Monday, June 30, 2008

Royale Energy Doing Well with Natural Gas

By Wiedemann, Liz

Taking a gamble on natural gas has paid off for a local energy company, although predictions of how long the ride will last remain inconclusive.

San Diego-based Royale Energy Inc. reported a 69 percent jump in its stock value in a May 15 company earnings report.

Royale's closing price per share May 20 was $5.59, up from $3.31 at the previous week's close. Its market capitalization for May 20 was $44,272,800.

The independent natural gas exploration and production company is publicly traded on the Nasdaq as ROYL and is operating 68 wells in California, with others in Texas, Utah, Oklahoma and Louisiana.

Donald Hosmer, Royale's chief executive officer and co-founder, said that his company's recent success can be attributed to the price of natural gas rising and an increase in Royale's production.

"From February to March, our production increased 20 percent, and in April we turned on another four wells which added another 15 percent increase," said Hosmer, who founded the company with his father and brother in 1986.

In August 2007, Hosmer said the company was receiving $5.85 per Mcf, or 1,000 cubic feet, of natural gas. Currently, the price is more than $11 per Mcf, he said. One thousand cubic feet of natural gas is approximately enough to meet the natural gas needs of an average home for four days, according to the American Gas Association.

The Gas Price Index, published daily by Natural Gas Intelligence, determines the price at which Royale sells its natural gas to customers and end-users. Such companies have included Spreckels Sugar Co., The Coca-Cola Co., San Diego Gas & Electric Co. and BP Energy.

Hosmer also said that the supply of liquefied natural gas is significantly down.

"Last year we (the United States) were importing 2 billion Mcf per day, and now we're seeing less than 1 billion Mcf per day," he said.

Rush Toward Commodities

There's no doubt that money is to be found in commodities right now, according to Charles Langley, publisher and gasoline analyst for the Utility Consumers' Action Network (UCAN), and nothing succeeds like success, he says.

Key commodities like oil have gone up in price 183 percent since 2005, and the more expensive they get, the more people want them, said Langley of the nonprofit consumer advocacy group.

"But, they're also less affordable," Langley said. "People think oil is highly overvalued in the futures markets."

How long oil and natural gas prices will be on the rise is the million-dollar question, but Hosmer remains optimistic.

"I'm not a gas trader, but it seems that the fundamentals are tight, and there is more demand on natural gas as a cleaner burning fuel," he said. "A lot of people say prices will stay strong because of that."

Michael Shames, executive director for UCAN, said that recent revenue increases reported by oil and gas companies are mostly attributable to the premiums paid on world oil markets.

"Prices at $130 per barrel of oil and $15 per MMBtu (1 million British thermal units) of natural gas far exceed the costs of producing that amount," Shames said.

He said that prices are rising largely because traders in those markets are flush with cash that previously was invested in real estate and complex securities.

"Now traders are rushing away from those tainted markets and towards commodities," Shames said.

The rise in natural gas prices during the last quarter may be responsible for big investment returns, but it was a bet, Shames said.

"My personal conclusion is that oil and gas prices will trend down this year, but I was wrong earlier in the year - which is why I'm not a fuel trader," he said.

The closing trade price of Royale Energy stock was $5.44 on May 28.

Natural Gas Prices Solid for $23/mmBTU?

The price of natural gas in the U.S. has about doubled in a bit less than a year despite the fact that U.S. production has actually increased by about 5%. This is due in part to new horizontal drilling techniques being applied to recently developed vast “unconventional” gas fields in the U.S. and Canada. So it might seem like the price of gas has gotten ahead of fundamentals. But there are good reasons to be bullish about gas prices longer term.

Natural gas is inherently cheap on two scores. One is that the BTU equivalency of gas to oil would price gas around $23 per Mcf, nearly double its current price. Also, gas is the cleanest burning fossil fuel, so it should be advantaged if and when carbon taxes are passed to deal with climate change.

Gas is a regional market and supplies in Europe and Japan are tighter than in the U.S. Thus prices are higher there, allowing them to outbid U.S. LNG terminals for imports, which has virtually eliminated LNG supply coming to North America. Moreover, European and Asian gas supply prospects may be even tighter after 2009, as discussed here, which would continue to preclude LNG supplies from the U.S. market absent much higher prices.

Meanwhile demand for North American natural gas is growing from a number of markets including fertilizer and Canadian oil sands production. In the future natural gas demand for transportation and electricity production will grow. A strong marketing effort to promote natural gas for buses, delivery trucks, and other heavy urban vehicles like garbage trucks, is one source of future rising demand. Reports are starting to surface of people converting cars from gasoline to natural gas, a common practice on other continents.

A second important market likely to strengthen in near future years is electric power generation. That market is turning strongly away from coal in the U.S. and Europe and toward alternatives like solar and wind which are non-base load sources, meaning they work during some days and some hours a lot better than others. When they don’t work, the generating plants must have “peaking capacity” to bring them quickly up to nameplate capacity. Natural gas is the way to obtain short term bursts of generating capacity.

An example of this was described in the Oil & Gas Journal (4/7/08) in an article about the enormous new additions to wind power being constructed in Texas and Oklahoma as follows (p.19):

“Between Amarillo and Midland, capacity factors can rise of fall by 60% within 12 hrs. So by 2011, when Texas has about 10,000 Mw of installed wind capacity, power generation might rise or fall by 6,000 Mw in half a day, requiring the sudden start-up or short-down of 15 - 20 peaking plants [powered by natural gas] to balance the load. “

Are wind and solar key parts of America’s coming energy revolution? If so, count on natural gas as well.

In the same issue a piece titled “Climate Bill Seen Raising Gas Use” quantifies the growth of natural gas that will be required for new wind and solar capacity, saying, “The Climate Stewardship and Innovation Act sponsored by Sens. Lieberman and McCain would raise gas demand by an average 14%/year against reference-case levels during 2020 - 2030.” That’s a little further out than investors need to concern themselves with. But the substitution of wind and solar for coal is happening already, spurring more gas use.

One concern about natural gas investments is the important variability caused by weather conditions. Hurricanes can destroy supplies temporarily; hot summers and cold winters add enormously to demand; and temperate weather can destroy gas demand as we have seen in recent years. Therefore it is very hard to predict what the price of natural gas will be by October, say, at the end of the summer and the 2008 hurricane season. But lately gas storage has been running a few percent below the five year average, providing a slight bullish background to the market.

In the longer term, weather conditions may be less of a factor. The fundamental bullish long term trends discussed above, less likely to be influenced by weather conditions, make me want to participate in the natural gas market, both through stocks like XTO and many others and by owning calls on long-dated natural gas futures contracts. Jim Kingsdale

Saturday, June 28, 2008

Natural Gas Rig Count Up to 1530

From Herald News Services
Published: Saturday, June 28, 2008
The number of active U.S. natural gas rigs rose to 1,530 this week, the highest since gas-specific recordkeeping began in 1987, according to data published by Baker Hughes Inc.

Rising demand in the U.S. for gas to generate electricity, coupled with declining imports from Canada and reduced supplies of liquefied natural gas have pushed prices higher on speculation of a possible supply crunch next winter.

Rigs exploring for or producing natural gas increased by 16 in the week ended Thursday, Baker Hughes said. The count rose by 35, or 2.3 per cent, from a year earlier.

Friday, June 27, 2008

Natural Gas Exploration in USA is UP

June 27 (Bloomberg) -- U.S. natural-gas producers are drilling wells previously deemed too costly and resurrecting abandoned fields from Appalachia to the Rockies, spurred by the biggest rally in fuel prices in eight years.

Devon Energy Corp. and Range Resources Corp. are drilling horizontal wells that cost three times as much as traditional vertical shafts to unlock gas from rock formations that were unprofitable to exploit before this year's 75 percent gain by gas futures. The number of active U.S. gas rigs rose to a nine- month high last week, according to a survey by Baker Hughes Inc.

``As prices are better you want to drill more wells to get more production on line as quick as possible,'' said Larry Pinkston, chief executive officer at Unit Corp., a Tulsa, Oklahoma-based gas producer and drilling-rig operator. ``So we definitely are drilling more wells.''

The rise in gas futures in New York this year exceeded the 45 percent surge in oil and all commodities besides coal. U.S. gas demand probably will grow 4 percent this year, double the rate of new supply, said Roger Read, an analyst at Natixis Bleichroeder Inc. in Houston.

Gas gained the most since prices more than doubled in the first half of 2000. This month, futures rose above $13 per million British thermal units for the first time since 2005, when Hurricanes Katrina and Rita idled wells in the Gulf of Mexico. Read attributed the gain to ``unrelenting growth in electric power demand,'' lower-than-expected imports and increasing demand for alternatives to coal and oil.

Producer Shares Rise

An index of independent energy producers in the Standard & Poor's 500 climbed 29 percent this year, led by gains of more than 60 percent at Southwestern Energy Co. and Chesapeake Energy Corp. All 10 index members get most of their output from gas. Unit Corp., which isn't in the index, jumped 75 percent. The S&P index of integrated producers such as Exxon Mobil Corp., driven more by oil wells and refining, has fallen 1.7 percent.

New drilling projects will boost U.S. gas supplies in 2009 by 3.6 percent, the biggest increase since 1994, Read said. Gas is the most widely used U.S. furnace fuel and the third-largest source of power generation, according to the Energy Department.

The U.S. Bureau of Land Management, which oversees energy exploration on federal property, issued 7,124 permits to drill in the fiscal year ended Oct. 1, 5.7 percent more than fiscal 2006. Nine out of 10 of those permits were issued for projects in Wyoming, New Mexico, Utah and Colorado.

Drilling Accelerates

Range Resources, based in Fort Worth, Texas, increased its capital budget 40 percent this year to $1.27 billion to sink more wells in the Barnett Shale in Texas and the Marcellus Shale in Pennsylvania and West Virginia.

Range Resources, which gets most of its production from the Barnett Shale, expects to begin pumping commercial volumes of gas from the Marcellus in early 2009.

Drilling horizontal wells in deep, hard deposits such as the Barnett Shale costs about $3 million each, compared with $1 million to $1.5 million for a vertical well, Range Resources President Jeffrey Ventura said in a telephone interview.

Horizontal drilling is costlier because it requires more sophisticated rigs with more powerful motors, said Michael McMahon, managing director of New York-based leveraged buyout firm Pine Brook Road Partners LLC, which bankrolled three new gas producers in the past 15 months.

Horizontal Wells

Horizontal drilling is the only way to tap formations that otherwise won't give up their gas, Ventura said.

``There some areas of the Barnett Shale that didn't work at all as vertical developments but are very commercial as horizontals,'' Ventura said. ``Rock formations that people thought were non-prospective are now prospective.''

Unit Corp.'s Pinkston plans to drill at least 280 wells this year, up 11 percent from 2007. The program will let the company replace at least 150 percent of the gas and oil it pumps for the next several years, he said.

The company, which also owns 131 onshore rigs and a pipeline business, built two new rigs this year and plans to add another two in the fourth quarter, Pinkston said. Unit will decide in the next few weeks whether to order more rigs for 2009 delivery, he said.

Competition for drilling equipment and rig crews is escalating costs for producers, said Pine Brook's McMahon.

Pine Brook, founded in 2006 by former Warburg Pincus Vice Chairman Howard Newman, is stockpiling about 20 miles of pipe, enough to excavate six wells, in response to delivery delays from pipe makers because of soaring demand, McMahon said.

Uruguay Finds Natural Gas Field

Uruguay says it has discovered a large natural gas field off its Atlantic coast that could potentially transform the country from an importer to an exporter of the fuel.

The announcement of the possible find was made by President Tabare Vazquez on his official website.

According to the state oil firm, studies show that the field could contain as much as 85 billion cubic metres of natural gas.

If this estimate is correct, it would provide Uruguay with gas for the next 800 years.

There has been no drilling so far, but authorities say the field could also contain oil, and an auction of gas and oil exploration rights is being prepared for next June.

Uruguay has been looking to open gas fields since a decrease in output forced neighbouring Argentina to cut back on exports.

Thursday, June 26, 2008

Dallas Residents to Pay Increase for Natural Gas

By ERIC TORBENSON / The Dallas Morning News

Atmos Energy residential customers in Dallas will pay about 65 cents more a month for natural gas service, after Texas regulators approved a rate hike.

The increase affects about 20 percent of Atmos' customers in its Mid-Tex Division.

The new prices will start showing up in bills as soon as the utility can implement the Texas Railroad Commission order, Atmos spokesman Rand LaVonn said Wednesday.

Last September, Atmos asked for a $1.57 a month increase.

All cities except Dallas settled with the company before the commission ruled on the request.

In January, 151 cities agreed to an average rate increase of 20 cents a month, and the cities gave Atmos an annual mechanism to adjust rates, a process usually reserved for the railroad commission.

In February, 49 more cities settled with Atmos, also for increases averaging about 20 cents per residential customer.

Dallas and unincorporated areas of Atmos' territory were the last holdouts, and their customers will pay more than the cities that settled.

"We wish Dallas could have come on board with us," Mr. LaVonn said.

A telephone message to Dallas officials involved in the process wasn't returned.

Dallas customer rates won't adjust annually under the ruling.

Atmos may file to get other rate increases in the future.

The railroad commission may grant an increase, lower the requested amount or force the utility to lower rates.

The annual rate increase for Atmos customers affected by the commission order totals $2.7 million, the utility said.

Atmos must charge the wholesale cost of gas to customers; it earns a profit on service fees.

Washington DC Friendly to Alaskan Natural Gas

WASHINGTON -(Dow Jones)- U.S. regulators Wednesday approved a procedural request allowing developers to move ahead with an application for a major new natural gas pipeline from Alaska to the lower 48 states.

The U.S. Federal Energy Regulatory Commission approved the request from BP PLC (BP) and ConocoPhillips (COP) to initiate a "pre-filing process," during which the regulator's staff will review the companies' proposal before the official application. The companies said they hope to file the application by August 2011, and company officials say that once the pipeline project is approved, it would take 10 years to complete.

The "Denali-Alaska Pipeline" - which would have the capacity to pump 4 billion cubic meters of gas - is in competition with a proposal from Canada's biggest natural gas pipeline company, TransCanada Corp. (TRP).

FERC's head of energy projects, Mark Robinson, told the joint-venture that the pre-filing process "will greatly improve our ability to identify issues early and address them in our environmental review document."

Alaska's North Slope holds around 35 trillion cubic feet of proven natural gas reserves, with leases owned primarily by BP, ConocoPhillips and Exxon Mobil Corp. (XOM). Long-held plans to connect this supply with the lower 48 states had been scuppered by a slump in natural gas prices, along with regulatory and political difficulties.

But prices are on the rise again and the outlook remains strong, with more U.S. power generation switching to natural gas from coal amid tightening environmental laws. Currently, natural gas is the source of roughly one-fifth of U.S. electricity supplies and an ingredient for making everything from plastics to fertilizer.

The Alaska-Denali project will include a gas-treatment plant on Alaska's North Slope and a large-diameter pipeline that travels more than 700 miles through Alaska, then into Canada through the Yukon Territory and British Columbia to Alberta. If it's necessary to transport gas from Alberta, the project will also include a pipeline from Alberta to the lowest

Tuesday, June 24, 2008

Pennsylvania Excited About Natural Gas Exploration

( - University Park, Pa. — One of the top questions on the minds of Pennsylvania landowners these days is how much money might they see in royalties from drilling natural gas in the Marcellus Shale. While individual royalties will vary, Penn State's Workforce Education and Development Initiative, a collaboration of the Outreach Workforce Assessment Center and the College of Education Institute for Research in Training and Development, has released its forecast of the potential impact of increased royalty income. According to the report, natural gas royalty income will create a positive impact on Pennsylvania employment, economic output, personal income and population.

"There's no question, Pennsylvania landowners will benefit from royalty income earned," said Rose Baker, program manager for the Workforce Assessment Center. "The ripple effect on the rest of the state economy might be equally impressive."

For every $1 billion in royalty income by Pennsylvania residents each year from 2008 through 2011:

• Nearly 8,000 jobs will be created annually.

• Disposable personal income will hover around $1 billion annually.

• The population will increase by thousands each year through 2011.

Estimates of the shale's value, which primarily runs below Ohio, West Virginia, Pennsylvania and New York, have been put around $1 trillion — give or take a billion.

Statewide, Pennsylvania is expected to see a boon from landowner royalties. The personal income they may generate is expected to translate into more purchases of goods, increasing the output of Pennsylvania industries and improving the income of state workers, which in turn attracts more workers to the state.

"Royalties are likely to be substantially greater than upfront checks," said Tom Murphy, educator with Penn State Cooperative Extension. "Landowners are coming in looking for unbiased information to make sound decisions as they explore these new found opportunities."

In the last few months, statewide public meetings offered by Penn State Cooperative Extension educators on natural gas exploration and leasing have been standing-room-only events. Landowners have been interested in learning whether their properties sit above a treasure of natural gas and how they might be able to sell drilling rights to natural gas companies. Although gas leases have been around for years, the money offered per acre has risen dramatically, especially since a recent study by professors from Penn State and the State University of New York at Fredonia discovered much more gas than was originally thought.

For more information on Penn State's Natural Gas Exploration and Leasing Program and upcoming landowner information sessions, check out online. To get a copy of the Economic and Workforce Brief, go to online.

The Workforce Assessment Center in the Office of Economic and Workforce Development supports the development of the workforce in Pennsylvania through the utilization of Penn State resources to conduct various types of workforce assessments for employees, industry partnerships, not-for-profit organizations and government entities. For information, visit online. The Workforce Assessment Center is part of Penn State Outreach, the largest unified outreach organization in American higher education. Penn State Outreach serves more than 5 million people each year, delivering more than 2,000 programs to people in all 67 Pennsylvania counties, all 50 states and 80 countries worldwide.

Natural Gas Spot Market for 2008/2009 is $11 MCF

WASHINGTON, D.C. — The government released a short-term energy outlook last week, revising projections for natural-gas prices upward. According to a report from the Energy Information Administration (EIA), natural gas will cost a whopping 52% more this year than last year.

Two months ago, the same forecast projected a 16.5% hike in the price of natural gas from last year, and last month, the projection was a 35% increase. Natural gas spot prices averaged $7.17 per thousand cubic feet (Mcf) in 2007 and are now expected to average more than $11 per Mcf in 2008 and 2009.

High oil prices, lower imports of liquid natural gas, growing consumption and a year-over-year decline in inventories are contributing to price increases, the government says. Factors such as an active hurricane season could alter projections even more, EIA reports, and conditions will likely continue to keep prices high.

Sunday, June 22, 2008

Canadians Store Natural Gas for Others

Gas storage customer lined up
New Brunswick natural gas firm interested
By JUDY MYRDEN Business Reporter
Sat. Jun 21 - 6:09 AM

A Calgary energy company and its partners are poised to sign a deal with their first customer to store natural gas at their proposed $60-million underground facility near Truro.

Alton Natural Gas Storage L.P., owned by Landis Energy Corp. and Fort Chicago Energy Partners, both of Calgary, said Friday they are "pursuing an agreement" to lease storage space to Enbridge Gas New Brunswick.

"It gives you more flexibility around your supply portfolio," Dave Charleson, Enbridge Gas manager, said Friday.

Mr. Charleson said storing natural gas would allow the company more price stability. The distributor could store gas in the off-season and then sell it to consumers at lower prices.

"It gives us a little more flexibility around the season," said Mr. Charleson, adding that in mature gas markets, such as Ontario, natural gas storage is used extensively. .

The practice would also give Enbridge the option to purchase gas from other suppliers and store it in the caverns if the main supplier, the Sable natural gas project, is experiencing a decline in volumes.

Enbridge now uses the Maritimes and Northeast Pipeline, which travels through Nova Scotia to New Brunswick, to provide natural gas to 8,600 homes and businesses. In 1999, the company signed a deal with the New Brunswick government for the exclusive rights to distribute natural until 2020.

The proposal has already received the necessary environmental permits.

"This shows there is demand for gas storage," David Birkett, president of Alton Natural Gas Storage, said Friday. "We are negotiating with others but this is the first one that has indicated clearly they are willing to move forward, and it won’t be the last one."

Landis would use piped-in river water to hollow out salt caverns for gas storage in Colchester County, treat the water to reduce salinity and then discharge it into the river.

The storage facility is expected to include a series of engineered salt caverns more than 700 metres deep. The caverns will be developed using water from the Shubenacadie estuary, transported through about 12 kilometres of buried pipelines. Four initial caverns will be formed and others may be created later. Alton recently finished clearing the cavern site, and engineering and pre-construction surveying is complete. The company is obtaining the water pipeline right-of-way and has started acquiring the necessary easement for that right-of-way.

A few months ago Alton announced a pipeline proposal that would originate southeast of Truro and ship gas to Quebec and into the northeast U.S.

The Atlantic Connector Gas Pipeline would have an initial capacity of about 1.2 billion cubic feet per day. It would originate near Alton and stretch through New Brunswick and into Quebec to hook into the national gas transmission grid.

Thursday, June 19, 2008

Tennessee Natural Gas Exploration

HUNTSVILLE, Tenn., June 19 /PRNewswire-FirstCall/ -- Miller Petroleum,
Inc. (Pink Sheets: MILL.PK) today announced that it had entered into a
transaction with a subsidiary of Atlas Energy Resources, LLC (NYSE: ATN)
whereby Miller has assigned to Atlas (i) a 100% working interest and 80% net
revenue interest in its oil and gas leases comprising 27,620 acres in Koppers
North and Koppers South in Campbell County, Tennessee; (ii) a 100% working
interest in eight existing wells on the Koppers acreage; and (iii) a 100%
working interest and 82.5% net revenue interest in oil and gas leases
comprising of 1,952 acres adjacent to the Koppers acreage.

Pickens - USA Should Develop Natural Gas for Transportation

Texas oil baron T. Boone Pickens told Congress that the country should ramp up a plan to use domestic natural gas and wind power to reduce the nation's "addiction" to foreign oil.

According to a report by Virginia-based SNL Financial, the founder of BP Capital Management LP, told the Senate Energy and Natural Resources Committee June 17 that the country should divert the natural gas that accounts for 22 percent of the nation's electricity to the transportation sector.

"Natural gas is the second-largest energy resource in the country," Pickens told the committee. "If we take the natural gas we're using for electrical generation and move it to transportation, we can replace 38 percent of our foreign oil imports. And that, sports fans, is a real number."

Reducing foreign oil imports by 38 percent would save the nation nearly $300 billion every year. Wind generation could then be ramped up quickly to replace the electricity displaced from the power grid, he suggested.

"It's time we got serious about using [wind power]," he said.

Pickens, who made his fortune in the oil business, could become a major fixture in the wind industry with his proposal to construct a 4,000-MW wind farm in Texas.

Citing a federal study showing that the United States could develop 20 percent of its electricity from wind, Pickens called for a project to build a transmission backbone in the center of the nation.

Wednesday, June 18, 2008

Iraq Natural Gas Lacking Delivery System

Iraq, Shell Discuss Natural Gas Venture

The Iraqi Oil Ministry is negotiating with Royal Dutch Shell over a joint venture to develop natural gas in southern Iraq, officials said.

An Iraqi official said that Shell approached the Oil Ministry in December and that meetings have been held since then.

The official said Iraq loses about $40 million worth of natural gas a day associated with oil production because of insufficient means to export the gas or consume it domestically.

Natural Gas in Shale Interesting Encana

Shaun Polczer, Calgary Herald
Published: Tuesday, June 17, 2008

The amount of natural gas in shale could breathe new life into North American supplies, offsetting declines and decreasing the need to import costly liquefied natural gas from offshore, EnCana Corp.'s CEO said Monday.

Speaking at the Canadian Association of Petroleum Producers' annual investment symposium, Randy Eresman announced two shale discoveries in B.C. and Louisiana that he said could provide the company with major new sources of production in the order of two billion cubic feet per day.

Eresman said shale discoveries have "reversed the situation of decline" in North American gas supplies after similar announcements by Forest Oil, Apache Corp. and EOG Resources in recent months.

Tuesday, June 17, 2008

Natural Gas JV Project - Japan & China?

By Michiyo Nakamoto in Tokyo and Mure Dickie in Beijing

Published: June 17 2008 03:00 | Last updated: June 17 2008 03:00

Tokyo and Beijing appear close to agreement on joint development of natural gas fields in disputed waters of the East China Sea. A deal would resolve one of the most contentious issues to strain Sino-Japanese ties in recent years.

The countries agreed over the weekend to accelerate negotiations about how they might jointly develop the gas fields, Japan's foreign ministry said.

Nobutaka Machimura, Japan's chief cabinet secretary, said the discussions were in their last stages. Japanese media said the announcement of a deal could come this week.

Joint development of energy resources in the East China Sea has become a test-case issue for the diplomatic rapprochement between Beijing and Tokyo.

The lingering dispute over gas extraction in the area stems from divergent claims regarding the extent of the neighbours' exclusive economic zones.

Tokyo says its zone extends to a median line between the two countries, while Beijing, basing its claim on its continental shelf, says its zone stretches much closer to Japan.

The two sides failed to meet a self-imposed deadline for a deal on joint gas exploration and extraction last year but said during a landmark visit to Japan by Hu Jintao, the Chinese president, last month that a deal was in sight.

"Prospects for settling the dispute are already in view and I'm happy about this," Mr Hu said during his visit.

The Japanese foreign ministry said that Masahiko Komura, foreign minister, and his Chinese counterpart Yang Jiechi had agreed at the weekend to accelerate talks to resolve the dispute "as soon as possible". However, there could be no agreement until details were settled, the ministry said.

China's foreign ministry and Chinese state oil companies that have interests in the East China Sea declined to comment.

Estimates of how much gas is available in the East China Sea have varied widely but Chinese and -Japanese dependence on imported energy has added to the sensitivity of the dispute over extraction rights.

Recent disagreement has centred on the Chunxiao gas field, which lies within China's EEZ but just a few kilometres from the median line. Chinese development of the field has prompted complaints from Tokyo that gas could be drawn from its side of the line.

Analysts have said that a key obstacle to agreement on joint development is the desire of officials on the two sides not to allow a deal to weaken the territorial claims on which their EEZs are based. But agreement on the issue would show that Beijing and Tokyo's newly amicable leaders can go beyond warm rhetoric to tackle substantive issues.

Monday, June 16, 2008

Natural Gas Prices Up 57% in One Year

By KAREN YOUSO, Star Tribune
If you find gas prices at the pump a worry, get ready to wring your hands over natural gas, too. Like gasoline, its prices are going up -- way up.

Utilities are paying 57 percent more for natural gas than they did last year at this time, said Vincent Chavez with the Minnesota Office of Energy Security.

That's important because this is the time of year when utilities buy gas for use in December and January. It's a bellwether of home heating costs come winter.

Bills might not be exactly 57 percent higher than last year -- markets are complicated and they fluctuate over the year -- but the trend is not good.

In a hot summer, natural gas will be used to generate electricity to power air conditioning, pulling natural gas prices up -- along with your electric bill.

If it's a stormy season, with hurricanes hitting the Gulf states and disrupting supplies, prices could go higher.

On the other side, increased supplies, such as when out-of-commission pumps come back online, generally send prices down.

But that didn't happen when a pump came back earlier this year, Chavez said. Apparently, the market, distracted by record-breaking crude oil prices, isn't acting as it should.

In any case, state officials expect at least a double-digit increase in the cost of gas for home heating this winter. They urge consumers to start preparing now.

• Call your utility and set up a budget plan so bills are averaged over the year. You might be paying $200 to $300 now, when you're using little natural gas, Chavez said, but it'll be banked against the much higher bills come winter. Also ask about getting an energy audit to pinpoint ways to save energy in your home.

• Replace an older boiler or furnace with the highest-efficiency models available. You can get help doing that. Minnesota's Fix-up Fund is a statewide program that offers low-interest loans to families with incomes up to $93,000, according to Megan Ryan, communications director for Minnesota Housing. Go to and click the "homeowners" box in the upper left corner. Or call 651-296-7608 or 1-800-657-3769. Neighborhood Energy Connection offers even lower interest rates, said loan manager LeAnne Karris. Go to, or call 651-221-4462, ext. 132.

• Seal air leaks in your house and insulate the attic. Free publications from the state can help you do that safely and effectively. Go to www. Look for "Caulking and Weatherstripping," "Home Heating" and "Attic Bypass." Or call 651-296-5175 or 1-800-657-3710.

Sunday, June 15, 2008

Political Debate About U.S. Off Shore Natural Gas Exploration Just Getting Started

TAMPA - Mike Wyckoff is an unlikely proponent of something Florida politicians and environmentalists have been trying to prevent for decades: The exploration and production of oil and natural gas in the waters off Florida's Gulf Coast.

A 27-year resident of Madeira Beach, the real estate broker lives 150 yards from the beach and manages 16 beachfront properties.

But as $4-a-gallon gas squeezes many consumers and household budgets, Wyckoff says it's time to lift the ban on oil and gas drilling in the eastern Gulf of Mexico, a move that could boost supplies and lower prices.

Wyckoff acknowledges the obvious risk. A major oil spill could ruin Florida's beaches and ground the state's tourism industry. The $65 billion-a-year industry employs nearly 1 million people.

"There's a risk and a reward," Wyckoff said. "At this point, maybe the risk is worth the potential reward."

Hovering around $134 a barrel, crude oil prices have doubled over the past year. In the Tampa Bay area, pump prices have reached budget-busting levels, averaging $3.96 a gallon, according to AAA. Nationally, gas prices are averaging $4.06 a gallon, or 33 percent higher than this time last year.

The tipping point on the debate over drilling off Florida's Gulf Coast may be near, as record high oil and gasoline prices force consumers and policymakers to question decades-old moratoriums against drilling on federal lands and in territorial waters of the United States.

"There is certainly a renewed look at the nation's offshore policy," said Dan Naatz, vice president of federal resources for the Independent Petroleum Association of America. "Attitudes are starting to change and people are starting to look at this in a new light given the current price environment."

Experts Unsure How Much Is There

No one knows for sure how much oil might be found in the waters off Florida's Gulf Coast because geologists have been prevented by federal regulators from gauging the region's oil resources with modern-day seismic technology. The best estimate offered by the U.S. Minerals Management Service is 3.88 billion barrels of oil within 125 miles of Florida's Gulf coastline. That's enough oil to meet U.S. demand for 176 days. The United States consumes about 22 million barrels of oil daily.

But that estimate is based on data from the 1970s. If the industry were allowed to explore the eastern Gulf today, the 1970s estimate probably would be significantly eclipsed by the new research, Naatz contends.

"The initial resource estimates for the western-central Gulf of Mexico were significantly smaller than what's already been produced," Naatz said. "The more you explore, the greater the resource."

A measure to allow oil and gas exploration as close as 50 miles off the U.S. coastline, including Florida's Gulf Coast, was narrowly defeated by a congressional subcommittee this week. But House Republicans said they plan to bring the proposal again when the full House Appropriations Committee meets next week.

The measure's author, Rep. John Peterson of Pennsylvania, said the debate in Congress is far from over and promised to keep raising the issue.

"There is no valid reason for Congress to continue keeping Americans from the energy resources they own and are in dire need of," Peterson said.

More than a quarter of the nation's oil production - nearly 2 million barrels a day - comes from the western Gulf of Mexico.

The eastern Gulf could be just as prolific, Naatz said. "The geology doesn't stop at the boundary line," he said.

In arguing for oil exploration of Florida's coast, drilling proponents often point to a China-Cuba partnership that allows the Chinese to drill for oil just 50 miles off Key West.

But U.S. Sen. Mel Martinez, R-Fla., argued Thursday on the Senate Floor that there is no proof that China and Cuba are planning to drill for oil anywhere offshore.

"China is not drilling off the coast of Cuba," Martinez said. "Reports to the contrary are simply false. They're akin to urban legend."

Jorge Pinon, a senior energy fellow at the University of Miami, said Cuba has awarded offshore leases to six oil companies - none of them Chinese.

Cuba's plans for offshore oil production may be in question, but the debate over oil exploration in the United States rages on.

Activists Say Drilling Would Hurt Tourism

Environmental groups say drilling off the coast of Florida would threaten the state's pristine beaches and its $65-billion-a-year tourism industry.

"These are really special ecosystems," said Holly Binns, a spokeswoman for Environment Florida. "One oil spill could devastate the ecology and the economy of the Florida coastline for decades."

Binns said opening the waters off the Florida Gulf Coast and the East and West Coasts to drilling won't cause pump prices to fall because it will take seven to 10 years before those supplies could be added to the supply chain. Lifting the moratoriums on offshore drilling, Binns said, would only further enrich U.S. oil companies.

"The oil industry and their allies in Congress see this as an opportunity to open up the few areas that remain off limits to them for very good reason," Binns said.

Drilling proponents are using high gas prices "to scare the public into thinking coastal drilling offers a real solution to our dependency on oil," said U.S. Sen. Bill Nelson, D-Fla.

Nelson said there isn't enough oil and gas in the areas off-limits to producers to lower prices.

Instead, Congress should "reign in unregulated oil trading" and focus on conservation and renewable energy technologies.

But drilling proponents disagree, saying if Congress allowed the industry to tap America's offshore oil and gas reserves, energy markets would react and drive down oil prices.

"Anywhere between $20 and $45 a barrel would drop off the price if the U.S. government announced that they would be issuing leases," said Jim King, a Republican candidate for the 5th Congressional District of Florida, which includes, Pasco, Polk and Hernando counties.

King, who favors drilling off Florida's Gulf Coast, said most of the people he has encountered while campaigning would welcome oil and gas drilling off Florida's coast.

About 85 percent of the offshore territory of the United States is off-limits to drilling. That includes the entire East and West Coasts, Florida's Gulf Coast and the waters off northern Alaska.

These restricted areas hold about 86 billion barrels of oil and 420 trillion cubic feet of natural gas, 10 times more oil and 20 times more natural gas than Americans consume in a year. Alaska's Arctic National Wildlife Refuge holds an estimated 10.6 billion barrels of recoverable oil. North Dakota's Bakken oil field, an area not off-limits to producers, is a recent discovery that might contain up to 3.65 billion barrels of unconventional oil.

Jeff Miller, a warehouse manager at an auto body parts business in Plant City, said the United States should be doing more to increase oil production at home.

"The whole continent is floating on oil," Miller said. "We're not getting it because they're afraid of the environmentalists."

Sales are down at the family-run business Miller manages. Customers aren't spending as much on auto parts because of the skyrocketing cost of oil and gasoline, he said.

Bottom line, says Miller: If there's oil off the Florida coast, the United States should go get it.

Natural Gas Rigs at All Time High This Week

The number of active oil and natural gas rigs in the U.S. rose to a 22-year high of 1,901 this week, after declining for the previous two weeks, according to data published by Baker Hughes Inc.

Canadian rigs rose by 12 from June 6 to 230, the highest since March 21.

U.S. rigs exploring for or producing oil or natural gas increased by 15 in the week ended Thursday to the highest since December 1985. The count rose by 141, or eight per cent, from a year ago.

Friday, June 13, 2008

Oil & Natural Gas Wild Catter Given Thumbs Up

Thursday's pick was Range Resources (RRC - Cramer's Take - Stockpickr), an overlooked wildcatter that Cramer said investors should seriously consider.

Although Range Resources is down from a recent high of $76.81 a share a month ago to about $64 a share, he said it is in the perfect position to play catch-up with the rest of the wildcatters.

"When it comes to the wildcat drillers, the only thing that matters is the ability to find more oil and natural gas," said Cramer. That's why Range, with 2.2 trillion cubic feet of proven reserves and potentially another 16 to 21 trillion cubic feet in the Marcellus Shale in Pennsylvania, is among the best in the group.

Cramer said he also likes Range for its diversification, with properties in almost a half dozen oil shale fields across the country. He said Range is also a low-cost operator, finding gas at the cost of just $1.89 per million cubic feet compared to the industry average of $3.

Wednesday, June 11, 2008

Liquid Natural Gas Supplies Tight for England

LONDON (Thomson Financial) - A consultation by the National Grid on the UK's winter gas and electricity supply has forecast possible problems in attracting liquified natural gas (LNG) because of higher prices overseas, while gas from Norway may be diverted to the continent, according to UK energy regulator Ofgem.

A failure to attract LNG could be coupled with Norwegian producers diverting extra flows of natural gas to mainland Europe through the Langeled pipeline, as happened in winter 2007-2008, Ofgem said.

The UK increasingly has to compete with Europe and other countries such as Japan for LNG, as prices abroad are traditionally higher.

The regulator forecast an increase in gas import capacity if two LNG terminals in south Wales are completed on schedule. The existing Isle of Grain LNG terminal is due to be expanded for this winter.

In electricity, National Grid said supplies will be able to meet demand during the winter and that there will be a spare capacity margin of 26.8 per cent, which it is says are higher than in recent years.

Ofgem's final report will be published in the last week of September.

Tuesday, June 10, 2008

Natural Gas Prices Highest June Ever

gas prices posted for June are not only the highest of the year, they're the highest in history — higher even than in the record-breaking months that followed Hurricane Katrina in 2005.

Katrina, followed by Hurricane Rita, battered Gulf Coast gas supplies that September.

The next month, the per therm price charged by marketers jumped to between $2.20 and $2.55 per therm — figures so high that the state Public Service Commission rushed to allocate aid to the poor and elderly.

This month, gas marketers variable prices ranged from $2.88 to $3.33 per therm.

Fixed prices are also up over the post-Katrina months, although not as dramatically. The figures are the apples-to-apples prices that the PSC uses, and include all fees.

The retail prices are based on much higher wholesale prices for natural gas.

The steep climb in wholesale price coincided with the soaring price of oil and gasoline and is likely partly linked to it.

Struggling with prices at the pump, most customers haven't yet noticed the natural gas problem because they're not heating their homes and therefore not buying that fuel in volume.

Because electric companies lean on natural gas-fired plants in the summer, prices are unlikely to drop until the fall, which is the other traditional time to lock in rates.

And it's anybody's guess what will happen even then.

Gas companies traditionally store relatively cheap gas for the winter at this time.

They're now storing high-priced gas instead.

Keith Poston, a spokesman for AGL Resources, parent of Atlanta Gas Light and Georgia Natural Gas, said wholesale gas prices are up 118 percent over last summer.

"It's not shaping up to be a good year right now," he said.

Monday, June 9, 2008

BP & Conoco Still Pursue Alaska Natural Gas Pipeline

Continuing the public relations push to convince people their gas pipeline project is better, representatives from oil giants BP and ConocoPhillips were in town last week, just eight days after a governor's representative was here stumping for the TransCanada line.

A week ago, Bruce Anders told about 75 civic and business leaders in Soldotna that TransCanada's natural gas pipeline proposal is the only one that meets the requirements of Gov. Sarah Palin's Alaska Gas Inducement Act (AGIA) and is the one most likely to be approved by the Federal Energy Regulatory Commission.

On Wednesday, a BP manager and a ConocoPhillips analyst told members of the Kenai Chamber of Commerce the producers' project is best because of the oil companies' pipeline experience, their market capitalization ability and their solid technical capabilities.

Vlad Morakhovsky, Alaska North Slope gas commercial analyst for ConocoPhillips, said the partners in the Denali-The Alaska Gas Pipeline project anticipate construction of their 48-inch line from natural gas fields on the North Slope to Calgary, Alberta, Canada, to take three years, bringing the first gas to the market "in about 10 years."

"We have people in the field right now," said Bob Hawley, gas projects and operations manager for BP Exploration-Alaska.

Hawley said workers are doing engineering studies and soon the jointly owned limited liability corporation will open its new headquarters in Anchorage.

The company plans to conduct its open season -- a time for accepting firm transportation commitments to ship gas or pay to ship gas -- by 2010.

The corporation plans to spend $600 million over the next 36 months preparing for open season, Hawley said.

Although the initial plan is to build the gas pipeline to Alberta, the Canadian natural gas market is not sufficient enough to support the project, he said. So, if needed, the pipeline will continue on to Chicago to serve markets in the Midwest.

The project will have a gas treatment plant on the North Slope to remove carbon dioxide and other impurities, and gas will be compressed to 2,500 pounds-per-square inch.

Hawley said the gas will be chilled to below freezing so as not to melt Alaska's permafrost. The pipeline will be buried three feet deep, except where it crosses geologic faults and rivers.

According to Morakhovsky, infrastructure improvements that will be needed along the route of the pipeline include upgrading all highways and bridges, as well as upgrading ports. The improvements, he said, would happen in the next five years.

"Our main goal is to have as many Alaskans involved as possible," Morakhovsky said. "To this point, ConocoPhillips has been sponsoring a number of training programs ... and will continue."

He said Denali planners want to complete their field studies in order to determine the tariff -- the cost to transport gas in the pipeline.

TransCanada has published an anticipated tariff of $4.73 per million Btu of gas.

Sunday, June 8, 2008

Long Beach California - No to Liquid Natural Gas Facility

LONG BEACH, Calif.—A company that tried to build a liquefied natural gas terminal at the Port of Long Beach has abandoned its plan due to local opposition.

Sound Energy Solutions, a Mitsubishi Corp. and ConocoPhillips subsidiary, said a decision by harbor commissioners to end an environmental review on the project has forced the firm to withdraw its proposal, according to a filing with the Federal Energy Regulatory Commission on Friday.

The proposed $750 million terminal would have provided California, which gets natural gas from in-state suppliers and via pipeline from Texas and other places, with an alternative source of fuel.

Sound Energy Solutions had offered the city $500 million over 40 years in franchise and wharf fees, property taxes, user fees and other funds.

But the project was strongly opposed by environmentalists who say the terminal would not meet clean air requirements, and by others who raised safety concerns, including the potential for a natural gas explosion.

LNG is a gas that is super-cooled and compressed into liquid form for transport by ship to markets not connected by pipelines. The fuel is received at import terminals and converted back into a gas so it can be piped to users.

Saturday, June 7, 2008

Chesapeake Claims #1 Natural Gas Producer in USA in 2008

NEW YORK (Associated Press) - Chesapeake Energy Corp. is poised to soon become the largest producer of U.S. natural gas, the company's chairman and chief executive officer said Friday.

Speaking at the company's annual shareholders meeting, Aubrey McClendon said he expects the company's gas production to surpass that of the top two producers, BP PLC and Anadarko Petroleum Corp., within the next two months.

McClendon said Chesapeake's daily gas production during the first quarter of this year was only 86 million cubic feet, or MMcf, behind that of BP PLC. Chesapeake's average daily production in 2007 was 1,957 MMcf per day, a 23 percent increase over the previous year.

McClendon said the company has its largest-ever backlog of drilling opportunities at about 33,700, which he said is an inventory of 10 years. Last year, the company's production rose for the 18th straight year.

Chesapeake's primary focus on natural gas exploration and drilling should position the company well within the industry during coming years, he said, noting that natural gas produces fewer carbon emissions than other fossil fuels. He predicted that as oil was considered the fuel of the 20th century, that natural gas will receive that title in this millennium.

"In the debate about who are the good guys and who are the bad guys in the energy world today, as that extends over time, we think that increasingly Chesapeake will be seen as one of the good guys," he said.

"We're here trying to produce more clean-burning, American-produced natural gas to meet America's demand for a fuel that can allow us to import less oil from unfriendly places around the world, hopefully burn a little less coal, have a better environment and at the same time, create jobs and wealth right here in the U.S."

Chesapeake's story long has been one of steady and sometimes spectacular growth. McClendon noted that if someone invested $1,000 with the company during its initial public offering in 1993, than that person would have more than $50,000 now. That is one of the best returns among energy companies, he said.

The company now employs about 6,500 people, with about 2,500 of those in Oklahoma City. It has operations in 20 states.

McClendon also gave an update on what he called the company's "significant" discovery of natural gas in the Haynesville Shale, located in northwestern Louisiana and eastern Texas. In the last month, Chesapeake _ which already had four horizontal wells in the area _ has completed two more, with two more to be finished by the end of the month.

Chesapeake is using five operated rigs to further develop its Haynesville Shale leasehold and anticipates operating at least 12 rigs by the end of this year and at least 30 rigs by the end of next year.

McClendon declined to reveal how much natural gas company officials project might be produced from the field, but he said it "will end up being the most significant play in the company's history."

In company business, McClendon and former U.S. Sen. Don Nickles of Oklahoma were overwhelming re-elected to serve three-year terms on Chesapeake's board of directors. Top of page

Friday, June 6, 2008

Natural Gas Storage Up - Price Up Too for July


Natural gas in storage in the U.S. rose last week but is 0.1 percent below the five-year average for this time of year, a government report 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 105 billion cubic feet to nearly 1.81 trillion cubic feet for the week ending May 30.

The inventory level was slightly below the five-year average, and well below last year's storage level of more than 2.13 trillion cubic feet, according to the government data.

In morning trading, natural gas for July delivery rose more than 5 cents to over $12.43 per 1,000 cubic feet on the New York Mercantile Exchange

Thursday, June 5, 2008

Warner - Liberman Senate Bill - Natural Gas v Coal

Thanks to the Warner-Lieberman bill's ambitious greenhouse gas reduction targets and the lack of low-carbon energy sources in the short term, the U.S. can anticipate a massive switch from coal to natural gas by the power industry. Senate debate on the bill started Monday, and calls for 2005-level carbon emissions starting in 2012.

Switching from coal to natural gas will drive up both the demand and the price of natural gas (the only low-carbon alternative) to unprecedented levels, which will in turn further erode the number of U.S. manufacturing jobs.

Limited natural gas supply capacity will pit power-sector purchases in direct competition with demand from the residential, commercial, farm and manufacturing sectors. There is nothing in the bill that will stop a potential national crisis, one that is already underway in anticipation of these carbon constraints.

Simply setting a cap on carbon emissions does nothing to remove the barriers to greater natural gas supply. The lack of low-carbon energy alternatives for power generation (at least until new nuclear and coal-fired power plants with carbon capture to reduce emissions become more commonplace) means that natural gas is the default low-carbon energy option. In fact, none of the potential low-carbon energy alternatives will be available by 2012 except natural gas, the year the bill first imposes these stringent limits.

Energy efficiency, conservation and renewable energy will be helpful, but those options will not prevent the crisis that will ensue when companies are forced to decrease their emissions.

Because natural-gas-fired power generation is setting the marginal price for electricity in a growing portion of the country, as natural gas prices go up, so will the price of electricity. Homeowners, farmers and manufacturers could pay exorbitant prices, multiples higher than government forecasts.

It will make little difference, though, to most electric utilities if the price of natural gas goes up. Most state public-service commissions readily approve an automatic pass-through for energy costs to the rate payer. That means utility companies won't be adversely affected--but residential, commercial and industrial consumers will.

Most U.S. manufacturers compete on a global basis, and will thus be acutely affected by further increases in natural gas prices. Natural gas prices are about 50% higher than a year ago. These elevated prices have already contributed to the loss of 3.3 million manufacturing jobs; that's 19.2% of all manufacturing jobs since 2000.

The bill actually provides financial incentives for an electric utility to switch from coal to natural gas. If a power generator does make the switch, it could avoid having to purchase carbon allowances, or it could make a profit by selling the carbon reduction to other companies.

These perverse incentives will significantly increase electric power production from existing natural gas power plants that are currently only being used for peaking power.

None of this would be a problem if we had plenty of natural gas production capacity, but U.S. production of the commodity is fragile, despite record well completions. According to Energy Information Administration data, U.S. dry production from 2000 to 2007 is flat, while total demand rose 9.8%. It's surprising but true: Today's domestic natural gas production isn't much different now than it was in the 1970s.

The lack of globally competitive natural gas prices is already causing our country to import larger quantities of our products and displace domestic production. Products like chemicals, plastics, fertilizer, steel, aluminum and paper can be made here--and open up well-paid jobs to workers in those industries--or we can continue to increase our import dependency on other countries. Imports from 2003 to 2007 rose a staggering 78.3%, according to an analysis of 16 U.S. Census Bureau industry product categories.

In the end, the Warner-Lieberman bill could mark the final demise of the energy-intensive manufacturing industries that rely upon globally competitive energy to survive.

That is unfortunate, because these are the same industries that provide the enabling product solutions our country will need to meet the climate challenge in the long term: fiberglass insulation, lightweight materials for vehicles, plastic composites for wind turbines, silica for solar panels, fertilizer to expand crop supply and double-pane windows. Demand for these products will continue to increase; it's only a question of whether they will be produced domestically or imported.

Wednesday, June 4, 2008

Azerbaijan Natural Gas to Gazprom - Nyet!

If you cannot beat them, try to co-opt them: that apparently is Gazprom’s operational philosophy. The Russian state-controlled energy giant on June 2 sounded out officials in Azerbaijan about large-scale purchases of Azerbaijani natural gas. But Baku seems unenthused about doing a deal.

Azerbaijan is the only Caspian Basin state currently able to export a significant volume of energy via pipelines that are not controlled by Russia. Indeed, the United States, European Union and Azerbaijan have pursued the construction of a trans-Caspian pipeline, which, if connected to the existing routes traversing Azerbaijan, could break Russia’s near-monopoly over oil and gas exports out of Central Asia. Given this possibility, Gazprom’s offer to buy Azerbaijani gas is likely a round-about attempt by the Kremlin to throw a monkey wrench into trans-Caspian pipeline plans.

Gazprom’s chief executive officer Alexei Miller made the purchase offer during talks with Azerbaijani President Ilham Aliyev on June 2 in Baku. Miller reportedly told Aliyev that Gazprom was prepared to pay a "market price" for the gas, a likely hint that geopolitics and not economics was driving the company’s offers. After meeting with Aliyev, Miller departed for Iran, where he was to hold energy discussions with Iranian officials. News of the Russian offer caused a buzz at the first day of a regional energy conference in Baku on June 3.

"We are interested in the development of mutually beneficial energy cooperation between Gazprom and Azerbaijan," a Gazprom statement quoted Miller as saying. Miller described Azerbaijan as a "natural partner" for Gazprom, noting that "we already connected with developed gas-transportation infrastructure."

Azerbaijani government officials did not immediately comment on Miller’s offer, and representatives of the state oil company, SOCAR, were circumspect about the possibility of gas sales to Russia. SOCAR President Rovnag Abdullayev characterized the Russian offer as a "positive" development, but he gave no indication that Baku would go for it. "We have received many proposals from different counties – Iran, Turkey, Israel, Russia and European Union countries," the Turan news agency quoted Abdullayev as saying. "Azerbaijan will consider all the offers and will eventually choose the most beneficial ones."

Up until 2007, Azerbaijan was an importer of Gazprom gas. However, those imports came to an abrupt stop when Gazprom declared that it was sharply raising its gas price. [For background see the Eurasia Insight archive]. Rather than meet Gazprom’s exorbitant demand, Azerbaijan simply stopped buying from the Russian company, and Baku also stopped shipping oil via the Baku-Novorossiysk pipeline.

Since then, Baku has ignored all of Gazprom’s cooperation offers. Experts in Baku doubt that Azerbaijan will take Gazprom up on Miller’s latest proposal. They note that if Baku agreed to supply the volumes that Russia seeks, then Azerbaijan would not have enough left over to make viable an envisioned European export route via the planned Nabucco pipeline. [For background see the Eurasia Insight archive]. "Selling gas to Russia would mean the rejection of these very important projects for Azerbaijan -- projects that have not only economic, but also political significance [to Baku]," Ilham Shaban, Baku-based energy expert, told EurasiaNet on June 3.

"The Azerbaijani government is trying to turn into important player in the European gas market – both as exporter and transit country," Shaban continued. "Gazprom’s idea totally contradicts these plans."

Sabit Bagirov, a former president of SOCAR who is now an energy consultant, agreed that Baku would likely rebuff Gazprom. "Azerbaijan is already exporting its gas to Europe at market prices. So, I do not see reasons why Baku should sell its gas to Russia instead of the Europe," Bagirov told EurasiaNet.

Tuesday, June 3, 2008

Natural Gas Found in Egypt

June 2 (Bloomberg) -- Dana Petroleum Plc, the Scottish oil and natural-gas explorer expanding in North Africa, and partner Gaz de France SA found gas off Egypt in the Mediterranean Sea.

The WEB-1X well in the West El Burullus area of the Nile Delta region encountered ``good quality gas-bearing sands,'' Aberdeen-based Dana said today in a statement distributed by the Regulatory News Service. Each partner owns half the license, according to the statement.

Tests showed the well may flow at 27 million cubic feet a day or more, Dana said.

Monday, June 2, 2008

Shell Invests in Australian Coal Seam Gas - LNG Project

June 2 (Bloomberg) -- Royal Dutch Shell Plc, Europe's largest oil company, and Australia's Arrow Energy Ltd. signed an initial accord for a $700 million venture to extract natural gas from coal seams to tap rising demand for cleaner-burning fuels.

Under the accord, Shell would buy a 30 percent stake in Arrow's coal seam gas acreage in Queensland state, and a 10 percent interest in the Brisbane-based company's international unit, Shell said today in an e-mailed statement. It would have the right to negotiate to buy any liquefied natural gas produced from the ventures. Arrow shares jumped to a record in Sydney.

The agreement follows last week's accord by Malaysia's Petroliam Nasional Bhd. to pay $2.51 billion for a stake in a rival Australian project led by Santos Ltd. proposing to use coal seam gas to produce LNG, the fastest-growing energy market. Shell was probably among the list of potential partners for the Santos project, JPMorgan Chase & Co. said April 9.

``This very obviously provides credibility for Arrow's projects,'' said Andrew Pedler, senior energy analyst at Wilson HTM Investment Group in Brisbane. ``It is directioned both domestically and internationally, just by the character and nature of Shell.''

Arrow Energy gained as much as 78 cents, or 23 percent, to A$4.11 in Sydney trading. The stock was at A$3.88 on the Australian stock exchange at 10:53 a.m. local time. Liquefied Natural Gas Ltd., Arrow's existing partner for an LNG project in Queensland state, advanced as much as 11 percent

Sunday, June 1, 2008

Canadian Nationa Energy Board - Natural Gas Stays $11 to $13/mmBtu for Summer 2008

Canadians shouldn't expect any relief from high oil, gasoline and natural gas prices in the coming months, the National Energy Board says in its summer outlook.

Oil is expected to average $130 US a barrel through the summer, about where it's trading now. The NEB cites a tight oil market due to seasonal demand, geopolitical supply risks, low spare producing capacity, and the weakness of the U.S. dollar, which it said was attracting more money to commodities.

High oil prices will also keep gasoline near record levels, the NEB said.

"Global oil prices continue to rise," said NEB chair GaƩtan Caron. "What happens in world crude oil markets this summer will largely determine the price of gasoline in both Canada and the U.S.," he said.

Natural gas prices have more than doubled since last fall to the current level of $11.86 per million BTUs. The NEB is forecasting that natural gas prices will stay between $11 and $13 US this summer.

"This is due in part to record crude oil prices, lower liquefied natural gas (LNG) imports into North America, declines in Canadian production, a greater volume of gas needed to refill storage and the usual uncertainty of potentially hot summer weather," it said.

The agency said if natural gas prices rise "substantially," electricity prices could increase this summer, "particularly in regions that have natural gas fired electricity generation, including Ontario and Alberta."