Jul 19

Bulgaria to Finalize Shale Gas Contract with Chevron in Days

By Curve Bulgaria, shale gas No Comments »

Bulgaria will finalize shale gas exploration talks with US Chevron and seal a contract in the next few days, Energy Minister Traicho Traikov has announced.

Traikov participated Tuesday in a discussion on shale gas exploration and production in Bulgaria.

The Energy Minister revealed that auctions for new exploration blocks in North Bulgaria were forthcoming.

In end-May, US energy giant Chevron won a shale gas drilling permit in Novi Pazar, Northeast Bulgaria, with a EUR 30 M bid. British company BNK Petroleum, which also took part in the competition, was ranked second.

The prospect of shale gas exploration in the region has eliciting clashing reactions from energy experts, politicians, and the local population.

Locals remain divided, some of them highlighting environmental concerns while others defend the favorable business climate.

Experts themselves fail to agree on the benefits of shale gas fracturing.

Traikov boasted Tuesday that the tender documentation envisaged a minimum bonus of EUR 200 000 for the five-year exploratory period.

Bids for the other two shale gas deposits would be submitted by end-June, Traikov specified.

According to preliminary estimates of the companies which applied for the Novi Pazar block, total reserves of shale ghas come in at 300 bcm – 1 trillion cu m.

Traikov assured that the exploration works did not pose environmental risks, adding that an environmental impact assessment would be drawn up before the launch of the production process.

“Shale gas exploration in no way differs from natural gas exploration”, the minister insisted.

Energy Minister Traikov and Environment Minister Karadzhova agreed that an environmental impact assessment was not required for exploration, unlike the case with production.

If the production stage were reached, Karadzhova explained, the overall project of the company would also be examined for compatibility with Natura 2000 requirements.

“If the production stage is reached, this could fetch tens of millions in concession fees per year. I think it is reasonable to check if we can use this resource, regardless of the long-term perspective”, Traikov said.

Under Bulgarian legislation, 50% of the concession fees remain at the disposal of the local administration.

Source: Novinite

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Jul 13

Halliburton Awarded Integrated Services Contract from Chevron for Shale Natural Gas Exploration in Poland

By Curve Halliburton, shale gas No Comments »

HOUSTON – Halliburton (NYSE: HAL) announced today that it has been awarded a contract from Chevron for integrated services for shale natural gas exploration in Poland.

Work on Chevron Polska’s initial shale gas exploration drilling program is expected to begin in the fourth quarter and the contract award is for three years, with extension opportunities. Halliburton services to be provided will include drilling services, mud logging, cementing, coiled tubing, slickline services, well testing, completion and hydraulic fracturing. Halliburton will support the project with project management services.

“Halliburton is committed to delivering the same industry-leading expertise and service for shale gas projects in Europe as we are delivering every day in North America,” said Brady Murphy, Halliburton senior vice president, Europe/West Africa Region. “We have invested early in Poland, and we have the people and the technologies in place to support this growing market.”

Source: Halliburton

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Apr 19

US report boosts interest in Poland’s shale gas potential

By Curve Poland No Comments »

Realm Energy was mentioned in an article from today’s Warsaw Business Journal:

A new report published by the United States Energy Information Administration (EIA) estimates that Poland’s shale-gas reserves are more substantial than previous assessments suggested. Energy and natural resources consultancy Advanced Resources International (ARI) had previously estimated Poland’s shale gas reserves at some three million cubic meters (tcm) but the EIA’s latest analysis released April 5th suggests 5.3 tcm of shale gas could be sitting beneath the surface.

If correct, this could become a real geopolitical game-changer for Poland. Specifically, it would enable Poland to diversify its energy portfolio (away from domestic coal and Russian natural gas), develop as an energy exporter (while increasing domestic natural gas reserves) attract much-needed FDI and strengthen commercial interests in the sector, especially from the United States.

…

So far, Poland’s Environment Ministry has granted 85 concessions for exploration. Last month, Dutch-British giant Shell announced that it too was looking to join the long list of international energy companies exploring shale gas reserves in Poland, which already includes the US’s Exxon Mobil, Conoco Philips and Chevron.

In addition, smaller firms such as Canada’s Realm Energy International and the UK’s San Leon Energy and Aurealion Oil and Gas have acquired leases and exploration rights.

Read the full article at Warsaw Business Journal.

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Jan 25

International Shale Gas Propels U.S. Technology (and Profits)

By Curve shale gas No Comments »

Seeking Alpha contributor Kent Moors published a very informative article on shale gas today:

Last week, there was a meeting on shale gas that was standing room only. That’s hardly major news these days, as producers, consumers, environmentalists, analysts, regulators, and, oh yes, investors all focus upon the new major player in the energy market.

Except this meeting took place in The City – London’s financial district.

This may come as a surprise. After all, the way the European Union structures its energy pricing makes it more difficult for companies to make a profit.

On the other hand, rising dependence on imported gas (especially from Russia) does not sit well with Brussels.

Domestic shale gas, therefore, is increasingly regarded as the solution.

It will not eliminate the need for imports. But it may well allow Europe to renegotiate terms on pipeline contracts. And that’s more than enough to accelerate the interest in shale gas.

Gas in Europe, the Middle East, North Africa, Asia…

Now, the U.K. itself has some possible shale plays, but that nation has barely even begun to estimate the possibilities.

Elsewhere in Europe, the development has advanced beyond the discussion stage. Production is underway in Sweden (Alum), Hungary (Makó Trough, Szolnok), Austria (the Vienna Basin),and Germany (Lower Saxony).

But the real breakthroughs are likely to come from five major plays in Poland, three in France, and Ukraine – where there may actually be more shale gas potential than the rest of Europe combined.

This is taking place elsewhere, too. Geologists tell us there is more shale in MENA (Middle East and North Africa) countries than anywhere else in the world.

Saudi Arabia had ignored its natural gas until recently. Now, that kingdom is involved in an energetic pursuit of both freestanding gas and shale.

In addition to the Saudis, substantial shale gas is expected elsewhere in the Middle East – especially Syria, Iraq and Jordan.

I have already talked to a delegation from Morocco on their oil and gas shale opportunities (“Shale Gas Initiative Brings Morocco to My Doorstep,” December 13), and Algeria, Tunisia, and Libya have high prospects, as well.

However, the main global target these days is China.

There, the government has already committed to emphasizing gas as the future for electricity production. The attempt is to wean the country from its reliance on polluting, low-quality coal as fuel for power generation.

The Global Leader in Shale

Wherever you are in the world, the primary advantage in the development of shale gas is its ability to satisfy a larger portion of domestic energy requirements from local or regional production. Natural gas is also a rising source for the industrial and petrochemical applications that are essential for economic development.

The downside, of course, remains the environmental impact and water quality considerations.

Hydraulic fracking is the technology used to break open the rock and release the gas, and it employs large amounts of water. That, coupled with the chemicals used in the process, result in a fear of releasing toxic substances in flowback.

The U.S. is the global leader in shale gas (and oil) technology – both in extraction and in addressing the environmental consequences.

There are more than two dozen producing shale gas basins in the American market, along with several additional huge plays in Canada.

In response to the explosion of international interest in shale gas, the U.S. Department of State (DOS) launched the Global Shale Gas Initiative (GSGI) in April 2010.

The organization seeks to provide expertise and advice to developing countries worldwide on the exploitation of shale gas and its economic, policy, and market ramifications.

One of the reasons for the GSGI is the opportunity it presents American companies to profit from shale gas development elsewhere in the world.

Certainly, producers are interested…

Who’s Positioned to Profit

In addition to those leading the shale gas production list – such as Chesapeake Energy Corp. (NYSE:CHK) – major oil companies have used M&A to move into the sector.

Exxon Mobil Corp. (NYSE:XOM) acquired XTO, and Chevron (NYSE:CVX) absorbed Atlas Resources to target shale gas. XOM has an immediate reason, since it is already involved in several European shale plays.

Others, such as Shell (NYSE:RDS.A), Total (NYSE:TOT), Statoil (NYSE:STO), as well as the Chinese majors CNOOC Ltd. (NYSE:CEO) and Sinopec (NYSE:SHI), are farming into already-producing basins or joint venturing with experienced major producers.

There are certainly opportunities for the investor to make some profit for what the operators are doing. Yet the main advantage may well come from the technical side.

Here, the current leaders in shale gas applications remain the largest oilfield service (OFS) companies: Halliburton Co. (NYSE:HAL), owner of the patent on the primary frac technique, and Schlumberger Ltd. (NYSE:SLB), the worldwide leader in OFS.

The most significant potential for investor interest will be with those companies developing improved drilling techniques, non-chemical fracking processes, and larger-horsepower pumping equipment. Each of these categories becomes more essential as the number of shale gas wells grows – bringing renewed environmental concerns right along with it.

It has been less than a decade since the combination of horizontal drilling and fracking made the exploitation of shale gas profitable. In the interim, an initial stage of technical improvements has reduced the cost of production.

Another stage of improvements is now necessary, both to address the declining pricing of gas in the U.S. market (resulting from the rapidly increasing volume coming from shale development) and the need to make the process safer for the environment.

Currently, a number of small companies are rising to the challenge with advances in equipment, pumping techniques, and water treatment. This is going to be the next great example of the entrepreneurial spirit.

And it will receive a major boost from what is now happening elsewhere in the world.

Source: Kent Moors, Seeking Alpha

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Nov 09

Big Oil Bets On Natural Gas

By Curve ExxonMobil, gas, natural gas, Royal Dutch Shell, shale gas No Comments »

Royal Dutch Shell said that by 2012 it expects more than half of its output will be natural gas – not oil. That is as if Starbucks said it expects to sell more tea than coffee.

Yet this prediction is not unusual for Big Oil these days. In fact, most of the big boys are making big bets on natural gas.

Exxon Mobil completed eight projects last year. Seven of them were for natural gas projects – not oil. Of the three scheduled this year, two of them are gas. ConocoPhillips paid $5 billion for Origen, an Australian gas company.

Meanwhile, Chevron hammers away at its mammoth liquefied natural gas plant off the coast of Australia, at a total cost of more than $40 billion. (Liquefied natural gas, or LNG, is easier to transport.) Most of the oil giants are also slamming billion-dollar fistfuls on the table to pick up shale gas acreage in places such as the Marcellus in Appalachia.

This shift creates new opportunities for investors. But before we get to those, let’s try to understand what’s happening.

There are several things at work here. One is that new oil deposits, like pitchers who can hit, are becoming harder to find. They are also costlier. The Kashagan oil field, which was supposed to be a great find in the Caspian Sea, is seven years behind schedule and billions of dollars over budget. Another factor at work is that 90% of the world’s oil reserves are in the hands of national oil companies. They are off-limits for the likes of Exxon and others.

By contrast, natural gas deposits are more plentiful. They are also getting cheaper to develop. The cost to build an offshore LNG terminal is about half of what it was only two years ago. The big LNG plants can be just as expensive as anything in the oil world, but – unlike oil – these projects don’t usually go forward unless there are long-term contracts in hand to support them. Some of these contracts go for 20-year terms. This makes the business more appealing to the majors, who don’t have to sweat the huge ups and downs they endure in the oil markets.

With contracts in hand, the gas business is just one of putting together an Erector Set. As The Economist notes, “The gas business is really an infrastructure business: drill wells, build gas plants, install pipelines and accrue profits.”

But there is more. The world’s use of natural gas is growing faster than its use of oil. The IEA’s guess is that oil consumption grows half a percent a year. Natural gas consumption, by contrast, should rise more than 50% in the next 20 years. Total, the big French oil company, is even more bullish. It estimates that China will use much more natural gas than is commonly assumed. Only a lack of infrastructure keeps China’s appetite for natural gas under wraps. But China is in the process of building that infrastructure today. It is only a matter of time before the nat gas markets feel its impact.

Finally, natural gas is cleaner burning. There is a lot of talk of carbon taxes of one kind or another, not only in the US, but abroad. I believe it is a matter of when, not if, governments punish dirtier fuels. Natural gas will benefit.

However, I don’t expect the price of natural gas to rise in a big way anytime soon. There is simply too much of it. Natural gas producers are all expanding production. Most are spending more to expand production than their cash flow supports. This is happening even though most look like they don’t make any money at $4 nat gas. (A recent survey put the industry average at $5.74.) This doesn’t bode well for the price of natural gas in the short term. As beaten up as it is, it could stay here for a while, or even go lower.

One of my favorite plays in the natural gas sector remains Contango Oil & Gas (AMEX:MCF). This is because it is a low-cost producer with no debt, so it can still create shareholder value in a low-price environment. Contango’s all-in costs are under $2 for nat gas.

Longer term, the current low nat gas price is not sustainable, as most of the industry seems to lose money at these prices. As old contracts (made when natural gas prices were higher) roll off, these producers will start to shut down production.

At a recent conference, Ken Peak – CEO of Contango and the largest stockholder, with 19% of the shares – shared the following chart, which makes the point. It shows the cost curve for the lower 48 states in the US. This chart shows that these producers need $7 gas to make money. “If this is right,” Peak said, “I believe we will make a lot of money.”

Low Natural Gas Prices

He says this because logic dictates that we should expect the price of nat gas to gravitate toward the cost of the marginal producers. And since Contango’s costs are under $2, it stands to make a lot of money when gas turns around. I know it’s been almost two years and no dice on Contango’s stock price, but I’m content to wait it out (and buy more).

Even at today’s depressed gas prices, Contango’s SEC PV-10 value – think of it as a rough net asset value – is over a billion dollars. With 15.7 million shares out, Contango is worth at least $63 per share. And that’s why it is still a buy.

But let’s get back to natural gas in broad terms. Even though pricing looks unexciting in the near term, demand looks healthy long term. The world will burn more natural gas in cars and buses of the future than it does today. It will burn more natural gas to heat and cool homes than it does today. It will rely more on natural gas to provide electricity.

Long-term investors should treat these things as inevitable. Big Oil certainly is.

Source: Chris Mayer for the Daily Reckoning.

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Feb 16

Oil Giants Head to Europe for Shale Gas

By Trevor J. Murphy shale gas in Europe No Comments »

Oil giants and explorers are jumping into the race to search for shale gas potential in Europe and commit to what analysts at Bloomberg are calling a “buoyant market.”

JPMorgan Chase & Co reported this week that Exxon Mobil has secured land in Europe, acquiring shale plays in Germany and Hungary, and has also applied for permits in Poland. Other companies like ConocoPhillips and Chevron are also exploring options in Poland, while Royal Dutch Shell has garnered contracts in Sweden. Other companies such as Vancouver-based Realm Energy have also made recent announcements of their intent to explore Europe’s shale potential (read “Realm Energy Makes Aggressive Play for European Shale Gas Deposits”).

Mark Greenwood, a Sydney-based analyst with JPMorgan, says the success of the US shale plays is driving companies overseas.

“A land-grab has occurred in Europe over the last two years with majors such as Exxon, Conoco, Chevron and Statoil ASA all participating, not willing to miss out as they did in the U.S.,” he says.

The International Energy Agency said in November the world may have an “acute glut” of gas in the next few years because production of so-called unconventional fuel, which includes shale gas, is set to rise 71 percent between 2007 and 2030.

Over the past three years, the development of technology to exploit shale gas and the boom in US shale success has led to major mergers and acquisitions between oil and gas companies, says Bloomberg.

A report by Wood Mackenzie Consultants Ltd. in the UK said overseas investment by national oil companies doubled from 2008 levels to $26 billion and accounted for 44 percent of spending outside North America.

Another analysis of shale gas done by Allen Brooks of Parks, Paton, Hoepfl & Brown anticipates that this unconventional gas is “likely to present a challenge for the market in 2010.”

SOURCES:
Bloomberg: “Exxon, Chevron ‘Land Grab’ for Europe Shale Gas, JPMorgan says”
Business Week: “Mergers in Oil, Gas Seen ‘Buoyant’ in 2010 by Wood Mackenzie”
Gerson Lehrman Group: “Excellent Analysis of Gas Shales Capabilities; Benefits and Problems for 2010”

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