967 Rigs Looking for Natural Gas

The number of rigs actively exploring for oil and natural gas in the U.S. increased by 3 this week to 1,672.

Houston-based Baker Hughes Inc. said Friday that 967 rigs were exploring for natural gas and 696 for oil. Nine were listed as miscellaneous. A year ago this week, the rig count stood at 1,069.

Of the major oil- and gas-producing states, Texas gained five rigs, Alaska gained two and California and Louisiana each gained one. Arkansas, New Mexico, Oklahoma and Wyoming each lost one, while Colorado lost two rigs. North Dakota, Pennsylvania and West Virginia remained unchanged.

The rig count tally peaked at 4,530 in 1981, during the height of the oil boom. The industry posted a record low of 488 in 1999

Oil $82.55/barrel - Natural Gas $3.31/MCF

Oil prices fell to near US$82 a barrel yesterday in Asia after a report showed a surge in US crude supplies undermined hope demand is improving.

Benchmark oil for December delivery was down US37c at US$82.18 a barrel on the New York Mercantile Exchange. The contract rose US3c to settle at US$82.55 on Tuesday. The American Petroleum Institute said crude inventories rose 6.4 million barrels last week while analysts surveyed by Platts, the energy information arm of McGraw-Hill, had forecast a rise of 1.5 million barrels. Inventories of petrol fell while distillates rose.

Investors are also looking for hints about the size of a Treasury bond-buying programme the Federal Reserve may implement next week to spur economic growth, known as quantitative easing.

"The surprisingly large build in API crude oil stocks could work with a stronger US dollar, a watered-down [quantative easing] event and technical resistance to turn oil prices lower from here," said Cameron Hanover.

Natural gas slid US4.4c to US$3.31 per 1000 cubic feet.

Gas Inventories Up

Analysts and traders expect government data scheduled for release Thursday to show another above-average build pushing natural gas inventories to last fall's levels.

The U.S. Energy Information Administration is expected to report that 73 billion cubic feet of gas were added to storage during the week ended Oct. 22, according to the average prediction of 16 analysts and traders in a Dow Jones Newswires survey.

The EIA is scheduled to release its storage data Thursday at 10:30 a.m. EDT (1430 GMT).

The survey's median result was 74 billion cubic feet, with a high estimate of a 92-bcf build and a low of a 60-bcf injection. The storage estimate is higher than last year's 24-bcf build in storage for the same week and the 45-bcf five-year average build for that week.

If the storage estimate is correct, inventories as of this past Friday will total 3.756 trillion cubic feet, 9.1% above the five-year average and nearly in line with the year's level for the same week.

The last six weeks of storage builds have been above average, narrowing the gap between this year's level and last November's when U.S. storage hit an all-time high of 3.837 tcf.

Last fall's build was attributed to weak demand from commercial and industrial users hard-hit by the recession. Blame for the current swell falls on warmer-than-normal temperatures and a rosy outlook in the futures market, which "has been creating plenty of financial incentive to put gas in the ground," said analyst Martin King, an analyst with First Energy Capital.

The EIA's weekly storage page is http://tonto.eia.doe.gov/oog/info/ngs/ngs.html.

No Frac in the PA Forest

HARRISONBURG, Pa., Oct. 26 /PRNewswire-USNewswire/ -- Rolf Hanson, executive director of the Associated Petroleum Industries of Pennsylvania, questioned the decision by Governor Ed Rendell to halt with an executive order new natural gas drilling leasing on state lands over a political stalemate on taxes:

"Holding hostage important natural gas development and the creation of new jobs and revenues over a political impasse is not sound energy policy. The Keystone state continues to struggle with high unemployment and budget deficits, and natural gas is part of the solution to the state's economic problems."

"Researchers at Penn State University estimate that the Marcellus gas industry in Pennsylvania could be generating $13.5 billion in value-added economic output and almost 175,000 jobs in 2010. Pennsylvanians' know that tax increases on the oil and natural gas industry is not the answer. In July, Harris Interactive released a poll showing that six in 10 Pennsylvania voters oppose higher taxes on America's oil and natural gas industry."

"We need to put politics aside and do what's right for Pennsylvanians. That means allowing the Marcellus Shale to unleash the forces that will create thousands of new jobs in the state."

Penn Shale in Trouble?

HARRISBURG -- Gov. Ed Rendell on Tuesday is expected to call for a moratorium on further leasing of state forest land for natural gas drilling.

That news today came on the heels of reports that Republican gubernatorial candidate Tom Corbett, who has publicly opposed a tax on natural gas extraction, continues to rake in campaign cash from natural gas companies.

Marcellusmoney.org, a list being compiled by Conservation Voters of Pennsylvania and Common Cause/Pennsylvania, said today that Mr. Corbett had received $856,220 from the gas drilling industry during the past 10 years, up from the $700,000 reported a few weeks ago and the $373,000 reported in June.

Most of the contributions have come in the past two years. The latest tracking report covers the period of Sept. 14 to Oct. 18.

Democratic gubernatorial candidate Dan Onorato has received significantly less in the last decade, $124,300.

"In the last weeks before the election, drilling industry CEOs went all out for Tom Corbett because he thinks that ordinary Pennsylvanians should pay to clean up the messes that their drills leave behind," said Josh McNeil of Conservation Voters.

Mr. Corbett said the natural gas industry is just in the beginning stages in this state and he doesn't want to impose a tax that could send thousands of jobs elsewhere.

Mr. Rendell will hold a news conference Tuesday in Philadelphia, where he will "sign an executive order instituting a strategic moratorium on future drilling operations in the state," according to his office.

Such a moratorium, however, wouldn't affect drilling planned on the 700,000 acres of state forest land in areas of Marcellus Shale that has already been leased to private companies. Only 25 wells are now producing gas on that land but eventually 400 more wells could be located there.

Mr. Rendell will leave office in January, however, and whether such a moratorium would continue would be up to either Mr. Corbett or Mr. Onorato.

Mr. Rendell also is expected to continue his criticism of Senate Republicans for what he sees as their "unwillingness to enact a severance tax on the natural gas industry."

Rig Count at 1669

The U.S. energy rig count fell by one to 1,669, the second consecutive decline, according to data published by Baker Hughes Inc. Oil rigs were unchanged at 695, and natural-gas rigs dropped by one to 965.

The total U.S. count has gained 59 percent in the past year, Baker Hughes reported on itswebsite.

The number of oil rigs held at the highest level since Jan. 1, 1988. The total has more than doubled in the past year.

Gas rigs declined for the fourth time in five weeks. The count has risen 33 percent in a year.

Miscellaneous rigs, which primarily drill for geothermal energy, were unchanged from last week at nine.

Canadian rigs fell by four to 419, the first drop in four weeks. The total has gained 72 percent in the past year.

Natural Gas Industry Promotes in West Virginia

CHARLESTON, W.Va. -- The media in some parts of the state won't tell any good stories about natural gas so the industry is buying advertisements to tell its side, said Corky DeMarco, executive director of the West Virginia Oil and Natural Gas Association.

"The problem is, in certain areas, nobody wants to write the story that's coming from us," DeMarco told University of Charleston business students, alumni, and invited guests on Tuesday. "They want to write the sensational, the fictional."

Natural gas drilling in the Appalachian basin has become a high-profile business during the past several years as companies learned how to drill horizontal wells and fracture, or "frack," the Marcellus Shale to release natural gas.

The new drilling know-how is re-shaping the industry. There's talk that the Marcellus Shale gas field may contain 500 trillion cubic feet of gas. Instead of talking about running out of natural gas within 10 years - a prevalent discussion within the industry in the 1970s - the discussion is about having up to 90 years of proven and potential supply.

Fracturing shale formations uses lots of water and sand and some chemicals. Concerns have been raised about the volume of water used and its disposal; truck traffic in drilling areas; surface owners' rights; and safety. In the past four months there have been two well fires and an explosion at drilling operations in Marshall County.

Duke Building Natural Gas Power Plant

EDEN, N.C. -- Duke Energy is moving forward with plans to build a natural gas-powered facility in Eden.

The plant, which will convert natural gas into electricity, will be located at the Dan River Steam Station.

The plant will open in 2012 and is expected to initially employ between 20 and 25 workers.

At the peak of construction, it's expected to create as many as 500 construction jobs.

Another gas powered electricity plant is being built in Rowan County, the company has said.

Natural Gas Price Putting Alternatives on Hold

NEW YORK — By unlocking decades' worth of natural gas deposits deep underground across the United States, drillers have ensured that natural gas will be cheap and plentiful for the foreseeable future. It's a reversal from a few years ago that is transforming the energy industry.

The sudden abundance of natural gas has been a boon to homeowners who use it for heat, local economies in gas-rich regions, manufacturers that use it to power factories and companies that rely on it as a raw material for plastic, carpet and other everyday products. But it has upended the ambitious growth plans of companies that produce power from wind, nuclear energy and coal. Those plans were based on the assumption that supplies of natural gas would be tight, and prices high.

Billions of dollars' worth of plans to build wind farms and nuclear reactors have been delayed or scuttled, including Constellation Energy's Calvert Cliffs nuclear project in Maryland. The company signaled last week it was in peril because of higher-than-expected financing costs.

And coal power, already struggling under tighter environmental regulations, is now under even more pressure. Natural gas emits fewer dangerous chemicals and about half as much carbon dioxide as coal.

The new natural gas discoveries, mostly beneath states in the East, South and Midwest, have kept prices remarkably low, even as demand has begun to come back since the end of the recession.

"We once thought we could face gas shortages and brownouts. Now we are facing an enormous oversupply of natural gas," said Fadel Gheit, senior oil and gas analyst at Oppenheimer and Co. "We have not scratched the surface of potential of gas in the U.S. and across the world."

The U.S. uses natural gas to produce 21 percent of its electricity. Coal is the dominant fuel, accounting for 48 percent of the electricity mix. By 2015, natural gas is predicted to reach 25 percent, while coal is expected to fall to 44 percent.

In the middle of the last decade, natural gas looked to be in short supply. Production in the U.S. was slowing, imports from Canada were rising and plans for importing liquefied natural gas from the Middle East and elsewhere were drawn up.

Natural gas, which had traded at about $2 per million British thermal units in the 1990s, hit nearly $15 in 2005. It is now about $3.50, driven lower by reduced industrial demand and rising production by those learning to make a profit from shale gas at ever lower prices.

Shale gas fields

Starting in about 2006, after decades of work, natural gas drillers like Devon Energy, EOG Resources and XTO Energy, now owned by Exxon Mobil Corp., perfected methods first tried in 1981 that now allow them to cheaply drill down and then horizontally into gas trapped in formations of shale never before thought accessible.

In just a few years, a number of shale gas fields around the country are suddenly producing gas, including the Barnett field in Texas, the Fayetteville field in Arkansas, the Haynesville field in Louisiana and the massive Marcellus field that stretches from Western New York through Pennsylvania, Eastern Ohio and West Virginia.

A recent study by the Massachusetts Institute of Technology on the future of natural gas found that 80 years' worth of global natural gas consumption could be developed profitably with a gas price of $4 or below.

Plans for nuclear plants and wind farms were made under the assumption that gas prices would average $7 to $9. At that level, electricity prices would be high enough to make wind and nuclear power look affordable. Now many of these projects suddenly look too expensive.

Plans for three dozen new nuclear plants were drawn up in the middle of the last decade, and the nuclear industry hailed what it called a renaissance. Lawmakers, aiming to help stave off high electricity prices, authorized an $18.5 billion loan guarantee program to help the nuclear industry begin building new plants after two decades of inactivity.

Now almost all of those plans have been delayed or shelved. Even companies that are finalists for federal loan guarantees, NRG Energy and Constellation Energy, announced recently that they have nearly stopped spending on their projects.

Constellation announced recently that it was giving up on its loan guarantee application because the federal government's terms were too restrictive. Analysts say low natural gas prices are making the project uneconomic. NRG CEO David Crane said he will not pursue the company's two-reactor project in South Texas if natural gas prices stay low, even if his project is offered a loan guarantee.

"Clearly $4 gas challenges the economics of just about every other form of electricity generation," says Richard Myers, a vice president at the Nuclear Energy Institute, an industry group. "If you take a snapshot, today, it looks bleak."

Wind power waning

The wind industry is also suffering. Antonio Mexia, chief executive of the Portuguese utility EDP, which is the third-largest wind power producer in the world and owner of Houston-based Horizon wind, said in a recent interview that the company plans to reduce wind investments by 75 percent in the U.S. between this year and next.

Nationwide, the wind industry installed enough wind turbines to supply electricity to 2.6 million homes in 2009, a record. This year wind turbine construction will likely fall 40 percent, and next year Mexia predicts that it could fall again, by as much as half. Federal subsidies for renewable energy projects reduce costs by some 30 percent, but that is not enough to help the wind-power industry compete with natural gas these days, he says.

Debate is Taxing Marcellus Shale

When it comes to natural gas drilling, all eyes are on Pennsylvania.

From controversy over methane-tainted water in the small northeastern Pennsylvania town of Dimock, to the legislative tussle over an extraction tax, to a close watch on regulatory moves in Harrisburg, how the state proceeds on many fronts related to the Marcellus Shale formation has the potential to affect the industry's future elsewhere.

"The eyes of the world are back on Pennsylvania as part of a transformation, I believe, in energy policy," Scott Perry, director of the state's Bureau of Oil and Gas Management, said this week at Penn State University's Marcellus Summit conference.

The state's link to the oil and gas business goes back 150 years ago to a boom that began in northwestern Pennsylvania in small-town Titusville.

"We did it once before," Perry said, "and it looks like we're going to do it again."

The gas riches of the vast Marcellus Shale — which underlies Pennsylvania, New York, West Virginia and part of Ohio — have attracted a rush of drillers and related operations to the region in the last two years. Tens of thousands of acres of Pennsylvania land have been leased and thousands of wells have been drilled.

Some geologists estimate the Marcellus contains 500 trillion cubic feet of natural gas, of which 50 trillion cubic feet might be recoverable by hydraulic fracturing, or "fracking" — enough to supply the entire East Coast for 50 years. Those vast gas riches are attractive because they're so close to major markets in the Northeast.

"The Marcellus is so big, so new and happening so fast," said conference presenter Bobby Huffman, project director for Houston-based Spectra Energy Transmission, a major natural gas infrastructure company. "I would say the rest of the industry is watching it because the potential for the ultimate amount of gas production is so big in Pennsylvania."

Advancements in the technology have significantly increased the yield and economic viability of tapping the shale gas.

But environmentalists are concerned on several fronts, especially because the process uses millions of gallons of water mixed with sand and chemicals, some of them toxic, and blasts deep underground to crack the shale and free the gas within. Surface spills of chemicals and contamination of water aquifers and private wells by migrating methane gas are among concerns.

Julian Boggs of the Columbus-based Environment Ohio, said in a phone interview that his group has been keeping tabs on Marcellus issues in western Pennsylvania, though drilling concerns aren't quite at the forefront as a statewide issue there. Marcellus projects have only recently crept into parts of eastern Ohio.

In Ohio, the Utica Shale — a formation deeper underground than the Marcellus — may hold more promise than the Marcellus, based on preliminary interest from gas companies, said Rick Simmers, statewide enforcement coordinator for the Ohio Division of Mineral Resources Management.

"We're watching and gearing up for a fight, especially with leasing of state lands," Boggs said. "The biggest problem with hydraulic fracturing ... is that it hasn't been around long enough for the environmental impact to be understood."

The fracking process is currently exempt from regulation by the U.S. Environmental Protection Agency; EPA is considering how to structure a study requested by Congress, where bills are pending that would reverse the exemption and give the EPA regulatory oversight.

Louis D'Amico, president of the Pennsylvania Independent Oil & Gas Association, said some environmental groups may be spreading misinformation about fracking.

"There are a large group of environmental groups ... opposed to any kind of fossil fuel development, raising the specter of hydraulic fracturing," he said in a phone interview. "They have created an atmosphere of fear with a lot of people who don't understand."

D'Amico gave a measured response when asked to assess Pennsylvania's regulatory oversight. For example, he praised new rules about improved well casing standards, but took issue with turnaround times for permitting requests.

Kansas, he said, can issue permits in a day, whereas in Pennsylvania, "we're lucky we get that done in several months."

"I think our programs here are going to be pretty much a model in other states," D'Amico said. "That being said, there are areas of concern that perhaps Pennsylvania has gone too far regulatory-wise."

Simmers said his department began developing plans 4½ years ago to deal with potential development, just as industry attention was focusing on the Marcellus in Pennsylvania.

"We realized early on that we were not going to be the focus of Marcellus development. It gave us time to sit and watch," Simmers said. "We had the benefit of stepping back and saying, 'What can we do to do this properly?'"

Ohio had issued about 64 Marcellus permits, with 42 drilled — a tiny fraction compared with Pennsylvania, where more than 2,300 permits had been issued the first nine months of 2010. Nearly half of those wells have been drilled.

In New York, the Department of Environmental Conservation has halted issuing permits for wells needing "high-volume" hydraulic fracturing, classified as using 80,000 gallons of water or more. The state is studying issues including water management in that type of fracking.

Brad Field, director of New York's Division of Mineral Resources, told the Penn State conference the state issued 500 permits in 2009 for wells needing less water. "That's what's going forward in New York. We're still open for business," he said. "Low-volume fracking does take place in the Marcellus, in the Utica, but nothing of the high-volume variety is going forward."

More than 500 wells have also been drilled into the Marcellus field in West Virginia.

Natural Gas Rates to Drop in South Carolina

CAYCE, S.C., Oct 15, 2010 (BUSINESS WIRE) -- South Carolina Electric & Gas Company (SCE&G), principal subsidiary of SCANA Corporation(SCG 41.14, +0.04, +0.10%), received approval today from the Public Service Commission of South Carolina (PSC) on a 2.31 percent overall decrease to its retail natural gas base rates, including a 4.48 percent reduction for residential customers.

SCE&G Vice President of Natural Gas Operations Marty Phalen said the decrease means residential customers on average will be paying over $100 a year less for natural gas beginning in November than they were one year ago. "Although this decrease relates to base rates, we are also pleased that the wholesale cost of gas remains very low as we prepare to head into the heating season," said Phalen.

SCE&G filed for the decrease under terms of the Natural Gas Rate Stabilization Act, a South Carolina law designed to reduce volatility of customer rates by allowing for more efficient recovery of the costs that regulated utilities incur in expanding, improving and maintaining natural gas service infrastructure to meet the needs of customers. The rate decrease will be implemented with the first billing cycle of November.

Phalen said an increase in business from SCE&G's interruptible industrial customers and lower capital spending costs by the company were the primary factors that allowed for the requested decrease.

The overall 2.31 percent decrease to natural gas rates breaks out as follows:

4.48 percent decrease for residential customers 2.18 percent decrease for small/medium commercial customers 1.52 percent decrease for large commercial/industrial customers.

PROFILE

South Carolina Electric & Gas Company is a regulated public utility that provides natural gas service to approximately 310,000 customers throughout South Carolina. The company also is engaged in the generation, transmission, distribution and sale of electricity to approximately 660,000 customers throughout the state. More information about SCE&G is available on the company's website at www.sceg.com.

SCANA Corporation, a Fortune 500 company headquartered in Cayce, South Carolina, is an energy-based holding company principally engaged, through subsidiaries, in electric and natural gas utility operations and other energy-related businesses in South Carolina, North Carolina and Georgia. Information about SCANA Corporation and its businesses is available on the Company's website at www.scana.com.

SAFE HARBOR STATEMENT

Statements included in this press release which are not statements of historical fact are intended to be, and are hereby identified as, "forward-looking statements" for purposes of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements include, but are not limited to, statements concerning key earnings drivers, customer growth, environmental regulations and expenditures, leverage ratio, projections for pension fund contributions, financing activities, access to sources of capital, impacts of the adoption of new accounting rules and estimated construction and other expenditures. In some cases, forward-looking statements can be identified by terminology such as "may," "will," "could," "should," "expects," "forecasts," "plans," "anticipates," "believes," "estimates," "projects," "predicts," "potential" or "continue" or the negative of these terms or other similar terminology. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and involve a number of risks and uncertainties, and that actual results could differ materially from those indicated by such forward-looking statements. Important factors that could cause actual results to differ materially from those indicated by such forward-looking statements include, but are not limited to, the following: (1) the information is of a preliminary nature and may be subject to further and/or continuing review and adjustment; (2) regulatory actions, particularly changes in rate regulation, regulations governing electric grid reliability and environmental regulations; (3) current and future litigation; (4) changes in the economy, especially in areas served by subsidiaries of SCANA Corporation (SCANA); (5) the impact of competition from other energy suppliers, including competition from alternate fuels in industrial interruptible markets; (6) growth opportunities for SCANA's regulated and diversified subsidiaries; (7) the results of short- and long-term financing efforts, including future prospects for obtaining access to capital markets and other sources of liquidity; (8) changes in SCANA's or its subsidiaries' accounting rules and accounting policies; (9) the effects of weather, including drought, especially in areas where the Company's generation and transmission facilities are located and in areas served by SCANA's subsidiaries; (10) payment by counterparties as and when due; (11) the results of efforts to license, site, construct and finance facilities for baseload electric generation; (12) the availability of fuels such as coal, natural gas and enriched uranium used to produce electricity; the availability of purchased power and natural gas for distribution; the level and volatility of future market prices for such fuels and purchased power; and the ability to recover the costs for such fuels and purchased power; (13) the availability of skilled and experienced human resources to properly manage, operate, and grow the Company's businesses; (14) labor disputes; (15) performance of SCANA's pension plan assets; (16) higher taxes; (17) inflation; (18) compliance with regulations; and (19) the other risks and uncertainties described from time to time in the periodic reports filed by SCANA or South Carolina Electric & Gas Company (SCE&G) with the United States Securities and Exchange Commission (SEC). The Company disclaims any obligation to update any forward-looking statements.

SOURCE: SCANA Corporation

SCANA Corporation 
Media Contact: 
Robert Yanity, 800-562-9308, ryanity@scana.com 
Investor Contact: 
Byron Hinson, 803-217-5352, bhinson@scana.com

Iran and Iraq Say They Have the Largest Natural Gas Reserves

A new oil war is brewing in the Middle East - it's not a fight for reserves, but over how big reserves are.

Iran and Iraq, two of the region's largest oil producers, have been playing a game of oneupmanship over the size of their respective oil reserves ever since Baghdad signed landmark agreements with international oil firms last year to dramatically raise its oil output.Earlier this week Iran said its official oil reserves now stood at 150.31-billion barrels, a 9 percent rise over the previous estimate.

"Today, our oil reserves have reached 150.31 billion barrels," said Masoud Mir-Kazemi, Iran's oil minister, told a news conference in Tehran. "With the exploration that we have made...by the end of the year, it will become more."

Iran, the second largest producer in the Organization of Petroleum Exporting Countries (OPEC) after Saudi Arabia, said the revised estimate reflected partly on new discoveries and partly on better reserve data. The county also revised its gas reserve estimate to 33.1 trillion cubic meters. Iran has the second biggest natural gas reserves after Russia.

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U.S. Energy Information Administration says as of January 2010, Iran has an estimated 137.6 billion barrels of proven oil reserves, or roughly 10 percent of the world's total reserves, citing data from the Oil and Gas Journal.

Iran's announcement came a few weeks after Iraq raised its proven crude oil reserve estimates to 143.1 billion barrels, a gain of 25 percent. The new estimate would make Baghdad the holder of the second largest oil reserves in the world after Saudi Arabia.

However, analysts are skeptical about the timing of the announcement as well as the veracity of the claims of both OPEC oil producers.

"Given the recent Iraqi increase and the fact that it relegated Iran to third place within OPEC in conventional reserves, it is not far-fetched to suspect that Iran wanted to defend its position within the OPEC pecking order, especially as its announcement came on the eve of the organization’s latest meeting," said Samuel Ciszuk, IHS Senior Middle East Energy analyst.

Ciszuk points out that the size of the reserves is a main consideration behind the size of the production quota entitled for an OPEC member state. Iraq is currently allowed to export as much oil as it can, given the nation's need for rehabilitating its economy after years of sanctions and occupation. If Iraq's plan to raise its output from the current 2.4 million barrels per day to 12.5 million barrels per day in the next seven years, it will have to be allowed a raised quota commensurate with its reserve size.

"If Iraq manages to achieve even half of its ambitious plans in ten years, this would mean it [is] looking for a production quota of 6 million barrels  per day, while other members of OPEC naturally would be inclined to demand to be allowed to produce nearer to their full capacity themselves in order not to lose too much of a market share."

If OPEC is forced to slash members' production quotas to accommodate Iraq's new capacity in the event of a less-than-expected growth in global oil demand, Iran could be the worst hit, Ciszuk says. "For Iran, which barely manages to break even on oil prices at today's level, losing part of its global market share permanently would be a very harsh blow."

Meanwhile, a former Iraqi oil minister said new claims made by both Iraq and Iran are politically motivated and not supported by evidence.

Issam Al-Chalabi, who served as oil minister under Saddam Hussein, told Reuters in an interview that Iraq's claim that its proven oil reserves were 25 percent higher was "unreliable."

"Unfortunately the announcement that was made last week has not been substantiated by proper evidence," Chalabi said.

He also said Iran's claim of higher reserves was also unreliable and not substantiated with evidence.

Analysts view the claims of Iran and Iraq over reserves essentially as a tactic to build up a long-term defense of their OPEC quota, although perpetually tinkering with data could undermine the integrity of the claims.

Oil export is the lifeline for both countries and favorable OPEC production entitlement is something they will fight hard to preserve. Both Iran and Iraq have been beset with wars and sanctions which ran down their oil infrastructure and suffocated investments in exploration and technology.

"While Iraq's oil production capacity has been constrained by years of sanctions and conflict, including an eight-year war against Iran from 1980-1988, Iran is suffering from under-investment in its energy sector due to sanctions that have recently been tightened over its controversial nuclear program," notes Platts analyst Aresu Eqbali.

MIT Gets Natural Gas Development Money

Royal Dutch Shell PLC will give the Massachusetts Institute of Technology $25 million to research new, efficient technologies to help find and deliver oil and natural gas, officials are expected to announce today.

The money, to be delivered in five annual payments of $5 million, will go to the MIT Energy Initiative, a program that conducts research aimed at transforming the way the world gets and uses energy. With the Shell donation, the four-year-old program has helped to attract more than $300 million for energy research and education at MIT, and has produced several breakthroughs, including the development of a solar cell that can be printed on paper.

The Shell funds will be used to pursue a number of advanced technologies, including the use of seismic data to explore underground oil and natural gas reservoirs, and the study of powerful ocean waves to measure their effect on high-strength steel — an effort to build stronger, but lighter offshore installations. Shell will have the option to license technologies developed by MIT, and some of the university’s research will be made available to other energy companies.

“The energy future is an uncertain one, where we need completely new solutions,’’ Gerald Schotman, the energy company’s chief technology officer, said. “It’s a very deliberate decision to step up.’’

The MIT Energy Initiative was established in 2006, and is a priority of university president Susan Hockfield. Energy demand is expected to double as the world’s population grows by an estimated 3 billion people by 2050. The MIT research is aimed at helping the world deal with the use of scarce energy supplies and seeking alternatives to conventional power sources like oil and natural gas.

Shell is one of the largest backers of the MIT initiative. The biggest donation to the program came in 2008 from Italian oil conglomerate Eni, which pledged $50 million over five years to explore more efficient and less expensive solar power technologies. Under that partnership, several breakthroughs have been made, including the construction of an ultra-flexible solar cell.

In the previous year, British Petroleum gave the university $25 million, later raised to $31 million, to improve coal-fueled electric generation to reduce air pollution and capture carbon dioxide emissions, which are thought to contribute to climate change. Lockheed Martin Corp., Siemens, and Hess Corp. have also sponsored Energy Initiative research.

MIT’s relationship with Shell and its competitors helps the university address energy and climate issues, said Ernest J. Moniz, director of the Energy Initiative, which he called one of the broadest programs of its kind.

“The solutions, in the end, have to come from these energy companies,’’ he said.

Phil Flynn, a Chicago-based oil analyst with PFGBest, said Shell’s investment in MIT research will drive the innovation the industry needs to safely get at hard-to-reach oil in deep water or remote locations.

“I think Shell is saying, ‘Hey, we can do even better, we can be even more efficient, and we can do it in a way that’s safe. . . . We’ve got enough data here that we’ve spent billions on, let’s get some smart kids to take a look at this and see what they can come up with,’ ’’ Flynn said.

Local academics, however, expressed some reservations.

Robert K. Kaufmann, director of graduate studies at Boston University’s Center for Energy and Environmental Studies, questioned whether the research MIT does for Shell will get to the crux of the energy issue — namely, that demand for energy is growing even as oil and natural gas supplies dwindle. The focus needs also to be on “consuming energy more efficiently and smarter,’’ he said.

Still, “this is great for MIT,’’ Kaufmann said. “It’s always good to have smart people working on important problems.’’

Erin Ailworth can be reached at eailworth@globe.com. 

Shell Vocal in Support of Natural Gas

Natural gas has “a key role” to play if the UK is to meet its energy challenges over the short to medium-term and offers “great potential” for providing a low-cost pathway to secure, clean electricity, according to the chief executive of Royal Dutch Shell.

Peter Voser sets out his views on Tuesday in a speech to the Oil and Money conference in London. Natural gas, he will say, is important to the UK for three reasons: supplies are more abundantly available than in the past; new natural gas power plants are less costly and easier to build than any other source of electricity; and the environmental benefits of natural gas as a source of electricity are substantial and immediate.

Mr Voser’s comments echo those of other industry executives. The UK faces numerous problems in relation to its energy supply. Nearly half of its installed power generation capacity faces either closure or upgrading over the next 10 to 15 years. The government is committed to reducing greenhouse gas emissions by 34 per cent by 2020. Renewable energy should supply 15 per cent of the UK’s total energy demand by 2020.

Natural gas is still the key fuel for heating UK homes. Britain would have to import more natural gas from overseas than ever before, National Grid said in its annual winter outlook report on the state of the country’s energy supplies last week. About 55 per cent of the gas used to heat homes and businesses this winter will need to be imported, the highest level on record.

The UK is expected to import more liquefied natural gas this winter than before, National Grid adds.The shale boom in the United States has freed for other markets liquefied natural gas supplies that were originally destined for America.

According to Mr Voser, natural gas has the benefit of being cost competitive, a key measure at a time when government budgets are under strain. He will argue that governments should commit to carbon capture and storage projects to help cut carbon dioxide emissions.

“A greater reliance on natural gas would cut greenhouse gas emissions and buy society time to make a less expensive transition to new nuclear and offshore wind electricity generation,” he will say.

Natural Gas Liquids Market Expansion

HOUSTON, Oct 11, 2010 (GlobeNewswire via COMTEX) -- Gulf Coast Fractionators, a partnership among ConocoPhillips (COP 59.79, -0.05, -0.08%), Devon Energy Corporation (DVN 67.05, -0.09, -0.13%) and Targa Resources Partners LP (NGLS 29.89, -0.05, -0.17%) ("Targa Resources Partners" or the "Partnership"), today announced plans to expand the capacity of its natural gas liquids fractionation facility located in Mont Belvieu, Texas. The maximum gross fractionation capacity of the facility will be expanded by approximately 42 percent (43,000 barrels per day) to 145,000 barrels per day. Targa Resources Partners owns a 38.8% interest in Gulf Coast Fractionators.

ConocoPhillips, as the operator, will manage the expansion project and existing operations are not expected to be disrupted during the construction phase. The expansion is expected to be operational during the second quarter of 2012, subject to regulatory approvals. The total capital expenditures of approximately $75 million are expected to be significantly lower than a greenfield fractionation facility since the new capacity will be integrated with existing fractionation capacity, utilities, infrastructure and footprint already at Mont Belvieu.

ConocoPhillips is an integrated energy company with interests around the world. Headquartered in Houston, the company had approximately 29,900 employees, $151 billion of assets, and $181 billion of annualized revenues as of June 30, 2010. For more information, go to www.conocophillips.com.

Devon Energy Corporation is an Oklahoma City-based independent energy company engaged in oil and gas exploration and production. Devon is a leading U.S.-based independent oil and gas producer and is included in the S&P 500 Index. For additional information, visit www.devonenergy.com.

About Targa Resources Partners

Targa Resources Partners is engaged in the business of gathering, compressing, treating, processing and selling natural gas and storing, fractionating, treating, transporting and selling natural gas liquids, or NGLs, and NGL products. The Partnership owns an extensive network of integrated gathering pipelines and gas processing plants and currently operates along the Louisiana Gulf Coast primarily accessing the offshore region of Louisiana, the Permian Basin in West Texas and Southeast New Mexico and the Fort Worth Basin in North Texas. Additionally, our natural gas liquids logistics and marketing assets are located primarily at Mont Belvieu and Galena Park near Houston, Texas and in Lake Charles, Louisiana with terminals and transportation assets across the United States.

Targa Resources Partners' principal executive offices are located at 1000 Louisiana, Suite 4300, Houston, Texas 77002 and its telephone number is 713-584-1000.

Forward-Looking Statements

Certain statements in this release are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical facts, included in this release that address activities, events or developments that the Partnership expects, believes or anticipates will or may occur in the future are forward-looking statements. These forward-looking statements rely on a number of assumptions concerning future events and are subject to a number of uncertainties, factors and risks, many of which are outside Targa Resources Partners' control, which could cause results to differ materially from those expected by management of Targa Resources Partners. Such risks and uncertainties include, but are not limited to, weather, political, economic and market conditions, including a decline in the price and market demand for natural gas and natural gas liquids, the timing and success of business development efforts; and other uncertainties. These and other applicable uncertainties, factors and risks are described more fully in the Partnership's Annual Report on Form 10-K for the year ended December 31, 2009 and other reports filed with the Securities and Exchange Commission. Targa Resources Partners undertakes no obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

This news release was distributed by GlobeNewswire, www.globenewswire.com

SOURCE: Targa Resources Partners LP

CONTACT:  Targa Resources Partners LP

Investor contact:

Anthony Riley, Sr. Manager - Finance / Investor Relations

Matthew Meloy, Vice President - Finance and Treasurer

713-584-1133