Prices Low but Producers Drilling Continues

By: Ben Casselman
Natural-gas producers are getting hit hard by sliding gas prices, but that isn't keeping them from drilling more wells.
Natural gas this week fell below $5 a million British thermal units for the first time since December, and is down 14% since the start of the year. That is hitting profits at big gas producers such as Chesapeake Energy Corp., EOG Resources Inc. and Southwestern Energy Co. Southwestern this week reported a $35.7 million net loss for 2009, although its fourth-quarter profits rose 51% to $158 million.
But despite the low prices, companies are increasing spending and drilling more wells. On Friday, Baker Hughes Inc. reported that the number of drilling rigs looking for natural gas onshore in the U.S. rose by 12 this week to 905 rigs, the highest number in over a year.
When gas prices began to fall in late 2008, big gas producers slashed budgets and reduced drilling. But the number of rigs drilling for gas has bounced back 36% since July, as energy companies plowed into new fields in Pennsylvania, Louisiana and elsewhere that remained profitable even at low prices.
The drilling rebound is keeping U.S. gas production high, bucking predictions it would fall along with prices. Gas production in the lower-48 states has declined just 1.2% since its peak in February 2009, and actually rose slightly in December from a year ago, according to government data released Friday.
Interest in such "unconventional" gas fields will likely drive the rig count even higher in coming months. Big independent gas producers plan to spend an average of 22% more on capital projects this year than last according to a study released earlier this month by IHS Herold, a consulting firm.
"There's renewed enthusiasm over U.S. unconventional gas. You can really see that in the spending," said Aliza Fan Dutt, an analyst with the firm.
Still, energy executives say that if prices remain below $5 a million BTUs, drilling will slow again, crimping production.
"I think $5 gas is not a sustainable gas price even for the best shale plays," Chesapeake Chief Executive Aubrey McClendon told investors this month.
Increased demand for drilling rigs has led service providers to raise their prices, squeezing profit margins for producers, said Jon Wolff, an energy analyst with Credit Suisse in New York.
There is some good news for producers, however. A cold winter has driven up demand for gas, depleting the huge stockpiles that had helped push down prices. Storage levels are now 2.9% lower than a year ago, according to government data released this week.
"It illustrates again the power of demand," said Subash Chandra, an energy analyst with Jefferies & Co. in New York.
Write to Ben Casselman at ben.casselman@wsj.com

Rig Count Up 28

HOUSTON (Dow Jones)--The number of rigs drilling for oil and natural gas climbed this week as producers ramped up activity to take advantage of higher commodity prices.
The number of oil and gas rigs climbed to 1,373, up 28 from the previous week, according to data from oil-field services company Baker Hughes Inc. (BHI). The number of gas rigs was 905, an increase of 12 rigs from last week, while the oil rig count was 456, an increase of 16 rigs. The number of miscellaneous rigs was unchanged at 12 rigs.
The number of gas rigs in use peaked at 1,606 in September 2008. Producers scaled back natural-gas drilling sharply last year in response to low prices amid a flood of supply from shale-rock formations. But the rig count has steadily climbed over the last several weeks, as producers lock in prices on future output and frigid winter weather boosts gas demand and prices.
In September, natural gas prices reached their lowest level in more than seven years, but prices have nearly doubled from that low. Recent cold weather has spurred significant demand for gas heating, putting a dent in inventories. Total gas in U.S. storage for the week ended Feb. 19 was 1.853 trillion cubic feet--about 3% below last year's level and 0.7% above the five-year average.
Natural gas for April delivery on the New York Mercantile Exchange recently traded less than a penny lower at $4.762 a million British thermal units.
-By Jason Womack, Dow Jones Newswires; 713-547-9201; jason.womack@dowjones.com

Australia and China Still Talking Natural Gas

Feb. 25 (Bloomberg) -- Woodside Petroleum Ltd. remains in talks to sell PetroChina Co. liquefied natural gas from the $30 billion Browse project off Australia, after an initial supply agreement lapsed, Chief Executive Officer Don Voelte said.


Australia’s second-largest oil and gas producer was also contacted by as many as five other potential buyers when the PetroChina accord wasn’t renewed, Voelte said in a Bloomberg Television interview today.

“Two people can pull out of the deal,” Voelte said. “Maybe as we progressed, maybe we kinda fell out of love with the deal.” An agreement to supply CPC Corp of Taiwan remains in place, he said.

The preliminary agreement with China’s largest oil and gas company to supply as much as 3 million metric tons of LNG a year was valued at about A$45 billion ($40 billion), Voelte said in August. Woodside expects Chinese demand for its LNG to increase, he said today in Sydney.

“Very little LNG goes to China at this time,” Voelte said. “It’s a growing market. Most LNG from our company goes to Japan, a little to Korea. We see China to be a growth market, but we don’t count on it to be the only growth market.”

PetroChina’s Hong Kong-based spokesman Mao Zefeng wasn’t immediately available to comment.
Supply Guarantee
Woodside rose 1.3 percent to A$43.86 at 1:40 p.m. in Sydney, compared with the 0.3 percent drop in the benchmark S&P/ASX 200 Index. The oil and gas producer has gained 29 percent in the past year, lagging behind the index’s 39 percent advance.
Woodside is in discussions with at least three possible customers, including a company in China, to sell Browse LNG, Voelte said Feb. 9. PetroChina’s initial accord to buy gas from Browse expired because the Australian gas producer couldn’t guarantee it would meet the original timeline for supplying the fuel, the Chinese energy company’s parent said Jan. 5.
Woodside and partners Chevron Corp., Royal Dutch Shell Plc, BP Plc and BHP Billiton Ltd. this month opted to process the fuel at a hub in the Kimberley region of Western Australia after accepting a government deadline to decide how to develop the venture. A final investment decision for Browse is due in 2012.
The Browse fields, off Western Australia, are estimated to contain 13 trillion cubic feet of sales gas and 355 million barrels of condensate, a type of light oil, Macquarie Group Ltd. said in a client note today.
Strike Threat
The first stage of Woodside’s Pluto LNG project is more than 80 percent complete and initial LNG is expected in early 2011. That depends on “a productive industrial relations environment,” Woodside said yesterday.
The Australian energy company has agreements with “sister plants” to supply LNG to customers should strikes delay the A$13 billion venture in Western Australia, Voelte said today. Woodside devised the “risk mitigation” measures after talks with customers, the Perth-based company said yesterday.
“We don’t have to put the plans in place if we don’t need them,” Voelte said. “It’s not uncommon in the industry because LNG plants are so costly and so big that when you shut them down for maintenance or to replace equipment your customers just can’t go without. So if you are planning a big shutdown, let’s say in 2012, the other plant is there to supply volumes to match it.”
Woodside aims to allocate about 55 percent of the budget to build Pluto to Australian companies, Voelte said. “What we can build in Australia, we will build in Australia.”
Local Content
LNG developers in Australia are having gas processing units built in cheaper Asian locations and shipped in, and engineering and design work done overseas, economists at Goldman Sachs JBWere said in a report this month.
In Australia, a skills shortage and higher wages will make it difficult for companies to build multiple LNG plants at the same time, Voelte said. And “there are an awful lot of goods and services that Australia doesn’t make for LNG plants.”
Voelte said he is “comfortable” with two or three people within the company to potentially replace Chief Financial Officer Mark Chatterji. Chatterji will leave Woodside at the end of 2010 to return to the U.S., the company said yesterday.
“The board will want to make sure we compare internal candidates to outsiders, but my first instinct is we have a pool of people who are future CFOs, pick one of them,” he said.
Woodside yesterday reported a 2.1 percent increase in 2009 net income to A$1.82 billion. Sales fell 27 percent to A$4.35 billion because of lower commodity prices, while output declined 0.5 percent to 80.9 million barrels of oil equivalent.
To contact the reporters on this story: Heidi Couch in Sydney hcouch@bloomberg.net; James Paton in Sydney jpaton4@bloomberg.net

Last Updated: February 24, 2010 22:11 EST

Natural Gas Production Forecast is Up for All 2010

By Reg Curren

Feb. 24 (Bloomberg) -- Natural gas futures rose for the first time in five days, rebounding from an 11-week low, before a government report tomorrow that will probably show a bigger- than-average decline in U.S. stockpiles.
The Energy Department report may show that supplies fell 169 billion cubic feet last week, based on the median of 24 analyst estimates compiled by Bloomberg. The five-year average decline is 132 billion. Cold weather and snow along the East Coast will probably lift demand this week.
“We do expect a flip in the year-to-year from a surplus to a deficit and there’s a good chance we’ll eat substantially into the five-year,” said Peter Beutel, president of trading adviser Cameron Hanover Inc. in New Canaan, Connecticut. “We still have plenty of heating demand in front of us.”
Natural gas for March delivery rose 3.8 cents, or 0.8 percent, to settle at $4.816 per million Btu at 2:34 p.m. on the New York Mercantile Exchange. The March contract expired today. The April contract advanced 5 cents, or 1 percent, to $4.859.
Cold weather this winter narrowed the gas inventory surplus to the five-year average to 2.7 percent, or 53 billion cubic feet, in the week ended Feb. 12 from 15.7 percent in early December.
Futures also advanced as a winter storm watch was posted for New York City and other areas in the eastern U.S. New York may get as much as 10 inches of snow by Feb. 26, according to the National Weather Service.
Short Positions
“We broke down to the $4.75 support area and with the number tomorrow and the weather changing with the snowstorms, people are squaring out of short positions,” said Michael Rose, trading director at Angus Jackson Inc. in Fort Lauderdale, Florida. “People are just content to buy back short positions.”
Below-normal temperatures are forecast for much of the eastern half of the country through March 5, according to Commodity Weather Group of Bethesda, Maryland. Milder weather is anticipated after that.
Hedge-fund managers and other large speculators increased their net-short position in New York gas futures in the week ended Feb. 16, according to U.S. Commodity Futures Trading Commission data.
Speculative short positions, or bets prices will fall, outnumbered long positions by 154,292 contracts on the New York exchange, the Washington-based commission said in its Commitments of Traders report. Net-short positions rose by 3,465, or 2.3 percent, from a week earlier.
Trading Range
Gas futures will probably stay in a tight range around $5 per million Btu as U.S. supplies appear to be adequate to meet the rest of winter demand, Scott Hanold, an analyst at RBC Capital Markets in Minneapolis, said in a telephone interview.
“Storage is looking a little better, but not a whole lot,” Hanold said. “When you get out into spring we’re going to lose our heating demand and production is going to start ramping up.”
The Energy Department on Feb. 10 raised its forecast for nationwide natural gas production in 2010 to an average of 58.73 billion cubic feet a day from 58.41 billion estimated a month earlier.
Wholesale natural gas at the benchmark Henry Hub in Erath, Louisiana, fell 0.16 cent to $4.909 per million Btu, according to data compiled by Bloomberg.
Gas futures volume in electronic trading on the Nymex was 141,891 contracts as of 2:59 p.m., compared with a three-month daily average of 241,000. Volume totaled 212,760 yesterday. Open interest was 794,836 contracts, compared with the three-month average of 748,000. The exchange has a one-business-day delay in reporting open interest and full volume data.
To contact the reporter on this story: Reg Curren in Calgary at rcurren@bloomberg.net
Last Updated: February 24, 2010 16:12 EST

Exxon Qatar Natural Gas Project Started Up

HOUSTON, Feb 23 (Reuters) - Qatar Petroleum and Exxon Mobil (XOM.N) said on Tuesday the Al Khaleej Gas-Phase 2 (AKG-2) project started up with 1.25 billion cubic feet per day (bcfd) of sales gas capacity aimed at meeting demand from local industry.
Combined with Al Khaleej Gas-Phase 1 (AKG-1), which began production in 2005, the AKG projects will have a total capacity of 2 billion bcfd, making it the largest source of domestic gas supply in Qatar, Exxon said.
"We consider the AKG project as one of the strategic development projects of the North Field as it supplies gas to various power and desalination plants, as well as petrochemical and other energy intensive industries in Qatar," Abdulla Bin Hamad Al-Attyiah, Deputy Premier Minister of Energy and Industry, Chairman and Managing Director of Qatar Petroleum, said.
Exxon's North Field projects in Qatar are expected to produce nearly 3 bcf per day of natural gas for Qatar when completed. (Reporting by Anna Driver in Houston)

Natural Gas P.R. Continues

(Feb. 22) -- T. Boone Pickens is seen by some as the model of the new environmentalist -- no longer the tree-hugging seal scrubber of old but a 21st-century businessman whose pursuit of profit margins happily aligns with caring for the planet.
The cowboy champion of alternative energy, dubbed "the oracle of oil" by CNBC, pursued a media blitz in 2008 for what he saw as a bright future for wind energy. But in light of recent setbacks for wind, he has thrown his weight behind natural gas, which according to an interview he gave to Melanie D.G. Kaplan of Smartplanet is "at a tipping point."
"It's been there in the ground for millions of years. There's an over-200-year supply for us," he said. "If you convert the natural gas to the barrel of oil equivalent, or BOE, you're formidable. You're bigger than Russia, Iran, Qatar. It's right here in North America. It's abundant, cheap, clean, and it's ours. It's a global energy game-changer."
Pickens' wind projects have seen trouble in the past months, most notably the death of his plans for a giant North Texas wind farm in Pampa. Cheap natural gas makes wind farms less profitable, and for an alternative energy booster who made his public reputation on dollars-and-sense capitalism, gas was a natural move.
Never one to speak softly, Pickens announced his commitment to natural gas with an ad last month linking oil use to America's wars in the Middle East. Pickens believes in global warming, but for him alternative energies were always more about national security and independence than they were about environmentalism.
Many alternative energy sources, like wind, are really a form of solar energy, meaning that wind power has the potential to last as long as the sun or the Earth. Natural gas, however, is a fossil fuel, albeit a cleaner one. Pickens believes that America has strong enough reserves to run for a long time, but the 200-year supply he cites is not infinite.
"Natural gas is not a permanent or complete solution to imported oil," the Pickens Plan Web site says. "It is a bridge fuel to slash our oil dependence while buying us time to develop new technologies that will ultimately replace fossil transportation fuels."

That bridge, however, could provide a hefty profit for Pickens, who is aiming for a 12-million-strong fleet of natural gas vehicles.


The particular tipping point to which Pickens was referring may be legislation pending in Congress that would provide tax incentives to consumers and producers of natural gas cars. A strong supporter of the proposal, Pickens lists Senate Majority Leader Harry Reid, D-Nev., among his allies, and believes that legislation will be passed before Memorial Day.

The question for Pickens himself will be whether he can move fast enough to see these plans come to fruition. "I'm not an R&D guy," he told Smartplanet. "I figure 10 years for R and 10 years for D, and I'm 100 years old."

Filed under: Nation, Money

New York Debate Continues on Fracking

By Adam Bosch

Times Herald-Record

Posted: February 21, 2010 - 2:00 AM

CALLICOON — The mayor of a map-speck Texas town warned Sullivan County that noise, air pollution and heavy traffic will overrun the Catskills if smart regulations are not implemented before natural gas drilling starts.

"This is a delicate process that has to be regulated," said Calvin Tillman, the mayor of Dish, Texas. "If you do it wrong, ain't nobody gonna want to live here."

Tillman spoke to a crowd of more than 150 Saturday at the Delaware Youth Center in Callicoon. He's been touring parts of New York and Pennsylvania to chat about his town's experience with gas drilling in northern Texas.

Some of Tillman's data and anecdotes drew gasps and murmurs from the crowd, comprised largely of gas drilling opponents.

He told them about noisy gas-drilling rigs that spit out carcinogens, including benzene, in dangerously high concentrations. Some became ill from the pollution. He told them about the army of huge trucks that tore up local roads in his town of 180 people. He showed them photos of drill rigs that were so close to homes they threw shadows over a child's sandbox.

"There should be places that are off-limits to gas drilling," Tillman told the crowd, which met that idea with applause. Then he told the citizens to band together and demand better regulations: "Together we bargain, divided we beg."

Sullivan County began to grapple with gas drilling about 18 months ago, as companies began soliciting leases to drill in the gas-rich Marcellus shale that lies beneath many of the towns here. The move to drill has slowed because of the sagging economy and because New York is revisiting its drilling regulations.

That has given Sullivan County time to prepare for what seems inevitable.

"I think everyone understands there will be drilling; we just have to make sure it's done responsibly," Nancy Janyszeski, chairman of the Board of Supervisors in Nockamixon Township, Pa., told the crowd.

Neither Janyszeski nor Tillman were anti-drilling. They never once spoke of banning it. Rather, they preached smart preparation. Tillman said Sullivan County should prepare baseline air and water tests, advocate for a severance tax on minerals that could pay for environmental oversight, work to outlaw drilling near schools and other sensitive areas, and push for greener drilling techniques.

In a blunt, Southern tone, he boiled his message down to this: "Don't assume nothing will happen. Prepare ahead of time. You have an opportunity to do this better than we did."

abosch@th-record.com

Natural Gas Rig Count Up by 2 This Week in the USA

The number of rigs drilling for natural gas in the United States rose by two this week to an 11½-month high of 893, according to a report Friday by oil services firm Baker Hughes in Houston.
It was the eighth straight weekly gain and puts the gas rig count at its highest level since March 6, 2009, when there were 916 gas rigs operating.
The U.S. natural gas drilling rig count has rebounded 34 per cent after bottoming at 665 on July 17, its lowest level since May 3, 2002, when there were 640 active gas rigs.
But the rig count is still well off its recent peak above 1,600 in September 2008, and still stands at 125 rigs, or 12 per cent, below the same week last year.
Many gas producers had scaled back drilling operations earlier last year amid tight credit and with natural gas cash prices sinking during summer to about $2 US per million British thermal units, a 7½-year low and down some 85 per cent from July 2008 highs above $13.

© Copyright (c) The Calgary Herald

Read more: http://www.calgaryherald.com/business/energy-resources/natural+count+rises/2591235/story.html#ixzz0g85wGt43

Freaking Fracking and the Power Plays to Kill Natural Gas Drilling?

http://industry.bnet.com/energy/10003088/congressional-probe-into-natural-gas-fracking-the-first-step-toward-federal-regulation/

By Kirsten Korosec | Feb 19, 2010

An upcoming congressional investigation of hydraulic fracturing — a controversial high-pressure drilling process that’s significantly boosted North American natural-gas production — has been advertised as a mere fact-finding mission. In reality, though, it’s a clear first move toward overt federal regulation of the environmentally questionable practice.

Congressional Democrats are already worried that the chemicals used in the process could contaminate drinking water. Hydraulic fracturing, or “fracking,” pumps a high-pressure mix of water, sand and chemicals thousands of feet underground, breaking up shale formations to release trapped oil and gas. The chemicals used in fracking make up less than 0.5 percent of the overall mix by volume, but they often include hazardous substances such as benzene — a known carcinogen.

The stakes are huge, and not just for the oil and gas industry. Thanks to improvements in fracking, drillers can now reach vast tracts of previously untouchable gas trapped in shale. It has changed the industry, for sure. But it’s also a resource that could make the United States self-sufficient in natural gas supply by 2030.
Even the folks behind the investigation — Reps. Edward Markey and Henry Waxman — acknowledge the importance of fracking.

Hydraulic fracturing could help us unlock vast domestic natural gas reserves once thought unattainable, strengthening America’s energy independence and reducing carbon emissions, Waxman said in a release.

So, what’s the big deal, really? Why not regulate the practice and get on with it already? The industry is convinced that the EPA would make fracking either illegal or so expensive as to ruin its commercial viability. Exxon (XOM) was worried enough about the prospect of EPA regulation that it included a fracking-related escape clause in its $41 billion acquisition of independent oil and gas producer XTO Energy (XTO).
Unfortunately for the industry, the investigation is already amassing the firepower it needs to make the case for federal regulation. Halliburton (HAL) and seven other oil-field companies, including Schlumberger (SLB) and BJ Services (BJS), are at the center of the investigation by the House Energy and Commerce Committee and have been asked to turn over information about the chemicals used in fracking, how much water is consumed and how companies dispose of waste water during the process.

Halliburton and BJ Services already appear to have have broken a promise to the EPA not to use diesel fluids in their fracking processes, according to Waxman. Between 2005 and 2007, Halliburton allegedly used more than 807,000 gallons of seven diesel-based fluids. BJ Services reported using 2,500 gallons of two diesel-based fluids, although it acknowledged violating the agreement and has taken steps to correct the error.
Granted, the EPA agreement was voluntary, and it’s not even entirely clear whether Halliburton even violated it in the first place. But it doesn’t matter. This is what folks are going to focus on. Not the success of the unconventional natural gas industry in the United States. Not the positive safety record of fracking to date. And not the benefits of using natural gas as a bridge fuel to wean ourselves off of foreign oil and towards domestic resources.
Instead, it will come down to who should be trusted: the EPA or America’s favorite whipping boy?

Oil Prices Up while Gas Falls

By CHRIS KAHN (AP) – 5 hours ago

NEW YORK — Natural gas prices tumbled more than 4 percent Thursday after the government said supplies are still higher than average despite a rash of snowstorms that blanketed the East Coast during the past few weeks.
Natural gas is used to both heat homes and power electric generators, and supplies generally drop in the winter as homeowners crank up the heat.
The Energy Information Administration said natural gas stores did fall last week. However the remaining supply of 2.03 trillion cubic feet is still nearly 3 percent higher than the five-year average.
Natural gas lost 23.5 cents at $5.151 per 1,000 cubic feet in trading on the New York Mercantile Exchange.
With the winter more than half over, analyst Stephen Schork said natural gas prices were headed lower.
"We're at the end of the season," he said. "And there's an assumption out there that we have a lot of storage capacity, a lot of untapped wells that could easily be brought online."
The EIA said in a separate report that supplies of distillates, including diesel fuel and heating oil, fell almost twice as much as expected last week. The drop in supplies was due in part to a plunge in imports of those fuels.
Crude inventories rose by 3.1 million barrels to 334.5 million barrels, which is 5.4 percent below year-ago levels, according to the EIA.
Oil prices have been rising this week with further signs of economic growth. One day after the government reported gains in industrial production and home construction, the Philadelphia Federal Reserve said manufacturing is improving. Its manufacturing index rose to 17.6 in February from 15.2 in January.
Benchmark crude for March delivery added $1.43 at $78.76 a barrel on the Nymex. In London, Brent crude increased $1.46 at $77.73 a barrel on the ICE futures exchange.
At the pump, retail gas prices rose overnight for the first time in nearly two weeks to a national average of $2.614 a gallon, according to AAA, Wright Express and Oil Price Information Service. A gallon of regular unleaded is still 12.6 cents cheaper than a month ago. It's 65.7 cents more expensive than the same time last year.
In other Nymex trading in March contracts, heating oil added 3.14 cents to $2.0381 a gallon, and gasoline rose 4.83 cents to $2.0554 a gallon.
Associated Press writers Pablo Gorondi in Budapest, Hungary and Alex Kennedy in Singapore contributed to this report.

Copyright © 2010 The Associated Press. All rights reserved.

Land Owners are Natural Gas Supportive in New York

BINGHAMTON, New York (Reuters) - New York landowners whose properties sit on the gas-rich Marcellus Shale are pushing back against calls for greater environmental regulation, saying it has halted the U.S. gas drilling boom at the New York border.
Their concerns have opened a new front in the gas drilling wars, in which environmentalists and neighbors opposed to seeing gas wells in their back yards have put a drag on the exponential growth of onshore U.S. natural gas production.
A group of landowners who stand to earn a windfall from leasing their property to companies like Chesapeake Energy gathered in the town of Binghamton recently to push back against claims that drilling could pose health hazards.
"This is a very depressed area and this is something that will turn this whole community around," said Dan Fitzsimmons, 54, a leader of the Joint Landowners Coalition, which includes 17,500 families.
"If people are educated with the facts and not with environmental scare rhetoric, I think this thing will move along very quickly," he said.
Development of the massive Marcellus Shale in several northeastern states holds the promise of providing the United States with an abundant, relatively clean domestic energy source, but environmental concerns that shale gas drilling could contaminate drinking water have created regulatory risk.
New York City, for example, has urged a ban on drilling in its upstate watershed, an unfiltered system that serves 9 million people and accounts for 6 percent of the Marcellus Shale area in New York state.
Critics point to the rural Pennsylvania town where residents recently sued Cabot Oil & Gas Corp, claiming the company's natural-gas drilling has contaminated their water wells with toxic chemicals and reduced their property values.
New York landowners see a flurry of drilling activity just over the border in Pennsylvania and wonder why it cannot happen in New York, where the state is trying to close an $8.2 billion budget deficit.
Industry sources privately express their exasperation with New York, saying they have all but given up on the state.
One to two years of drilling in New York could generate $1.4 billion of economic activity, including $108 million in payments to landowners and the creation of hundreds of jobs, according to the Independent Oil & Gas Association of New York.
At issue is a process known as hydraulic fracturing, in which 3.5 million gallons (13.25 million liters) per well plus sand and diluted chemicals are pumped into shale formations at high pressures, cracking the rock and freeing the gas.
"New York state, because of its great environmental laws, has a tremendous opportunity to be a national leader in how this process evolves," said James Simpson, a staff attorney at environmental group Riverkeeper.
"There's no question that hydraulic fracturing is here to stay throughout the country and New York state is positioned uniquely to do it right," he said.
NEW YORK TAKES ANOTHER LOOK
In 2008, Governor David Paterson ordered the Department of Environmental Conservation to study the impact of high-volume horizontal hydraulic fracturing, a process that enables drilling in multiple directions from a single drilling pad.
Chesapeake, the second largest producer of U.S. natural gas, has leased the mineral rights for 1 million acres in New York state. The Oklahoma-based energy company says the process is already heavily regulated and there has never been a documented case of ground water contamination because of hydraulic fracturing.
"There has been a lot of non-factual information shared with the public," David Spigelmyer, Chesapeake Energy's vice president for government relations, told Reuters.
The company has fought new federal regulation including the proposed Frac Act, which would give the U.S. Environmental Protection Agency more oversight over natural gas drilling.
"We believe the states are much more ideally positioned to ... regulate this industry," Spigelmyer said.
Environmentalists -- including many that tout natural gas as a cleaner alternative to other oil and coal -- say the industry has been unwilling to meet them half way.
"As long as the natural gas industry continues to insist that these concerns, these environmental, economic, public health, landowner concerns, are not real... the more powerful this movement will grow," said Albert Appleton, who headed the New York City Department of Environmental Protection in the 1990s.
Earlier this month, the Onondaga County legislature -- which includes the city of Syracuse -- voted to ban hydraulic fracturing on county-owned land until impacts are studied.
Attitudes are different in Binghamton, a city of less than 50,000 people, where advocates of drilling point to boarded-up store fronts on Main Street.
"We stand on the edge of something here, when done correctly, that can change our area," said Bryant La Tourette, 47, a landowner who heads the Oxford Land Group. "I don't see right now any other business that can come here and make this much of an economic impact."
(Additional reporting by Jon Hurdle; Editing by Daniel Trotta)

Displeasure with U.S. Congress Climate Action Partnership

BP and ConocoPhillips are leaving a business coalition that played a major role in the crafting of climate change legislation that passed the US House of Representatives last year.
Conoco said Tuesday it is quitting the US Climate Action Partnership (US CAP) because climate legislation that has emerged from Congress thus far would place an unfair burden on US oil refiners and does not recognize the role that natural gas can play in reducing emissions of greenhouse gases.
BP confirmed that it too was pulling out of the group in comments to Dow Jones Newswires and other news media. Both companies are major producers of oil and natural gas and have extensive US refining operations.
The climate change bill adopted by the US House last year was widely criticized for granting 30% of the available greenhouse gas emission allowances free-of-charge to the coal-dominated electric utility sector while granting refineries a relatively meager 2% of the allowances.
The legislation was co-sponsored by Reps. Henry Waxman, a Democrat from California, and Edward Markey, a Democrat from Massachusetts. Similar legislation is currently stalled in the Senate.
Many in the oil industry had argued that refiners would respond to such a policy by scaling back their US operations, thus increasing US dependence on imports of crude oil and refined products (IOD Jul.22,p3).
The House plan also proposed granting just 9% of the available free allowances to local natural gas distribution companies.
That also came under fire from industry leaders who argued that gas will play a crucial role in displacing electricity produced by less environmentally friendly coal-fired power plants and in supplementing intermittent electricity output from wind and solar plants.
"House climate legislation and Senate proposals to date have disadvantaged the transportation sector and its consumers, left domestic refineries unfairly penalized versus international competition, and ignored the critical role that natural gas can play in reducing greenhouse gas emissions," Conoco Chief Executive Jim Mulva said in a statement released by his company.
BP spokesman Ronnie Chappel said his company also plans to leave US CAP. "We can be more effective if we show up in the discussion as BP," Chappell said, adding that BP is hoping for legislation that "sends the right signals to all energy producers and all energy consumers."
The departure of BP and Conoco leaves Royal Dutch Shell as the only major oil company among US Cap's 30 or so members. Major electricity producers AES, Duke, Exelon and NRG belong to the group as do automakers Ford, Chrysler and General Motors.
The Waxman-Markey bill drew heavily on a legislative blueprint that US CAP offered to Congress in early 2009. Among other things, the group recommended economy-wide cuts in greenhouse gas emissions to 80% less than 2005 levels by 2050.
It also called for a "cap-and-trade" mechanism to achieve that goal, rather than a carbon tax which was favored by some oil industry leaders, such as Exxon Chief Executive Rex Tillerson (IOD Mar.6,p2).
The organization also called for downstream sources -- like refiners and gas utilities -- to be made responsible for curbing carbon emissions, arguing they were best-placed to pass along the cost of compliance to consumers.
Mulva said Conoco remains supportive of a "federal legislative solution for mandatory reduction of greenhouse gas emissions" despite its exit from the climate partnership.
But he said leaving US Cap will allow Conoco to "better focus its efforts on ensuring fair and equitable treatment of the transportation sector and its consumers, and on expanding opportunities for greater near-term greenhouse gas reductions through increased use of natural gas."
Lauren O'Neil, Washingto

Another Marcellus Shale Player

By Jonathan Soble in Tokyo
Published: February 16 2010 13:11 | Last updated: February 16 2010 13:11

Mitsui & Co, the Japanese trading and investment group, has agreed a $1.4bn deal with Anadarko Petroleum to buy a minority stake in the US group’s Marcellus Shale natural gas project in Pennsylvania.
The deal, announced on Tuesday, will give Mitsui control of 32.5 per cent of Anadarko’s shale-gas assets in the state, where most of the 250,000 sq km Marcellus deposit is located.

The Japanese company said it planned to spend an additional $3bn-$4bn on exploration and extraction, making Marcellus one of its largest energy investments. It said it was counting on rising demand in the US for natural gas as an alternative to coal and oil.
The deal could bolster confidence in the future of shale gas and other “unconventional” natural-gas sources. Shale gas is found hundreds of metres below ground inside densely packed rock and extracting it on a commercial scale has become possible only in the past few years.
Shale-gas explorers such as Anadarko, which is based in Texas, use advanced techniques such as horizontal drilling and “fracturing” gas-encasing rock with a mix of sand and water pumped into wells at high pressure.
Analysts say exploiting shale gas beds could more than quadruple the world’s useable natural gas reserves. Shale-gas development has been confined mostly to North America so far, but Mitsui said it hoped the Marcellus deal would lead to future projects in China, where large shale-gas deposits have also been found.
Like other Japanese trading houses such as Mitsubishi and Marubeni, Mitsui has expanded from its original import-export business to become a major financial backer of commodities and energy projects. It owns a Y250bn ($2.78bn) interest in Russia’s Sakhalin-2 liquefied natural gas project, its biggest such investment so far.
Mitsui said it expected the Marcellus development to last 60 years and produce 360m to 460m cu ft of gas a day at its peak. Most of the $3bn-$4bn in additional development costs would be spent in the fist ten years or so to drill “a few thousand wells”. It said it planned to close the deal on March 15.

Copyright The Financial Times Limited 2010. You may share using our article tools. Please don't cut articles from FT.com and redistribute by email or post to the web.

Natural Gas Explosion Kills 5

Posted by stoian2008

According to the AP, the explosion at the Kleen Energy Systems power plant in Connecticut occurred as workers purged natural gas lines. At least five people have been killed with another 12 injured by the explosion. It was not clear if more people are still trapped under the rubble, but rescue teams were expected to work into Monday. The power plant was slated to be operational by mid-2010. Read more about this story at Power Plant News Today: Latest Connecticut Power Plant Explosion news - http://powerplants.einnews.com/news/connecticut-power-plant-explosion Latest Kleen Energy Systems news - http://powerplants.einnews.com/news/kleen-energy-systems Located at http://powerplants.einnews.com, Power Plant News Today is a service of EIN News, an industry leader in news monitoring for business professionals and analysts. Using a combination of proprietary search technology and human editing, EIN News delivers to its members the latest power plant news from around the world, saving them valuable time they'd spend searching for information. New users to Power Plant News Today can enjoy a no-obligation, one-week free trial. About EIN Presswire The EIN Presswire press release distribution service is a news-syndication solution that distributes news to more than 10 million visitors annually at EIN News and millions more through its press release distribution partners. A news source for leading journalists, decision-makers and industry professionals worldwide, EIN Presswire targets press releases to a wide array of worldwide business professionals in more than 80 different industries. EIN Presswire also offers affiliate network opportunities and news distribution to tens of thousands of news subscribers daily. Read the newest business news at http://www.einpresswire.com and the latest world news in more than 80 different industries at http://www.einnews.com.

Alaska Natural Gas Officials Looking to Asia for Buyers

 By BECKY BOHRER
Associated Press
2010-02-15 07:26 AM
Alaska officials are looking to China and what some believe will be that country's strong demand for natural gas to help the state advance its long-held pipeline dreams.Gov. Sean Parnell has invited an official with China's National Energy Administration and others to visit Alaska, following up on a trade mission Lt. Gov. Craig Campbell helped lead to China in December.
Campbell returned from that trip believing the rapidly developing communist nation, already a leading export market for such Alaska products as seafood, zinc and lead ore, could also become a major investor in or export market for Alaska natural gas or its byproducts.
The potential for Alaska is huge, said Harold Heinze, chief executive of the Alaska Natural Gas Development Authority, who was with Campbell on the trip. He sees several possibilities for the Chinese, from building a plant to convert ethane to pellets that would be used in manufacturing to signing on with a major natural gas pipeline project. Ethane is a component for plastics that he says is found in the Prudhoe Bay region.
"One thing you look for in a partner is, do they have money and do they have more money than you. And these guys have money," he said, adding: "They're major players in the world."
In theory, if the interest and money are there, that could also spur progress on a pipeline that many Alaskans have long looked to for new jobs, reliable energy and as a source for more state revenue amid projections of slumping oil production.
But there are plenty of uncertainties, from permitting and pricing _ how gas holds up against other energy sources _ to what China's true longterm demands for gas will be over alternatives like coal, and the level of competition Alaska would face from other producers to meet the gas demand.
And there are the various pipeline options and plans, each with diehard constituencies and questions about their viability.
Estimates released last month by the companies working with the state to advance a major line put the project costs at $20 billion to $41 billion, depending on the route
One route, the cheaper option, estimated at $20 billion to $26 billion, would run from the harsh North Slope to Valdez, Alaska, where gas would be liquefied at a facility that another entity would build and then shipped elsewhere, possibly overseas. The plant cost isn't included in the estimates.
The costlier option envisions a pipeline going from the North Slope to Canada, where gas could move on existing systems to North American markets.
But there have been numerous other proposals through the years to move North Slope gas, even a bullet line to move the gas to the most populated part of the state, southcentral Alaska.
"The Chinese may, because they're interested in resources, they may be able to do things and invest in things that don't look economic in market terms," said James Jensen, a consultant in natural gas economics.
"In fact, if the Chinese said, 'Gee, if we could get this thing going and we could tie up a certain amount of American gas for our own use,' they might do something that I wouldn't think would be economic," he said. "But they might do it."
Officials with TransCanada Corp., based in Calgary, Alberta, and Irving, Texas-based Exxon Mobil Corp., say the project is economically viable and hope to move toward an "open season," when they can court gas producers and try to secure commitments for shipping deals, by May.
The companies, in a recent filing with federal regulators, estimated 35 trillion cubic feet of proven gas reserves on the North Slope.
Through a process in which TransCanada beat out applicants including a Chinese company several years ago, the state agreed to reimburse up to $500 million of the eligible costs of the project.
A TransCanada spokeswoman declined comment on whether there'd been interest from China on the project, saying: "All discussions with individual customers are confidential and we would not be able to discuss any individual details as a result of that."
A rival project by Britain's BP PLC and Houston-based ConocoPhillips is also moving ahead.
Campbell said he's not advocating any specific project, but he'd like the Chinese officials to visit "earlier, rather than later." They've indicated a "huge demand," for natural gas, he said, and Alaska wants a market.

Natural Gas Shale Play with Tax and Regulations

HARRISBURG, Pa. (AP) - The natural gas industry in one of the nation's hottest exploration spots is bracing for a political tussle over whether and how Pennsylvania will tax methane from the potentially lucrative Marcellus Shale formation.
An industry trade association, the Marcellus Shale Coalition, said Thursday it wants any discussion of a tax to involve the high cost to drill a shale well and cumbersome state laws that make it costly to operate.
A tax enacted without addressing issues that hamper exploration companies could encourage some to move resources to shale formations in other states, said coalition president Kathryn Klaber.
"What is important is to look at the broad issues, not just a tax, as to how we make this climate best for growth," Klaber said. "There are a lot of modernization policies that need to be put in place to develop this massive natural resource."
On Tuesday, Gov. Ed Rendell issued his annual spending plan for the state and renewed his call to enact a tax identical to West Virginia's: 5 percent on the value of sale, plus 4.7 cents per thousand cubic feet produced.
Rendell projects the tax would produce $180 million in the fiscal year beginning July 1 and increase to nearly $530 million after five years, including 10 percent set aside for local governments.
Rendell wants money to shore up a state treasury that faces a projected $5.6 billion gap in 2011 and 2012 resulting from spiraling public pension costs and the expiration of federal stimulus budget aid.
Pennsylvania is the biggest natural gas producer that does not impose some type of tax on it.
However, the coalition wants to steer talk of a tax to reflect those imposed by shale states, such as Texas, Arkansas and Louisiana. In those states, the tax is discounted initially to allow the exploration companies to recoup a multimillion-dollar investment in each well.
For instance, Texas imposes a 7.5 percent tax but discounts it for 10 years or until the operator recovers 50 percent of the drilling and completion costs. In Arkansas, the state imposes a 5 percent tax on natural gas production but discounts it to 1.5 percent for at least three years.

Last year, Rendell called for the same tax rate on gas. After months of Republican-led opposition, he relented, saying he did not want to hurt an industry in its infancy.

In recent weeks, Rendell has said he believes the industry can afford to pay a tax, and pointed to the heavy influx of cash into Marcellus Shale exploration ventures.

Natural Gas Use Up Last Week

By DEBORAH JIAN LEE (AP) – 1 day ago




NEW YORK — Natural gas stockpiles fell more than expected last week, the government said Friday.



The Energy Department's Energy Information Administration said in its weekly report that natural gas inventories held in underground storage in the lower 48 states dropped by 191 billion cubic feet to about 2.22 trillion cubic feet for the week ended Feb. 5.



Analysts expected a plunge of between 177 billion and 181 billion cubic feet, according to a survey by Platts, the energy information arm of McGraw-Hill Cos.



The inventory level was 5.4 percent above the five-year average of about 2.1 trillion cubic feet, and 8.4 percent above last year's storage level of about 2.04 trillion cubic feet, according to the government data.



Natural gas contracts rose 6.4 cents to $5.460 per 1,000 cubic feet on the New York Mercantile Exchange.



Copyright © 2010 The Associated Press. All rights reserved.

Energy Transfer Buys Louisiana Assets

DALLAS, Feb 10, 2010 (BUSINESS WIRE) -- Dallas-based Energy Transfer Partners, L.P. /quotes/comstock/13*!etp/quotes/nls/etp (ETP 44.10, -0.03, -0.07%) today announced it has signed an agreement to purchase certain natural gas gathering and treating assets in the Haynesville Shale from Tristate Midstream, L.P., a portfolio company of Dallas-based Energy Spectrum. Energy Transfer is acquiring Tristate North Louisiana Midstream, LLC and TSM Treating, LLC, which collectively own a 120-mile gathering system in Red River and Bienville Parishes with a capacity of 275 million cubic feet per day, and natural gas treating facilities with approximately 480 million cubic feet per day of treating capacity.
"We are pleased to be expanding our gathering and treating assets in the Haynesville Shale producing region," said ETP's Mac Stallcup, Vice President -- Louisiana Business Development. "These Tristate assets, which include significant long-term acreage dedications, are not only strategically located, but further compliment our emerging presence in the area. Through this acquisition, we have increased acreage dedicated to us under long-term gathering agreements in the Haynesville Shale to more than 100,000 acres."
The gathering network will tie to several interstate and intrastate pipelines including Energy Transfer's planned Tiger Pipeline. Tiger Pipeline, expected to be in service in the first half of 2011, is under development and consists of an approximately 180-mile, 42-inch natural gas pipeline that will serve the Haynesville Shale producing region in Louisiana and the Carthage Hub area in East Texas.
The closing of this acquisition is subject to receipt of customary regulatory approval.
Energy Transfer Partners, L.P. /quotes/comstock/13*!etp/quotes/nls/etp (ETP 44.10, -0.03, -0.07%) is a publicly traded partnership owning and operating a diversified portfolio of energy assets. ETP has pipeline operations in Arizona, Colorado, Louisiana, New Mexico, and Utah, and owns the largest intrastate pipeline system in Texas. ETP's natural gas operations include gathering and transportation pipelines, treating and processing assets, and three storage facilities located in Texas. ETP currently has more than 17,500 miles of pipeline in service and has a 50% interest in joint ventures that have approximately 500 miles of interstate pipeline in service. ETP is also one of the three largest retail marketers of propane in the United States, serving more than one million customers across the country.
Energy Transfer Equity, L.P. /quotes/comstock/13*!ete/quotes/nls/ete (ETE 30.73, -0.23, -0.74%) is a publicly traded partnership, which owns the general partner of Energy Transfer Partners, L.P. and approximately 62.5 million ETP limited partner units.
This press release may include certain statements concerning expectations for the future that are forward-looking statements as defined by federal law. Such forward-looking statements are subject to a variety of known and unknown risks, uncertainties, and other factors that are difficult to predict and many of which are beyond management's control. An extensive list of factors that can affect future results are discussed in ETP's Annual Report on Form 10-K and other documents filed from time to time with the Securities and Exchange Commission. ETP undertakes no obligation to update or revise any forward-looking statement to reflect new information or events
The information contained in this press release is available on the Partnerships' website at www.energytransfer.com.
SOURCE: Energy Transfer Partners, L.P.

Shale Natural Gas Company Evaluations

Feb 9 (Reuters) - Following is the Thomson Reuters North
America Shale Gas Valuation Index, based on closing share
prices from Feb. 8.

For a related story, double-click on [ID:nN09246576]

Data from from StarMine, a Thomson Reuters company, using
the 12-month forward SmartEstimate, a measure that selects
estimates from only the most accurate analysts.

StarMine Intrinsic Value is a variation on the
dividend-discount model methodology that adjusts for biases
uncovered in analyst forecasts.
EV/EBITDA
Index average                         7.0
Range Resources Corp (RRC.N)         11.9
CNX Gas Corp (CXG.N)                  9.7
EQT Corp (EQT.N)                      9.0
Exco Resources Inc (XCO.N)            8.4
Southwestern Energy Co (SWN.N)        8.4
Petrohawk Energy Corp (HK.N)          8.1
Quicksilver Resources Inc (KWK.N)     7.4
Cabot Oil & Gas Corp (COG.N)          7.3
Carrizo Oil And Gas Inc (CRZO.O)      7.3
Forest Oil Corp (FST.N)               7.2
Encana Corp (ECA.N)                   7.2
Goodrich Petroleum Corp (GDP.N)       7.0
Encore Acquisition Co (EAC.N)         7.0
EOG Resources Inc (EOG.N)             6.4
Chesapeake Energy Corp (CHK.N)        6.3
Comstock Resources Inc (CRK.N)        6.1
Anadarko Petroleum Corp (APC.N)       5.6
Devon Energy Corp (DVN.N)             5.4
Newfield Exploration Co (NFX.N)       5.1
Cimarex Energy Co (XEC.N)             5.0
Apache Corp (APA.N)                   4.4
Talisman Energy Inc (TLM.N)           3.8
PRICE/EPS
Aggregate:                           16.0
Range Resources Corp                 57.4
Comstock Resources Inc               47.0
Encore Acquisition Co                45.1
Anadarko Petroleum Corp              33.1
Cabot Oil & Gas Corp                 29.4
Petrohawk Energy Corp                29.0
EOG Resources Inc                    23.5
Encana Corp                          23.3
CNX Gas Corp                         22.3
EQT Corp                             21.2
Talisman Energy Inc                  20.4
Southwestern Energy Co               19.5
Exco Resources Inc                   16.8
Quicksilver Resources Inc            15.1
Carrizo Oil And Gas Inc              13.9
Forest Oil Corp                      10.9
Devon Energy Corp                    10.9
Cimarex Energy Co                    10.5
Newfield Exploration Co              10.2
Chesapeake Energy Corp                9.9
Apache Corp                           9.5
Goodrich Petroleum Corp               ---
PRICE/INTRINSIC VALUE
Aggregate                             0.91
Range Resources Corp                  2.05
Comstock Resources Inc                1.86
Encore Acquisition Co                 1.85
Anadarko Petroleum Co                 1.78
CNX Gas Corp                          1.54
Cabot Oil & Gas Corp                  1.38
Petrohawk Energy Corp                 1.37
Talisman Energy Inc                   1.34
Southwestern Energy Co                1.16
EOG Resources Inc                     1.15
Cimarex Energy Co                     1.10
EQT Corp                              1.08
Newfield Exploration Co               0.95
Quicksilver Resources Inc             0.84
Exco Resources Inc                    0.83
Devon Energy Corp                     0.75
Apache Corp                           0.71
Carrizo Oil And Gas Inc               0.70
Encana Corp                           0.69
Forest Oil Corp                       0.68
Chesapeake Energy Corp                0.56
Goodrich Petroleum Corp               ---
 (Reporting by Daniel Trotta; Editing by Gerald E. McCormick)

Gazprom Welcomes Independents Into Russian Market

MOSCOW, Feb. 8 (UPI) -- Russian gas monopoly Gazprom offered few plans to increase domestic gas sales, opening the door to independent producers by as early as 2030.
Gazprom called on independent natural gas producers to take on as much as 40 percent of the domestic market by 2030, Russia's Vedomosti newspaper reports.
The gas monopoly said last week it had no plans to increase domestic gas sales for the year. Gas demand in Europe, one of Gazprom's primary customers, is expected by 2030 to increase by 19 percent of their 2008 levels.
The regional energy sector was cast into disarray in the wake of the economic recession and a January 2009 gas row between Kiev and Moscow.
The Kiev gas dispute prompted Moscow and Europe to look for ways to diversify their transit options. Europe aims to diversify its natural gas sector with the Nabucco pipeline, while Moscow embarks on a similar effort with its Nord Stream and South Stream gas pipelines.
Nord Stream, state-run news agency RIA Novosti says, has the capacity to meet rising European demand by itself.
Gazprom announced Friday that its natural gas sales to foreign markets could increase 30 percent by 2030.

China Importing More Liquid Natural Gas

China would make efforts to import more liquefied natural gas (LNG) to cope with supply shortage, said head of China's National Energy Administration (NEA) on Sunday.

Zhang Guobao, also vice-minister of the National Development and Reform Commission, made the statement at a press conference in Beijing. China would speed up the building of LNG terminals, natural gas pipelines, and storage facilities in the country's coastal areas, Zhang said. 

China imported 3.5 million tonnes of LNG in 2009, equal to 5 billion cubic meters of natural gas, accounting for almost 6 percent of China's total gas consumption in the year, according to Zhang.

At the national work conference in December, Zhang said China would build more LNG terminals in Shandong Province and Zhuhai of Guangdong Province, and boost domestic production by further exploiting offshore reserves and major gas fields in central, western China.

Zhang said China had been diversifying its gas import sources which included Malaysia, Qatar, Papua New Guinea in addition to Australia and Indonesia. He also called on domestic enterprises to sign more long-term LNG import agreements.

Ukraine Obligates One More Time to Gazprom

By Kateryna Choursina and Daryna Krasnolutska

Feb. 6 (Bloomberg) -- Ukraine will import 8.5 billion cubic meters of natural gas from Russia this quarter because of freezing temperatures, said Ihor Didenko, first deputy chief executive officer at NAK Naftogaz Ukrainy.
The country will keep its plan to import 27 billion cubic meters from Russia in all of 2010, Didenko said today at a press conference in Kiev. The largest volumes of fuel will be bought this quarter and in the fourth quarter.
Ukraine relies on Russia for more than 50 percent of its energy needs and ships about 80 percent of Russia’s Europe-bound gas. Ukraine signed a supply and transit contract with exporter OAO Gazprom in January 2009 to end a debt and pricing dispute, agreeing to pay for imports by the seventh day of each month.
NAK Naftogaz imported 2.55 billion cubic meters of Russian gas in January, more than initially planned, as temperatures plunged as low as minus 30 degrees Celsius (minus 22 Fahrenheit) in some regions. It paid $780 million for the gas, Fuel and Energy Minister Yuriy Prodan said on Feb. 3.
To contact the reporters on this story: Daryna Krasnolutska in Kiev at dkrasnolutsk@bloomberg.net; Kateryna Choursina in Kiev at kchoursina@bloomberg.net
Last Updated: February 6, 2010 09:53 EST

Gazprom Delays Natural Gas Project

MOSCOW
Petroleumworld.com, Feb 5, 2010

State-run Russian energy giant Gazprom will delay development of the giant Shtokman gas field in northern Russia by three years because of "changes in the market situation," shareholders said Friday.

Pipeline gas production is expected to start in 2016 while liquified natural gas production should begin in 2017, after final investment decisions in 2011, a statement issued by shareholders said.
The gas field is owned by a consortium made up of Gazprom, Total and Statoil.
Gazprom's original plan called for production, estimated at 23.7 billion cubic metres of natural gas a year, to begin in 2013.
The statement issued Friday cited "changes in the market situation and particularly in the liquified natural gas market" for the delay.
Gazprom announced in July that it might delay the launch of the gas project to reflect market conditions.
The Shtokman field holds natural gas reserves estimated at 3.8 trillion cubic metres.
Located in the Barents Sea, it is seen as being technically challenging to exploit.

U.S. #1 in Natural Gas

http://www.benzinga.com/111162/human-ingenuity-and-advances-in-engineering-have-turned-the-u-s-into-saudi-arabia-of-nat-gas

"How ironic that during the ‘drill, baby, drill’ demonstrations as gasoline prices spiked in 2007 and 2008, a silent revolution with natural gas was already underway that will make those concerns largely irrelevant.
By marrying and perfecting two processes into a technology called horizontal fracking, engineering has virtually created, from nothing, new natural gas resources, previously regarded as inaccessibly locked in useless shale deposits. Suddenly, the mammoth shale formations in Texas, Pennsylvania, Ohio, New York, North Dakota, and elsewhere have the potential to produce abundant amounts of gas for decades to come.
Human ingenuity has turned theoretical gas reserves — too costly ever to be exploited — into practical resources. And just in time. Less than a decade ago, experts were noting that conventional natural gas production had begun to plateau, despite annual increases in the number of wells drilled."
~Max Schulz writing in the American.com

MP: The chart above shows natural gas production (data here) in the United States, which recently overtook Russia as the #1 gas producer in the world.

5% Pennsylvania Tax Proposed for Natural Gas

By Rona Kobell

Pennsylvania Gov. Edward Rendell announced this month that he will introduce a plan to tax the fast-growing natural gas industry this year-a move that could put hundreds of millions of dollars back in the cash-strapped state budget.
At a recent news conference in Harrisburg, Rendell called the tax "appropriate" and "necessary." Although the tax has broad support from environmentalists and citizens, it's not yet clear if most of the state's legislators will support it.
The tax has become a hot button issue in recent years as companies have converged upon the Keystone State to extract the natural gas buried deep below the Marcellus Shale, a gas-rich formation stretching across Pennsylvania, West Virginia and New York.
While natural gas burns cleaner than coal, extracting it from the ground through a process called hydrofracking requires millions of gallons of water and creates environmental problems-among them water pollution, forest fragmentation and the contamination of drinking water supplies.
Environmentalists, citizens, local government officials and scientists have complained that the Pennsylvania Department of Environmental Protection lacks the resources to police the industry, and that a tax would bring in revenues to hire more inspectors and help them do that.
Last year, Rendell's proposed 5 percent tax-similar to the one that is law in West Virginia-would have generated $107 million in its first year and was projected to bring in $632 million by 2013. But the governor dropped the idea after meeting with gas company representatives. They had convinced him, he said, not to tax a fledgling industry just as it was getting started.
Today, that is a much harder case to make.
In December, energy giant Exxon Mobil agreed to pay $41 billion for XTO Energy Inc., in part on the strength of XTO's Marcellus holdings. Additionally, when the state opened 32,000 acres of state forestland to drilling, the leases brought in $128.5 million-twice the amount officials expected.
In 2008, the state saw 195 Marcellus wells drilled; last year, there were 763. Rendell said the DEP will seek to permit 5,200 wells in 2010.
And as the industry grows, so do the concerns.
PennFuture has called for a moratorium on drilling in state forests until scientists have studied its affects on wildlife and habitat. The environmental advocacy group also wants all revenues collected from public land leases to remain within the Department of Conservation and Natural Resources to address maintenance issues.
The Susquehanna River Basin Commission, which regulates how much water companies can withdraw for fracking, ordered Texas-based Novus Operating Co. to immediately cease all water-related activities because they lacked permits.
The SRBC has taken such action before, levying fines ranging from $75,000 to $450,000 for non-compliance. It had to warn many out-of-state-based drillers of its permit requirements a couple years ago, when the companies first began arriving in earnest. But SRBC executive director Paul Swartz said that ignorance was not the case here.
"The commission considers these violations by Novus to be intentional, and we will respond accordingly," Swartz said. "Commission staff had clearly informed company officials of the need for prior approval before undertaking the projects."
http://www.bayjournal.com/article.cfm?article=3770

Taxicabs Run on CNG in Chicago

Associated Press
CHICAGO - A major taxicab company says it has started a conversion to Compressed Natural Gas vehicles with a contract award to Clean Energy Fuels Corp. to build and operate two new CNG fueling stations in Chicago.


Yellow Group said Monday the stations would sell fuel to the company's growing CNG taxi fleet.

Yellow Group plans an initial deployment of 100 new CNG taxis under its Yellow Cab subsidiary, which it says is America's oldest and largest continuously operating taxi fleet.

The move is part of a 10-year contract awarded to the California-based Clean Energy Fuels, which partnered with Yellow Group to apply for and secure $1.5 million in grant funding from the City of Chicago and the U.S. Department of Energy.

http://www.chicagotribune.com/news/local/wire/chi-ap-il-yellowcabs-natura,0,2082719.story

More Natural Gas for Pennsylvania

By Andrew Maykuth


Inquirer Staff Writer

In their exuberance, oil- and gas-industry officials repeat a single refrain when describing the natural gas from Pennsylvania's Marcellus Shale:


A game-changer.

Tony Hayward, chief executive officer of oil giant BP P.L.C., was the latest to gush enthusiastically when he called unconventional natural gas resources like the Marcellus "a complete game-changer."

"It probably transforms the U.S. energy outlook for the next 100 years," Hayward said Thursday at the World Economic Forum in Davos, Switzerland.


The breathtaking emergence of natural gas as America's energy savior was not in the cards. Just four years ago, after Hurricanes Katrina and Rita devastated Gulf Coast rigs and rattled gas markets, energy pundits forecast a bleak winter of short supplies, high prices, and low thermostats.

The vast scale of shale-gas resources has come into focus quickly, and industry officials are touting the possibility of steady supplies for decades to come.


The Potential Gas Committee in Colorado last year revised its outlook of America's future gas supply - up 35 percent in just two years. The forecast was the highest in its 44-year history.


The Marcellus Shale is the nation's fastest-growing producing area. Though it lies under five states, about 60 percent of its reserves are in Pennsylvania, according to Terry Engelder, a Pennsylvania State University geologist.

"In terms of its impact on Pennsylvania, this is probably without peer in the last century," said Engelder, whose projections in 2008 alerted the public about the size of the Marcellus.

"America's energy portfolio has undergone a first-order paradigm shift just in the last two years," he said. "This is such an exciting thing."


Not everyone has climbed aboard the bandwagon. Some environmentalists are uneasy about the hydraulic-fracturing process that has unlocked the shale gas. The technique requires the injection of millions of gallons of water into a well to break up the shale to initiate production.

And some analysts say they believe the gas industry's estimates are too optimistic.

"I would look at all this with a bit of healthy skepticism," said Arthur E. Berman, a Houston gas-industry consultant, who says he believes some operators have overstated the production potential and understated the cost of Texas shale-gas wells. His pointed criticism got him banished from one trade journal - and invited to speak at scores of investor workshops.

"Two years ago, we were talking about importing gas from the Middle East," he said. "And now we have a hundred-year supply of domestic gas?"

Berman said he had been unable to conduct a similar analysis of Marcellus wells because Pennsylvania law allows operators to keep their production data secret for five years, unlike other states, where output is reported to taxing authorities promptly.

"If something looks too good to be true," he said, "I need to look more closely."

Questioning voices such as Berman's are uncommon in the industry, which portrays natural gas as abundant, cheap, and cleaner than coal and oil - a domestically produced "bridge fuel" to ease the transition to renewable wind and solar generation.

For companies like UGI Corp. - the Valley Forge energy company that operates regulated utilities in Pennsylvania that sell natural gas to retail customers and operates unregulated subsidiaries that consume and transport natural gas - the Marcellus Shale represents a game-changing opportunity on several fronts.

"That activity in the Marcellus Shale is really a win-win, not only for our regulated business, but also our nonregulated business," UGI chief executive Lon R. Greenberg told analysts in a conference call last week.

Officials at UGI and other Pennsylvania gas utilities say retail customers will benefit in the long run, as utilities begin buying their supplies from Marcellus sources, saving pipeline costs from the Gulf Coast.

UGI's utilities are in a strong position because many of their 578,000 customers are in Marcellus cities such as Scranton, Wilkes-Barre, and Williamsport. The utility could eventually work out deals to buy gas directly from producers.

Though UGI has no interest in becoming a gas producer, the company is exploring the possibilities for investing in "midstream" pipelines that tie the Marcellus wells to the interstate pipelines that move gas to lucrative urban markets like New York. Expansion of the pipeline infrastructure is critical to opening the Marcellus to exploration.

In addition, UGI is looking at expanding its underground gas-storage operations in Western Pennsylvania, said Brad Hall, president of UGI Energy Services.

"There is a bit of a gold-rush mentality," he said, "but in this case, there's really gold."

UGI may also reap some other, unintended benefits.

The company's power-generation subsidiary last year announced a $125 million project to convert its aging Hunlock Power Station near Wilkes-Barre from coal to natural gas.

Hall said the decision was made before the Marcellus abundance was fully understood. But when the plant comes online in 2011, it is likely to find eager sellers of fuel nearby.

"It makes us look like we were really smart."

Contact staff writer Andrew Maykuth at 215-854-2947

or amaykuth@phillynews.com.