Tag Archives: shale gas

Canada’s Natural gas production is under threat if it can’t find new markets

Posted on May 17, 2012 | Leave a comment

This past Tuesday, Shell Canada declared an official launch to a liquefied natural gas (“LNG”) terminal project in Kitimat, B.C. The multi-billion-dollar plant would load and esimtated 1.2 billion cubic feet per day onto LNG tankers. The project partnership, gives shell a 40 per cent interest, and 20 per cent each to Korea Gas Corp., Mitsubishi Corp., and PetroChina Co. Ltd.

With the increased production in the US and the US becoming an exporter of natural gas, it is critical for Canada to find an alternative market for Canadian natuarl gas. The only way to do this is through export via a LNG export facility.

One potential problem is that Kitimat LNG is primarily owned by American companies where other interests and politics could come into play and its corporate backers (Apache Corp. EOG Reources etc) have delayed an investment decision that was expected for early this year. An Asian backed LNG project may have a better chance of success given the huge and growing demand for natural gas in Asia. Having your customers finance the facility and participate in the ownership has a different set of motivating factors to influence the investment decision.

The take-away here is that Canada is at a critical juncture in saving their natural gas industry, and growing it by tapping into the global LNG distribution network. Certainly a point highlighed by Shell Canada president Lorraine Mitchelmore who referred to not openting up Asian markets “We are at risk. You have to find a market for this product.”

Hopefully, Kitimat LNG, and Shell’s project are not too late. Shell is leading their partnership project and intends to start front-end engineering and design on the terminal in 2013. A final investment decision could come in 2015, with construction complete by the end of the decade.

Related articles:

Globe & Mail: Shell urges quick action to secure LNG markets for Kitimat terminal

Globe & Mail: PetroChina takes stake in Shell gas field in B.C.

→ Leave a comment

Posted in Uncategorized

Tagged , , , , , , , , , ,

Another gas export terminal proposed for Louisiana; Japan consumption growing; Obama needs to get on board

Posted on April 17, 2012 | Leave a comment

As natural gas dips below two dollars, Sempra Energy Inc. says it will develop a $6 billion liquefied natural gas export terminal at its existing import terminal at Hackberry in southwestern Louisiana.

It’s the third LNG export terminal in the works for Louisiana. Cheniere Energy Inc. said late Monday that it has received permission from the Federal Energy Regulatory Commission to modify its import terminal at Sabine Pass in Cameron Parish for exports, making it the first large-scale U.S. gas exporter. Energy Transfer Equity LP has filed for federal permission to build an export facility at its import terminal at Lake Charles.In Canada, Kitimat LNG leads the race to open an LNG exporting facility in Canada with two others in the planning stages.

Why? Because natural gas fetches a higher price in Asia then it does in North America where the spot price was at $1.95 today. Japan is bracing for what may be its first summer without nuclear power as safety concerns after a tsunami triggered a nuclear crisis last year ensured that all its nuclear reactors, except for one, remain shut. Asian liquefied natural gas spot prices have risen to around $16 since hitting a low in mid-February as buyers continue to stock up on summer supplies.

Japan is committed to moving forward without nuclear power. The one remaining reactor, Hokkaido Electric’s Tomari No.3, is scheduled to go offline on May 5 for maintenance. Before the Fukushima nuclear plant disaster, about a third of Japan’s power came from nuclear utilities and the country has relied heavily on LNG to fill the nuclear gap, with February imports of the fuel up 23 percent year on year.

For the USA to become an exporter is simply driven by profit and not necessarily by policy or strategic interest. As oil continues to increase in price, and cost Americans more at the pump, the US must look to reduce consumption overall and provide valid alternatives to petro only power. As the biggest consumer of energy the US should seriously reconsider the long term benefits of exporting natural gas and not taking full advantage of this domestic energy source and its potential to offset imports of oil from those countries that do not share the same interests as the US.

The cost of gasoline will likely become a hot topic in the US presidential campaign as President Barack Obama seems to be trying to position himself as the defender of the middle class and the increasing energy costs they are dealing with now. Rising gasoline prices could threaten Obama’s political future, and in defence proposed new measures today to reduce oil market manipulation that are unlikely to get support from a divided Congress. A better solution may be to support natural gas and shale gas produces as well as encouraging increased use of natural gas in the American transportation system.

Canada on the other hand is better positioned to export natural gas surplus to Asia. The US use to be Canada’s largest customer, but as the US became the largest producer of natural gas in the world, it no longer needs to import from Canada. For Canada, its a matter of finding another customer to buy current and future surplus while also taking full advantage of natural gas as cheaper, cleaner energy alternative to oil and coal.

This year could be a pivotal time for the North American natural gas industry and who takes full advantage of this valued energy resource.

 

→ Leave a comment

Posted in Uncategorized

Tagged , , , , ,

Exxon’s big bet on shale gas

Posted on April 16, 2012 | Leave a comment

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

→ Leave a comment

Posted in Uncategorized

Tagged , , , ,

Cheap natural gas makes inroads as U.S. vehicle fuel

Posted on March 28, 2012 | Leave a comment

Its about time! Natural gas prices are at record lows due to the shale gas drilling boom and this abundent clean burning source of energy is finally starting to get the attention of North American auto makers.

In a recent National Post article, Mark Hanson, an analyst at investment research firm Morningstar is quoted as saying the use of natural gas instead of oil based gasoline is “definately starting to take off”.  He states further that “The economics seem to work, its just a question of what pace” the necessary infrastructure will take to develop.

Oddly enough natural gas vehicles or compressed natural gas (“CNG”) vehicles have been produced by every car manufacturer in the world, and sold in every market in the world except for the United States and Canada. Here CNG is left to the aftermarket. Government incentives cover a good portion of the cost of converting existing gasoline vehicles to CNG. Some of the larger commercial fleets in Canada and North America have already taken advantage of the numerous benefits of CNG. With car manufacturers offering CNG direct from the factory, consumers are more likely to choose natural gas as their preferred transportation energy source.

Infrastructure has always been the reason for lack of development which is a bit odd. In Canada at least, most homes are heated by natural gas. A robust pipeline network for natural gas runs down every street in every city in Canada. Installing a natural gas compression station at any gas station in Canada is simply not the issue. Whether the gas station wants to invest in doing so is the real question, and it creates the “chicken and egg” scenario. Consumers are more likely to purchase CNG cars knowing natural gas stations are widely distributed, while gas stations are likely to build stations if there are enough CNG customers.

With car manufacturers offering a CNG option direct from the manufacturer to consumers, governments should cancel conversion incentives and direct more of these incentive dollars by providing or increasing incentives for the installation of natural gas compression stations at gas stations throughout North America… or simply mandate that gas stations must offer alternative energy choices, including natural gas and electric re-charge stations.

National Post: Cheap natural gas makes inroads as US vehicle fuel

Related: LA Auto Show: Honda Civic Natural Gas named 2012 Green Car of the Year

→ Leave a comment

Posted in Uncategorized

Tagged , , , ,

China eyes tech breakthrough before shale gas leap

Posted on March 28, 2012 | Leave a comment

The following story is a must read for those interested in fully understanding China’s current situation for unlocking its vast wealth of shale gas.

BEIJING – (Source: National Post) China wants to identify the right technology to unlock its potentially large shale gas resource in the next few years, aiming for a leap in shale production by 2020, two years after it embarked on a search of the unconventional fuel.

Top energy agency, the National Energy Administration (NEA) officially unveiled on Friday a target to produce 6.5 billion cubic metres (bcm) of shale gas by 2015, or roughly 6% of China’s current total gas production.

But it intends to dramatically boost output to 60-100 bcm in 2020, a level some experts say is over-ambitious as it faces techonological, environmental and regulatory roadblocks.

“The U.S. technologies may not be fully applicable in China’s shale gas formation, they need to be revamped,” Zhang Yuqing, NEA’s head of Oil and Gas Department, said.

“The main task in the 12th five-year period is to lay a good foundation, especially some key technologies in shale gas exploration and development.”

China started the shale push in late 2009, inspired by a shale boom in the United States. Its state energy firms have since then entered multi-billion-dollar shale deals in the United States with Chesapeake Energy and Devon Energy Corp.

At home companies have drilled several dozens of wells and brought in firms such as Royal Dutch Shell, Chevron Corp and Hess Corp for joint studies.

But China has yet to start commercial shale production, though it is widely believed to hold the world’s largest shale resource.

The Ministry of Land and Resources revealed early this month China may hold 25.08 trillion cubic metres (tcm) of potentially recoverable shale gas resources. That compared to a U.S. Energy Informationa Agency’s forecast in March 2011 at some 36 tcm.

NEA’s Zhang said foreign firms can enter product sharing contracts with Chinese firms or provide engineering services.

Shell, which has done more exploration works in China than the rest of foreign firms – having drilled an estimated five wells in the southwest Sichuan basin, has yet to land a PSC contract with partner PetroChina 0857.HK, an industry executive has told Reuters.

China aims to complete an evaluation of national shale gas resource potential, make shale gas technology improvements, and localise the manufacture of major equipment by 2015. It will also establish industry standards and perfect government policies, according to the NEA plan.

Exploration will focus on finding 600 bcm of proven geological shale gas reserves and 200 bcm of recoverable deposits by 2015.

Read the full story.

→ Leave a comment

Posted in Uncategorized

Tagged , , , , , , ,

CNPC to bid for stake in natural gas venture

Posted on February 23, 2012 | Leave a comment

(Source: China Daily) China National Petroleum Corp, the country’s biggest energy producer, offered to buy a stake in Woodside Petroleum Ltd’s Browse liquefied-natural-gas project in Australia, two people with knowledge of the matter said.

CNPC made a binding bid for as much as 15 percent of the venture comprising two natural gas areas off Western Australia’s coast, one of the people said, asking not to be identified as the sale process is confidential. The stake may be worth up to $1.5 billion, based on Citigroup Inc estimates.

China is buying energy assets abroad and developing shale-gas resources at home to fuel expansion in the fastest-growing major economy. CNPC is the only Chinese company seeking a stake in Browse, estimated to cost $36 billion, the people said.

“Given the growth in China’s gas market and the view that shale gas in China will probably take time before we see material volumes, there’s a gap in terms of supply and demand that needs to be filled,” said Neil Beveridge, a Hong Kong-based analyst at Sanford C. Bernstein & Co. “So, China is exploring its options.”

Woodside may reduce its ownership of Browse as the company increases exploration spending and seeks opportunities to expand in gas and oil outside Australia, Chief Executive Officer Peter Coleman said on Wednesday. The company’s discussions to sell part of its Browse holding are “maturing”, he said, when asked if CNPC had bid for a stake.

‘Strong’ interest

“The interest has been strong I can say, and we’ll know over the next few months exactly what we’re doing in that space,” Coleman said after the gas producer reported a 4 percent decline in full-year profit.

Liu Weijiang, a Beijing-based spokesman at CNPC, said he was unaware of any deal with Woodside, declining to comment further.

Woodside on Wednesday increased the estimate for its natural gas resources in the Browse Basin by 17 percent to 439 billion cubic meters, according to a presentation by the Perth-based company. Australia’s second-largest oil producer owns 46 percent of the Browse project.

Shares of Woodside rose to the highest in six months, climbing 2.5 percent to close at A$36.86 ($39.21) in Sydney. The stock recorded its biggest gain since Jan 11, while the benchmark index was little changed.

Coleman had said in August the company may sell stakes in its Browse and Pluto gas ventures to help fund the developments. Browse may cost $36 billion to build, compared with an earlier estimate of $30 billion, Credit Suisse Group AG said in November.

Potential buyers

Mitsui & Co is interested in buying a stake in the venture, according to a spokesman for the Japanese trading company.

Osaka Gas Co hasn’t bid for a stake in Browse, spokesman Jun Kumagai said by telephone, when asked to comment on a Reuters report that the Japanese gas distributor was among companies that had submitted offers. The utility had indicated an interest in acquiring a stake in the venture about a year ago and is currently not in talks with Woodside, he said.

Woodside has said it’s received interest from potential buyers of a minority stake in Browse, without identifying them. The company said on Wednesday that it expects to reach a final investment decision on the proposed venture in the first half of 2013.

The Australian company may fetch $1.6 billion selling 16 percent of Browse and lowering its holding to 30 percent, Citigroup estimated on Jan 27.

“Woodside’s 46 percent interest in the Browse resource is valuable, despite ongoing challenges with the project,” Mark Greenwood, a Sydney-based Citigroup analyst, wrote in the report.

Woodside’s Coleman declined to say how much of the venture the company may sell.

That’s “the question everybody would like to know”, he said after the company reported its 2011 net income dropped to $1.51 billion. “We have a firm view on it. We know what that number is, but I don’t think it’s appropriate to share.”

Chevron Corp, Royal Dutch Shell PLC, BP PLC and BHP Billiton Ltd are the other partners in Browse.

As Woodside attracts Asian interest in Browse, the Australian company is considering expansion overseas through new partnerships and “casting a very broad net”, Coleman said. While the energy producer is studying shale and coal-seam gas, it intends to keep the focus on liquefied natural gas and oil, he said.

CNPC aims to increase its overseas oil and gas production to 200 million tons by the end of 2015 from more than 100 million tons last year. The company has operations in countries including Venezuela, Peru and Ecuador.

“CNPC would be interested in Australia because of its political stability and because of its experience in exporting (liquefied natural gas) to China,” said Gordon Kwan, head of regional energy research at Mirae Asset Securities Ltd in Hong Kong.

PetroChina Co, its Hong Kong-listed unit, plans to spend at least $60 billion this decade on global acquisitions to build oil and gas reserves and meet domestic demand.

→ Leave a comment

Posted in Uncategorized

Tagged , , , , ,

Poland may tax shale gas in 2015, official says

Posted on February 23, 2012 | Leave a comment

Feb 22 (Source: Reuters) – Poland may tax shale gas production as of 2015, an official said on Wednesday, as the country hopes future extraction of the commodity would generate fresh state budget revenues on top of boosting its energy security.

Poland granted more than 100 exploration permits, issuing them to global majors such as Chevron and Exxon Mobil , after a U.S. agency estimated the country could have Europe’s largest shale gas reserves of some 5.3 trillion cubic metres.

Though that has not been confirmed yet, Warsaw is already drafting legislation applicable should the shale drive move into a production phase.

“Commercial extraction may be possible as of 2015, so we can preliminarily target that date as one when the tax could start functioning,” Deputy Finance Minister Maciej Grabowski told a conference.

“The goal is to provide a predictable environment for investors,” he added.

Prime Minister Donald Tusk’s government has high hopes for shale gas to help Poland lower its reliance on the highly-polluting coal as well as on Russian gas, thereby improving the security of its energy supplies and improving its energy mix.

Tusk wants shale gas to flow as early as 2014 and his centrist cabinet has recently obliged several state-owned companies to make shale gas investment a key priority.

Poland’s gas monopoly PGNiG said in January it would work with the country’s largest copper miner KGHM and two top utilities PGE and Tauron , all state-owned, exploring for shale gas.

Separately, Exxon also said last month its two shale wells in Poland had not found commercial quantities of gas, prompting Gazprom Europe’s largest gas supplier, to say European shale was an “illusion”.

→ Leave a comment

Posted in Uncategorized

Tagged , , ,

AltaGas to buy Semco Energy for $1.14 billion

Posted on February 1, 2012 | Leave a comment

CALGARY – (Source) AltaGas Ltd said Wednesday it has agreed to buy privately held Continental Energy Systems LLC’s Semco Energy Inc unit for $1.14 billion, adding natural-gas distribution and storage assets in Michigan and Alaska to its Canadian distribution and gas-processing businesses.

AltaGas said in a release that the purchase comes as it aims to expand into the northern United States, and will boost its earnings and cash flow by more than 10 percent.

In the deal, the company will acquire a Michigan gas-distribution business with 286,000 customers as well as a regulated storage facility with 4.9 billion cubic feet of capacity and a half share in 12.8 bcf unregulated storage facility.

It said it will also operate Alaska’s gas distributor with 132,000 residential customers and 11 bcf of gas storage currently under construction.

To help pay for the purchase, AltaGas will issue 12.1 million subscription receipts for C$29 each to raise gross proceeds of C$350 million ($350 million).

If demand warrants, the issue’s underwriters, a group led by BMO Capital Markets, RBC Capital Markets and TD Securities, have the option to buy a further 1.8 million receipts, boosting gross proceeds to C$403 million.

The proceeds will be held in escrow until regulators approve the acquisition.

AltaGas shares were halted on the Toronto Stock Exchange prior to the announcement. They were last up 10 Canadian cents at C$30.38.

Calgary Herald: AltaGas to buy Semco Energy for $1.14 billion

→ Leave a comment

Posted in Uncategorized

Tagged , , , , , , ,

Fermanagh shale gas ‘could supply Northern Ireland’

Posted on February 1, 2012 | Leave a comment

There could be enough natural gas trapped within shale rock in County Fermanagh to supply all the gas Northern Ireland needs for decades.

The claim has come from the exploration company with a licence for the area.

Tamboran Resources has spent the last year analysing surveys and taking rock samples.

It now says preliminary results show there could be enough gas to guarantee security of natural gas supply for Northern Ireland over 50 years.

The region would even become a gas exporter, they claim.

“We’re 100% certain there is gas there. We’re 90% certain that we’ll get it out in the sort of quantities we’re talking about,” said environmental director Tony Bazley.

He said the discovery could lead to 600 direct jobs by 2025 and the company will seek engineering solutions and other services locally which could lead to another 2,400 jobs.

Tamboran also projects tax revenues for the government of up to £6.9bn.

But the most significant claim is that the shale gas deposits may be large enough to provide Northern Ireland with all the gas it needs for decades, even becoming an exporter.

Currently all Northern Ireland’s natural gas is imported.

Full Article: Fermanagh shale gas ‘could supply Northern Ireland’

→ Leave a comment

Posted in Uncategorized

Tagged , , ,

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

Posted on February 1, 2012 | 1 Comment

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

→ 1 Comment

Posted in Uncategorized

Tagged , , , , , , ,