March 17 (Bloomberg) -- Royal Dutch Shell Plc, Europe’s biggest oil company by market value, failed to match all of last year’s oil and gas production with new discoveries, in contrast to smaller rival BP Plc.
Shell’s reserve replacement ratio, including oil sands, fell to 95 percent in 2008 from 124 percent the previous year, the Hague-based company said today in a strategy update. That excludes acquisitions, divestments and year-end price effects.
Earlier this month, BP said it replaced 121 percent of reserves. Shell’s Chief Financial Officer Peter Voser pledged to pay out around $10 billion in dividends this year, even as the company funds the biggest spending program among its peers to revive production growth against a backdrop of falling oil prices and the global recession.
“They came out with a commitment to invest in growth and with the capacity to support cash returns,” Jason Kenney, an Edinburgh-based analyst at ING Wholesale Banking, said in a telephone interview. “I would have liked to have seen an increase in reserves although that is on the horizon with Shell’s projects.” He has a “hold” rating on the stock.
Including year-end price effects, Shell’s reserve replacement ratio was 97 percent last year. The reserve ratio reported to the U.S. Securities and Exchange Commission standards was 98 percent.
‘Good Enough’
“It is not 100 percent, but it is good enough,” Aymeric de Villaret, a Paris-based analyst at Societe Generale SA, said in a telephone interview. He has a “buy” rating on Shell stock.
Shell dropped 21 pence, or 1.3 percent, to 1,619 pence in London. The shares have fallen 10 percent this year, compared with a 13 percent drop for BP.
The company added 1.2 billion barrels of oil equivalent to its non-proven resources last year at a cost of $2 to $3 a barrel. Total net reserves were unchanged at 11.9 billion barrels of oil equivalent at the end of last year.
The reserve replacement ratio of 126 percent from 2006 to 2008 was described as “satisfactory” by Chief Executive Officer Jeroen Van der Veer, who’s due to be replaced by Voser in July.
Shell will increase dividend payments in line with inflation, while the company’s “likely gearing level” is comfortable, according to Voser.
Dividend Growth
Its quarterly dividends are “normally” similar to the first-quarter payout, Voser said on a conference call with reporters. The company has already said it will raise its dividend for the first three months of 2009 by 5 percent to 42 cents.
Shell has “huge scope” to drive costs in exploration and production lower, according to Malcolm Brinded, executive director for the upstream business. Costs may be reduced by as much as 30 percent to 50 percent, he told analysts on a Web cast.
The Perdido prospect in the Gulf of Mexico and the BC-10 project in Brazil are on schedule to meet output forecasts. Perdido is now likely to start up in “early 2010,” Brinded said.
Nigeria remains an “extremely important” resource base for Shell’s long-term growth even though militant attacks have curbed output since 2006, Brinded added. The oil major plans to start up its Bonga NW and Forcados Yokri Ip projects in Nigeria from 2012 onwards.
Iraq Agreement
Shell hopes to sign a definitive agreement to develop natural gas projects in Iraq before long, according to Linda Cook, who heads up the gas and power division.
Shell will maintain project investment between $31 billion and $32 billion this year after cutting spending in 2008.
The company reiterated plans to invest in new fields with a capacity of about 1 million barrels of oil and gas equivalent a day. It forecasts annual production growth of 2 percent to 3 percent in the early years of the next decade to 2012.
Shell will invest about $3 billion on exploration this year, less than originally expected, van der Veer said.
Output fell for a sixth consecutive year in 2008 and Shell plans to “rejuvenate” production through so-called unconventional projects including a gas-to-liquids venture in Qatar and oil sands fields in Canada.
‘Small Part’
Renewable sources of energy will form a ‘small part” of the equation in respect of worldwide fuel supplies in coming years, the CEO said. Instead, the company will focus on biofuels.
Total oil and gas production may drop for a seventh year in 2009 before rebounding in 2010, Shell said.
In an annual report, Shell said it’s under investigation by the SEC and the Department of Justice for violations of the U.S. Foreign Corrupt Practices Act.
Last year, Shell said its U.S. subsidiary, Shell Oil, was contacted by the Justice Department with regard to using freight forwarding company Panalpina Inc. in a way that may have violated the act.
To contact the reporter on this story: Fred Pals in Amsterdam at fpals@bloomberg.net
Last Updated: March 17, 2009 13:30 EDT
Wednesday, March 18, 2009
Qatar Natural Gas Meca Economy
March 17 (Bloomberg) -- As Dubai scales back plans to build a waterfront development twice the size of Hong Kong Island, 30,000 workers off the coast of Doha in Qatar are constructing a $14 billion luxury residential project called the Pearl.
The first residents will move into condominiums costing as much as $1.4 million on a man-made island this summer, and boutiques including Sonia Rykiel and Stefano Ricci are already doing business on the marina looking onto the Persian Gulf. From the quayside, where yachts are moored, building sites are visible in the distance with cranes stretching up into the sky.
Gas-rich Qatar, the Gulf’s fastest-growing economy, is spending more than $100 billion in the next three years on projects including a new financial district and international airport. This comes as Dubai suffers a real-estate crash spurred by its dependence on banking and tourism, and the region’s oil- producing economies, such as Saudi Arabia, dip into reserves to avoid recession.
“Qatar doesn’t seem to have any problems; the money is there,” said Lionel Scharly, chairman of the French luxury design company Scharly Designer Studio. After visiting Dubai in December and deciding not to do business, he is bidding for work at the Pearl and plans to open an office in Doha. “In Dubai, everyone is talking about the crisis,” he said from Paris.
A sheikhdom smaller than the U.S. state of Connecticut, with a population of about 1 million, Qatar in 2008 had the world’s second-highest per capita income, at $101,000, after Liechtenstein. It is hurt less than neighbors by the slump in oil prices to $47 a barrel, from more than $147 last July, because of a bet its rulers made 25 years ago: natural gas.
LNG Exporter
Today, Qatar is the world’s largest exporter of liquefied natural gas. Most of the LNG is sold on 25-year contracts, which although renegotiable, aren’t subject to the same price volatility as oil. LNG prices paid by Japan, the biggest importer, have fallen 13 percent since July, compared with the 68 percent plunge in crude.
With the world’s third-largest natural-gas reserves, after Russia and Iran, Qatar plans to more than double LNG output to 77 million tons a year in 2011. It will earn more than $153 billion in gas sales over the next three years, according to the International Monetary Fund.
That means the government will continue to post budget surpluses and can finance 60 percent of the planned investments, according to the Doha-based unit of HSBC Holdings Plc.
Science and Technology
Construction of a deepwater port is to start next year amid expansion of a science and technology park and an education hub. Qatar is also building an energy quarter and new installations for LNG exports in partnership with companies including Royal Dutch Shell Plc, Exxon Mobil Corp. and ConocoPhillips.
Sheikh Hamad bin Khalifa al-Thani, who deposed his father in a bloodless coup in 1995, accelerated the development of gas by plowing billions of dollars into building facilities to export LNG, which is natural gas chilled to liquid form and then transported by ship. By the end of 2010, 14 LNG plants are due to be operational.
The leadership “has put the country onto a very fast growth rate with measured steps,” said Reiji Joseph, director of corporate finance at the Qatari branch of KPMG, the auditing and consulting firm.
At the Pearl, two young women wearing jeans and high heels under traditional black Islamic robes were shopping at French luxury retailer Hermes International SCA. Leaving the store with shopping bags and orange leather Hermes handbags under their arms, they waited for a chauffeur-driven car to pick them up. In the city’s restored Souq Waqif, Doha’s oldest market, diners crowded tables on the terraces of upscale restaurants.
World Exception
While the world experiences recession in 2009, Qatar’s economy is forecast by the IMF to expand at the fastest rate in more than a decade -- 29 percent. The median growth estimate of seven economists surveyed by Bloomberg is 9 percent.
Saudi Arabia, the largest Arab economy and the world’s top oil exporter, expects a 65 billion-riyal ($17 billion) deficit this year, after posting a record budget surplus of 590 billion riyals in 2008. Standard Chartered Plc in January cut its growth forecast for the kingdom to 1 percent from 2 percent.
The United Arab Emirates economy, meanwhile, will contract by between 0.5 and 1 percent in the first half before recovering to annualized growth of 0.5 percent, Standard Chartered says. Dubai, the second-biggest U.A.E. sheikhdom, ran up $80 billion of debts to banks to become a financial and tourism hub.
Villas on Hold
Government-owned real-estate developer Nakheel PJSC has financing for only 700 villas at Dubai’s Waterfront project, after planning to build 10,000. Emirates, the sheikhdom’s airline, announced on March 11 that it will reduce weekly flights to Shanghai and Beijing.
State-owned Qatar Airways Ltd. said the same day that it will add six routes to Australian and Indian cities next winter and raise frequency on other routes at the end of this month.
The Qatari arm of Vinci SA, the world’s biggest construction company, got 2,500 applications last month when it advertised in Dubai, 400 kilometers (250 miles) away, for 100 white-collar jobs. The company, based near Paris, is about to start building the world’s longest bridge, between Qatar and Bahrain. The $4.5 billion project is expected to employ 10,000 people.
“It’s much easier to hire than it was a year ago,” said Gerald Mille, chief executive officer of Vinci’s joint venture with state-owned Qatari Diar. “We put the ads in Dubai and it worked immediately.”
-- With reporting by Tim Barwell in London. Editors: Anne Swardson, Peter Hirschberg
The first residents will move into condominiums costing as much as $1.4 million on a man-made island this summer, and boutiques including Sonia Rykiel and Stefano Ricci are already doing business on the marina looking onto the Persian Gulf. From the quayside, where yachts are moored, building sites are visible in the distance with cranes stretching up into the sky.
Gas-rich Qatar, the Gulf’s fastest-growing economy, is spending more than $100 billion in the next three years on projects including a new financial district and international airport. This comes as Dubai suffers a real-estate crash spurred by its dependence on banking and tourism, and the region’s oil- producing economies, such as Saudi Arabia, dip into reserves to avoid recession.
“Qatar doesn’t seem to have any problems; the money is there,” said Lionel Scharly, chairman of the French luxury design company Scharly Designer Studio. After visiting Dubai in December and deciding not to do business, he is bidding for work at the Pearl and plans to open an office in Doha. “In Dubai, everyone is talking about the crisis,” he said from Paris.
A sheikhdom smaller than the U.S. state of Connecticut, with a population of about 1 million, Qatar in 2008 had the world’s second-highest per capita income, at $101,000, after Liechtenstein. It is hurt less than neighbors by the slump in oil prices to $47 a barrel, from more than $147 last July, because of a bet its rulers made 25 years ago: natural gas.
LNG Exporter
Today, Qatar is the world’s largest exporter of liquefied natural gas. Most of the LNG is sold on 25-year contracts, which although renegotiable, aren’t subject to the same price volatility as oil. LNG prices paid by Japan, the biggest importer, have fallen 13 percent since July, compared with the 68 percent plunge in crude.
With the world’s third-largest natural-gas reserves, after Russia and Iran, Qatar plans to more than double LNG output to 77 million tons a year in 2011. It will earn more than $153 billion in gas sales over the next three years, according to the International Monetary Fund.
That means the government will continue to post budget surpluses and can finance 60 percent of the planned investments, according to the Doha-based unit of HSBC Holdings Plc.
Science and Technology
Construction of a deepwater port is to start next year amid expansion of a science and technology park and an education hub. Qatar is also building an energy quarter and new installations for LNG exports in partnership with companies including Royal Dutch Shell Plc, Exxon Mobil Corp. and ConocoPhillips.
Sheikh Hamad bin Khalifa al-Thani, who deposed his father in a bloodless coup in 1995, accelerated the development of gas by plowing billions of dollars into building facilities to export LNG, which is natural gas chilled to liquid form and then transported by ship. By the end of 2010, 14 LNG plants are due to be operational.
The leadership “has put the country onto a very fast growth rate with measured steps,” said Reiji Joseph, director of corporate finance at the Qatari branch of KPMG, the auditing and consulting firm.
At the Pearl, two young women wearing jeans and high heels under traditional black Islamic robes were shopping at French luxury retailer Hermes International SCA. Leaving the store with shopping bags and orange leather Hermes handbags under their arms, they waited for a chauffeur-driven car to pick them up. In the city’s restored Souq Waqif, Doha’s oldest market, diners crowded tables on the terraces of upscale restaurants.
World Exception
While the world experiences recession in 2009, Qatar’s economy is forecast by the IMF to expand at the fastest rate in more than a decade -- 29 percent. The median growth estimate of seven economists surveyed by Bloomberg is 9 percent.
Saudi Arabia, the largest Arab economy and the world’s top oil exporter, expects a 65 billion-riyal ($17 billion) deficit this year, after posting a record budget surplus of 590 billion riyals in 2008. Standard Chartered Plc in January cut its growth forecast for the kingdom to 1 percent from 2 percent.
The United Arab Emirates economy, meanwhile, will contract by between 0.5 and 1 percent in the first half before recovering to annualized growth of 0.5 percent, Standard Chartered says. Dubai, the second-biggest U.A.E. sheikhdom, ran up $80 billion of debts to banks to become a financial and tourism hub.
Villas on Hold
Government-owned real-estate developer Nakheel PJSC has financing for only 700 villas at Dubai’s Waterfront project, after planning to build 10,000. Emirates, the sheikhdom’s airline, announced on March 11 that it will reduce weekly flights to Shanghai and Beijing.
State-owned Qatar Airways Ltd. said the same day that it will add six routes to Australian and Indian cities next winter and raise frequency on other routes at the end of this month.
The Qatari arm of Vinci SA, the world’s biggest construction company, got 2,500 applications last month when it advertised in Dubai, 400 kilometers (250 miles) away, for 100 white-collar jobs. The company, based near Paris, is about to start building the world’s longest bridge, between Qatar and Bahrain. The $4.5 billion project is expected to employ 10,000 people.
“It’s much easier to hire than it was a year ago,” said Gerald Mille, chief executive officer of Vinci’s joint venture with state-owned Qatari Diar. “We put the ads in Dubai and it worked immediately.”
-- With reporting by Tim Barwell in London. Editors: Anne Swardson, Peter Hirschberg
Tuesday, March 17, 2009
Natural Gas Exploration Up Before the Hill
By BEN GEMAN AND NOELLE STRAUB, Greenwire
Published: March 16, 2009 - New York Times
Senior Interior Department officials will be on Capitol Hill tomorrow to discuss oil and gas drilling and renewable energy development on land and offshore as momentum builds toward possible comprehensive enerIn the House, the Energy and Mineral Resources Subcommittee will hold the latest in a series of hearings on petroleum development on the outer continental shelf, or OCS, that will feature an official with the Minerals Management Service, Interior's acting inspector general and a Government Accountability Office expert.
The House hearing is expected to explore allegations that oil companies are failing to produce energy from tens of millions of acres of existing leases on federal lands and waters even as the industry is pressing for new areas to be made available, among other OCS drilling issues.
Interior Secretary Ken Salazar is slated to appear tomorrow before the Senate Energy and Natural Resources Committee, where Chairman Jeff Bingaman (D-N.M.) plans to introduce and mark up a broad-based energy bill before the Easter recess. Bingaman's bill is expected to cover a range of energy efficiency, transmission, research and development issues.
But it remains unclear how Bingaman will address regulations that cover oil and natural gas on land or offshore. "The comprehensive energy bill we are working on will have an oil and gas supply component to it," said Bingaman spokesman Bill Wicker, declining to provide further details.
It appears unlikely the bill will try and redraw lines regarding where leasing can and cannot occur, which is in flux following the expiration of OCS leasing bans last year.
The Obama administration is still formulating its position on where new leasing may be allowed. In February, Salazar delayed a Bush-era proposal to allow much wider coastal leasing to study the issue further, while Bingaman in January said he would "like to know what their view is before we settle on ours."
Beyond leasing questions, a host of royalty and other issues surrounding oil and gas development are in play.
President Obama's fiscal 2010 budget plan calls for several changes, including new fees on nonproducing Gulf of Mexico leases, part of a "use it or lose it" strategy Democrats say is needed to encourage production from acreage already offered for leasing.
House Natural Resources Chairman Nick Rahall (D-W.Va.) has championed plans that would prevent companies from obtaining new federal leases unless they are already producing from their current leases or "diligently developing" them.
Industry officials have derided the idea as a gimmick. A top Chevron Corp. executive, in testimony to Rahall's committee last month, said the "existing regulatory process and basic economics ensure that leases are developed in a diligent manner."
Other plans in Obama's budget include new fees on companies to fund processing of permits for oil and gas drilling on public lands, and increasing the return from oil and gas production by revising the royalty system and adjusting rates.
Tough questions
Salazar will likely face some tough questions about onshore energy development from Republicans, who say his early moves as secretary have all been aimed at slowing production.
In early February, Interior canceled oil and gas leases on 77 parcels of federal land in Utah and launched a review to see whether they were appropriate for leasing. Also last month, Salazar halted Bush administration oil shale research and development leasing efforts, saying he would offer "new and fair" lease terms after seeking public input.
Salazar is still reviewing commercial oil shale regulations for millions of acres in the West that were put in place months before Bush left office, but he has been openly critical of them.
Senate Energy and Natural Resources Committee ranking member Lisa Murkowski (R-Alaska) used the confirmation hearing for Interior deputy secretary nominee David Hayes last week to rail against Obama's energy policies, saying the administration's 2010 budget blueprint is "a war on domestic production." She said punishing the oil and gas industry will not bring the age of renewable energy any faster.gy bills in the House and Senate.
Published: March 16, 2009 - New York Times
Senior Interior Department officials will be on Capitol Hill tomorrow to discuss oil and gas drilling and renewable energy development on land and offshore as momentum builds toward possible comprehensive enerIn the House, the Energy and Mineral Resources Subcommittee will hold the latest in a series of hearings on petroleum development on the outer continental shelf, or OCS, that will feature an official with the Minerals Management Service, Interior's acting inspector general and a Government Accountability Office expert.
The House hearing is expected to explore allegations that oil companies are failing to produce energy from tens of millions of acres of existing leases on federal lands and waters even as the industry is pressing for new areas to be made available, among other OCS drilling issues.
Interior Secretary Ken Salazar is slated to appear tomorrow before the Senate Energy and Natural Resources Committee, where Chairman Jeff Bingaman (D-N.M.) plans to introduce and mark up a broad-based energy bill before the Easter recess. Bingaman's bill is expected to cover a range of energy efficiency, transmission, research and development issues.
But it remains unclear how Bingaman will address regulations that cover oil and natural gas on land or offshore. "The comprehensive energy bill we are working on will have an oil and gas supply component to it," said Bingaman spokesman Bill Wicker, declining to provide further details.
It appears unlikely the bill will try and redraw lines regarding where leasing can and cannot occur, which is in flux following the expiration of OCS leasing bans last year.
The Obama administration is still formulating its position on where new leasing may be allowed. In February, Salazar delayed a Bush-era proposal to allow much wider coastal leasing to study the issue further, while Bingaman in January said he would "like to know what their view is before we settle on ours."
Beyond leasing questions, a host of royalty and other issues surrounding oil and gas development are in play.
President Obama's fiscal 2010 budget plan calls for several changes, including new fees on nonproducing Gulf of Mexico leases, part of a "use it or lose it" strategy Democrats say is needed to encourage production from acreage already offered for leasing.
House Natural Resources Chairman Nick Rahall (D-W.Va.) has championed plans that would prevent companies from obtaining new federal leases unless they are already producing from their current leases or "diligently developing" them.
Industry officials have derided the idea as a gimmick. A top Chevron Corp. executive, in testimony to Rahall's committee last month, said the "existing regulatory process and basic economics ensure that leases are developed in a diligent manner."
Other plans in Obama's budget include new fees on companies to fund processing of permits for oil and gas drilling on public lands, and increasing the return from oil and gas production by revising the royalty system and adjusting rates.
Tough questions
Salazar will likely face some tough questions about onshore energy development from Republicans, who say his early moves as secretary have all been aimed at slowing production.
In early February, Interior canceled oil and gas leases on 77 parcels of federal land in Utah and launched a review to see whether they were appropriate for leasing. Also last month, Salazar halted Bush administration oil shale research and development leasing efforts, saying he would offer "new and fair" lease terms after seeking public input.
Salazar is still reviewing commercial oil shale regulations for millions of acres in the West that were put in place months before Bush left office, but he has been openly critical of them.
Senate Energy and Natural Resources Committee ranking member Lisa Murkowski (R-Alaska) used the confirmation hearing for Interior deputy secretary nominee David Hayes last week to rail against Obama's energy policies, saying the administration's 2010 budget blueprint is "a war on domestic production." She said punishing the oil and gas industry will not bring the age of renewable energy any faster.gy bills in the House and Senate.
Natural Gas Exploration Up Before the Hill
By BEN GEMAN AND NOELLE STRAUB, Greenwire
Published: March 16, 2009 - New York Times
Senior Interior Department officials will be on Capitol Hill tomorrow to discuss oil and gas drilling and renewable energy development on land and offshore as momentum builds toward possible comprehensive enerIn the House, the Energy and Mineral Resources Subcommittee will hold the latest in a series of hearings on petroleum development on the outer continental shelf, or OCS, that will feature an official with the Minerals Management Service, Interior's acting inspector general and a Government Accountability Office expert.
The House hearing is expected to explore allegations that oil companies are failing to produce energy from tens of millions of acres of existing leases on federal lands and waters even as the industry is pressing for new areas to be made available, among other OCS drilling issues.
Interior Secretary Ken Salazar is slated to appear tomorrow before the Senate Energy and Natural Resources Committee, where Chairman Jeff Bingaman (D-N.M.) plans to introduce and mark up a broad-based energy bill before the Easter recess. Bingaman's bill is expected to cover a range of energy efficiency, transmission, research and development issues.
But it remains unclear how Bingaman will address regulations that cover oil and natural gas on land or offshore. "The comprehensive energy bill we are working on will have an oil and gas supply component to it," said Bingaman spokesman Bill Wicker, declining to provide further details.
It appears unlikely the bill will try and redraw lines regarding where leasing can and cannot occur, which is in flux following the expiration of OCS leasing bans last year.
The Obama administration is still formulating its position on where new leasing may be allowed. In February, Salazar delayed a Bush-era proposal to allow much wider coastal leasing to study the issue further, while Bingaman in January said he would "like to know what their view is before we settle on ours."
Beyond leasing questions, a host of royalty and other issues surrounding oil and gas development are in play.
President Obama's fiscal 2010 budget plan calls for several changes, including new fees on nonproducing Gulf of Mexico leases, part of a "use it or lose it" strategy Democrats say is needed to encourage production from acreage already offered for leasing.
House Natural Resources Chairman Nick Rahall (D-W.Va.) has championed plans that would prevent companies from obtaining new federal leases unless they are already producing from their current leases or "diligently developing" them.
Industry officials have derided the idea as a gimmick. A top Chevron Corp. executive, in testimony to Rahall's committee last month, said the "existing regulatory process and basic economics ensure that leases are developed in a diligent manner."
Other plans in Obama's budget include new fees on companies to fund processing of permits for oil and gas drilling on public lands, and increasing the return from oil and gas production by revising the royalty system and adjusting rates.
Tough questions
Salazar will likely face some tough questions about onshore energy development from Republicans, who say his early moves as secretary have all been aimed at slowing production.
In early February, Interior canceled oil and gas leases on 77 parcels of federal land in Utah and launched a review to see whether they were appropriate for leasing. Also last month, Salazar halted Bush administration oil shale research and development leasing efforts, saying he would offer "new and fair" lease terms after seeking public input.
Salazar is still reviewing commercial oil shale regulations for millions of acres in the West that were put in place months before Bush left office, but he has been openly critical of them.
Senate Energy and Natural Resources Committee ranking member Lisa Murkowski (R-Alaska) used the confirmation hearing for Interior deputy secretary nominee David Hayes last week to rail against Obama's energy policies, saying the administration's 2010 budget blueprint is "a war on domestic production." She said punishing the oil and gas industry will not bring the age of renewable energy any faster.gy bills in the House and Senate.
Published: March 16, 2009 - New York Times
Senior Interior Department officials will be on Capitol Hill tomorrow to discuss oil and gas drilling and renewable energy development on land and offshore as momentum builds toward possible comprehensive enerIn the House, the Energy and Mineral Resources Subcommittee will hold the latest in a series of hearings on petroleum development on the outer continental shelf, or OCS, that will feature an official with the Minerals Management Service, Interior's acting inspector general and a Government Accountability Office expert.
The House hearing is expected to explore allegations that oil companies are failing to produce energy from tens of millions of acres of existing leases on federal lands and waters even as the industry is pressing for new areas to be made available, among other OCS drilling issues.
Interior Secretary Ken Salazar is slated to appear tomorrow before the Senate Energy and Natural Resources Committee, where Chairman Jeff Bingaman (D-N.M.) plans to introduce and mark up a broad-based energy bill before the Easter recess. Bingaman's bill is expected to cover a range of energy efficiency, transmission, research and development issues.
But it remains unclear how Bingaman will address regulations that cover oil and natural gas on land or offshore. "The comprehensive energy bill we are working on will have an oil and gas supply component to it," said Bingaman spokesman Bill Wicker, declining to provide further details.
It appears unlikely the bill will try and redraw lines regarding where leasing can and cannot occur, which is in flux following the expiration of OCS leasing bans last year.
The Obama administration is still formulating its position on where new leasing may be allowed. In February, Salazar delayed a Bush-era proposal to allow much wider coastal leasing to study the issue further, while Bingaman in January said he would "like to know what their view is before we settle on ours."
Beyond leasing questions, a host of royalty and other issues surrounding oil and gas development are in play.
President Obama's fiscal 2010 budget plan calls for several changes, including new fees on nonproducing Gulf of Mexico leases, part of a "use it or lose it" strategy Democrats say is needed to encourage production from acreage already offered for leasing.
House Natural Resources Chairman Nick Rahall (D-W.Va.) has championed plans that would prevent companies from obtaining new federal leases unless they are already producing from their current leases or "diligently developing" them.
Industry officials have derided the idea as a gimmick. A top Chevron Corp. executive, in testimony to Rahall's committee last month, said the "existing regulatory process and basic economics ensure that leases are developed in a diligent manner."
Other plans in Obama's budget include new fees on companies to fund processing of permits for oil and gas drilling on public lands, and increasing the return from oil and gas production by revising the royalty system and adjusting rates.
Tough questions
Salazar will likely face some tough questions about onshore energy development from Republicans, who say his early moves as secretary have all been aimed at slowing production.
In early February, Interior canceled oil and gas leases on 77 parcels of federal land in Utah and launched a review to see whether they were appropriate for leasing. Also last month, Salazar halted Bush administration oil shale research and development leasing efforts, saying he would offer "new and fair" lease terms after seeking public input.
Salazar is still reviewing commercial oil shale regulations for millions of acres in the West that were put in place months before Bush left office, but he has been openly critical of them.
Senate Energy and Natural Resources Committee ranking member Lisa Murkowski (R-Alaska) used the confirmation hearing for Interior deputy secretary nominee David Hayes last week to rail against Obama's energy policies, saying the administration's 2010 budget blueprint is "a war on domestic production." She said punishing the oil and gas industry will not bring the age of renewable energy any faster.gy bills in the House and Senate.
Local Communities Should Embrace Natural Gas
Natural gas needs to build local markets
by: OilOnline
Monday, March 16, 2009
The price of natural gas is critically low for producers in the Barnett, Haynesville, Marcellus, and Fayetteville Shales. Recent reports indicate drilling activity in these newly discovered domestic gas plays has seen huge declines in recent months. Wells in the Barnett Shale, Haynesville Shale, Marcellus Shale, and Fayetteville Shale will may not be able to sustain production at prices below breakeven for long. Community tax bases will suffer. Resources and personnel could be forced to move on to other locations, domestic and international. Royalty owners will lose income. Exploration, drilling and production will quickly dry up. Production costs in most of these plays exceed the current $4/MMBtu market price. Most operators require at least $5-$6/MMBtu as a minimum to maintain profitable production. Unconventional gas plays in shale require special expertise, equipment and additional completion techniques that simply cost more cash to economically recover the resource. A $7-$10/MMBtu price should be a policy objective that keeps the domestic industry healthy and contributes to further exploration and US energy independence. The US economy and security may depend on bringing these clean burning gas discoveries in the Barnett Shale, Haynesville Shale, Marcellus Shale, and Fayetteville Shale to market profitably. With price a function of supply and demand, we are seeing a greater supply than demand. That has to change.
The real problem may be marketing. Natural gas producers will need to team up with utilities and product manufacturers to aggressively market their products in metro markets close to these plays. Communities and utilities that benefit should contribute to the effort with incentives and education programs. The quickest solution may be to build stronger local markets for natural gas. Products have to be developed, converted and heavily marketed. In homes, gas heating, cooking, water heating, refrigerators, grills, fireplaces and even backup generators need to regain market share. Electric vs Gas price models need to be advertised. Consumers need to see gas as the clean burning alternative to coal/oil generated electric on a local basis.
According to Lokke Advertising, CEO, Don Lokke, Jr. "Natural gas, locally produced, is critical to energy independence and local economies. Cities and utilities need to embrace the economies of local energy independence. Cities and consumers need to start thinking on a local or regional basis with regard to natural gas consumption. It is most economical when produced and used locally. Gas producing markets need to encourage use of natural gas. The regional economy benefits from lower cost energy, greater direct and indirect tax revenue, increased jobs, and a net decrease in wealth transfer out of the region."
"Local producers face increasing competition form LNG imports and alternative fuels. All the more reason for natural gas producers lead their sector in consumer education and product programs. The clean burning natural gas industry, as a whole, needs to actively support competitive incentives that build profitable local markets. Decreased cost of transportation to nearby metro areas, should offer a competitive advantage for locally produced natural gas. Yet, natural gas use has declined in the face of aggressive marketing and infrastructure investment over the last 50 years by electric utilities at the consumer level. Gas stoves, ovens, refrigerators and water heaters have been replaced in favor of electric alternatives. As a marketing resource and advertising agency, our primary concern is the oil and gas sector. It's our job to identify markets and products that make sense for our clients and the consumer. We aren't talking 'spin' or politically correct justifications. We are looking for sustainable markets that strengthen local and regional economies." according to Lokke.
Lokke Advertising, founded in 1978, is active in the oil, gas and energy sectors with online energy news and web site networks. An Advertising Red Book listed agency for over 21 years, the one man agency/consultancy, out of Dallas has worked with Fortune 500, mid-cap, and small-cap clients for over 30 years. The agency web site is located at http://www.lokkeadvertising.com/.
by: OilOnline
Monday, March 16, 2009
The price of natural gas is critically low for producers in the Barnett, Haynesville, Marcellus, and Fayetteville Shales. Recent reports indicate drilling activity in these newly discovered domestic gas plays has seen huge declines in recent months. Wells in the Barnett Shale, Haynesville Shale, Marcellus Shale, and Fayetteville Shale will may not be able to sustain production at prices below breakeven for long. Community tax bases will suffer. Resources and personnel could be forced to move on to other locations, domestic and international. Royalty owners will lose income. Exploration, drilling and production will quickly dry up. Production costs in most of these plays exceed the current $4/MMBtu market price. Most operators require at least $5-$6/MMBtu as a minimum to maintain profitable production. Unconventional gas plays in shale require special expertise, equipment and additional completion techniques that simply cost more cash to economically recover the resource. A $7-$10/MMBtu price should be a policy objective that keeps the domestic industry healthy and contributes to further exploration and US energy independence. The US economy and security may depend on bringing these clean burning gas discoveries in the Barnett Shale, Haynesville Shale, Marcellus Shale, and Fayetteville Shale to market profitably. With price a function of supply and demand, we are seeing a greater supply than demand. That has to change.
The real problem may be marketing. Natural gas producers will need to team up with utilities and product manufacturers to aggressively market their products in metro markets close to these plays. Communities and utilities that benefit should contribute to the effort with incentives and education programs. The quickest solution may be to build stronger local markets for natural gas. Products have to be developed, converted and heavily marketed. In homes, gas heating, cooking, water heating, refrigerators, grills, fireplaces and even backup generators need to regain market share. Electric vs Gas price models need to be advertised. Consumers need to see gas as the clean burning alternative to coal/oil generated electric on a local basis.
According to Lokke Advertising, CEO, Don Lokke, Jr. "Natural gas, locally produced, is critical to energy independence and local economies. Cities and utilities need to embrace the economies of local energy independence. Cities and consumers need to start thinking on a local or regional basis with regard to natural gas consumption. It is most economical when produced and used locally. Gas producing markets need to encourage use of natural gas. The regional economy benefits from lower cost energy, greater direct and indirect tax revenue, increased jobs, and a net decrease in wealth transfer out of the region."
"Local producers face increasing competition form LNG imports and alternative fuels. All the more reason for natural gas producers lead their sector in consumer education and product programs. The clean burning natural gas industry, as a whole, needs to actively support competitive incentives that build profitable local markets. Decreased cost of transportation to nearby metro areas, should offer a competitive advantage for locally produced natural gas. Yet, natural gas use has declined in the face of aggressive marketing and infrastructure investment over the last 50 years by electric utilities at the consumer level. Gas stoves, ovens, refrigerators and water heaters have been replaced in favor of electric alternatives. As a marketing resource and advertising agency, our primary concern is the oil and gas sector. It's our job to identify markets and products that make sense for our clients and the consumer. We aren't talking 'spin' or politically correct justifications. We are looking for sustainable markets that strengthen local and regional economies." according to Lokke.
Lokke Advertising, founded in 1978, is active in the oil, gas and energy sectors with online energy news and web site networks. An Advertising Red Book listed agency for over 21 years, the one man agency/consultancy, out of Dallas has worked with Fortune 500, mid-cap, and small-cap clients for over 30 years. The agency web site is located at http://www.lokkeadvertising.com/.
Monday, March 16, 2009
Alaska Natural Gas Transpipeline Up for Review
By Pat Forgey | JUNEAU EMPIRE
Legislative opponents of Gov. Sarah Palin's natural gas pipeline plan are asking the Legislature to reconsider the endorsement it gave Trans-Canada Corp.'s plan just months ago.
"All Alaskans want a gas pipeline. But we need to temper that with the reality of the U.S. and world markets today," said Rep. Craig Johnson, R-Anchorage, co-chair of the House Resources Committee.
Johnson and Rep. Jay Ramras, R-Fairbanks, have introduced House Concurrent Resolution 12, a measure calling on the Palin administration to "review and re-evaluate" the license the state issued to TransCanada last year after spending 60 days in special session reviewing its application.
The "license" gives TransCanada exclusive access to $500 million in state money to help develop a pipeline, but also commits the Calgary, Alberta-based company to develop and finance a pipeline in ways that are good for Alaska.
Johnson and Ramras expressed concern that troubled credit markets would make the project difficult to finance, while new supplies of gas, including imports of liquefied gas and gas from shale beds, would depress market prices.
Department of Revenue Commissioner Pat Galvin said he was mystified at the resolution, coming just months after approval of TransCanada.
"It's kind of strange to come this quickly after the Legislature approved the license," he said. "The issues raised in the resolution are not ones we see as long-term detriments to the project."
Ramras said that in the business world, large projects are routinely re-evaluated when risk factors change, and that's what happened with credit market and liquid natural gas changes.
"It's been a tectonic change in the Lower 48," Ramras said.
Galvin said the license awarded to TransCanada under the terms of the Alaska Gasline Inducement Act was intended to get the long-term project beyond short term market fluctuations.
"It's ironic that we're in this short-term dip in gas prices that makes AGIA so necessary," he said. "It's a contractual obligation to keep moving forward."
Rep. Beth Kerttula, D-Juneau, called the resolution a "political attack" on the AGIA pipeline.
"I'm certain the governor and her administration are completely on top of that project and don't need to be told to stay on top of it," she said.
Resolution sponsors Ramras and Johnson both opposed the TransCanada license last summer. Kerttula supported it.
House Speaker Mike Chenault, R-Nikiski, has referred the bill to the House Resources Committee, which Johnson co-chairs, and the Energy Committee, on which Ramras sits.
Legislative opponents of Gov. Sarah Palin's natural gas pipeline plan are asking the Legislature to reconsider the endorsement it gave Trans-Canada Corp.'s plan just months ago.
"All Alaskans want a gas pipeline. But we need to temper that with the reality of the U.S. and world markets today," said Rep. Craig Johnson, R-Anchorage, co-chair of the House Resources Committee.
Johnson and Rep. Jay Ramras, R-Fairbanks, have introduced House Concurrent Resolution 12, a measure calling on the Palin administration to "review and re-evaluate" the license the state issued to TransCanada last year after spending 60 days in special session reviewing its application.
The "license" gives TransCanada exclusive access to $500 million in state money to help develop a pipeline, but also commits the Calgary, Alberta-based company to develop and finance a pipeline in ways that are good for Alaska.
Johnson and Ramras expressed concern that troubled credit markets would make the project difficult to finance, while new supplies of gas, including imports of liquefied gas and gas from shale beds, would depress market prices.
Department of Revenue Commissioner Pat Galvin said he was mystified at the resolution, coming just months after approval of TransCanada.
"It's kind of strange to come this quickly after the Legislature approved the license," he said. "The issues raised in the resolution are not ones we see as long-term detriments to the project."
Ramras said that in the business world, large projects are routinely re-evaluated when risk factors change, and that's what happened with credit market and liquid natural gas changes.
"It's been a tectonic change in the Lower 48," Ramras said.
Galvin said the license awarded to TransCanada under the terms of the Alaska Gasline Inducement Act was intended to get the long-term project beyond short term market fluctuations.
"It's ironic that we're in this short-term dip in gas prices that makes AGIA so necessary," he said. "It's a contractual obligation to keep moving forward."
Rep. Beth Kerttula, D-Juneau, called the resolution a "political attack" on the AGIA pipeline.
"I'm certain the governor and her administration are completely on top of that project and don't need to be told to stay on top of it," she said.
Resolution sponsors Ramras and Johnson both opposed the TransCanada license last summer. Kerttula supported it.
House Speaker Mike Chenault, R-Nikiski, has referred the bill to the House Resources Committee, which Johnson co-chairs, and the Energy Committee, on which Ramras sits.
Sunday, March 15, 2009
China Developing Natural Gas Field in Iran
China will help in the exploration of the offshore South Pars field, believed to be part of the world's largest natural gas reservoir. The deals points to the limitations of U.S. sanctions.
By Borzou Daragahi
1:31 PM PDT, March 14, 2009
Reporting from Beirut -- Iran announced a $3.2-billion natural gas deal today with China, a move that underscored the difficulty of using economic sanctions to pressure Tehran to bow to Washington's demands on its nuclear program.
Iranian state television quoted a senior government official as saying the deal with a Chinese consortium, announced two days after the Obama administration renewed U.S. sanctions against the Islamic Republic, would eventually include an unnamed European country as a partner.
By Borzou Daragahi
1:31 PM PDT, March 14, 2009
Reporting from Beirut -- Iran announced a $3.2-billion natural gas deal today with China, a move that underscored the difficulty of using economic sanctions to pressure Tehran to bow to Washington's demands on its nuclear program.
Iranian state television quoted a senior government official as saying the deal with a Chinese consortium, announced two days after the Obama administration renewed U.S. sanctions against the Islamic Republic, would eventually include an unnamed European country as a partner.
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