Thursday, January 31, 2008

Shell Natural Gas Iraq Project Valued 2.5 Billion

Jan. 31 (Bloomberg) -- Royal Dutch Shell Plc may spend $2.5 billion on a natural gas plant in southern Iraq to meet energy demand in the Middle East, where economies are growing 5.9 percent a year, according to a person involved in the plan.

Shell met with Iraqi officials in The Hague last week to propose building a pipeline that would link the Basrah region to a new facility on the country's coast, the person said. Shell would also build a facility that could freeze 16 million cubic meters of gas a day and ship it to Kuwait and the United Arab Emirates, the person said.

Gas demand in the Persian Gulf grew 28 percent from 2003 to 2006 as the United Arab Emirates and Saudi Arabia developed steel, aluminum and chemical industries to curb their reliance on crude oil exports. Shell, based in The Hague, needs new energy sources after oil and gas production fell 14 percent in four years.

``The Gulf Arab states need extra sources of gas one way or another,'' said David Butter, a London-based senior Middle East analyst at the Economist Intelligence unit. ``And you'd expect Shell to be looking very closely at Iraq as it has unique potential.''

Iraq had 3.17 trillion cubic meters of gas in reserves at the end of 2006, according to estimates by BP Plc. The proposed project's daily output would be enough to supply about 14 percent of the U.A.E.'s demand, the BP figures show. Abu Dhabi National Energy Co., a state-run utility in one of the country's seven sheikdoms, plans to expand its power capacity by 78 percent, to 16,000 megawatts, over five years.

Iraqi Contracts

Shell may complete its proposal in about a week, the person said. Representatives in Shell's press offices in The Hague and in London couldn't be reached for comment. Calls to the Iraqi Oil Ministry spokesman weren't answered.

Middle East gas consumption has grown faster in the past decade than in the U.S., Europe and Asia, according to BP. Use of the fuel in the region almost doubled to 289 billion cubic meters annually in the 10 years through 2006, BP said.

Prices for Algerian LNG tripled in the five years through Sept. 30, according to Gas Strategies Group Ltd. Producers have charged more amid rising construction costs and a shortage of equipment and contractors.

LNG is natural gas that's chilled to a liquid, shipped by tanker and then turned back into gaseous form at its destination.

Wednesday, January 30, 2008

LNG Projected in New Guinea Priced at $10 Billion

OIL SEARCH and its partners in a proposed liquefied natural gas project in Papua New Guinea expect to decide whether the project will proceed to the next stage - front-end design and engineering - by the end of March.

The partners, led by operator Exxon Mobil, last year said a 6.3 million tonne a year, two-train LNG development with an onshore plant near Port Moresby was likely to cost around $US10 billion ($11.25 billion), but that figure is under review.

JP Morgan has assumed the project cost will rise to $US11 billion, given capital cost decreases are exceedingly rare in the current heated market for skilled construction workers and raw materials. Oil Search said a financing review presented to the partners in December indicated "considerable market depth and capacity to provide the funding required to support the project".

Exxon expects to start marketing the LNG on behalf of the joint venture participants, including Oil Search, Santos, AGL Energy and Nippon Oil, once it has decided to proceed to the two-year front-end design and engineering phase.

After a site visit in November, a JP Morgan analyst, Mark Greenwood, said the length of the engineering phase appeared "quite staggering". The project is expected to start production in 2013 or 2014.

"We believe that a faster schedule could be achieved," Mr Greenwood said. "The fact that Exxon is setting such a conservative schedule is somewhat of a concern, because there is a tendency for project teams to meet conservative targets."

The Papua New Guinea project has been Oil Search's key growth initiative since the collapse of the proposed $8 billion PNG-Australia gas pipeline last year. "The gas project is the key thing for Oil Search, the only thing that matters, and that looks broadly on track," a Morgan Stanley analyst, Stuart Baker, told Bloomberg.

Oil Search shares closed 35c lower at $4.35 yesterday after it revealed production at its ageing PNG oilfields had fallen 2.2 per cent during the December quarter versus the September quarter.

Oil Search produced 9.78 million barrels of oil equivalent last year, giving it a record sales revenue of $US690.2 million due to the higher oil price. The company sold two of its three December cargoes at prices above $US100 a barrel.

Oil Search is undertaking a company-wide review which may result in it deciding to sell its interests in the Middle East. The projects contribute only a small amount of production and revenue. Oil Search expects to release the initial results of the review towards the end of this quarter.

Tuesday, January 29, 2008

Natural Gas Prices Looking Good Long Term for Producers!

CALGARY -- Is natural gas on the rebound?

It has been such a long time since anyone warmed up to natural gas that we've grown accustomed to view it as a business in blow-down mode, particularly in high-cost Western Canada.

Yet some analysts are beginning to see an end to the two-year downturn that pushed many smaller companies out of business -- and bigger ones to other basins.

Richard Wyman, vice-president and senior oil-and-gas analyst at Canaccord Adams, said the encouraging signs for the Canadian sector include a Canadian dollar that has weakened from its high, a colder-than-expected winter, falling costs for oilfield services and land, and a flattening in drilling in the United States, which should moderate supplies.

"It looks to me that we may be rightsizing this whole thing this winter," he said. "The direction is definitely positive."

In a note Monday, UBS Securities Canada Inc. analysts said: "Sentiments toward natural gas weighted domestic producers appears to be improving, with many names rising off their lows."

"This winter may be the turning point for natural gas prices," Peters & Co. energy analysts said in their recently released North American energy outlook.

"Perhaps the tide is turning for natural gas weighted companies."

There have been some encouraging signs from producers, too.

Last week, BP PLC said it will re-enter the natural-gas business in Western Canada with a $1-billion unconventional gas play in British Columbia. El Dorado, Ark-based Murphy Oil Corp. had just revealed it spent $224-million in December buying up land in British Columbia.

Natural-gas prices have climbed nearly 50% since last year's third quarter, closing Monday at US$8.09 per million British thermal units on NYMEX, up US11.2¢.

Indeed, deep spending cuts by the Canadian sector, in which costs shot up as prices weakened, curbed supplies from Western Canada by more than 500 million cubic feet a day in 2007, and are set to drop by more than one billion cubic feet (bcf) a day this year, says Peters, which has boosted its natural-gas price assumptions for 2008 to an average of US$8.35 for NYMEX.

Brightening the picture for Western Canada is that drilling and completion costs have come down 25% from the peak in 2006, the brokerage estimated.

North American inventories, which for two years seemed to be stuck on full, are deflating.

Storage in the United States is now 221 bcf below last year and about 185 bcf above the five-year average, while a major withdrawal of 225 to 235 bcf is expected to be reported next, which would be well above the year ago the five-year averages, UBS said.

Supporting the optimisim is the LNG story, which is not unfolding as many expected. Imports have trickled down to one bcf/d, from a high of three bcf a day a couple of years ago, as cargoes respond to big demand and huge price spikes in such places as Japan and Spain rather than coming to North America.

"Landed prices into Japan have reached US$21 per million British thermal units in the past week," said FirstEnergy Capital Corp. analyst Martin King in a report Monday. "The global LNG market remains incredibly tight and still undersupplied."

Cameron Gingrich, lead project analyst at energy consultancy Ziff Energy Group, said gas prices in Europe and Asia are responding to the high price of oil. Gas prices in North America decoupled from oil prices two years ago.

Those markets are likely to remain tight in the winter because of heating demand. However, Ziff believes LNG supplies could come back in greater amounts to North America in the summer.

Longer term, LNG supplies to North America are likely to increase as new projects are built in places like the Middle East and Algeria. Meanwhile, Alberta producers are facing higher royalties in 2009, which could make this year's gas recovery short-lived.

Monday, January 28, 2008

Iran Sending Natural Gas to Turkey - Again?

Iran on Sunday resumed shipping natural gas to Turkey, after cutting supplies during a cold snap almost one month ago, CNN-Turk television reported.

Iran cut gas supplies at the beginning of this month, despite having promised not to interrupt shipments again after a reduction last year due to another dip in temperatures.

The cut last year sparked debate over Turkey's need to reduce energy dependence on Russia and Iran, its two main suppliers. Turkey uses natural gas in industry and to heat homes.

After Russia, Iran is Turkey's second-largest supplier of natural gas, now providing around 20 million to 22 million cubic meters per day through a 2,580-kilometer pipeline.

Turkey also imports some liquefied natural gas from Nigeria and Algeria.

Jan 25 Summary - Natural Gas is $7.98/K

Oil futures jumped back above $90 a barrel, as recession worries that pulled prices lower in recent weeks faded some.

News that Chinese oil demand grew by 6.4 percent in December, the highest rate in months, contributed to oil's advance. The Fed's surprise rate cut this week probably helped support the price of oil as well, since rate cuts tend to send the dollar lower. Crude futures offer a hedge against a falling dollar, and oil futures bought and sold in dollars are more attractive to foreign investors when the greenback is falling.

Light, sweet crude for March delivery rose $1.30 to settle at $90.71 on the New York Mercantile Exchange after rising as high as $91.38.

February heating oil futures jumped 4.28 cents to settle at $2.5191 a gallon on the Nymex, while February gasoline futures added 3.54 cents to settle at $2.3182 a gallon. Heating oil and gasoline prices were supported by news that Valero Energy Corp.'s 255,000 barrel a day refinery in Aruba was shut down due to a fire.

Natural gas rose 18.1 cents to settle at $7.983 per 1,000 cubic feet.

Peabody Takes Stake in Coal-to-Gas Company

Coal producer Peabody Energy Corp. took a minority stake in GreatPoint Energy Inc., which licenses a technology to convert coal, petroleum coke and biomass into ultra-clean pipeline quality natural gas.

Peabody did not disclose the financial terms of the investment.

Peabody said GreatPoint Energy uses a single-stage catalytic gasification process to create natural gas that is 99.5 percent pure methane. It can be transported across North America using the existing natural gas pipeline infrastructure.

Cambridge, Mass.-based GreatPoint said it will develop coal-to-natural-gas facilities with Peabody near its Powder River mines in Wyoming, which produce more than 100 million tons of coal a year.

Coal Shares Stay Hot

Shares of coal producers climbed again, with Consol Energy Inc. hitting a new high of $76.25. The stock is up over 20 percent since Tuesday. Alpha Natural Resources has had a similar climb. Peabody Energy, Massey Energy and Arch Coal all gained around 15 percent over the last four sessions.

Investors are flocking to coal as spot prices rise, international demand heats up and supply concerns grow. Widespread flooding has slowed, even halted, production in Australia and South Africa _ major sources of coal for Asia and Europe. The Financial Times reported that BHP Billiton Mitsubishi Alliance, one of the world's biggest exporters of coal used to make steel, declared "force majeure" because of disruptions at its Australian operations. "Force majeure" is declared when extreme events prevent fulfillment of contract obligations.

Rio Tinto and Xstrata also reported coal production problems in Australia. Production losses are estimated in the hundreds of millions of dollars. Some analysts are also concerned the production delays will affect annual contract prices.

China Halts Coal Exports

Weather is causing coal problems in China as well. The government suspended coal exports after the coldest, snowiest winter in decades left millions of Chinese without heat and running water.

Friction between coal producers and utilities has just made matters worse.

China's domestic prices of coal and crude oil rose 14.2 percent and 35 percent year-on-year, respectively, in December, according to the country's central bank.

But electricity prices rose only 2.1 percent. Utilities have chafed at caps on rates that prevent them from passing the higher costs for coal on to customers. And coal suppliers are pushing for higher prices.

China exported 53 million tons of coal last year, down 16 percent from 2006. Coal imports rose 34 percent to 51 million tons, much of it going to the country's expanding steel industry.

Former Sinopec Chairman Faces Corruption Charges

The former chairman of China's No. 2 oil company, Sinopec Corp., was expelled from the Communist Party and charged with corruption and bribe taking.

Chen Tonghai "abused his position to obtain improper benefits for his mistress and others and led a corrupt life," state broadcaster CCTV reported on its main evening national news broadcast.

Chen resigned abruptly last June from his Sinopec post and as president of the company's state-owned parent, and immediately disappeared from public view.

Sinopec, also known as China Petroleum & Chemical Co., is Asia's biggest publicly listed oil refiner by capacity and China's second-biggest oil company after China National Petroleum Corp.

Petrohawk Offers Shares, Delays IPO

Independent oil and natural gas producer Petrohawk Energy Corp. plans a public offering of 15 million shares of common stock. The company expects to use proceeds to pay down part of its debt in a senior revolving credit agreement.

Petrohawk had 170.4 million shares outstanding as of Nov. 2.

Petrohawk also said it will delay a proposed initial public offering of units in a master limited partnership because of market conditions.

The company said in October that its HK Energy Partners LP unit planned to offer 9.3 million common units representing limited partner interests. The division was created by Petrohawk to acquire, develop and exploit oil and natural gas properties.

Petrohawk raised its 2008 production guidance and capital budget to $800 million from $700 million, because of recent acquisitions and positive drilling results.

More Rigs Operating in the U.S.

The number of rigs actively exploring for oil and natural gas in the U.S. rose by 15 this week to 1,747. That compares with a rig count of 1,699 a year ago.

Of the rigs running nationwide, 1,422 explored for natural gas and 318 for oil, according to Houston-based Baker Hughes Inc., which tracks operating rigs. Seven rigs were listed as "miscellaneous."

Colorado and Oklahoma each gained eight operating rigs, New Mexico three, and Louisiana one. California lost four, Texas lost three and Alaska dropped by one.

Total Will Pay Damages for Big Oil Spill

Total SA said it will appeal the guilty verdict against it in the 1999 sinking of the oil tanker Erika, which caused France's worst-ever oil spill.

But the French petroleum giant also said that whatever the outcome of the appeal, it will also pay court-ordered compensation for the spill.

The court ordered Total and three other defendants to pay $285 million in compensation to 101 civil parties; including the state, associations involved in the cleanup and ecology groups.

--Compiled by AP Business Writer Greg Stec. Questions or comments can be directed to

Sunday, January 27, 2008

Kenworth LNG Trucks Coming to California

Kenworth Truck Co. plans to begin large-scale production of heavy-duty trucks powered by liquefied natural gas at its Renton plant next year.

The move to LNG trucks is the latest by Kenworth and its parent company, Bellevue-based Paccar Inc., to look for alternatives to conventional diesel-fuel engines as a way to reduce operating costs and meet increasingly stringent air-emission rules.

Kenworth already has announced plans to market medium-duty hybrid trucks this year, and Paccar is developing a similar hybrid system for heavy-duty trucks, what most people refer to as semis.

How many LNG-powered units Kenworth's Renton plant will produce will depend on market demand, and initially it's not expected to have a big impact on employment, said Bob Christensen, Kenworth general manager.

But with California and other states writing tougher regulations on truck-engine emissions, "We think it's an emerging market," Christensen said.

In LNG systems, natural gas is held as a liquid at minus 260 degrees Fahrenheit. The truck itself doesn't require any special refrigeration equipment; instead, it relies on a vacuum-bottle cryogenic tank system to hold the fuel at that temperature.

Kenworth plans to use its T800, a model frequently used in such applications as regional freight hauling and dump trucks, in combination with a Cummins engine and an LNG fuel system developed by Westport Innovations Inc. in Vancouver, B.C.

Paccar has been researching natural gas as a truck fuel for more than a decade, comparing the merits and drawbacks of compressed natural gas and LNG.

Early on it was thought that natural gas couldn't deliver the horsepower of a diesel engine. Christensen said the gap has been narrowed, and Kenworth will offer 400- and 450-horsepower configurations. "The torque and drivability of the LNG truck has been very good," he said.

One major market for LNG trucks is hauling containers at ports. Kenworth noted that the ports of Los Angeles and Long Beach, Calif., have set up a fund to replace diesel-engine trucks with LNG vehicles and will remove all pre-2007 trucks by 2012.

Improving emissions from trucks through cleaner engines and fuels is also a goal of the Northwest Ports Clean Air Strategy approved recently by the ports of Seattle, Tacoma and Vancouver, B.C.

Kenworth and Westport already have put together fuel systems that can be retrofitted to existing trucks.

Although LNG trucks require specialized tank, fuel injector, pump and electronic systems, which boost the cost of the truck, federal and state programs may offset the cost, Christensen said. Meanwhile, the gap between the cost of diesel fuel and natural gas is widening, he said, giving natural gas an operating-cost advantage.

Saturday, January 26, 2008

Coal to Natural Gas Still a Growth Industry

BILLINGS, Mont. (AP) - Peabody Energy Corp. (NYSE:BTU) , the world's largest private coal company, announced Friday it has joined with a Massachusetts firm to develop multiple coal-to-natural gas plants in Wyoming's Powder River Basin that would produce cleaner-burning fuel and less pollution.

The basin, which straddles the Montana-Wyoming border, produces about 40 percent of the country's coal, primarily for electricity generation.

St. Louis-based Peabody and GreatPoint Energy of Cambridge, Mass., said they are in the early stages of jointly developing 'gasification' plants that would convert some of that coal into synthetic natural gas. Financial terms were not disclosed.

Coal-derived gas is considered a cleaner fuel than raw coal. It also has the potential to produce fewer greenhouse gases emissions -- a fundamental issue for the coal industry as it faces mounting pressure over climate change.

For Peabody and GreatPoint to be successful, they will have to buck a trend of coal plant delays and cancellations that have swept the country in recent months.

The companies said their plants would use a GreatPoint-licensed technology to capture some carbon dioxide, considered a contributor to global warming. If the synthetic gas was used for electricity generation, carbon dioxide emissions could be reduced by up to 40 percent compared to a conventional coal-fired power plant, Dan Goldman, GreatPoint vice president, said.

Rising construction costs and environmental worries -- coal plants are the nation's largest contributor of greenhouse gasses -- have led companies elsewhere to abandon or defer at least four dozen coal plants. Those included both conventional and gasification plants.

However, University of Wyoming economist Ed Barbier said Peabody and GreatPoint could overcome that trend through the economic advantages of building plants next to the Powder River Basin's abundant coal reserves.

A coal-to-gas plant near one of the basin's mines could tap into the region's extensive pipeline network and transport the fuel offsite at minimal expense. Peabody produced 138 million tons of coal from its three mines in the basin in 2006.

Barbier said another factor working in the industry's favor is a desire by state officials for projects that go beyond mining coal.

But he added that volatility in the industry -- in part due to global warming -- means even promising projects can stall.

Only a handful of gasification plants now exist.

'What we want to do is advance the technologies,' said Peabody's Beth Sutton. 'We see real opportunities there given the high cost of natural gas.'
GreatPoint's Goldman said his company also is exploring coal-to-natural gas projects in Montana, Alberta and the U.S. Gulf Coast, after building a successful pilot project in Illinois.

On Wall Street, Peabody shares added $4.12, or 7.9 percent, to $56.07 in Friday trading. The stock has ranged from $37.20 to $63.97 in the past year.

Friday, January 25, 2008

Natural Gas Discovered in Australia & Egypt


Apache Corp. (APA) said it discovered deposits of natural gas at wells in both Egypt and Australia.

Apache said its Hydra-1X exploration well in Egypt's Western Desert test- flowed 41.6 million cubic feet of natural gas and 1,313 barrels of condensate per day.

The Houston oil and gas company also said its Brulimar-1 discovery on Australia's Northwest shelf included 113 feet of net pay in the Upper Triassic Mungaroo sandstone.

In 2008, Apache plans to drill 282 wells in Egypt and 52 wells in Australia.

Shares of Apache recently traded up $2.17, or 2.4%, at $93.50.

-Jennifer Hodson; 201-938-5400;

Thursday, January 24, 2008

Natural Gas Storage Program in Fresno is a Go!

Northwest Natural Gas Co. (NYSE: NWN) says it has found enough potential customers for an underground natural gas facility near Fresno, Calif., to proceed with its Gill Ranch Storage LLC project.

"There is the type of demand we anticipated, if not more," said Steve Sechrist, spokesman for the Portland-based gas utility.

As a prelude to filing an application to develop the 20-billion-cubic-foot storage facility with the California Public Utilities Commission, NW Natural and its partner, Pacific Gas & Electric Co. advertised the project in industry publications and solicited nonbinding declarations of interest from potential users.

The effort netted a "big hit," according to Sechrist, who said he couldn't identify the prospective customer.

NW Natural and PG&E plan to jointly develop the $150 million project with NW Natural taking a 75 percent ownership stake.

Having established that there is customer demand for underground gas storage, the development team will seek a Certificate of Public Convenience and Necessity from California regulators this year. The certificate would allow construction of the facility, including the storage field, equipment and a 25-mile pipeline connecting it to PG&E's gas transmission network.

Permitting will take about a year and includes an environmental review under the California Environmental Quality Act.

If successful, it will enter contracts with customers later this year and begin construction in late 2009, with a scheduled opening date in late 2010.

Wednesday, January 23, 2008

India China USA Competing for Natural Gas & Oil

Natural gas has become a new-age economic weapon: Goldman

K.A. Martin

Says it could be used to make a political point

KOCHI: Natural gas has become a new political and economic weapon that could be used to make a political point, said Professor Marshall Goldman of Harvard University here on Tuesday.

He was speaking to The Hindu on the sidelines of the three-day meet on the India-China-USA Triangle convened by the Centre for National Renaissance, New Delhi.

Professor Goldman, an expert on Russia, said natural gas now had more potential than oil, as natural gas supply lines acted like the umbilical cord. If it snapped, countries could come under pressure. He cited the instance of Ukraine cutting off natural gas supply to the European Union nations.

Professor Goldman, who later made a presentation on India-China-U.S. Energy Triangle, called natural gas a double-edged sword. It could be used for economic and political bargains. Cutting off natural gas supplies would be worse than oil embargoes because there were several options in sourcing oil.

He said India and China had sought oil and natural gas from Russia. This move was a diversification from the Middle East. But Russians realised that they had a new economic and political tool in their hands which threw up possibilities.

Using natural gas as a source of energy was good because it was cleaner. Sourcing it from Russia and the Central Asian countries would generate wealth for the region, he pointed out.

Prof. Yitzhak Shichor from Hebrew University, Israel, made a presentation on “Regulation or Strangulation: Beijing, Delhi and Washington in pursuit of Energy.”

He began his presentation by saying that the U.S. was Buddha of the past, China of the present and India of the future. The three countries do not have their own domestic sources to feed their energy demands, he said.

The paper analysed the competition among the U.S., India and China for oil resources from a strategic perspective. The three would remain the primary energy consumers for a long time to come. The key to ensuring energy supplies was engagement among the countries.

The former Energy Secretary, E.A.S. Sharma, sought regional cooperation in meeting the energy demands. He called for gas grids in place of bilateral pipelines so as to end the monopoly situation. There could be an electricity grid that included countries such as Nepal and Pakistan.

Hu Shisheng, Director, CICIR, China, chaired the session on India-China-U.S. Energy Triangle.

Tuesday, January 22, 2008

PetroBras Discovers Huge Natural Gas Field!!!

Petroleo Brasileiro SA, Brazil's state-controlled oil company, and Portugal's Galp Energia SGPS SA discovered a natural gas field that may be as big as Tupi, one of the world's biggest finds of the past 30 years.

The discovery, known as Jupiter, is beneath more than 5 kilometers (3.1 miles) of ocean and seabed and contains natural gas liquids known as condensate as well. It's located about 290 kilometers (180 miles) off the coast of Rio de Janeiro state, 37 kilometers from the Tupi field, Rio de Janeiro-based Petrobras said in a statement today sent by e-mail.

The find, if it contains as much gas and oil as Tupi, would be the second giant strike reported by Petrobras in the past 10 weeks. The Tupi field, disclosed Nov. 8, has as much as 8 billion barrels of oil and gas, three quarters of the reserves of Kazakhstan's 12-billion-barrel Kashagan field. Kashagan was the largest oil discovery in the last three decades.

``This find makes it clear that what we have in Brazil is another huge geological basin,'' John Parry, senior analyst with Jonn S. Herold Inc., a Norwalk, Connecticut-based energy research unit of Denver-based IHS Inc., said in a telephone interview. ``As they say the best place to find oil and gas is usually right near where you've already found it.''

U.S. Supplier

Petrobras, which owns 80 percent of Jupiter and operates the well, said the oil bearing rock is more than 120 meters wide, suggesting that ``the area of this structure could have dimensions similar to Tupi.''

Lisbon-based Galp, which also holds a stake in Tupi, owns 20 percent.

Should the estimates for Tupi and Jupiter be confirmed, it would more than double Petrobras's 11.7 billion barrels of reserves, according to U.S. Securities and Exchange Commission standards.

Brazil's discoveries may result in the country overtaking such producers as Venezuela and Mexico and becoming a major supplier to the U.S., Parry said.

``It is conceivable that after 2010 or 2012 you could see Brazil and Petrobras matching Venezuela and exceeding them,'' he said. ``Brazil would become an important producer in the western hemisphere and you would have a natural market to the U.S.''

A Tupi sized field would likely produce about 1 million barrels a day in 5-to-10 years, he said.

Petrobras worldwide operations produced an average 2.37 million barrels of oil and natural gas equivalent a day in December, according to Petrobras' Web site. Brazilian output was an average 2.3 million barrels a day, 80 percent from its offshore Campos and Santos basins.

The Jupiter well is in the BM-S-24 exploration block in Brazil's offshore Santos Basin. As with Tupi, the hydrocarbons are in rock formations beneath a layer of salt.

Petrobras preferred shares, the company's most-traded class of stock, fell 5.33 reais, or 7.4 percent, in Sao Paulo. Trading ended before the Jupiter announcement was made. Galp fell 65 centavos, or 4.6 percent to 13.65 euros in Lisbon before the announcement.

Monday, January 21, 2008

China Natural Gas 2007 Up 10 Percent

BEIJING, Jan. 21 (Xinhua) -- China Petroleum and Chemical Corporation (Sinopec) announced on Monday that its crude oil output reached 291.67 million barrels last year, up 2.27 percent from 2006.

According to unedited figures released by Sinopec, it produced 283 billion cubic feet of natural gas in 2007, up 10.33 percent.

Sinopec processed 155.58 million tons of crude in 2007, a year-on-year increase of 6.33 percent.

Output of gasoline rose by 7.35 percent to 24.69 million tons; diesel, up 3.84 percent to 60.08 million tons; kerosene, up 31.02 percent to 8.32 million tons and light chemical feedstock, up 3.21percent to 23.47 million tons.

Output of ethylene, synthetic resins and synthetic rubbers rose by 6.02 percent, 12.08 percent and 19.76 percent, respectively, from 2006.

However, output of synthetic fibers fell 5.66 percent and that of urea was down 2.73 percent.

Total domestic sales volume of refined oil products rose 6.9 percent to 119.39 million tons in 2007.

Listed in Hong Kong, New York, London and Shanghai, Sinopec is the largest oil refiner and one of the largest oil producers in China.

Sunday, January 20, 2008

Lodi Storage in Califoria Gets New Owner

BREINIGSVILLE, Pa., Jan. 18 /PRNewswire-FirstCall/ -- Buckeye Partners, L.P. (the "Partnership"), today announced that the Partnership had closed on its previously announced acquisition of Lodi Gas Storage, L.L.C. which owns a natural gas storage facility located in northern California, from an affiliate of ArcLight Capital Partners, LLC ("ArcLight") for total cash consideration of approximately $432 million. Additional consideration of $12 million will be due to ArcLight upon receipt of approval from the California Public Utilities Commission for a storage reservoir expansion project associated with the acquired assets, known as Kirby Hills Phase II. The Partnership financed the purchase price through public equity offerings completed in August, 2007 and December, 2007, and a public debt offering completed earlier this month.

Lodi Gas Storage owns and operates a storage facility located near Lodi, California, and a facility known as Kirby Hills located approximately 45 miles west of the Lodi facility. The combined LGS facilities provide approximately 22 Bcf of working gas capacity and are connected to Pacific Gas and Electric's intrastate gas pipelines that serve natural gas demand in the San Francisco and Sacramento areas. The Kirby Hills Phase II expansion project is expected to provide an approximate incremental 12 Bcf of working gas capacity. The expansion project is expected to be in service by the end of 2008.

Buckeye Partners, L.P., through its operating subsidiaries, owns and operates one of the largest independent refined petroleum products pipeline systems in the United States in terms of volumes delivered, with approximately 5,400 miles of pipeline. The Partnership also owns or operates 51 refined petroleum products terminals with an aggregate storage capacity of approximately 20.0 million barrels in Illinois, Indiana, Massachusetts, Michigan, Missouri, New York, Ohio, Pennsylvania and Wisconsin, and operates and maintains approximately 2,700 miles of pipeline under agreements with major oil and chemical companies. For more information about Buckeye Partners, L.P., visit the Partnership's website at

This press release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 that the General Partner believes to be reasonable as of today's date. Actual results may differ significantly because of risks and uncertainties that are difficult to predict and many of which are beyond the control of the Partnership. Among them are (1) adverse weather conditions resulting in reduced demand; (2) changes in rate regulation by the Federal Energy Regulatory Commission; (3) changes in other laws and regulations, including safety, tax and accounting matters; (4) competitive pressures from other transportation services and alternative energy sources; (5) liability for environmental claims; (6) improvements in energy efficiency and technology resulting in reduced demand; (7) the inability to integrate acquired assets successfully with the Partnership's existing assets and to realize anticipated cost savings and other efficiencies; (8) labor relations; (9) changes in real property tax assessments; (10) regional economic conditions; (11) market prices of petroleum products and the demand for those products in the Partnership's service territory; (12) disruptions to the air travel system; (13) security issues relating to the Partnership's assets; (14) interest rate fluctuations and other capital market conditions; (15) construction costs, unanticipated capital expenditures and operating expenses to repair or replace the Partnership's assets; (16) availability and cost of insurance on the Partnership's assets and operations; (17) expansion in the operations of the Partnership's competitors; (18) shut-downs or cutbacks at major refineries that use the Partnership's services; and (19) the treatment of the Partnership as a corporation for federal income tax purposes or if the Partnership becomes subject to entity-level taxation for state tax purposes. You should read the Partnership's Annual Report on Form 10-K, and its most recently filed Form 10- Q, for a more extensive list of factors that could affect results. The Partnership undertakes no obligation to revise its forward-looking statements to reflect events or circumstances occurring after today's date.

Saturday, January 19, 2008

Russia & Bulgaria Ink the Pipeline Deal

SOFIA, Bulgaria -- Bulgarian and Russian officials signed a deal Friday to build a natural-gas pipeline that would undercut a rival project backed by the U.S. and European Union and strengthen the Kremlin's dominance over EU energy supplies.
[Vladimir Putin]

The agreement came after visiting Russian President Vladimir Putin pushed hard to secure Bulgaria's crucial participation in the proposed South Stream pipeline that would cross from Russia under the Black Sea to Bulgaria and then branch off for delivery deeper in Europe. The deal required last-minute negotiations late Thursday, amid tough bargaining by Bulgaria and wariness about Russia's clout. The Bulgarian cabinet approved the deal at an extraordinary meeting only a few hours before it was signed.

"Bulgaria's interests are fully protected, because the company which will be set up to construct and run the pipeline on Bulgarian soil will be with 50% Bulgarian and 50% Russian ownership," Bulgarian Prime Minister Sergei Stanishev said.

Russia's state-controlled gas monopoly, OAO Gazprom, had previously been offering Bulgaria a minority stake in the part of the pipeline that would run through Bulgaria. "Until yesterday, the Russian side insisted on holding a 51% stake," Mr. Stanishev said. He said Mr. Putin deserved most of the credit for progress in the late-night negotiations.

Despite the concession, the imminent deal was a victory for Mr. Putin and Russia, which is already Europe's dominant gas and oil supplier and is seeking to increase its control over westward routes for its energy supplies from the former Soviet Union.

"It's very important that the parties have shown their ability to compromise, and the draft that has been prepared reflects a balance of interests," Gazprom chairman Dmitry Medvedev, who is likely to succeed Mr. Putin after the March 2 presidential election, said after meeting with Mr. Stanishev.
[Dmitry Medvedev]

Mr. Medvedev said agreements on South Stream "will work for decades and make it possible to ensure stable conditions for future energy deliveries for Bulgaria, Russia and EU nations."

Gazprom has set up a parity joint venture with Italy's ENI SpA to develop a feasibility study for the 550-mile, $10 billion pipeline. The project is a direct rival to the Nabucco pipeline, sponsored by the U.S. and the EU, which would also come through Bulgaria.

Taking advantage of the clashing pipeline offers, Bulgaria has bargained with the Kremlin. On Thursday, Bulgarian President Georgi Parvanov underlined his nation's support for the EU's efforts to diversify energy supply routes -- and for Nabucco -- in a speech at a ceremony marking the opening of a Russian cultural festival in Bulgaria.

After Mr. Parvanov had spoken, a clearly annoyed Mr. Putin, standing next to him, said Bulgaria was free to choose its direction but warned it to make sure it "works to its benefit." South Stream would undercut Nabucco and dash the EU's hopes of reducing its growing reliance on Russia, which now supplies up to 40 % of Europe's gas and up to a third of the oil imports of some European countries. South Stream would have an estimated annual capacity of 1.15 trillion cubic feet, roughly equivalent to 60% of the natural gas consumed annually in the Netherlands.

Earlier in the week, Mr. Stanishev said that South Stream would enhance his country's standing, but that "it is important for Bulgaria to see a clear economic interest, besides the geostrategic interest." The Kremlin's plans have upset opposition parties and nongovernmental organizations in this former Soviet satellite. They fear Bulgaria's increasing dependence on Russian energy supplies and criticize Moscow's human-rights record.

About 100 demonstrators protested Mr. Putin's visit in downtown Sofia Thursday. They were watched closely by police, who have mounted a huge security operation. The protest was organized by the Anna Politkovskaya Association for Freedom of Speech, named after the Russian journalist who was murdered in 2006.

"Putin is coming to Bulgaria to sign Bulgaria's total economic dependence on Russia," the group said in a statement.

With Messrs. Putin and Parvanov looking on, officials also signed a €4 billion ($5.9 billion) contract to build Bulgaria's second nuclear plant near the northern town of Belene. An agreement for a joint company, with Greece, to build the Burgas-Alexandroupolis oil pipeline, which will channel Russian oil from the Black Sea to the Aegean bypassing Turkey's busy Bosporus, was also signed.

As part of its energy blitz, Russia has promised to extend South Stream into Serbia and build a huge gas storage facility there -- moves that would turn the Balkan nation into a major hub for Russian energy supplies to Europe. Belgrade has turned increasingly away from the West and toward Russia, which has supported Serbia in the debate over independence for Serbia's Kosovo province.

Friday, January 18, 2008

DOE Funded Marcellus Shale Natural Gas Project - Significant if Successful

"The value of this science could increment the net worth of U.S. energy resources by a trillion dollars, plus or minus billions," says Terry Engelder, professor of geosciences, at Penn State.

The Marcellus shale runs from the southern tier of New York, through the western portion of Pennsylvania into the eastern half of Ohio and through West Virginia. In Pennsylvania, the formation extends from the Appalachian plateau into the western valley and ridge. This area has produced natural gas for years, but the Marcellus shale, a deep layer of rock, is officially identified as holding a relatively small amount of proven or potential reserves. However, many gas production companies are now interested in the Marcellus.

Engelder, working with Gary Lash, professor of geoscience, SUNY Fredonia, has conservatively estimated that the Marcellus shale contains 168 trillion cubic feet of natural gas in place and optimistically suggests that the amounts could be as high as 516 trillion cubic feet.

"Conservatively, we generally only consider 10 percent of gas in place as a potential resource," says Engelder. "The key, of course, is that the Marcellus is more easily produced by horizontal drilling across fractures, and until recently, gas production companies seemed unaware of the presence of the natural fractures necessary for magnifying the success of horizontal drilling in the Marcellus."

The U.S. currently produces roughly 30 trillion cubic feet of gas a year, and these numbers are dropping. According to Engelder, the technology exists to recover 50 trillion cubic feet of gas from the Marcellus, thus keeping the U.S. production up. If this recovery is realized, the Marcellus reservoir would be considered a Super Giant gas field.

Engelder, who has studied this area of the U.S. for most of his career and began looking into fractures under a National Science Foundation grant 25 years ago, has identified and mapped natural fractures in the Marcellus shale. He and Lash will present some of their recent work at the 2008 American Association of Petroleum Geologists Annual Convention and Exhibition this spring.

The researchers look at the patterns of fractures in the shale and determine which are important for gas production. Fractures that correlate with the folding of the ridge and valley system are less common in black shale. However, because of their orientation, the fractures that formed prior to the folding will release gas if the wells cross the fracture zones.

These fractures, referred to as J1 fractures by Engelder and Lash, run as slices from the northeast to the southwest in the Marcellus shale and are fairly close together. While a vertical well may cross one of these fractures and other less productive fractures, a horizontally drilled well aimed to the north northwest will cross a series of very productive J1 fractures.

"It takes $800,000 to drill a vertical well in the Marcellus, but it takes $3 million to drill a horizontal well," says Engelder.

Companies that drill gas wells need to be certain that horizontal drilling will produce the gas they expect and the work by Engelder and Lash suggests that it will.

"We know that the Marcellus shale appears as an outcrop near Batavia, N.Y., east of Buffalo," says Engelder. "And we can see the fractures in the Marcellus in the exposed sections of the ridge and valley areas to the southeast. Because we see them going through the folded areas, we know they were there before the folding. If it happened earlier, then we know they have to be in the intervening basin as well."

The natural fractures in the Marcellus shale are the key to recovering large amounts of gas. As heavily organic sediments were laid down 365 million years ago, the black shale of the Marcellus formed. As the organic material decayed and degraded, methane and other components of natural gas formed and dispersed through the pores in the rock. About 300 million years ago, the pressure of the gas caused fractures to form in the shale. It was not until 280 million years ago that the eastern portion of Pennsylvania was pushed into the folding of the ridge and valley province that makes up that area. Gas that occurs in pockets underground is considered a conventional reservoir; gas that is distributed throughout the rock, like the Marcellus, is called an unconventional reservoir.

The Penn State-Fredonia approach is not restricted to production of the Marcellus shale, but can be applied to any gas-bearing shale with this type of fracture. Because the approach begins with a vertical well and then drills horizontally in the direction that will crosscut the productive fractures, old vertical wells can be reused.

"We can go back to wells that are already drilled and played out, and then drill horizontal from there," says Engelder. "Reusing old wells has both economic and environmental value."

Thursday, January 17, 2008

Bulgaria Wants More Money from Gazprom for Natural Gas to EU

Bulgaria may delay signing an agreement to operate a pipeline for carrying Russian natural gas under the Black Sea to European Union nations, Energy and Economy Minister Petar Dimitrov said.

Bulgaria and Russia are disputing ownership of the asset, he said in an interview with Bulgarian state television Channel 1 Wednesday. The pipeline would be laid from Russia and split in Bulgaria into a northern route, going to Austria via Romania and Hungary, and a southern route, crossing the Balkan peninsula to Italy.

The countries had planned to sign the deal during Russian President Vladimir Putin’s visit to Bulgaria on Jan. 18.

“It is possible that we might not sign the agreement at the end of the week, and that talks will continue during the Russian president’s visit,” Dimitrov said Wednesday. “We would like to guarantee some economic benefit for the state from this pipeline. The talks are difficult.”

The so-called South Stream pipeline would be built by OAO Gazprom, the world’s biggest natural gas company, and Eni SpA of Italy. Russia’s Gazprom wants a southern underwater link to cut reliance on transit countries and boost its export capacity.

Officials from Bulgaria and Russia are holding talks with representatives of Gazprom and Bulgarian state-run natural-gas distributor Bulgargaz AD.

Dimitrov outlined two options, which were being negotiated with Gazprom. One option envisages Bulgaria having ownership of the pipelines passing through the country and participating in its profit. The other option would allow Russia to keep ownership of the pipelines and pay transit fees, Dimitrov said.

Wednesday, January 16, 2008

PNM Resources into Natural Gas

Jeff Sterba -- chairman, president and CEO of PNM Resources -- said the sale is part of the company's strategic effort to focus on electric production and distribution and strengthen its financial position as the company prepares to make new investments in energy infrastructure.

The company expects to invest $1.7 billion over the next five years -- more than double the amount invested in the last five years -- to meet growing consumer demand.

Under the sale, about 800 PNM employees will transfer to Continental Energy, a Michigan-based utility holding company. Continental will more than double its customer base by acquiring PNM's operations, which now serve nearly 500,000 businesses and residential clients. Continental current natural gas businesses serve about 410,000 customers in Michigan and Alaska.

The proposed sale is subject to Hart-Scott-Rodino anti-trust review. It is expected to close at the end of 2008, after New Mexico state regulators rule on the deal.

In much of its 90-year history, PNM has been an electric company. It entered the gas business in 1985 as a result of an anti-trust price fixing lawsuit against the gas company's prior owner, Southern Union Co. (NYSE: SUG). PNM agreed at the time to purchase the gas company and work to restore health to its operations.

Sterba said in a prepared statement that Continental Energy is well-qualified to take over the gas operations.

"We are pleased to have found a quality, experienced natural gas delivery company to buy our New Mexico gas operations," Sterba said. "They'll have the opportunity to serve New Mexico with the same employees who serve them now."

George A. Schreiber Jr., president and CEO of Continental Energy, said the business will be re-named as New Mexico Gas Company and will be locally managed and headquartered here.

"New Mexico's strong economic potential, the markets served by PNM's gas assets and its skilled work force make this an attractive investment opportunity," Schreiber said. "We expect all PNM gas employees, along with those needed to support it administratively, will transfer to the new company after regulatory approval is received and the transaction closes."

Meanwhile, in a separate, smaller transaction, PNM Resources (NYSE: PNM) has agreed to pay $202 million to Continental to purchase Cap Rock Energy Corp., a regulated Texas electric business with 36,000 customers in north, central and West Texas. That transaction will be reviewed by the Public Utility Commission of Texas and the Federal Energy Regulatory Commission.

Sterba said net proceeds resulting from both transactions with Continental will be used to retire debt, fund future electric capital expenditures and for other corporate purposes.

Tuesday, January 15, 2008

500 Mile Natural Gas Line: Colorado to Kansas!

A 500-mile new natural gas pipeline from Weld County in northern Colorado to Brown County, Kan., opened Jan. 12, Rockies Express Pipeline LLC said Monday.

The pipeline is expected to be open for 713 miles from Weld County to Audrain County, Mo., in early February.

The Rockies Express pipeline is a massive $4.4 billion, 1,678-mile natural gas pipeline carrying gas from western Colorado to Ohio that's scheduled to be complete in June 2009. When finished, the pipeline will have a capacity to move 1.8 billion cubic feet of natural gas a day.

Kinder Morgan Energy Partners operates the Rockies Express pipeline and owns 51 percent of the equity in the project, which will become 50 percent when construction of the entire project is completed. Sempra Pipelines & Storage, a unit of San Diego-based Sempra Energy (NYSE: SRE), has a 25 percent ownership interest in the project. ConocoPhillips (NYSE: COP), based in Houston, owns a 24 percent interest in the project, with an additional 1 percent interest to be acquired after the pipeline construction is completed.

Sunday, January 13, 2008

Natural Gas Prices Not Rising as Fast as Oil!!

Natural gas prices remain significantly below their highs despite recent advances by the price of crude oil to over US$100 per barrel. Is now the time to favour natural gas and "gassy" stocks and trusts over crude oil and "oily" stocks and trusts?

Seasonal influences According to, natural gas and crude oil prices have corresponding periods of seasonal strength early in the year.

However, seasonal trends vary thereafter. The seasonality chart on natural gas from 1990 to 2005 shows a period of strength from mid-February to the end of April followed by a second period of strength from the end of July to the end of October.

In contrast, the seasonality chart on crude oil for the period from 1983 to 2005 shows a period of seasonal strength from the end of February to the middle of October.

As noted in this column on Nov. 10, the TSX Energy Index has a period of seasonal strength from the end of November to the end of May.

Fundamental influences

Inventory levels in the United States currently favour crude oil over natural gas, but that could change shortly.

Crude oil inventories have reached a three-year low. Natural gas inventories remain well above their five-year average. However, many U.S. utilities have the ability to switch from crude oil to natural gas (and vice versa) in order to fuel their power plants when prices are "out of whack."

When the ratio between natural gas prices and crude oil prices reaches the 0.075 level, natural gas is significantly less expensive than crude oil and utilities will switch at least part of their fuel requirements to natural gas.

The 0.075 level has been reached on eight occasions during the past 14 years. The most recent occasion was three weeks ago. On each occasion, the price of natural gas has advanced significantly (i.e. usually more than 50%) during the next few months.

Conversely, when the natural gas/crude oil ratio reaches 0.25, utilities have an incentive to switch from natural gas to crude oil.

Technical influences Natural gas prices are far from their record high at US$15.50 set in December, 2005. They have traded in a range between US$5.25 and US$9 per MBtu. during the past two years. Recently, they have bounced from support at US$7 and appear poised to test resistance at US$9.

Ways to invest Investors can take advantage directly in an increase in the natural gas/ crude oil ratio by owning the exchange-traded fund U.S. Natural Gas Fund LP (UNG/


Alternately, they can favour "gassy" stocks and trusts over "oily" stocks and trusts. The strategy looks particularly interesting during the current period of seasonal strength lasting until May. - Don Vialoux, chartered market technician, is the author of a free daily report on equity markets, sectors, commodities, equities and exchange-traded funds. Reports are available at Vialoux does not own securities mentioned in this report.

Saturday, January 12, 2008

ConocoPhillips Turned Down in Alaska

Gov. Sarah Palin of Alaska sent a letter to ConocoPhillips (COP.N: Quote, Profile, Research) this week calling the company's proposal to build a long-sought natural gas pipeline "critically short of meeting the state's objectives."

The apparent rejection of ConocoPhillips' bid came as a boost for TransCanada Corp (TRP.TO: Quote, Profile, Research), which was named the sole finalist this month for state sponsorship of the project under the Alaska Gasline Inducement Act.

Alaska's main criticism of ConocoPhillips' proposal, which was submitted outside of the AGIA process, was a request that state taxes be fixed on the project for decades.

"That approach is no more acceptable now than it was before AGIA," Palin wrote in the letter to ConocoPhillips' CEO James Mulva, dated Jan. 9. A copy of the letter was provided to Reuters late Thursday.

"Your alternative does not give the state a reason to deviate from the AGIA process," Palin added.

Friday, January 11, 2008

Iran Ships Natural Gas to Turkey - Again!

Iran will resume shipping natural gas to Turkey by Monday, a week after cutting supplies during a cold snap, Turkey's prime minister said.

Iran cut gas supplies to Turkey last Monday, despite having promised not to interrupt shipments again after a reduction in the gas flow last year due to another dip in temperatures. This week, Iran said that, in addition to the extreme cold, supplies from Turkmenistan were short, Turkish media said.

Prime Minister Recep Tayyip Erdogan said Thursday that a representative of Iranian President Mahmoud Ahmadinejad offered assurances that Iran would resume shipments this week.

"They said they would resolve the issue by Monday at the latest and resume giving us gas," Erdogan told reporters in comments broadcast on Turkish television.

State-run Turkish news agency Anatolia said Ahmadinejad called Erdogan later Thursday to reiterate Iran's promise to start pumping natural gas to Turkey.

The cut last year sparked debate over Turkey's need to reduce energy dependence on Russia and Iran, its two main suppliers. Turkey uses natural gas in industry and to heat homes.

After Russia, Iran is Turkey's second-largest supplier of natural gas, now providing around 20 million to 22 million cubic meters per day through a 2,580-kilometer (1,600-mile) pipeline.

Turkey also imports some liquefied natural gas from Nigeria and Algeria.

Thursday, January 10, 2008

Mr Mars Wants No Natural Gas Drilling on His Land

A reclusive billionaire whose family owns the Mars candy empire is emerging as a formidable opponent to the energy industry's plans to expand development of some of the country's most productive coal and gas deposits.

Forrest E. Mars Jr., the former chief executive of Mars Inc., owns a sprawling ranch along Montana's Tongue River — directly in the sights of companies hoping to tap the area's extensive coal and natural gas reserves.

Through his previously undisclosed ownership of the 82,000-acre Diamond Cross ranch, Mars is bringing his $14 billion fortune to bear on the side of ranchers and conservationists trying to curb the companies' ambitions.

"The perception that it's the big guy (energy companies) versus the little guy (ranchers). In this instance that's not the case," said Bruce Williams, vice president of Fidelity Exploration and Production, a defendant in one of several lawsuits brought by Diamond Cross over natural gas drilling.

The Mars family has a long-standing reputation for secrecy, and Forrest Mars' name is not listed as a party in any of the lawsuits pitting Diamond Cross against coal and natural gas developers. His ownership in the ranch was revealed in a Dec. 28 court affidavit reviewed by The Associated Press.

Mars did not respond to requests for interviews made through his son-in-law, Lonnie Wright, and through Diamond Cross attorney Loren O'Toole.

O'Toole said Mars' opposition to energy development stemmed from the vast amounts of water such projects can consume. In the arid West, water is essential to keeping working cattle ranches such as Diamond Cross alive.

The ranch sits on the northern end of the Powder River Basin, an area with some of the most productive coal and natural gas fields in the nation. Development of those resources was concentrated over the last decade in the southern portion of the basin, in Wyoming.

However, in recent years, exploration began pushing north into Montana. And Mars' ranch soon began to push back, with lawsuits against the companies involved.

Mars' influence on the rolling plains of southeastern Montana could be put to the test by state and federal laws favoring oil and gas development.

Under a property regime known as split estates, landowners in many Western states do not necessarily control the minerals beneath their property. In the Diamond Cross case, Fidelity and another company, Pinnacle Gas Resources, have oil and gas leases on the ranch that predate Mars' ownership, according to public records and company officials.

State law gives the companies the right to enter Mars' land to drill on those leases. So far, however, he's held them at bay.

"Forrest has a lot of money but he's in the same boat as anybody else," said Beth Kaeding, chairwoman of the Northern Plains Resource Council, a conservation group of which Mars is a member.

"If you don't own the mineral rights, it doesn't matter how huge your ranch is, how politically powerful you are, how much money you have," Kaeding said. "Mineral rights trump surface rights."

Mars, Inc. — maker of Snickers, the Mars bar, M&Ms and a variety of other food products — is one of the country's largest family-held companies, with an estimated 40,000 employees and $21 billion in annual revenues.

Public records show the billionaire began to amass property in southeastern Montana as early as 2003 — just as natural gas production in the area was booming.

Since then, Mars has launched or joined multiple court fights through Diamond Cross. The lawsuits have challenged the industry's depletion of water reserves, a proposal to build a new coal railroad through the ranch and, most recently, efforts to drill on Diamond Cross itself.

Ranch manager Denise Wood said Mars had kept the property as a working cattle ranch and his concerns about energy development mirrored those of many long-time residents, particularly the practice of pumping out underground water reserves to access trapped pockets of natural gas.

Those reserves are depended on by farmers and ranchers to water their fields and livestock. Energy companies sometimes capture the water and hold it in stock ponds that ranchers can use, but often it is lost as runoff.

Mars attorney O'Toole said the lawsuits were not meant to block development.

"That's not the point," he said. "The point is we can't lose all that water and at the same time have no provision to put it back."

In the most recent legal case involving Diamond Cross, Wyoming-based Pinnacle Gas Resources is attempting to begin drilling on a lease it holds to more than 10,000 acres of Mars property.

When the company notified Diamond Cross last month that it planned to begin drilling on the ranch by early January, O'Toole responded with a letter barring Pinnacle employees from the ranch. Pinnacle sued, demanding access. The first hearing in the case is scheduled Tuesday, in state district court.

"As a lawyer it should come down to the facts and the law, but there's no denying that money talks," said Pinnacle attorney Chris Mangen.

A Mars victory would mark "a significant change in the interpretation of state law that says you do have access," said Tom Richmond, administrator for the Montana Board of Oil and Gas Conservation. That agency is a defendant in a separate Diamond Cross lawsuit, over its approval of some of Pinnacle's drilling plans.

Richmond offered another solution to the dispute: Pointing to the gas company's size — its stock is worth about 1 percent of Mars' estimated personal fortune — he suggested the billionaire could simply buy the publicly traded company if he was determined to keep it off his land.

Wednesday, January 9, 2008

Birchcliff Drilling Natural Gas Wells in Canada

Not too many years ago, Seymour Schulich told my colleague Eric Reguly to do what he was doing, and buy Canadian Oil Sands Trust. Units were around $5.
Eric didn’t listen to one of Canada’s most successful investors. Canadian Oil Sands is now at $38. Eric gets all bent out of shape when we bring it up. Which we do, frequently.

Now, I’m in the same position. Mr. Schulich, who has given away more money than most of us will make in 10 lifetimes, put out a short news release this week announcing he’d raised his stake in Birchcliff Energy. He now owns 19 per cent of a junior play with a $700-million market capitalization. So Mr. Schulich got a call: What’s up at Birchcliff?

The reply offers an insight into the investment philosophy of a very successful investor-entrepreneur.
First, Mr. Schulich respects the management team. Birchcliff CEO Jeff Tonken has had his ups and downs, but Mr. Schulich admires the fact that he founded Stampeder Exploration in 1987, and sold it a decade later for $1.3-billion.
Second, Mr. Schulich sees an angle. Birchcliff is just starting to drill natural gas wells on properties adjacent to fields owned by EnCana. Canada’s biggest player in natural gas has been exploring here for years. EnCana has already found all sorts of reserves.

The final and most interesting point for those interested in energy markets is that Mr. Schulich thinks we’re at or near the bottom on natural gas prices. He’s patient money. He says gas could easily go sideways for some time. But three years out, he sees natural gas fetching far more than it does today.
Birchcliff did a $100-million financing back in September at $3.80 a share, led by GMP Securities and Scotia Capital. The stock’s been rising ever since. Mr. Schulich says his average cost per share is around $5.
Birchcliff closed Tuesday at $7.49 on the Toronto Stock Exchange. Mr. Schulich fearelessly predicts it can hit $50 over the next few years, as gas reserves are proven and commodity prices rebound. I can’t buy the stock, ‘cause I’ve now written about it. I’ll have to mention this one to Eric.

Tuesday, January 8, 2008

Iran Cuts Natural Gas to Turkey!!!

ANKARA -- Iran began to cut short natural gas supply to Turkey as of early Monday, but local officials said there was no serious problem for now, the semi-official Anatolia news agency reported.

Officials of Turkish Petroleum Pipeline Corp (Botas) said that they have taken necessary measures to make sustain the gas supply to industry and residents.

However, Energy & Natural Resources Minister Hilmi Guler said on Sunday that Iran had reduced daily gas supply as of last week due to cold weather, noting that Ukraine also dropped the amount of natural gas it pumped to Turkey.

"We will solve the problem by all means. We will hold talks with Iranian officials and draw gas from our storage depots," Guler was quoted as saying.

Turkey imports 29 million cubic meters of natural gas per day from Iran but recently this number has dropped to 4 to 5 million cubic meters.

Monday, January 7, 2008

East Africa Exploring for Natural Gas & Oil

anuary 07, 2008: Search for oil in the Northern frontier’s Anza basin will begin in the first quarter of 2008, government officials said.

Oil explorers allocated blocks in northern Kenya, Rift Valley and Lamu are preparing for the search which will begin in the next three months, said Mr Alfred Odawa, a senior superintendent geologist at Energy ministry. The Anza basin and offshore Lamu are licensed out to nine international explorers.

Local and international experts say prospects of an oil find in these areas is high.

“For any of the international oil firms to decide to get exploration licences from us, they must have closely studied available data for any indications of hydrocarbons,” said Mr Odawa.

Australian listed companies—Gippsland Offshore petroleum, Origin Energy, Woodside Energy and East Africa Exploration company have been allocated on and off shore Lamu basin.

While Lundin Petroleum, China National Offshore Oil Company Ltd (CNOOC) and Vangold are licensed to cover the Anza basin.

Turkana Drilling Company and Camex Company are to explore the Rift Valley’s tertiary basin .

The interest shown by these international companies in Kenya’s oil exploration activities follows aggressive marketing by National Oil Corporation of Kenya (Nock) .

The East Africa region depends on oil imports principally from the Middle East and any local oil discovery will readily find a market. Mike Devji, president, Canadian based Lion Petroleum Inc, said “this region is still a virgin territory.”

The whole of eastern African – from Somalia down to South Africa – has seen less than 500 wells drilled compared with West Africa’s 15,000 or so, or North Africa’s 19,000.

“Excitement is now focused with the hope that better exploration technology will unearth something that East Africa’s previous wells did not. Exploration in Kenya will attract other players after the elections.”

Kenya’s push for her own oil reserves is fanned by recent discoveries in Uganda and also by the increasing demand for fuel energy.

East Africa Exploring for Natural Gas & Oil

anuary 07, 2008: Search for oil in the Northern frontier’s Anza basin will begin in the first quarter of 2008, government officials said.

Oil explorers allocated blocks in northern Kenya, Rift Valley and Lamu are preparing for the search which will begin in the next three months, said Mr Alfred Odawa, a senior superintendent geologist at Energy ministry. The Anza basin and offshore Lamu are licensed out to nine international explorers.

Local and international experts say prospects of an oil find in these areas is high.

“For any of the international oil firms to decide to get exploration licences from us, they must have closely studied available data for any indications of hydrocarbons,” said Mr Odawa.

Australian listed companies—Gippsland Offshore petroleum, Origin Energy, Woodside Energy and East Africa Exploration company have been allocated on and off shore Lamu basin.

While Lundin Petroleum, China National Offshore Oil Company Ltd (CNOOC) and Vangold are licensed to cover the Anza basin.

Turkana Drilling Company and Camex Company are to explore the Rift Valley’s tertiary basin .

The interest shown by these international companies in Kenya’s oil exploration activities follows aggressive marketing by National Oil Corporation of Kenya (Nock) .

The East Africa region depends on oil imports principally from the Middle East and any local oil discovery will readily find a market. Mike Devji, president, Canadian based Lion Petroleum Inc, said “this region is still a virgin territory.”

The whole of eastern African – from Somalia down to South Africa – has seen less than 500 wells drilled compared with West Africa’s 15,000 or so, or North Africa’s 19,000.

“Excitement is now focused with the hope that better exploration technology will unearth something that East Africa’s previous wells did not. Exploration in Kenya will attract other players after the elections.”

Kenya’s push for her own oil reserves is fanned by recent discoveries in Uganda and also by the increasing demand for fuel energy.

Sunday, January 6, 2008

Natural Gas Derivatives Locked In Over $6.00/MmBtu

BRIDGEPORT, W.Va., Jan. 4 /PRNewswire-FirstCall/ -- Petroleum Development
Corporation (Nasdaq: PETD) today announced that the Company has added to
previously announced natural gas commodities derivative positions to protect
against possible price instability in future periods.
For the period from April 2008 through October 2008, the Company entered
into Colorado Interstate Gas (CIG) based swaps at a rate of $6.54 per Mmbtu
for approximately 30% of the production from the Piceance and DJ Basins. For
the same period, the Company entered into Panhandle Eastern (PEPL) based swaps
at a rate of $6.80 per Mmbtu for approximately 30% of the production from the
Northeast Colorado (NECO) basin as well.
By putting these positions in place, the company has approximately 75% of
natural gas production in all areas covered by either collars or swaps for the
summer period in 2008.

Saturday, January 5, 2008

TransCanada Gets Leg Up in Alaska Gas Pipeline Contest

Only one of the five applications submitted for the exclusive right to build a natural gas pipeline to transport North Slope gas to market will advance to the next round of public scrutiny, Gov. Sarah Palin announced Friday.

The application from TransCanada Alaska Co., LLC/Foothills Pipelines, Ltd., a subsidiary of Calgary-based TransCanada Corp. (TSX:TRP), was the only one that met all the state's requirements, she said during a press conference in Anchorage.

"We have long stated that it only takes one good application. We're thrilled to have a project sponsor willing to build a pipeline on terms that benefit all Alaskans," Palin said.

The application will be evaluated by the state to determine whether it provides the maximum in benefits to Alaskans and merits issuance of the exclusive licence. As part of that, a 60-day public comment period on TransCanada's application opens Saturday.

After that process, if the state determines it meets those requirements, the application will be forwarded to the Legislature for approval.

Applications were submitted under the Alaska Gasline Inducement Act, or AGIA, passed by the Alaska Legislature in May 2007.

Other applications that were submitted but did not meet state requirements were from the Alaska Gasline Port Authority, AEnergia LLC, Sinopec ZPEB and Alaska Natural Gasline Development Authority.

Officials from those companies were notified Friday that their applications did not meet all the requirements set out by the law, and will not be evaluated further.

TransCanada is a leading Canadian energy and pipeline company with a long interest in an Alaska gas line.

A North Slope gas line has been discussed since oil first moved down an 1,300-kilometre trans Alaskan pipeline in 1977. But the prospects only gained momentum in the last few years with natural gas futures trading in the mid-$7 range.

In 2006, former governor Frank Murkowski settled in principle with BP PLC, Exxon Mobil Corp. and ConocoPhillips Co. on fiscal terms - taxes and royalties - for producing the North Slope gas.

It would have frozen oil taxes for 30 years and gas taxes for up to 45 years for the three major oil companies.

Still, last year's deal did not guarantee a pipeline would get built; the hope was it would enable producers to move forward with a pipeline.

The line would ultimately have delivered 4.5 billion cubic feet of natural gas a day, which is about seven per cent of the current U.S. demand.

But state legislators felt the deal had too many giveaways for big firms, including locking in the tax rates. The Legislature never voted on the deal.

That led Palin, who took office 13 months ago, and her administration to chart a different course. Rather than negotiate with one group, her plans called for new guidelines designed to stimulate competition among oil and pipeline companies.

While energy analysts have estimated there to be about 35 trillion cubic feet of proved natural gas reserves in the North Slope, they believe that figure will rise in the future.

A large amount of natural gas comes to the surface when oil is being pumped from Alaska's large-but-dwindling oil fields. But for now, the industry reinjects the gas into the ground.

Friday, January 4, 2008

Gazprom Raising Natural Gas Prices for CIS Countries to Western European

VILNIUS, Jan 2 (Reuters) - Russian gas monopoly Gazprom is set to more than double the price of natural gas for Lithuania in 2008 from a year ago, Baltic news agency BNS said on Wednesday.
Analysts have said the increase in gas prices could push the consumer price index, which hit a 10-year high of 7.8 percent in November, to double digit levels this year.
Lithuanian gas utility Lietuvos dujos, 38.9 percent owned by E.ON Ruhrgas and 37.1 percent by Gazprom, will pay 833 litas ($354) per 1,000 cubic meters (tcm) of imported natural gas as of January, BNS said.
A Lietuvos dujos spokeswoman declined to comment on the reported price rises, as the agreement on the gas supplies has not been signed yet.
Gazprom was not available for comment.
The gas price for industrial users will be linked to the world price of heavy fuel oil and is to be reviewed each month as set in a three-year agreement, BNS said.
Lietuvos dujos has already said that residential users will pay a fixed price for a whole year. The price is to rise by average 71 percent from last year.
Lietuvos dujos paid Gazprom a discount price of 316 per tcm in the first quarter 2007, an official at the state energy price commission told Reuters. He said the commission expected average import gas price in the first half of 2008 to be 885 litas.
Gazprom has been trying to move all its former Soviet customers to western European prices, which have been around $260 per 1,000 cubic metres and which Gazprom has said will be around $350 in 2008.
Lithuania, like its Baltic neighbours, is completely dependent on Russia for gas, though the whole region accounts for only a small part of Gazprom's exports at 4.9 billion cubic metres in 2006, compared with a major customer such as Ukraine at 59 bcm. (Reporting by Nerijus Adomaitis; Editing by Louise Ireland)

Thursday, January 3, 2008

Harvest Natural Resources Acquires Indonesian Natural Gas Property

HOUSTON, Jan 02, 2008 /PRNewswire-FirstCall via COMTEX/ -- Harvest Natural Resources, Inc. (NYSE: HNR: 12.32, -0.18, -1.44%) today announced it has acquired a 47 percent interest in the 1.35 million acre Budong-Budong Production Sharing Contract (PSC: 11.02, -0.10, -0.89%) located onshore West Sulawesi, Indonesia, from Tately Budong-Budong N.V. (Tately). See map above. Tately is a subsidiary of Pexco N.V.

The acquisition is subject to approval by the Indonesian government authorities, including BPMigas, Indonesia's oil and gas regulatory authority. During the first three-year exploration phase of the PSC beginning January 2007, Harvest and Tately expect to acquire, process and interpret approximately 500 kilometers of 2D seismic and drill two exploration wells. The expected cost of this program is $22 million of which Harvest will fund the first $17.2 million plus it's pro rata share of subsequent costs. Tately will operate through the exploration phase of the PSC. Harvest has the option to assume operatorship upon approval of a plan of development for any commercial discovery, subject to BPMigas approval.

Harvest President and Chief Executive Officer, James A. Edmiston, said: "Budong-Budong provides Harvest with exposure to significant resource potential in a basin with a demonstrated active petroleum system and abundant oil and gas seeps. Recently completed multi-client seismic surveys by a number of global integrated companies have improved the understanding of the geology and enhanced the prospectivity of the West Sulawesi foldbelt and by analogy, the sparsely explored onshore area of the foldbelt."

Edmiston continued, "The high-impact exploration opportunities in the Budong-Budong PSC in Indonesia and our recent entry into offshore Gabon through the agreement to acquire a 50-percent operated interest in the Dussafu Marin PSC are ideal complements to our lower-risk Venezuelan development opportunities. The growth opportunities in both the Budong-Budong and the Dussafu PSCs are consistent with our strategy to develop a more diverse asset portfolio with a focus on highly-proven hydrocarbon provinces."

The Budong-Budong PSC contains Indonesian frontier terms with a net after-tax production sharing split of 35 percent contractor and 65 percent Indonesian government for oil and 40 percent contractor and 60 percent Indonesian government for natural gas. The effective date of the PSC is January 2007. The PSC has a 30-year term with an initial six-year exploration phase with an option for a four-year exploration extension.

About Harvest Natural Resources

Harvest Natural Resources, Inc. headquartered in Houston, Texas, is an independent energy company with principal operations in Venezuela and business development offices in Russia and the United Kingdom. For more information visit the Company's website at

"This press release may contain projections and other forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. They include estimates and timing of expected oil and gas production, oil and gas reserve projections of future oil pricing, future expenses, planned capital expenditures, anticipated cash flow and our business strategy. All statements other than statements of historical facts may constitute forward-looking statements. Although Harvest believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. Actual results may differ materially from Harvest's expectations as a result of factors discussed in Harvest's 2006 Annual Report on Form 10-K and other public filings."

Wednesday, January 2, 2008

Natural Gas Supplies Up in India for 2008

MUMBAI: Major developments in the Indian oil and gas business during 2008 could define it as a turning point. The events have global ramifications and are expected to impact the supply-demand dynamics of petro-product trading in the international oil markets. The most significant of these is the large addition of fresh refining capacity in India, an event that will pump out high-quality petroleum products into the markets. By the year-end, refining capacity is expected to grow by close to 47 million tonnes, almost a third of the total capacity now.

The other big change will be the beginning of natural gas supplies from the Krishna-Godavari basin by the middle of the year, an event that is finally expected to end the perennial gas shortage in the country. Gas will displace a lot of traditional liquid fuels like naphtha and LSHS that are currently being used by power, petrochemicals and fertiliser companies. The third big change involves the gradual spread of pipeline infrastructure. A cross-country gas pipeline grid is emerging, that has already seen two former adversaries, Gail and RIL, collaborate to connect various consumption centres.

This will eventually provide an avenue for gas produced by others, like ONGC and GSPC. But the biggest benefit, expected to touch millions of consumers, is the availability of gas for retail. Natural gas, piped alongside trunk lines, will be available to dozens of cities for use as an auto fuel and domestic fuel. Close to 20 city-specific gas companies have already been set up by oil companies, in anticipation of the gas.

Pointing out changes on the oil infrastructure front in 2008, oil industry insiders say that two large single buoy mooring (SBM) systems, one at Paradip on the east coast being set up by Indian Oil and the other at Jamnagar (RIL) on the west coast, will change the economies of scale for the two firms.

IOC will be able to bring in crude oil in VLCC’s for the first time on the east coast, improving its refining margins. The economies of scale have been used very effectively by RIL for its Jamnagar refinery since its inception. For Reliance, the new SBM, will allow exports of large parcels of high-quality fuel from the new refinery to markets like the US.

“On a global scale, the Indian petroleum products coming out of the two Reliance refineries and the Essar Oil project will rapidly displace products currently being supplied by the Korean oil giants,” oil trading sources said. Since the products like cleaner diesel and petrol, are moving to the US, there is expected to be a surplus of local production from existing suppliers, they said. RPL’s new refinery has the capability to produce Euro 5 standard petro-products, which can be sold for good margins in the environmentally-conscious US.

Though not as environmentally stringent, Indian power producers, too, are expected to start importing low sulphur furnace oil and LSHS for use in their refineries particularly in the metros. On the financial front, the year is expected to see money being raised for BPCL’s 9 MT Bina refinery, as well as the financial closure for Nagarjuna Oil’s Cuddalore refinery. So, construction will be in full swing at the three new refinery projects at Bina, Cuddalore and Paradip in Orissa, setting the pace for India’s emerging position as an Asian refining hub.

Tuesday, January 1, 2008

KUALA LUMPUR Natural Gas Contract

Petroliam Nasional Bhd (Petronas) yesterday awarded a production sharing contract (PSC) to Shell Energy Asia Ltd, ConocoPhillips Sabah Gas Ltd and Petronas Carigali Sdn Bhd for the exploration, development and production of natural gas from the Kebabangan Cluster fields, offshore Sabah.

Under the contract, Petronas Carigali, the exploration and production arm of Petronas, has a 40% interest in the PSC while Shell Energy Asia Ltd and ConocoPhillips have a 30% stake each.

A joint operating company, Kebabangan Petroleum Operating Company Sdn Bhd, has been formed to operate the venture on behalf of the partners, Petronas said in a statement.

The natural gas produced from the fields is expected to be evacuated via pipelines to the Sabah Oil and Gas Terminal, which is currently under construction.

The gas fields in the Kebabangan Cluster, comprising the Kebabangan, Kamunsu East, Kamunsu East Upthrown and Kamunsu East Upthrown Canyon, are located about 130km offshore Sabah. – Bernama