By Adam Kealoha Causey • acausey@gannett.com • Gannett • March 30, 2009
SHREVEPORT - Shreveport is examining how natural gas can fuel more than just mass transit.The city plans to use $4.7 million in federal economic stimulus money for bus system upgrades. Much of it will be gas-related.
"We don't want to see this just stopping at SporTran," Mayor Cedric Glover said last week.
That directive points City Hall staffers toward moving other fleets, such as garbage and dump trucks, to the locally extractable, cleaner-burning fuel.
Getting the money for buses now doesn't mean other city vehicles aren't a priority, according to Shreveport environmental affairs manager Wes Wyche.
"SporTran, because they're a transit agency, actually got an automatic formula apportionment," Wyche said. "So they got the money without having to compete for it."
City department leaders don't know about a similar conduit for public works vehicles, Wyche said, but they are looking for competitive grants to help them catch up with SporTran.
Beyond that, the city also would consider selling compressed natural gas from its planned fueling station to private businesses and other buyers, Glover said.
Construction on the fueling station should start in the next 10 to 12 months at the SporTran office at 1115 Jack Wells Blvd., department director Gene Eddy said. Natural gas will get there via pipelines, much like it does to homes and businesses with gas service.
Shreveport is not partnering with any Haynesville Shale operators, Eddy said.
The new buses should arrive in the next 12-14 months, Eddy said. They should be rolling on Shreveport and Bossier City streets in 15 months.
Vehicles that run on natural gas are more expensive than those that run on gasoline or diesel, but state and federal tax credits help curb costs, Stephe Yborra told The Times in January. Yborra is communications director for Natural Gas Vehicles for America. The organization put on a workshop in January at the Shreveport Convention Center.
Natural Gas Vehicles for America targets fleets that need central fueling, have repetitive routes and use 7,000 to 15,000 gallons of fuel a year.
Another benefit, Yborra said, is that when gasoline and diesel prices cost $4 to $5 a gallon, natural gas prices were nearly $2 per gallon cheaper.
Additional Facts
By the numbers
The breakdown for the $4.7 million Shreveport will receive for its bus system:
5 new natural gas-powered buses: $2.1 million.
Building a fueling station: $1.5 million.
Converting maintenance facility: $335,000.
Training costs: $50,000.
Rebuilding engines, transmission: $100,000.
Replacing the bus washer $150,000.
Security cameras: $154,000.
Facilities: $90,000.
Terminal upgrades: $150,000.
Bus bike racks: $47,500.
Architectural, engineering work: $40,000.
Total: $4,716,500.
Source: SporTran
Tuesday, March 31, 2009
Monday, March 30, 2009
New Natural Gas Laws for Colorado
GRAND JUNCTION, Colo. (Map, News) - Colorado oil and gas companies are pouring over new state regulations to be ready by April 1, when the rules are set to take effect.
The Legislature approved the rules last week despite objections from opponents, mainly Republicans, who warned that stricter regulations will harm one of the state's most important industries. The rule's supporters say state regulations needed to be updated to handle the impacts of widespread drilling.
State officials say companies will be able to ease into the new rules because drilling permits approved before Wednesday are subject to the old rules. Permits are good for one year, and state officials say there are thousands of wells yet to be drilled under existing permits.
"There's going to be a transition period which will, we believe, be helpful to the companies," said Harris Sherman, executive director of the Colorado Department of Natural Resources.
Sherman is also a member of the Colorado Oil and Gas Conservation Commission, the main regulatory body.
Wayne Bankert of Laramie Energy II questioned how much having grandfathered permits will help at a time when the industry has sharply cut back drilling and may not use a lot of the permits. He said companies plan a year or two ahead, and delays in getting permits under the new rules could be become an issue later when existing permits expire.
The industry has said the new rules, which require consultation with state health and wildlife experts in some cases, likely will make it longer and more expensive to get permits. They have blamed uncertainty around the new regulations for significant drops in drilling in Colorado, saying companies would rather invest elsewhere.
The rules' supporters say that plunging oil and natural gas prices, tight credit and a shortage of pipeline capacity in the region have more to do with the decline in activity.
The roughly 100 new and revised rules will enact two laws requiring more consideration of the environment, wildlife and public health and safety when approving oil and gas development. Lawmakers overwhelmingly approved the two measures in 2007, when Colorado and the rest of the Rockies were in the middle of a natural gas boom.
Companies have cut back drilling since the national recession has deepened.
The rules' opponents have targeted Gov. Bill Ritter, who made updating the regulations and expanding the oil and gas commission to include more industry outsiders priorities. But residents who live in natural gas fields and wildlife advocates are thanking him and Democratic lawmakers for supporting the rules.
"This is an important achievement," said Gretchen Nicholoff, president of the Western Colorado Congress, a conservation group. "For years we've been pursuing commonsense protections for public health and the environment while endorsing responsible energy development. "
Last year, the state issued a record 8,027 drilling permits, nearly double the 4,323 approved in 2005. Most of the permits were for natural gas.
The oil and gas conservation commission worked about 18 months on the new rules. The commission approved the regulations late last year after holding public hearings across the state and dozens of work sessions attended by industry and government officials, landowners and conservationists.
---
Information from: The Daily Sentinel, http://www.gjsentinel.com
The Legislature approved the rules last week despite objections from opponents, mainly Republicans, who warned that stricter regulations will harm one of the state's most important industries. The rule's supporters say state regulations needed to be updated to handle the impacts of widespread drilling.
State officials say companies will be able to ease into the new rules because drilling permits approved before Wednesday are subject to the old rules. Permits are good for one year, and state officials say there are thousands of wells yet to be drilled under existing permits.
"There's going to be a transition period which will, we believe, be helpful to the companies," said Harris Sherman, executive director of the Colorado Department of Natural Resources.
Sherman is also a member of the Colorado Oil and Gas Conservation Commission, the main regulatory body.
Wayne Bankert of Laramie Energy II questioned how much having grandfathered permits will help at a time when the industry has sharply cut back drilling and may not use a lot of the permits. He said companies plan a year or two ahead, and delays in getting permits under the new rules could be become an issue later when existing permits expire.
The industry has said the new rules, which require consultation with state health and wildlife experts in some cases, likely will make it longer and more expensive to get permits. They have blamed uncertainty around the new regulations for significant drops in drilling in Colorado, saying companies would rather invest elsewhere.
The rules' supporters say that plunging oil and natural gas prices, tight credit and a shortage of pipeline capacity in the region have more to do with the decline in activity.
The roughly 100 new and revised rules will enact two laws requiring more consideration of the environment, wildlife and public health and safety when approving oil and gas development. Lawmakers overwhelmingly approved the two measures in 2007, when Colorado and the rest of the Rockies were in the middle of a natural gas boom.
Companies have cut back drilling since the national recession has deepened.
The rules' opponents have targeted Gov. Bill Ritter, who made updating the regulations and expanding the oil and gas commission to include more industry outsiders priorities. But residents who live in natural gas fields and wildlife advocates are thanking him and Democratic lawmakers for supporting the rules.
"This is an important achievement," said Gretchen Nicholoff, president of the Western Colorado Congress, a conservation group. "For years we've been pursuing commonsense protections for public health and the environment while endorsing responsible energy development. "
Last year, the state issued a record 8,027 drilling permits, nearly double the 4,323 approved in 2005. Most of the permits were for natural gas.
The oil and gas conservation commission worked about 18 months on the new rules. The commission approved the regulations late last year after holding public hearings across the state and dozens of work sessions attended by industry and government officials, landowners and conservationists.
---
Information from: The Daily Sentinel, http://www.gjsentinel.com
Sunday, March 29, 2009
Natural Gas Cars to China
NEW YORK, March 27, 2009 /PRNewswire-FirstCall via COMTEX/ ----China Natural Gas, Inc. ("China Natural Gas" or the "Company") (OTC Bulletin Board: CHNG), one of the leading providers of pipeline natural gas for industrial, commercial and residential use and compressed natural gas (CNG: undefined, undefined, undefined%) for vehicular fuel in Xi'an, China, today announced that Richard Wu, the Company's Chief Financial Officer, is resigning from the Company, effective April 30, 2009, for personal health and family reasons. The Company has assembled a recruiting team and has initiated a comprehensive search for a new chief financial officer.
Mr. Qinan Ji, Chairman and CEO of China Natural Gas, commented, "We are saddened by Mr. Wu's departure, and on behalf of the Company, we would like to thank Mr. Wu for his many contributions. We wish him every success in the future."
Mr. Ji continued, "Meanwhile, we are actively searching for candidates with strong industry and financial expertise, CPA designation and U.S. capital market experience. We anticipate that the search for a qualified successor will be completed in the near future."
About China Natural Gas, Inc.
China Natural Gas, Inc., ("CHNG"), is the first China-based natural gas retailing company publicly traded in the U.S. It currently owns and operates a network of CNG retail filling stations as well as a 120 kilometer long compressed natural gas pipeline in Xi'an, China. Xi'an is a fast growing Chinese city supported by a population of 8.5 million and is the "gateway" to the broad Western regions of China. CHNG currently retails natural gas at company-owned filling stations, delivers natural gas services to residential, commercial and industrial customers, and converts gasoline-fueled vehicles to hybrid (natural gas/gasoline) powered vehicles. Currently it is estimated that there are 5,000 buses and 20,000 taxis using CNG in Xi'an.
This press release may contain forward-looking statements. These statements are based on the current expectations or beliefs of China Natural Gas, Inc. management and are subject to a number of factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements, including the progress of construction and development activities, fluctuation of natural gas prices, the availability of natural gas supplies, changes in governmental regulations and/or economic policies.
Mr. Qinan Ji, Chairman and CEO of China Natural Gas, commented, "We are saddened by Mr. Wu's departure, and on behalf of the Company, we would like to thank Mr. Wu for his many contributions. We wish him every success in the future."
Mr. Ji continued, "Meanwhile, we are actively searching for candidates with strong industry and financial expertise, CPA designation and U.S. capital market experience. We anticipate that the search for a qualified successor will be completed in the near future."
About China Natural Gas, Inc.
China Natural Gas, Inc., ("CHNG"), is the first China-based natural gas retailing company publicly traded in the U.S. It currently owns and operates a network of CNG retail filling stations as well as a 120 kilometer long compressed natural gas pipeline in Xi'an, China. Xi'an is a fast growing Chinese city supported by a population of 8.5 million and is the "gateway" to the broad Western regions of China. CHNG currently retails natural gas at company-owned filling stations, delivers natural gas services to residential, commercial and industrial customers, and converts gasoline-fueled vehicles to hybrid (natural gas/gasoline) powered vehicles. Currently it is estimated that there are 5,000 buses and 20,000 taxis using CNG in Xi'an.
This press release may contain forward-looking statements. These statements are based on the current expectations or beliefs of China Natural Gas, Inc. management and are subject to a number of factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements, including the progress of construction and development activities, fluctuation of natural gas prices, the availability of natural gas supplies, changes in governmental regulations and/or economic policies.
Saturday, March 28, 2009
Natural Gas Drilling Rigs Down from 2003
NEW YORK, March 27 (Reuters) - The number of rigs drilling for natural gas in the United States fell 47 to 810 last week, the lowest level since April 2003, according to a report issued on Friday by oil services firm Baker Hughes Inc in Houston.
U.S. natural gas drilling rigs, which three weeks ago fell below 1,000 for the first time since May 7, 2004, have been in a steady decline since peaking above 1,600 in September.
Traders and analysts have said tight credit and a 70 percent slide in gas prices over the last nine months have forced many producers to scale back drilling operations.
The current gas rig count stands about 637 below the same week last year, and is the lowest for gas drilling rigs since April 25, 2003, when there were 804 gas rigs operating.
Near record-high gas production last year and a deepening recession that sharply cut demand led to a severe oversupply that collapsed gas prices to about the $4 per mmBtu level from their peak above $13 in July.
While first quarter U.S. natural gas production was still expected to be up from the same period last year despite the steady slide in drilling, most industry analysts expect to see year-on-year output declines soon, probably in late spring or early summer, as rigs continue falling.
Gas rigs are expected to decline by another 10 to 15 percent this year to between 700 and 750, a level that should turn output negative and help tighten the supply-demand balance. (Reporting by Joe Silha; Editing by Marguerita Choy)
U.S. natural gas drilling rigs, which three weeks ago fell below 1,000 for the first time since May 7, 2004, have been in a steady decline since peaking above 1,600 in September.
Traders and analysts have said tight credit and a 70 percent slide in gas prices over the last nine months have forced many producers to scale back drilling operations.
The current gas rig count stands about 637 below the same week last year, and is the lowest for gas drilling rigs since April 25, 2003, when there were 804 gas rigs operating.
Near record-high gas production last year and a deepening recession that sharply cut demand led to a severe oversupply that collapsed gas prices to about the $4 per mmBtu level from their peak above $13 in July.
While first quarter U.S. natural gas production was still expected to be up from the same period last year despite the steady slide in drilling, most industry analysts expect to see year-on-year output declines soon, probably in late spring or early summer, as rigs continue falling.
Gas rigs are expected to decline by another 10 to 15 percent this year to between 700 and 750, a level that should turn output negative and help tighten the supply-demand balance. (Reporting by Joe Silha; Editing by Marguerita Choy)
Friday, March 27, 2009
House Bill 1050 Increase Natural Gas Drilling on Pennsylvania Land
HARRISBURG, Pa., March 25, 2009 /PRNewswire via COMTEX/ ----The Marcellus Shale Committee, the Independent Oil and Gas Association of Pennsylvania and the Pennsylvania Oil and Gas Association issued the following joint statement today regarding the introduction of House Bill 1050 (D. Reed - Indiana) to increase leasing opportunities on state forest land and provide millions of dollars in revenue from that activity to local conservation districts, municipal governments and the Commonwealth.
"Significant natural gas reserves can be found in Pennsylvania's state forest land, and the opportunities it can create for new jobs and new revenue for state and local government and conservation districts is even more significant. This industry is poised to develop these gas reserves responsibly and in cooperation with the state Bureau of Forestry and the Department of Conservation and Natural Resources. Advances in technology, including the development of multiple wells from a single pad and horizontal drilling techniques allow for a far more efficient means of securing natural gas reserves, impacting fewer acres in development, a reduced number of roads to access this single location, fewer gathering pipelines and far less surface disturbance.
"Leasing 130,000 acres of land for three years amounts to less than 20 percent of the state's total forest resources, and will produce an indigenous source of clean energy and provide good-paying jobs to thousands of people. The distribution of funding from leasing and royalty payments among local and state governments and conservation districts ensures that revenue is directed where it can meet the needs of communities and programs that protect the environment.
"This approach to create sustainable, long-term revenue for the Commonwealth through responsible leasing of land is sound and deserves the support of the legislature."
About the Marcellus Shale Committee: Formed in 2008, the Marcellus Shale committee represents the oil and gas industry in Pennsylvania on matters pertaining to the acquisition, exploration, drilling, and development of the Marcellus Shale natural gas resource and provides a unified voice before all state, county, and local government or regulatory bodies. The committee, sponsored jointly by the Pennsylvania Oil and Gas Association and the Independent Oil and Gas Association of Pennsylvania, includes independent producers with historical expertise in the Pennsylvania oil and gas fields and national companies dedicated to bringing their industry experience and resources to achieve common goals.
About IOGA-PA: The Independent Oil and Gas Association of Pennsylvania (IOGA: undefined, undefined, undefined%) is the principal non-profit trade association representing Pennsylvania's Independent oil and natural gas producers, marketers, service companies and related businesses.
About POGAM: The Pennsylvania Oil & Gas Association is the non-profit trade association of the Commonwealth's independent oil and gas producers. The association promotes the general welfare of Pennsylvania's crude oil and natural gas exploration and production industry. The association and its members are committed to the economical and environmentally responsible development, production and use of the Commonwealth's crude oil and natural gas resources.
SOURCE Marcellus Shale Committee; IOGA-PA; POGAM
"Significant natural gas reserves can be found in Pennsylvania's state forest land, and the opportunities it can create for new jobs and new revenue for state and local government and conservation districts is even more significant. This industry is poised to develop these gas reserves responsibly and in cooperation with the state Bureau of Forestry and the Department of Conservation and Natural Resources. Advances in technology, including the development of multiple wells from a single pad and horizontal drilling techniques allow for a far more efficient means of securing natural gas reserves, impacting fewer acres in development, a reduced number of roads to access this single location, fewer gathering pipelines and far less surface disturbance.
"Leasing 130,000 acres of land for three years amounts to less than 20 percent of the state's total forest resources, and will produce an indigenous source of clean energy and provide good-paying jobs to thousands of people. The distribution of funding from leasing and royalty payments among local and state governments and conservation districts ensures that revenue is directed where it can meet the needs of communities and programs that protect the environment.
"This approach to create sustainable, long-term revenue for the Commonwealth through responsible leasing of land is sound and deserves the support of the legislature."
About the Marcellus Shale Committee: Formed in 2008, the Marcellus Shale committee represents the oil and gas industry in Pennsylvania on matters pertaining to the acquisition, exploration, drilling, and development of the Marcellus Shale natural gas resource and provides a unified voice before all state, county, and local government or regulatory bodies. The committee, sponsored jointly by the Pennsylvania Oil and Gas Association and the Independent Oil and Gas Association of Pennsylvania, includes independent producers with historical expertise in the Pennsylvania oil and gas fields and national companies dedicated to bringing their industry experience and resources to achieve common goals.
About IOGA-PA: The Independent Oil and Gas Association of Pennsylvania (IOGA: undefined, undefined, undefined%) is the principal non-profit trade association representing Pennsylvania's Independent oil and natural gas producers, marketers, service companies and related businesses.
About POGAM: The Pennsylvania Oil & Gas Association is the non-profit trade association of the Commonwealth's independent oil and gas producers. The association promotes the general welfare of Pennsylvania's crude oil and natural gas exploration and production industry. The association and its members are committed to the economical and environmentally responsible development, production and use of the Commonwealth's crude oil and natural gas resources.
SOURCE Marcellus Shale Committee; IOGA-PA; POGAM
Thursday, March 26, 2009
Natural Gas Garbage Trucks for Dallas Advocated
03:08 PM CDT on Wednesday, March 25, 2009
By BRAD WATSON / WFAA-TV
DALLAS - They cut costs and emissions but there's a trade off.
They also can't be used on nearly half the pick-up routes.
The Dallas City Council on Wednesday decides whether to spend nearly $4 million to buy the first natural gas-powered garbage trucks for the city.
Sanitation Services runs about 200 garbage trucks - all of them diesel - but now wants to start replacing some of them with natural gas trucks.
The garbage pick-up business is a dirty business, made dirtier by the diesel trucks Dallas uses.
But the city wants garbage trucks to go green and buy 26 natural gas trucks.
"They are going to emit 80 percent less emissions than the diesel counterparts," said Mary Nix from Sanitation Services.
San Antonio bought 30 of the trucks and put them on the streets in January.
With a state clean air grant and lower fuel costs, the total cost for natural gas garbage trucks is $1.1 million less than diesel over the seven years they're used.
But going green does not mean problems gone.
"These trucks will not be able to be used in many of the alleys that we do collection pick-up," Nix added.
Trucks rumbling through alleys snag tree limbs, utility lines and building overhangs.
The natural gas trucks are about two feet taller than the diesel trucks because the fuel tank is on top.
So the gas trucks will be restricted to street pick up only.
The city believes the trade off is worth it and wants to buy up to 40 gas trucks.
But it knows there could be a problem if gas trucks ever need to fill in alley routes, which is 45 percent of all pick-up, for broken down diesel trucks.
"It's certainly possible but we will have to evaluate our interest in buying any more than the 40 trucks based on well we'll be able to deploy them," said Nix.
If the city council wanted most of the garbage truck fleet to go green, it would need to decide how to clear out alleys and keep them clear or move all pick-up to the street.
E-mail bwatson@wfaa.com.
By BRAD WATSON / WFAA-TV
DALLAS - They cut costs and emissions but there's a trade off.
They also can't be used on nearly half the pick-up routes.
The Dallas City Council on Wednesday decides whether to spend nearly $4 million to buy the first natural gas-powered garbage trucks for the city.
Sanitation Services runs about 200 garbage trucks - all of them diesel - but now wants to start replacing some of them with natural gas trucks.
The garbage pick-up business is a dirty business, made dirtier by the diesel trucks Dallas uses.
But the city wants garbage trucks to go green and buy 26 natural gas trucks.
"They are going to emit 80 percent less emissions than the diesel counterparts," said Mary Nix from Sanitation Services.
San Antonio bought 30 of the trucks and put them on the streets in January.
With a state clean air grant and lower fuel costs, the total cost for natural gas garbage trucks is $1.1 million less than diesel over the seven years they're used.
But going green does not mean problems gone.
"These trucks will not be able to be used in many of the alleys that we do collection pick-up," Nix added.
Trucks rumbling through alleys snag tree limbs, utility lines and building overhangs.
The natural gas trucks are about two feet taller than the diesel trucks because the fuel tank is on top.
So the gas trucks will be restricted to street pick up only.
The city believes the trade off is worth it and wants to buy up to 40 gas trucks.
But it knows there could be a problem if gas trucks ever need to fill in alley routes, which is 45 percent of all pick-up, for broken down diesel trucks.
"It's certainly possible but we will have to evaluate our interest in buying any more than the 40 trucks based on well we'll be able to deploy them," said Nix.
If the city council wanted most of the garbage truck fleet to go green, it would need to decide how to clear out alleys and keep them clear or move all pick-up to the street.
E-mail bwatson@wfaa.com.
43 Compressed Natural Gas Trucks Running in Denver
Denver Business Journal
UPS Inc. said Wednesday it has deployed 43 vehicles powered by compressed natural gas in the Denver area.
The vehicles are among 300 CNG vehicles that the Atlanta-based shipping company (NYSE: UPS) ordered in May for use nationwide.
With the 300 new vehicles, UPS now has 1,819 CNG trucks in operation.
CNG generally produces fewer emissions than other vehicle fuels and often is cheaper.
Other CNG vehicles of the 300-truck order are in use in Atlanta (46); Oklahoma City (100), and four cities in California: Sacramento (21), San Ramon (63), Los Angeles (9) and Ontario (18).
UPS Inc. said Wednesday it has deployed 43 vehicles powered by compressed natural gas in the Denver area.
The vehicles are among 300 CNG vehicles that the Atlanta-based shipping company (NYSE: UPS) ordered in May for use nationwide.
With the 300 new vehicles, UPS now has 1,819 CNG trucks in operation.
CNG generally produces fewer emissions than other vehicle fuels and often is cheaper.
Other CNG vehicles of the 300-truck order are in use in Atlanta (46); Oklahoma City (100), and four cities in California: Sacramento (21), San Ramon (63), Los Angeles (9) and Ontario (18).
Wednesday, March 25, 2009
Indiana Coal Gasification Bill for Natural Gas Supplies
Associated Press - http://www.forbes.com/feeds/ap/2009/03/24/ap6207660.html
Indiana governor signs coal-gasification bill
By RICK CALLAHAN , 03.24.09, 05:50 PM EDT
Gov. Mitch Daniels signed a bill into law Tuesday that allows the state's finance authority to negotiate long-term contracts to buy and sell synthetic natural gas from a planned southern Indiana coal-gasification plant.
Daniels said the law will save Indiana's natural gas users billions of dollars by ensuring a steady supply of synthetic natural gas free of the price fluctuations of the natural gas market.
Under the bill, the quasi-governmental Indiana Finance Authority would act as an intermediary contracting partner between the state's gas utilities and the developer of a coal-gasification plant near the Ohio River town of Rockport.
The law allows the finance authority to negotiate 30-year supply contracts with the plant's developer for the gas, which the utilities would pipe to their customers.
The roundabout method was needed because utilities dropped out of negotiations for the synthetic gas contracts last fall amid concerns the long contracts would harm their credit.
"They had some accounting issues doing that directly, but this is a very innovative bill," Daniels said. "The state of Indiana will be the contracting authority and pass the gas onto the utilities, which will in turn transmit it to its customers."
In the two previous sessions, lawmakers passed tax credits for the eventual developer of the plant, which would turn coal into synthetic natural gas, stripping it of pollutants and carbon dioxide to create a gas similar to real natural gas.
Comment On This Story
Daniels said the state will open bidding soon on a contract to build the coal-gasification plant, which is expected to attract $2 billion in private investment, create up to 1,000 temporary construction jobs and 200 permanent jobs.
Bidding will be open to all potential developers, but a group that approached the state a few years ago with the idea for the project has been considered the leading candidate.
The governor said the plant would be the nation's first modern coal-gasification plant of its kind and would put Indiana at the forefront of so-called "clean coal" technology.
"This will establish Indiana as the leader in the clean coal era, which many of us believe is essential to America's future to have a strong economy, affordable energy rates and a better environment to leave to our kids," Daniels said.
Aside from that plant, Duke Energy Corp. (nyse: DUK - news - people ) is building a $2.35 billion power plant near Edwardsport that will turn coal into gas and then burn it in turbines to produce electricity.
The bill signed Tuesday by Daniels is the first to pass both chambers of the General Assembly this session. It cleared the Senate 48-0 and the House 90-8.
Daniels said federal agencies forecast that over the long term it will be cheaper "perhaps by a very large margin" to produce synthetic natural gas from coal rather than by actual natural gas due to the gas markets' sometimes wild fluctuations.
But opponents of the bill contend that it could actually lead to higher bills for natural gas users.
Kerwin Olson, program director for the Citizens Action Coalition of Indiana, said that last year coal prices doubled even as natural gas prices were going down.
"Certainly the price of coal is going to affect the cost of this synthetic natural gas," he said. "As far as the ratepayer impact goes, it's unthinkable for us that the state would force ratepayers to enter into a 30-year contract with no review of the price whatsoever."
"The way we see it that's an erosion of consumer and ratepayer protection."
David Pippen, an aide to Daniels, said that under the law the state finance authority will be the contracting party "while the developer and the state will have to work out the logistics of delivery and recovery of costs with the utilities."
Copyright 2009 Associated Press. All rights reserved. This material may not be published broadcast, rewritten, or redistributed
Indiana governor signs coal-gasification bill
By RICK CALLAHAN , 03.24.09, 05:50 PM EDT
Gov. Mitch Daniels signed a bill into law Tuesday that allows the state's finance authority to negotiate long-term contracts to buy and sell synthetic natural gas from a planned southern Indiana coal-gasification plant.
Daniels said the law will save Indiana's natural gas users billions of dollars by ensuring a steady supply of synthetic natural gas free of the price fluctuations of the natural gas market.
Under the bill, the quasi-governmental Indiana Finance Authority would act as an intermediary contracting partner between the state's gas utilities and the developer of a coal-gasification plant near the Ohio River town of Rockport.
The law allows the finance authority to negotiate 30-year supply contracts with the plant's developer for the gas, which the utilities would pipe to their customers.
The roundabout method was needed because utilities dropped out of negotiations for the synthetic gas contracts last fall amid concerns the long contracts would harm their credit.
"They had some accounting issues doing that directly, but this is a very innovative bill," Daniels said. "The state of Indiana will be the contracting authority and pass the gas onto the utilities, which will in turn transmit it to its customers."
In the two previous sessions, lawmakers passed tax credits for the eventual developer of the plant, which would turn coal into synthetic natural gas, stripping it of pollutants and carbon dioxide to create a gas similar to real natural gas.
Comment On This Story
Daniels said the state will open bidding soon on a contract to build the coal-gasification plant, which is expected to attract $2 billion in private investment, create up to 1,000 temporary construction jobs and 200 permanent jobs.
Bidding will be open to all potential developers, but a group that approached the state a few years ago with the idea for the project has been considered the leading candidate.
The governor said the plant would be the nation's first modern coal-gasification plant of its kind and would put Indiana at the forefront of so-called "clean coal" technology.
"This will establish Indiana as the leader in the clean coal era, which many of us believe is essential to America's future to have a strong economy, affordable energy rates and a better environment to leave to our kids," Daniels said.
Aside from that plant, Duke Energy Corp. (nyse: DUK - news - people ) is building a $2.35 billion power plant near Edwardsport that will turn coal into gas and then burn it in turbines to produce electricity.
The bill signed Tuesday by Daniels is the first to pass both chambers of the General Assembly this session. It cleared the Senate 48-0 and the House 90-8.
Daniels said federal agencies forecast that over the long term it will be cheaper "perhaps by a very large margin" to produce synthetic natural gas from coal rather than by actual natural gas due to the gas markets' sometimes wild fluctuations.
But opponents of the bill contend that it could actually lead to higher bills for natural gas users.
Kerwin Olson, program director for the Citizens Action Coalition of Indiana, said that last year coal prices doubled even as natural gas prices were going down.
"Certainly the price of coal is going to affect the cost of this synthetic natural gas," he said. "As far as the ratepayer impact goes, it's unthinkable for us that the state would force ratepayers to enter into a 30-year contract with no review of the price whatsoever."
"The way we see it that's an erosion of consumer and ratepayer protection."
David Pippen, an aide to Daniels, said that under the law the state finance authority will be the contracting party "while the developer and the state will have to work out the logistics of delivery and recovery of costs with the utilities."
Copyright 2009 Associated Press. All rights reserved. This material may not be published broadcast, rewritten, or redistributed
Tuesday, March 24, 2009
Natural Gas Prices Up & Rising
By Mario Parker
March 23 (Bloomberg) -- Natural gas futures rose for a third day in New York on speculation a government plan to lift the economy will prove successful, boosting demand for the industrial and power-plant fuel.
Gas, oil and stock markets gained after the Obama administration said it would finance as much as $1 trillion in purchases of distressed assets. Gas futures are down 68 percent from their 2008 high in July as the recession cut demand from factories and electricity generators.
“There’s a bit of a plan coming together to hopefully stabilize these financial institutions,” said Tom Orr, research director at Weeden & Co. LP in Greenwich, Connecticut. “The banks are higher and I think gas can work its way higher.”
Natural gas for April delivery rose 6.7 cents, or 1.6 percent, to settle at $4.294 per million British thermal units at 2:51 p.m. on the New York Mercantile Exchange. The futures have declined 24 percent this year.
Crude oil for May delivery gained $1.73 or 3.3 percent, to settle at $53.80 a barrel on the exchange. The Standard& Poor’s index of 500 stocks increased 5.2 percent to 808.30 at 3:01 p.m.
Natural gas futures also advanced as a 17 percent rally since March 18 prompted some investors to close out short positions, or bets on falling prices, said Carl Neill, an energy analyst at Risk Management Inc. in Chicago.
Large speculators increased their net-short positions in gas futures by 1 percent to 115,187 contracts in the week ended March 17, Commodity Futures Trading Commission data show.
“The general thinking in this market was overwhelmingly how far it will go down and not if it will go down,” Neill said. “Last week’s reversal caught some people short. There were too many people leaning on the short side of the boat.”
U.S. Rigs
Falling prices in the past year prompted some gas producers to limit supply in an attempt to buoy prices. The number of gas rigs operating in the U.S. has dropped 47 percent to 857 from a peak of 1,606 in September, according to Baker Hughes Inc.
“Just as demand for unleaded fuel had dropped and refiners did a stealth cutback, nat gas producers did the same thing” to support prices, said Michael Rose, a director of trading at Angus Jackson Inc., a brokerage in Fort Lauderdale, Florida.
Prices will average $6.84 per million Btu in the fourth quarter, according to a Bloomberg survey of 20 analysts. Gas may rise further in 2010 to average $7.50 for the year.
Demand for the fuel has been stifled by factory shutdowns and slowdowns during the recession. Output at factories, mines and utilities in the U.S. dropped 1.4 percent in February after a revised 1.9 percent decline in January, the Federal Reserve said March 16.
Nucor Corp., the largest U.S. steelmaker, revised its first-quarter forecast from a profit to a loss because of lower- than-expected demand. Nucor’s steel mills will run at about 43 percent of capacity in the first quarter, down from 48 percent in the previous period, the company said March 16.
U.S. steel plants operated at 41 percent of capacity in the week ended March 14, down from with 90 percent in the same period a year earlier, the American Iron and Steel Institute said March 16.
To contact the reporter on this story: Mario Parker in Chicago at mparker22@bloomberg.net.
March 23 (Bloomberg) -- Natural gas futures rose for a third day in New York on speculation a government plan to lift the economy will prove successful, boosting demand for the industrial and power-plant fuel.
Gas, oil and stock markets gained after the Obama administration said it would finance as much as $1 trillion in purchases of distressed assets. Gas futures are down 68 percent from their 2008 high in July as the recession cut demand from factories and electricity generators.
“There’s a bit of a plan coming together to hopefully stabilize these financial institutions,” said Tom Orr, research director at Weeden & Co. LP in Greenwich, Connecticut. “The banks are higher and I think gas can work its way higher.”
Natural gas for April delivery rose 6.7 cents, or 1.6 percent, to settle at $4.294 per million British thermal units at 2:51 p.m. on the New York Mercantile Exchange. The futures have declined 24 percent this year.
Crude oil for May delivery gained $1.73 or 3.3 percent, to settle at $53.80 a barrel on the exchange. The Standard& Poor’s index of 500 stocks increased 5.2 percent to 808.30 at 3:01 p.m.
Natural gas futures also advanced as a 17 percent rally since March 18 prompted some investors to close out short positions, or bets on falling prices, said Carl Neill, an energy analyst at Risk Management Inc. in Chicago.
Large speculators increased their net-short positions in gas futures by 1 percent to 115,187 contracts in the week ended March 17, Commodity Futures Trading Commission data show.
“The general thinking in this market was overwhelmingly how far it will go down and not if it will go down,” Neill said. “Last week’s reversal caught some people short. There were too many people leaning on the short side of the boat.”
U.S. Rigs
Falling prices in the past year prompted some gas producers to limit supply in an attempt to buoy prices. The number of gas rigs operating in the U.S. has dropped 47 percent to 857 from a peak of 1,606 in September, according to Baker Hughes Inc.
“Just as demand for unleaded fuel had dropped and refiners did a stealth cutback, nat gas producers did the same thing” to support prices, said Michael Rose, a director of trading at Angus Jackson Inc., a brokerage in Fort Lauderdale, Florida.
Prices will average $6.84 per million Btu in the fourth quarter, according to a Bloomberg survey of 20 analysts. Gas may rise further in 2010 to average $7.50 for the year.
Demand for the fuel has been stifled by factory shutdowns and slowdowns during the recession. Output at factories, mines and utilities in the U.S. dropped 1.4 percent in February after a revised 1.9 percent decline in January, the Federal Reserve said March 16.
Nucor Corp., the largest U.S. steelmaker, revised its first-quarter forecast from a profit to a loss because of lower- than-expected demand. Nucor’s steel mills will run at about 43 percent of capacity in the first quarter, down from 48 percent in the previous period, the company said March 16.
U.S. steel plants operated at 41 percent of capacity in the week ended March 14, down from with 90 percent in the same period a year earlier, the American Iron and Steel Institute said March 16.
To contact the reporter on this story: Mario Parker in Chicago at mparker22@bloomberg.net.
Investing Natural Gas Hedge Funds
March 23 (Bloomberg) -- Randy Shain said he wasn’t stunned when hedge-fund managers Paul Greenwood and Stephen Walsh were arrested last month for allegedly misappropriating $554 million in client funds.
A probe three years ago by his First Advantage Investigative Services LLC found in public documents that a brokerage run by the pair had agreed to settle regulators’ claims that it improperly used customer assets as loan collateral and had been fined at least 11 times for violating rules at several U.S. exchanges. The firm neither admitted nor denied the allegations, which covered actions from August 1985 to January 1986.
“It’s a case of turning over the stones and finding what’s underneath,” said Shain, who doesn’t know if the client of his New York-based firm steered clear of the fund managers.
Firms like Shain’s say they are seeing an increase in requests for background checks on fund managers in the wake of high-profile fraud cases against Bernard Madoff in New York, Florida’s Arthur Nadel and R. Allen Stanford and his Antigua- based bank. In all, the men are accused of cheating clients out of as much as $73 billion.
“Investors are being more careful in checking out where they put their money,” said Pete Turecek, a senior managing director overseeing hedge funds at Kroll Inc., a risk-consulting company in New York “As the economy continues to weaken, some people including money managers may be drawn to taking shortcuts.”
‘Really Fruitful’
Sharath Sury, whose S4 Capital LLC oversees $2 billion in assets, hired an investigative firm three years ago to look into a hedge fund before making a planned investment.
Sury said the probe revealed that the New York-based fund, which had $600 million in client assets, didn’t reconcile trades daily as the manager had claimed, reported inconsistent asset values and used an auditor related to its founder. The fund shut down in 2007, he said, declining to name the firm.
“This was a case of the background checks proving to be really fruitful,” said Sury, chief executive officer of Chicago-based S4 Capital. “It helped us avoid major losses.”
Investigators trawl through court filings and public databases such as LexisNexis and interview former employees to get information on managers that may raise concerns. They dig up records of violations of trading rules, faked resumes, drunk- driving offenses and drawn-out divorce cases.
$1,000 Cost
Background checks can take from two to six weeks, and may cost about $1,000 for each individual or company investigated, according to the firms.
“Basically you don’t want managers to have distractions that will impact their decision making,” said Michael Dubin, president of New York-based The LongChamp Group Inc., which allocates client money to hedge funds.
Background searches helped Cole Partners Asset Management LLC stay away from managers that were later found to have had run-ins with regulators, said Rian Akey, chief operating officer of the Chicago-based firm, which channels money into hedge funds.
Akey said a check done three years ago on a New York-based hedge fund found that in 1999 the managers had paid fines amounting to $500,000 for violating trading rules. “That was enough to put us off,” he said, declining to name the fund.
Public records show that Nadel, founder of Scoop Management Inc. in Sarasota, Florida, was disbarred as a lawyer in New York in March 1982. Nadel faces federal charges of defrauding investors of more than $300 million.
Undetected for Decades
Madoff fooled clients and regulators for decades as he used money from new investors to pay off old ones. Fairfield Greenwich Group, Tremont Group Holdings Inc. and Bank Medici AG were among victims that channeled client money to Madoff’s firm.
Harry Markopolos, a former money manager, told Congress that he had tried to convince the agency for nine years that Madoff was a fraud. Madoff, 70, pleaded guilty last week to defrauding investors of as much as $65 billion in the biggest Ponzi scheme in history. He will be sentenced on June 16 and faces 150 years in prison.
“There is now a rethinking of diligence practices,” said Mitch Nichter, a partner at Paul, Hastings, Janofsky & Walker LLP, a New York-based law firm. “This will translate into enhanced efforts to verify information provided by hedge funds.”
Not all investors hire outside firms to perform background checks. In-house teams can do the same work, says Cem Habib, portfolio manager at London-based Altedge Capital Ltd., which invests in hedge funds.
“In addition, we have an extensive network of people in the industry that we can speak with to check up on other people’s backgrounds if we need to,” he said.
Driving Records
Fraudulent activity is not the only thing that can be unearthed in investigations. Drunken driving can highlight character issues, according to Kroll’s Turecek.
“It may signify an inability to handle stress properly,” he said. “We look for patterns of behavior that may be indicative of a larger issue or of someone’s character.”
A background check on a New York-based hedge fund in 2005 found that one of its analysts had recently resisted arrest after being caught shoplifting, according to Jeff Brenner, a principal at Intelysis Corp. in Cherry Hill, New Jersey. The analyst was due to appear in court a week before the Intelysis client was about to put money in the fund, he said.
“At the end of the day he’s helping to determine where money is being invested,” said Brenner, whose firm has done more than 500 hedge-fund investigations since 1998.
Allegations in divorce filings, such as adultery with a co- worker, can also raise red flags, said Turecek.
“Such situations may warrant looking at the individual’s expenses to see if there were improperly charged to the company.”
To contact the reporter on this story: Saijel Kishan in New York at skishan@bloomberg.net
A probe three years ago by his First Advantage Investigative Services LLC found in public documents that a brokerage run by the pair had agreed to settle regulators’ claims that it improperly used customer assets as loan collateral and had been fined at least 11 times for violating rules at several U.S. exchanges. The firm neither admitted nor denied the allegations, which covered actions from August 1985 to January 1986.
“It’s a case of turning over the stones and finding what’s underneath,” said Shain, who doesn’t know if the client of his New York-based firm steered clear of the fund managers.
Firms like Shain’s say they are seeing an increase in requests for background checks on fund managers in the wake of high-profile fraud cases against Bernard Madoff in New York, Florida’s Arthur Nadel and R. Allen Stanford and his Antigua- based bank. In all, the men are accused of cheating clients out of as much as $73 billion.
“Investors are being more careful in checking out where they put their money,” said Pete Turecek, a senior managing director overseeing hedge funds at Kroll Inc., a risk-consulting company in New York “As the economy continues to weaken, some people including money managers may be drawn to taking shortcuts.”
‘Really Fruitful’
Sharath Sury, whose S4 Capital LLC oversees $2 billion in assets, hired an investigative firm three years ago to look into a hedge fund before making a planned investment.
Sury said the probe revealed that the New York-based fund, which had $600 million in client assets, didn’t reconcile trades daily as the manager had claimed, reported inconsistent asset values and used an auditor related to its founder. The fund shut down in 2007, he said, declining to name the firm.
“This was a case of the background checks proving to be really fruitful,” said Sury, chief executive officer of Chicago-based S4 Capital. “It helped us avoid major losses.”
Investigators trawl through court filings and public databases such as LexisNexis and interview former employees to get information on managers that may raise concerns. They dig up records of violations of trading rules, faked resumes, drunk- driving offenses and drawn-out divorce cases.
$1,000 Cost
Background checks can take from two to six weeks, and may cost about $1,000 for each individual or company investigated, according to the firms.
“Basically you don’t want managers to have distractions that will impact their decision making,” said Michael Dubin, president of New York-based The LongChamp Group Inc., which allocates client money to hedge funds.
Background searches helped Cole Partners Asset Management LLC stay away from managers that were later found to have had run-ins with regulators, said Rian Akey, chief operating officer of the Chicago-based firm, which channels money into hedge funds.
Akey said a check done three years ago on a New York-based hedge fund found that in 1999 the managers had paid fines amounting to $500,000 for violating trading rules. “That was enough to put us off,” he said, declining to name the fund.
Public records show that Nadel, founder of Scoop Management Inc. in Sarasota, Florida, was disbarred as a lawyer in New York in March 1982. Nadel faces federal charges of defrauding investors of more than $300 million.
Undetected for Decades
Madoff fooled clients and regulators for decades as he used money from new investors to pay off old ones. Fairfield Greenwich Group, Tremont Group Holdings Inc. and Bank Medici AG were among victims that channeled client money to Madoff’s firm.
Harry Markopolos, a former money manager, told Congress that he had tried to convince the agency for nine years that Madoff was a fraud. Madoff, 70, pleaded guilty last week to defrauding investors of as much as $65 billion in the biggest Ponzi scheme in history. He will be sentenced on June 16 and faces 150 years in prison.
“There is now a rethinking of diligence practices,” said Mitch Nichter, a partner at Paul, Hastings, Janofsky & Walker LLP, a New York-based law firm. “This will translate into enhanced efforts to verify information provided by hedge funds.”
Not all investors hire outside firms to perform background checks. In-house teams can do the same work, says Cem Habib, portfolio manager at London-based Altedge Capital Ltd., which invests in hedge funds.
“In addition, we have an extensive network of people in the industry that we can speak with to check up on other people’s backgrounds if we need to,” he said.
Driving Records
Fraudulent activity is not the only thing that can be unearthed in investigations. Drunken driving can highlight character issues, according to Kroll’s Turecek.
“It may signify an inability to handle stress properly,” he said. “We look for patterns of behavior that may be indicative of a larger issue or of someone’s character.”
A background check on a New York-based hedge fund in 2005 found that one of its analysts had recently resisted arrest after being caught shoplifting, according to Jeff Brenner, a principal at Intelysis Corp. in Cherry Hill, New Jersey. The analyst was due to appear in court a week before the Intelysis client was about to put money in the fund, he said.
“At the end of the day he’s helping to determine where money is being invested,” said Brenner, whose firm has done more than 500 hedge-fund investigations since 1998.
Allegations in divorce filings, such as adultery with a co- worker, can also raise red flags, said Turecek.
“Such situations may warrant looking at the individual’s expenses to see if there were improperly charged to the company.”
To contact the reporter on this story: Saijel Kishan in New York at skishan@bloomberg.net
Monday, March 23, 2009
Korea & Venezuela Sign Natural Gas Development Deal
THE WALL STREET JOURNAL ASIA
SEOUL -- South Korea signed a memorandum of understanding with Venezuela to jointly cooperate in exploring, developing, and producing oil and gas.
Venezuela's energy and oil minister, Rafael Ramirez, who is visiting South Korea, signed the agreement Saturday with South Korea's minister of knowledge economy, Lee Youn-ho.
Mr. Ramirez also runs Venezuelan state oil company Petroleos de Venezuela SA.
The two ministers also discussed strategic cooperation between PDVSA and South Korea's state-run Korea National Oil Corp. and Korea Gas Co.
Mr. Ramirez requested KNOC participate in development of an oil field that produces more than 200,000 barrels a day, located in Venezuela's Orinoco belt area. The Venezuelan minister also requested South Korea participate in the development of two gas fields.
Both sides agreed to come up with details of the preliminary pact in the near future.
SEOUL -- South Korea signed a memorandum of understanding with Venezuela to jointly cooperate in exploring, developing, and producing oil and gas.
Venezuela's energy and oil minister, Rafael Ramirez, who is visiting South Korea, signed the agreement Saturday with South Korea's minister of knowledge economy, Lee Youn-ho.
Mr. Ramirez also runs Venezuelan state oil company Petroleos de Venezuela SA.
The two ministers also discussed strategic cooperation between PDVSA and South Korea's state-run Korea National Oil Corp. and Korea Gas Co.
Mr. Ramirez requested KNOC participate in development of an oil field that produces more than 200,000 barrels a day, located in Venezuela's Orinoco belt area. The Venezuelan minister also requested South Korea participate in the development of two gas fields.
Both sides agreed to come up with details of the preliminary pact in the near future.
Sunday, March 22, 2009
Ukraine Gets Opportunity to Show Natural Gas Maturity
http://www.dw-world.de/dw/article/0,,4115007,00.html
The European Union and Ukraine are set to agree on a program of political reforms and physical repairs to the former Soviet state's gas network, officials said. But if Ukraine can't pay, Europe may not get any gas.
On Monday, March 23, Ukraine's President Viktor Yushchenko and Prime Minister Yulia Tymoshenko -- currently feuding ahead of presidential elections -- are set to meet the head of the EU's executive, Jose Manuel Barroso, and officials from the World Bank, European Investment Bank and energy companies in Brussels.
They are expected to sign a joint declaration committing Ukraine to reforming the rules for operating its gas network. That should pave the way for Western and Russian donors to invest in the renovation of the network, EU diplomats told DPA news agency.
Huge investments needed
One fifth of all the natural gas consumed in the EU flows through Ukraine's 13,500-kilometer (8,400-mile) network of gas pipelines. Some experts have said that the network will need some 2.5 billion euros ($3.4 billion) in investment over the next six years just to keep the pipes and pumping stations in working order.
Analysts say that Ukrainian monopoly Naftogaz, which runs the pipeline system, is having difficulties attracting the necessary investment due to a perceived lack of transparency both in its management and in Ukraine's top political leadership.
"I see a situation later this year where Naftogaz will not be able to meet its payment obligations to Gazprom because of its worsening financial situation," Robert Shetler-Jones from Swiss-based gas trader RosUkrEnergo (RUE) told Reuters news agency. RUE is owned by Russian gas giant Gazprom and two Ukrainian businessmen.
"If Ukraine continued not to pay, then this could have a serious impact on the European gas supplies," added Shetler-Jones.
A highly-charged issue
The question of Ukraine's gas transit system has been a highly-charged one ever since a row with Russia in 2005-2006 provoked Russian gas monopoly Gazprom to shut supplies off to Ukraine, causing severe shortfalls in Europe.
The drama was repeated in January, when gas supplies to the EU were stalled for two weeks.
The EU has said it is interested in becoming less dependent on both Russia and Ukraine as energy suppliers.
On Thursday, EU leaders agreed to give 200 million euros to the "Nabucco" pipeline project, which is meant to bypass both countries and bring gas directly from the Caspian Sea to Europe.
The European Union and Ukraine are set to agree on a program of political reforms and physical repairs to the former Soviet state's gas network, officials said. But if Ukraine can't pay, Europe may not get any gas.
On Monday, March 23, Ukraine's President Viktor Yushchenko and Prime Minister Yulia Tymoshenko -- currently feuding ahead of presidential elections -- are set to meet the head of the EU's executive, Jose Manuel Barroso, and officials from the World Bank, European Investment Bank and energy companies in Brussels.
They are expected to sign a joint declaration committing Ukraine to reforming the rules for operating its gas network. That should pave the way for Western and Russian donors to invest in the renovation of the network, EU diplomats told DPA news agency.
Huge investments needed
One fifth of all the natural gas consumed in the EU flows through Ukraine's 13,500-kilometer (8,400-mile) network of gas pipelines. Some experts have said that the network will need some 2.5 billion euros ($3.4 billion) in investment over the next six years just to keep the pipes and pumping stations in working order.
Analysts say that Ukrainian monopoly Naftogaz, which runs the pipeline system, is having difficulties attracting the necessary investment due to a perceived lack of transparency both in its management and in Ukraine's top political leadership.
"I see a situation later this year where Naftogaz will not be able to meet its payment obligations to Gazprom because of its worsening financial situation," Robert Shetler-Jones from Swiss-based gas trader RosUkrEnergo (RUE) told Reuters news agency. RUE is owned by Russian gas giant Gazprom and two Ukrainian businessmen.
"If Ukraine continued not to pay, then this could have a serious impact on the European gas supplies," added Shetler-Jones.
A highly-charged issue
The question of Ukraine's gas transit system has been a highly-charged one ever since a row with Russia in 2005-2006 provoked Russian gas monopoly Gazprom to shut supplies off to Ukraine, causing severe shortfalls in Europe.
The drama was repeated in January, when gas supplies to the EU were stalled for two weeks.
The EU has said it is interested in becoming less dependent on both Russia and Ukraine as energy suppliers.
On Thursday, EU leaders agreed to give 200 million euros to the "Nabucco" pipeline project, which is meant to bypass both countries and bring gas directly from the Caspian Sea to Europe.
Saturday, March 21, 2009
Natural Gas Supply Abundant - Maybe a Glut
By CLIFFORD KRAUSS
Published: March 20, 2009 - New York Times
HOUSTON — The decline in crude oil prices gets all the headlines, but the first globalized natural gas glut in history is driving an even more drastic collapse in the cost of gas that cooks food, heats homes and runs factories in the United States and many other countries. Six giant plants capable of cooling and liquefying gas for export are due to come on line this year just as the economies of the Asian and European countries that import the most gas to run their industries are slowing.
Energy experts and company executives say that means loads of gas from Qatar, Egypt, Nigeria and Algeria that otherwise would be going to Japan, Korea, Taiwan and Spain are beginning to arrive in supertankers in the United States, even though there is a gas glut here, too.
With industrial and utility use of natural gas declining, gas prices in the United States have already declined by two-thirds since the summer. Prices are not likely to go down much more, experts say, but an increase in imports is likely to keep them low until the global economy recovers and drives demand back up.
That is good news for American consumers and many businesses, since gas provides about a fifth of the power generated by electric utilities and is a vital component for fertilizers, plastics and other industrial products. But it is bad news for proponents of energy independence, who cheered the boom in domestic gas drilling and production over the last four years.
Gas industry executives expect that liquefied gas imports into the United States will at least triple in the second half of this year. That comes as domestic producers have lowered their rig count in natural gas fields around the country by 50 percent in the last several months because of the fall in prices, leading to an expected drop in production by the end of the year.
Normally a decline in production would result in a rising gas price, leading to an eventual recovery in drilling. But energy executives say that increasing imports will probably delay a recovery in production, which until now depended almost entirely on national market forces.
“The United States used to have gas bubbles all by itself; now the world can have a gas bubble,” said Donald Hertzmark, a consultant who advises energy companies on international gas projects. “Over the next few years, a globalized gas market will exert a moderating influence on gas prices here in the United States.”
For Mr. Hertzmark the decline in natural gas prices will mean a major stimulus for the domestic and world economies. American oil executives see it another way.
Rodney Waller, a senior vice president at the oil and gas company Range Resources, called the expected surge in liquefied natural gas imports part of a “pile on” of problems including plummeting demand, prices and credit besetting companies that stretched their exploration and production budgets in recent years to meet expanding demand.
“Any time you push the price down, you push down the ability of U.S. independents to add reserves and production domestically,” he said. He warned that some small and midsize oil and gas companies “with debt that are in trouble now will simply get pushed over the brink.”
Natural gas is becoming a world commodity like oil. It is still loosely connected to world oil benchmark prices and its price, usually set by longer-term contracts everywhere except for the United States and Britain, can diverge widely from one continent to another. Until the last few years, liquefied natural gas was a high-priced necessity for countries that did not produce their own gas supplies or have access to piped reserves; but it now has become a cheap economic driver for countries like Japan with few energy resources.
But as more terminals have been built, the amount of gas that is shipped from one continent to another in giant tankers has climbed. And now the emergence of the global market in gas is about to take a giant leap.
The global capacity for liquefied natural gas exports of 200 million tons a year will increase by 25 percent with the completion of six new plants in Qatar, Russia, Indonesia and Yemen, totaling $48 billion in investments, and the upgrading of a seventh plant in Malaysia. National energy companies in those countries, assisted by ExxonMobil, Total, BP and Shell, rushed construction of those projects in recent years to satisfy the mushrooming appetite for energy around the world. More large plants are due on line in 2010 and 2011.
“We had many years of ever increasing demand so the world geared up for that, but what the world did not prepare for was an economic recession that is global in scope and in impact,” said Darcel L. Hulse, president and chief executive officer of Sempra LNG, a division of Sempra Energy that operates an import terminal in Mexico and is completing construction on a facility in Louisiana. “That is what has exacerbated the imbalance of supply and demand to such an excess.”
Some analysts say companies may slow completion of a few of the new export terminal projects. “The companies will want to bring them on line because they want to recoup their investments made over four to five years and pay off their loans,” said Nikos Tsafos, an analyst at PFC Energy, a firm that advises governments and energy companies.
The international gas glut and expected surge in gas imports represent a reversal from trends of less than a year ago when the world suffered a shortage of liquefied gas and prices spiked in the United States and elsewhere.
Natural gas in the United States costs a little over $4 per thousand cubic feet, down from a peak of more than $13 last year. Oil now costs a bit more than $51 a barrel, down from a peak of more than $145 in July. On average, world spot prices for liquefied natural gas cargoes have come down by more than two-thirds since last summer.
Published: March 20, 2009 - New York Times
HOUSTON — The decline in crude oil prices gets all the headlines, but the first globalized natural gas glut in history is driving an even more drastic collapse in the cost of gas that cooks food, heats homes and runs factories in the United States and many other countries. Six giant plants capable of cooling and liquefying gas for export are due to come on line this year just as the economies of the Asian and European countries that import the most gas to run their industries are slowing.
Energy experts and company executives say that means loads of gas from Qatar, Egypt, Nigeria and Algeria that otherwise would be going to Japan, Korea, Taiwan and Spain are beginning to arrive in supertankers in the United States, even though there is a gas glut here, too.
With industrial and utility use of natural gas declining, gas prices in the United States have already declined by two-thirds since the summer. Prices are not likely to go down much more, experts say, but an increase in imports is likely to keep them low until the global economy recovers and drives demand back up.
That is good news for American consumers and many businesses, since gas provides about a fifth of the power generated by electric utilities and is a vital component for fertilizers, plastics and other industrial products. But it is bad news for proponents of energy independence, who cheered the boom in domestic gas drilling and production over the last four years.
Gas industry executives expect that liquefied gas imports into the United States will at least triple in the second half of this year. That comes as domestic producers have lowered their rig count in natural gas fields around the country by 50 percent in the last several months because of the fall in prices, leading to an expected drop in production by the end of the year.
Normally a decline in production would result in a rising gas price, leading to an eventual recovery in drilling. But energy executives say that increasing imports will probably delay a recovery in production, which until now depended almost entirely on national market forces.
“The United States used to have gas bubbles all by itself; now the world can have a gas bubble,” said Donald Hertzmark, a consultant who advises energy companies on international gas projects. “Over the next few years, a globalized gas market will exert a moderating influence on gas prices here in the United States.”
For Mr. Hertzmark the decline in natural gas prices will mean a major stimulus for the domestic and world economies. American oil executives see it another way.
Rodney Waller, a senior vice president at the oil and gas company Range Resources, called the expected surge in liquefied natural gas imports part of a “pile on” of problems including plummeting demand, prices and credit besetting companies that stretched their exploration and production budgets in recent years to meet expanding demand.
“Any time you push the price down, you push down the ability of U.S. independents to add reserves and production domestically,” he said. He warned that some small and midsize oil and gas companies “with debt that are in trouble now will simply get pushed over the brink.”
Natural gas is becoming a world commodity like oil. It is still loosely connected to world oil benchmark prices and its price, usually set by longer-term contracts everywhere except for the United States and Britain, can diverge widely from one continent to another. Until the last few years, liquefied natural gas was a high-priced necessity for countries that did not produce their own gas supplies or have access to piped reserves; but it now has become a cheap economic driver for countries like Japan with few energy resources.
But as more terminals have been built, the amount of gas that is shipped from one continent to another in giant tankers has climbed. And now the emergence of the global market in gas is about to take a giant leap.
The global capacity for liquefied natural gas exports of 200 million tons a year will increase by 25 percent with the completion of six new plants in Qatar, Russia, Indonesia and Yemen, totaling $48 billion in investments, and the upgrading of a seventh plant in Malaysia. National energy companies in those countries, assisted by ExxonMobil, Total, BP and Shell, rushed construction of those projects in recent years to satisfy the mushrooming appetite for energy around the world. More large plants are due on line in 2010 and 2011.
“We had many years of ever increasing demand so the world geared up for that, but what the world did not prepare for was an economic recession that is global in scope and in impact,” said Darcel L. Hulse, president and chief executive officer of Sempra LNG, a division of Sempra Energy that operates an import terminal in Mexico and is completing construction on a facility in Louisiana. “That is what has exacerbated the imbalance of supply and demand to such an excess.”
Some analysts say companies may slow completion of a few of the new export terminal projects. “The companies will want to bring them on line because they want to recoup their investments made over four to five years and pay off their loans,” said Nikos Tsafos, an analyst at PFC Energy, a firm that advises governments and energy companies.
The international gas glut and expected surge in gas imports represent a reversal from trends of less than a year ago when the world suffered a shortage of liquefied gas and prices spiked in the United States and elsewhere.
Natural gas in the United States costs a little over $4 per thousand cubic feet, down from a peak of more than $13 last year. Oil now costs a bit more than $51 a barrel, down from a peak of more than $145 in July. On average, world spot prices for liquefied natural gas cargoes have come down by more than two-thirds since last summer.
Friday, March 20, 2009
Colorado Consumer Natural Gas Down 31%
DENVER - Colorado's largest utility says the price it charges for natural gas will fall by 31 percent next month compared to the current month.
Xcel Energy Inc. said Wednesday it submitted the proposed rate cut to state regulators at the Colorado Public Utilities Commission.
Xcel says the lower gas price combined with warmer weather could bring a 41 to 45 percent decline in residential and small-business gas bills in April compared with March.
The company said gas prices are falling because the recession has reduced demand and because so much gas is now in storage waiting to be used.
Xcel is based in Minneapolis.
Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
Xcel Energy Inc. said Wednesday it submitted the proposed rate cut to state regulators at the Colorado Public Utilities Commission.
Xcel says the lower gas price combined with warmer weather could bring a 41 to 45 percent decline in residential and small-business gas bills in April compared with March.
The company said gas prices are falling because the recession has reduced demand and because so much gas is now in storage waiting to be used.
Xcel is based in Minneapolis.
Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
Thursday, March 19, 2009
Natural Gas Customers in Missouri Looking for 25% Rate Cut
The sluggish economy has produced at least one ray of good news for natural gas customers. AmerenUE yesterday filed a request with the Missouri Public Service Commission for a 25 percent rate reduction for residential natural gas service.
Susan Gallagher, AmerenUE spokeswoman, said lower demand nationwide for natural gas is one reason for the second rate reduction in five months for the company’s 127,000 natural gas customers. Electric rates will not be affected.
“When you see a recession like this and demand back off, the pricing also drops in response to that,” Gallagher said.
Kevin Kelly, PSC public information administrator, said commission staff will review the rate-change request, which likely will be on the commission’s March 25 agenda.
AmerenUE has requested that the new rate take effect April 1. This would be Ameren’s second rate reduction since October, reflecting lower wholesale costs from the company’s suppliers.
The new “purchased gas adjustment,” or PGA, rate would decrease from approximately 99 cents per hundred cubic feet of natural gas to 75 cents per hundred cubic feet. Gallagher said customers in the company’s service areas will experience varying savings because of usage differences. For Central Missouri customers, the change in the PGA will result in an average decrease in a customer’s total bill, excluding taxes, of about $6.29 per month during the “non-winter” usage period of April through October.
The rate was reduced from $1.10 per hundred cubic feet to 99 cents last fall. The rate was reduced despite higher wholesale supplier rates, which have decreased in the past four to six weeks, Gallagher said.
The new rate would be in effect until at least June, Gallagher said. Any changes after that would be a direct reflection of wholesale costs.
Thomas Moss, AmerenUE president and CEO, said in a news release that the company’s long-term contracts for wholesale natural gas and the use of storage are factors in controlling market volatility.
The PGA reflects the wholesale cost of natural gas from the company’s suppliers, plus the cost of transporting that gas to the AmerenUE system. Since the wholesale costs change daily, the PGA also includes an adjustment to compensate for any under- or over-collection of actual costs in previous periods. AmerenUE passes these supplier costs on to customers, dollar for dollar, through the PGA.
For residential customers, the PGA accounts for about two-thirds of an average gas bill, excluding taxes, so any change in the PGA can have a significant impact on the total price customers pay.
Kelly said PSC staff will review AmerenUE’s rate request to ensure the accuracy of costs and compliance with current regulations as well as whether the request reflects current market conditions.
Reach Jodie Jackson Jr. at 573-815-1713 or e-mail jjackson@columbiatribune.com.
Susan Gallagher, AmerenUE spokeswoman, said lower demand nationwide for natural gas is one reason for the second rate reduction in five months for the company’s 127,000 natural gas customers. Electric rates will not be affected.
“When you see a recession like this and demand back off, the pricing also drops in response to that,” Gallagher said.
Kevin Kelly, PSC public information administrator, said commission staff will review the rate-change request, which likely will be on the commission’s March 25 agenda.
AmerenUE has requested that the new rate take effect April 1. This would be Ameren’s second rate reduction since October, reflecting lower wholesale costs from the company’s suppliers.
The new “purchased gas adjustment,” or PGA, rate would decrease from approximately 99 cents per hundred cubic feet of natural gas to 75 cents per hundred cubic feet. Gallagher said customers in the company’s service areas will experience varying savings because of usage differences. For Central Missouri customers, the change in the PGA will result in an average decrease in a customer’s total bill, excluding taxes, of about $6.29 per month during the “non-winter” usage period of April through October.
The rate was reduced from $1.10 per hundred cubic feet to 99 cents last fall. The rate was reduced despite higher wholesale supplier rates, which have decreased in the past four to six weeks, Gallagher said.
The new rate would be in effect until at least June, Gallagher said. Any changes after that would be a direct reflection of wholesale costs.
Thomas Moss, AmerenUE president and CEO, said in a news release that the company’s long-term contracts for wholesale natural gas and the use of storage are factors in controlling market volatility.
The PGA reflects the wholesale cost of natural gas from the company’s suppliers, plus the cost of transporting that gas to the AmerenUE system. Since the wholesale costs change daily, the PGA also includes an adjustment to compensate for any under- or over-collection of actual costs in previous periods. AmerenUE passes these supplier costs on to customers, dollar for dollar, through the PGA.
For residential customers, the PGA accounts for about two-thirds of an average gas bill, excluding taxes, so any change in the PGA can have a significant impact on the total price customers pay.
Kelly said PSC staff will review AmerenUE’s rate request to ensure the accuracy of costs and compliance with current regulations as well as whether the request reflects current market conditions.
Reach Jodie Jackson Jr. at 573-815-1713 or e-mail jjackson@columbiatribune.com.
Wednesday, March 18, 2009
Shell Wants to Develop Iraq Natural Gas
March 17 (Bloomberg) -- Royal Dutch Shell Plc, Europe’s biggest oil company by market value, failed to match all of last year’s oil and gas production with new discoveries, in contrast to smaller rival BP Plc.
Shell’s reserve replacement ratio, including oil sands, fell to 95 percent in 2008 from 124 percent the previous year, the Hague-based company said today in a strategy update. That excludes acquisitions, divestments and year-end price effects.
Earlier this month, BP said it replaced 121 percent of reserves. Shell’s Chief Financial Officer Peter Voser pledged to pay out around $10 billion in dividends this year, even as the company funds the biggest spending program among its peers to revive production growth against a backdrop of falling oil prices and the global recession.
“They came out with a commitment to invest in growth and with the capacity to support cash returns,” Jason Kenney, an Edinburgh-based analyst at ING Wholesale Banking, said in a telephone interview. “I would have liked to have seen an increase in reserves although that is on the horizon with Shell’s projects.” He has a “hold” rating on the stock.
Including year-end price effects, Shell’s reserve replacement ratio was 97 percent last year. The reserve ratio reported to the U.S. Securities and Exchange Commission standards was 98 percent.
‘Good Enough’
“It is not 100 percent, but it is good enough,” Aymeric de Villaret, a Paris-based analyst at Societe Generale SA, said in a telephone interview. He has a “buy” rating on Shell stock.
Shell dropped 21 pence, or 1.3 percent, to 1,619 pence in London. The shares have fallen 10 percent this year, compared with a 13 percent drop for BP.
The company added 1.2 billion barrels of oil equivalent to its non-proven resources last year at a cost of $2 to $3 a barrel. Total net reserves were unchanged at 11.9 billion barrels of oil equivalent at the end of last year.
The reserve replacement ratio of 126 percent from 2006 to 2008 was described as “satisfactory” by Chief Executive Officer Jeroen Van der Veer, who’s due to be replaced by Voser in July.
Shell will increase dividend payments in line with inflation, while the company’s “likely gearing level” is comfortable, according to Voser.
Dividend Growth
Its quarterly dividends are “normally” similar to the first-quarter payout, Voser said on a conference call with reporters. The company has already said it will raise its dividend for the first three months of 2009 by 5 percent to 42 cents.
Shell has “huge scope” to drive costs in exploration and production lower, according to Malcolm Brinded, executive director for the upstream business. Costs may be reduced by as much as 30 percent to 50 percent, he told analysts on a Web cast.
The Perdido prospect in the Gulf of Mexico and the BC-10 project in Brazil are on schedule to meet output forecasts. Perdido is now likely to start up in “early 2010,” Brinded said.
Nigeria remains an “extremely important” resource base for Shell’s long-term growth even though militant attacks have curbed output since 2006, Brinded added. The oil major plans to start up its Bonga NW and Forcados Yokri Ip projects in Nigeria from 2012 onwards.
Iraq Agreement
Shell hopes to sign a definitive agreement to develop natural gas projects in Iraq before long, according to Linda Cook, who heads up the gas and power division.
Shell will maintain project investment between $31 billion and $32 billion this year after cutting spending in 2008.
The company reiterated plans to invest in new fields with a capacity of about 1 million barrels of oil and gas equivalent a day. It forecasts annual production growth of 2 percent to 3 percent in the early years of the next decade to 2012.
Shell will invest about $3 billion on exploration this year, less than originally expected, van der Veer said.
Output fell for a sixth consecutive year in 2008 and Shell plans to “rejuvenate” production through so-called unconventional projects including a gas-to-liquids venture in Qatar and oil sands fields in Canada.
‘Small Part’
Renewable sources of energy will form a ‘small part” of the equation in respect of worldwide fuel supplies in coming years, the CEO said. Instead, the company will focus on biofuels.
Total oil and gas production may drop for a seventh year in 2009 before rebounding in 2010, Shell said.
In an annual report, Shell said it’s under investigation by the SEC and the Department of Justice for violations of the U.S. Foreign Corrupt Practices Act.
Last year, Shell said its U.S. subsidiary, Shell Oil, was contacted by the Justice Department with regard to using freight forwarding company Panalpina Inc. in a way that may have violated the act.
To contact the reporter on this story: Fred Pals in Amsterdam at fpals@bloomberg.net
Last Updated: March 17, 2009 13:30 EDT
Shell’s reserve replacement ratio, including oil sands, fell to 95 percent in 2008 from 124 percent the previous year, the Hague-based company said today in a strategy update. That excludes acquisitions, divestments and year-end price effects.
Earlier this month, BP said it replaced 121 percent of reserves. Shell’s Chief Financial Officer Peter Voser pledged to pay out around $10 billion in dividends this year, even as the company funds the biggest spending program among its peers to revive production growth against a backdrop of falling oil prices and the global recession.
“They came out with a commitment to invest in growth and with the capacity to support cash returns,” Jason Kenney, an Edinburgh-based analyst at ING Wholesale Banking, said in a telephone interview. “I would have liked to have seen an increase in reserves although that is on the horizon with Shell’s projects.” He has a “hold” rating on the stock.
Including year-end price effects, Shell’s reserve replacement ratio was 97 percent last year. The reserve ratio reported to the U.S. Securities and Exchange Commission standards was 98 percent.
‘Good Enough’
“It is not 100 percent, but it is good enough,” Aymeric de Villaret, a Paris-based analyst at Societe Generale SA, said in a telephone interview. He has a “buy” rating on Shell stock.
Shell dropped 21 pence, or 1.3 percent, to 1,619 pence in London. The shares have fallen 10 percent this year, compared with a 13 percent drop for BP.
The company added 1.2 billion barrels of oil equivalent to its non-proven resources last year at a cost of $2 to $3 a barrel. Total net reserves were unchanged at 11.9 billion barrels of oil equivalent at the end of last year.
The reserve replacement ratio of 126 percent from 2006 to 2008 was described as “satisfactory” by Chief Executive Officer Jeroen Van der Veer, who’s due to be replaced by Voser in July.
Shell will increase dividend payments in line with inflation, while the company’s “likely gearing level” is comfortable, according to Voser.
Dividend Growth
Its quarterly dividends are “normally” similar to the first-quarter payout, Voser said on a conference call with reporters. The company has already said it will raise its dividend for the first three months of 2009 by 5 percent to 42 cents.
Shell has “huge scope” to drive costs in exploration and production lower, according to Malcolm Brinded, executive director for the upstream business. Costs may be reduced by as much as 30 percent to 50 percent, he told analysts on a Web cast.
The Perdido prospect in the Gulf of Mexico and the BC-10 project in Brazil are on schedule to meet output forecasts. Perdido is now likely to start up in “early 2010,” Brinded said.
Nigeria remains an “extremely important” resource base for Shell’s long-term growth even though militant attacks have curbed output since 2006, Brinded added. The oil major plans to start up its Bonga NW and Forcados Yokri Ip projects in Nigeria from 2012 onwards.
Iraq Agreement
Shell hopes to sign a definitive agreement to develop natural gas projects in Iraq before long, according to Linda Cook, who heads up the gas and power division.
Shell will maintain project investment between $31 billion and $32 billion this year after cutting spending in 2008.
The company reiterated plans to invest in new fields with a capacity of about 1 million barrels of oil and gas equivalent a day. It forecasts annual production growth of 2 percent to 3 percent in the early years of the next decade to 2012.
Shell will invest about $3 billion on exploration this year, less than originally expected, van der Veer said.
Output fell for a sixth consecutive year in 2008 and Shell plans to “rejuvenate” production through so-called unconventional projects including a gas-to-liquids venture in Qatar and oil sands fields in Canada.
‘Small Part’
Renewable sources of energy will form a ‘small part” of the equation in respect of worldwide fuel supplies in coming years, the CEO said. Instead, the company will focus on biofuels.
Total oil and gas production may drop for a seventh year in 2009 before rebounding in 2010, Shell said.
In an annual report, Shell said it’s under investigation by the SEC and the Department of Justice for violations of the U.S. Foreign Corrupt Practices Act.
Last year, Shell said its U.S. subsidiary, Shell Oil, was contacted by the Justice Department with regard to using freight forwarding company Panalpina Inc. in a way that may have violated the act.
To contact the reporter on this story: Fred Pals in Amsterdam at fpals@bloomberg.net
Last Updated: March 17, 2009 13:30 EDT
Qatar Natural Gas Meca Economy
March 17 (Bloomberg) -- As Dubai scales back plans to build a waterfront development twice the size of Hong Kong Island, 30,000 workers off the coast of Doha in Qatar are constructing a $14 billion luxury residential project called the Pearl.
The first residents will move into condominiums costing as much as $1.4 million on a man-made island this summer, and boutiques including Sonia Rykiel and Stefano Ricci are already doing business on the marina looking onto the Persian Gulf. From the quayside, where yachts are moored, building sites are visible in the distance with cranes stretching up into the sky.
Gas-rich Qatar, the Gulf’s fastest-growing economy, is spending more than $100 billion in the next three years on projects including a new financial district and international airport. This comes as Dubai suffers a real-estate crash spurred by its dependence on banking and tourism, and the region’s oil- producing economies, such as Saudi Arabia, dip into reserves to avoid recession.
“Qatar doesn’t seem to have any problems; the money is there,” said Lionel Scharly, chairman of the French luxury design company Scharly Designer Studio. After visiting Dubai in December and deciding not to do business, he is bidding for work at the Pearl and plans to open an office in Doha. “In Dubai, everyone is talking about the crisis,” he said from Paris.
A sheikhdom smaller than the U.S. state of Connecticut, with a population of about 1 million, Qatar in 2008 had the world’s second-highest per capita income, at $101,000, after Liechtenstein. It is hurt less than neighbors by the slump in oil prices to $47 a barrel, from more than $147 last July, because of a bet its rulers made 25 years ago: natural gas.
LNG Exporter
Today, Qatar is the world’s largest exporter of liquefied natural gas. Most of the LNG is sold on 25-year contracts, which although renegotiable, aren’t subject to the same price volatility as oil. LNG prices paid by Japan, the biggest importer, have fallen 13 percent since July, compared with the 68 percent plunge in crude.
With the world’s third-largest natural-gas reserves, after Russia and Iran, Qatar plans to more than double LNG output to 77 million tons a year in 2011. It will earn more than $153 billion in gas sales over the next three years, according to the International Monetary Fund.
That means the government will continue to post budget surpluses and can finance 60 percent of the planned investments, according to the Doha-based unit of HSBC Holdings Plc.
Science and Technology
Construction of a deepwater port is to start next year amid expansion of a science and technology park and an education hub. Qatar is also building an energy quarter and new installations for LNG exports in partnership with companies including Royal Dutch Shell Plc, Exxon Mobil Corp. and ConocoPhillips.
Sheikh Hamad bin Khalifa al-Thani, who deposed his father in a bloodless coup in 1995, accelerated the development of gas by plowing billions of dollars into building facilities to export LNG, which is natural gas chilled to liquid form and then transported by ship. By the end of 2010, 14 LNG plants are due to be operational.
The leadership “has put the country onto a very fast growth rate with measured steps,” said Reiji Joseph, director of corporate finance at the Qatari branch of KPMG, the auditing and consulting firm.
At the Pearl, two young women wearing jeans and high heels under traditional black Islamic robes were shopping at French luxury retailer Hermes International SCA. Leaving the store with shopping bags and orange leather Hermes handbags under their arms, they waited for a chauffeur-driven car to pick them up. In the city’s restored Souq Waqif, Doha’s oldest market, diners crowded tables on the terraces of upscale restaurants.
World Exception
While the world experiences recession in 2009, Qatar’s economy is forecast by the IMF to expand at the fastest rate in more than a decade -- 29 percent. The median growth estimate of seven economists surveyed by Bloomberg is 9 percent.
Saudi Arabia, the largest Arab economy and the world’s top oil exporter, expects a 65 billion-riyal ($17 billion) deficit this year, after posting a record budget surplus of 590 billion riyals in 2008. Standard Chartered Plc in January cut its growth forecast for the kingdom to 1 percent from 2 percent.
The United Arab Emirates economy, meanwhile, will contract by between 0.5 and 1 percent in the first half before recovering to annualized growth of 0.5 percent, Standard Chartered says. Dubai, the second-biggest U.A.E. sheikhdom, ran up $80 billion of debts to banks to become a financial and tourism hub.
Villas on Hold
Government-owned real-estate developer Nakheel PJSC has financing for only 700 villas at Dubai’s Waterfront project, after planning to build 10,000. Emirates, the sheikhdom’s airline, announced on March 11 that it will reduce weekly flights to Shanghai and Beijing.
State-owned Qatar Airways Ltd. said the same day that it will add six routes to Australian and Indian cities next winter and raise frequency on other routes at the end of this month.
The Qatari arm of Vinci SA, the world’s biggest construction company, got 2,500 applications last month when it advertised in Dubai, 400 kilometers (250 miles) away, for 100 white-collar jobs. The company, based near Paris, is about to start building the world’s longest bridge, between Qatar and Bahrain. The $4.5 billion project is expected to employ 10,000 people.
“It’s much easier to hire than it was a year ago,” said Gerald Mille, chief executive officer of Vinci’s joint venture with state-owned Qatari Diar. “We put the ads in Dubai and it worked immediately.”
-- With reporting by Tim Barwell in London. Editors: Anne Swardson, Peter Hirschberg
The first residents will move into condominiums costing as much as $1.4 million on a man-made island this summer, and boutiques including Sonia Rykiel and Stefano Ricci are already doing business on the marina looking onto the Persian Gulf. From the quayside, where yachts are moored, building sites are visible in the distance with cranes stretching up into the sky.
Gas-rich Qatar, the Gulf’s fastest-growing economy, is spending more than $100 billion in the next three years on projects including a new financial district and international airport. This comes as Dubai suffers a real-estate crash spurred by its dependence on banking and tourism, and the region’s oil- producing economies, such as Saudi Arabia, dip into reserves to avoid recession.
“Qatar doesn’t seem to have any problems; the money is there,” said Lionel Scharly, chairman of the French luxury design company Scharly Designer Studio. After visiting Dubai in December and deciding not to do business, he is bidding for work at the Pearl and plans to open an office in Doha. “In Dubai, everyone is talking about the crisis,” he said from Paris.
A sheikhdom smaller than the U.S. state of Connecticut, with a population of about 1 million, Qatar in 2008 had the world’s second-highest per capita income, at $101,000, after Liechtenstein. It is hurt less than neighbors by the slump in oil prices to $47 a barrel, from more than $147 last July, because of a bet its rulers made 25 years ago: natural gas.
LNG Exporter
Today, Qatar is the world’s largest exporter of liquefied natural gas. Most of the LNG is sold on 25-year contracts, which although renegotiable, aren’t subject to the same price volatility as oil. LNG prices paid by Japan, the biggest importer, have fallen 13 percent since July, compared with the 68 percent plunge in crude.
With the world’s third-largest natural-gas reserves, after Russia and Iran, Qatar plans to more than double LNG output to 77 million tons a year in 2011. It will earn more than $153 billion in gas sales over the next three years, according to the International Monetary Fund.
That means the government will continue to post budget surpluses and can finance 60 percent of the planned investments, according to the Doha-based unit of HSBC Holdings Plc.
Science and Technology
Construction of a deepwater port is to start next year amid expansion of a science and technology park and an education hub. Qatar is also building an energy quarter and new installations for LNG exports in partnership with companies including Royal Dutch Shell Plc, Exxon Mobil Corp. and ConocoPhillips.
Sheikh Hamad bin Khalifa al-Thani, who deposed his father in a bloodless coup in 1995, accelerated the development of gas by plowing billions of dollars into building facilities to export LNG, which is natural gas chilled to liquid form and then transported by ship. By the end of 2010, 14 LNG plants are due to be operational.
The leadership “has put the country onto a very fast growth rate with measured steps,” said Reiji Joseph, director of corporate finance at the Qatari branch of KPMG, the auditing and consulting firm.
At the Pearl, two young women wearing jeans and high heels under traditional black Islamic robes were shopping at French luxury retailer Hermes International SCA. Leaving the store with shopping bags and orange leather Hermes handbags under their arms, they waited for a chauffeur-driven car to pick them up. In the city’s restored Souq Waqif, Doha’s oldest market, diners crowded tables on the terraces of upscale restaurants.
World Exception
While the world experiences recession in 2009, Qatar’s economy is forecast by the IMF to expand at the fastest rate in more than a decade -- 29 percent. The median growth estimate of seven economists surveyed by Bloomberg is 9 percent.
Saudi Arabia, the largest Arab economy and the world’s top oil exporter, expects a 65 billion-riyal ($17 billion) deficit this year, after posting a record budget surplus of 590 billion riyals in 2008. Standard Chartered Plc in January cut its growth forecast for the kingdom to 1 percent from 2 percent.
The United Arab Emirates economy, meanwhile, will contract by between 0.5 and 1 percent in the first half before recovering to annualized growth of 0.5 percent, Standard Chartered says. Dubai, the second-biggest U.A.E. sheikhdom, ran up $80 billion of debts to banks to become a financial and tourism hub.
Villas on Hold
Government-owned real-estate developer Nakheel PJSC has financing for only 700 villas at Dubai’s Waterfront project, after planning to build 10,000. Emirates, the sheikhdom’s airline, announced on March 11 that it will reduce weekly flights to Shanghai and Beijing.
State-owned Qatar Airways Ltd. said the same day that it will add six routes to Australian and Indian cities next winter and raise frequency on other routes at the end of this month.
The Qatari arm of Vinci SA, the world’s biggest construction company, got 2,500 applications last month when it advertised in Dubai, 400 kilometers (250 miles) away, for 100 white-collar jobs. The company, based near Paris, is about to start building the world’s longest bridge, between Qatar and Bahrain. The $4.5 billion project is expected to employ 10,000 people.
“It’s much easier to hire than it was a year ago,” said Gerald Mille, chief executive officer of Vinci’s joint venture with state-owned Qatari Diar. “We put the ads in Dubai and it worked immediately.”
-- With reporting by Tim Barwell in London. Editors: Anne Swardson, Peter Hirschberg
Tuesday, March 17, 2009
Natural Gas Exploration Up Before the Hill
By BEN GEMAN AND NOELLE STRAUB, Greenwire
Published: March 16, 2009 - New York Times
Senior Interior Department officials will be on Capitol Hill tomorrow to discuss oil and gas drilling and renewable energy development on land and offshore as momentum builds toward possible comprehensive enerIn the House, the Energy and Mineral Resources Subcommittee will hold the latest in a series of hearings on petroleum development on the outer continental shelf, or OCS, that will feature an official with the Minerals Management Service, Interior's acting inspector general and a Government Accountability Office expert.
The House hearing is expected to explore allegations that oil companies are failing to produce energy from tens of millions of acres of existing leases on federal lands and waters even as the industry is pressing for new areas to be made available, among other OCS drilling issues.
Interior Secretary Ken Salazar is slated to appear tomorrow before the Senate Energy and Natural Resources Committee, where Chairman Jeff Bingaman (D-N.M.) plans to introduce and mark up a broad-based energy bill before the Easter recess. Bingaman's bill is expected to cover a range of energy efficiency, transmission, research and development issues.
But it remains unclear how Bingaman will address regulations that cover oil and natural gas on land or offshore. "The comprehensive energy bill we are working on will have an oil and gas supply component to it," said Bingaman spokesman Bill Wicker, declining to provide further details.
It appears unlikely the bill will try and redraw lines regarding where leasing can and cannot occur, which is in flux following the expiration of OCS leasing bans last year.
The Obama administration is still formulating its position on where new leasing may be allowed. In February, Salazar delayed a Bush-era proposal to allow much wider coastal leasing to study the issue further, while Bingaman in January said he would "like to know what their view is before we settle on ours."
Beyond leasing questions, a host of royalty and other issues surrounding oil and gas development are in play.
President Obama's fiscal 2010 budget plan calls for several changes, including new fees on nonproducing Gulf of Mexico leases, part of a "use it or lose it" strategy Democrats say is needed to encourage production from acreage already offered for leasing.
House Natural Resources Chairman Nick Rahall (D-W.Va.) has championed plans that would prevent companies from obtaining new federal leases unless they are already producing from their current leases or "diligently developing" them.
Industry officials have derided the idea as a gimmick. A top Chevron Corp. executive, in testimony to Rahall's committee last month, said the "existing regulatory process and basic economics ensure that leases are developed in a diligent manner."
Other plans in Obama's budget include new fees on companies to fund processing of permits for oil and gas drilling on public lands, and increasing the return from oil and gas production by revising the royalty system and adjusting rates.
Tough questions
Salazar will likely face some tough questions about onshore energy development from Republicans, who say his early moves as secretary have all been aimed at slowing production.
In early February, Interior canceled oil and gas leases on 77 parcels of federal land in Utah and launched a review to see whether they were appropriate for leasing. Also last month, Salazar halted Bush administration oil shale research and development leasing efforts, saying he would offer "new and fair" lease terms after seeking public input.
Salazar is still reviewing commercial oil shale regulations for millions of acres in the West that were put in place months before Bush left office, but he has been openly critical of them.
Senate Energy and Natural Resources Committee ranking member Lisa Murkowski (R-Alaska) used the confirmation hearing for Interior deputy secretary nominee David Hayes last week to rail against Obama's energy policies, saying the administration's 2010 budget blueprint is "a war on domestic production." She said punishing the oil and gas industry will not bring the age of renewable energy any faster.gy bills in the House and Senate.
Published: March 16, 2009 - New York Times
Senior Interior Department officials will be on Capitol Hill tomorrow to discuss oil and gas drilling and renewable energy development on land and offshore as momentum builds toward possible comprehensive enerIn the House, the Energy and Mineral Resources Subcommittee will hold the latest in a series of hearings on petroleum development on the outer continental shelf, or OCS, that will feature an official with the Minerals Management Service, Interior's acting inspector general and a Government Accountability Office expert.
The House hearing is expected to explore allegations that oil companies are failing to produce energy from tens of millions of acres of existing leases on federal lands and waters even as the industry is pressing for new areas to be made available, among other OCS drilling issues.
Interior Secretary Ken Salazar is slated to appear tomorrow before the Senate Energy and Natural Resources Committee, where Chairman Jeff Bingaman (D-N.M.) plans to introduce and mark up a broad-based energy bill before the Easter recess. Bingaman's bill is expected to cover a range of energy efficiency, transmission, research and development issues.
But it remains unclear how Bingaman will address regulations that cover oil and natural gas on land or offshore. "The comprehensive energy bill we are working on will have an oil and gas supply component to it," said Bingaman spokesman Bill Wicker, declining to provide further details.
It appears unlikely the bill will try and redraw lines regarding where leasing can and cannot occur, which is in flux following the expiration of OCS leasing bans last year.
The Obama administration is still formulating its position on where new leasing may be allowed. In February, Salazar delayed a Bush-era proposal to allow much wider coastal leasing to study the issue further, while Bingaman in January said he would "like to know what their view is before we settle on ours."
Beyond leasing questions, a host of royalty and other issues surrounding oil and gas development are in play.
President Obama's fiscal 2010 budget plan calls for several changes, including new fees on nonproducing Gulf of Mexico leases, part of a "use it or lose it" strategy Democrats say is needed to encourage production from acreage already offered for leasing.
House Natural Resources Chairman Nick Rahall (D-W.Va.) has championed plans that would prevent companies from obtaining new federal leases unless they are already producing from their current leases or "diligently developing" them.
Industry officials have derided the idea as a gimmick. A top Chevron Corp. executive, in testimony to Rahall's committee last month, said the "existing regulatory process and basic economics ensure that leases are developed in a diligent manner."
Other plans in Obama's budget include new fees on companies to fund processing of permits for oil and gas drilling on public lands, and increasing the return from oil and gas production by revising the royalty system and adjusting rates.
Tough questions
Salazar will likely face some tough questions about onshore energy development from Republicans, who say his early moves as secretary have all been aimed at slowing production.
In early February, Interior canceled oil and gas leases on 77 parcels of federal land in Utah and launched a review to see whether they were appropriate for leasing. Also last month, Salazar halted Bush administration oil shale research and development leasing efforts, saying he would offer "new and fair" lease terms after seeking public input.
Salazar is still reviewing commercial oil shale regulations for millions of acres in the West that were put in place months before Bush left office, but he has been openly critical of them.
Senate Energy and Natural Resources Committee ranking member Lisa Murkowski (R-Alaska) used the confirmation hearing for Interior deputy secretary nominee David Hayes last week to rail against Obama's energy policies, saying the administration's 2010 budget blueprint is "a war on domestic production." She said punishing the oil and gas industry will not bring the age of renewable energy any faster.gy bills in the House and Senate.
Natural Gas Exploration Up Before the Hill
By BEN GEMAN AND NOELLE STRAUB, Greenwire
Published: March 16, 2009 - New York Times
Senior Interior Department officials will be on Capitol Hill tomorrow to discuss oil and gas drilling and renewable energy development on land and offshore as momentum builds toward possible comprehensive enerIn the House, the Energy and Mineral Resources Subcommittee will hold the latest in a series of hearings on petroleum development on the outer continental shelf, or OCS, that will feature an official with the Minerals Management Service, Interior's acting inspector general and a Government Accountability Office expert.
The House hearing is expected to explore allegations that oil companies are failing to produce energy from tens of millions of acres of existing leases on federal lands and waters even as the industry is pressing for new areas to be made available, among other OCS drilling issues.
Interior Secretary Ken Salazar is slated to appear tomorrow before the Senate Energy and Natural Resources Committee, where Chairman Jeff Bingaman (D-N.M.) plans to introduce and mark up a broad-based energy bill before the Easter recess. Bingaman's bill is expected to cover a range of energy efficiency, transmission, research and development issues.
But it remains unclear how Bingaman will address regulations that cover oil and natural gas on land or offshore. "The comprehensive energy bill we are working on will have an oil and gas supply component to it," said Bingaman spokesman Bill Wicker, declining to provide further details.
It appears unlikely the bill will try and redraw lines regarding where leasing can and cannot occur, which is in flux following the expiration of OCS leasing bans last year.
The Obama administration is still formulating its position on where new leasing may be allowed. In February, Salazar delayed a Bush-era proposal to allow much wider coastal leasing to study the issue further, while Bingaman in January said he would "like to know what their view is before we settle on ours."
Beyond leasing questions, a host of royalty and other issues surrounding oil and gas development are in play.
President Obama's fiscal 2010 budget plan calls for several changes, including new fees on nonproducing Gulf of Mexico leases, part of a "use it or lose it" strategy Democrats say is needed to encourage production from acreage already offered for leasing.
House Natural Resources Chairman Nick Rahall (D-W.Va.) has championed plans that would prevent companies from obtaining new federal leases unless they are already producing from their current leases or "diligently developing" them.
Industry officials have derided the idea as a gimmick. A top Chevron Corp. executive, in testimony to Rahall's committee last month, said the "existing regulatory process and basic economics ensure that leases are developed in a diligent manner."
Other plans in Obama's budget include new fees on companies to fund processing of permits for oil and gas drilling on public lands, and increasing the return from oil and gas production by revising the royalty system and adjusting rates.
Tough questions
Salazar will likely face some tough questions about onshore energy development from Republicans, who say his early moves as secretary have all been aimed at slowing production.
In early February, Interior canceled oil and gas leases on 77 parcels of federal land in Utah and launched a review to see whether they were appropriate for leasing. Also last month, Salazar halted Bush administration oil shale research and development leasing efforts, saying he would offer "new and fair" lease terms after seeking public input.
Salazar is still reviewing commercial oil shale regulations for millions of acres in the West that were put in place months before Bush left office, but he has been openly critical of them.
Senate Energy and Natural Resources Committee ranking member Lisa Murkowski (R-Alaska) used the confirmation hearing for Interior deputy secretary nominee David Hayes last week to rail against Obama's energy policies, saying the administration's 2010 budget blueprint is "a war on domestic production." She said punishing the oil and gas industry will not bring the age of renewable energy any faster.gy bills in the House and Senate.
Published: March 16, 2009 - New York Times
Senior Interior Department officials will be on Capitol Hill tomorrow to discuss oil and gas drilling and renewable energy development on land and offshore as momentum builds toward possible comprehensive enerIn the House, the Energy and Mineral Resources Subcommittee will hold the latest in a series of hearings on petroleum development on the outer continental shelf, or OCS, that will feature an official with the Minerals Management Service, Interior's acting inspector general and a Government Accountability Office expert.
The House hearing is expected to explore allegations that oil companies are failing to produce energy from tens of millions of acres of existing leases on federal lands and waters even as the industry is pressing for new areas to be made available, among other OCS drilling issues.
Interior Secretary Ken Salazar is slated to appear tomorrow before the Senate Energy and Natural Resources Committee, where Chairman Jeff Bingaman (D-N.M.) plans to introduce and mark up a broad-based energy bill before the Easter recess. Bingaman's bill is expected to cover a range of energy efficiency, transmission, research and development issues.
But it remains unclear how Bingaman will address regulations that cover oil and natural gas on land or offshore. "The comprehensive energy bill we are working on will have an oil and gas supply component to it," said Bingaman spokesman Bill Wicker, declining to provide further details.
It appears unlikely the bill will try and redraw lines regarding where leasing can and cannot occur, which is in flux following the expiration of OCS leasing bans last year.
The Obama administration is still formulating its position on where new leasing may be allowed. In February, Salazar delayed a Bush-era proposal to allow much wider coastal leasing to study the issue further, while Bingaman in January said he would "like to know what their view is before we settle on ours."
Beyond leasing questions, a host of royalty and other issues surrounding oil and gas development are in play.
President Obama's fiscal 2010 budget plan calls for several changes, including new fees on nonproducing Gulf of Mexico leases, part of a "use it or lose it" strategy Democrats say is needed to encourage production from acreage already offered for leasing.
House Natural Resources Chairman Nick Rahall (D-W.Va.) has championed plans that would prevent companies from obtaining new federal leases unless they are already producing from their current leases or "diligently developing" them.
Industry officials have derided the idea as a gimmick. A top Chevron Corp. executive, in testimony to Rahall's committee last month, said the "existing regulatory process and basic economics ensure that leases are developed in a diligent manner."
Other plans in Obama's budget include new fees on companies to fund processing of permits for oil and gas drilling on public lands, and increasing the return from oil and gas production by revising the royalty system and adjusting rates.
Tough questions
Salazar will likely face some tough questions about onshore energy development from Republicans, who say his early moves as secretary have all been aimed at slowing production.
In early February, Interior canceled oil and gas leases on 77 parcels of federal land in Utah and launched a review to see whether they were appropriate for leasing. Also last month, Salazar halted Bush administration oil shale research and development leasing efforts, saying he would offer "new and fair" lease terms after seeking public input.
Salazar is still reviewing commercial oil shale regulations for millions of acres in the West that were put in place months before Bush left office, but he has been openly critical of them.
Senate Energy and Natural Resources Committee ranking member Lisa Murkowski (R-Alaska) used the confirmation hearing for Interior deputy secretary nominee David Hayes last week to rail against Obama's energy policies, saying the administration's 2010 budget blueprint is "a war on domestic production." She said punishing the oil and gas industry will not bring the age of renewable energy any faster.gy bills in the House and Senate.
Local Communities Should Embrace Natural Gas
Natural gas needs to build local markets
by: OilOnline
Monday, March 16, 2009
The price of natural gas is critically low for producers in the Barnett, Haynesville, Marcellus, and Fayetteville Shales. Recent reports indicate drilling activity in these newly discovered domestic gas plays has seen huge declines in recent months. Wells in the Barnett Shale, Haynesville Shale, Marcellus Shale, and Fayetteville Shale will may not be able to sustain production at prices below breakeven for long. Community tax bases will suffer. Resources and personnel could be forced to move on to other locations, domestic and international. Royalty owners will lose income. Exploration, drilling and production will quickly dry up. Production costs in most of these plays exceed the current $4/MMBtu market price. Most operators require at least $5-$6/MMBtu as a minimum to maintain profitable production. Unconventional gas plays in shale require special expertise, equipment and additional completion techniques that simply cost more cash to economically recover the resource. A $7-$10/MMBtu price should be a policy objective that keeps the domestic industry healthy and contributes to further exploration and US energy independence. The US economy and security may depend on bringing these clean burning gas discoveries in the Barnett Shale, Haynesville Shale, Marcellus Shale, and Fayetteville Shale to market profitably. With price a function of supply and demand, we are seeing a greater supply than demand. That has to change.
The real problem may be marketing. Natural gas producers will need to team up with utilities and product manufacturers to aggressively market their products in metro markets close to these plays. Communities and utilities that benefit should contribute to the effort with incentives and education programs. The quickest solution may be to build stronger local markets for natural gas. Products have to be developed, converted and heavily marketed. In homes, gas heating, cooking, water heating, refrigerators, grills, fireplaces and even backup generators need to regain market share. Electric vs Gas price models need to be advertised. Consumers need to see gas as the clean burning alternative to coal/oil generated electric on a local basis.
According to Lokke Advertising, CEO, Don Lokke, Jr. "Natural gas, locally produced, is critical to energy independence and local economies. Cities and utilities need to embrace the economies of local energy independence. Cities and consumers need to start thinking on a local or regional basis with regard to natural gas consumption. It is most economical when produced and used locally. Gas producing markets need to encourage use of natural gas. The regional economy benefits from lower cost energy, greater direct and indirect tax revenue, increased jobs, and a net decrease in wealth transfer out of the region."
"Local producers face increasing competition form LNG imports and alternative fuels. All the more reason for natural gas producers lead their sector in consumer education and product programs. The clean burning natural gas industry, as a whole, needs to actively support competitive incentives that build profitable local markets. Decreased cost of transportation to nearby metro areas, should offer a competitive advantage for locally produced natural gas. Yet, natural gas use has declined in the face of aggressive marketing and infrastructure investment over the last 50 years by electric utilities at the consumer level. Gas stoves, ovens, refrigerators and water heaters have been replaced in favor of electric alternatives. As a marketing resource and advertising agency, our primary concern is the oil and gas sector. It's our job to identify markets and products that make sense for our clients and the consumer. We aren't talking 'spin' or politically correct justifications. We are looking for sustainable markets that strengthen local and regional economies." according to Lokke.
Lokke Advertising, founded in 1978, is active in the oil, gas and energy sectors with online energy news and web site networks. An Advertising Red Book listed agency for over 21 years, the one man agency/consultancy, out of Dallas has worked with Fortune 500, mid-cap, and small-cap clients for over 30 years. The agency web site is located at http://www.lokkeadvertising.com/.
by: OilOnline
Monday, March 16, 2009
The price of natural gas is critically low for producers in the Barnett, Haynesville, Marcellus, and Fayetteville Shales. Recent reports indicate drilling activity in these newly discovered domestic gas plays has seen huge declines in recent months. Wells in the Barnett Shale, Haynesville Shale, Marcellus Shale, and Fayetteville Shale will may not be able to sustain production at prices below breakeven for long. Community tax bases will suffer. Resources and personnel could be forced to move on to other locations, domestic and international. Royalty owners will lose income. Exploration, drilling and production will quickly dry up. Production costs in most of these plays exceed the current $4/MMBtu market price. Most operators require at least $5-$6/MMBtu as a minimum to maintain profitable production. Unconventional gas plays in shale require special expertise, equipment and additional completion techniques that simply cost more cash to economically recover the resource. A $7-$10/MMBtu price should be a policy objective that keeps the domestic industry healthy and contributes to further exploration and US energy independence. The US economy and security may depend on bringing these clean burning gas discoveries in the Barnett Shale, Haynesville Shale, Marcellus Shale, and Fayetteville Shale to market profitably. With price a function of supply and demand, we are seeing a greater supply than demand. That has to change.
The real problem may be marketing. Natural gas producers will need to team up with utilities and product manufacturers to aggressively market their products in metro markets close to these plays. Communities and utilities that benefit should contribute to the effort with incentives and education programs. The quickest solution may be to build stronger local markets for natural gas. Products have to be developed, converted and heavily marketed. In homes, gas heating, cooking, water heating, refrigerators, grills, fireplaces and even backup generators need to regain market share. Electric vs Gas price models need to be advertised. Consumers need to see gas as the clean burning alternative to coal/oil generated electric on a local basis.
According to Lokke Advertising, CEO, Don Lokke, Jr. "Natural gas, locally produced, is critical to energy independence and local economies. Cities and utilities need to embrace the economies of local energy independence. Cities and consumers need to start thinking on a local or regional basis with regard to natural gas consumption. It is most economical when produced and used locally. Gas producing markets need to encourage use of natural gas. The regional economy benefits from lower cost energy, greater direct and indirect tax revenue, increased jobs, and a net decrease in wealth transfer out of the region."
"Local producers face increasing competition form LNG imports and alternative fuels. All the more reason for natural gas producers lead their sector in consumer education and product programs. The clean burning natural gas industry, as a whole, needs to actively support competitive incentives that build profitable local markets. Decreased cost of transportation to nearby metro areas, should offer a competitive advantage for locally produced natural gas. Yet, natural gas use has declined in the face of aggressive marketing and infrastructure investment over the last 50 years by electric utilities at the consumer level. Gas stoves, ovens, refrigerators and water heaters have been replaced in favor of electric alternatives. As a marketing resource and advertising agency, our primary concern is the oil and gas sector. It's our job to identify markets and products that make sense for our clients and the consumer. We aren't talking 'spin' or politically correct justifications. We are looking for sustainable markets that strengthen local and regional economies." according to Lokke.
Lokke Advertising, founded in 1978, is active in the oil, gas and energy sectors with online energy news and web site networks. An Advertising Red Book listed agency for over 21 years, the one man agency/consultancy, out of Dallas has worked with Fortune 500, mid-cap, and small-cap clients for over 30 years. The agency web site is located at http://www.lokkeadvertising.com/.
Monday, March 16, 2009
Alaska Natural Gas Transpipeline Up for Review
By Pat Forgey | JUNEAU EMPIRE
Legislative opponents of Gov. Sarah Palin's natural gas pipeline plan are asking the Legislature to reconsider the endorsement it gave Trans-Canada Corp.'s plan just months ago.
"All Alaskans want a gas pipeline. But we need to temper that with the reality of the U.S. and world markets today," said Rep. Craig Johnson, R-Anchorage, co-chair of the House Resources Committee.
Johnson and Rep. Jay Ramras, R-Fairbanks, have introduced House Concurrent Resolution 12, a measure calling on the Palin administration to "review and re-evaluate" the license the state issued to TransCanada last year after spending 60 days in special session reviewing its application.
The "license" gives TransCanada exclusive access to $500 million in state money to help develop a pipeline, but also commits the Calgary, Alberta-based company to develop and finance a pipeline in ways that are good for Alaska.
Johnson and Ramras expressed concern that troubled credit markets would make the project difficult to finance, while new supplies of gas, including imports of liquefied gas and gas from shale beds, would depress market prices.
Department of Revenue Commissioner Pat Galvin said he was mystified at the resolution, coming just months after approval of TransCanada.
"It's kind of strange to come this quickly after the Legislature approved the license," he said. "The issues raised in the resolution are not ones we see as long-term detriments to the project."
Ramras said that in the business world, large projects are routinely re-evaluated when risk factors change, and that's what happened with credit market and liquid natural gas changes.
"It's been a tectonic change in the Lower 48," Ramras said.
Galvin said the license awarded to TransCanada under the terms of the Alaska Gasline Inducement Act was intended to get the long-term project beyond short term market fluctuations.
"It's ironic that we're in this short-term dip in gas prices that makes AGIA so necessary," he said. "It's a contractual obligation to keep moving forward."
Rep. Beth Kerttula, D-Juneau, called the resolution a "political attack" on the AGIA pipeline.
"I'm certain the governor and her administration are completely on top of that project and don't need to be told to stay on top of it," she said.
Resolution sponsors Ramras and Johnson both opposed the TransCanada license last summer. Kerttula supported it.
House Speaker Mike Chenault, R-Nikiski, has referred the bill to the House Resources Committee, which Johnson co-chairs, and the Energy Committee, on which Ramras sits.
Legislative opponents of Gov. Sarah Palin's natural gas pipeline plan are asking the Legislature to reconsider the endorsement it gave Trans-Canada Corp.'s plan just months ago.
"All Alaskans want a gas pipeline. But we need to temper that with the reality of the U.S. and world markets today," said Rep. Craig Johnson, R-Anchorage, co-chair of the House Resources Committee.
Johnson and Rep. Jay Ramras, R-Fairbanks, have introduced House Concurrent Resolution 12, a measure calling on the Palin administration to "review and re-evaluate" the license the state issued to TransCanada last year after spending 60 days in special session reviewing its application.
The "license" gives TransCanada exclusive access to $500 million in state money to help develop a pipeline, but also commits the Calgary, Alberta-based company to develop and finance a pipeline in ways that are good for Alaska.
Johnson and Ramras expressed concern that troubled credit markets would make the project difficult to finance, while new supplies of gas, including imports of liquefied gas and gas from shale beds, would depress market prices.
Department of Revenue Commissioner Pat Galvin said he was mystified at the resolution, coming just months after approval of TransCanada.
"It's kind of strange to come this quickly after the Legislature approved the license," he said. "The issues raised in the resolution are not ones we see as long-term detriments to the project."
Ramras said that in the business world, large projects are routinely re-evaluated when risk factors change, and that's what happened with credit market and liquid natural gas changes.
"It's been a tectonic change in the Lower 48," Ramras said.
Galvin said the license awarded to TransCanada under the terms of the Alaska Gasline Inducement Act was intended to get the long-term project beyond short term market fluctuations.
"It's ironic that we're in this short-term dip in gas prices that makes AGIA so necessary," he said. "It's a contractual obligation to keep moving forward."
Rep. Beth Kerttula, D-Juneau, called the resolution a "political attack" on the AGIA pipeline.
"I'm certain the governor and her administration are completely on top of that project and don't need to be told to stay on top of it," she said.
Resolution sponsors Ramras and Johnson both opposed the TransCanada license last summer. Kerttula supported it.
House Speaker Mike Chenault, R-Nikiski, has referred the bill to the House Resources Committee, which Johnson co-chairs, and the Energy Committee, on which Ramras sits.
Sunday, March 15, 2009
China Developing Natural Gas Field in Iran
China will help in the exploration of the offshore South Pars field, believed to be part of the world's largest natural gas reservoir. The deals points to the limitations of U.S. sanctions.
By Borzou Daragahi
1:31 PM PDT, March 14, 2009
Reporting from Beirut -- Iran announced a $3.2-billion natural gas deal today with China, a move that underscored the difficulty of using economic sanctions to pressure Tehran to bow to Washington's demands on its nuclear program.
Iranian state television quoted a senior government official as saying the deal with a Chinese consortium, announced two days after the Obama administration renewed U.S. sanctions against the Islamic Republic, would eventually include an unnamed European country as a partner.
By Borzou Daragahi
1:31 PM PDT, March 14, 2009
Reporting from Beirut -- Iran announced a $3.2-billion natural gas deal today with China, a move that underscored the difficulty of using economic sanctions to pressure Tehran to bow to Washington's demands on its nuclear program.
Iranian state television quoted a senior government official as saying the deal with a Chinese consortium, announced two days after the Obama administration renewed U.S. sanctions against the Islamic Republic, would eventually include an unnamed European country as a partner.
Saturday, March 14, 2009
Natural Gas Exploration Rigs Down
The number of rigs actively exploring for oil and natural gas in the United States dropped by 44 this week to 1,126, as weak energy demand continues to hamper oilfield activity.
Of the rigs running nationwide, 884 were exploring for natural gas and 228 for oil, Houston-based Baker Hughes Inc. reported Friday. A total of 14 were listed as miscellaneous.
A year ago, the rig count stood at 1,792. The U.S. count is down more than 40 percent since the end of August. Oil prices peaked near $150 a barrel in July before plunging. Light, sweet crude for April delivery fell 42 cents to $46.61 in trading Friday on the New York Mercantile Exchange.
Of the major oil- and gas-producing states, Texas lost 24 rigs, Oklahoma and North Dakota each lost five, Louisiana and Wyoming each lost three, Arkansas and Colorado each lost two and California lost one. New Mexico picked up one, and Alaska was unchanged.
Baker Hughes has tracked rig counts since 1944. The tally peaked at 4,530 in 1981, during the height of the oil boom. The industry posted several record lows in 1999, bottoming out at 488.
Of the rigs running nationwide, 884 were exploring for natural gas and 228 for oil, Houston-based Baker Hughes Inc. reported Friday. A total of 14 were listed as miscellaneous.
A year ago, the rig count stood at 1,792. The U.S. count is down more than 40 percent since the end of August. Oil prices peaked near $150 a barrel in July before plunging. Light, sweet crude for April delivery fell 42 cents to $46.61 in trading Friday on the New York Mercantile Exchange.
Of the major oil- and gas-producing states, Texas lost 24 rigs, Oklahoma and North Dakota each lost five, Louisiana and Wyoming each lost three, Arkansas and Colorado each lost two and California lost one. New Mexico picked up one, and Alaska was unchanged.
Baker Hughes has tracked rig counts since 1944. The tally peaked at 4,530 in 1981, during the height of the oil boom. The industry posted several record lows in 1999, bottoming out at 488.
Friday, March 13, 2009
New Colorado Natural Gas Processing Plant Online
NEW YORK, March 12 (Reuters) - Enterprise Products Partners LP (EPD.N) said on Thursday it began operations at the Meeker II natural gas processing plant in the Piceance Basin of Colorado, doubling processing capacity to 1.5 billion cubic feet per day.
The Meeker II complex also has the capability to extract up to 70,000 barrels per day of natural gas liquids, the company said in a statement.
Enterprise also began operations at its recently expanded Shilling and Thompsonville gas processing plants in South Texas, and expects the partnership's relocated Chaparral facility in the Permian Basin to begin processing natural gas later in March.
The Meeker complex is supported by long-term commitments from 10 of the largest producers in the Piceance Basin, Enterprise said.
Current inlet volume at Meeker is approximately 750 million cubic feet per day with approximately 38,000 barrels per day of natural gas liquids being extracted.
Natural gas volumes are projected to reach approximately 1.1 bcf per day by the end of 2009, producing approximately 60,000 bpd of natural gas liquids.
"This expansion will facilitate the continuing growth in natural gas production from the Piceance Basin that is expected in 2009 and 2010 despite the effects of the recent decrease in drilling activity. Based on producer estimates, there are over 300 wells that have been completed in the basin that are waiting for pipeline connections," said A.J. Teague, Enterprise executive vice president and chief commercial officer.
Meeker, through its connection with the White River natural gas hub, provides producers with access to markets through connections with six interstate pipelines that have approximately 2.5 bcf per day of total takeaway capacity.
The Chaparral facility was an idle plant acquired in the merger with GulfTerra Energy Partners LP in 2004 and recently relocated from southeast Texas to serve producers in the Permian Basin.
The facility can handle up to 40 mmcf per day of natural gas and extract more than 2,000 bpd of natural gas liquids, serving the partnership's approximately 900-mile (1,450-km) Carlsbad Gathering System in southeast New Mexico.
As part of the project, Enterprise constructed a new 13-mile, 4-inch diameter natural gas liquids pipeline that links the processing plant to TEPPCO Partners LP's (TPP.N) Chaparral pipeline, transporting to the world's largest fractionation complex at Mont Belvieu, Texas.
Additionally, interconnects with major interstate natural gas transmission lines provide producers with access to markets in the western United States.
Expansion projects were also completed and placed into service at two gas processing facilities that are part of Enterprise's South Texas system
At the Shilling plant in Webb County, capacity was increased from 60 mmcf per day to 110 mmcf per day as part of a project that involved relocating equipment from idle plants and modifying existing infrastructure.
The work allowed Enterprise to increase its market share in the region and provide added flexibility in accessing industrial end users along the Gulf Coast and the Houston Ship Channel.
The partnership modified existing equipment rather than build new systems to expand its Thompsonville gas processing plant in Jim Hogg County.
The Meeker II complex also has the capability to extract up to 70,000 barrels per day of natural gas liquids, the company said in a statement.
Enterprise also began operations at its recently expanded Shilling and Thompsonville gas processing plants in South Texas, and expects the partnership's relocated Chaparral facility in the Permian Basin to begin processing natural gas later in March.
The Meeker complex is supported by long-term commitments from 10 of the largest producers in the Piceance Basin, Enterprise said.
Current inlet volume at Meeker is approximately 750 million cubic feet per day with approximately 38,000 barrels per day of natural gas liquids being extracted.
Natural gas volumes are projected to reach approximately 1.1 bcf per day by the end of 2009, producing approximately 60,000 bpd of natural gas liquids.
"This expansion will facilitate the continuing growth in natural gas production from the Piceance Basin that is expected in 2009 and 2010 despite the effects of the recent decrease in drilling activity. Based on producer estimates, there are over 300 wells that have been completed in the basin that are waiting for pipeline connections," said A.J. Teague, Enterprise executive vice president and chief commercial officer.
Meeker, through its connection with the White River natural gas hub, provides producers with access to markets through connections with six interstate pipelines that have approximately 2.5 bcf per day of total takeaway capacity.
The Chaparral facility was an idle plant acquired in the merger with GulfTerra Energy Partners LP in 2004 and recently relocated from southeast Texas to serve producers in the Permian Basin.
The facility can handle up to 40 mmcf per day of natural gas and extract more than 2,000 bpd of natural gas liquids, serving the partnership's approximately 900-mile (1,450-km) Carlsbad Gathering System in southeast New Mexico.
As part of the project, Enterprise constructed a new 13-mile, 4-inch diameter natural gas liquids pipeline that links the processing plant to TEPPCO Partners LP's (TPP.N) Chaparral pipeline, transporting to the world's largest fractionation complex at Mont Belvieu, Texas.
Additionally, interconnects with major interstate natural gas transmission lines provide producers with access to markets in the western United States.
Expansion projects were also completed and placed into service at two gas processing facilities that are part of Enterprise's South Texas system
At the Shilling plant in Webb County, capacity was increased from 60 mmcf per day to 110 mmcf per day as part of a project that involved relocating equipment from idle plants and modifying existing infrastructure.
The work allowed Enterprise to increase its market share in the region and provide added flexibility in accessing industrial end users along the Gulf Coast and the Houston Ship Channel.
The partnership modified existing equipment rather than build new systems to expand its Thompsonville gas processing plant in Jim Hogg County.
Thursday, March 12, 2009
10% AT&T Fleet to Go Natural Gas
By PETER SVENSSON – 12 hours ago
NEW YORK (AP) — AT&T Inc. said Wednesday it will spend up to $350 million over five years to buy more than 8,000 Ford Motor Co. vans and trucks, then convert them to run on compressed natural gas.
It is the largest commitment by a U.S. corporation to vehicles using alternative fuels, the phone company said.
Natural gas is a fossil fuel, but burning it produces 25 percent less carbon emissions than using gasoline, AT&T said. Compared with oil, the U.S. produces a greater proportion of the natural gas it uses.
The company said it will spend the money over five years. While AT&T will buy the chassis from Ford, it has not yet selected a vendor to perform the conversion to natural gas, AT&T spokesman Fletcher Cook said.
The vehicles will be used by technicians who perform installations and maintain the telecommunications network, Cook said. The company will build 40 natural-gas filling stations to keep them rolling.
Compressed natural gas is already used by some cities and counties for their vehicle fleets, particularly for buses.
AT&T will also spend $215 million over 10 years to replace 7,100 passenger cars with hybrids, and eventually cars powered by other fuel sources, it said.
Dallas-based AT&T currently has 88,000 vehicles, Cook said.
Copyright © 2009 The Associated Press. All rights reserved.
NEW YORK (AP) — AT&T Inc. said Wednesday it will spend up to $350 million over five years to buy more than 8,000 Ford Motor Co. vans and trucks, then convert them to run on compressed natural gas.
It is the largest commitment by a U.S. corporation to vehicles using alternative fuels, the phone company said.
Natural gas is a fossil fuel, but burning it produces 25 percent less carbon emissions than using gasoline, AT&T said. Compared with oil, the U.S. produces a greater proportion of the natural gas it uses.
The company said it will spend the money over five years. While AT&T will buy the chassis from Ford, it has not yet selected a vendor to perform the conversion to natural gas, AT&T spokesman Fletcher Cook said.
The vehicles will be used by technicians who perform installations and maintain the telecommunications network, Cook said. The company will build 40 natural-gas filling stations to keep them rolling.
Compressed natural gas is already used by some cities and counties for their vehicle fleets, particularly for buses.
AT&T will also spend $215 million over 10 years to replace 7,100 passenger cars with hybrids, and eventually cars powered by other fuel sources, it said.
Dallas-based AT&T currently has 88,000 vehicles, Cook said.
Copyright © 2009 The Associated Press. All rights reserved.
Wednesday, March 11, 2009
Natural Gas Exploration Will Continue
By KRISTEN HAYS Copyright 2009 Houston Chronicle
March 10, 2009, 10:56PM
In recent years, Anadarko Petroleum Corp. has spent big to beef up and diversify its production portfolio in the U.S. and elsewhere. Now’s the time to bring exploration success to fruition by developing mega-projects already in the pipeline, CEO James Hackett said Tuesday.
Even if crude prices continue their recent upswing, he said, the best use of that additional cash is to reinvest it in exploration and production projects.
“We’ll make that decision as it comes,” Hackett said at the company’s annual meeting with analysts, noting no immediate plans for more acquisitions.
The Houston-based independent explorer and producer expects to increase production by up to 3 percent this year and spend a fifth of its reduced capital spending budget of $4 billion to $4.5 billion on exploration.
Fewer cuts
While Anadarko cut spending amid lower oil and natural gas prices and slumping demand in the global recession, other independents have slashed more.
Al Walker, Anadarko’s chief operating officer, said the company also is spending one-fifth of its budget on mega-projects, including finds in the Gulf of Mexico, offshore Ghana and offshore Brazil. Several major projects are slated to start producing from 2011 through 2013, Walker said.
Chevron also has a string of new projects scheduled to begin production in the coming years, executives from the San Ramon, Calif.-based oil major said at its annual analyst meeting, also Tuesday.
Those include Chevron’s Gorgon and Wheatstone liquefied natural gas projects in Australia as well as Gulf crude production from its Jack and St. Malo fields.
George Kirkland, executive vice president of global upstream and gas, told analysts that Chevron has begun engineering and design for a new Gulf production platform for the Jack and St. Malo fields that will have capacity to produce 120,000 to 150,000 barrels of oil equivalent per day.
Higher profile
Anadarko’s international positions, as well as its foothold in U.S. natural gas shale plays, has transformed it from a high-cost, low-return and spotty exploration company to one “poised to dramatically improve its exploration,” Bernstein Research analyst Neil McMahon said in a recent report to investors.
That, McMahon said, makes Anadarko “an increasingly attractive acquisition target for the majors.”
Such rumblings about Anadarko aren’t new, and other analysts have speculated that oil majors may consider buying independents to increase reserves and gain new positions in the downturn. However, so far deals haven’t stretched beyond buying certain assets, such as BP’s acquisitions of some Chesapeake Energy U.S. gas shale stakes last year.
Hackett told reporters Tuesday that the company will do right by its shareholders, “and as a public company, we obviously have to be mindful of the fact that if somebody believes we’ve done a good job, there is some risk that somebody may make you an offer you can’t refuse.”
Tax criticism
However, Anadarko isn’t seeking buyers.
“Our view is you don’t necessarily plan your business around that, and we never have,” he said.
Asked by an analyst about the Obama administration’s proposal to repeal some tax breaks for U.S. production while imposing a new excise or severance tax on Gulf production, Hackett answered with his trademark bluntness.
“It’s remarkable to me that we have an administration potentially penalizing its domestic champions at the same time they say they want energy security,” he said
kristen.hays@chron.com
March 10, 2009, 10:56PM
In recent years, Anadarko Petroleum Corp. has spent big to beef up and diversify its production portfolio in the U.S. and elsewhere. Now’s the time to bring exploration success to fruition by developing mega-projects already in the pipeline, CEO James Hackett said Tuesday.
Even if crude prices continue their recent upswing, he said, the best use of that additional cash is to reinvest it in exploration and production projects.
“We’ll make that decision as it comes,” Hackett said at the company’s annual meeting with analysts, noting no immediate plans for more acquisitions.
The Houston-based independent explorer and producer expects to increase production by up to 3 percent this year and spend a fifth of its reduced capital spending budget of $4 billion to $4.5 billion on exploration.
Fewer cuts
While Anadarko cut spending amid lower oil and natural gas prices and slumping demand in the global recession, other independents have slashed more.
Al Walker, Anadarko’s chief operating officer, said the company also is spending one-fifth of its budget on mega-projects, including finds in the Gulf of Mexico, offshore Ghana and offshore Brazil. Several major projects are slated to start producing from 2011 through 2013, Walker said.
Chevron also has a string of new projects scheduled to begin production in the coming years, executives from the San Ramon, Calif.-based oil major said at its annual analyst meeting, also Tuesday.
Those include Chevron’s Gorgon and Wheatstone liquefied natural gas projects in Australia as well as Gulf crude production from its Jack and St. Malo fields.
George Kirkland, executive vice president of global upstream and gas, told analysts that Chevron has begun engineering and design for a new Gulf production platform for the Jack and St. Malo fields that will have capacity to produce 120,000 to 150,000 barrels of oil equivalent per day.
Higher profile
Anadarko’s international positions, as well as its foothold in U.S. natural gas shale plays, has transformed it from a high-cost, low-return and spotty exploration company to one “poised to dramatically improve its exploration,” Bernstein Research analyst Neil McMahon said in a recent report to investors.
That, McMahon said, makes Anadarko “an increasingly attractive acquisition target for the majors.”
Such rumblings about Anadarko aren’t new, and other analysts have speculated that oil majors may consider buying independents to increase reserves and gain new positions in the downturn. However, so far deals haven’t stretched beyond buying certain assets, such as BP’s acquisitions of some Chesapeake Energy U.S. gas shale stakes last year.
Hackett told reporters Tuesday that the company will do right by its shareholders, “and as a public company, we obviously have to be mindful of the fact that if somebody believes we’ve done a good job, there is some risk that somebody may make you an offer you can’t refuse.”
Tax criticism
However, Anadarko isn’t seeking buyers.
“Our view is you don’t necessarily plan your business around that, and we never have,” he said.
Asked by an analyst about the Obama administration’s proposal to repeal some tax breaks for U.S. production while imposing a new excise or severance tax on Gulf production, Hackett answered with his trademark bluntness.
“It’s remarkable to me that we have an administration potentially penalizing its domestic champions at the same time they say they want energy security,” he said
kristen.hays@chron.com
Tuesday, March 10, 2009
Harrisburg PA Double Tax on Natural Gas
HARRISBURG -- Natural gas from the vast Marcellus Shale reserve will be taxed under the ground and when it is extracted, if Democratic lawmakers and the governor have their way.
Fifty-four of 67 counties would be able to levy real estate taxes on the underground value of natural gas and oil under a bill proposed Monday by House Majority Whip Bill DeWeese, D-Greene County.
It's similar to a bill DeWeese introduced in May 2007 that died in the House Finance Committee.
"The Marcellus Shale phenomenon was not at its dizzying zenith (then)," DeWeese said, when asked how the bill differs from the one that stalled.
Gov. Ed Rendell last month proposed a state severance tax on extracted natural gas. Rep. Bud George, D-Clearfield County, is expected to propose the severance tax in legislation.
Forty-five of the poorest school districts would benefit from levying a real estate tax on natural gas, said Timothy Allwein, an official with the Pennsylvania School Boards Association, one of several groups that joined DeWeese at a news conference.
DeWeese and other officials said the real estate tax is not a new tax. Counties could assess natural resources as property until a Supreme Court decision negated the practice in 2002. The court held that the Legislature did not explicitly recognize gas and oil as taxable.
Coal has long been taxed as property, officials said.
DeWeese said the real estate tax on natural gas would hit developers and drillers, not landowners and farmers.
David Coder, chairman of the County Commissioners Association of Pennsylvania, said the revenue would be used to lower property taxes or prevent the rise of property taxes.
Considering the economic downturn and drop in natural gas market prices, "This would be a very bad time to impose any additional taxes," said Matt Pitzarella, spokesman for Range Resources LLC, which has drilled more than 120 wells in Washington County.
Natural gas is selling for $3.87 per thousand cubic feet, or mcf, compared to $13.10 last July. The number of onshore drilling rigs in operation nationwide is down to 917 from 1,306 last fall and is expected to continue dropping.
The industry is especially vulnerable in Western Pennsylvania because the Marcellus Shale play is in its early stages of development, he said. More taxes "would ultimately cost people jobs and reduce the economic investment that the companies would be able to make," Pitzarella said.
Lou D'Amico, executive director of the Independent Oil & Gas Association of Pennsylvania, said DeWeese's proposal likely will spark court challenges if passed in its current form.
"He said this would be on the operator and not the land owner, and that's nice to say. I'd say it if I were a politician," D'Amico said, but state case law prohibits taxing the same revenue stream at different rates.
Thus a farmer who owns property in the Marcellus region would have to pay the same levy as a gas producer who leases the mineral rights to that land, he said.
Fifty-four of 67 counties would be able to levy real estate taxes on the underground value of natural gas and oil under a bill proposed Monday by House Majority Whip Bill DeWeese, D-Greene County.
It's similar to a bill DeWeese introduced in May 2007 that died in the House Finance Committee.
"The Marcellus Shale phenomenon was not at its dizzying zenith (then)," DeWeese said, when asked how the bill differs from the one that stalled.
Gov. Ed Rendell last month proposed a state severance tax on extracted natural gas. Rep. Bud George, D-Clearfield County, is expected to propose the severance tax in legislation.
Forty-five of the poorest school districts would benefit from levying a real estate tax on natural gas, said Timothy Allwein, an official with the Pennsylvania School Boards Association, one of several groups that joined DeWeese at a news conference.
DeWeese and other officials said the real estate tax is not a new tax. Counties could assess natural resources as property until a Supreme Court decision negated the practice in 2002. The court held that the Legislature did not explicitly recognize gas and oil as taxable.
Coal has long been taxed as property, officials said.
DeWeese said the real estate tax on natural gas would hit developers and drillers, not landowners and farmers.
David Coder, chairman of the County Commissioners Association of Pennsylvania, said the revenue would be used to lower property taxes or prevent the rise of property taxes.
Considering the economic downturn and drop in natural gas market prices, "This would be a very bad time to impose any additional taxes," said Matt Pitzarella, spokesman for Range Resources LLC, which has drilled more than 120 wells in Washington County.
Natural gas is selling for $3.87 per thousand cubic feet, or mcf, compared to $13.10 last July. The number of onshore drilling rigs in operation nationwide is down to 917 from 1,306 last fall and is expected to continue dropping.
The industry is especially vulnerable in Western Pennsylvania because the Marcellus Shale play is in its early stages of development, he said. More taxes "would ultimately cost people jobs and reduce the economic investment that the companies would be able to make," Pitzarella said.
Lou D'Amico, executive director of the Independent Oil & Gas Association of Pennsylvania, said DeWeese's proposal likely will spark court challenges if passed in its current form.
"He said this would be on the operator and not the land owner, and that's nice to say. I'd say it if I were a politician," D'Amico said, but state case law prohibits taxing the same revenue stream at different rates.
Thus a farmer who owns property in the Marcellus region would have to pay the same levy as a gas producer who leases the mineral rights to that land, he said.
Natural Gas Stocks Down
March 09, 2009: 10:39 AM ET
Shares of natural gas producers led gains in the energy sector, which drew strength from steady oil prices, a discovery by Anadarko Petroleum Corp. (APC) and analyst upgrades, as the broad market struggled back from opening losses.
The Amex Oil Index rose 0.3% to 781, with shares of refining giant Valero Energy Corp. (VLO) and Hess Corp. (HES) up nearly 3% each. The Amex Natural Gas Index rose 1.3% to 306, with Southwestern Energy Co.(SWN) up 4% to $29.86.
The Philadelphia Oil Service Index rose 2.6% to 112.
Crude oil futures rose 14 cents to $45.66.
Anadarko Petroleum shares rose 5% to $34.65 after the company announced an oil discovery at its Tweneboa-1 offshore well in Ghana.
"Tweneboa is an outstanding discovery and continues our success in Ghana," the company said. "We believe there is significant additional upside as we conduct appraisal activity closer to the perceived core of this stratigraphic trap, where a thicker reservoir section is mapped."
The well was drilled, logged and cased to a depth of approximately 11,790 feet, and is being deepened to further assess additional prospective hydrocarbon-bearing zones.
Halliburton Co. (HAL) jumped 7% to $16.16 after FBR upgraded the oil-service giant to outperform from market perform.
Drill-ship maker Transocean Ltd. (RIG) rose 3.7% to $52.99, also following an FBR upgrade to outperform from market perform.
Pritchard Capital Partners said Monday that Baker Hughes Inc.'s (BHI) rig count fell by 73 rigs last week to 1,170 rigs, down by 861 rigs or approximately 42% from the 2,031-rig peak set in September of last year. The 42% decline is outpacing those of the 1983 cycle, the 2001-2002 cycle, and the 1997-1998 cycle, Pritchard said.
Shares of Baker Hughes rose 5% to $28.
Total SA (TOT) said its Total Upstream Nigeria Ltd. (Tupni) unit started production earlier than expected on a major project off the shore of Nigeria. The Akpo Deep Offshore Field is one of the largest deep offshore projects ever undertaken and will be the largest brought on stream in 2009, Total said.
The ramp up of production to 175,000 barrels per day of condensate and 320 million standard cubic feet per day is expected to be reached during the summer. Total holds a 24% interest in the Akpo OML 130 block, alongside partners including Nigerian National Petroleum Corp., South Atlantic Petroleum of Nigeria, Cnooc Ltd. of China (CEO) and Brazil's Petrobras (PBR).
Total shares fell 1.3% to $45.18 in early U.S. trade.
-Steve Gelsi; 415-439-6400; AskNewswires@dowjones.com
(END) Dow Jones Newswires
03-09-09 1039ET
Copyright (c) 2009 Dow Jones & Company, Inc.
Shares of natural gas producers led gains in the energy sector, which drew strength from steady oil prices, a discovery by Anadarko Petroleum Corp. (APC) and analyst upgrades, as the broad market struggled back from opening losses.
The Amex Oil Index rose 0.3% to 781, with shares of refining giant Valero Energy Corp. (VLO) and Hess Corp. (HES) up nearly 3% each. The Amex Natural Gas Index rose 1.3% to 306, with Southwestern Energy Co.(SWN) up 4% to $29.86.
The Philadelphia Oil Service Index rose 2.6% to 112.
Crude oil futures rose 14 cents to $45.66.
Anadarko Petroleum shares rose 5% to $34.65 after the company announced an oil discovery at its Tweneboa-1 offshore well in Ghana.
"Tweneboa is an outstanding discovery and continues our success in Ghana," the company said. "We believe there is significant additional upside as we conduct appraisal activity closer to the perceived core of this stratigraphic trap, where a thicker reservoir section is mapped."
The well was drilled, logged and cased to a depth of approximately 11,790 feet, and is being deepened to further assess additional prospective hydrocarbon-bearing zones.
Halliburton Co. (HAL) jumped 7% to $16.16 after FBR upgraded the oil-service giant to outperform from market perform.
Drill-ship maker Transocean Ltd. (RIG) rose 3.7% to $52.99, also following an FBR upgrade to outperform from market perform.
Pritchard Capital Partners said Monday that Baker Hughes Inc.'s (BHI) rig count fell by 73 rigs last week to 1,170 rigs, down by 861 rigs or approximately 42% from the 2,031-rig peak set in September of last year. The 42% decline is outpacing those of the 1983 cycle, the 2001-2002 cycle, and the 1997-1998 cycle, Pritchard said.
Shares of Baker Hughes rose 5% to $28.
Total SA (TOT) said its Total Upstream Nigeria Ltd. (Tupni) unit started production earlier than expected on a major project off the shore of Nigeria. The Akpo Deep Offshore Field is one of the largest deep offshore projects ever undertaken and will be the largest brought on stream in 2009, Total said.
The ramp up of production to 175,000 barrels per day of condensate and 320 million standard cubic feet per day is expected to be reached during the summer. Total holds a 24% interest in the Akpo OML 130 block, alongside partners including Nigerian National Petroleum Corp., South Atlantic Petroleum of Nigeria, Cnooc Ltd. of China (CEO) and Brazil's Petrobras (PBR).
Total shares fell 1.3% to $45.18 in early U.S. trade.
-Steve Gelsi; 415-439-6400; AskNewswires@dowjones.com
(END) Dow Jones Newswires
03-09-09 1039ET
Copyright (c) 2009 Dow Jones & Company, Inc.
Monday, March 9, 2009
Kentucky Government & Natural Gas Revenue
By JOE BIESK - Associated Press Writer
FRANKFORT, Ky. -- A proposal moving in the Kentucky General Assembly is looking to find some extra cash by searching underground.
As states across the country struggle to find money to pay their bills - federal stimulus help aside - state Sen. Tom Jensen has proposed Kentucky look to see if it can profit from any natural gas or oil brewing beneath state-owned property. That would include searching on land for state parks and public universities.
"We need to start thinking outside the box a little bit, instead of just thinking about cutting and taxing," Jensen, R-London, said.
Kentucky has pockets of underground oil and natural gas reserves. Exactly how much lies beneath the surface of state-owned land remains to be seen. Jensen, who is chairman of the Senate Natural Resources and Energy Committee, has proposed two separate measures aimed at finding out.
One proposal Jensen has offered would order the Kentucky Geological Survey at the University of Kentucky to study where state-owned land with underground natural gas or oil exists. Another would authorize the state to begin leasing that land and collect royalties.
The bill would also apply to public universities in Kentucky.
Souring national and state economies left Kentucky state government facing a projected $456.1 million budget shortfall in the current fiscal year that ends June 30. Next year's budget outlook is expected to get worse, although official projections are not yet available.
Kentucky lawmakers last month approved a plan to balance the budget by cutting some government services, doubling the state tax on cigarettes and imposing a 6 percent tax on alcohol - beer, wine and liquor. Lawmakers are also considering a plan for state government to keep about $130 million for road projects by blocking a 4 percent drop in Kentucky's gasoline tax from kicking in.
Jensen said any money that could be generated from oil and natural gas royalties could help.
"There's some potential here," Jensen said. "I'm hopeful that it'll help us in this time of need."
Brandon Nuttall, a geologist with the Kentucky Geological Survey, said exact numbers for how much oil and natural gas resources exist in the state, and how much reasonably can be removed, is unknown. Kentucky likely has about 1.3 billion or more barrels of oil and at least 12 trillion cubic feet of natural gas, Nuttall said.
If sold, what's there likely could bring in money for programs such as scholarships or habitat restoration, Nuttall said.
"If you're looking for enough revenue, for example, to make up the budget shortfall, that's not going to happen," Nuttall said. "There's lots of different programs that this income could help support."
Tom FitzGerald, head of the Kentucky Resources Council, an environmental advocacy group said there were some concerns about whether the legislation would allow leasing of public lands before the survey is completed. FitzGerald said he wanted the measure to ensure that land managers would have a say in whether lands such as nature preserves, wilderness or public park lands should be open to drilling.
"We want to fully protect those values," FitzGerald said.
Nevertheless, there are questions remaining even if the legislature approves the plan.
Officials still would have to determine not only if the state owns the land, but whether it has mineral rights to any underground resources, Jensen said. Any drilling would have to be in the state's best interest and maintain the environment and local scenery, Jensen said.
The state may also want to look to drill under lakes, rivers and streams, he said. Other states already allow for oil and natural gas to be removed from government land, including Montana, Indiana and Louisiana, Jensen said.
Whether Kentucky could make thousands or millions in royalties remains to be seen, Jensen said. That's part of what he's hoping the survey can determine, Jensen said.
"I know it can generate some revenue, but is it going to generate a lot?" Jensen said. "I don't know."
FRANKFORT, Ky. -- A proposal moving in the Kentucky General Assembly is looking to find some extra cash by searching underground.
As states across the country struggle to find money to pay their bills - federal stimulus help aside - state Sen. Tom Jensen has proposed Kentucky look to see if it can profit from any natural gas or oil brewing beneath state-owned property. That would include searching on land for state parks and public universities.
"We need to start thinking outside the box a little bit, instead of just thinking about cutting and taxing," Jensen, R-London, said.
Kentucky has pockets of underground oil and natural gas reserves. Exactly how much lies beneath the surface of state-owned land remains to be seen. Jensen, who is chairman of the Senate Natural Resources and Energy Committee, has proposed two separate measures aimed at finding out.
One proposal Jensen has offered would order the Kentucky Geological Survey at the University of Kentucky to study where state-owned land with underground natural gas or oil exists. Another would authorize the state to begin leasing that land and collect royalties.
The bill would also apply to public universities in Kentucky.
Souring national and state economies left Kentucky state government facing a projected $456.1 million budget shortfall in the current fiscal year that ends June 30. Next year's budget outlook is expected to get worse, although official projections are not yet available.
Kentucky lawmakers last month approved a plan to balance the budget by cutting some government services, doubling the state tax on cigarettes and imposing a 6 percent tax on alcohol - beer, wine and liquor. Lawmakers are also considering a plan for state government to keep about $130 million for road projects by blocking a 4 percent drop in Kentucky's gasoline tax from kicking in.
Jensen said any money that could be generated from oil and natural gas royalties could help.
"There's some potential here," Jensen said. "I'm hopeful that it'll help us in this time of need."
Brandon Nuttall, a geologist with the Kentucky Geological Survey, said exact numbers for how much oil and natural gas resources exist in the state, and how much reasonably can be removed, is unknown. Kentucky likely has about 1.3 billion or more barrels of oil and at least 12 trillion cubic feet of natural gas, Nuttall said.
If sold, what's there likely could bring in money for programs such as scholarships or habitat restoration, Nuttall said.
"If you're looking for enough revenue, for example, to make up the budget shortfall, that's not going to happen," Nuttall said. "There's lots of different programs that this income could help support."
Tom FitzGerald, head of the Kentucky Resources Council, an environmental advocacy group said there were some concerns about whether the legislation would allow leasing of public lands before the survey is completed. FitzGerald said he wanted the measure to ensure that land managers would have a say in whether lands such as nature preserves, wilderness or public park lands should be open to drilling.
"We want to fully protect those values," FitzGerald said.
Nevertheless, there are questions remaining even if the legislature approves the plan.
Officials still would have to determine not only if the state owns the land, but whether it has mineral rights to any underground resources, Jensen said. Any drilling would have to be in the state's best interest and maintain the environment and local scenery, Jensen said.
The state may also want to look to drill under lakes, rivers and streams, he said. Other states already allow for oil and natural gas to be removed from government land, including Montana, Indiana and Louisiana, Jensen said.
Whether Kentucky could make thousands or millions in royalties remains to be seen, Jensen said. That's part of what he's hoping the survey can determine, Jensen said.
"I know it can generate some revenue, but is it going to generate a lot?" Jensen said. "I don't know."
Saturday, March 7, 2009
Oklahoma School Buses to Run on Natural Gas
By SHANNON MUCHMORE World Staff Writer
Published: 3/6/2009 1:04 PM
Last Modified: 3/6/2009 1:04 PM
STILLWATER – Oklahoma State University will convert more than 20 of its buses to run on compressed natural gas with money expected through the federal stimulus package.
The $4.2 million in stimulus funds would be allocated to OSU through the Oklahoma Department of Transportation, and was approved Friday by the Oklahoma A&M Board of Regents.
Also at the meeting, OSU officials announced the university has saved more than $5 million in the past 18 months through an energy conservation program.
Those systemwide savings will offset the utility cost to the university for bringing five buildings online at the Stillwater campus this year.
Before the meeting, Rick Krysiak, the director of the OSU Physical Plant, said the conservation program has taught students and faculty simple ways to save energy costs.
"We're not going out replacing equipment, we're changing people's habits," he said.
By SHANNON MUCHMORE World Staff Writer
Published: 3/6/2009 1:04 PM
Last Modified: 3/6/2009 1:04 PM
STILLWATER – Oklahoma State University will convert more than 20 of its buses to run on compressed natural gas with money expected through the federal stimulus package.
The $4.2 million in stimulus funds would be allocated to OSU through the Oklahoma Department of Transportation, and was approved Friday by the Oklahoma A&M Board of Regents.
Also at the meeting, OSU officials announced the university has saved more than $5 million in the past 18 months through an energy conservation program.
Those systemwide savings will offset the utility cost to the university for bringing five buildings online at the Stillwater campus this year.
Before the meeting, Rick Krysiak, the director of the OSU Physical Plant, said the conservation program has taught students and faculty simple ways to save energy costs.
"We're not going out replacing equipment, we're changing people's habits," he said.
By SHANNON MUCHMORE World Staff Writer
Friday, March 6, 2009
T.Boone Natural Gas Promoter Says Oil to 60 Before Below 40
Los Angeles, CA - T. Boone Pickens says the price of oil will be 60 dollars per barrel before it will drop below 40 again.
Pickens appeared on CNBC Thursday and said the price will rise to 75 dollars or more by the end of the year and even higher if the world economy recovers.
"If they do recover, then the price will move on up and if it's slow in coming out of the recession, it will stabilize for some period of time," he said Pickens said oil prices are steadily rising because "OPEC needs the money" to fund their internal programs and that he predicts "you'll see 60 [dollars per barrel] before you see 40."
Oil was trading at around 43 dollars a barrel this week.
Pickens says the U.S. imported 62-percent of its oil last month, which is down 5-percent from January.
"Have we had a breakthrough? Probably not," Pickens said. "We've had demand destruction because of the recession and all, but we're still paying 13-billion dollars (a month). That is 328-thousand dollars per hour sent to foreign governments."
Pickens also criticized Treasury Secretary Tim Geithner's plan to raise taxes on oil and natural gas companies.
"(Oil and gas companies) are on their back right now because, with prices like they are, you've shut down five hundred or six hundred rigs already. And, so you want to get those people back to work. You don't do it by raising taxes."
Pickens is in California where he was speaking at the ECOnomics Conference.
On The Net:
Pickens appeared on CNBC Thursday and said the price will rise to 75 dollars or more by the end of the year and even higher if the world economy recovers.
"If they do recover, then the price will move on up and if it's slow in coming out of the recession, it will stabilize for some period of time," he said Pickens said oil prices are steadily rising because "OPEC needs the money" to fund their internal programs and that he predicts "you'll see 60 [dollars per barrel] before you see 40."
Oil was trading at around 43 dollars a barrel this week.
Pickens says the U.S. imported 62-percent of its oil last month, which is down 5-percent from January.
"Have we had a breakthrough? Probably not," Pickens said. "We've had demand destruction because of the recession and all, but we're still paying 13-billion dollars (a month). That is 328-thousand dollars per hour sent to foreign governments."
Pickens also criticized Treasury Secretary Tim Geithner's plan to raise taxes on oil and natural gas companies.
"(Oil and gas companies) are on their back right now because, with prices like they are, you've shut down five hundred or six hundred rigs already. And, so you want to get those people back to work. You don't do it by raising taxes."
Pickens is in California where he was speaking at the ECOnomics Conference.
On The Net:
Thursday, March 5, 2009
Synthetic Natural Gas for Freeport, Texas
State regulators OK synthetic natural gas plant
By TOM FOWLER
March 4, 2009, 5:50PM
State environmental regulators have granted an air permit to a Freeport project that will turn a refining byproduct into natural gas while capturing carbon dioxide created by the process.
Hunton Energy of Houston says the plant will take pet coke, a common refinery waste product, and turn it into a synthetic form of natural gas that can be used by a chemical plant to create other products. Dow Chemical in Freeport has said it is interested in buying the gas.
The steam generated by the process will be used to run an electric turbine capable of creating up to 400 megawatts, which Dow could also purchase, while the 8 million tons of carbon dioxide created by the plant each year will be sold for injection into older oil fields to help improve production.
The project previously had financial backing by a unit of Goldman Sachs but that deal has been called off. Hunton President Rocky Sembritzky said the company is in the process of raising funds overseas.
tom.fowler@chron.com
By TOM FOWLER
March 4, 2009, 5:50PM
State environmental regulators have granted an air permit to a Freeport project that will turn a refining byproduct into natural gas while capturing carbon dioxide created by the process.
Hunton Energy of Houston says the plant will take pet coke, a common refinery waste product, and turn it into a synthetic form of natural gas that can be used by a chemical plant to create other products. Dow Chemical in Freeport has said it is interested in buying the gas.
The steam generated by the process will be used to run an electric turbine capable of creating up to 400 megawatts, which Dow could also purchase, while the 8 million tons of carbon dioxide created by the plant each year will be sold for injection into older oil fields to help improve production.
The project previously had financial backing by a unit of Goldman Sachs but that deal has been called off. Hunton President Rocky Sembritzky said the company is in the process of raising funds overseas.
tom.fowler@chron.com
Wednesday, March 4, 2009
Natural Gas Summary for Week Ending February 24
Submitted by The City Wire staff on Mon, 03/02/2009 - 9:41am.
The monthly “Natural Gas Market Indicators” report from the American Gas Association provides some glimpse into the factors behind the thousands of jobs in Arkansas and the Fort Smith region tied to the exploration, production, transmission and management of natural gas.
Natural gas prices at the closely watched Henry Hub — a connecting point of 13 pipelines in south-central Louisiana — fell below $4.25 mmBtu, according to the AGA February 25 report.
The price reflects a downward trend that is causing financial pain for exploration and production companies — including some of those active in Arkansas’ Fayetteville Shale Play — that made investment and exploration decisions based on a higher price.
Falling natural gas demand in the nation’s manufacturing sector, moderate weather and large amounts of gas in underground storage have caused the price decline, AGA noted in the report. Unfortunately, the AGA notes that most futures contracts have natural gas priced below $6 per mmBtu.
Other key metrics of the AGA report include:
• Working Gas in Underground Storage
Net storage withdrawals for the week ending Feb. 13, were only 24 Bcf (billion cubic feet), which is significantly less than the 172 Bcf withdrawn at this time last year. At 1,996 Bcf, working gas remaining in underground storage has jumped to 9.7% above the volume one year ago and 8.4% higher than the five-year average.
• Natural Gas Production
After averaging 55.6 Bcf per day for the 10-day period Feb. 15-24, natural gas production prior to extraction losses is down about 1 Bcf per day compared to the
first two weeks of the month. However, average daily production prior to extraction losses for February 2009 (56.2 Bcf per day) is 5% higher than in February 2008 (53.7 Bcf per day).
• Rig Counts
Total national rig counts for the week ending Feb. 20, stood at 1,300, having tumbled 36% from 2,031 rigs in late summer 2008. At 1,018, gas-directed operations are down 29% from one-year earlier. However, rigs operating today described as drilling horizontal wells (like many of those in the Fayetteville Shale Play), which tend to be newer and more efficient drilling systems, numbered 475 on Feb. 20. One year ago that number was 464. This also tends to support the notion that operations in less conventional reservoirs remain relatively solid.
The monthly “Natural Gas Market Indicators” report from the American Gas Association provides some glimpse into the factors behind the thousands of jobs in Arkansas and the Fort Smith region tied to the exploration, production, transmission and management of natural gas.
Natural gas prices at the closely watched Henry Hub — a connecting point of 13 pipelines in south-central Louisiana — fell below $4.25 mmBtu, according to the AGA February 25 report.
The price reflects a downward trend that is causing financial pain for exploration and production companies — including some of those active in Arkansas’ Fayetteville Shale Play — that made investment and exploration decisions based on a higher price.
Falling natural gas demand in the nation’s manufacturing sector, moderate weather and large amounts of gas in underground storage have caused the price decline, AGA noted in the report. Unfortunately, the AGA notes that most futures contracts have natural gas priced below $6 per mmBtu.
Other key metrics of the AGA report include:
• Working Gas in Underground Storage
Net storage withdrawals for the week ending Feb. 13, were only 24 Bcf (billion cubic feet), which is significantly less than the 172 Bcf withdrawn at this time last year. At 1,996 Bcf, working gas remaining in underground storage has jumped to 9.7% above the volume one year ago and 8.4% higher than the five-year average.
• Natural Gas Production
After averaging 55.6 Bcf per day for the 10-day period Feb. 15-24, natural gas production prior to extraction losses is down about 1 Bcf per day compared to the
first two weeks of the month. However, average daily production prior to extraction losses for February 2009 (56.2 Bcf per day) is 5% higher than in February 2008 (53.7 Bcf per day).
• Rig Counts
Total national rig counts for the week ending Feb. 20, stood at 1,300, having tumbled 36% from 2,031 rigs in late summer 2008. At 1,018, gas-directed operations are down 29% from one-year earlier. However, rigs operating today described as drilling horizontal wells (like many of those in the Fayetteville Shale Play), which tend to be newer and more efficient drilling systems, numbered 475 on Feb. 20. One year ago that number was 464. This also tends to support the notion that operations in less conventional reservoirs remain relatively solid.
Tuesday, March 3, 2009
Mid Continent Natural Gas Production Halted
BY JOHN-LAURENT TRONCHE
March 02, 2009
http://www.fwbusinesspress.com/display.php?id=9664
Fort Worth Business Press
Chesapeake Energy Corp. will halt production of about 240 million cubic feet of natural gas equivalent in the company’s mid-continent operations due to “unusually low prices” of commodities.
The Oklahoma City-based company will stop production, much in western Oklahoma, for at least the month of March, which represents about 7 percent of Chesapeake Energy’s gross operated production capacity, according to a March 2 press release. Also, the company is considering a further 10 percent reduction in drilling activity if oil and natural gas prices remain low throughout the year.
Currently, oil is at about $41 per barrel while natural gas is about $4.30 per million British thermal units - both well below the peaks of summer 2008, or even desirable levels of $100 per barrel and at least $8 per Btu, respectively.
Chesapeake Energy CEO Aubrey K. McClendon said the company expects “drilling activity to decline well beyond the 40 percent drop already seen since August 2008,” and natural gas production should continue to fall as the industry struggles to reduce the gap between a supply surplus and shrinking demand.
“We have elected to temporarily curtail approximately 7 percent of our gross natural gas and oil production in order to protect shareholder and royalty interest owner value during this time of extraordinarily low prices, especially for Mid-Continent natural gas,” McClendon said in the statement. “During March 2009, most Mid-Continent natural gas prices at major interstate pipeline delivery points will average around $2.70 per thousand cubic feet, a price at which most natural gas production is unprofitable.”
Chesapeake Energy currently operates 110 rigs, down from 158 in August 2008. Should the company elect to implement the additional 10 percent cut in drilling activity, it would do so in areas without joint ventures – one of which is, at least currently, the Barnett Shale.
Shares of Chesapeake Energy currently trade above $14 per share, having fallen about 69 percent in the last 12 months. Shares are down 13 percent for the year.
jtronche@bizpress.net
March 02, 2009
http://www.fwbusinesspress.com/display.php?id=9664
Fort Worth Business Press
Chesapeake Energy Corp. will halt production of about 240 million cubic feet of natural gas equivalent in the company’s mid-continent operations due to “unusually low prices” of commodities.
The Oklahoma City-based company will stop production, much in western Oklahoma, for at least the month of March, which represents about 7 percent of Chesapeake Energy’s gross operated production capacity, according to a March 2 press release. Also, the company is considering a further 10 percent reduction in drilling activity if oil and natural gas prices remain low throughout the year.
Currently, oil is at about $41 per barrel while natural gas is about $4.30 per million British thermal units - both well below the peaks of summer 2008, or even desirable levels of $100 per barrel and at least $8 per Btu, respectively.
Chesapeake Energy CEO Aubrey K. McClendon said the company expects “drilling activity to decline well beyond the 40 percent drop already seen since August 2008,” and natural gas production should continue to fall as the industry struggles to reduce the gap between a supply surplus and shrinking demand.
“We have elected to temporarily curtail approximately 7 percent of our gross natural gas and oil production in order to protect shareholder and royalty interest owner value during this time of extraordinarily low prices, especially for Mid-Continent natural gas,” McClendon said in the statement. “During March 2009, most Mid-Continent natural gas prices at major interstate pipeline delivery points will average around $2.70 per thousand cubic feet, a price at which most natural gas production is unprofitable.”
Chesapeake Energy currently operates 110 rigs, down from 158 in August 2008. Should the company elect to implement the additional 10 percent cut in drilling activity, it would do so in areas without joint ventures – one of which is, at least currently, the Barnett Shale.
Shares of Chesapeake Energy currently trade above $14 per share, having fallen about 69 percent in the last 12 months. Shares are down 13 percent for the year.
jtronche@bizpress.net
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