USA Natural Gas Supplies - 118 Years

WASHINGTON (Reuters) - The United States has over 100 years worth of natural gas supplies, and forecasters have consistently low-balled the amount of the clean-burning fuel trapped in unconventional places like shale rock, an industry group said on Wednesday.

Total U.S. recoverable supplies amount to 2,247 trillion cubic feet, or 118 years worth of supply at current production levels, according to a report funded by the American Clean Skies Foundation and completed by Navigant Consulting Inc.

The foundation is chaired by Aubrey McClendon, the outspoken chief executive of Chesapeake Energy Corp, the third-largest U.S. natural gas producer.

"The size of these shale gas deposits is so enormous that they can no longer be overlooked," said McClendon, whose company is making big bets in shale gas plays like the Barnett Shale in Texas and the Haynesville Shale in Louisiana.

More conservative estimates peg U.S recoverable natural gas supplies at 1,680 trillion cubic feet, or 88 years of supply.

But such estimates ignore the potential of unconventional gas production from shale, tight sands and coal-bed methane, said Rick Smead, co-author of the report and project manager for Navigant.

Forecasts from the U.S. Energy Information Administration "have been significantly outstripped by actual behaviour," Smead said.
But new technology like horizontal drilling and fracture stimulation in recent years have "liberated enormous amounts of natural gas," McClendon said.

A conservative estimate for sustainable production from just the "big seven" shale plays is at least 27 billion cubic feet per day -- half of current total natural gas production, Smead said. But many unconventional natural gas plays, especially in the West, are off-limits to drilling because of a congressional ban.

McClendon's Oklahoma City, Oklahoma-based company is spending $13.5 billion on drilling and leases in 2008, with the aim of being the biggest U.S. natural gas producer in coming years.

Chesapeake is the third largest U.S. natural gas producer, behind BP and Anadarko, according to first-quarter data.

Other U.S. natural gas producers like EOG Resources Inc, have taken a more cautious approach to securing rights to drill in unconventional shale plays.

U.S. natural gas futures prices have fallen about 30 percent since the start of July, and settled at $9.248 per mmBtu on Wednesday. McClendon told Reuters he expected prices to hover in the $10/MMBtu range.

"I think somewhere in that $9 to $11 range with an average of $10 is a pretty good price," McClendon said.

McClendon also declined to comment on a rumour that China National Petroleum Corp might bid for a minority stake in Chesapeake's shale gas assets.

USA Natural Gas Supply Good for 100 Years+

What: The press conference where the American Clean Skies
Foundation (ACSF) and Navigant Consulting Inc., will
unveil a comprehensive study indicating that the United
States has an abundant supply of natural gas -- enough
to last more than 100 years, will be broadcast live
online by the American Clean Skies Network.

Who: Aubrey K. McClendon, Chairman and CEO of Chesapeake
Energy and Chairman of the American Clean Skies
Foundation (ACSF), a non-profit charitable organization
dedicated to educating the public about energy and
environmental issues; Denise Bode, CEO of ACSF; Rick
Smead, Navigant Consulting, Inc. (NCI).

When: Wednesday, July 30, 2008
11:00 am - 12:00 pm EDT
10:00 am - 11:00 am CDT
9:00 am - 10:00 am MDT
8:00 am - 9:00 am PDT

Web Address: www.cleanskies.tv

Where: National Press Club
Peter Zenger Room
529 14th Street, NW
Thirteenth Floor
Washington, DC 20045
202-662-7500



SOURCE: American Clean Skies Foundation

American Clean Skies Foundation
Jim Martin, 202-682-6294
or
Brent Gooden, 405-715-3232

NYMEX Natural Gas Future Margins Change Today

NEW YORK, July 28 (Reuters) - The New York Mercantile Exchange (NYMEX) said Monday that it will change some margins for its Henry Hub natural gas futures and other related natural gas futures contracts, effective at the close of business on Tuesday.

Margins for the first and second months of the natural gas, natural gas penultimate financial, and natural gas last day financial futures contracts will remain unchanged.

The margins for the third to seventh months will decrease to $8,750 from $9,000 for clearing members, to $9,625 from $9,900 for members, and to $11,813 from $12,150 for customers.

Margins for the eighth to 14th months will decrease to $5,500 from $9,250 for clearing members, to $6,050 from $10,175 for members, and to $7,425 from $12,488 for customers.

The margins for the 15th to 19th months will decrease to $5,750 from $6,000 for clearing members, to $6,325 from $6,600 for members, and to $7,763 from $8,100 for customers.

Margins for the 20th to 31st months will decrease to $4,250 from $6,000 for clearing members, to $4,675 from $6,600 for members, and to $5,738 from $8,100 for customers.

The margins for the 32nd to 43rd months will decrease to $4,000 from $4,750 for clearing members, to $4,400 from $5,225 for members, and to $5,400 from $6,413 for customers.

Margins for the 44th to 55th months will decrease to $3,750 from $4,500 for clearing members, to $4,125 from $4,950 for members, and to $5,063 from $6,075 for customers.

Margins for all other months will decrease to $3,500 from $4,000 for clearing members, to $3,850 from $4,400 for members, and to $4,725 from $5,400 for customers.

Margin changes for other natural gas contracts including NYMEX miNY, Henry Hub swap and penultimate swap futures contracts can be found on the exchange Web site www.nymex.com.

University of Texas Selling OIl & Natural Gas Assets

WEST TEXAS - A plan to sell a billion dollars worth of oil and natural gas reserves in West Texas has been approved by the U.T. System.

The University of Texas System Regents unanimously approved the plan.

Now an investment bank or oil company will pay one billion dollars upfront for the reserves.

In the plan approved Friday by Regents, the company would agree to produce a set amount of oil and gas from the 2.1 million acres for the next decade.

Still no word on how the sale will affect tuition and fees for U.T. Students.

Arizona Natural Gas Pipeline is Work in Progress

For now, much of the 260 miles of steel green pipe sits next to a trench that rolls over desert hillsides, providing a curiosity for people traveling along Interstate 17 and the perimeter of the Valley.

Come this fall, the $711 million Transwestern Pipeline Co. line should be buried and bringing natural gas pumped from New Mexico and Colorado to power plants making electricity for Phoenix.

More than 1,000 workers have trenched, welded, X-rayed, coated and buried about 140 miles of pipe from Interstate 40 in northern Arizona to Coolidge.

The pipeline has created controversy in Pinal and Yavapai counties and Buckeye because of its proximity to developments, and Transwestern is still negotiating with a few holdout private landowners.

Energy regulators, though, strongly support the line because until now, just one company had controlled the flow of natural gas to the region. Officials hope the line will take pressure off rising electricity prices.

"It was the first time we gave preapproval to such a project, agreeing in concept that the pipeline was needed," said Mike Gleason, chairman of the Arizona Corporation Commission. "We were very much in favor of it. We want the gas here to power production plants so we'll have the power here in Arizona."

Currently, fuel for power plants in Arizona is shipped through a network of lines built by El Paso Gas Corp. Those lines date to the 1930s.

It's too early to predict what the second line could do to utility bills for Arizona Public Service Co. and Salt River Project, the two biggest customers signed up to buy gas from the line.

Natural-gas prices have been rising steadily, pushing up the price of electricity. Both the Transwestern and El Paso lines act simply as delivery services, connecting utility customers with companies drilling gas in different regions.

"Competition with multiple pipes is better, and we have access to less-expensive natural gas now," said Tom Carlson, fuels director for APS.

Many contracts that APS holds to buy gas from companies at the other end of the El Paso line require that a certain amount of the gas come from Oklahoma and Texas, where prices are higher than in the Four Corners region where gas is pumped from New Mexico and Colorado, he said.

"The Transwestern pipeline has access to San Juan (Basin) gas more so than the El Paso line does, and that is lower-cost natural gas," Carlson said. "That has economic value as well."

Any savings the utility is able to make on gas purchases gets passed directly to electricity customers, as are all gas expenses, he said.

By October, the Transwestern line should be delivering fuel to the APS RedHawk Power Station, west of Phoenix, near the Palo Verde Nuclear Generating Station. By November, the line should be complete to the Sundance Generating Station near Coolidge.

SRP not only will buy gas from the line for its Desert Basin Generating Station in Casa Grande and Santan Generating Station in Gilbert, but the company is planning three more natural-gas facilities southeast of the Valley around the line, spokesman Scott Harelson said.

Both APS and SRP buy power from independent natural-gas plants that will benefit from the line. In many cases, the utilities supply the gas for the plants when they are buying the electric output, said Greg Patterson, director of the Competitive Power Alliance, which represents many independent energy producers.

"That's huge," he said of the cost benefits of the new line. "Those costs get passed directly to Arizona consumers."

The line also provides a more secure supply of fuel to the region, he said.

Transwestern Pipeline Co. is a branch of Dallas-based Energy Transfer Partners, a publicly traded partnership that reported profits of $110 million a month for the first three months of this year.

An enormous project

Enbridge Gas Distribution Working with Natural Gas Customers

Re: With natural gas rates rising 44 per cent, we need national energy debate, July 22.

Enbridge Gas Distribution recognizes the concerns expressed regarding the impact of high natural gas prices on our customers.

As a result, we have been proactively communicating to help customers manage their costs. Information about the anticipated increase and tips on how to lower and manage costs this coming winter were included in June and July bills. Information about the winter warmth program and our home weatherization retrofit program which provide assistance to low-income households was also included.

t is important to note that, while the price of natural gas (which makes up about two-thirds of a typical customer's total annual bill) has increased, higher natural gas prices do not benefit Enbridge Gas Distribution. The reason for this is that we don't earn a profit on the price of the natural gas. As a natural gas distribution company, we earn our profit on delivering the natural gas through our pipes to customers. Our delivery prices are regulated by the Ontario Energy Board.

Our natural gas prices are based on a 12-month forecast of natural gas prices in the North American market. Natural gas is traded in a competitive market and prices are determined by North American supply and demand.

Enbridge Gas Distribution and other Canadian gas distribution companies purchase their natural gas from the western Canadian supply basin, as well as from other regions in Canada and the United States.

New sources of natural gas supply exist in both the United States and Canada. Ontario is well connected to supply basins in both countries. Energy regulators recognize that natural gas bound for eastern Canada does not always come from western Canada and may increasingly come from other sources.

Let me conclude with some comparisons. While our prices go up and down to reflect changes in the North American market, natural gas is still a good energy choice.

On a five-year average, it is still about 42 per cent less expensive than electricity and 34 per cent less expensive than oil for home and water heating.

Arctic Circle Loaded with Natural Gas

A report by the US Geological Survey found that the region inside the Arctic Circle contains just over one-fifth of the world’s undiscovered, recoverable oil and natural-gas resources.

The report, the largest-ever survey of energy resources north of the Arctic Circle, found that the area holds an estimated 90 billion barrels of oil and 1,670 trillion cubic feet of natural gas.

“Before we can make decisions about our future use of oil and gas and related decisions about protecting endangered species, native communities and the health of our planet, we need to know what’s out there,” said USGS Director Mark Myers in a press release. “With this assessment, we’re providing the same information to everyone in the world so that the global community can make those difficult decisions.”

Several news outlets are all over this story. Here’s what they have to say about what I think are the most important questions:

How much is it, really?

Most news outlets that covered this story say that, at today’s consumption rate of 86 million barrels of oil a day, the oil in the Arctic would meet global demand for three years.

Keith Johnson, The Wall Street Journal’s environmental blogger, notes that it would be 12 years if the United States could keep all the oil for itself. “The Arctic reserves might bring a little relief to tight markets,” writes Mr. Johnson, “but they don’t look like the answer to declining production in oil fields in the rest of the world.”

As for the natural gas reserves, The New York Times reports that the region holds about 30 percent of the world’s undiscovered natural gas, an amount equal to Russia’s proven gas reserves, which are the world’s largest. But most of the natural gas estimated to be in the Arctic is also in Russia: as the Associated Press reports, the majority of it is concentrated in two Russian provinces.

How much would it cost to extract it?

Pumping oil out of the hot desert is one thing. Pumping it out of the Arctic seabed is another matter altogether. The New York Times’s Dot Earth blogger, Andrew Revkin, calls Arctic drilling “ridiculously hard,” and he directs readers to a story he wrote in 2004 that highlights the challenges of drilling there.

Johnson, The Wall Street Journal blogger, points to a USGS excercise in Arctic oil number-crunching [Excel spreadsheet] that calculates that a billion-barrel field would cost about $37 per barrel to extract, plus at least another $3 in exploration costs. By comparison, CNN reported last year that it costs about $2 per barrel to pump oil from the ground in Saudi Arabia, and $5 to$7 per barrel in Venezuela and Azerbaijan.

The irony of course is that global warming is making it easier to extract these resources by melting Arctic ice.

Who owns it?

Recent years have seen a race among the Arctic powers – the United States, Russia, Denmark, Canada, and Norway – to lay claim to the ocean floor at the North Pole.

But the USGS estimates that most of the oil is not at the pole, but near Canada, Russia, and the United States. The USGS found that more than half of the oil resources are in just three regions: Arctic Alaska (30 billion barrels), the Amerasia Basin (9.7 billion barrels) and the East Greenland Rift Basins (8.9 billion barrels).

More than 70 percent of the natural gas is thought to occur in three regions – the West Siberian Basin, the East Barents Basins, and Arctic Alaska.

So it looks as though Arctic Alaska has the greatest energy potential, with Russia also having an important stake as well, particularly in natural gas. But there is undoubtedly also some oil and natural gas in Arctic regions whose sovereignty is disputed.

The Globe and Mail, a Canadian daily, provides a breakdown of exactly where and how much all the oil and natural gas is (scroll down to the end of the story).

What’s the environmental impact?

Dot Earth’s Revkin discusses the possibility of an oil spill in icy Arctic waters: “The Arctic is a very different place,” he writes, “both because the water is so much colder that oil tends to congeal more, and because sea ice (at least in winter these days) can stall the spread of oil but also make it harder to clean up.”

But the question on most people’s minds is climate change. If we were to burn all that oil and natural gas, how much CO2 would be added to the atmosphere?

According to the Environmental Protection Agency, a single barrel of oil emits 0.43 metric tons, or 948 pounds, of carbon dioxide. So 90 billion barrels would emit 38.7 billion metric tons of C02.

According to the Carbon Dioxide Information Analysis center, 1,000 cubic feet of natural gas emits about 0.052 metric tons, or 115 pounds, of CO2. Divide that by 1,000 and then multiply by 1,670 trillion, and we get about 87 billion metric tons of CO2.

None of these figures include the emissions produced by extraction or transportation of the fuels.

Compressed Natural Gas Buses for Oakland

Oakland International Airport will buy 26 buses that run on compressed natural gas, or CNG, as shuttles connecting terminals with BART and rental car lots.

CNG vehicles are considered cleaner than diesel or gasoline fueled vehicles. The buses connecting BART to the airport have each done about 600,000 miles of work in their 10 years of driving. Rental car buses are 27 years old. All the buses must be replaced by the end of 2009 by state clean air laws.

Six of the new buses will be used to ferry people to and from the Coliseum BART station, the closest BART stop to the airport. (Ridership has been growing on the five-year-old BART connection to San Francisco International Airport, where trains roll right into the terminal.)

The other 20 buses will carry people back and forth to the rental car lots beyond the airport, most of them along Doolittle Drive to the northeast.

The airport thinks it may save up to $400,000 a year by switching from diesel buses to CNG. It didn't say, however, what the upfront cost of the new, cleaner vehicles will be, but the airport has already passed some of that cost onto its customers. People who ride the BART to Oakland Airport shuttles have been paying a dollar more per trip since March 2007 in order to pay for the new buses. Also, $10 has been added to every rental car contract.

A one-way trip from downtown Oakland to the Oakland Airport costs $1.50 BART fare plus $3 for the shuttle, for a total cost of $4.50. From downtown Oakland to SFO costs $5.65, but the trip is all on BART, with no schlepping of suitcases down stairs or escalators and no wait on busy San Leandro Street in a gritty industrial neighborhood for the airport shuttle to arrive.

From downtown San Francisco BART costs $5.35 to SFO and the trip to Oakland Airport costs $6.55, including the shuttle fare.

New CNG buses are set to start running in 2009, although the airport didn't give a more precise date during the year.

TransCanada Tracking to Build Alaska Natural Gas Pipeline

TransCanada Corp. is one legislative hurdle away from landing a lucrative Alaskan licence to pursue the most expensive private-sector construction project in North American history, after the company's proposal for a massive natural gas pipeline won a key vote in the state's House of Representatives.

The house voted 24-16 in favour of a bill that would award TransCanada the pipeline licence under the Alaska Gasline Inducement Act (AGIA), a year-old program spearheaded by Governor Sarah Palin to kick-start the long-dormant concept of a pipeline to deliver the state's natural gas to the continental U.S. market.

Under the program, TransCanada would stand to receive up to $500-million (U.S.) of government funding to advance the project to the construction stage by 2014 - a complex planning and permitting process that the company has estimated would cost it $625-million.

Should the project go into construction, TransCanada has estimated its budget at $26-billion - more than 60 per cent higher than the estimated cost for the proposed Mackenzie gas pipeline in the Northwest Territories, and more than twice the total cost of the Keystone pipeline, which TransCanada and partner ConocoPhillips Co. recently committed to expand and extend to deliver Alberta crude to the U.S. Gulf Coast.
The bill passed the house without any of the contentious amendments that had been proposed by several legislators. It also passed a "reconsideration" vote - its final reading in the house - yesterday afternoon.

Now, the bill proceeds to the state Senate, which most observers expect will approve the licence before the Aug. 2 deadline for final passage of the bill. However, many of the issues and proposed changes that came up in the house could well resurface in the Senate hearings and debate.

"We have to await judgment of [the] Senate," said Tony Palmer, TransCanada's vice-president of Alaska development, in e-mailed comments yesterday, adding that the exact timing of a Senate vote remains up in the air. "We wouldn't prejudge how the votes will come down in the Senate."

Some senators remain concerned that the government is poised to give TransCanada a handout while two of the big producers who actually control much of the natural gas - BP PLC and ConocoPhillips - have proposed their own pipeline project outside of the AGIA process, seeking no upfront government money.

Ms. Palin pleaded with legislators this week to leave the bill alone, arguing that any amendments would set back the pipeline proposal by at least a year, if not undermine the AGIA program entirely.

"A last-minute change sets a horrible precedent, if the result is that we have to begin the process all over again because legislators added new terms," the Republican Governor said in a statement. "It's not realistic to expect businesses to go through the process all over again and absorb the time and expense."

Meanwhile, the government of the Northwest Territories - which has been touting the Mackenzie pipeline project to deliver its own natural gas to southern markets - had only positive things to say about the Alaskan house's passage of the TransCanada licence.

"The Northwest Territories has, for almost a year now, been promoting the benefits of Arctic natural gas from the Northwest Territories and Alaska," said Bob McLeod, the territory's minister responsible for energy initiatives.

"Despite what media pundits or columnists may wish to imply, the Mackenzie project and the Alaska gas pipeline are not competing projects. They are two phases of a comprehensive objective that will ensure a secure and stable energy supply for the future."

$450 Million Fund for Finding Natural Gas

Avista Capital Partners is wasting no time putting capital to work from its still-open second fund.

On the heels of committing to one of the largest buyouts of the year, Avista has teamed with others to form two natural-gas exploration companies with total equity capital of up to $450 million.

The New York firm has partnered with energy-focused EnCap Investments L.P. to launch Royal Offshore, a Corpus Christi, Texas, company that explores and produces natural gas in the region around the Gulf of Mexico. Avista, EnCap and Royal's management together have committed $350 million of capital, with Avista and EnCap equally splitting a majority interest, said Jeff Gunst, an Avista principal.

The investors are betting on Scott Smith and Bill Gregorcyk, former executives of Royal Production Inc., also based in Corpus Christi. Smith and Gregorcyk had purchased blocks of property in the Gulf region and were seeking an equity sponsor. The duo retained energy-investment advisory firm Parkman Whaling LLC to assist it in the process. Avista and EnCap, which had invested in deals together in the past, teamed up again for this deal.

(This story originally appeared in LBO Wire, a daily email newsletter published by Dow Jones & Co. that covers news about venture-capital and start-up companies.)

In a second energy deal, Avista is forming another gas exploration and production start-up - this time across the pond. The firm has committed to provide up to $100 million to the London venture, known as Hansa Hydrocarbons L.P., which primarily will acquire and develop natural-gas properties in the North Sea and Northern Europe.

Avista had been looking at natural-gas opportunities in the North Sea for some time, attracted by a growing regional demand for gas which is outstripped by supply, Gunst said. That region resembles the Gulf of Mexico "10 years ago," with players "transitioning from (oil) majors to smaller companies" as available properties are deemed too small by bigger corporations, he said.

Hansa's principals, John Martin, Patrick Kennedy and Simon Lunn, previously worked with such corporations as BP PLC (BP) and Royal Dutch Shell PLC (RDSA). They reached out to Avista after learning the firm had invested in London-based oil and gas exploration firm Celtique Energie Ltd., said Kennedy, who serves as Hansa's chief financial officer. Hansa didn't use any investment banking service.

Hansa will focus on developing the Permian Basin from the Netherlands to Poland, and aims to supply natural gas to the Western European market.

These are Avista's latest deals from its second fund. In early May, Avista and Nordic Capital said they would acquire Bristol-Myers Squibb Co.'s (BMY) wound- care and ostomy-care products division for about $4.1 billion, in one of the largest buyouts announced this year.

Pickens II - Natural Gas for Heavy Equipment Vehicles

DOBBS: Now, your plan is to have natural gas move into transportation, correct?

PICKENS: That's correct. It already is. There are 8 million vehicles around the world on natural gas and only 142,000 of them are in the United States. Can you believe, I mean, with our leadership, did not take us in the right direction. But not trying to place blame, it's really our problem. Yours, mine, and the rest of the people in America.

DOBBS: You're exactly right. And the cost of conversion to natural gas for large vehicles, those dinosaurs or the gas guzzlers are the ones in many cases that are most readily convertible to natural gas, are they not?

PICKENS: I'm not interested in passenger car near as much as I am in heavy duty equipment. The government should move quickly to mandating that all new vehicles that be purchased by the government would be natural gas vehicles. General Motors has 19 different vehicles they make but none in the United States. All of them out of the country. South America and Europe.

DOBBS: Right.

PICKENS: But here's what is interesting. Gazprom last week, the biggest company in the world, Russia, they announced that they were going to put natural gas fueling stations all over Europe. Now, that's interesting because it tells you that we're behind again. We're behind again. Here we are. We have natural gas, which is cleaner, cheaper, abundant and domestic. Video Watch Pickens discuss plan for wind power »

DOBBS: And let's be clear about this, too, Gazprom, the Russian oil and energy company, is not doing it out of the goodness of its heart, it's driving profits but at the same time creating greater dependency in Europe, Western and Eastern Europe on Russian energy because of the pipelines that move from Russia into Europe. So there's a strategic plan behind what they are doing as well. There is no strategy in this country whatsoever, even as a consumption economy we don't have a plan.

PICKENS: We have not had a plan in 40 years, Lou. What I want to do is to fold in the great resource we have in the central part of this country, which is wind. And then you have resource from Texas west to California. You've got solar. Those two resources have to be developed. So when you develop the wind, you can then remove natural gas from power generation and put it into a transportation fuel market. We can do that; and is it easy? Almost easy. There have to be some things, some hurdles to clear. But when you take that natural gas out of power generation and put it into transportation fuel, that's 22 percent of that 23 trillion. That amount, you put into transportation would reduce our imports by 38 percent. See where states stand on renewable resources »

DOBBS: I'm going to round it off to 40 percent. That's an immense impact immediately. It's about $300 billion that you would save a year.

PICKENS: That's right.

DOBBS: More on the out years as we move into the next decade. Where you estimate, we could be transferring as much as $10 trillion in wealth from this country to primarily to the Middle East and to other oil-producing nations unless we change directions and do so quickly.
PICKENS: ... of the oil we import comes from the Mideast and Africa. The two most unstable areas. And if we did this, we can do it in five to 10 years, and we could get away from that dependency of 38 percent.

DOBBS: Now, I want to point out, Boone Pickens is not only offering a plan and solution and strategy, he's also investing his money in wind power while others are talking about it. And posturing and playing some ideological and partisan games. Boone Pickens, as always, it's a great pleasure to talk with you. Thanks for looking out for the country.

Natural Gas Field Found in Australia by Hess

Hess Discovers Natural Gas off Australia's Northwest Coast

By Angela Macdonald-Smith

July 21 (Bloomberg) -- Hess Corp., the fifth-biggest U.S. oil company, said it made a second natural gas discovery off the northwest coast of Australia.

The Briseis-1 exploration well found gas over a depth of 151 feet, in line with estimates before the well was drilled, New York-based Hess said in a statement on its Web site.

Natural Gas Industries Going Offshore

Some members of Congress contend that the oil companies are currently authorized to drill where 80% of our oil and gas resources are located. The fact is that 84% of our continental offshore shelf is off limit to exploration or production.

Some members of Congress contend that we don't have enough oil and gas resources to solve our petroleum problems. According to estimates provided by the U.S. Department of the Interior, our oil reserves are larger than the known oil reserves of Iran, Iraq, Russia, Nigeria or Venezuela. There is, however, a large number of conflicting estimates of our petroleum reserves in large areas. Most of these estimates are based on speculation instead of scientific exploration.

Some members of Congress contend it would take 10 or more years to produce additional oil and gas if present legal restrictions were lifted. According to driller that know the facts, there are areas where oil rigs with with pipelines to shore are located adjacent to off-limit areas and those areas could be in production within a year. Of even more importance, as explained in a recent article by Martin Feldstein - 'We Can Lower Oil Prices Now' - if additional drilling is authorized now, it will immediately increase supply and lower prices.

Oil producers have a supply of oil in the ground and if they have an expectation that the oil prices will increase at a faster rather than the interest rate, they have an incentive to leave the oil in the ground. Conversely, if they think oil prices will decrease, they have an incentive to produce more oil now. If they produce more oil now the speculation bubble will burst.

It is essential that we obtain reliable estimates of all our petroleum reserves. Exploration should be allowed in all areas provided it is performed with a method i.e. seismic or electromagnetic that is deemed harmless and approved by the Dept. of the Interior within a prescribed period of time. Additional reserves would undoubtedly be found if additional modern exploration were allowed. With today's technology, this could be done rapidly and with no effect on the environment.

Many of the existing drilling leases are in areas that are difficult and time consuming to exploit. For example, some are in very deep water and some require long pipelines. The key to fast and successful production is to allow determination of the potential in each areas. This would allow drilling in optimum locations to produce oil and gas in the shortest time.

Arguments that the development of alternate fules will solve our petroleum problems are ludicrous. For example, we can't fuel our vehicles with windmills. We can make some electricity with windmills, however, we already know how to make electricity and that hasn't solved our petroleum problems. The mistake of biofuels is already well documented.

Alternate fuel solutions will take decades to develop and implement, however, even then they won't replace our nee for oil and gas because oil and gas are the raw materials needed to produce chemicals, plastics, pharmaceuticals and fertilizers.

The high price of natural gas in the US compared with other locations has resulted in the loss of hundreds of thousands of US jobs. Natural gas is very expensive to ship therefore low cost gas requires supply through local pipelines. The result is that he cost of natural gas in Dubai is much lower than the cost in the US. That is why G.E. sold their Plastics Division to Dubai. If we don't correct this problem, there will be an OPEC for all products made from natural gas. It should also be noted that we have huge reserves of natural gas in shallow waters and that any accidental gas leakage wouldn't create pollution.

The Chinese are preparing to drill in Cuban waters less than 50 miles off the coast of Florida into a huge dome of natural gas. With the latest horizontal drilling technology, the Chinese could even harvest natural gas 7 miles closer to Florida under our waters. Our self-imposed restrictions prevent us from drilling into the same dome.

It should be noted that in the UK they are drilling under the sea from onshore locations, which eliminates any possibility of water or shore pollution.

The proposal by some members of Congress to simply increase taxes on our oil companies was tried by President Carter and it was a complete failure. It created a critical shortage of petroleum.

We should unleash our free enterprise system to solve our petroleum problem. We should allow our US entrepreneurs to determine the location and magnitude of all our petroleum reserves and to drill in all reasonable locations. In return for these opportunities, we should penalize oil company profits that are not used for exploration and production, and reward those that are used.

Our current drilling bans are self-destructive. The provide financial support to our enemies in the War on Terror and to our Communist adversaries, and they are destroying our economy.

Picken's Natural Gas Program Embraced by Democratic Leaders

WASHINGTON – T. Boone Pickens says he's ready to give up partisan politics if it means weaning the country off foreign oil.

[Click image for a larger version] JIM MAHONEY/DMN
JIM MAHONEY/DMN
Dallas billionaire T. Boone Pickens has mounted a $50 million ad drive aimed at reducing oil imports by building wind farms and using natural gas to fuel cars.

Mr. Pickens once gave millions to a group that undermined U.S. Sen. John Kerry's Vietnam War service and offered $1 million to anyone who could prove that the Swift Boat group's charges against the presidential candidate were false.

Now he's stopped donating to such groups as he preaches a clean-energy gospel that's won over Democrats such as Senate Majority Leader Harry Reid.

Mr. Pickens, 80, will meet Tuesday with House Speaker Nancy Pelosi and other top Democrats about his plan to replace oil with wind power and natural gas.

As Democrats struggle to address high gasoline prices without opening more wilderness and coastlines to oil companies, Mr. Pickens offers a valuable partnership: a certified oil industry icon who says the country can't drill its way out of the energy crisis.

"I can be most effective as a nonpartisan, and I think the Democrats know me to be an honorable person," Mr. Pickens said Friday, adding that he's talked to Al Gore and the two agreed on "95 percent of what we talked about."

Mr. Pickens is financing a $50 million advertising campaign aimed at reducing oil imports by building massive wind farms and using natural gas to fuel cars.

The ideas align perfectly with his business ventures, which appears to make Democrats enthusiastic – not cynical – about his pitch.

"If Pickens can show it's very profitable, that's a very important point," said Daniel J. Weiss, director of climate strategy for the Center for American Progress, a liberal think tank.

"That will help steer investors toward those kinds of investments."

In addition to cooperating with Democrats, Mr. Pickens is offering other surprises.

He suggests that the country "probably needs" a national electricity grid to take advantage of all the wind power that would come from the middle of the country, including West Texas. The idea is radical for Texas, whose independent grid gives it freedom from federal regulation.

"What Pickens wants to do is go beyond that, and make sure the grid not only goes from the Panhandle to Dallas or Houston but to Albuquerque or Los Angeles," Mr. Weiss said.

"It's a way to expand the market for clean electricity."

Mr. Pickens is already the country's most famous advocate of wind power.

His company, Mesa Power LLP, announced in May that it would spend $2 billion on enormous turbines to harness the wind of West Texas.

The state boosted his plan this week by authorizing an almost $5 billion plan to build transmission lines to carry the electricity to Texas cities.

Count Mr. Reid, the Senate majority leader, as one of his newest fans.

The Nevada Democrat said Thursday that although Mr. Pickens was once "my mortal enemy," he is "putting his money where his mouth is" when it comes to clean energy.

Mr. Pickens will appear next month in Las Vegas with several famous Democrats, including former President Clinton and former Treasury Secretary Robert Rubin, at an energy summit hosted by Mr. Reid and the Center for American Progress Action Fund.

But how Mr. Pickens' big ideas translate in Washington is uncertain.

Energy politics have become thorny as Democrats resist President Bush's call to allow exploration on the Outer Continental Shelf, or OCS.

If there's no immediate compromise on new drilling, Mr. Pickens' emphasis on natural gas could have appeal.

Rep. Rahm Emanuel, a leading House Democrat, announced legislation this week to force automakers to make 10 percent of their cars run on natural gas by 2018.

The bill would provide $2.6 billion in bonding authority for low-interest loans for natural-gas fueling stations.

Mr. Emanuel has been working on the proposal for a year and spoke to Mr. Pickens about it, an aide said.

Mr. Pickens said he didn't think he influenced the bill but said the two had "a good conversation" about it.

But Mr. Pickens doesn't agree with all the Democrats' energy priorities.

Bills to limit speculation on energy prices are "wasting time" and ignore the cause of high prices – not enough oil, he said.

"Go ahead and drill on the OCS," said Mr. Pickens, who also plans to meet with House Republican leaders next week.

"I'm not against anything except for foreign oil."

The United States imports about 65 percent of its oil, costing the country about $700 billion a year, Mr. Pickens says.

By comparison, most of its natural gas comes from North American sources.

Rep. Gene Green, a Houston Democrat who supports new domestic drilling, said Mr. Pickens' plan is "a great idea" but could be ensnared in partisan politics.

Hundreds of House Republicans and energy-state Democrats would probably insist that legislation such as Mr. Emanuel's include authorization for new domestic drilling.

"Natural gas is at historically high [price] levels, and if we're going to create another big user of it, we're going to have to have more production," Mr. Green said.

Mr. Pickens supports new exploration but says Mr. Green has it wrong.

Wind power could replace natural gas for power plants.

The country has been woefully slow to adopt natural gas as a fuel for vehicles, even though the idea is gaining ground overseas, he noted.

The world has 8 million vehicles running on natural gas, but only 142,000 in the United States, he said.

"We have ample natural gas to do this," he said. "So how did we get ourselves in this spot?

"We got ourselves here because the oil was cheap. And they kept feeding us rope, and we hung ourselves."

Even former Green Party presidential candidate Ralph Nader, who's running a low-profile independent campaign this year, thinks Mr. Pickens' platform could make a difference in the energy debate.

"I'm very alert to the way things move in Washington, and very often they move in unconventional manners," Mr. Nader said.

"They don't move because the president moves or because the Congress moves. They move because some one person or persons take a dramatic detour.

US Natural Gas Inventories Rise

NEW YORK - Crude oil fell more than $5 a barrel, dropping below $130 for the first time in six weeks, as global economic growth slows. Natural gas dropped more than 7 percent after a government report showed US supplies rose a greater-than-forecast 104 billion cubic feet last week. Some users can switch between oil-based fuels and gas depending on cost. Oil also fell because of reports showing the US and Chinese economies are slowing.

"The rout in natural gas is pulling oil lower," said Addison Armstrong, director of market research at TFS Energy LLS in Stamford, Conn. "The sheer weight of the decline is bound to impact all the energy markets. A consensus was already forming that [energy] prices were too high."

Crude oil for August delivery fell $5.31, or 4 percent, to settle at $129.29 a barrel on the New York Mercantile Exchange, the lowest close since June 5. Futures are up 75 percent from a year ago.

Futures have dropped almost $18 from last week's record $147.27 a barrel on signs that US consumption is falling. Oil is down 11 percent since July 14, the biggest three-day drop since December 2004.

Prices closed below the 50-day moving average for the first time since Feb. 8, an indication the bull market may be coming to an end. Traders use moving averages of different periods in conjunction with other statistical patterns for buying and selling decisions.

Oil also fell because August options expired at the close of Nymex trading yesterday. August $130 puts, which represent the right to sell at that price, were the most actively traded options contract on the Nymex yesterday.

Natural gas for August delivery declined 86.1 cents, or 7.6 percent, to settle at $10.54 per million British thermal units in New York, the lowest close since April 17.

US natural gas inventories were forecast to increase 88 billion cubic feet in the week ended July 11, according to the median of responses from 22 analysts surveyed by Bloomberg News.

China's economic expansion cooled to the slowest pace since 2005 as gross domestic product grew 10.1 percent in the second quarter from a year earlier, down from 10.6 percent in the first quarter, the statistics bureau said yesterday in Beijing.

BP Bets Big on USA Natural Gas

By BEN CASSELMAN and RUSSELL GOLD
July 18, 2008

Oil giant BP PLC will pay $1.75 billion for natural-gas assets in Oklahoma, placing a big bet on North America's booming unconventional gas fields.

The deal with Oklahoma City-based Chesapeake Energy Corp. is the latest sign of a major shift in Big Oil's strategy. For years, the largest oil companies have all but ignored the continental U.S. in favor of huge oilfields overseas and offshore. Now, facing declining production, shrinking reserves and increasing political challenges, the companies are coming back.

They're returning to a rapidly changing North American energy scene. In recent years, smaller independent companies including Chesapeake have learned how to produce gas from unconventional reservoirs -- tightly packed sands, coal beds or dense rocks called shales -- that were long considered too difficult or too expensive to produce. That's led to a drilling boom in Texas, Colorado, Pennsylvania and elsewhere, spurred in part by soaring energy prices.
[Chart]

Global companies such as BP had largely remained on the sidelines, shunning the fields because they require hundreds of small wells managed by large numbers of employees. In years past, they'd sold most of their U.S. assets, arguing it was a mature region that didn't offer adequate returns.

Now that's changing as they face harsh political treatment in energy-rich nations and are losing access to the world's best remaining reserves.

BP's dive into unconventional U.S. gas is "a seminal event," said Ralph Eads, chairman of Jefferies Randall & Dewey, the energy investment banking arm of Jefferies & Co.

Like most big oil companies, BP has struggled recently to replace aging fields and grow its production. Its oil and gas production was down 2.8% in 2007 from a year earlier.

In Thursday's deal, the company is buying 90,000 acres of natural-gas leases, believed to contain two trillion cubic feet of gas, the equivalent of more than 350 million barrels of oil. Chesapeake produces about 50 million cubic feet per day production on the Oklahoma property.

BP's announcement comes three days after rival Royal Dutch Shell PLC announced a C$5.9 billion (about $6 billion) takeover bid for Canadian natural-gas producer Duvernay Oil Corp. Shell also has partnered with EnCana Corp. to enter what has become the hottest new unconventional play, the Haynesville Shale in east Texas and Louisiana.

In April, Exxon bought an interest in an unconventional gas field in Hungary and has plans for gas wells in Germany also. ConocoPhillips jumped ahead of the trend in 2005 when it purchased Texas-based gas-producer Burlington Resources Inc. for $35 billion.

Unconventional oil and gas fields offer significant advantages. Not only are they in politically stable areas, they offer relatively little risk. Because each well is much like another, costs can actually go down over time, a sharp contrast to the rapidly rising costs of wells overseas.

Appalachian Basin Natural Gas Target for Shale Development

PITTSBURGH, Jul 16, 2008 (BUSINESS WIRE) -- A consortium of energy companies active in the Appalachian Basin have organized to form the Appalachian Shale Water Conservation and Management Committee (ASWCMC). The founding members include: Anadarko Petroleum, Cabot Oil & Gas, Chesapeake Energy, Chief Oil & Gas, EOG Resources, Equitable Resources, J-W Operating, Marathon Oil Corporation and Range Resources. The ASWCMC has joined with the Gas Technology Institute (GTI), a leading research, development and training organization, and selected Tom Hayes as the Managing Director for the committee.
The Marcellus Shale formation, one of several Appalachian potential shale plays, is an emerging resource for natural gas in the country with potential reserves estimated to be as high as 50-200 trillion cubic feet (Tcf). As the shale development continues and new companies enter the Appalachian Basin, the companies participating in the ASWCMC will likely increase.
The mission of the ASWCMC is to develop best management practices and technical solutions for shale developments in the Appalachian Basin. The committee will work cooperatively with the appropriate regulatory agencies to ensure that water resources are managed in an efficient and environmentally responsible manner. Initial goals of the ASWCMC will be to determine current and future water needs, water quality specifications for drilling and hydraulic fracturing, and to identify technologies that provide solutions for water management and water conservation. "There are several water treatment and recycling techniques, some of which are being tested in other shale fields. The consortium has engaged GTI to help us identify the options available and help us find the best techniques for use in Appalachia and the Marcellus Shale development," said Len Paugh, Operations Manager with Range Resources.
Only around 200 wells have been drilled into the Marcellus Shale in the Appalachian Basin, but the industry recognized the need to responsibly manage water resources early. In April 2008, the ASWCMC organizers submitted a cooperative government-industry research proposal to the U.S. Department of Energy - National Energy Technology Laboratory. "The proposed project would include funding for studies to obtain water management information, to develop solutions to manage water streams associated with energy development and methods that minimize the demands on public water supplies," said Tom Hayes, Managing Director of the ASWCMC. "We will pursue other opportunities for research of industry pilot water treatment and recycling tests."
ASWCMC is a consortium of energy companies focused on efficient and responsible use of water in drilling, completion, and production operations associated with shale development in the Appalachian Region.

EXCO Buys Natural Gas Assets in Texas

EXCO Resources, Inc. has closed an acquisition of producing oil and natural gas properties, acreage and other assets in Gregg, Rusk, and Upshur Counties, Texas for approximately $252 million from private sellers, subject to customary post-closing purchase price adjustments. EXCO’s average working interest in the properties is approximately 94% with an average net revenue interest of 72%. EXCO’s estimate of net proved reserves acquired is 109 Bcfe and estimated total net reserves (proved, probable and possible) exceed 370 Bcfe exclusive of Bossier/Haynesville shale potential, discussed below, all based on NYMEX strip pricing at the contract effective date of March 1, 2008.

The assets include producing properties with more than 15 Mmcfe per day of net production from 83 producing wells and approximately 11,000 gross acres. Also included in the assets is a 50 mile gathering system with compressors, a dehydration unit and a refrigeration plant. EXCO estimates that there are more than 500 additional drilling locations in the Cotton Valley and Travis Peak formations, of which 92 are proved. EXCO will operate the field and estimates a capital budget of $20 million to drill 9 wells during the remainder of 2008. The current primary productive formations in the field are the Upper Cotton Valley, Pettet and Travis Peak. A majority of the acquired leasehold covers rights to all depths, including the Bossier/Haynesville shale. In prior years, two vertical wells were drilled into the Bossier/Haynesville shale on this acreage and logged pay potential in these horizons. Recent industry activity in the vicinity of the acquired acreage has confirmed the presence of shale potential. EXCO plans to drill at least one vertical well in 2008 to further delineate potential of the Bossier/Haynesville, and EXCO estimates that there could be more than 100 potential shale locations across the acquired acreage.

The acquisition of these properties will be financed with a $300 million Senior Unsecured Term Loan due December 15, 2008, at our unrestricted subsidiary, EXCO Operating Company, LP, formerly known as EXCO Partners Operating Partnership, LP.

U.S. Natural Gas Price Falls 4% on Fed Chief Economy Assessment

July 15 (Bloomberg) -- Natural gas futures fell to the lowest in almost seven weeks on concern demand will slow, after Federal Reserve Chairman Ben S. Bernanke said risks to U.S. growth have increased.

Gas fell after Bernanke, in Senate testimony, said there are ``significant downside risks to the outlook for growth.'' About 31 percent of the natural gas consumed in the U.S. is used by industrial companies, according to Energy Department data.

``Bernanke is saying the U.S. is really starting to falter,'' said Chris Jarvis, president of Caprock Risk Management LLC in Hampton Falls, New Hampshire. ``There is growing risk the U.S. could fall into a major recession, which would drag on the global economies.''

Natural gas for August delivery fell 48.2 cents, or 4 percent, to settle at $11.477 per million British thermal units at 3:16 p.m. on the New York Mercantile Exchange, the lowest closing price since May 29.

The Fed chief abandoned the message of the Fed's June policy statement that downside risks to growth had ``diminished somewhat,'' while maintaining a warning on inflation in semiannual testimony on the economy to the Senate Banking Committee.

Crude oil futures for August delivery fell for the first time in a week, dropping $6.44, or 4.4 percent, to settle at $138.74 a barrel on the New York.

Exxon Moving Forward with Alaska Natural Gas & Oil

JUNEAU, Alaska — Exxon Mobil Corp. has hired contractors with plans to begin work on an oil and gas field the state of Alaska wants to take back.

The state's Department of Natural Resources rejected Exxon Mobil's most recent development plan for the Point Thomson field. The dispute is still in court, but the Irving, Texas, company announced Monday it's still moving forward with work.

The field's rich cache of oil and gas sit at the heart of a dispute over a proposed natural gas pipeline, which some lawmakers believe cannot be successful until the state's dispute gets resolved.

Exxon Mobil is the operator for leases purchased 31 years ago, but never developed; BP PLC and Chevron also have a stake in the unit.

The state has been trying to strip Exxon and its partners of the leases since late 2006 under both Gov. Sarah Palin and her predecessor, former Gov. Frank Murkowski.

Exxon Mobil recently told lawmakers that it's serious about this development plan and considers it vital to any gas pipeline project that would go into Canada and eventually serve U.S. markets.

The Alaska Legislature should within a week take a vote on whether to issue a state license to TransCanada Corp. to build a pipeline that would take natural gas from Alaska's North Slope into Canada and then down to the Lower 48.

ConocoPhillips and BP have joined forces on a competing pipeline that is not seeking a state license or the accompanying $500 million in state incentives.

Exxon Mobil's $1.3 billion Point Thomson plan includes drilling that will begin the 2008-2009 winter season.

It's considered a first phase that will initially produce about 200 million cubic feet of natural gas, plus 10,000 barrels per day of liquid condensate removed from the gas and sold through existing and new pipelines.

The state's natural resources commissioner Tom Irwin, however, rejected this plan proposed in February. A Superior Court ruling is expected by year's end.

Malaysia Government Pushing Natural Gas Vehicles for Buses

By Yamin Vong

FINALLY, we have some good news and some light at the end of the tunnel.

The government will be pushing for a transport fuel policy where natural gas for vehicles (NGV) will be used for buses.

This is one of the findings of the anti-inflation committee.

"We are looking at gas as a possibility to structure an energy policy. At the moment, we are swinging towards getting the public transport sector to use gas to reduce the use of diesel," said Domestic Trade and Industry Minister Datuk Shahrir Abdul Samad last Wednesday.

This is one of the best outcomes of the hike in fuel prices. It has made the government start to take the lead in how to diversify our addiction to petrol and diesel.

The next steps that the anti-inflation committee should do is to drive the public transportation agenda with an iron fist - the people who use buses should be treated with more care and respect by allocating special lanes for buses and taxis. Bus lanes should be re- implemented step by step so that the police can focus its resources and enforce strictly. And what are all the multi-million ringgit CCTVs being used for, if not to control traffic? Coming back to the point of gas playing a major role as a transport fuel, in a modern economy, the transport fuel policy is designed to diversify and minimise consumption. With this new direction, Malaysia can optimise its natural gas resources and substitute this for crude oil.

We'll have to wait for the full announcement of the transport fuel policy but as it is, the most important first step is the recognition of NGV as a public transport fuel.

This is one of the most natural things to do - using NGV for public transport. Firstly, it's logical for Malaysia to use this domestically rather than spend money liquefying it for export. Secondly, it's a clean fuel. Thirdly, it's a `sticky' fuel, i.e. it's not easy to smuggle or steal unlike diesel.

The issues that the government must address is the pricing and the availability of fuel. The technology of conversion has reached a stage where diesel buses can be retro-fitted to use diesel for starting and peak loads, and at cruising, NGV is injected into the combustion chamber.

Of course, there are also the diesel engines that are made for NGV.

The energy policy, which is expected to be announced in three months, will presumably also look at the transport fuel policy because transport fuel accounts for 40 per cent of total energy consumed.

With a clear transportation energy policy, Malaysians can pull together in one direction as a nation in solving the energy demand of the transportation sector.

Motor vehicles account for around 40 per cent of the nation's energy consumption, 99 per cent of which is petrol and diesel.

The transportation energy policy should include alternative fuel targets. For example, the European Union has established a target of replacing 20 per cent of petrol and diesel fuels with alternatives with the target of 10 per cent NGV and 5 per cent hydrogen by year 2020, and 5.75 per cent biofuels by 2010.

Targets are important because plans can be prepared, implemented and monitored.

If the decision is to substitute 10 per cent of the transportation fuel with NGV, then the authorities can calculate how much natural gas needs to be allocated to the transportation sector, how many and where NGV stations need to be built, how many and what types of vehicles should be converted, the skilled manpower that needs to be trained, etc.

We need the targets and specific numbers rather than just saying we need more NGV stations but later ending up with a natural gas supply problem.

NGV will not be able to fuel all 40 per cent of the energy demands of the transportation sector, hence we need to ensure that whatever percentage we target that there will be enough natural gas supply in the long term.

We can also determine whether other oil companies will be involved with Petronas to build NGV stations instead of Petronas doing it all by itself.

It seems that the other oil companies are not keen to build NGV stations as the rate of returns on the investment is not attractive.

The reaction of the managing director of one of Malaysia's biggest oil companies is that as a business entity, he's not keen to buy and be dependent on Petronas, its competitor.

"What happens if Petronas prioritises supplies to its own stations, and treats us like poor relatives?" he asked.

Clear policy is also needed in terms of the pricing mechanism for natural gas supply to NGV stations and retail price of NGV to consumers.

Worldwide, the retail price of NGV is much cheaper than petrol or diesel.

These lower price differentials are needed and must be maintained to ensure the long term viability and sustainability of the NGV programme.

How the price of NGV, compared with petrol and diesel, is determined depends on factors such as whether NGV is used to reduce dependence on imported oil, utilisation of local natural gas resources, reduction of air pollution and to enhance energy security.

Lee Giok Seng, executive director of the Asia Pacific Natural Gas Vehicles Association (ANGVA), is a champion for NGV in Malaysia.

He says that depending on how proactive the government wants to be, NGV in Malaysia can be as successful as in countries like Argentina (about 1.7 million natural gas vehicles), Brazil (1.4 million), Pakistan (1.7 million), India (500,000) and Thailand (75,000).

"In Europe, biogas produced from wastes and landfills are being upgraded as fuel for natural gas vehicles," said Lee.

"This upgraded biogas is known as biomethane, and is a renewable source of natural gas supply.

"In Sweden, around 20 per cent of the natural gas supply is from upgraded biogas production." Lee is, however, concerned that many people are jumping on the bandwagon of NGV without really understanding the whole structural requirement of providing NGV such as the availability of natural gas, the technical limitation of NGV, the safety issues, the operational cost, and the skilled manpower needed.

"It takes time to develop the infrastructure for NGV and the first basic requirement is that there must be adequate supply of natural gas, especially via pipelines," he said.

"Places like Kelantan, where currently there are no piped natural gas supply, will need considerable time, effort and funds to implement NGV projects."

There had been proposals recently that Kelantan converts to NGV.

ANGVA is a regional NGV industry association promoting the use of NGV in the Asia-Pacific region. It is now looking for drivers to participate in the Green Highway II, using NGV vehicles to drive from Kuala Lumpur to Donghae, South Korea.

The ANGVA secretariat is based in Bangi, Malaysia. Previously it was based in Chuncheon, South Korea.

More information on ANGVA can be viewed at www.angva.org.

Natural Gas Drilling Offshore Encouraged by McCain

Drilling Takes Center Stage
July 11, 2008
Ken Silverstein, EnergyBiz Insider
Editor-in-Chief
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America's energy policy is at the center of the presidential contest. The debate has escalated into a war of words now that President Bush is pushing Congress to pass recently introduced legislation that would lift the ban on offshore drilling.

The comments have ignited a long-standing feud between conservatives and liberals who generally hold different views on how to end this country's dependence on foreign oil as well as how to approach environmental policies. Republicans want to work with those states that favor increased oil and gas production to enact policies that would allow drilling in areas that are at least 100 miles offshore - a cause repubiated by leading Democrats who say that such policies capitulate to big industry.

Record-high gasoline prices along with volatile natural gas indexes have given new credence to the conservative position that producers should have greater access to areas now off-limits to development. But liberals object to that thinking, noting that the resulting ecological destruction would have little bearing on immediate prices and that those resources are dwindling. Instead, they say the country must conserve and plow its capital into sustainable energy forms.

To be clear, critical differences exist between the development of oil and gas. Californians, for instance, recall the oil spill near Santa Barbara in 1969 while Alaskans and the rest of the country remember the Exxon Valdez oil spill in Bristol Bay in 1989. Concerns are apparent among all citizens in those locations that perpetual strong winds and turbulent seas could cause a repeat of those accidents.

Natural gas, by comparison, would have to be piped out, creating the potential for leaks. But the gas industry says that it has advanced its drilling and transport techniques so that the environmental footprint is nominal. Moreover, it says that existing climate change legislation on Capitol Hill would increase the demand for its product by 20-30 percent over the next couple decades.

"Despite protests from some sectors, natural gas exploration is in fact an environmentally safe process that will increase our nation's domestic energy supply and lower prices from today's record-breaking levels, providing much-needed financial relief for consumers," says David Parker, chief executive of the American Gas Association. "It is estimated that up to 420 trillion cubic feet of natural gas could be developed from the Outer Continental Shelf, or to put it another way -- 22 years of supply at current rate of U.S. production."

Americans are feeling squeezed. A Gallup Poll report says that 57 percent would favor increased access to not just the deep waters in the Atlantic and Pacific Oceans, and the Gulf of Mexico, but also to wilderness areas such as those in Alaska. But those same respondents insist that developers must adhere to strict environmental guidelines.

New Paradigm

In 2006, Congress gave natural gas producers greater drilling rights in the Gulf of Mexico but denied them such guarantees off the shores of the Atlantic and Pacific Oceans. It's all part of a moratorium first enacted in 1982 that forbids oil and gas leasing in most of the Outer Continental Shelf. Beyond 3 miles from the shoreline, the federal government regulates drilling activity.

The presumptive Republican presidential nominee John McCain wants to lift that moratorium now that prices are so volatile. While McCain had once been opposed to granting more drilling rights, President Bush has long advocated them as a way to become more self-reliant. Barack Obama, conversely, opposes expanding such rights, arguing that nation cannot drill its way out of energy dependence.

"The president's proposal sounds like another page from the administration's energy policy that was literally written by the oil industry: give away more public resources to the very same oil companies that are sitting on 68 million acres of federal lands they have already leased," says House Speaker Nancy Pelosi, D-Calif.

The U.S. Interior Department estimates that if areas now closed to drilling were accessed, 86 billion barrels of oil and 420 trillion cubic feet of natural gas are technically recoverable. The question is whether the added production would affect prices. No one disputes that it would take several years for the new supplies to come on line. But some experts such as Daniel Yergin, head of the Cambridge Energy Research Associates in Boston, says that it would send an immediate psychological signal - one that would tell foreign suppliers that this country will not be held hostage to their whims.

And then there are the practical concerns. While Florida Governor Charlie Crist, a Republican, has reversed his position and now supports John McCain's view, other key politicos in the state have said that drilling there would hurt tourism. Meanwhile, in California opponents of drilling that include Governor Arnold Schwarzenegger say that the added supplies would quickly run out at the current rates of consumption.

Currently, about 35 percent of the natural gas consumed in the United States each year is produced off-shore. But proponents of greater drilling rights say that about 85 percent of all off-shore areas are off-limits to both oil and gas production. If more supplies came to market, commodity prices would fall, they add.

"We have proven oil reserves of at least 21 billion barrels in the United States," McCain said in a speech in Houston to oil executives. "But a broad federal moratorium stands in the way of energy exploration and production. And I believe it is time for the federal government to lift these restrictions and to put our own reserves to use."

Change is assuredly coming to Washington. Oil and gas development will take center stage no matter who wins. The debate, which will help determine the next president, is pitting record high energy prices and economic disruption against environmental prudence. The goal in either case is to write a new paradigm that will become the bedrock of America's energy policy well into the future.

More information is available from Energy Central:

* Natural Gas: America's Untapped Resource, EnergyBiz, March/April 2006

* Gas Heats Up - AGA Leader Downes Defines Big Issues, EnergyBiz, Jan/Feb 2006

* Schwarzenegger's California Overhaul - A Conversation with His Leading Energy Advisor, EnergyBiz, Sept/Oct 2005

New York Natural Gas Bill Awaiting Governor's Signature

ALBANY — With the stroke of a pen, Gov. David Paterson could give a significant boost to the natural-gas boom in the Southern Tier or slow down the process to better plan for the expected surge in drilling.

Paterson so far isn't saying publicly what he intends to do to the bill, passed last month by the Legislature, but insiders expect him to sign it. Supporters and opponents are lining up on either side of the bill as they await Paterson's decision.

The measure would streamline the permitting process for new wells and bring it up to date with new technology that allows explorers to drill horizontally as well as vertically.

The new drilling technique is considered crucial as developers go after what might be the largest pool of natural gas in the country beneath a geologic formation that stretches from the Southern Tier west into Ohio and south as far as West Virginia.

The largest estimate of the gas waiting to be extracted from the formation, about 500 trillion cubic feet, is two and a half times as much as the entire country uses in a year.

Even if only a tenth of that total can be extracted, it would still generate more than $500 billion in revenue, experts say, with a significant portion of that staying in depressed regions of the state and the country.

Geologists have suspected for decades that the gas is there, but recent technological advances and the surge in prices is now making it both technically and economically feasible to extract.

"The technology is changing, and we've got to keep pace with that change,'' said Gary Lash, a geology professor at SUNY Fredonia and the leading expert on the geologic formation, known as the Marcellus Shale, that is considered likely to hold the huge gas supply.

"This is a move in the right direction. It will speed things up,'' he said of the bill.

But speeding things up is exactly the wrong step to take, said Assemblywoman Donna Lupardo, D-Endwell, Broome County, one of seven of the 150 members of the Assembly who voted against the measure.

"Without proper planning and consideration of environmental factors, any attempt to streamline the process is unwise,'' she said.

The bill would give the state Department of Environmental Conservation the power to set uniform standards of spacing between wells to conform to the technology that allows the drilling to spread out from a central point. Without that change, the DEC would have to go through a permitting process for each of potentially thousands of drilling applications.

Lupardo said that she's not convinced that local governments yet have a handle on the impact on roads, air quality and water supplies that drilling a significant number of wells might entail.

And she also wants more information about the fluid that will be injected into the wells to help crack open rock fissures and release the gas. Also, Lupardo questioned whether DEC will have enough staff to keep tabs on the projects.

Assemblywoman Aileen Gunther, D-Forestburgh, Sullivan County, the only other upstate lawmaker to vote against the measure, said she didn't see the need for such a speedy change.

"I feel like it should be slowed down,'' she said. "It came up all of a sudden.''

But bill sponsor Assemblyman William Parment, D-North Harmony, Chautauqua County, pointed out that thousands of oil and gas wells have been dug for decades using the technique of forcing water and other liquids into the well, known as "hydrocracking,'' with no substantial adverse environmental effects

"Hydrocracking is a common practice in gas and oil development field and has been practices for many years in New York State without incident,'' he said.

James Tierney, the top DEC official on water issues, said his agency will find out what is in the fluid before it grants any drilling permits.

"What is in this stuff? We don't have any answers yet,'' he said. "But unless we know what it is, we wouldn't grant the permit.''

There is no indication when Paterson will act on the bill.

PickensPlan.com - USA Convert to Natural Gas - NOW!

Famous Texas oil man T. Boone Pickens got a standing ovation Thursday after he rolled out his plan to wean the nation off imported oil.

Pickens launched the plan July 8 via a $58 million advertising and web campaign. Its website is PickensPlan.com.

The website received 170,000 hits in its first two days, according to Pickens, who was the keynote luncheon speaker Thursday at the Colorado Oil & Gas Association's annual seminar on natural gas. The luncheon was held at the Colorado Convention Center.

Pickens' goal is simple: To slash America's thirst for imported oil, which costs $700 billion a year.

"We have to cut down on the $700 billion a year that's going out of this country," Pickens said. "We import 70 percent of this country's oil. This country can be brought to our knees if the oil was cut off."

In 1970, the U.S. imported 24 percent of its oil. By 1990 it was 42 percent, and today it's almost 70 percent, Pickens said.

"It's the largest transfer of wealth in the history of mankind. We can't afford it," he said.

Pickens aims to cut imports of crude oil by reducing the demand for gasoline and diesel for cars and trucks.

The U.S. should switch to the use of natural gas-powered vehicles for a chunk of the national fleet, Pickens said.

"Natural gas is cleaner, it's cheaper, it's abundant and it's domestic," Pickens said.

Natural gas generates about 22 percent of the country's electricity. If most of that natural gas was diverted from electricity generation to fuel for cars and trucks, and if wind turbines generate that electricity instead, that would cut demand for imported oil by about $300 billion a year at today's prices, Pickens said.

"The answer is wind. We have more wind than anyone else in the world and we're not using it," he said.

Pickens said it can be done if the nation -- and its political leaders -- believe energy is a national crisis that can be fixed.

Fairbanks Natural Gas Pipeline Route - Up in the Air

If there is a reason for Fairbanks to support a small-diameter gas pipeline from Fairbanks to Anchorage via the Richardson and Glenn highways, the proponents did not provide one Monday.

Instead, they justified the longer route with vague comments about development of Ahtna lands that might have natural gas potential — an uncertain prospect at best — and providing natural gas to the missile defense system.

Neither of those ideas warrants going the long way around and the extra hundreds of millions, including an unknown state subsidy, that would be required.

We need to hear far more from the Palin administration, as well as from Enstar and the Alaska Natural Gas Development Authority before this largely undefined “partnership” goes ahead.

And the Palin administration should make sure it is not advertising more than it can deliver, pledging “the first phase of a bullet line to bring Alaska gas to Alaskans within the next five years.”

The shortest distance between two points is a straight line. In this case, the straight line is more or less along the Parks Highway, not the Richardson and Glenn highways.

With a state subsidy in the offing, the long route needs a better defense than was offered Monday by the governor.

Also unclear from the announcement is where the gas would come from, who would pay for the construction and what the costs would be to get gas to Fairbanks within the next five years.

Kazakhstan Building Natural Gas Pipeline to China

ALMATY, Kazakhstan: Construction on a gas pipeline linking energy-rich Kazakhstan with China started Wednesday, a Kazakh construction company said.

The pipeline should be completed by June 2010 and will have an initial annual capacity of around 4.5 billion cubic meters (160 billion cubic feet) of natural gas, Kazstroiservis said.

The new transit route is part of a larger project to build two parallel pipelines connecting China with Central Asia's vast natural gas reserves. The pipes will stretch more than 1,800 kilometers (1100 miles) from the Turkmenistan, cross Uzbekistan and Kazakhstan, and will enter China's northwestern Xinjiang region.

China hopes the pipelines will reach annual capacity of around 30 billion cubic meters of gas within the next three decades. China is growing increasingly reliant on natural gas supplies and its annual demand is expected to reach more than 200 billion cubic meters by 2020.

The pipeline will also ensure diversity of export routes for Central Asia's vast gas reserves. Most of regional gas exports are controlled by Russian gas giant OAO Gazprom, and the West is also vying for large-scale energy supplies from the region.

T. Boone - Natural Gas for Transportation is the Future

By Timothy Gardner
NEW YORK, July 8 (Reuters) - Texas oil investor T. Boone Pickens called on Tuesday for a massive switch to natural gas as a transportation fuel and a boost in wind power in a plan aimed at reducing U.S. foreign oil dependence by a more than a third.
The Pickens Plan, which includes exploiting domestic natural gas supplies by tapping new areas like East Texas and Appalachia, could replace 38 percent of U.S. oil imports, he said.
"U.S. natural gas can replace foreign oil. It's the only natural resource we have that can do that," Pickens said during a press event for the release of his energy plan.
The 10-year plan would reduce the U.S. annual oil import bill of $700 billion, at oil prices of $140 a barrel, by hundreds of billions of dollars, he said.
His plan comes as U.S. consumers who have already been hit by the credit and housing crunches are now facing record gasoline prices as oil prices rally on rising demand from developing countries and violence in the Middle East.
Pickens, a life-long Republican, hopes to discuss the plan with both U.S. presidential candidates. He is launching a television advertising campaign for the plan worth tens of millions of dollars.
Earlier this year, Pickens announced he would spend $10 billion to build the world's biggest wind farm in Texas that should start generating power by 2011.
When asked if his plan is a way to ensure his investments would him even richer, the 80-year-old billionaire said he's not concerned about making still more money.
CLOSEST THING TO WAR
Pickens' vision has two steps.
First, investors would have to boost development of wind farms, particularly in what he called the U.S. wind corridor, a slice of the country from Texas to North Dakota. It's an "unbelievable asset that's not been touched," he said.
The extra wind power, according to the plan, would replace the natural gas the country burns to generate power. Currently the country gets 22 percent of its power from natural gas.
Then, the freed-up natural gas could then be used to power vehicles, but the country would have to convert a large share of its vehicles to run on compressed natural gas.
Pickens said the cost savings would be convincing as his plan would reduce oil prices "substantially." But he stopped short of predicting how much.
"You never know how much demand will rise in places like China and India," said Pickens, who heads the hedge fund BP Capital. "I don't think we'll ever see prices below $100 a barrel."
Analysts have said sending wind power generated from the heart of the country to the coasts could required investments of hundred of billions of dolllars in power lines.
Pickens acknowledged the plan has some some high hurdles.
Another barrier would be that a new system of natural gas-filling stations would have to be built and cars would have to be converted to run on the fuel.
The government would need to provide leadership to create power transmission corridors from the heart of the country to the coasts, he said. The effort would have to be comparable to the interstate highway system former U.S. President Dwight Eisenhower created during the Cold War to improve the mobility of the military, Pickens said.
"This comes down to the closest thing to war, while not having war," Pickens said about the imperative for the U.S. to tap its own natural resources to reduce its foreign oil habit.

NYMEX Natual Gas Price Falls with Oil Price

Natural Gas Declines Amid Speculation Economic Growth to Slow

By Mario Parker

July 8 (Bloomberg) -- Natural gas in New York declined, following crude oil, amid concern the U.S. economy is slowing and energy demand will fall.

Oil fell as much as $6 a barrel as other commodities tumbled for the third straight session and the dollar rose against the euro. The Reuters/Jefferies CRB Index of 19 raw materials fell 10.99 points, or 2.4 percent, to 448.05. Yesterday, the gauge tumbled 2.8 percent, the most since March.

``The primary drivers of natural gas are crude oil and heat,'' said George Hopley, an analyst at Barclays Capital Inc. in New York. ``If the overall economy isn't backing crude oil, then you can say that's affecting natural gas'' and summer temperatures are not excessive.

Natural gas for August delivery fell 60.9 cents, or 4.7 percent, to settle at $12.368 per million British thermal units at 3:12 p.m. on the New York Mercantile Exchange. That's the biggest one-day decline since March 17, when it fell 7.8 percent to $9.10 per million Btu. Gas has advanced 66 percent this year.

Gas has slipped $1.21 per million Btu since closing at $13.577 on July 3, the highest price since Dec. 21, 2005.

``We're probably seeing some longs sell their positions,'' said Peter Beutel, president of energy consultant Cameron Hanover Inc. in New Canaan, Connecticut. ``A lot of this is part of a liquidation going on throughout'' commodities.

Speculative long positions are trades placed anticipating future prices will advance.

Following Oil

Gas is following oil, said James Ritterbusch, president of Ritterbusch & Associates in Galena, Illinois. Plus, the U.S. dollar is ``firming'' against the euro and there is ``some follow-through from yesterday'' when gas declined 4.4 percent.

Crude oil for August delivery slid $5.33, or 3.8 percent, to settle at $136.04 a barrel in New York. Futures earlier fell as low as $135.14 and have risen 42 percent so far this year. Oil reached a record $145.85 on July 3.

``The same thing that drove natural gas prices up is the same thing that's driving them down,'' said Chris Jarvis, president of Caprock Risk Management LLC in Hampton Falls, New Hampshire. ``Crude oil is driving the whole energy complex and natural gas is held hostage.''

Gas also declined as Hurricane Bertha weakened to a Category 2 storm as it passed over the Atlantic hundreds of miles from the U.S. mainland, the National Hurricane Center said.

Bertha Stands Down

Last week natural gas traders bought contracts amid speculation Bertha would move into the Gulf of Mexico over the extended July 4 holiday weekend in the U.S., said Lisa Zembrodt, a commodity analyst at Summit Energy Services Inc. in Louisville, Kentucky. When Bertha veered away from the Gulf it signaled ``good news'' and gas prices fell, she said.

Below-normal temperatures are probable for the U.S. Midwest, starting July 20, the U.S. Climate Prediction Center in Camp Springs, Maryland, said in an outlook yesterday.

Mild weather typically reduces demand from gas-fired power plants for electricity to run air conditioners.

``Look at your air conditioner. Do you want to change it from where it was last month?'' said Hopley. ``And there's only one more month of peak summer demand. There's further capitulation on the demand side.''

Quicksilver Buys Natural Gas Assets in Texas

LONDON (Thomson Financial) - Quicksilver Resources Inc. said Monday it has acquired natural gas assets in Texas from a number of private parties for $1.31 billion.

The company said the acquisition of the assets will immediately boost earnings and cash flow per share.

Quicksilver said the acquired properties currently have net production of about 45 million cubic feet (MMcf) per day. It estimates the properties, located in the Barnett Shale formation, contain more than 1 trillion cubic feet of recoverable natural gas resources, including about 350 billion cubic feet of proved reserves.

Quicksilver said it acquired the properties from private enterprises including Chief Resources LLC, Hillwood Oil & Gas L.P. and Collins and Young L.L.C.

Wind Power Versus Natural Gas Debated in Texas

Sure, wind is among the cheapest, cleanest fuels generating the power Texans increasingly demand. But as officials brag about the state's status as the No. 1 wind producer in the country, they're also debating how much is too much. Building the transmission lines to bring wind power from rural West Texas to population zones will cost billions. And even with enough transmission lines, the on-again, off-again nature of wind can leave coal and natural gas-fired power plants scrambling to fill in the gaps.

For electricity companies, predicting wind patterns is a new art.

The wind blows hardest before the sun comes up, when people aren't using much power. It tends to die down during the afternoon – especially in the summer – just when people demand more juice.

Solving each issue will cost money.

Wind developers say wind power is so cheap that the cost to accommodate it is negligible. Coal, nuclear and natural gas plant owners doubt it.
"As we add more and more wind, there are some uncertainties and some costs," said Thad Hill, head of Texas operations for NRG Energy, which operates coal, nuclear, gas and wind plants in Texas.

"The important thing is, when we decide how much wind is the right amount, that we make that decision understanding these costs," he said.

Paul Sadler, executive director of advocacy group the Wind Coalition, said wind must be accommodated fairly, and technology exists to do so.

"Integration of wind is not sending a man to the moon," he said. "It's just a matter of having the will to do it."

But how much wind is too much?

Natural Gas Price May Rise This Week if Weather Storms Appear

July 4 (Bloomberg) -- Natural gas may rise in the days ahead as hot weather spurs demand from utilities and a tropical storm churns through the Atlantic Ocean.

Seven of 18 analysts surveyed by Bloomberg News, or 39 percent, said prices would rise through July 11. Six, or 33 percent, said futures would fall. Five said prices would be little changed. Last week, 53 percent of survey participants said prices would rise.

``The heat maps look supportive and we have this tropical storm out there,'' said Chris Jarvis, president of Caprock Risk Management LLC in Hampton Falls, New Hampshire.

Hotter weather typically curbs the expansion of storage by increasing demand from gas-fired power plants for electricity to run air conditioners.

Tropical Storm Bertha developed yesterday in the eastern Atlantic, the National Hurricane Center in Miami said. Storm track forecasts show Bertha staying away from the U.S.

Storms that approach the Gulf of Mexico can force energy companies to shut gas-production platforms.

Gas in storage gained 85 billion cubic feet in the week ended June 27, the U.S. Energy Department said yesterday. Inventories rose to 2.118 trillion cubic feet, 2.6 percent below the five-year average for this time of year. The increase was less than the 89 billion analysts had expected.

Natural gas for August delivery rose 2.9 percent this week to settle at $13.577 per million British thermal units yesterday, the highest close since Dec. 21, 2005.

Oil & Natural Gas Exploration in Indiana

FORT WAYNE, Ind. - Record oil prices are spurring some companies to look for oil in Indiana.

Deka Exploration -- an Oklahoma-based company that drilled for oil in Steuben County a decade ago before deciding to go elsewhere -- is giving northwest Indiana another look. Others are also exploring for oil.

Indiana permit applications for oil and natural gas wells have increased to levels not seen in at least 20 years, according to the Indiana Department of Natural Resources' oil and gas division.

Improved technology has led to more accuracy in drilling. But the main motivation for the increased exploration is rising oil prices, said Herschel McDivitt, director of the Indiana Department of Natural Resources Division of Oil and Gas.

"They tend to make operators a little more willing to take some risks," he said.

Indiana production of crude oil has averaged about 1.73 million barrels annually in recent years. That's a small portion of consumption -- the U.S. uses more than 20.6 million barrels of petroleum every day.

$10 Billion Natural Gas Development Deal Set to Go

ConocoPhillips and Abu Dhabi National Oil Company are set to sign an agreement next week.

(Bloomberg) -- Abu Dhabi National Oil Co. will sign a contract within two months to develop its sour gas reserves at the Shah field, Gulf News reported, citing officials it didn't identify.

Abu Dhabi, which holds the fifth-largest gas reserves in the world, is offering a 40 percent stake in the venture, which has a price tag of $10 billion. ConocoPhillips, the third- biggest U.S. oil company, is ``working closely'' with Abu Dhabi National Oil, also known as Adnoc, to help develop the sour gas reserves, Chief Executive Officer Jim Mulva said in April.

Statoil Finds New Natural Gas in Barents Sea

OSLO, Norway: StatoilHydro ASA says it has discovered natural gas with a wildcat well drilled in the Barents Sea, about 200 kilometers (125 miles) north of Norway's northernmost tip.

The national petroleum directorate, which made the announcement Friday, said it was too early to estimate the size of the find but planned to further study the first well in the new Arctic exploration block.

The well was drilled about 150 kilometers (90 miles) northeast of StatoilHydro's Snoehvit field, which in September became first offshore field to begin production in the frigid waters of the Barents Sea, which Norway shares with Russia.

"It is of course promising that we have discovered gas, but the drilling was performed in a relatively complex formation," StatoilHydro spokeswoman Bente Fotland said. "We therefore need to perform more analyses and evaluations in order to determine the resource potential of the discovery."

Norway, a major oil and natural gas exporter, has been pushing the search for new reserves, especially oil, into the Arctic, hoping for new finds to offset slowly dwindling crude production from fields in the North Sea and the Norwegian Sea.

Gazprom Proposes European Natural Gas Stations

Russian gas monopoly Gazprom has proposed to set up a new network of natural gas service stations across Europe as an alternative to petrol, at a time when oil prices are at a record high.

Gazprom's CEO, Alexei Miller, has proposed the creation of the network in alliance with European partners. Industry analysts have said that even though such a network would serve Gazprom well, it could not find it easy in Europe, where gas-fueled vehicles are few and related infrastructure is insufficient.

Gazprom's plans for a trans-European natural gas outlet network could run into rough weather due to the existing sentiment in Europe against becoming over-dependent on Russia for energy supplies. Russian gas is mainly used across the continent for power generation and heating purposes.

Mr Miller said: "Considering the price of petrol, gas is a real alternative. The price of a car running on petrol is 1.7 times more than the price of running on natural gas in Germany for example."

Natural Gas Getting Price Buzz from Energy Ministers

uly 2 (Bloomberg) -- Natural gas, trading at a 40 percent discount to crude, may rise to reach the record price of oil as demand for cleaner-burning fuels increases, according to energy ministers from Qatar, Algeria and Iran.

U.K. natural gas sells for 71.35 pence a therm, or the equivalent of $85 a barrel based on its energy content, compared with $141 for Brent crude. British natural gas rose 38 percent this year, lagging behind the 50 percent advance in oil.

Natural-gas use worldwide rose 3.1 percent last year, almost three times faster than the 1.1 percent increase in oil, according to figures compiled by BP Plc. Gas is cleaner-burning than oil and creates half as much carbon dioxide as coal when used to generate power, helping ease the buildup of greenhouse gases blamed for climate change.

``Gas is clean and it is an alternative to oil,'' Qatar Oil Minister Abdullah al-Attiyah said in an interview in Madrid this week. ``The price should be at least competitive to oil.'' Qatar holds 895 trillion cubic feet of gas reserves, the world's third- largest, after Russia and Iran.

Rising global energy demand, environmental restrictions and slower progress in expanding nuclear power and wind farms are increasing demand for gas.

Liquefied natural gas may become more expensive than crude oil as demand from Asia and Europe rises faster than supply, Sanford C. Bernstein & Co. said in a report last month.

Babcock & Brown Buy Natural Gas Assets

uly 2 (Bloomberg) -- Babcock & Brown Infrastructure Fund North America, owner of ports and lines to deliver gas and power, agreed to buy Dominion Resources Inc.'s natural-gas utilities in Pennsylvania and West Virginia for $910 million.

The deal, subject to regulatory approvals, includes Peoples Natural Gas Co. and Hope Gas Inc., the San Francisco-based fund, an affiliate of Babcock & Brown Ltd., Australia's second-largest investment firm, and Richmond, Virginia-based Dominion said today in statements.

Babcock is adding natural-gas delivery to 359,000 homes and businesses in the Pittsburgh area and to 115,000 in West Virginia to U.S. holdings that include a power cable under San Francisco Bay, port operations in Florida, Louisiana and Alabama, and a stake in the 9,800-mile (15,768-kilometer) Natural Gas Pipeline of America.

It's paying $60 million less for the gas utilities than Dominion was to have gotten from Equitable Resources Inc. under a March 2007 agreement. Dominion and Equitable scuttled the deal in January after the U.S. Federal Trade Commission moved to block it, saying it would create a natural-gas monopoly in the in the Pittsburgh area.

``The deal made more sense for Equitable than somebody else,'' said Jim Halloran, who helps manage about $35 billion at National City Private Client Group in Cleveland, including 2.2 million Dominion shares. ``Once you take out the best bidder, you get lower value.''

Dominion Forecast Unchanged

The Standard & Poor's 17-member Supercomposite Gas Utilities Index has risen 38 percent since the planned sale to Equitable was announced, and 9.7 percent since it broke up.

Dominion left its profit forecasts for 2008 and 2009 unchanged because they excluded results from the two utilities.

Dominion fell 19 cents to $47.49 in New York Stock Exchange composite trading. Babcock & Brown fell 19 cents to A$7.03 on the Australian Stock Exchange. Babcock & Brown Infrastructure Group rose 4.5 cents to 75 cents.

Macquarie Group Ltd. is Australia's biggest investment bank.

Occidental to Build CO2 Removal Plant in Pecos Texas

OKLAHOMA CITY — Two energy companies have said they plan to build and operate a plant in West Texas that would extract carbon dioxide from natural gas.

Oklahoma City-based SandRidge Energy Inc. and Los Angeles-based Occidental Petroleum Corp. announced the agreement Monday. Officials from the companies said the plant, which will be located in Pecos County, Texas, will produce at least 450 million cubic feet of carbon dioxide per day after it opens in 2011.

Carbon dioxide is used in crude oil production.

SandRidge will drill, produce and deliver natural gas to the plant for processing, while Occidental will pay the $1.1 billion in construction costs for the plant and will operate the facility and treat the gas under a 30-year agreement.

SandRidge will retain 100 percent of the methane gas after treatment at the plant, while Occidental will retain all of the carbon dioxide. As part of the agreement, Occidental will receive an additional 50 million cubic feet of carbon dioxide from existing SandRidge gas processing plants.

The project also will include a 160-mile pipeline from McCarney, Texas, to an industry carbon dioxide hub in Denver City, Texas. The pipeline is not part of the agreement.

Ray R. Irani, the chairman and chief executive officer of Occidental, said the project will allow his company to develop about 500 million barrels of oil reserves from currently owned assets.

"This agreement underscores the vast resource of natural gas that SandRidge controls in the West Texas Overthrust," said Tom Ward, SandRidge's chairman and CEO. "The Century Plant will allow us to not only produce this high (carbon dioxide) gas, but will also provide an environmentally responsible process for the use of (carbon dioxide) to increase U.S. oil production."