Tag Archives: Apache Corp

Shell applies for 25-year natural gas export licence

Posted on July 30, 2012 | Leave a comment

(Source: Globe & Mail) Royal Dutch Shell plc and its three Asian partners have applied to export an enormous volume of natural gas from the British Columbia coast, as global attention begins to focus on the movement of Canadian energy to Japan, China and other markets.

On Friday, Shell said it had applied to the National Energy Board for a licence to export up to 24-million tonnes per year of natural gas. That is equivalent to 3.4-billion cubic feet per day, fully a quarter of Canada’s entire output in 2011.

Shell, which has partnered with Korea Gas Corp., Mitsubishi Corp. and PetroChina on an export terminal slated for Kitimat, B.C., is asking for approval to export gas for 25 years.

The partners intend to build their initial terminal to half the capacity they are requesting, “with an option to expand the project to a total of four units or 24 million tonnes,” spokesman David Williams said in a statement.

“The application is an important milestone in the regulatory process and assures that there are sufficient natural gas reserves in Canada to meet domestic needs and exports.”

Outside of export possibilities, Canada’s natural gas industry faces tremendous challenges. The discovery of large new supplies of natural gas in the U.S. have raised concerns that Canadian gas will, over the course of the next decade, no longer be needed south of the border.

At the same time, northeastern British Columbia has proven to possess enormous gas reserves. In June, for example, Apache Corp. said it had drilled a well in the province’s far northern Liard play that was the most prolific shale gas test in the world. Apache is leading a separate project to build an LNG export terminal in Kitimat.

Shell has declined to estimate the cost of its terminal. On Friday, however, TransCanada Corp. chief executive Russ Girling pegged it at $12-billion, plus a $4-billion pipeline to deliver gas from the B.C. northeast.

Natural gas exports offer the possibility of selling gas into international markets, where gas prices are linked to oil prices, and are much higher as a result.

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Apache calls new discovery in northeastern BC “best shale gas reservoir in North America.”

Posted on June 14, 2012 | Leave a comment

One of the energy companies planning a liquefied natural gas terminal at Kitimat announced Thursday “an outstanding” new shale gas discovery, the best in North America, in British Columbia’s remote and largely unexplored Liard Basin.

The find by Apache Corp., one of three partners in the $4.5-billion Kitimat LNG terminal and pipeline proposal, is estimated to contain enough gas in itself to justify doubling the size of the Kitimat terminal. The company is calling it the best and highest quality shale gas reservoir in North America and says its wells are the most prolific in the world, based on the volume of gas three test wells are producing.

Based on the production from those wells, Apache announced it has 48 trillion cubic feet of marketable gas within its Liard Basin properties. By way of comparison, all companies active in the Horn River Basin, one of three other major shale gas basins in B.C., have marketable gas of 78 trillion cubic feet, giving one company alone a natural gas find that is two-thirds the size of the entire Horn Basin.

One well alone produced 21 million cubic feet of gas a day over a 30-day test period.

“This is enormous,” said Gordon Currie, senior oil and gas analyst at Salman Partners. “Those are big, big numbers.”

Based on Apache’s results alone, the Liard should provide B.C. with enough gas to export “for many, many years to come,” Currie said.

Bill Mintz, director of public affairs at Apache, said the Liard discovery provides the company with enough gas to meet the needs of any future expansion at its proposed LNG terminal. Apache and its partners plan a five-million-tonne-a-year LNG plant which, if supply and demand warrant it, could be doubled to 10 million tonnes a year. The Liard alone could provide that additional five million tonnes of LNG.

Mintz said gas from the Liard wells is already being sold through a pipeline connecting them to Fort Nelson. The Liard find is not only large, but the Apache test wells are producing more gas from fewer hydraulic fractures, six per well as opposed to 20 in the nearby Horn River Basin.

One of the Apache wells, D-34-K, “is one of the best shale wells we have seen in any play. Our analysis indicates that the formation characteristics are remarkably consistent across this large basin,” Apache president Steven Farris said in making the announcement at the company’s annual investors day in Houston, Texas.

A slide presentation on the find says the drilling in the Liard is “believed to be the most prolific shale gas resource test in the world.”

Full Story, Vancouver Sun: Apache calls new discovery in northeastern BC “best shale gas reservoir in North America.”

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Massive B.C. reservoir could double gas output

Posted on June 14, 2012 | Leave a comment

A monster British Columbia well just south of the 60th parallel is pumping a tremendous volume of natural gas from a globally significant new play that stands to dramatically boost Canada’s gas resources. (Source)

Until Thursday, it was a secret, drilled in 2009 and kept under wraps while Houston-based Apache Corp. snapped up more potentially prolific land around it.

Revealing results from the well, Apache called it “the most prolific shale gas resource test in the world.”

And the Liard Basin where the well is situated, about 150 kilometres northwest of Fort Nelson, B.C., stands to be the “best unconventional gas reservoir in North America,” the company said. Initial results show it contains enough gas to match Canada’s entire current output for nearly a decade.

That’s based in part on that single well from 2009, which produced 21 million cubic feet per day during its first month, after being “fracked” – a technique used to free shale gas – six times. In other shale gas reservoirs, companies use 18 fracks – and more – to cause even more gas to flow.

The overall estimates are early, and geologists cautioned against placing too much stock in numbers generated from relatively scant data. And though Apache said it believes wells in the Liard could be profitable at a well-head price of $2.57 (U.S.) per thousand cubic feet – not far from the current price of natural gas in the central U.S. – others said those predictions could prove optimistic. A single Liard well costs $35-million to drill and complete.

Still, there is little doubt about the importance of the Liard discovery, though it comes at a time when the industry is confronting a gas glut that has severely depressed prices.

Apache is nonetheless highly bullish on a play it began exploring in 2007.

“It’s the most exciting thing I’ve ever worked on,” said Robert Spitzer, the company’s Canadian vice-president of exploration, who has spent 31 years doing this kind of work.

Apache has secured about 174,000 hectares of land in the Liard, which is 100 kilometres west of the Horn River, another substantial B.C. shale gas play.

The Liard, Apache estimated, contains 210 trillion cubic feet (tcf) of natural gas, of which 48 tcf is “sales gas” that could be produced and sold. By comparison, all of western Canada produced 5.3 tcf in 2011.

The Liard expectations are equally massive relative to overall U.S. proved gas reserves of 300 tcf, and a Canadian total of 70 tcf, according to a BP PLC report released Wednesday.

Globe & Mail: Massive B.C. reservoir could double gas output

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China Shale Gas Discovery May Kill Canadian Pipeline and LNG Plans

Posted on December 12, 2011 | 2 Comments

Royal Dutch Shell has discovered shale gas in China – a market that North American producers hope will drive demand for their export plans to Asia.

Shell has not made any public confirmation of the discovery, but their local partner PetroChina has indicated positive progress. Professor Yuzhang Liu, Vice president of Petrochina’s Research Institute of Petroleum Exploration and Development is quoted by Reuters as stating:

“Shell has two vertical wells and they got very good primary production. It’s good news for shale gas.”

And while shale gas has been a boon in the United States, a similar revolution in China would be at the expense of North American (and others) producers hoping to export natural gas to China. Canada is also is looking towards Asia as the US has increased domestic production and Canadian exports to the US have fallen. Two separate groups have formulated plans for an Liquified Natural Gas (“LNG”) export facility in Kitimat, BC. To get the natural gas to the coast, a major pipeline is required. Considerable investment considerations that now might be seeing the market they were targeting for sales, starting to diminish.

The U.S. Energy Information Administration estimates that  China has 1,275 trillion cubic feet (tcf) of technically recoverable shale gas resources. That would make it the largest in the world followed by an estimated 862 tcf in the US. And given their long term energy demands, China will invest heavily in proving up the potential of this major energy source. Its cleaner then coal, and its domestic exploration, extraction and production would be a major job creator.

But not all is lost for Canada’s export of natural gas. The three major target markets in Asia are China, Japan and Korea. And the latter two, are still desperate of natural gas, and have no known shale gas deposits of any commercially viable size. In fact, it’s Royal Dutch Shell that is leading one of the two LNG export facilities being contemplated for Kitimat, BC.  Shell along with Korea Gas Corp (“Korgas”), China National Petroleum Co. and Mitsubishi Corp., are considering a plant that would produce and load 1.8 billion cubic feet of natural gas per day onto LNG tankers heading for Asia. The other plan is for a 1.4-billion cubic feet a day facility proposed by Kitimat LNG, which is owned and backed by Apache Corp. , EOG Resources Inc. and Encana Corp.

If Shell and PetroChina do determine that shale gas deposits in China are economically viable, and they are able to recover the amounts suggested by the EIA it will have an impact on pipeline and export facility plans in Canada. Worse case it may merely delay the plans as other Asian markets will and have made long term commitments to buying Canadian natural gas.

Regardless, the shale gas revolution that HRN predicted would have a significant impact on the global energy market and global geopolitical is well underway and may happen faster then we all expect. Keep an eye on Shell’s progress in China as their drilling activities are expected to be concluded by the end of the year.

Reuters: Shell strikes shale gas in China

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Apache applies for first Canadian LNG export license

Posted on December 10, 2010 | Leave a comment

Shale gas has fundamentally changed the natural gas industry in North America which has lead to major strategy shifts in supply and distribution. Apache Corporation today applied to become Canada’s first exporter of liquefied natural gas (“LNG), in order to open up a new distribution channel to Asia. The Company has filed for a 20-year export license.

Janine McArdle, President of Apache’s subsidiary KM LNG is quoted:
“The exportation of LNG is an important step forward for the Canadian natural gas industry and offers substantial benefits to the province of British Columbia in particular. The applied-for authorization will demonstrate Canadian LNG is a secure and reliable source of supply that can compete for market share in the Asia Pacific region.”

The Kitimat LNG project is jointly owned by Apache Corp. (51%) and EOG Resources Canada (49%). The two companies acquired the facility earlier this year from Calgary-based Galviston LNG which originally founded the Kitimat LNG project as an import facility, but revised plans as an export facility due to shale gas discoveries like the Horn River Basin (See HRN: EOG acquires other half of Kitimat LNG project).

The Kitimat LNG plant will have a capacity of ~700 million cubic feet of natural gas per day or approximately 5 million tonnes of LNG per year. The facility is planned to open in 2014.
In the US, Cheniere Energy has  applied with U.S. federal regulators to convert its Sabine Pass LNG import terminal in Louisiana to an export facility making the US a net exporter of natural gas (See HRN: US to provide affordable clean energy to China).
Natural gas is poised to become the most important energy source of the next century and shale gas basins are unlocked around the world increasing global supply. Increased global supply, and an international LNG distribution market makes natural gas a global commodity and will likely keep prices relatively affordable. Natural gas will continue to gain favor as a lower-carbon alternative to coal and oil in a world concerned with climate change and polution.
The Kitimat LNG facility location is ideally located due to its close proximity to the Asian market. The Kenai LNG terminal in Alaska, owned by ConocoPhillips and Marathon Oil Corp., has been exporting the fuel for 30 years but has a relatively small capacity of 1.4 million tons a year.

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The demise of Canadian natural gas exports to the US

Posted on July 20, 2010 | 2 Comments

We have commented at various times about Canadian exports to the US being in decline since 2008 (See HRN Feb. 2010: Does the US need Canadian Natural Gas), as lower US domestic demand and increased US domestic production reduced the need for foreign supply. But rather then apply a “sit and wait” strategy, natural gas producers with Canadian assets need to focus on the development of other markets outside the US, and working with the Canadian Federal and Provincial Governments on increasing Canadian domestic usage of natural gas.

Despite a hot summer, and a predicted “active hurricane season” (which has yet to mateiralize) natural gas prices remain flat. The primary reason is that production continues to put-pace demand as producers are forced to develop and maintain shale gas land leases or risk losing them. These Companies invested signifcant capital into acquiring these assets over the last couple years, and losing the leaces – and the investment capital – is simply not an option. So the continue to drill, prove-up and produce natural gas. Back in January, we pointed out that the US had surpassed Russia as the number one producer of natural gas in the world (See HRN: US becomes largest producer of natural gas for 2009). This increased domestic production is conveniently located in close proximity to the Northeast US, where the bulk of natural gas is consumed. This close proximity to the end consumer provides producers in the US a distinct advantage over natural gas that is pumped across North America. Canada take note. New markets outside the US need to be opened up.

Apache Corp. was one of the first natural gas producers in Canada to understand the impact of increased US natural gas domestic production on Canadian natural gas exports. It is for this primary reason they bought control of the planned Kitmat LNG plant in BC. They clearly understand they need another customer for their Horn River gas. (See HRN: Apache Corp acquires Majority Stake in Kitimat LNG; and EOG acquires other half of Kitimat LNG Project)

But first and perhaps more importantly, Canada needs to increase and encourage the domestic use of natural gas. In the long term, natural gas will emerge as the single most important energy source in North America driven by an abundent supply, proven application and lower carbon footprint in a society that is demanding carbon reductions. It is natural gas’ attractive low carbon footprint that will increase demand for natural gas globally as a environmentally preferred fuel source. And in time, this lower carbon footprint will also prove to be a competitive advantage once environmental concerns return to the headlines (and economic concerns take second billing) and the international community agrees to a cost on carbon.

So Canada should increase natural gas usage to maximize the benefits of this resource as a lower carbon energy source rather then exporting this carbon advantage to competitors. Even with increased usage, Canada will still produce a surplus that can justify building a pipeline to an LNG facility for exporting natural gas to Asia.

For more on Canada’s declining Natural gas exports, read Peter Tertzakian’s article in the Calgary Herald: Falling gas traffic on TransCanada’s Mainline a death spiral

Also… Join the BlueBridge Plan.

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EOG acquires other half of Kitimat LNG project

Posted on May 19, 2010 | 2 Comments

Artist rendering of Kitimat LNG Inc.'s proposed processing plant

The proposed $3-billion liquified natural gas (“LNG”) export facility located in Kitimat, British Columbia took another significant step towards becoming reality when EOG Resources Inc. of Houston announced it will buy Calgary-based Galveston LNC Inc. which founded Kitimat LNG back in 2004.

In January a 51% stake in the project was sold to another Houston-based Company Apache Corp. Both Apache Corp, and EOG are major players in the British Columbia’s Horn River Basin – one of the largest shale gas basins in North America.

The acquisition is a move by both EOG and Apache to open up new markets for their Horn River gas because the US has their own growing domestic shale basin plays that have increased natural gas reserves in the US by as much as 40%. The growth market for natural gas is certainly Asia. By acquiring the Kitimat LNG facility EOG and Apache provide a hedge against a declining export market to the US.

The Kitimat LNG plant will have a capacity of ~700 million cubic feet of natural gas per day or approximately 5 million tonnes of LNG per year. The facility is planned to open in 2014.

Globe & Mail: EOG buys rest of Kitimat LNG project

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Apache to boost Horn River production

Posted on May 2, 2010 | Leave a comment

Apache Corp. announced plans to increase production in two of their natural gas fields including the Horn River Basin. Steven Farris, chairman and chief executive of Apache’s Kitimat LNG facility will provide a valuable export terminal for the Horn River to deliver natural gas to international markets.

Apache Corp. and Occidental Petroleum joined a list of energy companies posting financial results this past Thursday, which reported higher first-quarter profits on a combination of rising energy prices and increased production levels. However, rising natural gas production has seen an concerning rise in U.S. natural gas inventory levels. (See HRN: US natural gas in storage increases by 83 Bcf; prices down)

This may be yet another indication that producers are forced to develop the shale properties they acquired over the last couple years in order to maintain their land lease licenses. Growing production amid increased supply and increasing inventories means prices will stabilize at these low trading levels for some time. This stabilization is what will provide the comfort for industry and utilities to convert to the cleaner more affordable natural gas option.

WSJ Online: Apache CEO: Will Boost Gas Output in Horn River, Granite Wash

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Apache Corp acquires majority stake in Kitimat LNG

Posted on January 14, 2010 | 2 Comments

Opening Canadian natural gas supplies to new markets in Asia took another step forward as Apache Corp. acquired majority control of a planned $3.0 Billion Liquid Natural Gas (“LNG”) facility in Kitimat, British Columbia. Apache, has reportedly purchased a 51% stake in the facility and took the same share of the export capacity.

Kitimat LNG was originally conceived as an import terminal for LNG. But as natural gas was unlocked from shale gas plays across North America, and specifically in the Horn River Basin in northeast  British Columbia where natural gas in place could be as much as 500 trillion cubic feet. The bottom line is that North America is awash in natural gas and natural gas is slowly being recognized as a valued cleaner fuel alternative to oil and gas.

Even with increased domestic consumption through improving economics, and increased demand as natural gas is used as a cleaner alternative (hopefully), there will be excess capacity for export. Canada is the 3rd largest producer of natural gas in the world. After domestic consumption, Canada exports the excess to the U.S. However, shale gas has increased the estimated reserves of natural gas in the U.S. by an estimated 40%. Some see exports to the U.S. declining which justifies the opening of new markets in Asia and elsewhere.

Glove & Mail: Apache bets on B.C. gas

Also see: Apache signs supply deal with Kitimat LNG (August 2009)

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Is PetroChina next to buy BC’s Horn River natural gas?

Posted on August 18, 2009 | Leave a comment

Petrochina_logoChinese energy giant PetroChina (NYSE:PTR) closed a deal to buy US$41 billion worth of Australian liquefied natural gas over the next 20 years. The gas will come from Exxon Mobil Corp.’s (NYSE:XOM) 25% share of the Gorgon gas field development off Australia’s west coast. Exxon Mobil  recently announced a “world  class” discovery in their Horn River project located in northeast British Columbia reporting initial flow rates of 16 to 18 Mcf/day on three horizontal wells. Exxon Mobil has stated that the Horn River project will be a major asset for them.

Given China’s growing appetite for energy, and their efforts to reduce carbon emissions, the Chinese have looked towards natural gas as a practical energy solution. The Chinese have not hesitated in cutting deals with anyone that has the resources they are seeking to acquire. PetroChina is building or planning LNG terminals (for importing LNG) at Dalian in Liaoning province, Rudong in Jiangsu province, Tangshan in Hebei province, and Shenzhen in Guangdong.

Meanwhile, Kitimat LNG has been doing all the right things in putting together LNG buyers and  natural gas suppliers for their LNG processing plant in Kitimat, British Columbia. Committed buyers include Korea Gas Corp, and Gas Natural of Spain, while committed natural gas suppliers include EOG Resources and Apache Corp. So it seems logical that Exxon Mobil (supplier) and PetroChina (LNG buyer) should be next to close deals with Kitimat LNG. Following preview agreements, PetroChina would likely be given an equity option in Kitimat LNG.  Note: Finance Minister Jim Flaherty invited Chinese investment in the Canadian energy sector (see Calgary Herald: “Flaherty urges China to buy Canada”)

Wall Street Journal: “PetroChina Signs LNG Deal with Exxon”

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