Germany's Federal Cartel Office has launched a probe of 35 natural gas suppliers suspected of charging excessively high prices.
German authorities had noted price differences that ranged from 25 percent to 45 percent, the office said in a statement on Wednesday, March 5.
The cartel office would therefore check whether recent German gas price hikes were justified, it added.
"Horribly weak" competition
Office head Bernhard Heitzer said preliminary results of the probe suggested that competition was "still horribly weak" in the gas sector.
"From what we know now, an entire series of companies have raised gas prices to a level that they could never demand in a functioning, competitive economy," he said.
A gas compressor station of the Yamal-Europe pipeline near Nesvizh, some 130 km southwest of the capital Minsk, Belarus, Wednesday, Dec. 27, 2006. Bildunterschrift: Großansicht des Bildes mit der Bildunterschrift: As much as 20 percent of the German market stands to be affected by the probe
The price increases concerned four million clients and around 20 percent of the market, the office said.
A spokesman contacted by the AFP news service declined to provide the names of companies under investigation, saying only that national and regional firms were concerned.
In all, 770 companies supply gas to households and companies in Germany, of which around 30 are active throughout the country.
Some don't pass on savings
Regional anti-cartel offices had also launched their own investigations into gas price increases.
Heitzer said a number of companies were raising gas prices in a way that would be impossible to do in a normal competitive situation.
"Even in places where the network fees are low, that price advantage isn't necessarily passed on to clients; the savings appear to be used to boost the company's value in another area," Heitzer added.
Friday, March 7, 2008
Thursday, March 6, 2008
Gazprom & Ukraine Fighting Natural Gas with Europe in the Middle?
Western Europe is watching warily as Russia and Ukraine are locked in a natural gas dispute that has reduced the supply to Ukraine by at least half since the beginning of the week.
After Russia’s statecontrolled natural gas monopoly announced the second supply cut in two days on March 4, Ukraine’s natural gas company said there are no immediate plans to divert Europebound gas to Ukrainian customers, but held out the possibility it could do so if reserves run low.
Much of the Russian gas consumed in Europe comes in pipelines crossing Ukraine.
The Russian monopoly, OAO Gazprom, is demanding Ukraine sign documents resolving a $600 million debt dispute and enabling further gas deliveries. On March 3, it cut shipments by 25 percent.
Gazprom spokesman Sergei Kupriyanov announced another 25 percent cut in the evening on March 4 and held out the possibility of more.
The European Union “looks to the parties to make every effort to find a rapid and durable solution to their disagreement.
In addition, we look to both parties to ensure that gas supplies to the EU remain unaffected,” EU Energy Commissioner Andris Piebalgs said in a statement.
After Russia’s statecontrolled natural gas monopoly announced the second supply cut in two days on March 4, Ukraine’s natural gas company said there are no immediate plans to divert Europebound gas to Ukrainian customers, but held out the possibility it could do so if reserves run low.
Much of the Russian gas consumed in Europe comes in pipelines crossing Ukraine.
The Russian monopoly, OAO Gazprom, is demanding Ukraine sign documents resolving a $600 million debt dispute and enabling further gas deliveries. On March 3, it cut shipments by 25 percent.
Gazprom spokesman Sergei Kupriyanov announced another 25 percent cut in the evening on March 4 and held out the possibility of more.
The European Union “looks to the parties to make every effort to find a rapid and durable solution to their disagreement.
In addition, we look to both parties to ensure that gas supplies to the EU remain unaffected,” EU Energy Commissioner Andris Piebalgs said in a statement.
Wednesday, March 5, 2008
PetroChina Projects Natural Gas Double Production by 2118
China's natural gas output would at least double the present volume in the coming decade to reach 150 billion to 200 billion cubic meters, PetroChina Vice President Jia Chengzao said on Tuesday.
PetroChina, the country's leading natural gas producer, alone has reported an annual output rise of 10 billion cubic meters for two consecutive years, he said.
"We will strive to keep the same growth rate this year," said Jia, a member of the 11th National Committee of the Chinese People's Political Consultative Conference, who is attending the annual political advisory session.
His company produces about 75 percent of China's total natural gas output.
Recent discoveries of new gas fields, including Jidong Nanpu Oil Field in north China's Bohai Bay, which contains 1.18 billion tons of oil and gas reserves, would boost China's natural gas sector and optimize its energy structure, said Jia.
PetroChina, the country's leading natural gas producer, alone has reported an annual output rise of 10 billion cubic meters for two consecutive years, he said.
"We will strive to keep the same growth rate this year," said Jia, a member of the 11th National Committee of the Chinese People's Political Consultative Conference, who is attending the annual political advisory session.
His company produces about 75 percent of China's total natural gas output.
Recent discoveries of new gas fields, including Jidong Nanpu Oil Field in north China's Bohai Bay, which contains 1.18 billion tons of oil and gas reserves, would boost China's natural gas sector and optimize its energy structure, said Jia.
Tuesday, March 4, 2008
$4 Billion USD Investment for Oil and Natural Gas
Natural Gas Partners said it has closed on a $4 billion fund to invest in the oil and gas industry.
Since its founding in 1988, the private equity company has managed more than $7 billion of cumulative capital and made investments in over 130 companies in the oil and gas production, oilfield service, mid-stream and related energy sectors.
Natural Gas Partners said the new fund will engage in the same size and type of deals the company has made in the past.
"The fund has made ten investments to date, many of which are managed by experienced management teams from prior NGP portfolio companies, said William Quinn, the company's managing partner, in a statement. "Given our current investment pace and strong deal flow, we are glad to have raised a fund that is of sufficient size to allow us to continue to do this over the next several years."
The Natural Gas Partners funds are managed by Irving-based NGP Energy Capital Management. NGP Energy Capital Management's $9 billion in investments also includes NGP Capital Resources Co. (Nasdaq: NGPC), a publicly traded business development company with more than $400 million in capital; NGP Energy Technology Partners L.P. a $148 million fund investing in companies that provide technology-related products and services to the oil and gas, power and alternative energy sectors; and NGP Midstream and Resources L.P., a $1.4 billion fund that invests in selected areas of the energy infrastructure and mineral businesses.
Since its founding in 1988, the private equity company has managed more than $7 billion of cumulative capital and made investments in over 130 companies in the oil and gas production, oilfield service, mid-stream and related energy sectors.
Natural Gas Partners said the new fund will engage in the same size and type of deals the company has made in the past.
"The fund has made ten investments to date, many of which are managed by experienced management teams from prior NGP portfolio companies, said William Quinn, the company's managing partner, in a statement. "Given our current investment pace and strong deal flow, we are glad to have raised a fund that is of sufficient size to allow us to continue to do this over the next several years."
The Natural Gas Partners funds are managed by Irving-based NGP Energy Capital Management. NGP Energy Capital Management's $9 billion in investments also includes NGP Capital Resources Co. (Nasdaq: NGPC), a publicly traded business development company with more than $400 million in capital; NGP Energy Technology Partners L.P. a $148 million fund investing in companies that provide technology-related products and services to the oil and gas, power and alternative energy sectors; and NGP Midstream and Resources L.P., a $1.4 billion fund that invests in selected areas of the energy infrastructure and mineral businesses.
Monday, March 3, 2008
Alaska Natural Gas Pipeline Construction Still Only An Idea
David M. Reaume is a Washington state-based economist who was based for many years in Juneau, Alaska and is very up on the possibility of building a natural gas pipeline from Alaska to the Mid-west USA.
In November the average U.S. city gate price for natural gas stood at $8.05 per thousand cubic feet, or mcf. Some divining that I have done suggests that an average real -- inflation-adjusted, 2007 dollars -- U.S. city gate price of about $9 per mcf qualifies as a minimum "Go Price," where by the Go Price I mean one just high enough to give a positive incentive for producers to get the gas to the pipeline, assuming that the state and the federal government also pitch in.
Accepting that an average real city gate price of $9 per mcf is only a rough estimate of the critical Go Price, how likely is it that we will hit that price in a few years, and how likely is it that it will stay at or above that price for the long term? The answer depends on how one models future natural gas prices.
If, for example, we look at a simple time trend in real natural gas prices over the past 20 years we find that recent peaks are likely to be transitory. But this ignores the fact that the world might have changed greatly over the past five or 10 years. Given the heavy concentration of natural gas reserves outside the United States and Canada, there is some reason to suspect that natural gas prices might eventually return to something like their historical relationship to crude oil prices. After all, about 43 percent of the world's natural gas reserves are located in Iran (16 percent) and Russia (27 percent), two countries that have strong incentives to price their natural gas in step with OPEC's pricing of crude oil.
So what would happen if we abandon simple time trends and look at natural gas prices in relationship to crude oil prices? In particular, what would happen if the average real U.S. city gate price of natural gas found its way back to its historical relationship with the average real U.S. price of crude oil? Good things for pipeline construction. If the price of crude oil were to average $80 per barrel -- in inflation-adjusted 2007 dollars -- the corresponding average U.S. city gate price for natural gas would eventually rise to $9.50 per mcf.
But that might be asking too much given that there is no shortage of analysts who think that crude oil prices are due to drop sharply as the world economy slows down. A more reasonable target may be the $9 per mcf number that my divining suggests may represent a critical value for the proposed pipeline. To reach $9, the average U.S. price of crude oil would only need to stay above about $60 per barrel, both again in inflation-adjusted dollars. That is no sure thing but does not seem too far out of reach even though the December "Energy Outlook" from the U.S. Department of Energy forecasts zero gain in real natural gas prices for the next five years.
Would I bet on pipeline construction getting the go-ahead in the next three or four years? No, but I would not bet against it either. Gov. Sarah Palin is on the right track. Line up a contractor. Then if prices do respond favorably the stage is set. Is $500 million in pre-construction incentives a waste of money? I don't think so, given the stakes and the potential benefits to Alaskans. But then I don't live in Alaska anymore. Only Alaskans can decide.
In November the average U.S. city gate price for natural gas stood at $8.05 per thousand cubic feet, or mcf. Some divining that I have done suggests that an average real -- inflation-adjusted, 2007 dollars -- U.S. city gate price of about $9 per mcf qualifies as a minimum "Go Price," where by the Go Price I mean one just high enough to give a positive incentive for producers to get the gas to the pipeline, assuming that the state and the federal government also pitch in.
Accepting that an average real city gate price of $9 per mcf is only a rough estimate of the critical Go Price, how likely is it that we will hit that price in a few years, and how likely is it that it will stay at or above that price for the long term? The answer depends on how one models future natural gas prices.
If, for example, we look at a simple time trend in real natural gas prices over the past 20 years we find that recent peaks are likely to be transitory. But this ignores the fact that the world might have changed greatly over the past five or 10 years. Given the heavy concentration of natural gas reserves outside the United States and Canada, there is some reason to suspect that natural gas prices might eventually return to something like their historical relationship to crude oil prices. After all, about 43 percent of the world's natural gas reserves are located in Iran (16 percent) and Russia (27 percent), two countries that have strong incentives to price their natural gas in step with OPEC's pricing of crude oil.
So what would happen if we abandon simple time trends and look at natural gas prices in relationship to crude oil prices? In particular, what would happen if the average real U.S. city gate price of natural gas found its way back to its historical relationship with the average real U.S. price of crude oil? Good things for pipeline construction. If the price of crude oil were to average $80 per barrel -- in inflation-adjusted 2007 dollars -- the corresponding average U.S. city gate price for natural gas would eventually rise to $9.50 per mcf.
But that might be asking too much given that there is no shortage of analysts who think that crude oil prices are due to drop sharply as the world economy slows down. A more reasonable target may be the $9 per mcf number that my divining suggests may represent a critical value for the proposed pipeline. To reach $9, the average U.S. price of crude oil would only need to stay above about $60 per barrel, both again in inflation-adjusted dollars. That is no sure thing but does not seem too far out of reach even though the December "Energy Outlook" from the U.S. Department of Energy forecasts zero gain in real natural gas prices for the next five years.
Would I bet on pipeline construction getting the go-ahead in the next three or four years? No, but I would not bet against it either. Gov. Sarah Palin is on the right track. Line up a contractor. Then if prices do respond favorably the stage is set. Is $500 million in pre-construction incentives a waste of money? I don't think so, given the stakes and the potential benefits to Alaskans. But then I don't live in Alaska anymore. Only Alaskans can decide.
Sunday, March 2, 2008
Tennessee Natural Gas Exploration - Success!
AMESTOWN, Tenn. - They call him the boom maker.
Known for hitting substantial oil wells on and around the Cumberland Plateau, Young Oil Corp. owner and CEO Anthony Young has made a name for himself. Tales of his oil exploration in Tennessee have reached the Los Angeles Times, and the entrepreneur is enjoying success, with fancy cars and private jets.
Young's company is among dozens of oil and natural-gas businesses that have made millions in Tennessee during the past 150 years, and their finds have spurred jobs in many rural East and Middle Tennessee counties. But just as many others have struck out. The state has battled images of rough terrain and overall small production numbers that have kept major oil companies away.
But with record crude oil prices and an increase in demand for domestic exploration, could Tennessee's role in the oil industry be changing?
Big plays for a small player
As far as total oil production, Tennessee is still a relatively small player on a national scale. The state ranks 28th, but only 31 or 32 states produce any oil at all, according to Jeff Bailey, CEO and director of Tengasco Inc., a Knoxville-based oil and natural-gas exploration and production company.
Tengasco produces only a small amount of oil, mostly in the Swan Creek area of Hancock County, but at one time was the largest natural-gas producer in the state.
"We produce about 10,000 barrels of oil a year out of Tennessee, and all of that was found accidentally while we were drilling for gas," Bailey said. "Tennessee has a very small amount of oil and is pretty far down on the list."
All-time production for the state since the 1860s is 20.8 million barrels for an estimated total value of $428 million, according to a state geology report.
To compare, Alaska's production is about 30 times that in a given year. And the United States uses more than 20 million barrels of oil a day.
Because of that, Bailey said, exploration in East and Middle Tennessee and largely across the country is focused mostly on natural gas. For oil, the company relies more on its leases in Kansas and along the Gulf Coast.
But just because Tennessee ranks relatively low in nationwide production doesn't mean oil wells discovered here aren't big in their own right. Several companies, including Kentucky's Basin Oil & Gas Corp. and Huntsville, Tenn.'s Miller Petroleum, have hit record-setting wells. In its lifetime, the Days Chapel Field in Campbell County has produced 3 million barrels for Miller Petroleum, and the company claims to have drilled or serviced 65 percent of the wells in the state.
Basin Oil & Gas also claimed one of Tennessee's biggest wells in 1999, when a find in Overton County initially produced 2,400 barrels a day.
"There have been some pretty amazing fields in Tennessee," Bailey said. "A few of the finds over there (on the plateau) are kind of unique. So there's kind of a little new niche going on over there. Those guys may have stumbled onto something."
More recently, in March 2007, Young Oil Corp. hit one of those million-dollar wells. Located on leased property in eastern Overton County and assigned the name Norrod No. 1, the well came in free-flowing at more than 1,900 barrels a day. The landowners, who make about one-eighth of the profits, were pocketing $9,000 daily.
Leaseholders and landowners aren't the only ones making money from the exploration. A 3 percent tax is levied on all oil discovered in Tennessee, according to the Tennessee Department of Environment and Conservation. Of that 3 percent, that state receives two-thirds and the county of origin receives one-third.
In 2006, the most recent year for information, Tennessee realized $448,000 in severance tax revenue from petroleum exploration, TDEC reported.
Young reports that Norrod is still producing at a controlled rate of 100 barrels a day, meaning production was cut to sustain the well for a longer period of time. The well has produced 40,000 barrels of oil in less than a year.
Known for hitting substantial oil wells on and around the Cumberland Plateau, Young Oil Corp. owner and CEO Anthony Young has made a name for himself. Tales of his oil exploration in Tennessee have reached the Los Angeles Times, and the entrepreneur is enjoying success, with fancy cars and private jets.
Young's company is among dozens of oil and natural-gas businesses that have made millions in Tennessee during the past 150 years, and their finds have spurred jobs in many rural East and Middle Tennessee counties. But just as many others have struck out. The state has battled images of rough terrain and overall small production numbers that have kept major oil companies away.
But with record crude oil prices and an increase in demand for domestic exploration, could Tennessee's role in the oil industry be changing?
Big plays for a small player
As far as total oil production, Tennessee is still a relatively small player on a national scale. The state ranks 28th, but only 31 or 32 states produce any oil at all, according to Jeff Bailey, CEO and director of Tengasco Inc., a Knoxville-based oil and natural-gas exploration and production company.
Tengasco produces only a small amount of oil, mostly in the Swan Creek area of Hancock County, but at one time was the largest natural-gas producer in the state.
"We produce about 10,000 barrels of oil a year out of Tennessee, and all of that was found accidentally while we were drilling for gas," Bailey said. "Tennessee has a very small amount of oil and is pretty far down on the list."
All-time production for the state since the 1860s is 20.8 million barrels for an estimated total value of $428 million, according to a state geology report.
To compare, Alaska's production is about 30 times that in a given year. And the United States uses more than 20 million barrels of oil a day.
Because of that, Bailey said, exploration in East and Middle Tennessee and largely across the country is focused mostly on natural gas. For oil, the company relies more on its leases in Kansas and along the Gulf Coast.
But just because Tennessee ranks relatively low in nationwide production doesn't mean oil wells discovered here aren't big in their own right. Several companies, including Kentucky's Basin Oil & Gas Corp. and Huntsville, Tenn.'s Miller Petroleum, have hit record-setting wells. In its lifetime, the Days Chapel Field in Campbell County has produced 3 million barrels for Miller Petroleum, and the company claims to have drilled or serviced 65 percent of the wells in the state.
Basin Oil & Gas also claimed one of Tennessee's biggest wells in 1999, when a find in Overton County initially produced 2,400 barrels a day.
"There have been some pretty amazing fields in Tennessee," Bailey said. "A few of the finds over there (on the plateau) are kind of unique. So there's kind of a little new niche going on over there. Those guys may have stumbled onto something."
More recently, in March 2007, Young Oil Corp. hit one of those million-dollar wells. Located on leased property in eastern Overton County and assigned the name Norrod No. 1, the well came in free-flowing at more than 1,900 barrels a day. The landowners, who make about one-eighth of the profits, were pocketing $9,000 daily.
Leaseholders and landowners aren't the only ones making money from the exploration. A 3 percent tax is levied on all oil discovered in Tennessee, according to the Tennessee Department of Environment and Conservation. Of that 3 percent, that state receives two-thirds and the county of origin receives one-third.
In 2006, the most recent year for information, Tennessee realized $448,000 in severance tax revenue from petroleum exploration, TDEC reported.
Young reports that Norrod is still producing at a controlled rate of 100 barrels a day, meaning production was cut to sustain the well for a longer period of time. The well has produced 40,000 barrels of oil in less than a year.
Saturday, March 1, 2008
Natural Gas Public Company Stock - UP UP Up Today
NEW YORK (Associated Press) - Major exploration finds, higher production and climbing prices have pushed the natural gas sector back into investors' favor this year.
The Amex Natural Gas Index, which tracks the share performance of 15 companies, has climbed more than 25 percent since the start of 2008. Several individual companies have posted double-digit percentage gains as well.
Some analysts, though, are now trying to tame expectations that stocks and commodity prices will keep surging.
Commodity prices in general have been boosted by a weaker dollar, which has been falling amid concerns about the U.S. economy. Natural gas prices have marched upward along with those for oil, rising by more than 25 percent this year.
Shares in natural gas producers have also been supported by falling inventories, which are down 7.6 percent from year-ago levels, according to the Department of Energy. Colder weather than last winter has boosted the use of natural gas for heating.
In addition, exploration and production companies like Houston's EOG Resources Inc. and Southwestern Energy Co. have reported surging production, billions of cubic feet worth of new finds and positive outlooks.
EOG shares reached a new high Thursday after the company said it found crude oil at operations in Texas and Colorado. It also expects to begin producing gas at sites in Canada's Horn River Basin, with significant output beginning in 2010.
The company raised its 2009 and 2010 annual production growth forecast to 13 percent to 15 percent, compared with a previous average target of 10 percent.
Southwestern's stock has climbed more than 20 percent this year as investors became exuberant about its profit potential. The company said Thursday that its fourth-quarter earnings more than doubled on higher production and pricing. It also added 1 billion cubic feet of oil equivalent to its first-quarter production outlook.
"The positive news flow will continue," said FBR Research analyst Amir Arif. He rates the stock as "outperform," saying he expects Southwestern to boost production through better techniques.
Other stocks have seen similar gains. Fort Worth, Texas-based XTO Energy Inc. has risen almost 20 percent this year. It posted a sharply higher fourth-quarter profit and issued a better 2008 production outlook due to its previous and planned acquisitions.
Devon Energy Corp. shares have gained about 17 percent since the start of the year. The Oklahoma City producer said earlier this month that its fourth-quarter earnings more than doubled, on one-time gains from asset sales as well as higher production.
Though expectations for the natural gas industry have improved, it was not long ago that analysts were forecasting higher inventories and weak natural gas prices.
Citi Investment Research analyst Gil Yang says he is "bullish" on the natural gas sector, but believes some share prices have flown too high, too fast.
"Investors should take a more cautious view on the sector in the near term following strong performance of natural gas and natural gas equities in recent weeks," Yang said.
He downgraded four stocks on Thursday, cutting EOG, Southwestern, Chesapeake Energy Corp. and Quicksilver Resources Inc. to "hold" from "buy."
Banc of America analyst Michael Schmitz said that although prices may edge higher with oil, expectations "need to be reined in." That the natural gas sector's performance will likely be "quite volatile," he said, and investors should buy on price declines while remaining selective. Top of page
The Amex Natural Gas Index, which tracks the share performance of 15 companies, has climbed more than 25 percent since the start of 2008. Several individual companies have posted double-digit percentage gains as well.
Some analysts, though, are now trying to tame expectations that stocks and commodity prices will keep surging.
Commodity prices in general have been boosted by a weaker dollar, which has been falling amid concerns about the U.S. economy. Natural gas prices have marched upward along with those for oil, rising by more than 25 percent this year.
Shares in natural gas producers have also been supported by falling inventories, which are down 7.6 percent from year-ago levels, according to the Department of Energy. Colder weather than last winter has boosted the use of natural gas for heating.
In addition, exploration and production companies like Houston's EOG Resources Inc. and Southwestern Energy Co. have reported surging production, billions of cubic feet worth of new finds and positive outlooks.
EOG shares reached a new high Thursday after the company said it found crude oil at operations in Texas and Colorado. It also expects to begin producing gas at sites in Canada's Horn River Basin, with significant output beginning in 2010.
The company raised its 2009 and 2010 annual production growth forecast to 13 percent to 15 percent, compared with a previous average target of 10 percent.
Southwestern's stock has climbed more than 20 percent this year as investors became exuberant about its profit potential. The company said Thursday that its fourth-quarter earnings more than doubled on higher production and pricing. It also added 1 billion cubic feet of oil equivalent to its first-quarter production outlook.
"The positive news flow will continue," said FBR Research analyst Amir Arif. He rates the stock as "outperform," saying he expects Southwestern to boost production through better techniques.
Other stocks have seen similar gains. Fort Worth, Texas-based XTO Energy Inc. has risen almost 20 percent this year. It posted a sharply higher fourth-quarter profit and issued a better 2008 production outlook due to its previous and planned acquisitions.
Devon Energy Corp. shares have gained about 17 percent since the start of the year. The Oklahoma City producer said earlier this month that its fourth-quarter earnings more than doubled, on one-time gains from asset sales as well as higher production.
Though expectations for the natural gas industry have improved, it was not long ago that analysts were forecasting higher inventories and weak natural gas prices.
Citi Investment Research analyst Gil Yang says he is "bullish" on the natural gas sector, but believes some share prices have flown too high, too fast.
"Investors should take a more cautious view on the sector in the near term following strong performance of natural gas and natural gas equities in recent weeks," Yang said.
He downgraded four stocks on Thursday, cutting EOG, Southwestern, Chesapeake Energy Corp. and Quicksilver Resources Inc. to "hold" from "buy."
Banc of America analyst Michael Schmitz said that although prices may edge higher with oil, expectations "need to be reined in." That the natural gas sector's performance will likely be "quite volatile," he said, and investors should buy on price declines while remaining selective. Top of page
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