Aug 17

Sun About to Shine on Shale Gas

By Curve shale gas No Comments »

 

You wouldn’t necessarily think of Edmonton as being a “shale-friendly” zone, so when Edmonton Journal reporter, Gary Lamphier read a document on natural gas extraction recently, he was surprised at what he learned:

It’s been a long time since I bumped into anyone who is even remotely bullish on natural gas, the energy sector’s unloved stepchild.

Roughly two years after the recession ended, natural gas prices remain stuck in the basement, as a tidal wave of new shale gas supplies gluts the U.S., Alberta’s only existing export market.

Result: at the current price of less than $4 US per million British thermal units (MMBtu) in New York, natural gas is roughly 70 per cent below its 2008 high. Likewise, Alberta (AECO) spot prices are mired in the $3.65 (Cdn) range.

Contrast those ugly numbers with U.S. light crude prices — which hit a post-recession peak of $114 US per barrel in April, more than triple the lows of early 2009 — and it’s easy to see why investors continue to prefer oil stocks, despite the recent correction in crude.

So when an unabashedly upbeat report on natural gas by Calgary money manager Josef Schachter landed in my inbox a few days ago, I was intrigued.

Turns out Schachter — a veteran trader who advises clients at Toronto’s Maison Placements on energy issues — makes a compelling case that the bear market in natural gas is coming to an end.

In his view, natural gas prices actually bottomed last fall, and could rebound to the $7 range on the New York Mercantile Exchange by winter, as supply-demand forces come into better balance.

“People focus on production, and the production numbers are a mix of the conventional basin and shale, and shale (supplies) are still rising, as we all know,” he says.

“But as these shale plays reach maturity — like the Barnett (in Texas) and the Haynesville (in Louisiana) — the amount of new production that’s coming on (is offset by) what’s starting to come off. So if you aren’t on a treadmill drilling new wells, you’re going to hit a peak.”

With conventional natural gas output already falling sharply in Wyoming and the Gulf of Mexico, and total well counts down slightly in the Haynesville, that should help to put a floor under prices, Schachter believes.

Meanwhile, U.S. natural gas inventories have fallen below the five-year average while demand continues to rise, as cleaner-burning natural gas steadily displaces coal as a source for electric power generation.

“So you have less inventory, you have a potential production slowdown coming (as shale gas drilling plateaus) and you have demand rising, as shown by the inventory-to-sales ratio,” he says.

Tack on the possibility that gas production in the Gulf could be curtailed this fall as hurricane season gears up, and you have the makings of a more bullish picture for natural gas, Schachter contends.

“But the stronger issue we’re arguing is when you get into the winter of 2011-2012, if we don’t have high inventories and we go into a normal winter, we’ll see prices move back up to $7 on NYMEX and over $5 (Cdn) for AECO. That would be a big change and it would help Western Canada.”

Shale gas producers in the U.S. also face heightened regulatory pressures, as public concern over the potential impact of hydraulic fracturing — or fracking — on public water supplies continues to mount.

The use of fracking — a process whereby water and chemicals are directed under extreme pressure into gas-bearing shale rock, thereby allowing natural gas to flow more freely — has triggered a public backlash in many U.S. states.

In a recent report on the growing U.S. shale gas industry, a panel appointed by U.S. Energy Secretary Steven Chu called for changes that could boost the industry’s production costs significantly.

If so, that could slow the growth of new U.S. shale gas supplies, which have grown from almost nothing a few years ago to about 30 per cent of total U.S. natural gas production today.

The panel recommended creation of an industry group to encourage producers to measure and report air pollution, minimize water use and improve well casing and cementing. It also called for a national database to provide public information on the impact of fracking.

Although industry players say the use of fracking hasn’t caused any major incidents, critics say the threat to drinking water supplies remains significant.

“Public concerns extend to accidents and failures associated with poor well construction and operation, surface spills, leaks at pits and impoundments, truck traffic, and the cumulative impacts of air pollution, land disturbance and community disruption,” the report states.

“That (threat of tighter regulation on shale gas production) adds to the bullish argument on natural gas,” says Schachter.

“If you have to spend more money making sure that the regulations are met, and you’ve got to inform the government on toxicity levels and check on all the water wells in the area before you drill, and make sure your casing is strong enough and deep enough to get beyond the water table, all of that adds to your operating costs.”

Schachter’s advice? It’s time to get more bullish on natural gas.

He recommends switching out of oil stocks — which he says face more downside ahead as the peak summer driving season ends — and into selected natural gas stocks.

Source: Edmonton Journal

 

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Aug 10

Shale Gas Helps Revive Expansion in Chemical Industry

By Curve shale gas No Comments »

 

 

Bloomberg – Dow Chemical Co. spent a decade moving chemical production to the Middle East and Asia. Now it’s leading the biggest expansion ever seen back home in the U.S. as shale gas revives the industry’s economics.

Dow is among companies planning to build crackers, industrial plants typically costing $1.5 billion apiece that process hydrocarbons into ethylene and other synthetic materials. The new crackers will be the first to be built in the U.S. since 2001 and the largest wave of additional capacity, John Stekla, a director at Chemical Market Associates Inc., a Houston-based consultant, said in an interview.

Driving this renaissance is the plunge in the price of natural gas, used in crackers as a raw material, to a nine-year low. New drilling methods are opening up vast shale formations from Texas to West Virginia. U.S. chemical investments stemming from shale gas may top $16 billion, creating 17,000 jobs directly and another 400,000 indirectly, according to the American Chemistry Council, a Washington-based industry group.

“The U.S. now has investment-grade economics, and because of shale we are going to lock those economics in,” Dow Chief Executive Officer Andrew Liveris said. “We can grow our Americas base off our U.S. Gulf Coast assets. That is a big change.”

Dow will spend about $4 billion to construct a cracker near the Gulf Coast by 2017, reopen another in Louisiana, and build two propylene plants, Liveris said in a July 8 telephone interview from Dow’s Midland, Michigan, headquarters. That investment will supply ingredients for Dow plants making high- margin products such as paint additives and automotive plastics.

Read more

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Aug 04

Economist Claims Shale Gas “So Much Nicer Than Coal”…

By Curve shale gas No Comments »

 

The Economist (out August 6th) has some things to say when it comes to shale gas vs. coal mining – not the usual argument, but the extremely valid point about the safety of the extraction itself…

If the rise of gas means the decline of coal, the environment is one of the winners. Though more research into the damage shale-gas extraction may do to the environment is needed, there is no doubt that the extraction of coal already harms the environment a lot.

It kills a lot of miners, too. In America, a coalminer’s risk of dying on the job is almost twice that of a worker in the oil industry. In China, the world’s largest coal producer, mining fatalities have been dropping quite quickly, especially when calculated per tonne of coal produced, but official figures still put the 2010 number at 2,433.  The toll gets higher after the stuff is burned. In America it is estimated that in 2010, 23,600 premature deaths, and 20 times that many cases of illness, could be put down to soot from coal-fired power stations. Other pollutants, such as sulphur, increase the burden.

A recent analysis by Michael Greenstone and Adam Looney of the Brookings Institution concludes that if the damage to human health and the local environment by such pollution were factored into energy costs, the price of a kilowatt hour from an American coal-fired power station would more than double. For gas such accounting would increase the price by just 4%. In China, where pollution controls (though tightening) are less developed, air pollution may be killing more than 500,000 people a year, and blighting the lives of many millions more: a pressing reason for shifting from coal to gas.

This is all before taking the climate into account. Coal typically produces almost twice as much carbon dioxide per kilowatt-hour as natural gas. Just substituting gas for coal would not solve the world’s climate problems—Europe aspires to emission cuts of 80% or more by 2050, which would require any carbon dioxide from gas plants to be sequestered underground, not emitted to the air. But in terms of long-term climate impact gas is still a much better choice than coal.

However, carbon dioxide is not the only fossil-fuel by-product to affect the climate. Sulphate pollution due to coal cools the planet by shading its surface from sunshine. This effect is taken by climate scientists as explaining a slower rate of global warming over the 20th century than carbon-dioxide levels alone would suggest. The 130% growth in China’s coal use over the past ten years may help explain why temperatures did not rise much over the decade.  The near-term climate benefits of a global dash for sulphur-free gas may thus be smaller than might be expected.  Indeed, it is possible that over the next few decades, the net effect of such a dash could be marginally more warming.
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Jun 28

China Kicks off First Shale Gas Tender

By Curve China, shale gas No Comments »

 

China offered its first four shale gas blocks to domestic developers in an auction yesterday, the official Xinhua News Agency reported, without citing anyone.

Companies including PetroChina Co., China Petroleum & Chemical Corp., Cnooc Ltd., Shaanxi Yanchang Petroleum Group Co., China United Coalbed Methane Co. and Henan Provincial Coal Seam Gas Development and Utilization Co. placed bids for the blocks in Guizhou and Chongqing, in the southwest of the country, Xinhua reported.

The government originally planned to hold the auction in November 2010, Zhang Dawei, deputy director of oil and gas strategy research at the Ministry of Land and Resources, said at a conference last year. Zhang didn’t respond to calls to his office and mobile phone today.

China has as much as 1,275 trillion cubic feet of “technically recoverable” shale gas reserves, or 48 percent more than the U.S., according to an estimate by the U.S. Energy Information Administration on April 5. China’s deposits of the fuel may be 12 times higher than conventional natural gas, the EIA said.

The government aims to triple the use of gas to about 10 percent of energy consumption by 2020, reducing reliance on more polluting coal. It’s drafting a plan to develop domestic shale reserves in the five-year period ending 2015, Yang Lei, director of oil and natural gas at the National Energy Administration, said in Beijing on June 21.

China completed its first horizontal shale gas well in March after 11 months of drilling, according to PetroChina’s parent, China National Petroleum Corp.

CNPC and Royal Dutch Shell Plc are currently exploring the Jinqiu shale-gas block in southwestern Sichuan province. Shell and PetroChina are operating the Changbei tight-gas field in the Ordos Basin in northern Shaanxi province and exploring the Fushun-Yongchuan block in Sichuan.

 

Source: Bloomberg

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Jun 23

Deputy Leader of Polish Ruling Party Highlights Financial and Social Benefits of Shale Gas

By Curve unconventional gas No Comments »

 

Warsaw – Jaroslaw Gowin, the deputy leader of Poland’s leading party, wrote this week about the wider impact of unconventional gas extraction, commenting that if managed properly and under certain guidelines, shale gas can benefit the economy, the European Union and society as a whole.

Read the full article here: Petroleum Economist

 

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Jun 09

Exxon Puts Weight Behind Marcellus Shale with $1.7b Investment

By Curve ExxonMobil No Comments »

(Reuters) – Exxon Mobil Corp (XOM.N) said it bought privately held natural gas company Phillips Resources and related company TWP Inc for $1.69 billion last week, picking up about 317,000 acres for exploration in the Marcellus shale basin.

The action highlights the importance Exxon is placing on natural gas assets after spending about $30 billion last year to buy natural gas company XTO Energy, adding one of the leading developers of shale gas and a resource base of 45 trillion cubic feet of gas equivalent.

Exxon has shelled out billions to build up its exposure to so-called “unconventional resources”, formations like oil and gas shales that require more advanced technology for extraction.

“We believe that the mergers will create significant value by leveraging regional synergies in upstream operations and acreage holdings between XTO Energy Inc and the Phillips Companies,” said Alan Jeffers, an Exxon spokesman.

Exxon, already the largest producer of natural gas in the United States, said the two companies had proved reserves of 228 billion cubic feet equivalent of natural gas. The Phillips companies produce about 50 million net cubic feet per day of natural gas.

At a shareholders meeting last month, Exxon’s Chief Executive Rex Tillerson said his company was “positioned to double our US unconventional production over the next decade with an inventory of approximately 50,000 drillable well locations.”

Exxon has said it is taking a long-term view of natural gas markets, betting that power generation in developing countries like China and India will cause demand for the cleaner-burning fuel to surge in coming years.

Last year, Exxon paid around $700 million to buy Ellora Energy, picking up that company’s position in the Haynesville shale in Louisiana and Texas.

Exxon’s XTO unit will manage the assets. The company said its goal was to retain the companies’ employees.

 

Source: Reuters

 

 

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Jun 06

Golden Age for Natural Gas Predicted by International Energy Agency

By Curve natural gas No Comments »

LONDON (Reuters) – Increasing gas supplies from unconventional sources could encourage demand to rise to levels exceeding coal by 2030 and coming close to oil by 2035 if certain conditions are met, the International Energy Agency (IEA) said.

If governments introduce sound environmental regulation and companies implement what the IEA calls golden standards of practice around unconventional production, gas could become so important that the world could enter a “golden age of gas,” the IEA said.

Under such a scenario, “ample supply, robust emerging markets and uncertainty about nuclear power point toward a prominent role for gas,” in which over 25 per cent of global energy demand is covered by gas by 2035, the IEA said in a gas report published in London on Monday.

“If these conditions are met, the IEA expects global gas demand to overtake coal before 2030, and come close to oil around 2035,” said the agency’s chief economist, Fatih Birol.

Under those conditions, the IEA said it expected global gas demand to grow by an average of 2 per cent a year, compared with a 1.2 per cent growth in annual total energy demand.

Birol said this increase would end the current gas glut by 2015, by which time demand would begin to outstrip supply.

Under the new scenario, the IEA expects Europe’s import price for natural gas to rise from $7.40 per million British Thermal Units (MBtu) to $9.00 in 2015, to $9.50 in 2020 and beyond $10 per MBtu by 2030.

The IEA expects the boom in gas demand to result from a sharp increase in unconventional gas production mainly in China, Australia and North America, and from a decline in global nuclear power generation as a result of the nuclear incident at Japan’s Fukushima Dai-ichi plant earlier this year.

The report said around 40 per cent of the increase in global gas production between now and 2035 will come from unconventional gas exploration, such as fracking shale gas or exploiting coalbed methane gas, also known as coal seam gas.

According to the energy agency, the impact of Fukushima will significantly curb the rise in nuclear power generation, with gas stepping in to fill the gap.

“It is still premature to assess in detail the full implications of the Fukushima accident, but it is already clear that it will result in early retirements and delayed or cancelled investments in new reactors,” said Nobuo Tanaka, the IEA’s executive director.

CHINA, U.S. TO DRIVE PRODUCTION RISE

According to the IEA, the significant drivers of gas growth will be China’s 12th five-year plan, which envisages a steep increase in gas generation, as well as rising demand from gas-powered transport vehicles, especially in the United States and India.

Birol said that China’s gas growth is motivated by local environmental concerns.

“Worldwide, 16 out of the 20 most polluted cities are in China, largely related from coal power plant pollution, and for this reason, China is pushing for gas to replace a lot of coal power production,” he said.

In the United States, Birol said that “60 per cent of coal power plants will retire in the next 20 years due to old age, and there is a strong chance that a large proportion will be replaced by gas.”

Birol said, “China currently consumes about as much gas as Germany, but in 2035 it will be more than the OECD total.”

He added that “if our gas scenario takes place, the rise in global gas use will be around 600 billion cubic metres, the equivalent of one Russia (in current gas output).”

The IEA report said non-OECD countries would account for 80 per cent of global demand growth and that by 2035 China will use over 600 billion cm of gas.

India is expected to use over 200 billion cm of gas by 2035.

The IEA said it expected Australia to become one of the world’s top exporters of liquefied natural gas (LNG) by 2020, catching up with current leader Qatar.

Birol said that “global gas resources exceed 250 years of current production.”

CLIMATE TARGETS DIFFICULT TO MEET

But the IEA said that while gas will increasingly replace highly polluting coal and oil power generation, its steep rise will also come at the cost of low-carbon technologies such as nuclear and even renewable power generation.

Birol said, “This will not make it easier for the world to achieve its target of preventing average global temperatures from rising by more than 2 degrees Celsius.”

Instead, Birol said, the IEA’s gas scenario could lead to a 3.5 degree increase, a rise that he said the IEA finds unacceptable.

The revised figure of global CO2 equivalent emissions in 2035 as a result of the increased gas demand is a mere 0.5 per cent reduction, or 160 million tonnes, the agency said.

To meet the world’s stated climate target, Birol said, “we will need more energy efficiency, more renewable and nuclear power and, if possible, carbon capture and storage technology.”

Source: Reuters

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May 26

More Thoughts on European Shale from EUCERS

By Curve shale gas in Europe No Comments »

Natural Gas for Europe shared an article today, that offers some fresh insight into shale gas in Europe:

The always excellent European Energy Review has an article on the geo-economic blessings of shale gas titled ‘An offer Europe can’t refuse’.

In an interview with EER, Frank Umbach, director at the The European Centre for Energy and Resource Security (EUCERS) and co-author of the recent report ‘Strategic Perspectives of Unconventional Gas’, says that established European energy producers have been skeptical of shale gas, due in part to not wanting to offend Russian gas monopoly Gazprom.

The article point to other reasons (or excuses, depending upon your viewpoint), as to why shale gas development is not being pursued at the pace that Umbach believes it merits.

Read the article from the European Energy Review HERE (registration required)

Source: Natural Gas for Europe

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May 21

DEP Report: Marcellus Operations in Northcentral Region Show No Impact on Short-Term Air Quality

By Curve natural gas in the USA No Comments »
No Emission Levels Found that Constitute Public Health Concern

An air quality study near Marcellus Shale natural gas operations in Bradford, Lycoming, Sullivan and Tioga counties found no emission levels that would pose a public health concern, according to a report released today by the Department of Environmental Protection.
“The results show there are no emission levels that would be of concern to the health of residents living and working near these operations,” DEP Secretary Mike Krancer said. “They are consistent with the results of our air monitoring in southwest and northeast Pennsylvania, the other two areas of the state with the most Marcellus drilling.”
The report notes that the sampling effort, conducted between August and December 2010, was not meant to address potential cumulative impacts.
DEP’s assessment focused on concentrations of volatile organic compounds, including benzene, toluene and xylene, which are typically found in petroleum products. The department also sampled for other pollutants, such as carbon monoxide and nitrogen dioxide, near natural gas extraction and processing sites.
DEP first conducted background sampling in early August 2010 at the Sones Pond parking lot in Loyalsock State Forest, Sullivan County.
The air quality sampling was conducted the weeks of Aug. 30, Nov. 15 and Dec. 6. An evening sampling event was held Nov. 17. DEP used its mobile laboratories and the equipment was set up downwind of the target sources during early morning and late evening hours.
“This study provides us with additional valuable information as part of our ongoing effort to determine the impact of these operations on air quality, public health and the environment,” Krancer said.
The air monitoring surveys were located next to Talisman Energy’s Thomas Compressor Station in Troy Township, Bradford County; East Energy’s Shaw Compressor Station in Mainesburg Township, Tioga County; East Energy’s Chicken Hawk well south of Mainesburg; and Anadarko Petroleum’s Hagemeyer well in Gamble Township, Lycoming County.
Those surveys detected the main constituents of natural gas—including methane, ethane, propane and butane—as well as low levels of other compounds, such as MtBE, carbon monoxide and methyl mercaptan, the odor-producing compound.
DEP’s sampling did not find concentrations of any compound that is likely to trigger air-related health issues associated with Marcellus Shale drilling activities in the northcentral region.
Results from DEP’s previous air monitoring studies near Marcellus facilities in southwest and northeast Pennsylvania were announced in November 2010 and January 2011, respectively.
To view the report, log onto www.depweb.state.pa.us and click “Regional Resources,” then Northcentral Region and choose the “Community Information” link on the right side of the page.
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May 17

Polish Premier Pledges to Continue Shale Gas Exploration

By Curve Poland No Comments »

The French company Total is joining the group of companies prospecting for natural gas in Poland’s shale deposits, and Prime Minister Donald Tusk wants prospecting work to continue.

The Minister Donald Tusk confirmed on Friday [ 13 May] that irrespective of the lobbying within the EU against shale gas extraction, Poland will continue such work. “There are people, institutions, interests that are capable of creating effective lobbying in Europe, but we will be proceeding according to our own reconnaissance,” he stated.

This is how he commented on reports about a possible attempt to block shale gas prospecting in Europe, when the parliament in France banned the performance of certain procedures involved. The reason is their harmfulness to the environment. Polish Euro-MPs and the executives of Poland’s PGNiG, which is engaged in prospecting work, warned against pressure to restrict such work. We wrote about this in Friday’s Rzeczpospolita. “I know who is lobbying against shale gas extraction; please do not tell me that it is Europe,” Tusk commented.

However, he did not provide any details. Experts, on the other hand, are suggesting that the ban in France could be the result of effective pressure by the atomic lobby, since the country’s energy production is dominated by atomic power plants. Opinions are also appearing that ecologists supported by the Russian corporation Gazprom, which is the main supplier of natural gas to the EU, could also be seeking to have such work restricted.

Meanwhile the interest in Polish shale deposits is not waning. The French corporation Total, together with Exxon Mobil, will be looking for shale gas in Poland. The French giant purchased from the Americans a 49 per cent share of a concession in the Lublin region. This autumn, Exxon plans to make the first drill in the region of Chelm. Total’s entry into the Polish market comes as a considerable surprise. The corporation is known for its cooperation with Russian companies – it is a partner for Gazprom in the project to extract gas in the Arctic.

Exxon Mobil’s decision is another case when a concession holder in Poland cedes a share to a partner and shares the risk. In late April, Marathon sold the Canadian company Nexen Inc. a 40 per cent stake in ten concession. In December of last year, the Italian company Eni bought concession shares from the company Minsk Energy Resources.

Source: Rzeczpospolita via BBC Monitoring

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