burn natural gas.
But so far efforts have failed to create incentives for natural gas vehicles.
Last year, Pickens' Clean Energy Fuels Corp. pumped $19 million into a California bond initiative that would have handed rebates to people who bought natural gas and other alternative-fuel vehicles. But critics said the measure would have steered taxpayer dollars to Pickens, who is the majority shareholder of a company that supplies natural gas for transportation, and voters rejected it.
He's now pushing for a similar measure in Congress.
On Wednesday, Pickens will release a new ad promoting natural gas as an alternative fuel for cars and trucks. He said he will also be in Washington standing next to Sens. Robert Menendez, and Harry Reid when a natural gas bill is announced.
He's also embarking on another tour around the country to remind the public that even though oil prices are lower than last year, the world still faces an energy crisis.
People are driving more cars every year, and OPEC revenues keep increasing.
Without an energy plan that cuts the country's dependency on oil, "I'll tell you where you're going to be. You're going to be importing 75 percent of your oil, and you'll be paying $300 a barrel for it," he said.
Pickens said that federal support for natural gas vehicles would give his energy plan a true victory. So would energy legislation that installs a cap-and-trade system. That bill passed the House this summer and is waiting to be taken up by the Senate, he said.
"That would be the most far reaching legislation on energy in the history of America," he said. "If that happens, then I'll know I'll be successful."
Pickens said he might be able to go back to his day job if those bills pass. Until then, he'll keep pushing the issue any way he can.
"This is going to work," Pickens said, pointing his finger at reporters as the elevator doors closed and his entourage headed down to the street.
Over the past 12 months, Pickens pressed the public to rethink its use of energy. His "Pickens Plan" called for a number of changes such as investing in wind and solar energy, rebuilding the country's electrical grid and replacing gasoline with natural gas in cars and trucks.
Pickens says he was influential in starting a national dialog on energy and helped draft legislation that would give tax incentives for natural gas-burning vehicles.
But after spending millions on television commercials and a public relations tour that took him to 74 cities and 22 town halls, his plan has run into some sizeable hurdles, most notably a crash in energy prices. As prices plunged, the Texas billionaire's hedge funds lost billions of dollars. Pickens also scrapped plans for the world's biggest wind farm, and California voters rejected a natural gas initiative he backed.
"I do wonder how long that I can continue at the pace," Pickens, 81, said Tuesday in an interview with Associated Press reporters and editors. "I know my time is limited. I'm in a hurry. I want to get this done."During the past year, Congress has approved incentive programs that will funnel billions of dollars to solar, wind and other renewable energy programs. The House of Representatives passed an energy bill that would create a cap-and-trade system for carbon dioxide emissions.
"I think we should be given credit for some part of that," he said.
When Pickens announced his plan last year at this time, oil cost more than $130 a barrel and gasoline went for more than $4 per gallon. Crude has since fallen as low as $32.70 and now trades at $62.34.
Gasoline costs about $2.61 at the peak of the driving season.
While slumping energy prices have been a silver lining during the recession, there are some fears that the urgency to build solar, and for Pickens, wind power, is now diminished. For example, the natural gas that power companies use now costs less than half of what it did last year, making it harder for wind to compete.
The Texas oil man made a big splash last year by leasing about 200,000 acres in West Texas for a massive 1000 megawatt wind farm. But he said Tuesday that the plan has fallen apart because of technical problems concerning transmission.
"We're not going to be able to do them (in Texas), at this point," he said.
Pickens said he already has 687 wind turbines on order from General Electric, and he'll probably spread them among other projects.
The Pickens Plan also calls for building fleets of cars and trucks to burn natural gas.
But so far efforts have failed to create incentives for natural gas vehicles.
Last year, Pickens' Clean Energy Fuels Corp. pumped $19 million into a California bond initiative that would have handed rebates to people who bought natural gas and other alternative-fuel vehicles. But critics said the measure would have steered taxpayer dollars to Pickens, who is the majority shareholder of a company that supplies natural gas for transportation, and voters rejected it.
He's now pushing for a similar measure in Congress.
On Wednesday, Pickens will release a new ad promoting natural gas as an alternative fuel for cars and trucks. He said he will also be in Washington standing next to Sens. Robert Menendez, and Harry Reid when a natural gas bill is announced.
He's also embarking on another tour around the country to remind the public that even though oil prices are lower than last year, the world still faces an energy crisis.
People are driving more cars every year, and OPEC revenues keep increasing.
Without an energy plan that cuts the country's dependency on oil, "I'll tell you where you're going to be. You're going to be importing 75 percent of your oil, and you'll be paying $300 a barrel for it," he said.
Pickens said that federal support for natural gas vehicles would give his energy plan a true victory. So would energy legislation that installs a cap-and-trade system. That bill passed the House this summer and is waiting to be taken up by the Senate, he said.
"That would be the most far reaching legislation on energy in the history of America," he said. "If that happens, then I'll know I'll be successful."
Pickens said he might be able to go back to his day job if those bills pass. Until then, he'll keep pushing the issue any way he can.
"This is going to work," Pickens said, pointing his finger at reporters as the elevator doors closed and his entourage headed down to the street.
Wednesday, July 15, 2009
EU Natural Gas Consortium Flexing Tiny Muscles
CFA Institute Financial NewsBrief | 07/14/2009
After years of painstaking negotiations, the EU and Turkey cleared the way for construction of a natural gas pipeline that could end Europe's dependence on gas from Russia. The agreement to build the Nabucco pipeline from the Caspian Sea to Austria was signed by the prime ministers of the nations through which the pipeline will run: Austria, Bulgaria, Hungary, Romania and Turkey. The route bypasses Russia. Spiegel Online (Germany) (13 Jul.)
The proposed Nabucco pipeline would run from Turkey's eastern border, through Bulgaria, Romania and Hungary, to a key gas terminal in Baumgarten, Austria.
Germany is also a partner in the deal, which is being signed in the Turkish capital, Ankara.
Russia controls the current network of pipelines that supply Europe with natural gas.
To challenge the Nabucco proposal, Russia has proposed a competing natural gas pipeline to southeastern Europe. The South Stream pipeline would pass under the Black Sea and connect with Bulgaria. Russia and Italy would each control half of that pipeline. See map of pipeline »
However, Nabucco got a boost after Russia turned off the gas to Europe in January, during the latest in a series of price disputes with Ukraine, according to industry analysts.
The Nabucco project is budgeted at €7.9 billion (about $11 billion).
Since the idea's inception in 2002, plans for Nabucco have languished amid disagreements among consortium partners and lack of commitment from natural gas suppliers.
Turkey had demanded to retain 15 percent of the gas passing through the pipeline for consumption and export, which its European partners rejected.
The energy minister of Azerbaijan is expected to attend Monday's signing, a top Western government official said. Gas from Azerbaijan's Shah Deniz 2 field will be a crucial component of the project. European officials have raised hopes that other gas producers, such as Iraq and Turkmenistan, also might contribute to the pipeline.
Big hurdles remain for the pipeline project named after an opera by Verdi.
Consortium members must raise billions of dollars for the Nabucco project. Construction has not begun, and gas is not projected to be pumped through until 2014.
Still, industry analysts called Monday's intergovernmental agreement a significant development. "It's one of those steps that moves Nabucco out of the possible column and into the probable column," said John Roberts, an energy security specialist with Platts.
"My own guess is roughly by the end of the year, it will be pretty clear that Nabucco will be built."
E-mail to a friend E-mail to a friend
Share this on:
Mixx Facebook Twitter Digg del.icio.us reddit MySpace StumbleUpon
| Mixx it | Share
After years of painstaking negotiations, the EU and Turkey cleared the way for construction of a natural gas pipeline that could end Europe's dependence on gas from Russia. The agreement to build the Nabucco pipeline from the Caspian Sea to Austria was signed by the prime ministers of the nations through which the pipeline will run: Austria, Bulgaria, Hungary, Romania and Turkey. The route bypasses Russia. Spiegel Online (Germany) (13 Jul.)
The proposed Nabucco pipeline would run from Turkey's eastern border, through Bulgaria, Romania and Hungary, to a key gas terminal in Baumgarten, Austria.
Germany is also a partner in the deal, which is being signed in the Turkish capital, Ankara.
Russia controls the current network of pipelines that supply Europe with natural gas.
To challenge the Nabucco proposal, Russia has proposed a competing natural gas pipeline to southeastern Europe. The South Stream pipeline would pass under the Black Sea and connect with Bulgaria. Russia and Italy would each control half of that pipeline. See map of pipeline »
However, Nabucco got a boost after Russia turned off the gas to Europe in January, during the latest in a series of price disputes with Ukraine, according to industry analysts.
The Nabucco project is budgeted at €7.9 billion (about $11 billion).
Since the idea's inception in 2002, plans for Nabucco have languished amid disagreements among consortium partners and lack of commitment from natural gas suppliers.
Turkey had demanded to retain 15 percent of the gas passing through the pipeline for consumption and export, which its European partners rejected.
The energy minister of Azerbaijan is expected to attend Monday's signing, a top Western government official said. Gas from Azerbaijan's Shah Deniz 2 field will be a crucial component of the project. European officials have raised hopes that other gas producers, such as Iraq and Turkmenistan, also might contribute to the pipeline.
Big hurdles remain for the pipeline project named after an opera by Verdi.
Consortium members must raise billions of dollars for the Nabucco project. Construction has not begun, and gas is not projected to be pumped through until 2014.
Still, industry analysts called Monday's intergovernmental agreement a significant development. "It's one of those steps that moves Nabucco out of the possible column and into the probable column," said John Roberts, an energy security specialist with Platts.
"My own guess is roughly by the end of the year, it will be pretty clear that Nabucco will be built."
E-mail to a friend E-mail to a friend
Share this on:
Mixx Facebook Twitter Digg del.icio.us reddit MySpace StumbleUpon
| Mixx it | Share
Tuesday, July 14, 2009
Natural Gas Behind the Others in Lobbying Congress
The battle over climate legislation will now pit the country's top power sources against each other.Saying they failed to protect their interests as a landmark bill came together and passed the House last month, natural gas executives are forming a strategy to influence rewrites in the Senate.
"There are a lot of people in the industry who are scrambling their forces right now," said Fred Julander, founder and chairman of the Rocky Mountain Natural Gas Strategy Conference, an annual event that drew 1,800 industry people to Denver last week. "Whether we can learn and get up to speed -- and it's a steep learning curve -- is the question."
Battles in the Senate over climate bill language will be intense, and natural gas lags behind its competitors in the race to sway lawmakers.
"Much of what is going on is an industry feeling left out of the party and hoping to get more goodies for itself in the Senate bill," Steven Hayward, fellow at the American Enterprise Institute, a conservative think tank, said of natural gas.
Coal lobbyists have been talking to senators and aides for months, with their contacts becoming more frequent since the House bill passed. Coal lobbyists want to slow down the pace of the House measure's plan to cap greenhouse gas emissions and make businesses buy allowances for those emissions.
Natural gas also will have to compete against the utility industry, which has been lobbying heavily on energy legislation. While they represent natural gas and coal, utilities have big reasons to favor coal.
Electric utilities used coal for 59 percent of their power generation in 2007, while natural gas was used 13 percent of the time, according to the Energy Information Administration. Coal has been less expensive, making it more profitable for utilities to use as a fuel source.
Lobbying by utility interests so far has dwarfed competitors. In the first quarter of this year, utilities spent $35.1 million on lobbying. The natural gas industry spent less than a tenth of that, $3.3 million. Of the top 10 industries with a stake in climate legislation, natural gas put the least money into lobbying in the first quarter, according to a recent E&E analysis.
"As a whole, we're not very sophisticated in terms of public relations, and we need to be," Julander said. "We need to grow up and get in this game. No one is going to give us anything, even though we're the best for the environment."
'Coal Preservation Act'
Coal and natural gas are the top fuels used to make electricity in the United States. Natural gas emits about half the carbon dioxide, the principal greenhouse gas, that coal does for the same amount of energy produced. Natural gas executives and others at the Denver conference argued that while the House-passed legislation strives to reduce carbon emissions, it insulates coal in a way that will hurt lower-emitting natural gas.
Analysts agree that the bill crafted by Reps. Henry Waxman (D-Calif.) and Ed Markey (D-Mass.) helps coal.
"Coal did very well in Waxman-Markey," said AEI's Hayward, who added that the legislation could be called the "Sleight-Of-Hand Coal Preservation Act."
"It is so well-established in so many industrial states, and replacing it with another source, even natural gas, would cause a serious increase in utility rates, which no politician wants their fingerprints on," said Hayward, who in general dislikes the bill.
A spokesman for a trade group representing coal interests said the bill is structured to lower carbon emissions while still protecting consumers from higher electricity costs.
"The reality is, natural gas is a higher-priced fuel. It's a less domestically available fuel," said Joe Lucas, spokesman for American Coalition for Clean Coal Electricity. Language in the bill helping utilities that use coal "is a way of reducing the consumer's end price."
In the early years of climate regulation that charges for carbon emissions, the government would give away 85 percent of the carbon emission allowances and auction the remaining 15 percent.
http://www.nytimes.com/gwire/2009/07/13/13greenwire-at-center-ring-in-senate-climate-debate-coal-v-32201.html
"There are a lot of people in the industry who are scrambling their forces right now," said Fred Julander, founder and chairman of the Rocky Mountain Natural Gas Strategy Conference, an annual event that drew 1,800 industry people to Denver last week. "Whether we can learn and get up to speed -- and it's a steep learning curve -- is the question."
Battles in the Senate over climate bill language will be intense, and natural gas lags behind its competitors in the race to sway lawmakers.
"Much of what is going on is an industry feeling left out of the party and hoping to get more goodies for itself in the Senate bill," Steven Hayward, fellow at the American Enterprise Institute, a conservative think tank, said of natural gas.
Coal lobbyists have been talking to senators and aides for months, with their contacts becoming more frequent since the House bill passed. Coal lobbyists want to slow down the pace of the House measure's plan to cap greenhouse gas emissions and make businesses buy allowances for those emissions.
Natural gas also will have to compete against the utility industry, which has been lobbying heavily on energy legislation. While they represent natural gas and coal, utilities have big reasons to favor coal.
Electric utilities used coal for 59 percent of their power generation in 2007, while natural gas was used 13 percent of the time, according to the Energy Information Administration. Coal has been less expensive, making it more profitable for utilities to use as a fuel source.
Lobbying by utility interests so far has dwarfed competitors. In the first quarter of this year, utilities spent $35.1 million on lobbying. The natural gas industry spent less than a tenth of that, $3.3 million. Of the top 10 industries with a stake in climate legislation, natural gas put the least money into lobbying in the first quarter, according to a recent E&E analysis.
"As a whole, we're not very sophisticated in terms of public relations, and we need to be," Julander said. "We need to grow up and get in this game. No one is going to give us anything, even though we're the best for the environment."
'Coal Preservation Act'
Coal and natural gas are the top fuels used to make electricity in the United States. Natural gas emits about half the carbon dioxide, the principal greenhouse gas, that coal does for the same amount of energy produced. Natural gas executives and others at the Denver conference argued that while the House-passed legislation strives to reduce carbon emissions, it insulates coal in a way that will hurt lower-emitting natural gas.
Analysts agree that the bill crafted by Reps. Henry Waxman (D-Calif.) and Ed Markey (D-Mass.) helps coal.
"Coal did very well in Waxman-Markey," said AEI's Hayward, who added that the legislation could be called the "Sleight-Of-Hand Coal Preservation Act."
"It is so well-established in so many industrial states, and replacing it with another source, even natural gas, would cause a serious increase in utility rates, which no politician wants their fingerprints on," said Hayward, who in general dislikes the bill.
A spokesman for a trade group representing coal interests said the bill is structured to lower carbon emissions while still protecting consumers from higher electricity costs.
"The reality is, natural gas is a higher-priced fuel. It's a less domestically available fuel," said Joe Lucas, spokesman for American Coalition for Clean Coal Electricity. Language in the bill helping utilities that use coal "is a way of reducing the consumer's end price."
In the early years of climate regulation that charges for carbon emissions, the government would give away 85 percent of the carbon emission allowances and auction the remaining 15 percent.
http://www.nytimes.com/gwire/2009/07/13/13greenwire-at-center-ring-in-senate-climate-debate-coal-v-32201.html
Subscribe to:
Posts (Atom)