WASHINGTON — Canada’s ambassador to the United States is urging American energy regulators to discourage natural gas projects that would require tankers to travel through Canadian waters.
Gary Doer has written a letter to John Wellinghoff, chairman of the Federal Energy Regulatory Commission, expressing concerns with proposals to construct liquefied natural gas terminals in Maine.
In the letter dated Feb. 3 and obtained by The Canadian Press from a government source, Doer says if approved, those proposals would see tankers pass through Head Harbour Passage, which is within Canadian waters off the New Brunswick coast.
He says there would be navigational, environmental and public safety risks if the tankers were to go through that narrow passage.
The New Brunswick government has also voiced its opposition to the proposed $600-million Downeast LNG project.
Shale gas technology has closed the gap between the energy equivalent between natural gas and coal. Horizontal drilling and fracturing have increased natural gas reserves in the U.S. by as much as 40% which have lead to lower prices (more affordable) and greater less price volatility – a problem that has historically plagued the natural gas industry. Despite the progress by natural gas industry to reposition natural gas as the cleanest fossil fuel domestically available to meet U.S. energy needs, considerable hurdles are yet to be cleared and the coal lobby in the U.S. is well funded and well established.
Natural gas supplies declined by 115 Bcf for the week of January 29, 2009 with working gas in storage at 2,406 Bcf, according to Energy Information Administration (“EIA”) estimates. Stocks were 199 Bcf higher than last year at this time and 150 Bcf above the 5-year average of 2,256 Bcf. At 2,406 Bcf, total working gas is within the 5-year historical range.
Analysts polled by Platts expected a drawdown of between 121 billion and 125 billion cubic feet as natural gas futures continued to decline in price.
Bloomberg Television has a very interesting video presentation posted to YouTube providing comment on how shale gas may be a total game changer. Something we have been predicting on Horn River News for some time now.
Watch for a new extended article on the Horn River News soon that will provide further insight into the long term potential of natural gas, how it will impact global markets and change political leverage on the international stage.
The Exxon Mobil Corp. and TransCanada Corp. have stated the proposed major pipeline to move natural gas from Alaska to the Lower 48 estimate the project will cost from $20 billion to as much as $41 billion a 23% to 58% budget increase, depending on the route.
The Alaska Pipeline Project details came Friday in a filing with federal regulators. The filing is a first step toward an open season, when Exxon and TransCanada will try to ink shipping deals with North Slope gas producers. TransCanada Corp. is working with Exxon Mobil Corp. to advance the pipeline. The state of Alaska has promised to reimburse TransCanada up to $500 million of the cost. In addition to the Alberta-bound pipeline, Exxon and TransCanada today said they will consider an alternative route that would haul North Slope gas to the Alaskan port of Valdez to be converted into Liguified Natural Gas (“LNG”) and shipped to the U.S. and international markets. The 800-mile pipeline to Valdez would cost $20 billion to $26 billion, according to the statement.
Working gas in storage declined 86 Bcf for the week of Friday January 22, 2010 falling short of expectations. Analysts polled by Platts expected a drawdown in a range of 107 to 111 billion cubic feet. Total working in storage was a total of 2,521 Bcf according to Energy Information Administration (“EIA”) estimates. Stocks were 120 Bcf higher than last year at this time and 87 Bcf above the 5-year average of 2,434 Bcf.
At 2,521 Bcf, total working gas is within the 5-year historical range according to the EIA,but a trend towards less then expected declines in supply due to milder winter weather would increase concern of natural gas in storage being above historical levels at the end of the winter heating season and putting increased downward pressure on natural gas prices. However, today natural gas futures were up as colder temperatures in the major gas-consuming regions over the next two weeks were expected to bolster the demand for natural gas for heating. Utilities and financial traders were buying up gas in response to the weather forecasts, which had been revised from more moderate outlooks earlier in the week. Commodity Weather Group, is predicting below-normal temperatures in the eastern half of the U.S. from January 29 to Feb. 2, and in the Northeast from Feb. 3 to Feb. 7.
Woodside Petroleum has announced a possible natural gas discovery off the west coast of Australia. While it is too early to assess the quality of gas, or how well it will flow, Woodside’s early announcement is being seen as a sign of confidence and will boost justification for a second-stage expansion of its $13 billion Pluto liquefied natural gas project.
Dave Lesar, CEO of Halliburton stated during a conference call to discuss the company’s fourth-quarter earnings that 2010 is poised to be “much better” this year. Mr. Lesar premised, “However, this view requires a sustained increase in natural gas drilling activity.” and noted that U.S. natural gas storage levels would need to exit the winter heating season in line with historical levels. (see Horn River News: “Natural gas inventories down more then expected: within historical range”)
Mr. Lesar is quoted as stating;
“The increase in rig count, positive withdrawals from gas storage and the focus by operators on projects with high service intensity are positive indicators for the North America market in the short term.”
He goes on to state:
“Many operators have announced potential increases in upstream spending for 2010 targeted for new frontier developments and ultra-deepwater where we are well positioned. However, we expect operator investment will remain weighted toward the second half of the year. We believe 2010 will be a transition year as the industry seeks to balance supply growth with recovering hydrocarbon demand.”
The total number of wells drilled in Canada in 2009 fell to 8,360, the lowest mark since 1992 and about half the 16,362 in 2008. Alberta’s 2009 well count fell 50.4% to 5,802 wells from 11,687 a year earlier, while Saskatchewan operators rig-released 1,761 wells, 56% lower, and B.C. was down nearly 34% to 563 wells. From 10,000 to 15,000 jobs were lost in 2009 by the members of the Petroleum Services Association of Canada. The worst may be over.
Reasons for the decline in drilling activity are obvious. A worldwide recession for the most part of 2009 resulted in a reduced demand for natural gas and an increase in inventories in natural gas resulted in a natural gas price crash. The industry has gone through a structural change that will remain with the natural gas industry forever.
Research analyst Chris Theal of Macquarie Securities was referenced as stating “low commodity prices in the first part of 2009 slowed even the hot Saskatchewan Bakken oil play, leaving activity only in low-cost unconventional gas plays in Western Canada.”
But that was for 2009, and there are many looking to 2010 with optimism. An increase in activity started at the end of 2009, and many expect there to be increased activity through 2010 as well. Peters & Co. updated its 2010 forecast to 11,000 wells in Western Canada and this week estimated the 2011 well count will reach 12,500 with Western Canadian drilling fleet utilization rates grow from 40% this year to 45% in 2011.
