Sunday, August 31, 2008

TransCanada Wins Alaskan Pipeline Contract

Aug. 29 (Bloomberg) -- TransCanada Corp., the nation's largest pipeline company, won approval from Alaska Governor Sarah Palin to build a $27 billion pipeline to carry natural gas from the Arctic to U.S. markets.

Palin on Aug. 27 signed a bill authorizing the state to award Calgary-based TransCanada a license to build the 1,715- mile (2,744-kilometer) link from Prudhoe Bay to the Alberta Hub in Canada, according to a statement. The license will be granted in 90 days.

``Our company has started field work on the project in order to meet our target date for completing the initial open season within two years,'' TransCanada Vice President Tony Palmer said in the statement.

Alaskan authorities plan to develop gas deposits on Alaska's North Slope that were discovered decades ago and left untouched by the inability to get the fuel to users. Palin solicited pipeline proposals last year and chose TransCanada's proposal after rival plans by BP Plc and ConocoPhillips didn't meet the state's requirements.

Tapping the North Slope fields, which Alaska estimates to hold 35 trillion cubic feet of gas, would help make up for lower state revenue arising from declining oil production. Alaskan crude output has dropped by more than half since 1998.

Alaska owns the gas; BP, ConocoPhillips and Exxon Mobil Corp. hold most of the leases to develop it. The two partners have invited Exxon to join their pipeline venture known as Denali to compete with TransCanada.

State Subsidy

Under its license agreement with the state, TransCanada will get a $500 million subsidy in return for seeking federal regulatory approval for the project and finding customers for the pipeline. The license doesn't guarantee construction of the project.

The link will ship 4.5 billion cubic feet of gas a day through Canada to U.S. markets. TransCanada expects to hold an auction for capacity to help determine the size of the line in July 2010, the company said Aug. 1. The project could be operating by September 2018.

London-based BP is Europe's second-largest oil company behind Royal Dutch Shell Plc. ConocoPhillips, based in Houston, is the third-largest U.S. oil company, ranking behind Exxon and Chevron Corp.

Saturday, August 30, 2008

Sempra Energy Buildilng Baja Terminal for LNG

« Jamaica and Louisiana brace for Gustav | Main | Argentine ex-generals guilty of 'dirty war' deaths »
Sempra opens natural gas import terminal in Baja

With the help of Mexico President Felipe Calderon, San Diego-based Sempra Energy on Thursday inaugurated its $1-billion Energia Costa Azul gas import terminal to serve fast-growing energy demands in the southwestern U.S. and Baja California, Mexico.

The first such facility on North America's West Coast, the Sempra plant receives natural gas that was cooled to a liquid for overseas shipment by tanker. The fuel is then processed back into a gas for pipeline transport to users, including power plants, industry and homes.

As we reported yesterday, Calderon traveled to northern Baja California to open bidding on a $4-billion seaport that his adminstration hopes will one day rival those of Los Angeles and Long Beach and catapult Mexico into being a major player in North American logistics.

Friday, August 29, 2008

Natural Gas Prices Fall to $8.09/mmBtu

SAN FRANCISCO (MarketWatch) -- Crude-oil futures closed with a loss of more than 2% Thursday, as a bigger-than-expected climb in U.S. natural-gas supplies renewed concerns about weaker energy demand, sending futures prices for natural gas down by almost 7%.
Traders also took profits after oil's more than 3% price gain in the past three winning sessions and after Reuters reported that the International Energy Agency and the U.S. government were ready to release oil from emergency reserves if Tropical Storm Gustav disrupted U.S. oil production.

Crude had climbed above $120 a barrel earlier Thursday on concerns about storms battering energy infrastructure in the Gulf of Mexico.
Crude for October delivery closed at $115.59 a barrel on the New York Mercantile Exchange, down $2.56, or 2.2%.

It was at $115.64 a barrel in electronic trading on Globex as of 3 p.m. EDT -- down from a high of $120.50.

Natural-gas prices led the losses in the energy sector Thursday, with October natural gas down 55.8 cents, or 6.5%, to close at $8.05 per million British thermal units on Nymex.
Natural-gas inventories rose by 102 billion cubic feet for the week ended Aug. 22, the Energy Department said Thursday. Analysts at Global Insight expected a climb of 86 billion.
The bigger-than-expected rise in natural-gas supplies is "reminding traders that demand for energy is weaker than expected," said Phil Flynn, a vice president at Alaron Trading.
Total natural-gas stocks now stand at 2.757 trillion cubic feet, down 200 billion cubic feet from the year-ago level but 71 billion cubic feet above the five-year average, the government data showed.
Traders are asking themselves whether Gustav will do more damage to supply or demand, said Flynn. "At least for now, they are betting on demand [destruction]."
"If demand for oil was strong right now, I think the markets would be more nervous," he said. But "the oil that is expected to be shut [from Gustav] is 1.2 million barrels -- which is about the same amount demand is off from a year ago."
Gustav nears hurricane strength
For now, traders seem to be taking a "quick chance at some profit taking before the weekend," said Neal Ryan, a managing partner at Ryan Oil & Gas Partners. But "I doubt many will be going into this long weekend short with markets closed on Monday and so much uncertainty regarding the hurricane in the Gulf."
"The storm this weekend is forecast to become a major hurricane, with maximum sustained winds of at least 111 miles per hour, according to It said there are more than 4,0000 oil and gas installations in the Gulf and Katrina and Rita in 2005 destroyed 109 oil platforms and five drilling rigs.
Valero Energy (VLO:

VLO 35.02, 0.00, 0.0%) said it's closely monitoring Gustav and focusing "specific efforts" on its 250,000 barrels-per-day St. Charles refinery in Louisiana and 325,000 barrels-per-day Port Arthur refinery in Texas.

RDS.A 69.96, -0.05, -0.1%) began shutting in a few Gulf production well assets on Thursday morning, according to Reuters, which said the Gulf of home to about a quarter of U.S. oil production.
"We're really in a wait-and-see mode until a dependable track can be established on Saturday morning," said Ryan in emailed comments. "There is going to be a lot of jockeying in the energy pits as bets are going to be made while everyone puts on their amateur meteorologist hats."

Gustav picked up steam as it poured heavy rains on Jamaica Thursday, and residents along the Gulf Coast started readying for potential landfall. Read more.
The center of the storm at 2 p.m. EDT was about 40 miles east of Kingston, Jamaica's capital, packing winds near 70 miles per hour, according to the National Hurricane Center. A Category 1 hurricane has wind speeds of 74 to 95 mph.

"Given the thin trading conditions that are bound to set in over the next two days, we could see a rather substantial move higher, as both fresh buying and short-covering sets in ahead of the long weekend," said Edward Meir, an analyst at MF Global, in a research note.

Thursday, August 28, 2008

Natural Gas Pricing a TV Topic

On CNBC's "Fast Money," Melissa Lee started the program by mentioning the "there was a jump in crude oil today as a result of the Hurricane Gustav." Many investors are speculating the hurricane will hit the Gulf Coast. Lee asked the panelist whether this move is sustainable.

Guy Adami said he was not sure if the move was sustainable but instead mentioned about how traders can take advantage of Exxon Mobil XOM. He said "every time Exxon Mobil goes to $78-$79, it becomes a value play." He said to sell it as it goes to $82-$83 and to buy back again if it drops to the $78-$79 range.

Jon Najarian said the "the durable goods numbers was fantastic, which is why the market was up nicely."

The Chart of the Day showed natural gas vs. crude oil

Joe Terranova said "it is all about supply and all about investment" that is moving crude oil and natural gas. He said this is why the chart shows how crude oil has held up nicely compared with natural gas.

Wednesday, August 27, 2008

Storm in Gulf has Natural Gas Prices Up

Aug. 27 (Bloomberg) -- Oil and natural gas producers in the Gulf of Mexico will evacuate ``several thousand'' employees from offshore rigs today on concerns about Tropical Storm Gustav, according to Louisiana's Port Fourchon.

There are almost 20,000 workers on offshore platforms, about one-quarter of which are needed to maintain production, said Ted Falgout, the port's director. Gulf platforms contribute more than a fifth of U.S. oil production.

``Most companies are waiting until Friday to decide whether they need to shut down production,'' Falgout said in an interview. ``If you look at models showing the storm's track, it should scare you.''

Gustav may become the strongest storm to reach the Gulf since 2005, when hurricanes Katrina and Rita shut refineries and platforms, said on its Web site. Gustav is packing winds of 60 miles (97 kilometers) per hour, the National Hurricane Center said.

Natural Gas Up 6% on Storm Watch

Natural gas rose amid speculation Hurricane Gustav will slash through the Gulf of Mexico next week, paring output from production platforms.

Gustav is strengthening over the Caribbean Sea and made landfall in Haiti, the Miami-based National Hurricane Center said in an advisory. The storm was packing sustained winds of 90 mph. The Gulf accounts for about 14 percent of gas output and more than a fifth of oil production, according to the U.S. Energy Department.

"The question is whether it hits northern Mexico and southern Texas, or does it head for the big production areas" of the Gulf, said Chris Jarvis, president of Caprock Risk Management LLC in Hampton Falls, N.H. "We're going into the peak storm season."

Natural gas for September delivery gained 46.8 cents, or 6 percent, to $8.293 per million British thermal units at the 1:30 p.m. CDT close of floor trading on the New York Mercantile Exchange. Futures earlier touched $8.379 per million Btu and have tumbled 39 percent since closing at $13.577 on July 3, a 30-month high.

On the trading day closest to this one in 2007, gas closed at $5.523 per million Btu.

If Gustav curbs Gulf output, gas will climb to "$10 to $12" per million Btu, said Peter Linder, an analyst and senior adviser at DeltaOne Energy Fund in Calgary. The storm "is waking up a lot of people and there's a lot of short covering going on." Short trades are those placed anticipating prices will fall.

The September contract for the industrial and heating fuel expires tomorrow. Gas for October delivery rose 47.2 cents, or 6 percent, to $8.41 per million Btu at the close of floor trading.

In cash markets, gas at the Henry Hub in Erath, Louisiana, gained 39 cents, or 5.1 percent, to $8.02 per million Btu. The hub is the benchmark U.S. pricing and delivery point for Nymex futures.

"We're putting in the uncertainty premium right now," said Carl Neill, an energy analyst at Risk Management Inc. in Chicago. "We're almost to the exact three-year anniversary of Katrina, which is kind of disconcerting."

Hurricane Katrina formed over the Bahamas on Aug. 23, 2005, making landfall in southeast Louisiana on Aug. 29.

Hurricane Rita, the most intense tropical cyclone ever observed in the Gulf, made landfall Sept. 24, 2005, at Sabine Pass near the border of Texas and Louisiana.

The storms curtailed Gulf gas flow, prompting the fuel to touch $15.78 per million Btu on Dec. 13, 2005, the highest since gas began Nymex trading.

"I'd get out of the way if I were short," said Cameron Horwitz, an analyst at SunTrust Robinson Humphrey in Houston.

Gustav creates an opportunity to "put a little more gas on the table and then ride it up," he said.

The majority of storms during the Atlantic hurricane season, which extends through November, occur between now and the end of September, according to the hurricane center.

Gustav has the potential to grow into a Category 4 hurricane with winds of at least 131 miles per hour by the time it reaches the Gulf, said Jim Rouiller, a senior energy meteorologist with Planalytics Inc., a forecaster based in Wayne, Pennsylvania, whose clients include energy companies.

"The entire Gulf is under the gun," said Rouiller. "Gustav represents a real and potentially dangerous storm for the entire Gulf energy production region."

Three areas of low pressure are following Gustav in the Atlantic, marking the start of what should be an active three- week period, he said.

"Gustav is the forerunner of what could become a very nasty hurricane season for the U.S.," Rouiller said.

Royal Dutch Shell Plc is preparing to evacuate non-essential staff from the Gulf as Gustav advances and said there is no impact to production.

"Evacuations could begin as early as Wednesday," Destin Singleton, a spokeswoman for Shell, said in an e-mailed statement today. "We are making logistical arrangements to evacuate staff who are not essential to production or drilling operations."

Gustav is a Category 1 hurricane on the five-level Saffir- Simpson scale. A Category 5 storm has winds exceeding 155 miles per hour.

Gustav will probably intensify into a Category 2 hurricane later today with winds of at least 96 mph and may develop into a Category 3 or 4 storm by the end of the week, said Eric Wilhelm, senior meteorologist at private forecaster AccuWeather Inc. in State College, Pennsylvania.

Cuba, where the storm is headed, "is going to be nothing more than a speed bump," said Michael Ferrari, a vice president for Weather Trends International Inc. in Bethlehem, Pennsylvania. "There's a lot of warm water ahead of it. There's a lot of fuel for it. It's definitely a concern."

Landfall is difficult to predict, though a consensus puts it "somewhere west of New Orleans" after passing through the areas of highest offshore energy production, Ferrari said.

Gustav may influence the accumulation of supplies for winter heating needs. Analysts forecast gas stockpiles will reach 3.5 trillion cubic feet by Nov. 1, the start of the heating season.

Tuesday, August 26, 2008

Utah Checking Natural Gas Car Pollution Calculations

he number of natural-gas tanks powering Utah vehicles has exploded this year.
Now state officials and clean-car advocates want to ensure the tanks don't blow up, too, and that they pollute as little as intended.
The dozens who claimed clean-fuel tax credits by switching from gasoline earlier this decade mushroomed into the hundreds last year, but Questar fuel consumption suggests the real number of compressed-gas vehicles might have grown to 20,000 in the past year alone, according to the nonprofit Utah Clean Cities Coalition. The utility itself estimates the total is at least 6,000. Since January of 2007, Questar's
Gallons of savings:

Utah motorists are flocking to compressed natural gas because it costs just 87 cents to equal the energy in a gallon of gasoline that now runs $4. Last month, Questar sold 495,000 gallon equivalents of natural gas for vehicles.
natural-gas sales for vehicles have shot up 401 percent, spokesman Chad Jones said.
Many of the vehicles - including the nearly 700 that earned one-time tax breaks last year - are professionally equipped, safe and certified by the Environmental Protection Agency.
Others are backyard jobs with worn tanks and faulty exhaust systems, endangering both motorists and the Wasatch Front's air, Clean Cities Director Robin Erickson said. Those who buy old tanks or don't install kits properly are creating car bombs.
"They could cause a serious explosion," Erickson warned.
It's a time of great promise and caution for those who have worked years to bring Utahns around to the cause of clean air. Motorists are flocking to compressed natural gas because in Utah it costs just 87 cents to equal the energy in a gallon of gasoline that now runs $4. Compressed gas is unusually cheap here because Questar owns both the gas and the pipes and is a publicly regulated utility.
Moving thousands of cleaner vehicles onto the roads gratifies advocates like Erickson, but it's also clear that many drivers are taking chances.
Weber County is gearing up to shut down motorists who bring in unclean or unsafe vehicles for registration inspection. The Weber-Morgan Health Department last month announced that it will start rejecting compressed-gas vehicles whose emissions have been altered without proof of EPA certification and the mechanic who altered it.
There is no statewide rule restricting home conversions.
"The word is getting out that we won't even consider anything that's not EPA-certified [for a tax credit]," Utah Division of Air Quality scientist Mat Carlile said. But many switch without certification anyway, to reap the fuel savings.

Monday, August 25, 2008

Natural Gas Explosion in Australia Occurred June 3, 2008

Aug. 25 (Bloomberg) -- A report on an explosion at an Apache Corp. plant that cut Western Australia's natural gas supplies by 30 percent won't be published until after the Sept. 6 state election, the Western Australian newspaper said.

The National Offshore Petroleum Safety Authority report, initially due for completion by Aug. 27, has been delayed because of its complexity, the newspaper said, citing Department of Industry and Resources deputy Director-General of Resources Stedman Ellis. The newspaper didn't give a new release date.

The June 3 blast at Varanus Island off the state's north- west caused fuel shortages in resource-rich Western Australia, which generates a third of the nation's exports. Some supplies were reconnected Aug. 6, with full output due to return in December.

Natural Gas Drilling Boon - Technology Boon

The new drilling boom uses advanced technology to release gas trapped in huge shale beds found throughout North America — gas long believed to be out of reach. Natural gas is the cleanest fossil fuel, releasing less of the emissions that cause global warming than coal or oil.

Rising production of natural gas has significant long-range implications for American consumers and businesses. A sustained increase in gas supplies over the next decade could slow the rise of utility bills, obviate the need to import gas and make energy-intensive industries more competitive.

While the recent production increase is indisputable, not everyone is convinced the additional supplies can last for decades. “The jury is still out how big shale is going to be,” said Robert Ineson, a natural gas analyst at Cambridge Energy Research Associates, a consulting firm.

Still, many people in the natural-gas industry believe a new era is at hand, and a rising chorus of Wall Street analysts and Congressional lawmakers supports that notion. Competition among companies for rights to the new gas has set off a frenzy of leasing and drilling.

“It’s almost divine intervention,” said Aubrey K. McClendon, chairman and chief executive of the Chesapeake Energy Corporation, one of the nation’s largest natural gas producers. “Right at the time oil prices are skyrocketing, we’re struggling with the economy, we’re concerned about global warming, and national security threats remain intense, we wake up and we’ve got this abundance of natural gas around us.”

Senior Democrats in Congress are getting behind natural gas, portraying it as an alternative fuel for transportation that can serve as a stopgap until renewable sources of energy, like solar and wind power, become economical on a broad scale.

“You can have a transition with natural gas that is cheap, abundant and clean,” the House speaker, Nancy Pelosi of California, said Sunday on “Meet the Press” on NBC.

She also said that an investment she and her husband had made in a company that produces natural gas for use in automobiles, revealed last week by The Wall Street Journal, was not a conflict of interest because “I’m investing in something I believe in.”

Representative Rahm Emanuel of Illinois, the chairman of the House Democratic caucus, has introduced legislation to offer more tax credits to producers and consumers of natural gas and mandate the installation of natural gas pumps in some service stations.

Domestic gas production was up 8.8 percent in the first five months of this year compared with the period a year earlier, a rate of increase last seen in 1959, during the great drilling boom that followed World War II.

Most of the gain is coming from shale, particularly the Barnett Shale region around Fort Worth, which has been under development for several years. The increase in gas production stands in sharp contrast to the trend in domestic oil production, which has been declining steadily since 1970 and dropped 21 percent in the last decade alone.

The Barnett region proved that, using new technology, shale gas could be extracted on a large scale. But lately, companies have set their sights on shale formations that could produce far more gas than the Barnett.

Testing to determine the productivity of fields has been completed on just a tiny fraction of the potential acreage. According to a new report by Navigant Consulting, paid for by a foundation allied with the gas industry, there could be as much as 842 trillion cubic feet of retrievable gas in shales around the country, enough to supply about 40 years’ worth of natural gas, at today’s consumption rate. But thousands of wells need to be drilled before the exact reserves will be known.

Domestic natural gas prices have already plunged 42 percent since early July, an even faster drop in price than oil or most other commodities, in part because the rapid supply growth has begun to influence the market. Price spikes remain possible, of course, but throughout the industry the shale discoveries are causing a shift in thinking about the long-term outlook.

Black or brown shales are a type of sedimentary rock, high in organic matter, found beneath millions of acres in at least 23 states, including New York. The rock has been known for more than a century to contain gas, but it was considered virtually worthless until a decade ago because typical wells on such sites would produce gas briefly and then die.

Now, companies are drilling long, horizontal wells and pumping in water to fracture the rock, releasing vastly more gas than could the vertical wells of old.

US Natural Gas Production Up

By Clifford Krauss

American natural gas production is rising at a clip not seen in decades, pushing down prices of the fuel and reversing conventional wisdom that U.S. gas fields were in irreversible decline.

The new drilling boom uses advanced technology to release gas trapped in huge shale beds found throughout North America - gas believed just a decade ago to be out of reach.

Shale gas could ultimately be important beyond North America. The rest of the world has shale formations on an immense scale. Many of them, including beds in Europe, Russia and China, are known to contain gas, but exploration and assessment of those fields with the new production techniques is just beginning.

The trend has significant long-range implications for U.S. consumers and businesses. A sustained increase in gas supplies over the next decade could slow the rise of utility bills, obviate the need to import more gas from elsewhere around the globe, including liquefied natural gas delivered in tankers, and make energy- intensive industries more competitive.

While the process of extracting gas produces some environmental damage, natural gas is the cleanest fossil fuel, releasing less of the emissions that cause global warming than coal or oil. It is now used primarily for residential heating and cooking, power generation, providing energy for industrial processes, and as a feed stock for fertilizer, chemicals and plastics.

Some experts believe that wider use could be a step in battling climate change, helping to buy time until renewable fuels like wind and solar power become feasible on a large scale.

While the recent production increase is indisputable, not everyone is convinced the additional supplies can last for decades. "The jury is still out how big shale is going to be," said Robert Ineson, an analyst at Cambridge Energy Research Associates, a consulting firm.

Still, many people in the natural-gas industry believe a new era is at hand, and a rising chorus of analysts on Wall Street accepts that notion. Competition among companies for rights to the new gas has set off a frenzy of leasing and drilling.

"It's almost divine intervention," said Aubrey McClendon, chairman and chief executive of Chesapeake Energy, a major natural gas producer in the United States. "Right at the time oil prices are skyrocketing, we're struggling with the economy, we're concerned about global warming, and national security threats remain intense. We wake up and we've got this abundance of natural gas around us."

U.S. gas production is up about 9 percent this year, a rate of increase not seen since a one year jump in 1984 and matching rises more typical of the 1950s when gas drilling was booming. Most of that gain is coming from shale, particularly the Barnett Shale around Fort Worth, Texas, which has been under development for several years. The increase in gas production stands in sharp contrast to the trend in domestic oil production, which has been declining in fits and starts since 1970.

Sunday, August 24, 2008

Russia Geopolitics in Natural Gas and Oil

As Calgary-based junior oil and gas companies successfully make their respective marks beyond Canadian borders, largely by flying under the radar screen and looking for niche plays, the big energy companies are grappling with a different set of challenges.

In the 1970s, the supermajors based in the West controlled more than half of the world's production. Today that number has dwindled to about 13 per cent.

The reason is largely due to geopolitics and, to a lesser degree, technological limitations. It's certainly not because the world is running out of oil. A more accurate way of defining the current situation is that the world is dealing with geopolitical peak oil, not absolute peak oil.

n this context, one of the spotlights must be cast squarely on Russia and its vast natural resources. Russia is sitting on the world's largest natural gas reserves, is second largest in terms of coal and sits in eighth position in terms of its oil reserves.

It's no wonder many a western energy company has eyed Russia as a place to meaningfully add to reserves and production.

But with the way events have unfolded in recent years with Royal Dutch Shell and more recently BP, it's clear that whatever welcome mat existed for western companies to operate in Russia has been yanked back inside.

No wonder ExxonMobil, with its 30 per cent interest in the Sakhalin-1 project through its Exxon Neftgas subsidiary, is looking over its shoulder these days.

And now, Russia, with its long history of creating chess masters, is engaged in a match with Georgia that is bound to have significant implications on the global energy picture; it's as though the Russian government has decided that simply going after the assets owned by western-based companies is no longer enough and that flexing its muscles beyond its own borders is the next step in its practice of resource nationalism.

"The weakening of Georgia as a transit country was a key objective that Russia has achieved," said Robert Amsterdam, a New York-based lawyer who specializes in the practice of international law.

By destabilizing Georgia, Russia has shut down the possibility of new oil pipelines being financed by western energy concerns or built in the country that is the jumping-off point for crude oil and natural gas exports across the Black Sea.

"What the Russians are saying is that we are very serious about our energy policy and are prepared to back it up," said Amsterdam.

The other message is that they don't necessarily want pro-western democracies sitting on their borders; if Russia succeeds in undermining Georgia, the betting is that Ukraine -- also an access point for energy exports to Europe -- is next.

All this has to be causing the Europeans to be very nervous, because Russia is making other moves in the region that could ultimately result in the continent becoming even more dependent on Russia for meeting its natural gas needs.

Not so long ago, current President Dmitry Medvedev, who is also the former chairman of Russian natural gas giant Gazprom, made overtures to Azerbaijan and Turkmenistan aimed at getting both countries to sell their natural gas production to Russia. The natural gas from Azerbaijan would be used to fill the proposed South Stream pipeline and would effectively tie up supply for a rival proposal, the Nabucco pipeline that would carry natural gas into Europe via Turkey.

Saturday, August 23, 2008

United States Natural Gas Production Up!!!

HOUSTON: American natural gas production is rising at a clip not seen in half a century, pushing down prices of the fuel and reversing conventional wisdom that U.S. gas fields were in irreversible decline.

The new drilling boom uses advanced technology to release gas trapped in huge shale beds found throughout North America - gas believed just a decade ago to be out of reach.

Shale gas could ultimately be important beyond North America. The rest of the world has shale formations on an immense scale. Many of them, including beds in Europe, Russia and China, are known to contain gas, but exploration and assessment of those fields with the new production techniques is just beginning.

The trend has significant long-range implications for U.S. consumers and businesses. A sustained increase in gas supplies over the next decade could slow the rise of utility bills, obviate the need to import more gas from elsewhere around the globe, including liquefied natural gas delivered in tankers, and make energy-intensive industries more competitive.

While the process of extracting gas produces some environmental damage, natural gas is the cleanest fossil fuel, releasing less of the emissions that cause global warming than coal or oil. It is now used primarily for residential heating and cooking, power generation, providing energy for industrial processes, and as a feed stock for fertilizer, chemicals and plastics.
Some experts believe that wider use could be a step in battling climate change, helping to buy time until renewable fuels like wind and solar power become feasible on a large scale.

While the recent production increase is indisputable, not everyone is convinced the additional supplies can last for decades. "The jury is still out how big shale is going to be," said Robert Ineson, an analyst at Cambridge Energy Research Associates, a consulting firm.

Still, many people in the natural-gas industry believe a new era is at hand, and a rising chorus of analysts on Wall Street accepts that notion. Competition among companies for rights to the new gas has set off a frenzy of leasing and drilling.

"It's almost divine intervention," said Aubrey McClendon, chairman and chief executive of Chesapeake Energy, a major natural gas producer in the United States. "Right at the time oil prices are skyrocketing, we're struggling with the economy, we're concerned about global warming, and national security threats remain intense. We wake up and we've got this abundance of natural gas around us."

U.S. gas production is up about 9 percent this year, a rate of increa

Friday, August 22, 2008

T. Boone Natural Gas Talk in North Dakota


Billionaire Texas oilman T. Boone Pickens pitched his alternative energy plan on a day when the wind was gusting up to 40 mph and oil prices soared by more than $5 a barrel. He found a favorable audience.

"Nobody got up in that auditorium and left the room," Pickens said after Thursday's town hall meeting. "Everybody sat there because they were afraid they were going to miss something."

The so-called "Pickens Plan" aims to cut the country's dependence on foreign oil by putting up wind turbines in North Dakota and other states to replace power produced from natural gas. That would leave more natural gas to power vehicles that now use gasoline and diesel.

Pickens told residents of oil-rich North Dakota that he has nothing against oil, as long as it's in the United States.

"Don't leave the meeting saying, 'He's for this and he's for that,'" Pickens told the audience. "I'm only against one thing, and that's foreign oil."

Some critics of the plan have suggested Pickens is in it for money, citing his major investment in a Texas wind farm and majority ownership in a company that supplies fuel for natural gas vehicles.

"I'm 80 years old and I'm worth $3 billion," Pickens said in an interview. "I have no agenda."

Pickens used a chalkboard to draw pie charts and other notes while giving a 30-minute speech about his plan. He fielded questions from a handful of people, with more waiting to speak when the program ended.

Audience member Steve Winter said afterward that the Pickens plan should serve as a wake-up call to elected officials.

"We have to do something to right the ship," said Winter, of Valley City. "It's time for our politicians to stop yapping and step up and do something about it."

Several observers asked about ways to transmit power from the Midwest to the other areas. Pickens said he believes private financing can pay for energy transmission lines, but it's up to Congress to "open up the lanes."

Officials have said a lack of transmission lines is a major problem in developing alternate energy sources such as wind. Pickens said Congress has kept certain areas off limits because many people don't want unsightly power lines in their back yards.

Congress should advocate an emergency plan for moving power, such as the one President Eisenhower used to build the interstate highway system, he said.

"We can beat this problem, but we have to move quickly," Pickens said.

Jeremy Swanson, of Fargo, said he is involved in a community wind project and asked Pickens for suggestions about helping smaller producers transmit power. Pickens said it was difficult for him to address local issues.

"I didn't really get the answer I was hoping for," Swanson said.

Rep. Earl Pomeroy, D-N.D., helped introduce Pickens by talking about a North Dakota farmer, Denver Rosberg, who regularly visited the congressman's Bismarck office in the early 1990s to talk about wind energy. Rosberg died in 2005 at age 84.

"He was largely laughed off by everybody," Pomeroy said.

"I've been laughed off. I know how he feels," Pickens replied.

"We're not laughing now," Pomeroy said.

Thursday, August 21, 2008

India's Natural Gas Explorer Goes Shopping

Aug. 21 (Bloomberg) -- The following stocks may have unusual changes in Mumbai trading. Stock symbols are in brackets and prices are as of the last close. The preview includes news that broke after markets shut.

The Bombay Stock Exchange's Sensitive Index, or Sensex, rose 0.9 percent to 14,678.23. The S&P CNX Nifty Index on the National Stock Exchange added 47.50, or 1.1 percent, to 4,415.75. SGX Nifty futures for August delivery fell 1.4 percent to 4392.50 on the Singapore exchange today.

Overseas investors sold a net 11.4 billion rupees ($281.6 million) of Indian stocks on August 19, increasing their net outflow this year from equities to $6.9 billion, according to the nation's stock market regulator.

Maruti Suzuki India Ltd. (MSIL IN): The maker of half the cars sold in the country reiterated its plan to sell 1.2 million cars by 2011. Maruti rose 8.6 rupees or 1.4 percent, to 625.10.

Oil & Natural Gas Corp. (ONGC IN): India's biggest explorer unit, ONGC Videsh Ltd., has bid to buy the U.K.'s Imperial Energy Plc., Hindustan Times reported, citing unidentified officials familiar with the bid. ONGC Videsh has made a ``non-binding offer'' to pay $2.5 billion to buy a controlling stake in Imperial Energy, the paper said. Oil & Natural Gas Chairman R.S. Sharma declined to comment.

Onmobile Global Ltd. (ONMB IN): The Indian telecommunications software products maker was rated new ``overweight'' with a price estimate of 625 rupees a share at JPMorgan Chase & Co. The shares fell 9.15 rupees, or 1.8 percent, to 510.65.

Tata Motors Ltd. (TTMT IN): The Indian truck maker said it scrapped a plan to raise funds by issuing convertible preference shares for its June purchase of Jaguar and Land Rover from Ford Motor Co. The company now plans to raise funds by selling some of its investments to group companies. Tata Motors rose 2.85 rupees, or 0.7 percent, to 424.75.

Statoil Natural Gas Field Shut In by Pipeline Leak

Aug. 20 (Bloomberg) -- StatoilHydro ASA, Norway's largest oil and gas producer, may shut its Kvitebjoern natural-gas field in the North Sea until spring next year after a leak was discovered in a pipeline, sending U.K. gas prices to a record.

The pipeline to Kollsnes will shut down until repairs scheduled for spring 2009 are completed, spokeswoman Rannveig Stangeland said today from Stavanger, adding that the company may be able to get the work done earlier.

A leak was discovered yesterday at the same spot on the pipeline that was damaged last year, about 10 kilometers (6 miles) away from Kvitebjoern. The company in June postponed scheduled repairs to the pipeline amid record gas prices.

Kvitebjoern produced about 13 million cubic meters a day of gas, on average, and about 40,000 barrels of oil a day, in the first six months of year, according to the Norwegian Petroleum Directorate. Kvitebjoern's gas is sent to the Kollsnes plant on Norway's west coast from where it can be sent to the U.K., Germany, France and Belgium.

U.K. gas for delivery this winter, the six months through March, rose 15 percent to a record 104 pence a therm at 12:59 p.m. U.K. time, according to ICAP Plc. That's equal to $19.32 a million British thermal units. A therm is 100,000 Btus.

StatoilHydro kept an outlook for output of 1.9 million barrels a day of oil equivalent in 2008, while saying the shutdown will affect production for the ``remainder of the year.''

``As an isolated incident it will impact production negatively, but it won't impact the total full-year production,'' Stangeland said. ``We have a big portfolio, we're just going to have to adjust it to the targets we have set.''

StatoilHydro's share of Kvitebjoern production is about 98,000 barrels of oil equivalent a day, she said.

The company will flare gas, or burn into the air, that was left in the pipeline over the next week, she said. Maintenance was being carried out at Kvitebjoern and Kollsnes and pressure in the pipeline had been reduced.

The company started flaring at around 8:30 a.m. local time, Stangeland said. She would not give an estimate as to the amount of carbon dioxide that would be released. ``Our focus for the time being is the security aspect of the pipeline,'' she said.

Oil production at the Visund platform is being maintained ``at a somewhat lower level than usual,'' though not more than 10 percent lower, Stangeland said. Visund uses the Kvitebjoern pipeline for gas exports and has during the maintenance reinjected gas.

Wednesday, August 20, 2008

Pantera Natural Gas Flowing Today

AUSTIN, TEXAS, Aug 19, 2008 (MARKET WIRE via COMTEX) ----Pantera Petroleum, Inc. (OTCBB: PTPE)(FRANKFURT: 4PP) (the "Company") announces that its Sibley 84 #1 well in the West Gomez Field has entered production and has begun selling natural gas to Western Gas Resources, Inc., a wholly owned subsidiary of Anadarko Petroleum Corporation (NYSE: APC: 58.03, +1.61, +2.85%). On August 16, the on-site engineers opened the well on a 12/64ths inch choke and began selling gas at a natural flow rate of 2.7 million cubic feet of gas per day. Later, the crew opened the choke to 16/64ths of an inch and volume increased to over 4 million cubic feet of gas per day before the crew choked the well back.

Given that the natural flow rate, pre-acidization, of over 4 million cubic feet per day on a 16/64th inch choke is above our projections, we now intend to assess over the next week whether any acidization of the perforations is still required. Over the past week before production, the shut-in pressure continued to increase from 1300 pounds per square inch ("PSI") to 4400 PSI. The crew set the production unit, laid the flow line from the wellhead to the production unit, set the gas meter in place at the pipeline tie-in, laid the flow line from the production unit to the meter, and placed the well into production.

Building upon the success of the Sibley 84 #1 well, we are now moving forward to drill out the additional wells in the Block 83 84, including the Sibley 84 #2, a shallow drill, and the Gulf-Baker 83 #1, an additional re-entry well targeting the Fusselman and Devonian pay zones.

"We are very pleased to have successfully brought the Sibley 84 #1 into production at the natural flow rates we are seeing without the added step of acidization. This is a great event and a great success for our company and our shareholders. Next, we keep moving forward with momentum to drill out our two additional wells in the Block 83 84 project to place them into production," comments Pantera Petroleum's CEO, Chris Metcalf.

Tuesday, August 19, 2008

Williams Natural Gas Pipeline Expanding

TULSA, Okla., Aug 18, 2008 /PRNewswire-FirstCall via COMTEX/ -- Williams (WMB:
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WMB 28.12, +0.03, +0.1%) announced today that that the Federal Energy Regulatory Commission (FERC) has approved a proposal to expand Williams' Transco natural gas pipeline to serve markets in the northeastern United States.
The Sentinel expansion project is designed to increase Transco's firm transportation capacity by 142,000 dekatherms per day. Phase 1 of the expansion will provide 40,000 dekatherms per day as early as Nov. 1, 2008, while Phase 2 will provide 102,000 dekatherms per day by Nov. 1, 2009.
"We appreciate the efforts of the FERC and other state and federal agencies in reviewing this application," said Phil Wright, president of Williams' natural gas pipeline business. "We are committed to continuing to work with the FERC, state and county permitting agencies and all of the stakeholders involved, to construct this project in a safe, responsible manner so that we can provide much-needed incremental natural gas capacity to this part of the country."
The proposal requires adding or replacing approximately 18 miles of pipe at various locations in Pennsylvania and New Jersey, in addition to compressor facility modifications at Transco Station 195 in Delta, Pa.
Additional information about the project can be found online at
The Transco pipeline is a 10,500-mile pipeline system which transports natural gas to markets throughout the northeastern and southeastern United States. This expansion increases the total system capacity of the Transco pipeline to approximately 8.3 billion cubic feet per day.

Natural Gas Producers Want Bottom of $8.00/mmBtu

Natural-Gas Discount to Crude Is `Too Large': Chart of the Day

By Dan Lonkevich

Aug. 18 (Bloomberg) -- Natural gas is poised to outperform crude oil after prices for the heating and power-plant fuel dropped almost 40 percent since the end of June.

The CHART OF THE DAY shows how the ratio of crude to gas futures prices on the New York Mercantile Exchange rose Aug. 14 to the highest level since September 2006. It also shows how historically, gas outperforms crude after the ratio climbs to more than 10 or 12 to 1. The ratio of oil to gas prices, which has averaged 8.04 since 2000, reached 14.14 last week.

``It's too large of a price disparity,'' said Tom Orr, director of research at Weeden & Co. in Greenwich, Connecticut.

After a barrel of oil rose to 12.92 times the price of 1 million British thermal units of gas on Jan. 3, the ratio slid to 10.06 on March 31 and went below 10 in June. Gas futures have tumbled since the end of the second quarter, falling twice as fast as crude, amid a slowing economy and increasing fuel production from U.S. shale formations.

Oklahoma City-based Chesapeake Energy Corp. and other gas producers announced discoveries of as much as 44 trillion cubic feet of gas in the Haynesville Shale region of East Texas and northwest Louisiana.

``Gas is trying to hold a bottom at $8 per million Btu,'' Orr said. ``If you have a bit of good news it won't stay that way for long.''

Gas for September delivery traded as low as $7.96 per million Btu on Aug. 15. The futures traded as high as $13.694 on July 2. Orr said he sees prices rising to $9 or $10 in about six months.

Demand can react when oil and gas diverge. Gas competes with oil-based fuels in 5 percent to 10 percent of U.S. factories and power plants, according to the National Petroleum Council.

Monday, August 18, 2008

Louisiana Shale Natural Gas Discovery

La. - Chris Moreno lost his job managing a print shop two years ago, just after his wife became pregnant and they'd started building a house on 40 acres near the shores of Caddo Lake.

He fretted he'd have to relinquish his humble piece of paradise, where he indulged his country boy's passion for hunting raccoons and catching catfish.

But now fortune has smiled on Moreno - he's poised to become a millionaire, all because of that 40 acres he bought eight years ago for $45,000.

Landowners here in the piney three-state junction known as Ark-La-Tex recently learned that in this energy-starved era, they could be sitting on the largest natural gas field ever found in the continental United States. The discovery of the Haynesville Shale, which lies mainly beneath Louisiana but branches into Texas and Arkansas, was disclosed in March by energy companies, which had been quietly buying up drilling rights for months before telling the public.

The news has triggered a flurry of speculation as frantic as anything seen here since a gusher on a Texas hill named Spindletop in 1901 ushered in the modern oil industry. Hordes of landmen - leasing agents for the energy companies - have descended on Shreveport, the unofficial capital of Ark-La-Tex, dangling gaudy sums before landowners in hopes of getting permission to drill beneath their properties. Companies that earlier this year were leasing land for $200 an acre are paying upward of $20,000 an acre, leaving thousands of homeowners dreaming of plasma TVs and sports cars.

The windfall is changing lives for people like Moreno, 38, whose big worry has become whether to take the money now or hold out in hopes of getting even more. Energy companies have offered him $750,000 to drill his land, as well as 25 percent of whatever the wells yield, which could bring him an additional $900,000 a year. But the bids keep getting larger, so he's waiting. Chesapeake Energy Corp., one of the major companies involved in the Haynesville Shale, recently told investors that it thought the deposit was the world's fourth-largest. "They're throwing so much money around, it's easy to lose your mind," Moreno said. "Where do I draw the line? I do feel like my luck has changed overnight."

Never mind that only a few dozen wells have been drilled and the rest could come up dry. The mere promise of a big strike in natural gas, which has soared in price, has brought hundreds of millions in investment dollars to Shreveport, a riverboat gambling hub.

That's turned Ark-La-Tex into a particularly vivid example of how America's thirst for energy is creating wealth in a few lucky pockets of the country, even as high oil and gas prices drag the overall economy down.

Michael Long, a Shreveport councilman and third-generation veteran of booms and busts in this rollicking region, where fortune often has shifted with the price of oil, said now he knows how his Irish grandfather must have felt when he headed here with his four brothers a century ago in search of instant riches.

"This Haynesville fever has extended pretty far, pretty fast," Long said. "A lot of landowners are sitting there thinking, OK, I'm ready to make my million dollars."

The Haynesville Shale comes after the Barnett Shale, a similar natural gas find in the Dallas-Fort Worth area that has been extraordinarily productive and profitable. The Barnett Shale has spurred drilling in shopping mall parking lots and suburban subdivisions, and generated tens of thousands of jobs and more than a billion dollars a year in state and local taxes.

The Barnett and Haynesville formations are geologically similar, and companies have shown they can extract gas from previously unreachable places, leading experts to predict that the Haynesville Shale will make fast fortunes in Shreveport and bring decades of lucrative royalty payments.

"This is already the biggest thing ever to happen to this area," said Bill Pittman, a former landman who has started a Web site, MyOilPro, to advise property owners. "It's life-altering."

Bank tellers share stories of customers walking in with wide smiles and $800,000 checks. Companies have complained of spies sneaking around their test wells at night, trying to glean how much gas they're pulling up. An energy executive claimed rivals were hiring exotic dancers to go door to door to entice landowners. A popular rumor, knocked down by law enforcement but still spreading, was that Department of Homeland Security officials had warned that something fishy had to be happening because too much money was changing hands.

For the Shreveport-Bossier YMCA, the Haynesville Shale is the biggest stroke of luck since Elvis Presley sang a benefit concert before 10,000 screaming teenagers in 1956, raising enough money for a new swimming pool.

When Gary Lash took over as chief executive six years ago, he said the YMCA had $500 in the bank and $600,000 in debt. Now it's flush after energy companies upped one another in competition for the rights to drill beneath its 47-acre recreation spot, Camp Forbing. Lash has hired a camp director and is planning to spend several hundred thousand dollars to construct a rope course. He's thinking about building a new branch.

"It's crazy money," Lash said, although he declined to disclose how much the Y got. "But if they're willing to pay it, we're willing to take it."

There is a dark side to the Haynesville Shale mania, however, and it is worrying politicians and activists. Like California during the Gold Rush, Shreveport, population 200,000, is suddenly awash in dubious characters taking advantage of the gullible.

Freelance landmen are coaxing naive landowners into signing away gas rights for small amounts and are then selling the contracts at huge profit. Long said he was outraged to hear the story of a man who turned to his preacher, a landman, for advice and ended up signing with him for $200 an acre when bonuses were going for thousands.

Anger is simmering among some landowners who signed early for a relative pittance - only to learn later that energy companies had strong scientific evidence that the Haynesville Shale could be historic. But others shrug and admit they would have done the same if they were the energy companies.

Brent Rowell leased 60 acres in east Texas for $250 an acre and what he thought was an exceptional 20 percent cut of whatever the wells produced - monthly royalty checks known in these parts as "mailbox money."

"I hadn't even gotten over patting myself in the back when I read in the paper, 'Chesapeake Energy wants to drill the best Haynesville Shale wells on your land.' That was news to everyone out this way. Of course the going royalty rate now is 25 percent and goes up by the day."

Still, Rowell said, he isn't bitter.

"Did Chesapeake know I was sitting on top of Haynesville Shale? Of course. That's why it is called oil and gas business," he said.

In Stonewall, a country town of 1,700 about 30 minutes south of Shreveport, Kassi Fitzgerald is doing her part to educate neighbors. A registered nurse, Fitzgerald said she was spurred to activism after learning that her next-door neighbor, a Latino who speaks little English, signed a lease for $350 an acre at the same time she was offered $1,000.

"That Hispanic man bought the worst lot on our block, and he's worked his tail off to fix it up," said Fitzgerald, who was banding remaining neighbors together to command a higher price. "It killed me to see him get ripped off."

Fitzgerald stepped into a hair salon inside a mobile home and chatted up owner Mary Ott and her customers, who appeared to be talking about little else but the Haynesville Shale.

"I was all ready to accept that first $250-an-acre deal," said Ott, who owned a little more than four acres that she wound up leasing for $53,000. "I had a stamp on it and everything. Fortunately, I am a procrastinator."

Talk turned to a neighborhood where residents were offered $7,500 an acre, compared with $12,500 down the road. Why, asked a woman having her hair curled, was there such a disparity?

"It's the difference between brick houses and trailers," Fitzgerald replied. "They're doing it based on socioeconomics."

Thomas Price Jr., a Chesapeake vice president, said the company is thrilled about the gas field's potential - he talked of a future in which Louisianans will fuel cars with clean-burning natural gas instead of gasoline.

But he said that anyone who believes the Haynesville Shale is a lock must be a rube. He recalled that a similar frenzy over a gas deposit in central Louisiana called the Austin Chalk ended in failure for Chesapeake, although landowners walked away richer.

"We were buying leases like crazy, and it turned out to be a disaster," he said. "And let me tell you, there wasn't one person who came back and said sorry fellas, here's your bonus money back."

For now, companies with stakes in the Haynesville Shale are riding high. Petrohawk Energy Corp. is a relatively small gas company - but its big holdings happen to be in northwestern Louisiana, a situation that allowed it to seize a share of the Haynesville splotch. Its stock has doubled in the last five months.

Moreno, who now works for a window company, and other landowners share information online on the best bonuses being paid out by energy companies, as well as which landmen are honest.

Moreno wants to do right for his boys, Lucas, 9, and Wyatt, 1. He would love to get enough money to coax his wife, Ginger, a respiratory therapist, into staying home with the kids. But he also wants assurances that his hunting ground won't be sullied by drilling because for a sportsman like him, some things are more precious than mailbox money.

"They're not going to leave me with a big mud hole when they're gone," Moreno said before stepping out for a night of 'coon hunting with an old pal. "I'm going to make sure I do this right."

Sunday, August 17, 2008

Upstate New York Has Natural Gas

Officials and residents in several counties just south of the Mohawk Valley have a new direction to look for an energy source and economic development: down.

About one mile underground in a rock formation about 400 million years old sits what some geology experts estimate might be more than 500 trillion cubic feet of natural gas.

Approximately 10 percent of that is recoverable and would be enough to supply the entire United States for about two years, said Gary Lash, a geology professor at State University of New York Fredonia, who has been at the forefront of studying drilling in the state.

The wellhead value of that amount of natural gas, according to $1 trillion.

Drilling for natural gas has been occurring in western parts of the state for more than 100 years, but it’s moving east to counties such as Chenango, Otsego, Madison and others in the region.

Property owners are banding together to make sure they obtain the best deals available from the drilling industry and to protect their communities from environmental damage such as water contamination.

Richard Lasky, president of the Central New York Landowners Coalition, which owns 84,000 acres among its members in 10 counties, said people in the region hope their ways of life are protected during the development.

“Everybody wants it the same, but it will never be the same,” he said. “Whether we want it or not, it’s going to happen.”

With farms and businesses struggling in an unsure economy, the change might be necessary to keep Upstate New York afloat, Lasky said.

“This is our last chance,” he said.

The Marcellus Shale
Drilling in the region is in a semifreeze because Gov. David Paterson recently signed a bill requiring the state Department of Environmental Conservation to update its environmental regulations related to drilling.

The DEC rules last were updated in 1992 and don’t take into account all aspects of new technology that allows for horizontal drilling and hydraulic fracturing, which uses water, sand and chemicals to blast out natural gas that is trapped in the rock.

Companies can either wait for the DEC’s updated review sometime in 2009 or proceed with permits and pay for their own environmental review, the governor’s spokesman, Morgan Hook, said.

Paterson’s bill also allows for horizontal drilling and spacing that would allow for more wells in the Marcellus Shale, a giant rock formation a mile below the Earth’s surface that stretches from parts of Tennessee up to the southwest region of New York.

Late last week, U.S. Sen. Hillary Rodham Clinton, D-N.Y., expressed concerns about the environmental impact of expanded natural gas drilling in the Marcellus Shale.

Economic impact
If natural gas drilling goes forward in full force in the Marcellus Shale, more than $1 billion will be invested in Upstate New York, said Albany attorney Thomas West, who represents some companies in the industry on regulatory and legislative issues.

West said this would result in many benefits for Upstate New York:

Money for landowners: Property owners would receive an initial payment and royalties. West said he has seen offers of more than $2,500 per acre and royalties at a rate of up to 15 percent.

Increased tax base: A completed, productive well hooked to a pipeline would become taxable property at the local level if on private land.

Royalties for the state: The state would receive royalties for wells on land completely or partially owned by the state. This would create millions of dollars for the state each year.

Jobs and indirect benefits: Much of the testing and construction for the drills would be contracted out to workers who also often stay and eat locally.

State Sen. James Seward, R-Milford, said there also have been areas in the state where companies have provided local schools and government buildings with free natural gas.

“We need the jobs and the economic activity involved with this,” Seward said.

Fair share of the shale
Seward said he has been working with residents in his district to make sure they are careful about negotiating leases for drilling on their property. As public hearings and environmental reviews move forward, it will be important for governments in those areas to stay involved, he said.

“Locals know what’s best in their own communities,” Seward said.

Don Barber, D-Caroline, who is challenging Seward in November for the 51st District Senate seat, said the royalties for the state should be given back to the communities where the drilling occurred and set aside for economic development.

“That’s where it comes from,” he said. “That’s where it should stay.”

Seward and Barber said they support the decision to have the DEC update its regulations to make sure environmental and safety concerns are addressed.

Barber supports a moratorium on drilling to make sure it doesn’t take place before the rules are fully established. Seward said he thinks a moratorium would send the wrong message to drilling companies.

Adrian Kuzminski of Fly Creek in Otsego County said he supports the idea of a moratorium because he questions the DEC’s ability to regulate the drilling. The moderator of a group called Sustainable Otsego, Kuzminski said a major concern in the area is water contamination.

Environmental impact
Chemicals the companies inject into the water used for hydraulic fracturing don’t have to be reported publicly, and many people worry about how the chemicals could impact the environment. The issue has received attention in New York City, where some fear contamination to upstate reservoirs that service the city.

Others question the companies’ ability to obtain enough water for the drilling. The water can be drawn locally or trucked in.

Kuzminski said more studies are needed before people push forward with the drilling.
“I think it has the potential to be used, but the way it is being approached now is too risky,” he said. “It’s a slash and burn approach.”

Otsego 2000 Interim Executive Director Nicole Dillingham also said she worries about water contamination – particularly to Otsego Lake, which provides water to 500,000 people per year who live in or visit the Cooperstown area.

“It’s an issue that the state of New York must address,” she said.

West, the attorney for some drilling companies, doesn’t think people should worry. Drills are surrounded by at least two layers of steel casing and concrete to avoid contamination, he said.

“It’s a nonissue because the industry uses procedures to drill and create a well that prevent the well from contaminating the water,” West said.

Interest in natural gas drilling in the state has exploded this year, but many residents being approached about leasing their property for the drilling are staying patient.

No rush
Chenango County Farm Bureau President Bradd Vickers, who was approached 10 years ago about leasing his 400-acre farm in Preston, said the bureau has been working to spread awareness about looking at leases with caution.

“It’s not something you want to rush into,” he said.

Vickers said the leases can be confusing and should be reviewed with an attorney.

“It’s a very complex document disguised as a Lotto ticket, basically,” he said.

And the “Lotto ticket’s” value has continued to grow.

Lasky, the president of the Central New York Landowners Coalition, said in April he was offered $35 per acre with a 12.5 percent royalty for his 300 acres in Norwich. The highest offer the coalition has now seen on paper is $3,000 per acre with a 14 percent royalty, he said.

After Lasky received his first offer in April, he and neighbors with 1,400 acres combined started talking about working together to protect their rights. It only took a few months for the group to grow to its current size of 84,000 acres owned by members in 10 counties, he said.

Because of the increasing prices and environmental concerns, coalition members plan to wait until things calm down before putting their collective property out to bid, Lasky said.

“The gas has been there for thousands of years,” he said. “And I suppose it will be there another six months.”

Saturday, August 16, 2008

Natural Gas Auction in Colorado

GOLDEN, Colo. - A federal auction of oil and gas leases on Colorado's scenic Roan Plateau generated nearly $114 million Thursday, a record for onshore energy lease sales in the lower 48 states.

The U.S. Bureau of Land Management's auction netted more than 10 times the state's previous highest-grossing federal auction - $11.8 million in February 2006 - and underscored the push to develop domestic energy sources. The BLM estimates the plateau contains 9 trillion cubic feet of recoverable natural gas.

While a record, some industry groups had predicted the auction would net as much as $1 billion for the state. The state will get 49 percent of the lease revenue and the federal government will get 51 percent.

Gov. Bill Ritter, who opposes the BLM's Roan plans, accused the Bush administration of trying to rush through the sale before Bush leaves office.

Ritter had proposed selling leases over a number of years rather than all at once. He said that way, revenues would be higher because the value of natural gas would increase over time with growing demand.

"Today is a sad day for Colorado," Ritter said. "It's a missed opportunity, one we don't get back, one that falls squarely on the shoulders of the Bush administration."

Although the sale is over, no leases will be issued until the BLM considers nearly 15,000 protests. That could take several months. The protesters include the state, some communities and cities, environmentalists, anglers and hunters.

Another potential hurdle is a lawsuit filed by environmentalists challenging the BLM's development plan.

Leases on 31 parcels of land covering 54,631 acres were auctioned Thursday. Agency spokesman Steven Hall said the sale earned double the previous record for a BLM auction in the lower 48 states - $53.5 million in 2006 in Utah.

A 2,100-acre parcel drew the highest bid at $11,800 per acre, the second-highest bid for federal land in Colorado. The highest was $26,000 an acre in November near the plateau, located 180 miles west of Denver.

Nearly half the tracts Thursday went for less than $1,000 per acre, with the cheapest lease fetching $68 per acre.

"We're pleased that we've gotten to this point," said Jon Bargas, spokesman for the Denver-based Independent Petroleum Association of Mountain States. "But the lease sale is not a green light to develop. It's a first step."

About 100 people, including news media, attend the auction in the west-Denver suburb of Golden. Two auctioneers, both wearing white cowboy hats, coaxed buyers to increase their bids. BLM officials said brokers usually do the buying and the agency doesn't immediately know what companies are behind the deals.

After the sale, Mike Haley of buyer Meadow Ridge No. 3 LLC declined to say whom he was representing.

EnCana Oil and Gas (USA), one of the largest gas producers in Colorado, unsuccessfully bid on some parcels, spokesman Doug Hock said. EnCana didn't consider the plateau tracts a priority because of BLM restrictions in the area and uncertainly about a Colorado effort to change its oil and gas development regulations, Hock said.

EnCana already has 1.2 million acres under lease in the gas-rich Piceance Basin, which includes the Roan Plateau. The company is drilling on 45,000 acres of its own land next to some of the land leased Thursday.

The Roan boasts open land, deep canyons and rugged peaks as high as 9,000 feet. It provides winter habitat for some of the country's largest elk and mule deer herds and is home to mountain lions, peregrine falcons, bears, rare plants and native cutthroat trout.

The BLM's plan calls for 1,570 wells drilled from 193 pads and over 20 years, including 210 wells from 13 pads on top of the plateau. The BLM says its proposal would preserve 51 percent of land on the Roan while allowing recovery of more than 90 percent of natural gas there.

An unusual feature of the plan is that one company will oversee the on-the-ground operations for all leaseholders. The goal is to reduce the number of roads, pipelines and other facilities and minimize the impacts.

The BLM rejected a proposal by Ritter to make more land off-limits to drilling and to phase in leasing.

Conservationists note the plateau that looms over the Colorado River has been a mainstay of the area economy because it boasts hunting, fishing and other recreation.

Suzanne O'Neill of the Colorado Wildlife Federation said she's not optimistic that protests filed by her group, some city and counties and the state Department of Natural Resources will change much.

Clare Bastable, conservation director for the Colorado Mountain Club, called the sale "disheartening."

"This certainly does not mark the end of the battle to protect this important area," said Bastable. "There's more to come."

Friday, August 15, 2008

Natural Gas Inventory Up - Price Down a Bit


Natural gas in storage in the U.S. rose last week, but supplies are just shy of the five-year average for this time of year, a government report said Thursday.

The Energy Department's Energy Information Administration said in its weekly report that natural-gas inventories held in underground storage in the lower 48 states rose by 50 billion cubic feet to 2.567 trillion cubic feet for the week ending August 14.

The inventory level was just below the five-year average of 2.573 trillion cubic feet, and well below last year's storage level of 2.897 trillion cubic feet, according to the government data.

Analysts surveyed by energy research firm Platts expected a build to natural-gas storage of between 50 billion and 55 billion cubic feet for the week.

"An injection above expectations or well above last years build or the five-year average could bring natural gas prices lower because it means the industry is better prepared for higher gas consumption during the winter season.," the Platts report said.

Natural gas for September delivery fell 11.1 cents to $8.345 per 1,000 cubic feet in morning trading on the New York Mercantile Exchange.

Thursday, August 14, 2008

2.6 Trillion Cubic Feet of Natural Gas Found Offshore

CALGARY — Canadian Superior Energy Inc. shares were up more than 13 per cent in early trading Wednesday after the Calgary-based company (TSX:SNG) announced a "significant" natural gas discovery off the coast of Trinidad.

Initial testing from indicates that the Bounty well is capable of producing at a rate of approximately 200 million cubic feet per day and that there's potentially 2.6 trillion cubic feet of gas to be tapped there.

"We are very pleased with the results of the Bounty well and production testing indicates that we have drilled one of the best natural gas wells offshore Trinidad," Canadian Superior chairman Greg Noval said in a statement.

It's the second natural gas discovery Canadian Superior and its partners have made in 2008 on their Intrepid Block 5(c), 100 kilometres off the east coast of Trinidad.

Canadian Superior's shares have traded between $2.52 and $4.99 on the Toronto Stock Exchange over the past year.

At mid-morning Wednesday, the stock was at $4.74, up 56 cents from the previous close. Earlier in the session, the shares were as high as $4.90.

Wednesday, August 13, 2008

T. Boone Invests in Natural Gas Taxis

Betting on his new energy plan, oil mogul T. Boone Pickens has helped invest $160 million in a company that makes taxi cab fleets that run on natural gas, a cleaner burning fuel.
T. Boone Pickens

T. Boone Pickens

Pickens, along with lead investor Perseus, a private equity bank, invested this week in Troy, Michigan-based Vehicle Production Group (VPG). VPG makes natural gas-fueled taxi cabs and consumer cars that are wheelchair accessible. Clean Energy Fuels Corp., which was founded by Pickens, is also an investor in VPG. The company said it plans to use the funds to further production of vehicles for release by early 2010.

Of course, natural gas cars are part of Pickens' energy plan, which he announced with much fanfare in early July. The so-called Pickens Plan calls for greater use of natural gas cars in the United States to reduce the country's dependence on foreign oil. Still, Pickens himself has been criticized for drawing up an energy plan based on his own investments.

Tuesday, August 12, 2008

U.S. Natural Gas Glut Coming?

As major oil companies search for more oil to meet growing global demand, U.S. natural-gas companies face the opposite problem: what to do with all the gas they soon will be producing.

U.S. natural-gas production is soaring, thanks to high energy prices and new technologies that have unlocked reserves considered too difficult or expensive to tap in earlier eras. Production is up 8% this year, according to government data, and the growth is expected to continue as companies drill thousands of wells in Texas, Louisiana and Oklahoma, and look at massive new reserves in Appalachia and Canada.

Demand is growing, too, but more slowly. Total U.S. natural-gas consumption is up 5.5% this year through May, spurred largely by a gradual shift from coal power plants to cleaner-burning gas-fired ones. Consumption actually fell slightly between 2003 and 2006.

As some analysts have begun to toss around terms like "gas glut," natural-gas futures have tumbled 9.2% in the past two weeks, and they have brought producers' stocks down with them. Shares of large natural-gas producers Chesapeake Energy Corp., XTO Energy Inc. and EOG Resources Inc. are all down 30% or more from their recent highs in late June and early July. By comparison, oil-focused Exxon Mobil Corp. is down 17% from its recent high May 20.

"I think that supply growth has become the 800-pound gorilla in the North American gas investing equation," said Dan Pickering of Tudor Pickering Holt & Co., an energy-focused investment bank.

For consumers, increased supplies of natural gas could mean lower heating and cooling bills, as the fuel generates a fifth of the nation's electricity and heats half of the U.S.'s homes. But any relief is likely to be limited. Analysts say that if natural-gas prices settle below $8 per million British thermal units, producers will cut back production -- which will tighten supplies and drive prices up again.

"It'll be essentially a self-correcting mechanism," EOG Chief Executive Mark Papa said.

Cutbacks in production could spell trouble for producers and their investors. Unlike Big Oil, most independent producers aren't using their cash to buy back stock or pay big dividends. They have been plowing it back into drilling, because Wall Street values the companies on their growth potential. If lower prices force producers to slow their drilling, their growth will slow, too.

To prevent that, the industry in recent months has cranked up its lobbying to boost long-term demand for natural gas. In television ads and congressional testimony, the industry has been touting natural gas as cheaper than oil, cleaner than coal and domestically produced.

"Find me the congressman or find me the policy maker who's against cleaner energy, cheaper energy and American energy," Chesapeake Chief Executive Aubrey McClendon said in an interview.

Mr. McClendon, whose company expects to become the nation's top natural-gas producer by the end of the year, has been especially aggressive. Late last month he lobbied Washington lawmakers to promote compressed natural gas as an alternative to gasoline.

In an interview, Mr. McClendon said he wants to make lawmakers and the public aware of the potential for natural gas. But, he added, "You can only produce what the market wants ... We're not going to expand if the market for that expansion isn't there."

Other producers acknowledge they are concerned about supply outstripping demand. EOG's Mr. Papa said that if recent discoveries prove as successful as companies expect, the industry will need to promote natural gas for both power generation and transportation.

"It's going to change the dynamics of the gas markets," Mr. Papa said.

The new supplies could pose problems for importers of liquefied natural gas. U.S. LNG imports are down two-thirds from last year because higher prices in Asia and Europe have attracted shipments to those markets. If new U.S. production keeps prices comparatively low, LNG imports are unlikely to rise.

The U.S. natural-gas industry has a history of booms and busts. Last fall, producers cut back production when predictions of a warm winter drove prices to below $6 per million BTUs.

But experts say the current situation is different. Instead of a single big discovery or a weather-related demand slump leading to a temporary rise in supplies, the industry has found a completely new resource -- shale -- that could last decades.

Shale -- or dense rock formations that are common in many parts of the country and around the world -- has long been known to hold natural gas. But production was impractical because the rock isn't porous enough for the gas to flow.

In the 1990s, however, companies figured out how to crack the shale using pressurized water, releasing the gas. They perfected the technique in the Barnett Shale, a massive shale-gas field around Fort Worth, Texas, that now produces about four billion cubic feet per day of natural gas, 6.5% of total U.S. production and quadruple what it produced in 2004.

The success of the Barnett set off a frantic search for new shale fields, some of them staggeringly large. The recently discovered Haynesville Shale in northwest Louisiana and East Texas has by some estimates 250 trillion cubic feet of recoverable gas, five times as much gas as the Barnett. The massive Marcellus Shale formation in Appalachia could be bigger still. Together, U.S. shale plays could hold as much as 840 trillion cubic feet of gas by one industry estimate -- the equivalent of more than 140 billion barrels of oil, more than half the proven reserves of Saudi Arabia.

It is still early, and the actual amounts produced could be lower. Nor will all that gas be available right away. Producing it will require drilling tens of thousands of wells at a cost of billions of dollars. Limited availability of drilling rigs, oil-field workers and pipeline capacity, as well as environmental and regulatory constraints, will restrict how fast production can grow.

But the recent discoveries have put natural-gas producers in a fundamentally different position from their oil-producing peers. Many gas producers are promising double-digit production growth next year. Meanwhile, Chevron Corp. saw production decline 3.4%, and Exxon's oil production fell 2% in the second quarter from a year earlier, excluding unusual disruptions.

"There's very little doubt that you can bring this much gas supply on. The reserves are there," Credit-Suisse analyst Jon Wolff said. "The issue is, does that amount of gas push the price down?"

Monday, August 11, 2008

Natural Gas at $8.00/MMBtu

Aug. 8 (Bloomberg) -- Natural gas in New York declined to the lowest in six months as crude oil fell and the U.S. dollar climbed, dulling the allure of commodities as an investment alternative.

Crude has plunged more than $32 since touching a record $147.27 in New York on July 11. The dollar gained the most in more than four years against the euro amid an outlook for major world economies to slow. Mild weather is also limiting the demand for gas-fired power generation to run air conditioners.

The stronger dollar is playing a role, as are slumping crude prices, said Cameron Horwitz, an analyst at SunTrust Robinson Humphrey in Houston. ``Weather forecasts for cooler-than-normal temperatures to linger through the middle of August are also keeping a damper on things.''

Natural gas for September delivery fell 32.3 cents, or 3.8 percent, to settle at $8.248 per million British thermal units at 3:10 p.m. on the New York Mercantile Exchange. Futures have fallen 38 percent since June 30 as supplies expanded and crude oil prices declined. Gas touched $8.19 per million Btu after the close of floor trading, the lowest intraday price since $8.059 on Feb. 8.

When gas ``took out recent lows of $8.335 per million Btu, that brought in additional selling,'' said James Ritterbusch, president of Ritterbusch & Associates in Galena, Illinois. ``I don't see much support until we get down to $7.98 per million Btu. $7 is achievable next week.''

Crude oil for September delivery fell $4.82, or 4 percent, to settle at $115.20 a barrel in New York. Prices have fallen more than 8 percent so far this week. Oil dipped to $114.90 a barrel in after-hours electronic trading, a three-month low.

In cash markets, gas at the Erath, Louisiana-based Henry Hub, the benchmark pricing and delivery point for Nymex futures, fell 56 cents, or 6.3 percent, to settle at $8.22 per million Btu, the lowest since $8.06 on Feb. 8.

Commodity Meltdown

``This is a macro move across all commodities, with crude oil being the epicenter,'' said Chris Jarvis, president of Caprock Risk Management in Hampton Falls, New Hampshire. ``Natural gas is feeling some of the pain.''

Commodities, as measured by the Reuters/Jefferies CRB Index of 19 raw materials, today dropped to 387.42. The index declined 10 percent in July, the biggest monthly slide in 28 years, and is down 17.5 percent from a record 473.97 on July 3.

``Who's going to step in front of this train?,'' said Jarvis. ``The dollar is cranking and people are talking $109 to $110 a barrel for crude. Natural gas could go to $8.''

Only a big hurricane would ``stop the bleeding,'' he said.

Hurricanes Katrina and Rita curtailed Gulf of Mexico production in 2005, prompting gas to touch $15.378 per million British thermal units on Dec. 13, 2005, the highest since gas began trading on the Nymex.

No tropical storm formation expected in the next two days, the National Hurricane Center in Miami said today.

Utah Drilling Natural Gas Wells a Plenty

SALT LAKE CITY (AP) - Natural gas production has hit a new record in Utah.

The Utah Division of Oil, Gas and Mining says drilling in March alone produced enough gas to supply half a million homes for a whole year.

The rush to production shows no sign of ebbing. The agency says the new pace had production running at 35 billion cubic feet for March, the most recent month figures were available.

Oil production also set a record at 1.7 million barrels in March, eclipsing a previous record in May 1994.

The conservation group Southern Utah Wilderness Alliance reacted to the news by saying it's not putting a dent in production by challenging some drilling.

Utah officials most recently reported that gas drilling in 2007 set a production record.

Saturday, August 9, 2008

Venoco Presents at EnerCom's Oil & Gas Conference on August 18, 2008

Venoco, Inc. to Present at the Oil & Gas Conference

DENVER, Aug 08, 2008 /PRNewswire-FirstCall via COMTEX/ -- Venoco, Inc. (VQ:
Venoco is an independent energy company primarily engaged in the acquisition, exploitation and development of oil and natural gas properties in California and Texas. Venoco operates three offshore platforms in the Santa Barbara Channel, has non-operated interests in three other platforms, operates four onshore properties in Southern California, has extensive operations in Northern California's Sacramento Basin and operates eighteen fields in Texas.
SOURCE Venoco, Inc.

Friday, August 8, 2008

Shell Natural Gas Terminal Maintenance Scheduled for August 18

Shell to Close St. Fergus Gas Terminal Aug. 18 (Update2)

By Ben Farey

Aug. 8 (Bloomberg) -- Royal Dutch Shell Plc, Europe's biggest oil company, will close a natural-gas terminal in Scotland this month for planned maintenance, crimping U.K. supplies and boosting prices.

The St. Fergus terminal, which receives gas from U.K. and Norwegian North Sea fields, will shut down from Aug. 18 to Aug. 30, Shell spokesman Jack Page said by phone from Aberdeen today.

The Brent oil and gas fields will close as a result and the Flags gas pipeline into St. Fergus will be shut from Aug. 12 until Aug. 30. Page couldn't say when Brent will shut. The Flags pipeline ships gas to St. Fergus from Brent, StatoilHydro ASA's Statfjord field and smaller East Shetland Basin fields.

Gas for delivery during the rest of August advanced 7.1 percent to 52.50 pence a therm at 2:04 p.m. London time, according to prices from ICAP Plc. That's equal to $10.08 a million British thermal units. A therm is 100,000 Btus.

``Perhaps because this is the first time the whole Shell terminal will close since 1990, we are seeing a more nervous short-term response,'' Sam Shoro, senior European gas consultant at Global Insight Inc., said in an e-mail. ``I would expect prices to correct again next week,'' he said, noting that storage levels are high and supply is not tight.

Shell's St. Fergus terminal processes about 20 million cubic meters of gas a day in August, Page said. That's about 10 percent of U.K. demand at this time of year. The fields that feed into Flags flow more than 30 million cubic meters a day typically, Shoro said.

Declining Flows

Besides the Flags pipeline, Talisman Energy Inc.'s Fulmar field and the Kittiwake, Clyde, Gannet and Nelson fields send gas to St. Fergus through the Fulmar pipeline. A third pipeline runs directly to the terminal from Shell's Goldeneye field. Goldeneye produced about 9 million cubic meters a day in the 12 months through March, figures from the U.K.'s Department for Business, Enterprise & Regulatory Reform show.

Declining flows at Shell's St. Fergus terminal today are related to the total planned shutdown of the gas-processing plant later this month, Page said.

National Grid Plc data show deliveries into the terminal dropped 10 million cubic meters from yesterday to a rate of about 8 million cubic meters a day today.

``The affected fields are lining themselves up with the St. Fergus shutdown,'' which will take place ``module by module,'' Page said.

California Ballot Initiative for Natural Gas Buses?

SAN FRANCISCO -(Dow Jones)- The notion of spending taxpayers' money to help fill U.S. roads with natural gas-fueled vehicles faces a major test when voters in California, the nation's largest auto market, go to the polls in November.

Natural gas providers are spending millions of dollars on advertising to convince Californians to pass a ballot initiative allowing the state government to invest in the now-tiny market for natural gas-fueled cars and trucks. The push comes as gas producers, emboldened by a windfall of domestic production, press federal lawmakers to help expand the market for gas as a means for reducing dependence on foreign oil and cutting greenhouse-gas emissions.

If the California ballot initiative passes, up to a million vehicles fueled by compressed natural gas, or CNG, could ultimately end up on the state's roads. If the proposal - called Proposition 10 - fails, backers will face a tougher task selling authorities on the wisdom of investing in infrastructure for natural gas-fueled vehicles, compared with spending on biofuels or electric cars and trucks.

"Natural gas is on the menu of possible fuels for the future," said Jim Boyd, a member of the California Energy Commission. "Its carbon footprint isn't as good as totally non-carbon fuels. But as we transition to alternative fuels, there could be a pathway to a future that includes natural gas for while."

So far no opposition has been organized against the proposal, which would authorize the state to sell $5 billion in bonds to fund rebates of $2,000 to $ 50,000 each to people who purchase natural gas-powered cars and trucks. Some of the money would be earmarked for research, development and production of renewable energy technology, and education. The plan would cost the state $9.8 billion over 30 years.

But while scientists and policy makers say filling the tank with natural gas instead of gasoline or diesel could serve as a viable, stopgap means to cut greenhouse gases and dependence on foreign oil, it isn't ideal for the long term and shouldn't be heavily subsidized.

"Using natural gas has some small advantages," said Daniel Sperling, director of the Institute of Transportation Studies at the University of California, Davis, and a member of the California Air Resources Board. "If someone can make a business out of it, that's great. The public benefits are rather small, so I don't think...our government should put much effort into promoting it."

Familiar Faces

Among the most prominent backers of the Prop. 10 is Texas billionaire oilman T. Boone Pickens, who is founder and chairman of CNG provider Clean Energy Fuels Corp. (CLNE). Pickens, along with Chesapeake Energy Corp. (CHK) Chief Executive Aubrey McClendon, has contributed a total of $3.7 million to support Prop. 10.

Both Pickens and McClendon have testified before Congress in the past two weeks, pressing lawmakers for a bigger role for natural gas in the nation's fuel supply amid booming production from from places like the Barnett Shale in Texas and the Haynesville Shale in Louisiana and eastern Texas.

The executives had already gotten the attention of Rep. Rahm Emanuel, D-Ill., who introduced a bill that would provide tax credits for the purchase of natural-gas vehicles and home-refueling systems, and credits to encourage gas stations to install natural-gas pumps.

Although CNG has been around for more than 20 years, it's a small market. Only about 0.1% of the 23 trillion cubic feet of natural gas the U.S. consumed last year was used to fuel vehicles, according to the U.S. Energy Information Administration. Honda Motor Co. Ltd. (HMC) manufactures the only natural gas- fueled car available in the U.S., the Civic GX, while several companies sell conversion kits, costing about $3,700 to $5,500, to modify gasoline engines to run on CNG.

One thing natural gas has going for it politically is that it's a lot cheaper than gasoline. Retail CNG prices in California are about $2.50 to $3.00 a gallon. The average price of retail gasoline in California is $4.21 a gallon.

CNG proponents also point to the benefits that switching to a natural gas- heavy vehicle fleet can bring in shoring up the nation's energy security. Big U.S. natural gas discoveries and forecasts for larger reserves have emerged just as oil and gasoline prices have skyrocketed, forcing energy issues onto the front pages and into the speeches of both presumptive presidential candidates.

A report released last week by the Chesapeake-backed industry group American Clean Skies Foundation and Navigant Consulting Inc. estimated that U.S. natural gas reserves could be as large as 2,247 trillion cubic feet, or nearly 100 times current U.S. yearly demand.

"If we started moving to natural gas vehicles in large numbers, even if we didn't go to renewables, we'd have plenty of natural gas," said Rich Kolodziej, president of Natural Gas Vehicles for America, a Washington-based trade association for natural gas vehicles.

The industry's goal is to replace 20% of the diesel used in the U.S. with natural gas by 2025, about 10 billion gallons, or 1.3 billion cubic feet, Kolodziej said.

Jury's Out On Long-Term Benefits

Pickens, Chesapeake and other backers are keen to see Prop. 10 pass because they'd otherwise have to compete against other alternative-fuel providers for about $840 million California plans to hand out for development and deployment of alternative fuels, under a law called AB 118.

While natural gas is more environmentally friendly than gasoline and diesel, the advantages have diminished since the 1980s, when engines were less efficient and petroleum fuels were dirtier, said the University of California's Sperling.

Automobile-pollution controls have improved since then, and California requires car and truck engines to become more efficient in the near term, making natural gas less competitive as a cleaner-burning fuel.

A study by California Energy Commission found that using natural gas instead of gasoline reduced global warming pollution 20% to 30%. Swapping natural gas with diesel in heavy-duty trucks cut greenhouse-gas emissions 10% to 20%, according to the study, which examined the "life cycle" of the fuels, from wellhead to gas processor, to delivery point, to combustion.

Natural gas used to be viewed as a good alternative to diesel in heavy-duty trucks, but this has changed as new truck engines have become much more efficient, and as refiners have produced cleaner-burning diesels, said Patricia Monahan, deputy director for clean vehicles at the Union of Concerned Scientists in San Francisco.

"The jury is out as to which is cleaner," Monahan said, referring to natural gas versus diesel. She added that natural gas is best used to replace coal for power generation, and that other alternative vehicles running on solar-generated electricity, renewable diesel or fuel cells would be superior to those fueled by natural gas.

"You have to do a big calculation about what's the best use for the fuel," Monahan said. "Ultimately we'd like to see zero-emission vehicles on the road - fuel-cell vehicles or electric vehicles powered by renewable energy."

Liquid Natural Gas Terminal Debate is On in New Jersey♦

TOMS RIVER, N.J. - With energy prices sky high, proposals to place liquefied natural gas terminals off the New Jersey coast are getting a serious look. But environmental and fishing groups say they are the wrong choice for a state so heavily dependent on tourism.

Three projects for storing or transferring liquefied natural gas have been proposed for the ocean off New Jersey, but out of sight of the shoreline:

_ The Atlantic Sea Island Group wants to build a 63-acre artificial island nearly 20 miles off Sandy Hook for a liquefied natural gas port called "Safe Harbor Energy."

_ A group calling itself Liberty Natural Gas wants to build a pipeline tethered to buoys 15 miles off Asbury Park. Ships would connect to the pipeline and empty their gas, which would then be carried under the ocean floor to the mainland.

ExxonMobil has proposed a floating gas terminal called BlueOcean Energy about 20 miles off the coast of Manasquan.

Also, BP had proposed a liquefied natural gas receiving pier on the Delaware River in Logan Township, although a court recently ruled that Delaware could block the plan.

At a public hearing on the proposals before state Senate and Assembly committees Thursday, officials of two of the companies touted their projects as essential to increasing the supply of natural gas in the region and insisted they would be safe.

Mark Schanzer, BlueOcean's president, said his company's proposed facility could deliver about 1.2 billion cubic feet of natural gas per day, enough gas to heat 5 million homes.

"The region needs access to reliable supplies of natural gas," he said. "This facility provides that."

He said BlueOcean would generate billions of dollars worth of economic activity and $150 million in tax revenue and would create 300 jobs.

Thursday, August 7, 2008

Midstream Company Eyes Natural Gas Opportunities

OMAHA, Neb., Aug 07, 2008 /PRNewswire via COMTEX/ -- Tenaska Capital Management, LLC (TCM), has announced the formation of Voyager Midstream, LLC, a Houston-based company dedicated to developing, acquiring and managing midstream natural gas industry assets in a market where growth opportunities are increasing.
Voyager Midstream, staffed by a team of natural gas industry veterans, will focus nationwide on investments in the broad midstream sector of the gas industry, including processing plants, gathering systems and pipeline transportation, as well as gas storage facilities.
"This new company brings together a team with broad technical and marketing skills and extensive hands-on experience in gas exploration, production, processing, storage and transportation," said Paul Smith, TCM senior managing director.
"The group's wealth of experience and talent will also be supplemented by Tenaska's extensive natural gas industry knowledge and expertise. Voyager Midstream promises to take a leadership role in the gas industry's midstream sector."
Voyager Midstream will be led by Dr. Tom Shaw, who will head a team focusing on developing opportunities in the midstream gas storage sector, and Ken Snyder, who will concentrate on locating non-storage midstream acquisition opportunities.
Shaw is a Ph.D. geologist with more than 15 years' experience in oil and gas exploration and production and six years developing natural gas storage facilities. Snyder, owner of Gulf Energy Development, LLC, and founder of three private companies, has held senior management positions at several large energy corporations creating and directing energy investments.
Shaw's team includes:
-- L. Jay Evans, Jr., with 27 years' experience in the oil and gas production and in the natural gas industry, the last 25 years in executive and management capacities.
-- William C. "Rusty" Antrican, with more than 20 years' experience in natural gas storage, liquefied natural gas terminals, pipelines, resource development, mergers and acquisitions and privatization.
-- Renato Bizzio, a geologist with more than 25 years' experience in the oil and gas industry, including gas storage development projects in Colorado and Texas.
Collectively, the Shaw team has worked worldwide for such industry majors as Unocal, Shell, Chevron and Stone & Webster on almost 50 gas storage projects, plus many midstream applications.
Other natural gas assets which Tenaska Capital Management has managed include two natural gas storage facilities, Caledonia in Mississippi, and Chestnut Ridge in Pennsylvania. Caledonia recently was sold to ENSTOR, Inc. of Houston, and Chestnut Ridge is being completed.

Natural Gas Found in Uganda

KAMPALA, Aug. 6 (Xinhua) -- Tullow Oil, a company exploring for oil in western Uganda, announced on Wednesday that it had struck oil and natural gas deposits at Kasamene-1 exploration well, located in Butiaba region in the Lake Albert Rift Basin.

The London-based company said in a statement on its website that exploration at Kasamene-1 encountered over 31 metres of net oil pay and at least six metres of net gas pay.

"Downhole pressure testing and sampling has confirmed the presence of dry gas and moveable 30-33 degree API oil," the statement said, adding that the reservoir quality for both zones is excellent.

Aidan Heavey, chief Executive of Tullow, said the discovery indicates the potential for further significant discoveries from the Victoria Nile delta play.

Kasamene-1 was drilled 15 km to the north-west of the Ngege-1 discovery and is the second successful test of the Victoria Nile delta play fairway within the Lake Albert Rift Basin.

The company said that on completion of operations at Kasamene-1, the rig will move 10 km to the east and drill the Kigogole-1 prospect starting mid this month.

Heritage Oil, another company exploring for oil in the western part of the country, said the Kasamene-1 discovery, which is located in Block 2, lowers the exploration risk of prospects in Block 1.

The company said in a news release on Wednesday that the structural trends of Warthog, Giraffe and Buffalo oil wells in Block 1 can be traced to Kasamene-1, which is just 2.5 km away.

Exploration studies by RPS Energy in September 2007 showed that Buffalo and Giraffe prospects have meant gross un-risked prospective resources of 420 and 89 million barrels respectively.

Heritage said it is planning an active drilling campaign in Block 1 that is expected to commence next month on the Buffalo, Giraffe and Warthog prospects.

The Kasamene-1 discovery is one of the many in western part of the country since the first was announced in June 2006.Ministry of energy and mineral development statistics indicate that the country currently has 300 million barrels of oil.

Uganda is scheduled to start an early production scheme in 2009 to generate over 4,000 barrels per day and refine them into heavy fuel used for power generation and other fuel products.

The country is currently facing a power shortage which experts say is slowing down its economy growth. The discoveries are expected to offset the country's enormous fuel import bill of millions of U.S. dollars annually.