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http://www.bloomberg.com/news/2012-...n-near-record-prices-for-untested-fields.html



U.S. Shale Bubble Inflates After Near-Record Prices for Untested Fields
By Joe Carroll and Jim Polson
January 9, 2012


Surging prices for oil and gas shales, in at least one case rising 10-fold in five weeks, are raising concern of a bubble as valuations of drilling acreage approach the peak set before the collapse of Lehman Brothers Holdings Inc.

Chinese, French and Japanese energy explorers committed more than $8 billion in the past two weeks to shale-rock formations from Pennsylvania to Texas after 2011 set records for international average crude prices and U.S. gas demand. As competition among buyers intensifies, overseas investors are paying top dollar for fields where too few wells have been drilled to assess potential production, said Sven Del Pozzo, a senior equity analyst at IHS Inc.

Marubeni Corp., the Japanese commodity trader, last week agreed to pay as much as $25,000 an acre for a stake in Hunt Oil Co.’s Eagle Ford shale property in Texas. The price, which includes future drilling costs, exceeds the $21,000 an acre Marathon Oil Corp. paid last year for nearby prospects owned by KKR & Co.’s Hilcorp Resources Holdings LP. In the Utica shale of Ohio and Pennsylvania, deal prices jumped 10-fold in five weeks to almost $15,000 an acre, according to IHS figures.

“I don’t feel confident that the prices being paid now are justified,” Del Pozzo said in a telephone interview from Norwalk, Connecticut. “I’m wary.”

Vast New Resources
The world’s largest energy producers, including Exxon Mobil Corp. and Royal Dutch Shell Plc, are revisiting onshore U.S. prospects passed by in recent decades in favor of deep-water finds in West Africa and the Gulf of Mexico. New drilling techniques developed in the Barnett shale of north Texas have enabled companies to crack previously-impervious formations.

Overseas explorers such as China Petrochemical Corp. and Total SA want to learn from U.S. partners so they can exploit vast shale resources in Europe and Asia, said Mark Hanson, an analyst at Morningstar LLC in Chicago.

The U.S. holds an estimated 2,543 trillion cubic feet of gas, enough to meet domestic demand for more than a century at current rates of consumption, according to the Energy Department in Washington. Shale accounts for 862 trillion of that total, or 34 percent. In China, shale formations hold an estimated 1,275 trillion cubic feet of gas, 12 times as much as the nation’s so- called conventional fields.

Buying to Continue
The buying spree is likely to continue because international oil producers are eager to amass reserves in the U.S., which surpassed Russia in 2010 as the world’s largest source of gas, said Christian O’Neill, an analyst at Bloomberg Industries in Princeton, New Jersey.

Oil production also has blossomed in the world’s largest economy, rising to a 9-year high of 5.78 million barrels a day in October, the most recent month for which the Energy Department in Washington has figures.

Hunt, the closely held Dallas company founded by Texas tycoon H.L. Hunt in 1934, has only drilled “a handful” of wells in its Eagle Ford shale acreage, which means it doesn’t yet know how extensive or rich those holdings are, Del Pozzo said. Similarly, because drilling in the Utica shale in the U.S. northeast still is in its infancy, the geological characteristics and potential bounty of the region are hard to assess, said Manuj Nikhanj, head of energy research at ITG Investment Research Inc.

“The big risk is that people are jumping in with both feet too early,” Nikhanj said in a telephone interview from Calgary. “Of course, the other side of that is that if they wait, they risk missing out on what could turn out to be a big deal.”

More Science
Buyers are studying fields more closely before committing, he said. Total, Europe’s third-largest oil producer by market value, was selective about what sections of the Utica shale will be included in the 25 percent stake it acquired on Dec. 30 in 619,000 acres controlled by Chesapeake Energy Corp. and EnerVest Ltd.

Total’s outlay, including drilling costs, will be $2.32 billion, or the equivalent to about $15,000 an acre, based on Bloomberg calculations. That’s more than four times the average per-acre price from seven Utica shale transactions tracked by IHS from March 2011 to September 2011.

“We are seeing prices move up quite dramatically in these exploratory shale plays,” Nikhanj said. “But the Total joint venture also shows us that these companies with deep pockets are doing more science” before signing deals.

High-Risk Prospects
The quirky nature of shale geology means the risks are high that an investment made in a sparsely drilled prospect will go bust, Nikhanj said. Rock density, porosity and pressure levels vary widely within each field, which means one parcel may hold enough fuel to justify prices of $30,000 or $50,000 an acre, while the adjacent land is almost worthless to drillers.

Brent oil futures, the London-traded benchmark for two- thirds of the world’s crude, jumped 26 percent to an average of $110.91 a barrel in 2011, the highest on record, spurred by supply disruptions in North Africa and escalating worldwide demand for fuels to run trains, airplanes and trucks.

As long as crude commands such lofty prices, explorers will continue to seek out geologic formations soaked in oil and gas components such as propane, Dan McSpirit, a Denver-based analyst for BMO Capital Markets, said in a telephone interview.

Learning the Drill
China Petrochemical, the Beijing-based crude producer known as Sinopec Group, and Total expect to glean expertise from their U.S. partners in the horizontal drilling and high-pressure water injection necessary to extract oil and gas from shale, said Hanson, the Morningstar analyst. Ultimately, the know-how will be transferred to virgin shale prospects in Europe, Asia and Latin America, he said.

U.S. gas explorers including Chesapeake and Devon Energy Corp. are selling interests in shale fields to international energy companies such as Total and Sinopec to finance drilling on leases acquired during a “massive land grab” in 2007 and 2008 as oil and gas prices soared to record highs, O’Neill of Bloomberg Industries said.

The plunge in energy prices that followed Lehman’s bankruptcy and subsequent global financial crisis left operators like Chesapeake too poor to fulfill clauses that set deadlines for finishing wells on pain of forfeiting the leases, O’Neill said.

“These deals give the domestic exploration companies capital to drill so they won’t lose those assets, and gives the foreign companies the learning process they’re going to need to exploit shale resources on their own,” O’Neill said.



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http://www.bloomberg.com/news/2012-...ction-jumps-42-as-shale-drilling-expands.html



North Dakota Oil Production Jumps 42% as Shale Drilling Expands
By Joe Carroll
January 10, 2012


North Dakota oil production surged 42 percent to 510,000 barrels a day in November from a year earlier as energy explorers accelerated drilling the Bakken Shale formation.

The state’s daily crude output topped a half-million barrels for the first time during the month, North Dakota’s Oil and Gas Division said today in an e-mailed statement. North Dakota’s 6,300 wells produced enough oil to displace imports from foreign suppliers such as Iraq or Colombia, Lynn Helms, division director, said in the release.

“This is big news for the state and the country,” Helms said. “Oil production in the state has increased anywhere from 8,000 to 40,000 barrels a day every month since June.”

EOG Resources Inc. of Houston and Enid, Oklahoma-based Continental Resources Inc. are among the explorers drilling wells and pumping crude in North Dakota, according to the oil and gas division’s website.


http://www.bloomberg.com/news/2012-...ction-jumps-42-as-shale-drilling-expands.html
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http://www.bloomberg.com/news/2012-01-11/petrobras-proven-reserves-rise-2-7-percent-in-2011.html



Petrobras Proven Reserves Rise 2.7 Percent in 2011
By Helder Marinho
January 11, 2012


Petroleo Brasileiro SA said its proven reserves of oil, condensate and natural gas rose 2.7 percent in 2011 to 16.4 billion barrels of oil equivalent, according to standards set by Brazil’s oil regulator, or ANP, and the Society of Petroleum Engineers.

Proven reserves rose 1 percent to 12.9 billion barrels of oil equivalent, according to the U.S. Securities and Exchange Commission's standards, Petrobras said today in an e-mailed statement.




http://www.bloomberg.com/news/2012-01-11/petrobras-proven-reserves-rise-2-7-percent-in-2011.html
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trysail said:

LOL

"Pushing?" At $2.50/mcf (Henry Hub), most people would suggest it was closer to making an offer Exxon "can't refuse."
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I think the court case is in progress regarding the Point Thompson gas. I'm not exactly sure and too lazy to google. The State has TransCanada designing a pipeline to the midwest, and CH2 working on a pipeline feasibility to southcentral Alaska. Lotsa fun and games. Lotsa work for the pipeline designers.
 
http://www.bloomberg.com/news/2012-...shale-oil-estimate-to-23-billion-barrels.html



Repsol’s YPF Boosts Argentine Shale Oil Estimates to 23 Billion Barrels
By Rodrigo Orihuela and Ben Sills
February 8, 2012


Repsol YPF SA’s Argentine unit said its shale oil resources at the Vaca Muerta formation in the south of the country probably hold about 23 billion barrels, almost half the size of Brazil’s so-called pre-salt reserves.

The new estimates come after further drilling in the Connecticut-sized area of Argentina’s Neuquen province and reviews of the area by independent auditor Ryder Scott, YPF said late yesterday in a statement. YPF, the local unit of Madrid- based Repsol, previously discovered about 927 million barrels at the Loma La Lata field, which is located in the formation.

YPF, producer of more than half Argentina’s crude, is boosting exploration to arrest output declines amid government criticism that local oil companies are failing to invest in production. The resources at Vaca Muerta compare with the 50 billion barrels of oil Brazil estimates it’s found underneath a thick layer of salt beneath the seabed and which include the largest fields discovered in the Americas in three decades.

“There’s a tremendous amount of resource potential for YPF to develop...” “...It’s an impressive number in terms of the potential size and scope of Vaca Muerta within Argentina.”

American depositary receipts in Buenos Aires-based YPF climbed as much as 12 percent to $36.30 yesterday in New York and closed 11 percent higher at $35.90. Repsol rose 0.5 percent to close at 20.68 in Madrid, before the news was announced.

Repatriate Revenues
In October, the government ordered oil and mining companies to repatriate export revenues and in November opposed a dividend payment for YPF as it seeks to stem capital flight. YPF was one of nine companies that also lost financial incentives for oil exploration and production on Feb. 3., following speculation that the government may consider nationalizing the company.

The government could use central bank reserves to pay for a takeover of YPF, Sebastian Vargas, an economist at Barclay’s Capital, said yesterday in a report to clients.

YPF’s previous 927 million barrel estimate came from surveying 3 percent of the 12,000 square kilometers of Vaca Muerta licensed to the company, Chief Executive Officer Sebastian Eskenazi said in November. The 927 million resources are so-called prospective resources while the 23 billion are so- called contingent resources. Contingent resources include resources that may not be commercially viable.

Vaca Muerta
The Vaca Muerta formation, located in Patagonia, is almost the size of Connecticut, which is 12,997 square kilometers, or 5,018 square miles. Ryder Scott’s study covered an area of 8,071 square kilometers, in which YPF holds 5,016 kilometers.

The Loma la Lata discovery was Repsol’s largest ever and YPF’s largest since at least the early 1990s. The new resources may be the biggest in the Americas since at least the 1970s if the contingent resources are transformed into reserves.

Argentina’s government has discussed nationalizing YPF, Pagina/12 newspaper reported Jan. 29, without saying where it got the information. Pagina/12 regularly runs interviews with top government officials such as Vice President Amado Boudou, who have said that the company needs to do more on production.

YPF may not be able to sustain dividend payments equal to 90 percent of the company’s annual net income amid pressure from the Argentine government, Deutsche Bank AG said in a Feb. 6 note to clients. Repsol, Spain’s largest oil company, owns a 57 percent stake in YPF, while the Eskenazi family’s Petersen Energia SA owns about 25 percent of YPF and operates it.

Brufau Visit
Antonio Brufau, chief executive officer of Repsol, met Argentina’s planning and economy ministers Feb. 6 to discuss the government’s criticism, news agency EFE reported, citing people close to the meeting which it didn’t identify.

Repsol said in November that Loma la Lata’s shale oil is similar in volume to YPF’s existing reserves and its largest find. The company said Vaca Muerta is among the world’s largest and highest quality so-called non-conventional oil and gas resources. YPF is the world’s second-largest company in non- conventional acreage, auditors Wood Mackenzie said at the time.

Repsol is also exploring in Brazil’s Santos, Espirito Santo and Campos basins, including minority stakes in the Guara and Carioca discoveries where the company estimates recoverable reserves of as much as 3 billion barrels.

Repsol last year sold a 40 percent stake in its Brazilian business to China Petrochemical Corp. for $7.1 billion in a deal that valued the Spanish company’s remaining stake at about $10.7 billion. It invested $2 billion in exploring the site.

Brazil Discovery
The discovery of offshore oil in Brazil led to a surge in the market value of state-controlled oil producer Petroleo Brasileiro SA, which has about 16 billion barrels of reserves. Discoveries including the Lula and Franco fields contain billions of barrels and are the largest finds in the western hemisphere since Mexico’s Cantarell in 1976.

Total world resources of oil shale, which is more expensive to produce than conventional oil, are conservatively estimated at 2.6 trillion barrels, and the amount of shale oil that can be recovered depends on “many factors,” according to the Energy Minerals Division of the American Association of Petroleum Geologists.

Shale formations contributed to a boom in U.S. oil output that reached a 9-year high in October, according to Energy Department data.


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http://www.bloomberg.com/news/2012-...eatens-virgin-islands-debt-employment-1-.html



Refinery Closing Threatens Virgin Islands’ Debt, Employment
By Eric Sabo and Nathan Crooks
February 9, 2012


The U.S. Virgin Islands will confront the threat of a debt downgrade when one of the region’s largest oil refineries shuts down this month, doubling joblessness on St. Croix, the archipelago’s poorest island.

About 2,000 workers will lose their jobs when the 350,000- barrel-a-day Hovensa LLC refinery, a partnership of Hess Corp. and Petroleos de Venezuela SA, closes in mid-February to stem $1.3 billion in losses over the last three years. The decision leaves the Virgin Islands without its biggest private employer and facing a widening budget deficit and higher energy costs as some of its best-paid jobs disappear.

“People are already wondering how we’re going to pay utility bills,” Donna Christensen, the U.S. Virgin Islands’ delegate to Congress, said in a Feb. 1 phone interview from Washington. “But this isn’t only going to affect the Virgin Islands, it will have an impact across the nation.”

Faced with weaker demand for their fuels, Caribbean refineries are shutting down or scaling back production, a move that is straining island budgets while threatening higher energy costs along the East Coast. The closure means ratings on bonds sold by the Virgin Islands, a winter beach destination known for its Captain Morgan rum distillery, are under review, said Marcy Block, an analyst at Fitch Ratings.

East Coast Fuel
The Hovensa refinery provided 83,000 barrels a day of gasoline and 47,000 barrels of distillate in October to the U.S. Northeast, according to the Energy Department. U.S. East Coast gasoline demand averaged 3.06 million barrels per day in November, down from 3.31 million barrels five years ago, according to the latest data from the U.S. Energy Information Administration.

Gasoline futures rose 2 percent to a four-month high of $2.8254 a gallon on the New York Mercantile Exchange after the Jan. 18 announcement to close Hovensa. The news followed decisions by Sunoco Inc. and ConocoPhillips to shutter two Pennsylvania refineries.

The loss in tax earnings from the refinery will drain $60 million annually from the Virgin Islands’ $700 million budget, which was facing a $67 million operating deficit this year before the announcement, according to government estimates.

The closing may prompt a downgrade on about $650 million of BBB-rated Virgin Islands Public Finance Authority debt secured by gross receipts taxes, Fitch said in a Jan. 19 report. About $1.2 billion in bonds backed by federal excise taxes on rum sales to the U.S. are less likely to be affected, the report said.

‘Devastating Blow’
“This one closure will be a devastating blow to the Virgin Islands,” Block said in a Feb. 2 interview from New York. “They’re in a tough spot.”

The islands’ bonds are rated Baa1, the third-lowest investment grade rating, by Moody’s Investors Service and aren’t under review for a downgrade, spokesman David Jacobson said. Standard and Poor’s rates the debt BBB.

Virgin Islands’ debt has returned 3.1 percent this year, compared with 3.7 percent for Puerto Rico and 2.1 percent for municipal bonds overall, according to Barclays Capital. The tax- exempt bonds’ higher yields have helped them outperform other munis, said Matt Dalton, who manages about $1 billion of municipal debt, including Virgin Islands’ debt, as chief executive officer at Belle Haven Investments Inc. in White Plains, New York.

Falling Yields
The yield on the Public Finance Authority’s 5 percent bonds maturing in October 2020 have fallen 15 basis points, or 0.15 percentage point, this year to 3.6 percent, according to data compiled by Bloomberg. U.S. Treasuries maturing in November 2020 yield about 1.76 percent.

“People are desperate for yield,” said Dalton.

The U.S. Virgin Islands, which were purchased from Denmark for $25 million in gold in 1917, lie east of Puerto Rico and form part of the same archipelago as the British Virgin Islands. The islands, which include St. Croix, St. Thomas and St. John, are a U.S. territory and its 106,000 residents, who elect a governor and a 15-member senate, are U.S. citizens.

Out of 1,200 full-time workers and 950 contract employees employed by the refinery, only 100 will be retained, Alex Moorhead, a Hovensa spokesman, said in an e-mailed statement. Refinery workers who made as much as $32 an hour will have to compete for jobs in hotels or restaurants that pay about $11 per hour, said Jerry Jackson, the St. Croix representative of the United Steelworkers union.

St. Croix’s unemployment rate will jump to 18.7 percent, the highest among U.S. island territories, from 9.6 percent as a result of the closing, Labor Commissioner Albert Bryan Jr. said. The U.S. unemployment rate was 8.3 percent in January.

‘Fear and Anxiety’
Governor John de Jongh, who cut public salaries by 8 percent and fired 500 state workers last year to cope with budget shortfalls, said there could more dismissals, shorter work weeks, additional school closings and fewer police.

“The Hovensa announcement has caused a universal shudder of fear and anxiety to pass through our islands,” de Jongh, 54, said in his Jan. 30 State of the Territory speech. “Unlike a hurricane, we had no warning this was coming, no time to prepare, to adjust to the possibility that we might be hit.”

The Virgin Islands isn’t alone in struggling to sustain refinery operations. Valero Energy Corp. has reduced production at its 235,000 barrel-a-day Aruba refinery because it isn’t profitable, Bill Day, a San Antonio-based spokesman for the company, said Jan. 26.

Regional Recovery
The demise of Caribbean refineries comes as regional economies are still recovering from the 2008 global financial crisis, as well as the lingering damage from hurricanes and the 2010 earthquake in Haiti, the hemisphere’s poorest country.

When measured as a proportion of gross domestic product, four of the 11 most indebted nations in the world are in the Caribbean. St. Kitts & Nevis leads the region, with debt-to-GDP of 185 percent, ahead of Greece at 165 percent, according to the World Bank. Antigua & Barbuda, Jamaica and Barbados round out the list.

“The region has not been very lucky with natural disasters,” said Auguste Kouame, an economist at the Washington-based lender, in a Jan. 27 phone interview. “When a hurricane hits, they tend to borrow to respond to the shock.”

Michael Dembeck, executive director for the St. Croix Chamber of Commerce, said the refinery closing will have a ripple effect throughout the economy, harming trucking companies, restaurant business and cutting enrollment at private schools.

The government offers discounts on property and excise taxes of as much as 100 percent, along with other benefits, to help lure new investment, he said.

“We have to target light manufacturing and financial management firms, but those won’t come close to matching the loss in employment from Hovensa,” Dembeck, 64, said in a Feb. 2 phone interview from St. Croix. “It’s going to take time.”


http://www.bloomberg.com/news/2012-...eatens-virgin-islands-debt-employment-1-.html
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http://www.bloomberg.com/news/2012-...n-oldest-field-to-tap-heavy-oil-eiu-says.html



Saudi Aramco to Re-Open Oldest Field to Tap Heavy Oil, EIU Says
By Wael Mahdi
February 16, 2012


Saudi Arabian Oil Co. plans to re- open the Gulf kingdom’s oldest oil field and produce there for the first time in 30 years as the company boosts output of heavy crude, the Economist Intelligence Unit said.

The state-owned producer, known as Saudi Aramco, may revive a plan from 2008 to restore production at the mothballed Dammam field, the EIU said in a report. Dammam contains some 500 million barrels of oil and may yield as much as 100,000 barrels a day of Arabian Heavy crude, according to the report.

Aramco, the world’s largest oil exporter, is considering redeveloping the onshore field in response to “tight market conditions,” the London-based researcher said in the report issued yesterday. It shut Dammam, along with several other small fields, in the early 1980s due to low demand. Officials at Aramco’s headquarters in Dhahran, Saudi Arabia, did not answer phone calls seeking comment today, the first day of the Saudi weekend.

Saudi Arabia, which holds the world’s largest proven oil reserves, pumped 9.65 million barrels a day in January, according to data compiled by Bloomberg. The country discovered its first commercial quantities of oil at Dammam Well 7, known as the “Prosperity Well,” in 1938. Dammam 7 produced about 32 million barrels of oil before it was closed down, Aramco’s Chief Executive Officer Khalid Al-Falih said in a speech in Washington, D.C., on May 19.

Aramco is also speeding up a project to increase capacity for heavy crude at the Manifa field in the Persian Gulf. Additional production from Manifa, the world’s fifth-largest oil field, will help maintain Aramco’s maximum sustainable oil production capacity at 12 million barrels a day, Aramco said in June in its 2010 annual review.


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http://www.bloomberg.com/news/2012-...means-lower-tax-that-risks-unrest-energy.html



Russian Oil Boom’s End Means Lower Tax Haul
By Stephen Bierman
February 20, 2012


Russia’s 12-year oil boom is nearing its peak, forcing the next president to decide whether to cut taxes and revive production or use the windfall from $100 oil to boost public spending and quell mounting unrest.

As Vladimir Putin campaigns for a second stint in the Kremlin, the nation’s existing fields are losing pressure and oil companies OAO Rosneft, OAO Lukoil and TNK-BP say production taxes give little incentive to invest. Since Putin first became president in 2000, crude output has grown 57 percent to 10 million barrels a day, surpassing Saudi Arabia and flooding the state treasury.

“The cream has been skimmed off the top,” said Leonid Fedun, the billionaire deputy chief executive officer of Lukoil, Russia’s second-largest oil company. “Further steps require taxes based on different principles,” or production will start falling within three years, he said.

Any cuts in the oil and gas industry’s 5.64 trillion rubles ($190 billion) in taxes mean less cash to combat the biggest anti-government protests since the 1990s. Deputy Energy Minister Sergey Kudryashov said Feb. 2 the need to strike a balance between revenue and oil output levels is one of the most difficult questions facing the state.

“Being the world’s largest energy producer keeps Russia at the top table of global politics, that’s why it is non- negotiable,” Chris Weafer, chief strategist at Moscow-based investment bank Troika Dialog, said in a phone interview. “While a lot of rhetoric will be about reform and diversification, maintaining oil output is so important that it doesn’t have to be stated.”

Opinion Polls
Putin, seeking a return to the presidency in March 4 elections, leads polls with about 55 percent voter support, according to a survey of 1,600 voters by the All-Russian Center for the Study of Public Opinion. Communist leader Gennady Zyuganov polled 9 percent and Vladimir Zhirinovsky of the nationalist Liberal Democrat Party 8 percent.

The oil and gas industry accounted for almost 50 percent of the state’s income in 2011, and Rosneft’s tax bill last year ran to about half its $92 billion revenue.

Russia’s Soviet-era Siberian fields are maturing, and producers face eroding profitability related to the higher cost of maintaining output. Crude extraction in the Khanty Mansiysk region of western Siberia, which began in 1964 and now contributes roughly half of Russia’s oil, fell 1.7 percent in 2010, according to the regional government’s website.

Declining Prospects
The prospect of decline can be seen on the Moscow stock exchange. Rosneft, the state-controlled company that’s the biggest oil producer, dropped 17 percent in Moscow trading over the past year, a time when crude prices gained by 13 percent to about $120 a barrel.

The Moscow-based company was downgraded... this year on concern capital spending is rising on fields and refineries as production stalls.

“We have difficulty finding catalysts for the stocks amid elevated capex levels,” analysts at Troika said. Lukoil slid 4.3 percent during the past year, while TNK-BP gained 3.2 percent.

Oil producers want tax breaks to boost returns from bringing new fields online and spending on existing deposits. Rosneft has pushed for tax breaks before deciding to develop the Yurubcheno-Takhomskogo site in East Siberia. OAO Gazprom Neft, the oil arm of the world’s largest gas producer, has threatened to slow work on three remote fields because of taxes.

Tax Talks
Talks on tax reform are unlikely to produce a windfall for the oil companies, as the state will take as much as it can without ruining investment, said Eric Kraus, an asset manager at Nikitsky Capital. At the same time, Russian oil producers are a low-risk investment because taxes rise and fall with crude, Kraus said. The state bears price risk, he said.

The stocks with the highest dividends are the best picks, such as preferred shares in OAO Surgutneftegas, TNK-BP, and OAO Bashneft, Kraus said. They are “pretty much the only thing in Russian equity which pays its own rent,” Kraus said. The Surgutneftegas preferred stock traded today at its highest since January 2008.

Without tax holidays five years ago Russia would already be in decline, Lukoil’s Fedun said.

Russia used windfall revenue to build two oil funds to more than $225 billion in December 2008, cash Putin used to bail out the banking industry during the global credit crunch and fund deficits that grew from increased spending on weapons, pensions and railways.

Oil Reserve Funds
Putin, who wants a return to the presidency after four years as prime minister, is unlikely to receive a second oil windfall. Reserves in the two funds dropped to $150 billion at the end of January.

“Two to three percentage points of our annual growth used to come from the oil and gas sector,” then Finance Minister Alexei Kudrin said during a meeting with members of Putin’s All- Russia People’s Front in June. “That’s just gone now.”

Russia’s strategy to keep output above 10 million barrels a day for the next decade will initially depend on its ability to increase the amount recovered from existing fields, Kudryashov said. No major projects are scheduled to come on stream in the next four to five years, he said.

Pinning Hopes
After that, Russia is pinning its hopes on the development of untapped deposits in eastern Siberia and the Arctic. The state will create a special regime for its offshore deposits, Kudryashov said.

Reductions in tax rates on crude exports, introduced last year, which increased profitability of mature deposits, have helped. Producers’ ability to slow decline rates at older fields underpinned Russia’s surprise record output last year, Troika Dialog wrote in research on Jan. 10. The bank expects the trend to continue and forecasts marginal output growth this year to 10.4 million barrels a day.

It may be difficult for companies to sustain this without accelerating developments, said Alexei Kokin, an analyst at Uralsib Financial Corp. said.

Forecasts for a plateau in oil production around current levels for the next decade “may be a bit optimistic,” said Kokin. “All the risks are to the downside.”



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http://mdn.mainichi.jp/mdnnews/news/20120215p2g00m0dm089000c.html



Japan begins preparatory drilling for methane hydrate production


NAGOYA (Kyodo) -- Japan began preparatory drilling for seabed methane hydrate production tests in the Pacific Ocean off Aichi Prefecture in central Japan on Wednesday after a one-day delay, officials of Japan Oil, Gas and Metals National Corp. said.

A deep-sea drilling vessel from another state-affiliated organization, the Japan Agency for Marine-Earth Science and Technology, started drilling in waters about 1,000 meters deep some 70 to 80 kilometers south of the Atsumi Peninsula, the officials said.

If the project is successful, it would be the world's first seabed production of methane hydrate, expected to be a new source of energy for Japan.

The corporation, which is engaged in exploring and developing resources such as oil, natural gas and metals, plans to conduct seabed methane hydrate production tests from January to March 2013.

The Tokyo-based firm originally planned to launch the drilling by 9 a.m. Tuesday, but preparations for the work were delayed due to bad weather and device operation checks, the officials said.

The vessel, called "Chikyu," which means Earth, will dig about 260 meters or more below the seabed and set up four wells by around late March.

One of the four wells will be used for methane hydrate production tests and the remaining three will be used to monitor possible changes in the environment resulting from the project, such as temperature variations.

Methane hydrate, a sherbet-like substance consisting of methane gas trapped in ice below the seabed or permanently frozen ground, is viewed as a promising new energy source.

Methane hydrate deposits underneath the seabed in waters south of central Japan are estimated at around 1 trillion cubic meters, enough for more than 10 years' supply of natural gas consumed in Japan.


(Mainichi Japan) February 15, 2012



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http://www.reuters.com/article/2012...eedType=RSS&feedName=industrialsSector&rpc=43



Hovensa completes Virgin Islands refinery shutdown
February 21, 2012
NEW YORK (Reuters)

Hovensa LLC completed shutdown of its 350,000 barrel-per-day St. Croix, U.S. Virgin Islands refinery on Tuesday, the company said in a statement.

The complex will be operated as an oil storage terminal.

"Hovensa's operation of the complex as an oil storage terminal is subject to the completion of negotiations with the Government of the Virgin Islands," the company said.

Losses at the Hovensa refinery, owned by Hess and Venezuelan state oil company Petroleos de Venezuela, totaled $1.3 billion over the past three years and were projected to continue.

The company had announced the refinery shutdown on Jan 18.

On Tuesday, when Hovensa said the shutdown was complete, the markets focused on geopolitical tensions in the Middle East, the Euro and the strength of the S&P 500.

March RBOB futures ended the day up 1.81 percent at $3.066 per gallon and the cash market in the New York Harbor saw values of either side of 4.00 cents per gallon under the screen.

The 46-year-old refinery was once one of the largest plants in the Americas, with 500,000 bpd capacity. The company idled 150,000 bpd of older, less efficient units in 2011 on the West Side of the plant.

Sluggish oil demand growth in the United States and Europe, growing competition from new, advanced Asian refineries and spike in the price of Atlantic Basin Brent-based crude oil relative to inland U.S. grades has devastated refining margins for many older East Coast and European refiners.

The U.S. East Coast is now facing a tight summer gasoline supply outlook. In September, ConocoPhillips and Sunoco Inc. announced they would close three refineries with nearly 700,000 bpd of capacity in the region, two plants have already been idled, and Sunoco's 335,000 bpd Philadelphia refinery is slated for closure if no buyer is found.



http://www.reuters.com/article/2012...eedType=RSS&feedName=industrialsSector&rpc=43
Click to expand...
 
http://www.bloomberg.com/news/2012-02-24/n-alaska-may-hold-80t-cubic-feet-of-shale-gas.html



N. Alaska May Hold 80T Cubic Feet of Shale Gas
By Katarzyna Klimasinska
February 24, 2012


Alaska’s North Slope shales may hold as much as 80 trillion cubic feet of gas, or more than half the highest estimate for the Marcellus formation, and as much as 2 billion barrels of oil, the U.S. Geological Survey said.

President Barack Obama’s administration and the state of Alaska are offering more access to oil and natural gas resources on land and in the Arctic waters to help lower dependence on imported fuel and push more crude through a major oil pipeline crossing the state. Royal Dutch Shell Plc plans to start drilling this year in the Chukchi and Beaufort seas, which are off the coast of the North Slope.

“Alaska’s energy resources hold great promise and economic opportunity for the American people,” Interior Secretary Ken Salazar said today in an e-mailed statement.

The geological service, part of the Interior Department, said in a statement that North Slope shale hasn’t been developed because of economic and infrastructure considerations.

The assessment, the first made of North Slope shale resources, is based on success in extracting oil and gas from similar formations, such as the Marcellus Shale in the U.S. East. The agency last year estimated Marcellus may hold as much as 144 trillion cubic feet of gas.

Shale gas and shale oil, produced by horizontal drilling and hydraulic fracturing by injecting water and chemicals underground, led to record natural gas output in the U.S. last year and 33 percent decline in prices in the past 12 months.


http://www.bloomberg.com/news/2012-02-24/n-alaska-may-hold-80t-cubic-feet-of-shale-gas.html
Click to expand...
 
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