France, which last year banned oil and natural-gas extraction from shale rock, should keep experimenting with the technology if it wants to curb reliance on imports, the nation’s oil industry lobby said.

The country should use “all means” to cut purchases of energy supplies from abroad, the Paris-based Union Francaise des Industries Petrolieres said today in a statement. UFIP also urged France to revise its mining code so that the public and local government are more “closely associated” with projects.

Total SA , based in Paris, and international peers have been hurt by France’s ban on hydraulic fracturing, or fracking, which the government says may harm the environment. The process, which has made the U.S. the world’s largest gas producer, involves pumping water and chemicals into rock to release hydrocarbons.

The ban, the first of the technology by any country, has suspended shale exploration at permits around Paris and in southern France. Oil companies including Total, the nation’s largest, and Toreador Resources Corp. held licenses for shale exploration.

The decision to outlaw fracking curtailed operations for energy companies already contending with dwindling refining margins. French oil-product demand fell 1.3 percent last year to 77.8 million metric tons, contributing to refiner losses of about 800 million euros ($1.04 billion), UFIP said.

Lower profits from processing crude have forced refiners to cut costs and shut plants across Europe. In the past two years, LyondellBasell Industries NV, Petroplus Holdings AG and Total have decided to stop refining at sites in Berre, Petit-Couronne, Reichstett and Dunkirk, leaving France with eight working plants, compared with 24 in 1977.

Refining margins slumped to an average of 14 euros a ton in 2011 from 21 euros a year earlier, according to UFIP. French refiners lost 1 billion euros in 2009 when margins averaged 15 euros, and “hundreds of millions of euros” more in 2010, the group said previously, estimating that margins of about 25 euros are needed for profitable operations.

The French oil companies also called today for “minimum service” laws for ports to avoid strike disruptions. The crippling of operations at crude-import hubs in 2010, combined with strikes at refineries, led to shortages at the pumps.

Source: Bloomberg

American oil and gas giant Exxon Mobile said on Tuesday that two exploratory wells drilled in Poland in search of shale gas were not commercially viable.

“While we did find gas, it did not flow in commercial quantities in either of those two wells,” said vice president of investor relations David Rosenthal while discussing the firm’s Q4 2011 results.

Exxon has six exploration licenses for shale gas wells in Poland, two together with firm Total in the Lublin region and four in the Podlasie region with Hutton Energy.

Source: Warsaw Business Journal

Ukraine plans to hold a tender to choose investors to conduct geological surveys and produce shale gas in the country, Ukroil has reported. The tender is scheduled for February 2012. According to Ukrainian Natural Resources Ministry’s press office.

Natural Resources Minister Nikolay Zlochevskiy relayed the news to an American delegation headed by State Department Special  Envoy to Eurasia Richard Morningstar.

“We are interested in holding transparent tenders and for powerful investors to begin shale gas production in Ukraine. This will be a serious victory for our government team”, the minister said.

Morningstar responded, saying that the Americans were interested in producing on the Oleskoye and Yuzovskoye sections of Ukraine where the shale gas production is planned. “The United States is interested in Ukraine having energy independence”, he said.

The sides agreed to organize consultations with the US Geological Service and the Ukrainian State Geology and Mineral Deposits Service to exchange information on prospective geological formations.

Source: Oil and Gas Eurasia

Shale gas exploration is risky, according to San Leon Energy’s Director of Exploration John Buggenhagen, who spoke about assessing the prospects for shale development in Poland at Shale Gas World Europe 2011.

“If you came for answers,” he quipped, “you’re going to leave disappointed, because you’re going to leave with more questions. We are in a very early phase of the exploration here in Poland.”

Mr. Buggenhagen said he was a bit irritated with press reports that had written off Poland’s shale gas prospects. “They create fear and panic in the marketplace and that takes away everything we are trying to do in the industry.”

As an example, he showed a quote from the Economist which wrote that the geology was “less favorable” in Poland than in North America.

“Right now we’re in a flux of regulatory, economic, political and investment issues surrounding shale gas. If you read what’s going on in the investment world, because we’re a public company I have to take all this into a balance. And I can’t say it more clearly: Exploration is risky. We just started doing this.”

He continued: “I think everyone needs to ask themselves, how we’re going to get from here to commercial gas production that’s going to change the energy environment in Europe, and here in Poland locally.”

Mr. Buggenhagen explained that San Leon was a small, listed company that had built a tremendous asset base through acquisitions of companies, taking advantage of the tough market conditions. “Through takeovers of two Canadian companies and an Irish one, we’ve amassed one of the largest shale gas portfolios in Europe, and that’s significant because it’s how we’ve gone about doing this that is the first step in where shale gas is going in Poland.”

He said San Leon’s core portfolio started in Poland, that he himself had been looking into opportunities for five years and the key to that was being on the ground.

“Recent acquisitions of Realm Energy have increased our portfolio. We also have almost 2.5 million acres under application in Spain for unconventional gas; we also have significant applications in France; and we are looking at other countries as well including Morocco, where we have a tremendous shale gas position, again limited by some of the political issues.”

When one looked at the resource estimates, according to him, one saw tremendous numbers. “Just net to my company in Poland, we have the potential for more than 40 TCF of recoverable gas – those numbers are scalable throughout our portfolio. This is not just a well or a small field. This is a game changer, for everyone that’s involved here in Poland.”

He showed delegates San Leon’s vast, significant and well diversified positions in Poland, the company’s 14 concessions, spread throughout Poland.

“Where’s the sweet spot, the production center that’s going to fuel the growth that’s going to start this industry up? So we spread our blocks around the basin based on various geologic parameters.”

He reported that in southwest Poland San Leon had 1 million acres of contiguous position in the Permian basin. “We are leading the exploration effort there – actually drilling the first well targeting unconventional gas in the carboniferous section in Poland and hope to be reporting results in the coming months.”

“A quote I like that I heard very recently is ‘Every well that’s drilled in Poland is redefining the stratigraphy, the geology of the Baltic basin and the potential of Poland in general. Modern core, modern logs, modern drilling techniques – this is all new to Poland in terms of exploring for shale.”

Buggenhagen contended the results that San Leon and others were seeing in Poland were very different results from the model. “That’s neither good nor bad, we’re just having to re think the model that started this shale gas boom here in Poland.”

He mentioned that San Leon had become the largest net acreage holder for unconventional gas in Poland, in the Podlasie, Baltic and Carboniferous basins.

“We’re a small company, we use every penny that we have wisely. And we’re very aggressive – that’s a very delicate balance to maintain,” he said.

He noted that fewer than 15 wells had been drilled in Poland and said: “We know there’s shales in these rocks, but can we get the gas out of the ground?”

“After two wells, people have written off the basin,” he explained. The people in this room have invested so much as to not even consider that possibility.”

Providing the US’s Barnett shale and its progression over time as an example, Buggenhagen said, “I think we’re back in 1997, maybe even before that, in Poland, we’ve just started. Here we don’t have the benefit of the conventional production that preceded the unconventional in the Barnett.”

“It took George Mitchell 20 years,” he recalled. “The Bakken was a drilling hazard, people thought it was a crazy idea and now it’s producing.”

Despite an earlier protest before the start of the conference, he noted that Poland was very pro shale gas. “They understand that indigenous energy is better than imports; I can’t think of a dirtier energy resource than coal,” he commented.

He described what he said was “information chaos” surrounding– everyone’s looking at where the investment for the future was going to come from. “It’s important for us to be very open with the public, with the regulators and influence things to make for a positive industry.”

Referring to the demonstration, he said “What happened today is a tool for sorting out the balance, and keeping the industry honest.”

“It’s not going to happen overnight, it’s going to take time,” said Mr. Buggenhagen, who summed up of Poland’s nascent unconventional gas industry. “Look at the history of Poland – 23 years later the country has come very far in a short time, but we have a long way to go as an industry, as operators, contractors and regulators. As an industry it’s incumbent upon all of us in this room to get together to figure out how we can solve these issues.

“It will change the economy and energy balance of Europe and here locally it will change Poland and how it fits into the European Union going forward.”

Source: Natural Gas for Europe

State-owned oil and gas company PGNIG will work with other state-owned energy producers PGE, Tauron and copper miner KGHM in shale gas exploration in Poland.

The company said it had signed three letters of intent to cooperate with the three domestic heavyweights.

The government said recently it wants state-owned companies to make a ‘strong’ contribution to developing domestic shale gas.

Shale gas could start production in 2014, according to the government.

Poland has the largest deposits in Europe estimated at 5.3 trillion cubic metres and enough to meet domestic gas needs for up to 200 years, according to some projections.

At present Poland relies for its energy supplies mainly from Russia and environmentally unfriendly but domestically mined coal.

The government is becoming increasingly interested in maximimising domestic benefits from shale gas production, hence PGNiG’s and the country’s main oil refiner PKN Orlen’s plans to ramp up cooperation with local players.

The move is important in that it indicates a shift towards greater interlinkage of domestic resources, and possibly away from a reliance on foreign majors.

PGNiG holds 15 such of about 100 shale gas exploration licenses, with global majors such as Chevron and Exxon Mobil also eager to get in on the act.

The three agreements are for exploration in the Wejherowo acreage in northern Poland.

Wejherowo is one of 15 concessions held by PGNiG and believed to be one of the largest, although exact figures have not been released, if they are known at all at this stage.

The three domestic power producers will reportedly be responsible for infrastructure works above ground.

The total investment will be somewhere between 400 million and 500 million zlotys, PGNiG said.

Tauron said it plans to build a gas-fired power plant and plans to work with PGNiG on a 600 megawatt plant at Stalowa Wola. It also plans to build an 800 megawatt plant with KGHM, both fired by shale gas.

Source: theNews.PL

The San Francisco Chronicle explains to readers why shale gas production is keeping their gas bills lower this winter:

Natural gas prices that slumped to a 10-year low this month could save U.S. consumers $16.5 billion on home energy bills over the course of a year, according to a senior economist at the U.S. Federal Reserve.

U.S. households might see total savings from lower gas prices of as much as $113 billion a year through 2015, including tack-on effects such as lower product prices and higher wages generated by cheaper fuel, according to energy industry consultants IHS Inc.

The projected savings is “an unbelievable amount of money,” said Greg Ebel, chief executive of Spectra Energy Corp., during a Jan. 17 interview. “That’s better than any tax cut you’ve seen out there, better than any government handout.”

If consumers end up pocketing more than $100 billion due to low gas prices, it could add a “significant” piece to U.S. gross domestic product growth for 2012 or 2013, said Robert Solow, professor emeritus at the Massachusetts Institute of Technology in Cambridge, who won the 1987 Nobel Prize in economics. “If that figure is right, it’s a substantial amount,” Solow said in a telephone interview yesterday.

The savings realized by the nation’s 113 million households will vary depending on location and how much gas makes up the home’s total energy bill. Gas utilities are passing along the lower prices they’re paying for the fuel because of a glut of new domestic production from hydraulic fracturing and horizontal drilling in shale formations.

The price of gas has plunged about 30 percent since the end of October on mild weather and oversupplies, according to data compiled by Bloomberg. Natural gas for next-month delivery fell to $2.322 per million British thermal units on Jan. 19, the lowest price since February 2002. Gas settled at $2.728 yesterday.

Consumers will likely spend about 95 percent of the direct savings they see from their gas bills, said Bernard Weinstein, associate director of the Maguire Energy Institute at Southern Methodist University in Dallas. While that amount is a fraction of the $10.245 trillion in consumer spending for 2010, “it’s a step in the right direction,” Solow said.

Electricity prices, historically tied to the gas market, also are falling, although not necessarily for consumers. That’s because many power companies have raised rates to upgrade an aging power grid, install pollution controls and build new generators.

The typical U.S. household gas bill this year would drop to $323.50 from $468.80 in the previous year at an average gas price of $2.50 per million British thermal units — a savings of $145.30, said Mine Yucel, vice president and senior economist at the Federal Reserve Bank of Dallas.

Residents are forecast to pay about 25 percent less this winter for gas used in stoves, furnaces and fireplaces than they did in 2008, when the fuel last touched highs of more than $13.50, according to the U.S. Energy Information Administration.

“I think of shale gas as a real game-changer for consumers of natural gas,” said Hank Linginfelter, executive vice president of Atlanta-based AGL Resources Inc., in a telephone interview. “It’s having a significant impact on prices.’

AGL Resources, the largest standalone local U.S. gas distribution owner, said December bills have fallen on average 25 percent from a year ago at its utilities in seven states.

Iowa gas bills fell about 19 percent in December compared to the same month a year ago on lower demand and prices, MidAmerican Energy Co., owned by Warren Buffett’s Berkshire Hathaway Inc., said. Piedmont Natural Gas Co., based in Charlotte, North Carolina, has proposed cutting rates next month that would bring the average bill down by 40 percent since 2008.

Source: San Francisco Chronicle

Wednesday, January 25th, 2012

San Leon Energy Plc (AIM:SLE) (“San Leon” or the “Company”) is pleased to announce that it has completed the acquisition of more than 2,280 km of 2D seismic across its Tarfaya and Zag Licenses onshore Morocco. The data was acquired by San Leon Energy’s wholly owned subsidiary, NovaSeis.

608 line km of high density 2D seismic data was acquired on the northern portion of the San Leon operated Tarfaya License across the J North prospect. This adds to the existing 2,289 line km of existing 2D seismic across the license. The Netherland, Sewell & Associates 2008 CPR placed 156 million barrels of recoverable prospective oil resources in the J North prospect with upside potential of more than half a billion barrels. In total San Leon currently has 12 leads and prospects across the Tarfaya license with net prospective resources of 711 million barrels of oil equivalent based on the Netherland, Sewell & Associates 2008 CPR. Several new adjacent leads have also been identified around J North as a result of the new 2D seismic data.

The new seismic data quality is significantly improved compared to previous 2D seismic data in the area as a result of longer offsets and higher density acquisition. The new data is currently being processed and interpreted by the Company in its Warsaw office.

1,674 km of 2D seismic data was acquired across the San Leon operated Zag License in Morocco (greater than 5 million acres). This is the first seismic data ever acquired across the Zag License. The combined Zag Basin aeromagnetic survey acquired in 2009 by San Leon and the adjacent license to the north was the basis for the layout of the 2D program. The Company is focusing on the Zag license for both conventional and unconventional oil and gas potential. The unconventional gas potential is primarily within the Silurian interval, whilst the conventional oil and gas potential is in the Ordovician and Devonian intervals.

The Company will continue integrating the new seismic results into its existing basin model in preparation for opening a data room to seek partners for the exploration drilling phase. Any future exploration activities in the Southern provinces will, as they have been to date, be in accordance with international law.

NovaSeis (“the Crew”) was established by San Leon to acquire its onshore seismic data at lower cost with the flexibility to optimise acquisition parameters in difficult data areas. The Crew currently has 1,200 channels of Geospace Technologies (subsidiary of OYO Geospace) cableless GSRs with five Sercel NOMAD vibrators. The Company plans continued investment into NovaSeis to expand its capabilities to 3D acquisition this year as part of upcoming seismic acquisition programs in Poland. While NovaSeis was created to serve the needs of the San Leon Energy group, it is also available to acquire revenue-generating projects outside the Company.

Oisin Fanning, Chairman of San Leon, commented:

“We view Morocco as a long term project for the Company with significant upside over a huge unexplored area. The excitement of the potential of Morocco is based upon the significant production in the same basin in Algeria as well as the huge potential for a Silurian shale gas play. The completion of our seismic program is the next step in bringing our projects closer to drilling.

I am also very pleased with our investment in NovaSeis which has helped us acquire high quality, low cost seismic and given us the flexibility to acquire more data per line km than we could have using a more conventional cable acquisition system. The next step for NovaSeis is to return to Poland where the wireless system will make a real impact by significantly reducing the surface impacts of seismic acquisition while giving us the flexibility to acquire data in areas that a traditional system would not be possible.”

Source: San Leon Energy

President Barack Obama on Tuesday pledged support for the U.S. shale gas boom, but said government must focus on safe development of the energy resource.

In his State of the Union address, Obama called for government to develop a roadmap for responsible shale gas production and said his administration would move forward with “common-sense” new rules to make sure drillers protect the public.

“America will develop this resource without putting the health and safety of our citizens at risk,” Obama said.

Obama’s proposals on natural gas were similar to previous administration comments, and would do little to satisfy oil and gas industry backers who argue that the federal government needs to stay out of the way of burgeoning shale development.

Some industry groups had hoped Obama might streamline government oversight or offer specific plans to increase access for oil and gas drilling.

Instead, Obama pressed again for ending tax breaks for the oil and gas industry in his speech, something he has pushed for repeatedly without success.

The American Petroleum Institute, the top oil and gas lobbying group, said the policies Obama promoted in his speech are at odds with expanding energy output.

“It’s a contradiction because he calls for further regulation that will slow down the production of energy and then increasing costs by raising taxes,” said the institute’s president, Jack Gerard.

Chris Jarvis, president of Caprock Risk Management in Rye, New Hampshire, said Obama avoided tackling key issues regarding natural gas, such as switching to using more gas in transportation.

“He was basically using his discussion on energy to deflect away from his critics versus really doing major changes with the U.S. energy sector and natural gas,” Jarvis said.

Improvements in drilling techniques have transformed the U.S. energy landscape in recent years by unlocking the country’s immense shale oil and gas reserves.

But the drilling boom has raised concerns about the safety of natural gas extraction techniques like hydraulic fracturing, or fracking, which environmentalists say could pollute water supplies.

Still, with fracking mostly exempt from federal oversight and most shale gas production occurring on private lands, the Obama administration is limited in its authority over the practice.

Obama said the administration would move forward with rules that would require companies to disclose chemicals used during the fracking process on public lands.

In wide-ranging comments about the energy industry, Obama also said he would direct his administration to open 75 percent of the country’s potential offshore oil and gas resources to drilling.

This proposal would be carried out in the latest offshore drilling plan released by the Interior Department in November.

Obama strongly defended his record in investing in renewable energy.

The high profile collapse of solar-panel maker Solyndra last year – after the company received $535 million in loan aid from the administration – led critics to argue that government should not be in the business of backing energy companies.

“Some technologies don’t pan out; some companies fail,” Obama said. “But I will not walk away from the promise of clean energy … I will not cede the wind or solar or battery industry to China or Germany because we refuse to make the same commitment here.”

Though Congress failed to move on a proposal he put forward last year to set a target for power plants to produce mostly clean electricity by 2035, Obama said the administration would establish zones to develop 10 gigawatts of solar and wind power projects on public lands.

In addition, the Defence Department will purchase one gigawatt of renewable energy, with the Navy purchasing enough capacity to power a quarter of a million homes a year.

Source: Reuters

Reuters reports on how a Polish oil company is branching out:

Polish oil company Lotos said on Monday it will start drilling for shale gas in neighbouring Lithuania, and plans to take part in a tender to obtain new licenses later this year.

“We decided to start with the first drilling for shale gas or shale oil, let’s see what is underground,” Pawel Olechnowicz, the president and chief executive of Lotos, told reporters.

“We will make the first tests this year,” he added, declining to specify the timing.

Lotos CEO also said the company obtained approval to drill new wells for conventional oil in Lithuania, speaking after meeting with the Prime Minister Andrius Kubilius.

The Polish government holds a 53 percent stake in Lotos, which controls the biggest Lithuanian oil company Lotos Geonafta, and has 50 percent at another oil company, Minijos Nafta.

“Minijos Nafta will be the first company in Lithuania to explore the shale in Lithuania. We have been working on this for two years already,” Thomas Haselton, the CEO of Minijos Nafta, told Reuters in an email.

“Our specific exploration plans with regard to shale this year are to frac one of our existing wells within the shale zones, probably in the spring, and to drill a new well specifically for shale hydrocarbons in the summer or fall of this year,” he added.

A separate license to explore shale for hydrocarbons is not required in Lithuania, the government officials said, but there could be environmental requirements to be met.

“It is too early to say whether Lithuania will produce and oil or gas from shale, but there is a reasonable chance that hydrocarbons could be produced from shale in the southwestern part of Lithuania,” Haselton said.

Lithuania’s State Geological Service plans to call a tender in spring to issue new licenses to explore for hydrocarbons, including shale gas, at two new fields close at the border with Poland and with Russia’s enclave of Kaliningrad.

The fields cover about 2,000 square km, while already issued licenses cover a territory of about 6,300 square km.

“We are also prepared if there is going to be issued an new run for new concession here in Lithuania… Lotos Geonafta is going to be a partner of that,” Olechnowicz told reporters.

Preliminary estimates show there may be up to 120 billion cubic metres of shale gas reserves in Lithuania, government document has showed.

Neighbouring Poland has issued more than 100 shale gas exploration permits to companies including global majors Chevron and Exxon Mobil, after a U.S. study said Poland could have 5.3 trillion cubic metres of recoverable shale gas, the biggest in Europe.

Source: Reuters