Timing is everything for investors looking to add natural gas stocks to their portfolios.
With wintry weather settling over most of North America, analysts are cautiously optimistic that increased demand for the home-heating fuel will make it an attractive investment once again.
But prospective investors should hold off on making a move for now.
"It's going to take at least another heat-winter cycle to get things soaked up," said Bryan Gormley, the Canadian Gas Institute's director for policy and economics.
One nasty snowstorm isn't going to do it. The natural gas industry needs months of consistent chilly temperatures for there to be a price impact.
Since 2006, natural gas prices in North America have been dragged down by a surplus overhang resulting from two balmy winters and one tepid summer. Drilling activity plummeted in 2007 and is expected to continue dropping next year.
"The Canadian natural gas industry has been operating under very challenging economic conditions over the past couple of years," said Barry Munro of Ernst & Young's Global Oil and Gas Center.
But taking a longer-term view, though, Munro said he is "very bullish about the prospects for natural gas."
"If it stays cold throughout the rest of the winter and we get to a better level of balance around natural gas supplies, I think that you'll see a much more bullish outlook heading into the fall/winter of '08-'09."
While weather is the key factor affecting natural gas prices, it certainly isn't the only one.
One major "wild card" is the increasing use of liquefied natural gas, or LNG, Munro said. The gas is condensed into a liquid in ultra-cold temperatures, making it easier to store and transport.
Currently most LNG ends up in the already saturated North American marketplace. But in the future it will be easier to transport it to places where it can be sold for a much better price, Munro said.
Today natural gas can be sold for about $3 more per thousand cubic feet in Europe than in North America.
Investors should also look at developments south of the border before buying natural-gas related stocks. Ramped up drilling activity in the United States could offset the effects of Canadian production cuts.
Monday, December 31, 2007
Sunday, December 30, 2007
Novatek Number 2 in Russa for Natural Gas
Luxembourg's Bluebird Securities Saturday said it had acquired a 5.7 percent stake in Russia's second largest gas producer Novatek.
A company statement said it had bought the shares from the Cyprus-based SWGI Growth Fund but did not reveal the amount it had paid.
SWGI Growth Fund has thereby reduced its holding in Novatek from 19.9 percent to 14.24 percent, Russia's Interfax news agency said.
Russia's state-run Gazprom is the country's largest gas producer.
Last year, Novatek produced 28.7 billion cubic metres of natural gas and reached 100 billion cubic metres in cumulative natural gas production since starting natural gas production in 1998, according to a company statement.
It accounted for four percent of the country's total natural gas production in 2006.
A company statement said it had bought the shares from the Cyprus-based SWGI Growth Fund but did not reveal the amount it had paid.
SWGI Growth Fund has thereby reduced its holding in Novatek from 19.9 percent to 14.24 percent, Russia's Interfax news agency said.
Russia's state-run Gazprom is the country's largest gas producer.
Last year, Novatek produced 28.7 billion cubic metres of natural gas and reached 100 billion cubic metres in cumulative natural gas production since starting natural gas production in 1998, according to a company statement.
It accounted for four percent of the country's total natural gas production in 2006.
Saturday, December 29, 2007
Texas Supplies 29% of US Natural Gas
With 2007 production of 6.3 trillion cubic feet, Texas is meeting 29 percent of the country's demand for natural gas, according to the Texas Railroad Commission's Oil and Gas Division.
The RRC also reported Texas 2007 oil production at 337 million barrels of oil. The state had an average rig count of 872, representing nearly half -- about 48 percent -- of all active land rigs in the United States.
The commission's estimated final production for October 2007 is 28.2 million barrels of crude oil and 481.4 Mcf (thousand cubic feet) of gas.
Texas natural gas storage reported by the commission for November 2007 is 395.5 million Mcf, compared with 444.3 million Mcf in November 2006. The December 2007 gas storage estimate is 392.4 million Mcf.
The RRC set initial January 2008 natural gas production allowables for prorated fields in the state to meet market demand of 16.7 million Mcf.
In setting the initial January 2008 allowables, the commission used historical production figures from previous months, producers' demand forecasts for the coming month, and adjusted the figures based on well capability. The initial allowables will be adjusted after actual production for January 2008 is reported.
The RRC also reported Texas 2007 oil production at 337 million barrels of oil. The state had an average rig count of 872, representing nearly half -- about 48 percent -- of all active land rigs in the United States.
The commission's estimated final production for October 2007 is 28.2 million barrels of crude oil and 481.4 Mcf (thousand cubic feet) of gas.
Texas natural gas storage reported by the commission for November 2007 is 395.5 million Mcf, compared with 444.3 million Mcf in November 2006. The December 2007 gas storage estimate is 392.4 million Mcf.
The RRC set initial January 2008 natural gas production allowables for prorated fields in the state to meet market demand of 16.7 million Mcf.
In setting the initial January 2008 allowables, the commission used historical production figures from previous months, producers' demand forecasts for the coming month, and adjusted the figures based on well capability. The initial allowables will be adjusted after actual production for January 2008 is reported.
Friday, December 28, 2007
ONGC India Will Pump Gas Through March 2008 in South Bassein Field
GAIL (India) has urged Oil and Natural Gas Corporation (ONGC) to defer the shutdown of its largest gas field off Mumbai till March 2008 to enable power and fertilizer companies to achieve their yearly targets.
Official sources said ONGC planned to shutdown two production complexes at the Bassein field during January-February to hook-up new facilities. The closure could possibly lead to a fall in natural gas availability from 42 million standard cubic metres a day to 29-31 mscmd.
The sources said GAIL had written to the Petroleum and Natural Gas Ministry that it would have to cut gas supplies to power and fertilizer units by 30-55 per cent during the shutdown period.
Fuel supplies to other users would be cut by as much as 89 per cent. “We have requested ONGC to defer the shutdown keeping into account the concerns of end-user industries,” the letter stated. In a separate letter, GAIL Director (Marketing) B. C. Tripathi said the proposed shutdown fell in the last quarter of the financial year and this would adversely impact achievement targets of GAIL, power and fertilizer sectors. ONGC plans to shut the BPB process complex from January 1 to 25 and the BPA complex from February 14 to 28 to hook-up the South Bassein field and the Vasai East field to the production system.
The shutdown of the BPB facility will reduce gas output by 13.5 mscmd and the closure of the BPA facility to cut output by 11 mscmd. As against current production of 42 mscmd, gas supply is expected to be in the range of 29 to 31 mscmd during the shutdown period. ONGC has invested Rs. 2,937 crore in additional development of the South Bassein field and another Rs. 1,688 crore in the Vasai East field.
Official sources said ONGC planned to shutdown two production complexes at the Bassein field during January-February to hook-up new facilities. The closure could possibly lead to a fall in natural gas availability from 42 million standard cubic metres a day to 29-31 mscmd.
The sources said GAIL had written to the Petroleum and Natural Gas Ministry that it would have to cut gas supplies to power and fertilizer units by 30-55 per cent during the shutdown period.
Fuel supplies to other users would be cut by as much as 89 per cent. “We have requested ONGC to defer the shutdown keeping into account the concerns of end-user industries,” the letter stated. In a separate letter, GAIL Director (Marketing) B. C. Tripathi said the proposed shutdown fell in the last quarter of the financial year and this would adversely impact achievement targets of GAIL, power and fertilizer sectors. ONGC plans to shut the BPB process complex from January 1 to 25 and the BPA complex from February 14 to 28 to hook-up the South Bassein field and the Vasai East field to the production system.
The shutdown of the BPB facility will reduce gas output by 13.5 mscmd and the closure of the BPA facility to cut output by 11 mscmd. As against current production of 42 mscmd, gas supply is expected to be in the range of 29 to 31 mscmd during the shutdown period. ONGC has invested Rs. 2,937 crore in additional development of the South Bassein field and another Rs. 1,688 crore in the Vasai East field.
Thursday, December 27, 2007
Gazprom Capital Investments $20 Billion in 2008
MOSCOW, Dec 27 (Reuters) - Russia's gas export monopoly Gazprom (GAZP.MM: Quote, Profile, Research) will increase capital investment by 43 percent in 2008 to a record level of almost $20 billion as it speeds up development of Arctic fields and new pipelines.
Gazprom has prioritised equity investment over capital expenditures for several years because of massive new asset purchases despite investor criticism over inadequate new -production investment amid stagnant mature-field output in Siberia. On Thursday the world's largest gas producer said its state-controlled board had approved its capital investments, which will rise to a record of 479.4 billion roubles ($19.41 billion) in 2008 from 335.5 billion roubles in 2007 and 324.9 billion in 2006.
The capital investments will be equally split between gas production and transportation.
Long-term financial investment will fall by 48 percent to 230.7 billion roubles from a record of 443.86 billion in 2007 and 133.7 billion in 2006.
Capital investment will go toward the Bovanenkov and Kharasavei fields on the Arctic Yamal peninsula, the firm's next source of big gas output, and Shtokman on the Barents Sea.
More funds will also be invested in new pipelines to connect Yamal to the existing system of trunk pipelines, which also needs to be expanded, Gazprom said.
Gazprom's 2007 financial investments soared after the firm agreed to buy 50 percent in the Sakhalin-2 oil and gas project, previously led by Royal Dutch Shell (RDSa.L: Quote, Profile, Research), for $7.45 billion, and a controlling purchase of Moscow utility Mosenergo.
Next year Gazprom said it will have to buy 50 percent in state oil major Rosneft's (ROSN.MM: Quote, Profile, Research) unit Tomskneft, in a deal valued at $3.66 billion, and pay $625 million to further increase its stake in Belarus' national pipeline network.
The company said some of the financial investment will also go toward Sakhalin-2, its new Nord Stream pipeline to Germany and Shtokman, but gave no details
Gazprom has prioritised equity investment over capital expenditures for several years because of massive new asset purchases despite investor criticism over inadequate new -production investment amid stagnant mature-field output in Siberia. On Thursday the world's largest gas producer said its state-controlled board had approved its capital investments, which will rise to a record of 479.4 billion roubles ($19.41 billion) in 2008 from 335.5 billion roubles in 2007 and 324.9 billion in 2006.
The capital investments will be equally split between gas production and transportation.
Long-term financial investment will fall by 48 percent to 230.7 billion roubles from a record of 443.86 billion in 2007 and 133.7 billion in 2006.
Capital investment will go toward the Bovanenkov and Kharasavei fields on the Arctic Yamal peninsula, the firm's next source of big gas output, and Shtokman on the Barents Sea.
More funds will also be invested in new pipelines to connect Yamal to the existing system of trunk pipelines, which also needs to be expanded, Gazprom said.
Gazprom's 2007 financial investments soared after the firm agreed to buy 50 percent in the Sakhalin-2 oil and gas project, previously led by Royal Dutch Shell (RDSa.L: Quote, Profile, Research), for $7.45 billion, and a controlling purchase of Moscow utility Mosenergo.
Next year Gazprom said it will have to buy 50 percent in state oil major Rosneft's (ROSN.MM: Quote, Profile, Research) unit Tomskneft, in a deal valued at $3.66 billion, and pay $625 million to further increase its stake in Belarus' national pipeline network.
The company said some of the financial investment will also go toward Sakhalin-2, its new Nord Stream pipeline to Germany and Shtokman, but gave no details
Liquified Natural Gas Pricing Monitored Weekly in Canada
In an important sign of the times for the Canadian natural gas market, FirstEnergy Capital is now issuing weekly price updates about the global liquefied natural gas business.
Two years ago, when Canadian gas was exiting Alberta for America customers at more than $10 per thousand cubic feet, the about-to-burgeon LNG market was a cursory thought at best in most of the minds in downtown Calgary.
Now, as North American gas prices remain relatively low because of ample supplies of the commodity, LNG isn’t some abstract concept. Calgary producers suddenly realize they’ve got to compete against not only companies in the U.S. but sellers of natural gas around the world.
This was recently highlighted by EnCana Corp., Canada’s largest gas producer, whose CEO Randy Eresman said Alberta would have to “re-establish [the] competitiveness” of the province’s gas business. It is this sector that helps keep the treasury full, now under threat because of high costs, low prices and rising royalties—and ever-stiffer competition.
A year ago, gas producers in Calgary hoped low commodity prices, big supplies and full storage caverns were just a brief interlude that was rudely interrupting what had been a brilliant boom.
Then came this summer. Gas prices, unusually, were higher in North American than the United Kingdom and Japan—traditional destinations for LNG cargoes. So LNG poured into North America, helping fill available winter storage capacity for the second season in a row—likely ensuring no January-March boom in the price, even if the continent’s east coast goes through several deep freezes.
To make sense of it all, enter FirstEnergy, the Calgary-based independent brokerage founded in the early 1990s by a group of young bankers, including Murray Edwards. FirstEnergy does much of its business financing junior natural gas producers. Unlike the old days, the new competition to sell gas to Americans to heat their homes and fuel their factories starts in places like Trinidad, Qatar and Egypt.
Right now, FirstEnergy reports that imports of LNG in the U.S. is sitting at about a billion cubic feet a day, near a five-year low, a trend expected to continue through January. The figure is way down from a spike up to 4 billion cubic feet a day in the summer. That was the spike that helped fill storage for winter, keeping continental prices low.
LNG imports in the U.S. are low right now because the benchmark gas price in the country is at about $7 per thousand cubic feet (U.S.). By comparison, LNG producers selling their product in Asia can get as much as double that rate.
Canada exports about 10 billion cubic feet a day of gas to America. According to the Energy Information Administration, the U.S. imports roughly 20 per cent of its natural gas. For Canadians, the key stat is that the country is losing market share. In 2001, about 94 per cent of gas imported into the U.S. was Maple Leaf output. Last year that had fallen to 86 per cent—and fell to 75 per cent in July—before bouncing back towards 90 per cent in September.)
So, for Canadian producers, the hope is that LNG supplies continue go elsewhere and North America supplies will ebb (though they have been surprisingly strong in the U.S.).
Lower supplies stoke higher prices, good for struggling Calgary producers and their stocks (but bad news for all of us that heat our homes with gas). And if it’s a cold winter followed by a hot summer, that would be another factor that would push prices higher.
But hope is an effervescent thing to depend on in the hard world of business. With the boom of 2005 now a distant memory, and an unexpectedly difficult 2007, producers in Calgary are now stoic, some of whom are struggling to stay in business. The big world of LNG is just another in a stack of problems. Finding a way to reduce costs in Alberta will be the big challenge. The year ahead will certainly remain in the category of interesting times.
Postscript: (Natural gas has traditionally been a continental commodity, used near where it is produced. LNG emerged a number of decades ago but was only particularly relevant for countries such as Japan, which were without their own sources. Technology has improved, prices globally have risen and it looks like the LNG market in the next several years will become a global one. The gas at its source is supercooled to -160C, at which point it becomes a shippable liquid. The liquid is regasified at its destination and then moved onwards to customers by pipeline.
Two years ago, when Canadian gas was exiting Alberta for America customers at more than $10 per thousand cubic feet, the about-to-burgeon LNG market was a cursory thought at best in most of the minds in downtown Calgary.
Now, as North American gas prices remain relatively low because of ample supplies of the commodity, LNG isn’t some abstract concept. Calgary producers suddenly realize they’ve got to compete against not only companies in the U.S. but sellers of natural gas around the world.
This was recently highlighted by EnCana Corp., Canada’s largest gas producer, whose CEO Randy Eresman said Alberta would have to “re-establish [the] competitiveness” of the province’s gas business. It is this sector that helps keep the treasury full, now under threat because of high costs, low prices and rising royalties—and ever-stiffer competition.
A year ago, gas producers in Calgary hoped low commodity prices, big supplies and full storage caverns were just a brief interlude that was rudely interrupting what had been a brilliant boom.
Then came this summer. Gas prices, unusually, were higher in North American than the United Kingdom and Japan—traditional destinations for LNG cargoes. So LNG poured into North America, helping fill available winter storage capacity for the second season in a row—likely ensuring no January-March boom in the price, even if the continent’s east coast goes through several deep freezes.
To make sense of it all, enter FirstEnergy, the Calgary-based independent brokerage founded in the early 1990s by a group of young bankers, including Murray Edwards. FirstEnergy does much of its business financing junior natural gas producers. Unlike the old days, the new competition to sell gas to Americans to heat their homes and fuel their factories starts in places like Trinidad, Qatar and Egypt.
Right now, FirstEnergy reports that imports of LNG in the U.S. is sitting at about a billion cubic feet a day, near a five-year low, a trend expected to continue through January. The figure is way down from a spike up to 4 billion cubic feet a day in the summer. That was the spike that helped fill storage for winter, keeping continental prices low.
LNG imports in the U.S. are low right now because the benchmark gas price in the country is at about $7 per thousand cubic feet (U.S.). By comparison, LNG producers selling their product in Asia can get as much as double that rate.
Canada exports about 10 billion cubic feet a day of gas to America. According to the Energy Information Administration, the U.S. imports roughly 20 per cent of its natural gas. For Canadians, the key stat is that the country is losing market share. In 2001, about 94 per cent of gas imported into the U.S. was Maple Leaf output. Last year that had fallen to 86 per cent—and fell to 75 per cent in July—before bouncing back towards 90 per cent in September.)
So, for Canadian producers, the hope is that LNG supplies continue go elsewhere and North America supplies will ebb (though they have been surprisingly strong in the U.S.).
Lower supplies stoke higher prices, good for struggling Calgary producers and their stocks (but bad news for all of us that heat our homes with gas). And if it’s a cold winter followed by a hot summer, that would be another factor that would push prices higher.
But hope is an effervescent thing to depend on in the hard world of business. With the boom of 2005 now a distant memory, and an unexpectedly difficult 2007, producers in Calgary are now stoic, some of whom are struggling to stay in business. The big world of LNG is just another in a stack of problems. Finding a way to reduce costs in Alberta will be the big challenge. The year ahead will certainly remain in the category of interesting times.
Postscript: (Natural gas has traditionally been a continental commodity, used near where it is produced. LNG emerged a number of decades ago but was only particularly relevant for countries such as Japan, which were without their own sources. Technology has improved, prices globally have risen and it looks like the LNG market in the next several years will become a global one. The gas at its source is supercooled to -160C, at which point it becomes a shippable liquid. The liquid is regasified at its destination and then moved onwards to customers by pipeline.
Wednesday, December 26, 2007
China Encourages Foreign Investment in Natural Gas
China will encourage foreign investment in its energy sector and will continue to improve the environment for such investment, says a white paper published on Wednesday by the Information Office of the State Council.
China will improve external cooperation in the exploration and development of oil and natural gas resources, says the white paper, which is titled "China's Energy Conditions and Policies."
The paper stresses that China protects the legitimate rights and interests of foreign businesses that collaborate in oil exploitation.
The country encourages foreign businesses to participate in cooperative activities in oil exploration and development, such as risk exploration for oil and natural gas, low-permeability oil fields and gas reservoirs and the improvement of recovery rates of old oil fields, says the paper.
Foreign investment is also welcome in the construction and operation of oil and gas pipelines, as well as special oil and gas storage facilities and port berths, it says.
Exploration and development of unconventional energy resources, such as coalbed methane, is also open to foreign investment, it says.
"China allows foreign investors, either alone or in collaboration with Chinese counterparts, to conduct risk exploration on its territory," says the paper.
Foreign interests that invest in exploring and recovering paragenetic and associated minerals and utilizing tailing or exploring mineral resources in China's western regions "are entitled to enjoy the preferential policy of reduction of or exemption from mineral resources compensation fees", the paper says.
Paragenetic minerals are those mixed together in the same deposit, such as copper and gold.
The paper says further efforts are being made to improve management of and services to foreign investment in the exploration and production of mineral resources aside from oil and gas.
The country also encourages foreign investors to invest in and operate energy facilities such as power plants.
The scope of foreign investment will be expanded, the paper says.
In bringing in foreign investment for the development and utilization of energy resources, China focuses on several factors.
These include technology transfer, management experience and skilled staff to further shift the focus from investing in fossil energy resources to renewable resources.
China also wants to shift away from an emphasis on exploration and development to the development of service trade, and from reliance mainly on foreign loans and direct foreign investment to the directly pooling of funds in international capital market, the paper says
China will improve external cooperation in the exploration and development of oil and natural gas resources, says the white paper, which is titled "China's Energy Conditions and Policies."
The paper stresses that China protects the legitimate rights and interests of foreign businesses that collaborate in oil exploitation.
The country encourages foreign businesses to participate in cooperative activities in oil exploration and development, such as risk exploration for oil and natural gas, low-permeability oil fields and gas reservoirs and the improvement of recovery rates of old oil fields, says the paper.
Foreign investment is also welcome in the construction and operation of oil and gas pipelines, as well as special oil and gas storage facilities and port berths, it says.
Exploration and development of unconventional energy resources, such as coalbed methane, is also open to foreign investment, it says.
"China allows foreign investors, either alone or in collaboration with Chinese counterparts, to conduct risk exploration on its territory," says the paper.
Foreign interests that invest in exploring and recovering paragenetic and associated minerals and utilizing tailing or exploring mineral resources in China's western regions "are entitled to enjoy the preferential policy of reduction of or exemption from mineral resources compensation fees", the paper says.
Paragenetic minerals are those mixed together in the same deposit, such as copper and gold.
The paper says further efforts are being made to improve management of and services to foreign investment in the exploration and production of mineral resources aside from oil and gas.
The country also encourages foreign investors to invest in and operate energy facilities such as power plants.
The scope of foreign investment will be expanded, the paper says.
In bringing in foreign investment for the development and utilization of energy resources, China focuses on several factors.
These include technology transfer, management experience and skilled staff to further shift the focus from investing in fossil energy resources to renewable resources.
China also wants to shift away from an emphasis on exploration and development to the development of service trade, and from reliance mainly on foreign loans and direct foreign investment to the directly pooling of funds in international capital market, the paper says
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