Tag Archives: Exxon Mobil

National Energy Board approves four more LNG licenses in British Columbia – no time to waste

Four more proposed liquefied natural gas (“LNG”) projects in British Columbia have received approvals for export licences from the National Energy Board, bringing the total number of licenced projects to seven. Three of the four projects have major backers and include These four projects include: BG Group’s Prince Rupert LNG Exports Ltd., the Petronas-led Pacific NorthWest LNG Ltd. and Exxon Mobil Corp.’s West Coast Canada LNG Ltd. The fourth project is a smaller venture called Woodfibre LNG Export, planned for the Squamish area north of Vancouver. The NEB is reportedly reviewing an additional four applications on top of these seven granted licences.

None of the approved projects, however, are in the terminal construction stage because the proponents say they first need to learn details of the B.C. government’s plans for taxation of the LNG industry and internal assessments still must be conducted on the economics of proceeding.

Apparently none of the approved projects are in the construction stage. One of the reasons construction has not started is that the various proponents need to understand the BC governments taxation plans for the LNG industry. With the NEB doing their part the BC government can ill afford to delay the process as perhaps the entire Canadian natural gas industry is in jeopardy.

Just the day before the NEB announced their license approvals, the Energy Information Administration released their Annual Energy Outlook that forecasts the frack induced boom in natural gas and oil production will continue through to 2040. Natural gas production is forecast to rise a staggering 56% from 2012 to 2040 and will reach 37.6 trillion cubic feet (Tcf) and the report also predicts that the U.S. surpass Saudi Arabia as the world’s biggest oil-producer in 2015. Truly an amazing turn of events. So it is quite clear that the U.S. will not be needing Canadian natural gas any time soon, and Canada better move fast to save the Canadian natural gas industry.

If Canadians want to retain the billions of dollars generated and the thousand of jobs created by the Canadian natural gas industry, it is absolutely imperative that the pipelines to carry gas to the BC coast, and LNG facilities to process it for export must be approved and built as soon as possible. There is no time to waste. The U.S. once our largest customer is now our largest competitor and will not revert back to being a customer till at sometime after 2040. By 2040, a robust global LNG distribution network will be in place making LNG distribution worldwide efficient and cost effective. In order for Canada to compete effectively it is apparent a domestic distribution system that plugs into the global network must be in place.

While Ottawa reviews the licenses, BC debates tax schemes, and Canadians debate about pipelines and LNG distribution systems, other countries around the world are building out their distribution facilities and moving forward in being first to market, and first to service the energy hungry markets in Asia. The opportunity is there for Canada to seize but there is no time to waste.

Update: Today, the Northern Gateway Pipeline review will be released.

Read more @ The Globe & Mail: NEB Approves four more LNG license in BC, but await Ottawa’s blessing

Exxon’s big bet on shale gas

America’s most profitable company – Exxon Mobil – now produces about as much natural gas as it does oil. CEO Rex Tillerson thinks the fracking party has just begun.

(Source: CNN Money) — For Rex Tillerson fracking is more than a revolutionary approach to drilling oil and gas — it’s part of his personal history. Simply mention the word to the CEO of Exxon Mobil (XOM) and he starts reminiscing about his days as a young engineer. It was 1976, and Tillerson had been sent to East Texas for his second assignment at the company. His job was to follow around rigs drilling for natural gas and “complete” the wells. That meant experimenting with a process known as hydraulic fracturing, or fracking. By pumping water, sand, and chemicals down into a well at high pressure, he could cause cracks in the stone where the gas was trapped and allow more of it to flow.

That winter Tillerson practically lived out of the back of his car, driving to the company’s district office in Tyler at night so he could run punch-card decks through the computer to design his new fracking programs. Out in the field, when the temperature dropped and the wind blew, the then 24-year-old engineer was grateful for the shelter provided by the big diesel engines that powered the water pumps. “I would stand between those big fracking tanks to stay warm, because the water’s heated,” says Tillerson in a rare interview, laughing at the memory. “I’d stay there until they were ready to crank those babies up, and then I’d have to go out into the weather.”

What’s warming his heart today is the shale gas revolution that technology has enabled. In fact, Tillerson is betting much of his company’s future growth — and a good portion of his legacy — on the promise of fracking. Two years ago Tillerson engineered a $35 billion acquisition of natural-gas producer XTO Energy in large part to buy the company’s hydraulic-fracturing expertise. It is easily the largest deal the energy giant has done since the $88 billion mega-merger with Mobil orchestrated by Tillerson’s predecessor, Lee Raymond, in 1999.

In buying XTO, the 60-year-old Tillerson has further reshaped the company. In 2011, Exxon reported sales of $486 billion — a gargantuan number that could vault it past Wal-Mart (WMT) to recapture the No. 1 position in this year’s Fortune 500. The $41 billion in profit it earned was the second-largest total in corporate history, behind only the $45 billion record that Exxon set in 2008. Those astronomical earnings have been driven by persistently high oil prices. But today Exxon, the prototypical oil giant, gets about 50% of its production from, and has 50% of its reserves in, natural gas. The company’s stock has risen 77% since Tillerson became CEO at the beginning of 2006, compared with 29% for the S&P 500 index (SPX). To deliver the future returns that its shareholders expect, Exxon needs the XTO purchase — which so far hasn’t lived up to its promise because of falling natural-gas prices — to pay off bigtime. Tillerson has good reason to believe it will.

Over the past several years fracking has unlocked a vast new source of energy supply in the U.S. Advanced forms of the process that Tillerson used in the 1970s, combined with innovative methods of drilling, have enabled energy companies to extract huge quantities of natural gas and oil trapped in shale rock — assets that were previously thought to be either impossible or uneconomic to produce. Production from large shale deposits, or “plays,” such as the Barnett in Texas, the Haynesville in East Texas and Louisiana, and the vast Marcellus in the Northeast, has surged.

Read the full article: Exxon’s big bet on shale gas

Natural gas prices back near 10-year lows as production booms, supplies at record levels

NEW YORK — (Source) The price of natural gas dropped back near a 10-year low Wednesday after Exxon Mobil and other energy companies declined to cut production.

Exxon, America’s biggest natural gas producer, has led a push by major industry players into U.S. gas drilling over the past few years that has boosted production to the highest levels ever. Supplies in storage are well above average, and some experts estimate the nation has enough natural gas to meet its needs for a century.

Investors hoped that Exxon would follow smaller competitors like Chesapeake Energy and shut down some natural gas rigs. But when it released its quarterly and annual earnings results Tuesday, Exxon said it will not slow natural gas production.

“We remain bullish on the future of natural gas as an energy source,” Exxon investor relations chief David Rosenthal said.

The company has started to shift its focus to developing more oil in the U.S., but “we have not curtailed any gas production,” Rosenthal said.

On Wednesday the price of natural gas fell 10 cents, or 4 percent, to $2.40 per 1,000 cubic feet in New York. That follows an 8 percent drop on Tuesday. Natural hit a 10-year low on Jan. 19 at $2.32 per 1,000 cubic feet. The price rose briefly, after Chesapeake and other companies said they would cut natural gas production. It slid back as investors lost faith that the reductions would significantly impact supplies and mild winter weather persisted, keeping demand weak.

Washington Post: Natural gas prices back near 10-year lows as production booms, supplies at record levels

Polish shale gas to decrease dependence on Russian gas

HRN has reported numerous times how shale gas will change the geopolitical landscape of the world. More specifically, how new shale gas discoveries in Europe will reduce EU dependence on Russian natural gas, and reduce Russia’s influence on those that depend on Russian natural gas.

According to a recent London Times article Wood Mackenzie estimates that shale gas plays in Poland may reach 48 trillion cubic feet (1,36 trillion cubic metres). The deposits are said to similar to the Montney basin in British Columbia.

ConocoPhillips has plans to start drilling near the Polish coastal city of Gdansk in May  in addition to Exxon-Mobil, Marathon,  and Talisman Energy, who all have projects there. If current expectations are confirmed, Europe’s natural gas deposits would increase by 47% which would provide enough natural gas for Poland for some time and have a significant impact on that region’s dependence on Russian natural gas. Poland currently imports 72% of their gas from Russia.

Oisin Fanning, the executive chairman of San Leon Energy, a British company partnered with Talisman Energy is quoted:

“There is a landgrab under way. Poland is going to emerge as a significant gas producer and there is a lot of interest. All of the majors are coming in and Gazprom is looking at this with some alarm.”

Eager to diversify their energy sources and reduce their dependence on Russian gas, the Polish Government is offering attractive terms. Mr. Fanning is quoted:

“These are some of the best fiscal terms in the world. The Government is creating a very large commercial incentive to develop these deposits.”

Russia’s Gazprom will not lose much financially as natural gas will be sold  to China who is eagerly increasing natural gas usage. However, the influence that Russia may have over Poland and other EU countries may be dramatically diminished without the leverage of natural gas during cold winter months in Poland.

Times Online: Dash for Polish gas could end Russian stranglehold

Alaska pipeline costs soar up to $41 billion; LNG option under consideration

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.

Bloomberg: Exxon, TransCanada Say Alaska Gas Pipeline Cost Soars

Exxon bets on natural gas and buys XTO Energy in $41 billion deal

Exxon Mobil Corp.’s agreement to buy XTO Energy Inc. in an all-stock deal valued at $41-billion (U.S.) is a bet that natural gas usage in the long-run will rise as a cleaner energy alternative to coal and heavy oil. Exxon is the largest publicly traded oil company and has been accumulating shale gas assets in Poland, Germany, Hungary, and Argentina.

The acquisition is a key strategic move to position Exxon within the shale gas market and analysts like the deal. Major energy producers have been flocking to shale gas as a key energy source over the long term and new exploration has been extended outside North America’s prolific shale gas plays like the Horn River basin, and Barnett basin. Many companies are financing by selling off conventional natural gas production in favor of lower-cost shale gas.

Commenting on the Exxon, XTO deal, MarketWatch stated;

The move marks a major bet on gas as a cleaner-burning fuel than oil, as governments around the world look to Copenhagen climate-change talks this week to stem the flow of greenhouse gases into the atmosphere to combat global warming.

According to David Rockecharlie, co-head of energy investment banking group at Jefferies & Co. which co-advised XTO on the transaction:

“Every major oil company is thinking about getting into these shale plays both in the U.S. and globally, the question is how”.

Martin Molyneaux, managing director of institutional research at Calgary’s FirstEnergy Capital Corp. was quoted:

“It’s kind of like the Pope blessing the exercise. You couldn’t have a more credible enterprise sanctifying the unconventional industry in North America. This will cause a rethink for everybody. It pretty much revalues the whole industry up and down the value chain both in Canada and the United States.”

Market Watch: Exxon Mobile buys XTO Energy in $41 billion deal

Globe & Mail: Exxon deal shakes up natural gas sector

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

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”

Clean Energy Summit 2.0 – Natural gas is key – video highlights

Clinton Reid

Former President Bill Clinton, left, and Senator Harry Reid at the National Clean Energy Summit. (Photo: Center for American Progress Action Fund, CAPAF)

Natural gas is really gaining some momentum that will have a profound impact on the long term demand for natural gas and positive environmental impact that can be acheived through using natural gas more in the energy mix.

The US is the single largest customer for Canadian energy exports. The Energy policies of the US will also have a major impact on Canadian energy producers and natural gas will be in growing demand.

The Pickens Plan website has posted a video highlight reel on on the Clean Energy Summit 2.0 that is worth watching. You can view the video here. The Summit was attended by numerous influential Americans including Former President Bill Clinton, oil-billionaire turned natural gas /wind power champion T. Boone Pickens and Senator Harry Reid who was a co-sponsor of the Natural Gas Act which will increase tax credits for natural gas vehicles.

British Columbia is emerging as a major natural gas producer thanks to world class discoveries in the Horn River basin by Exxon Mobil, Apache Corp. EOG REsources, Encana Corp and many others (see list on side). The Provincial government of British Columbia has invested $187M into improved infrastructure; EnCana Corp is putting an initial $400M into a new gas processing plant; TransCanada is building a pipeline to tie Horn River to the network in Edmonton; and Kitimat LNG is building an LNG on the Pacific coast to export natural gas to Asia and international markets. Massive investment dollars are being invested in BC natural gas sector because of the favorable long term opportunity that natural gas will present in a changing energy world.

The next couple months will be very interesting. Key areas to watch are US natural gas inventories and the US Climate Bill.

British Columbia offers more incentives for energy exploration and development

Honourable Blair Lekstrom - Energy, Mines and Petroleum Resources Minister

Honourable Blair Lekstrom - Energy, Mines and Petroleum Resources Minister

The government of British Columbia continues to aggressively pursue investment capital for the Province’s massive natural gas potential in the Horn River and Montney basins. The province announced last week a “stimulus plan” whereby all wells drilled in British Columbia from September to June 2010 will only be charged a royalty of 2% for the first year of production – a strong incentive when you consider that most natural gas wells are most productive in their first year. Other royalty incentives  include:

  • An increase of 15 per cent in existing royalty deductions deep gas drilling.
  • Qualification of horizontal wells drilled between 1,900 and 2,300 metres into the deep royalty credit program.
  • An additional $50 million allocation for the Infrastructure Royalty Credit Program to be offered this fall to stimulate investment in oil and gas roads and pipelines.

Minister Blair Lekstrom was quoted as stating:

“B.C. is one of the most competitive oil and gas jurisdictions in North America, and this stimulus package will further strengthen the sector while increasing provincial revenues. In this day and age capital investment is very fluid and we want to encourage the oil and gas sector to invest in British Columbia.”

BC’s aggressive royalty schemes have put growing pressure on Alberta, where companies have lost confidence in that province’s ability to understand the market place.  This most recent incentive in BC will have Alberta’s Premier Ed Stelmach playing catch up again.

Interest in BC’s Horn River and Montney basin continue to attract major players. Exxon Mobil recently announced investment of another $100M to acquire additional land leases in the Horn River region following a Company  announcement last month of a “world class” discovery in Horn River with three wells each flowing upwards of 16 to 18 million cubic feet per day.

Province of British Columbia: Oil and Gas Stimulus to Boost Provincial Economy

Shale gas technology continues to evolve and bring down costs

Technology for unlocking natural gas and oil from tight shale rock formmation continues to evolve and bring down the costs of shale exploration and development. Lower costs make shale development more competitive and more economic to explore further.

Graphical representation of Packers Plus' StackFRAC system

Graphical representation of Packers Plus' StackFRAC system

To meet demand  for more stimulation stages in horizontal wells, Packers Plus launched its new 20 stage StackFRAC(R) HD “High Density” Multi-Stage Fracturing System. The system allows for “increased production through longer laterals and shorter stage lengths; costs are further reduced by smaller frac strings and liner sizes.”

Where only two years ago, major companies exploring shale gas used a price of $6 to $8 for shale  gas wells to break-even. The break-even point for most companies is now below $4, and expected to fall further making shale gas (and oil) a very attractive investment proposition for exploration and development companies. Any increase in current prices for natural gas would lead to a profit win fall. It is one of many reasons why companies are investing millions of dollars into shale gas areas like BC’s Horn River basin.

The average conventional gas well in Western Canada produces about 250,000 cubic feet of gas a day. Major producers like EnCana Corp. and Exxon Mobil are reporting initial results from their Horn River wells that use multistage technology are coming on at initial rates of 11, 18 and 20  million cubic feet per day. In addition, shale gas wells are usually lower pressure, and longer life as compared to conventional wells. With upfront costs coming down with technology innovations like Packer Plus’ StackFRAC system, the economics will continue to attract investment capital to shale gas, and the Horn River basin.

Bill Gwozd, a gas supply analyst for Ziff Energy in Calgary is quoted:

“If you can get more bang per well, it becomes more efficient to exploit and root out the basin. We’re bullish, but some producers are even more bullish than that.”

PR Newswire: Packers Plus launches new 20 stage completion system

* Recommended reading – Calgary Herald: Packers Plus leads drilling revolution