Jul 19

ConocoPhillips Still a big Player, but in a Different Game

By Curve shale gas No Comments »

Last week, Realm Energy announced a Farmount Agreement struck with ConocoPhillips for possible shale oil exploration in France.

Realm Energy has applied for exploration licenses for 1.65 million acres in Paris Basin, France. The applications consist of nine separate exploration permits inclusive of all rights for exploration of oil and gas in all formations underlying the land. Realm Energy struck a farmout agreement with ConocoPhillips to conduct joint exploration activities on selected exploration licenses which may be awarded as a result of these applications. Realm Energy will be the designated operator for the initial exploration phase, while ConocoPhillips has the option to operate thereafter.

On July 19th, there was more news regarding ConocoPhillips and it’s new objective to discover shale gas.

Houston, USA – ConocoPhillips no longer will rank among the major international oil companies after it spins off its refining business next year, but it will be the largest independent oil and gas player in the U.S. by a wide margin.

And its entry into that group will make waves.

Most notably, the move could put more pressure on smaller players to bulk up by acquiring assets or finding merger partners, analysts said.

That may be especially true of small and midsize companies in North America that have positions in highly sought-after shale gas formations but lack the capital and scale to develop them.

That scenario emerged Thursday — the same day ConocoPhillips announced its plans – when BHP Billiton Petroleum, a U.S.-based oil and natural gas arm of the Australian mining giant, said it will acquire Houston’s Petrohawk Energy Corp. for $12.1 billion.

The deal may not be the last of its kind.

“This is feeling to me like we’re getting to the consolidation phase,” said Andrew Coleman, a managing director of oil and gas exploration and production research at Raymond James in Houston.

That trend may have begun before ConocoPhillips announced plans to create two separate publicly traded companies out of its refining and exploration-production units. The separation is expected to be complete by the second quarter of 2012.

But the Houston oil giant’s move into the category of U.S. oil and gas independents underscores how companies in that group are only getting larger, even as oil majors like Chevron, Shell and BP are trimming down.

Houston’s Apache Corp., for instance, spent $11 billion last year acquiring Mariner Energy and assets from BP and Devon Energy Corp.

And Marathon Oil Corp., which completed a spinoff of its refining business last month and relaunched as an independent, recently agreed to pay $3.5 billion for a swath of acreage in South Texas’ Eagle Ford Shale.

Major oil companies including Exxon Mobil Corp. and Shell, along with state-owned oil giants like Norway’s Statoil, have also been writing big checks to buy small companies or acreage stakes in U.S. shale formations – thought to hold 100 years’ worth of natural gas as well as large quantities of oil and valuable natural gas liquids.

More than $120 billion has been spent on shale deals in the last three years, said Bob Fryklund, a vice president with IHS-Cambridge, who sees still more ahead.

“I don’t think we are done, as size is everything in shale if you are a long-term player,” he said.

The deals have greatly boosted the cost of entry into U.S. shales and other emerging oil and gas areas and driven up the cost of services, making it harder for little guys to compete.

“The North American exploration and production business is in the very early stages of evolving from a highly fragmented business comprised of a myriad of mid, small and private E&P companies” to one increasingly run by “world-class energy concerns,” said Bill Herbert, a managing director at Houston investment bank Simmons & Company International .

Still, convincing investors that a behemoth like Conoco-Phillips is a better bet than smaller independents with more aggressive growth plans may be a tall order, said Fadel Gheit, industry analyst with Oppenheimer & Co.

“Size is no longer really a prerequisite for investors,” he said. They just want a stock that performs well, he added.

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Jul 15

Realm Energy Announces Joint Participation With ConocoPhillips in Paris Basin

By Curve Realm Energy No Comments »

White Rock, Canada - Realm Energy International Corporation (“Realm Energy”) or the (“Company”) (TSX-V:RLM) (www.realmenergy.ca) is pleased to announce it has entered into a farmout agreement with ConocoPhillips to conduct joint exploration activities in the Paris Basin, France.

Realm Energy has made applications for exploration licenses for 1.65 million acres in the Paris Basin.  The applications comprise nine separate exploration permits and include all rights to explore for oil & gas in all formations underlying the lands.  The time frame for making applications for the licenses has ended.   Realm Energy has entered into a farmout agreement (the “Farmout Agreement”) with ConocoPhillips for the purpose of conducting joint exploration activities on selected exploration licenses that may be awarded as a result of these applications.  The Farmout Agreement provides Realm Energy with a limited carry on exploration expenditures and financial incentives conditional on acreage acquired and activity levels permitted by the Government. Realm Energy will be the designated operator for the initial exploration phase; ConocoPhillips has the option to operate thereafter.  The Farmout Agreement is conditional on the final award to Realm Energy of permits for a portion of the lands in the Paris Basin, and government approval of the joint participation of Realm Energy and ConocoPhillips.

Craig Steinke, Chief Executive Officer of Realm Energy, stated, “ConocoPhillips brings a wealth of experience in oil & gas operations as well as a high level of health, safety and environmental standards. Realm Energy is looking forward to working with ConocoPhillips on joint operations in France and having a long and successful partnership.”

Exploration activities in the Paris Basin are currently restricted by the Government of France so as to prohibit hydraulic fracturing as part of the petroleum exploration and development process.  In connection with their joint exploration activities, Realm Energy and ConocoPhillips will comply fully with all relevant legislation governing petroleum operations in France.

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Jul 13

A Fracking Good Deal on Aussie Shale Gas

By Curve Australia, shale gas No Comments »

US oil giant ConocoPhillips is poised to become the first global major to start looking for shale gas in Australia, signing a non-binding deal with New Standard Energy to spend up to $US110 million ($103m) on exploration in Western Australia.

The deal, announced yesterday, comes just a day after Beach Energy said it had significant gas flows from the nation’s first shale gas well, drilled in South Australia. It also comes after US mid-tier oil company Hess earlier this year agreed to spend up to $US60m acquiring interests in and exploring the Beetaloo Basin in the Northern Territory.

In the past decade, new shale gas technologies, which include the controversial underground process of fracking to release gas from the rock it sits in, has turned a gas shortage in the US into a surplus.

It is unclear whether there is similar potential in Australia, and whether it is cost effective, given our comparative lack of pipeline infrastructure and lack of previous exploration drilling.

But the testing of the waters by two US oil companies is bound to spur interest in companies such as New Standard, Beach and AWE that have been early entrants into shale gas exploration permits. Conoco and New Standard have signed a heads of agreement to negotiate the US major taking up to a 75 per cent stake in New Standard’s Goldwyer project on the northern edge of the Great Sandy Desert by funding up to $US109.5m of drilling and evaluation.

The pair are targeting a binding agreement by the end of September. If a binding agreement were struck, New Standard said it hoped exploration would begin next year.

Under the deal, Conoco will not immediately become the operator of the permits. Instead, it will fund Perth-based New Standard’s drilling of exploration wells.

But the major has the right to become the operator whenever it pleases. It also has the right to pull out of the deal at various stages of exploration, leaving New Standard with the whole of Goldwyer, which stretches over 45,000 square kilometres of the onshore Canning Basin.

In an April report, the US Energy Information Agency said the Canning Basin could hold the most shale gas of Australia’s onshore basins.

On Tuesday, Adelaide-based Beach said its Holdfast-1 well in the Cooper Basin had steady flows of 1.8 million cubic feet a day of shale gas.

The company described the flow rates as very significant.

Source: The Australian

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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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Feb 26

“North American players looking at shale gas opportunities in Europe”: The Canadian Press

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

The same technology that unleashed a natural gas bonanza in North America over the past decade has the potential to transform the European energy industry.

“A year or two from now, the activity over in Europe is going to be absolutely frenetic, and so you’ve got to get in there early,” said Craig Steinke, executive chairman of junior explorer Realm Energy International (TSXV:RLM).

Realm, which has offices in Vancouver and London, is involved in eight different shale basins in seven European countries, though it doesn’t disclose specifics for competitive reasons.

The likes of ExxonMobil Corp. (NYSE:XOM), Royal Dutch Shell PLC (NYSE:RDS), ConocoPhillips (NYSE:COP) and Chevron Corp. (NYSE:CVN) have begun to grab stakes in shale formations in Poland, Germany, Hungary, Ukraine and other European countries.

Some may wonder why North American companies would look for shale opportunities across the Atlantic when there are plenty of promising plays in their own backyard.

“In North America as a whole, the lands have been bid up to significantly high prices,” said Steinke.

“If you don’t have the land, you’re on the outside looking in.”

In Europe, energy companies can negotiate directly with government authorities to acquire large, contiguous tracts of land – though it may not be that way for long if activity picks up, said Steinke.

“Realm’s goal is to be an early mover on acquiring the lands. It’s going to put the company in a very advantageous position as the momentum builds,” he said.

“The opportunity won’t be there forever, that’s for certain.”

Shale is a ubiquitous type of sedimentary rock that is as tough as concrete. Freeing natural gas molecules from within the rock is no easy feat as it requires enormous amounts of water, chemicals, sand and, above all, technical know-how.

North America’s shale gas industry has its roots in the Barnett formation in north-central Texas, where energy companies began honing their techniques about 10 years ago.

Since then, horizontal drilling and multi-stage fracturing have spread to the Marcellus play in New York and Pennsylvania, the Haynesville play in Texas and Louisiana and the Horn River and Montney plays in northeastern British Columbia.

Realm collaborates with U.S. energy services giant Halliburton Co. (NYSE:HAL), which has been active in virtually all of North America’s shale gas plays.

Halliburton has been helping Realm parlay expertise it garnered from North American shale gas plays into European ones, which share many of the same characteristics.

European shale gas is also on the radar of Talisman Energy Inc. (TSX:TLM), already a big landholder in the Marcellus and Montney formations.

“We haven’t done any deals yet, but we are looking hard and depending on how things go, we could see an entry into an international opportunity,” Richard Herbert, Talisman’s executive vice-president of exploration, said on a conference call with analysts and reporters earlier this month.

Another reason European shale gas could be attractive is pricing. North America is currently dealing with a glut situation, in which supply is outpacing demand.

European countries are also eager to stop relying on natural gas imports from Russia, which has had a history of suddenly shutting off supplies amid disputes with its neighbours.

It’s going to take several years of work before European shale gas is commercially viable, said Michael Dawson, president of the Canadian Society for Unconventional Natural Gas.

Energy companies already know all the ins-and-outs of North America’s geology because so much conventional oil and gas drilling has taken place there. That’s not the case in Europe, he said.

There also isn’t much there in the way of specialized equipment needed to drill the high-tech wells. So all of that has to be built or transported from elsewhere.

“I think there has to be a realization that while everybody seems to be getting on the bandwagon with shale gas right now, it just doesn’t happen overnight,” said Dawson.

“It’s not a slam dunk that the shale gas potential in Europe is going to be successful.”

- By Lauren Krugel for The Canadian Press

SOURCE:
MSN.ca: “North American players looking at shale gas opportunities in Europe”

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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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Feb 09

Unconventional gas gaining momentum worldwide

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

Developments in the US and Australian unconventional gas sectors have grabbed the headline in recent years, but new regions are about to step into the limelight

Unconventional gas has driven some of the biggest energy news stories in North America and Australia in recent years as production ramps up and companies look to build positions in this long-term growth play. There remain many growth opportunities in these regions and, despite the slowdown driven by the market turmoil over the past 18 months, unconventional gas remains an attractive long-term investment. Meanwhile, outside North America and Australia, momentum is also building and these new regions could create the headlines of the future.

The dramatic rise in shale-gas production in the US, following tight-gas and coal-bed methane (CBM) production growth, has demonstrated the scale of the effect unconventional gas can have on even the very largest gas market. Unconventional gas production in the US Lower 48 has risen from 33% of the total output in 2000 to 59% today, and this is expected to rise to 73% in 2020. North America now has the potential to be essentially self-sufficient in gas over the next decade or more, which not only has significant implications for the US’ LNG-import requirements, but will also have a knock-on affect on other gas markets.

The effect of unconventional gas on the market in eastern Australian has been just as dramatic and Queensland’s prolific coal seams have proved a reliable source of gas even at prices below $3/’000 cubic feet. As a result, long-held plans for pipeline imports from Papua New Guinea have been cancelled and projects to export large volumes of CBM as LNG are moving forward – 10 or more LNG trains are under consideration.

The promise of large resource volumes and long-term growth is an attractive mix. Companies with no, or limited, previous exposure to unconventional gas, such as BG, Petronas and StatoilHydro, have built substantial positions in a relatively short period of time. Additionally, others such as Shell, ConocoPhillips and BP have added to their positions over the last 18 months.

For companies looking to gain a position, the upheaval in financial markets is providing an opportunity, as the independents that have been the engine of unconventional-gas growth seek partners to help fund their plans. As a result, new partnerships are emerging such as StatoilHydro with Chesapeake and Eni with QuickSilver in the US, and Shell with Arrow in Australia.

There remains much to do in North America and eastern Australia, but attention has also turned to the next areas for potential unconventional gas production. Positive long-term gas-market conditions are driving interest, most notably in Europe, India, China and southeast Asia. Companies from the very largest down to new start-ups are hunting for the next Barnett Shale, Pinedale Anticline or San Juan basin. Areas with good potential for tight gas, shale gas and CBM have been identified across these regions, but many questions still remain including:

• Where are the sub-surface conditions right for commercial production?
• How do you gain access to the land, both in terms of licensing and then physical access?
• Can you access suitable low-cost equipment and resources to run an efficient, long-term drilling campaign over a wide area?
• Are the fiscal terms sufficiently attractive to support commercial development?
• Are there pipelines to deliver the gas to market, and can they be accessed?
• What effect will environmental and regulatory restrictions have? and
• Will the gas price sustain development?
Many of these questions are applicable to conventional gas production, but they become even more important for unconventional gas developments where, for example:
• More drill sites are required;
• Continuous drilling is needed to offset well decline rates;
• Land may be held by incumbent companies, or split between many land owners;
• No suitable supply chain may exist;
• Higher costs mean economics are marginal; or
• The additional environmental challenges, such as water management and surface footprint, can be challenging.

Despite the challenges, unconventional gas production will take off in new areas – the preliminary economics look attractive for many of these emerging plays, with rates of return above 10%. However, there remains much uncertainty as little or no pilot testing has been carried out on them and more work is required by operators to test their viability.

Many of the above ground issues are only just being encountered in these new areas, but in some regions they are already stalling developments. In India, for example, initial progress with licensing was rapid, with three CBM licensing rounds having been completed and a fourth on the way. But progress has been slowed by local demands and gaining access to land. By contrast, initial progress in China was very slow as companies entered protracted negotiations with China United Coalbed Methane, although momentum is now building and the government remains extremely supportive through both targeted regulation and fiscal terms.

In Europe, licences are being acquired across the continent and pilot testing is starting to progress. Issues with accessing land are yet to have a large effect as operations are at a small scale. But if developments progress, this will be a significant challenge because of the strong environmental lobby; an innate conservatism of local communities towards new developments; and diverse land ownership. The limited supply chain in Europe is also being tested even at this early stage and new equipment and expertise will need to develop.

While these issues vary on a play-by-play basis, understanding the above ground risks becomes essential for assessing the real opportunity that unconventional gas presents. As a result, companies need a solid understanding of these risks if they are to successfully drive growth.

As a result of the many uncertainties, it is too early to forecast exactly when unconventional gas will take off in these new areas. But unconventional gas is unlikely to have a substantial effect on regional energy markets outside North America and eastern Australia for more than five years. From the middle of the next decade, however, production in China could begin to make an important impact, particularly if strong government support remains in-place.

In Europe, India and southeast Asia, unconventional gas is unlikely to have a significant effect on regional energy markets for the next decade, but local supplies could ramp up over this period. Beyond this, volumes could increase and play an important role in the supply mix. And other areas should not be overlooked: possible plays are being examined, and in some cases progressed, in Latin America, southern and northern Africa, and the Middle East, for example.

In these new areas, important milestones will signal progress. Initially, these include: successful pilot projects with repeatable flow rates; the announcement of the first commercial projects, however small; continued licensing; and a flow of new pilot projects. After the initial phase, companies will need to demonstrate that they can scale-up developments in a play and this means overcoming land access, supply chain and environmental issues on a much larger scale. For this to occur, continued government support will be essential and positive market fundamentals must remain in place.

If these milestones are met across Asia and Europe, then it could be these regions generating the unconventional-gas headlines of the future.

By Rhodri Thomas for Petroleum Economist

SOURCE:
Petroleum Economist: “Unconventional gas gaining momentum worldwide”

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