Awl Bidness

[thør]

Where'd you find that image? It really is pretty amazing to see and think about it and the possibilities. For me, the idea of methane hydrates has always been more in the realm of the theoretical.

Hot ice is pretty cool.

I'd seen it before in a Canadian Oil and Gas Conference flier so I knew some photos like it existed. I simply Did a Google image search for 'hydrate on fire' and found it. This one is less dramatic as a photo, but still a good pic:

http://polipundit.com/wp-content/uploads/2011/05/flaming_hydrate.jpg

 

[trysail]

I wouldn't touch this thing with a 20-foot pole. Other Russian companies, particularly LUKoil have taken great pains to comply with Western concepts of transparency and accounting standards. LUKoil has used U.S. GAAP accounting for more than a decade and has its reserves engineered by a well-known and highly reputable U.S. firm, DeGolyer & McNaughton.

Surgut, on the other hand, has long been know for its shadowy aspect and lack of disclosure.


__________________

http://www.bloomberg.com/news/2012-...russia-oil-with-28-billion-secret-energy.html



Surgut Revealed as Best Russian Oil With Sleepy $28 Billion Secret
By Stephen Bierman
March 2, 2012

Russia’s fourth-largest oil producer pumps more crude than the U.K., employs 100,000 people and trades on stock exchanges in Moscow, London and New York. What’s not disclosed is how much cash OAO Surgutneftegas (SNGSP) holds and the identity of its biggest shareholders.

A law to align Russian financial reporting with international standards this year promises to lift the veil on the Siberian driller, run by General Director Vladimir Bogdanov since his Soviet-era appointment in 1984 at the age of 33. [There are] estimates the company holds $28 billion in cash, more than double the balance of Exxon Mobil Corp.

Opaque accounting has held back the share price, according to Citigroup, which ranks the company as the best Russian oil investment ahead of OAO Lukoil. Even after dividends, Surgutneftegas investors earned a return of 11 percent over the past five years, a period when crude oil more than doubled. Russia, which holds a presidential election this weekend, is pushing transparency as part of a campaign to make Moscow a financial center and broaden the economy.

Greater transparency “is a game changer” at Surgutneftegas, said Ildar Davletshin, an oil and gas analyst at Renaissance Capital. “Something the market has been waiting for the last decade.”

Russian President Dmitry Medvedev, who will step down in May, met executives including Goldman Sachs Group Inc. Chief Executive Officer Lloyd Blankfein and JPMorgan Chase & Co. CEO Jamie Dimon last year for opinions on how Russia might gain a larger role in international finance.

Rosneft Switch
One result was a law that started Jan. 1 requiring publicly traded companies to meet International Financial Reporting Standards. TNK-BP, BP Plc’s Russian venture with a group of billionaires, said this week it will adopt IFRS standards for the first quarter. OAO Rosneft, Russia’s largest oil company, switched yesterday.

Prime Minister Vladimir Putin, favored to win the presidential election, signed the order to create the financial reporting legislation last year.

“Long a sleepy ignored stock, we see changes afoot at Surgutneftegas,” said Ronald Smith, an oil analyst... “A material change in transparency and already in law may be accepted by the market as inevitable by year end.”

Bogdanov, whose $3.3 billion fortune ranks 32nd on the Forbes list of Russia’s richest men, quit reporting under U.S. generally accepted accounting principles, or GAAP, after 2002 and has given no indication of a change. He declined to comment on 2012 plans when asked by Bloomberg News on Feb. 9 and wouldn’t be interviewed for this story. The Forbes estimate assumes the general director holds a controlling stake in Surgutneftegaz that isn’t disclosed.

Controlling Shareholders
The new law won’t force Surgutneftegas, which has a market value of about $35 billion, to disclose its controlling shareholders. The company listed ZAO ING Bank Evraziya and Bank of New York nominees as its largest shareholders and the only ones exceeding a 5 percent holding in accounts to Russian standards.

Surgut shares fell 0.3 percent to 30.39 rubles on Moscow’s Micex exchange at 4:29 p.m. local time.

Surgutneftegas has pumped oil from a swampy stretch of Siberia near the city of Surgut since the 1964 discovery of the region’s reserves. Even as rivals from billionaire Vagit Alekperov at OAO Lukoil and Mikhail Fridman of TNK over the past decade opened up accounting, Surgutneftegas held firm.

The company produced 1.2 million barrels a day in January, 0.7 percent more than a year earlier, according to data compiled by Bloomberg.

Bogdanov has kept ties to the Kremlin, running Putin’s maiden election campaign in west Siberia in 2000. In a Feb. 20 newspaper article, Putin thanked Bogdanov’s Surgutneftegas personally for funding a Pacific nuclear submarine base in 2002 when the state couldn’t fund it.

Shirked Acquisitions
The company has made only one acquisition, a purchase of MOL Nyrt. shares, allowing an estimated $28 billion to pile up, according to Smith, who extrapolated his figure from the company’s 2002 GAAP results.

“Surgutneftegaz remains among the least transparent companies in Russia,” said Aivaras Abromavicius, a partner at East Capital, which holds a 3.75 percent stake in Surgutneftegas. East Capital, an asset manager specializing in Eastern Europe and China, has overlooked a lack of clarity on ownership and reporting in favor of a “handsome” dividend supported by the company’s strong cash flow and cash position, he said.

Alexander Burgansky, an oil and gas analyst at Otkritie Capital, said reporting to international accounting standards would allow Surgutneftegas to compete for a wider range of investors.

Cash Not Clear
Right now it’s unknown if the cash is there, said Alexander Burgansky, an oil and gas analyst at Otkritie Capital. In Russian accounting, the company listed a total of $28 billion in short-term investments, long-term investments and cash accounts, although details of the investments aren’t made public, he said.

While investors may benefit from improved financial reporting standards -- Citigroup’s Smith said today’s valuation is based mainly on the company’s supposed cash holdings and not the underlying oil-production business -- they won’t unmask the company’s largest shareholders.

“Bogdanov wasn’t so secretive about Surgutneftegas ownership before 2002-2003,” the time when investors speculate he transferred ownership to someone else, said Vladimir Milov, an opposition politician who served as deputy energy minister at the time.

Milov named Gennady Timchenko, founder of oil trader Gunvor International, as the likely buyer of the company, without providing proof. Timchenko denies the claim, and his Volga Resources fund owns less than 0.1 percent of Surgutneftegas shares, said Stuart Leasor, a spokesman for the fund.

Putin Spokesman
Kremlin economic adviser Arkady Dvorkovich declined to comment on whether Surgutneftegas would have to report IFRS under the new law. Putin’s spokesman Dmitry Peskov also declined to comment directly on the issue.

In 2002, GAAP reporting showed that the company held shares in its own treasury, something the company later denied.

Surgutneftegas’s only major acquisition, a surprise purchase of 22 percent in Hungary’s largest refiner MOL Nyrt. from OMV AG, failed because of the lack of clarity in ownership. A Hungarian law prevented Surgutneftegas from being listed among shareholders until it revealed its beneficial shareholder, Peter Csaszar, a securities analyst at KBC said.

Surgutneftegas management may have controlled as much as 72% of the company through 23 non-commercial entities, Russian newspaper Vedomosti reported in 2007. Bogdanov controlled nine of the entities and 47 percent of Surgutneftgas’s voting rights, according to the newspaper.

“The world is changing around Surgut,” said Ivan Mazalov, director of Prosperity Capital Management, which manages about $4 billion in assets including Surgutneftegas shares. “And Surgut will have to adapt to that.”




http://www.bloomberg.com/news/2012-...russia-oil-with-28-billion-secret-energy.html

 

[trysail]

http://www.npr.org/news/graphics/2012/03/oil-prices/gr-oilprices-948.gif

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[trysail]

http://www.bloomberg.com/news/2012-...ket-as-explorers-spend-90-billion-energy.html




Iran Oil Power Declining as Explorers Increase Spending: Energy
By Ayesha Daya, Brian Swint and Rakteem Katakey
March 13, 2012

The Iran-driven run in oil prices to the highest since 2008 masks the Middle East producer’s diminishing importance to global oil supplies as record spending on drilling unearths reserves from Argentina to Angola.

New fields will ease pressure on prices, according to the Centre for Global Energy Studies. Futures show investors expect benchmark Brent crude to drop to less than $100 a barrel in 2015 from $125 today. Global exploration spending, led by Exxon Mobil Corp. and Royal Dutch Shell Plc, will jump 20 percent this year to at least $90 billion, Barclays Plc research shows.

Offshore drilling may unlock about 25 billion barrels of oil this year, more than four times Norway’s remaining reserves, according to Morgan Stanley. In addition, there are so-called unconventional fields in the U.S., where oil production from North Dakota’s shale rose 75 percent last year, and Argentina, home to a field found by Repsol YPF SA that may hold about 23 billion barrels.

“The price of oil has to come down because supply prospects are so positive,” said Manouchehr Takin, an analyst at the Centre for Global Energy Studies. “The rate of demand isn’t going to grow as in the past as we use resources more efficiently.”

The International Energy Forum, consisting of a group of nations that account for more than 90 percent of global oil and gas supply and demand, gathers today in Kuwait as pressure builds on Iran from U.S., the European Union and Israel to end its nuclear research program. The forum was founded in 1991 to discuss international energy security.

Largest Consumer
Saudi Arabian Oil Minister Ali al-Naimi and U.S. Deputy Energy Secretary Daniel Poneman, representing the world’s biggest crude exporter and the largest consumer, are joining ministers from more than 70 countries to discuss how to meet future energy demand and mitigate price volatility. Executives will attend from companies including Exxon, Shell and Total SA.

“Even now the market is well-supplied,” Aldo Flores- Quiroga, the IEF’s secretary-general, said in an interview in Kuwait yesterday. “New fields are being discovered. There are new areas where sources are being developed. The sources of supply are spreading and this will change the politics of oil.”

Concern that a strike against Iran will start a Middle East war has driven oil prices higher and exploration can’t do much to mitigate that in the short term, said Colin Lothian, corporate strategy analyst at Wood Mackenzie Consultants Ltd. The European Union will stop buying any Iranian oil from July 1.

OPEC Pumping
The Organization of Petroleum Exporting Countries, which supplies 40 percent of the world’s oil, is pumping the most in three years and crude surpassed $120 a barrel on Feb. 20 for the first time since May. The average price of OPEC’s main crude grades has surpassed $120 a barrel since Feb. 22, the longest stretch since 2008.

“It takes four to eight years from exploration to bringing supply on the market, so new discoveries won’t have a material impact on supply for a few years,” Lothian said in an interview. “Concerns in the market are different, about potential disruption in supply.”

Still, the underlying supply and demand picture may be more balanced. OPEC cut its global oil demand forecast for 2012 on March 9 by 130,000 barrels a day to 88.63 million on moderating prospects for global growth.

The forward curve for Brent crude, the benchmark for two- thirds of the world, shows prices dropping to $112 by the end of next year and to about $95 in December 2016.

Brent crude for April settlement on the London-based ICE Futures Europe exchange was up 58 cents, or 0.5 percent, at $125.92 as of 9:35 a.m. local time.

Less Important
Iran is becoming a less important global supplier. The second-largest OPEC producer will see its share of oil production slip from 4.9 percent in 2010 to 4.5 percent in 2015, according to the International Energy Agency.

Spending on oil and gas exploration rose to a record $72 billion last year, according to Wood Mackenzie, as drillers look to replace aging fields with finds in countries with little or no history of oil production.

“We are seeing a wave of new exploration activity,” said Robin Batchelor, the manager of Blackrock Inc.’s $4.5 billion World Energy Fund. “The majors are beginning to increase their exploration budgets and have become more interested in some of these frontier plays.”

Shell, based in The Hague, is increasing spending on exploration 35 percent to about $5 billion this year. London- based BP Plc is doubling exploration drilling this year and is stepping up spending on projects in Angola, the North Sea and the Gulf of Mexico.

Exxon Expects
Exxon expects to start up nine major projects this year and next and anticipates adding the equivalent of more than 1 million net barrels a day by 2016. The company’s 2012 exploration portfolio includes projects in Tanzania, Guyana and Ireland, according to a March 8 investor presentation.

Smaller explorers are making important discoveries also. Tullow Oil Plc last year discovered oil in French Guiana that may double its $4.4 billion economy. Cobalt International Energy Inc., backed by Goldman Sachs Group Inc., last month confirmed a 1,180-foot column of oil in waters off Angola.

The U.S. may surpass Russia as the world’s largest energy producer in the next 10 years as output of natural gas and crude from shale rock formations climbs, Pacific Investment Management Co.’s Mark Kiesel said last month.

China, the world’s biggest energy consumer, is estimated to have more gas trapped in shale than the U.S. and plans a second auction of shale exploration areas as it seeks to triple its use of gas to 10 percent by 2020.

“The world has become a very exciting place for energy and there are possibilities everywhere,” B.C. Tripathi, chairman of GAIL India Ltd., the country’s biggest natural-gas distributor, said in a telephone interview on March 7. “Our options to get oil and gas now range from America to Australia.”



http://www.bloomberg.com/news/2012-...ket-as-explorers-spend-90-billion-energy.html

 

[trysail]

Gentlemen (and ladies),

place your bets. Do you:

(1) believe in "regression to the mean" or
(2) believe it's "different this time?"

$/barrel of petroleum (WTI) divided by $/MM BTU of natural gas ( nearest NYMEX contract)

http://alfred.stlouisfed.org/alfredgraph.png?g=5SZ


​

 

[trysail]

http://www.bloomberg.com/news/2012-...ut-trumps-exxon-rosneft-chart-of-the-day.html



PetroChina’s Oil Output Trumps Exxon, Rosneft
By Bloomberg News
April 1, 2012

PetroChina Co. surpassed global rivals Exxon Mobil Corp. and OAO Rosneft to become the biggest oil producer among publicly traded companies last year.

The CHART OF THE DAY shows crude output by PetroChina compared with production of the world’s largest listed energy companies, in million barrels a day, based on Bloomberg calculations from company statements. The lower panel tracks Beijing-based PetroChina’s quarterly net income in million yuan, including the final three months of 2011 reported on March 29.

PetroChina plans “large scale” acquisitions to secure more oil and natural gas to help fuel the world’s second-biggest economy, Chairman Jiang Jiemin told reporters after the earnings report. The Hong Kong-listed company aims to spend at least $60 billion on global assets this decade to boost the share of overseas output to half of total production.

“There isn’t enough organic growth that can support such a growth, so PetroChina has to acquire the capacity through major acquisitions...” For PetroChina to reach its overseas production goal, Beveridge said the company needs to add capacity equivalent to that of Royal Dutch Shell Plc, which produced a combined 3.2 million barrels a day of oil and gas last year.

PetroChina’s oil and gas production outside China rose 18 percent last year, five times faster than that of domestic fields, data from the company’s earnings statement show. Overseas output climbed to 120.8 million barrels, less than a tenth of the total of 1.3 billion barrels, or 3.5 million barrels a day of oil and gas. Based on both crude and gas, Exxon Chairman Rex Tillerson said on a teleconference March 8 that his company remains the biggest listed producer at 4.5 million barrels equivalent a day.

While PetroChina has emerged as the top publicly traded oil producer, the company still has “huge” potential to expand its output, Jiang said. Unlisted Saudi Arabian Oil Co. produces almost 10 million barrels a day of crude.



http://www.bloomberg.com/news/2012-...ut-trumps-exxon-rosneft-chart-of-the-day.html

 

[trysail]

It's merely the 21st century continuation of the 19th century's "Great Game."


_________________
http://www.bloomberg.com/news/2012-...-gas-pipeline-to-europe-from-caspian-sea.html



Total Weighs Stake in Gas Pipeline to Europe From Caspian Sea
By Zulfugar Agayev
April 3, 2012

Total SA, Europe’s third-largest energy company, may join a pipeline to carry Caspian natural gas across Turkey as the European Union seeks to cut dependence on Russian fuel.

Total was invited to participate in the Trans-Anatolia pipeline project, or Tanap, planned by Turkey and Azerbaijan, as were BP Plc and Statoil ASA, its partners in Shah Deniz, the biggest Azeri gas deposit. It will take the Shah Deniz partners “several months” to decide on a route, said Christian Giudicelli, general manager of Total E&P Azerbaijan.

“We are evaluating the Tanap proposal very seriously,” Giudicelli said in an interview in the Azeri capital of Baku.

Nabucco, a 7.9 billion euro ($10.5 billion) pipeline project backed by the EU to import Caspian fuel, will consider whether to link up with Tanap as it prepares to make a final investment decision next year. The decision has been repeatedly delayed as Nabucco vies with competing links for Azeri and other Caspian region gas resources.

Turkey and Azerbaijan signed a memorandum of understanding in December on building the 2,000-kilometer (1,240 mile) Tanap pipeline from eastern Turkey to its European Union border. The link may carry 10 billion cubic meters of gas a year to the EU from Shah Deniz, while Turkey will buy 6 billion cubic meters.

A further agreement on Tanap was delayed from late March as Turkish and Azeri companies work out their stakes. Turkey wants as much as 50 percent, the non-state Azeri news service Turan reported last week, citing unidentified Turkish officials.

Tanap Stakes
State Oil Co. of Azerbaijan, also known as Socar, plans to start with about 80 percent of Tanap, which may cost $5 billion to $7 billion, according to a preliminary feasibility study, Socar President Rovnaq Abdullayev said in an interview in February. The Istanbul-based state pipeline company Boru Hatlari Ile Petrol Tasima AS, or Botas, and oil and gas producer Turkiye Petrollari AO will get a combined 20 percent.

Turkey may increase its stake in Tanap if it has the financial resources, the Azeri government-funded 1news.az website reported yesterday, citing Industry and Energy Minister Natiq Aliyev.

Socar plans to keep control of Tanap, while offering part of its holding to BP, Total and Statoil, Abdullayev said.

The Shah Deniz partners plan to almost triple the capacity of the 692-kilometer South Caucasus Pipeline, or SCP, that connects the Sangachal terminal near Baku to the eastern Turkish city of Erzurum via Georgia, Total’s Giudicelli said.

Absheron Gas
The capacity will be increased to 24 billion cubic meters a year from 8.8 billion cubic meters by adding compressor stations and building a link parallel to the existing one, Giudicelli said. The expansion will be completed before the planned second phase of Shah Deniz starts in 2017, he said.

Total is continuing exploration of the Absheron development with Socar and France’s GDF Suez SA after reporting a gas discovery there in September.

“Our initial estimate of Absheron’s reserves is several trillion cubic feet of gas,” Giudicelli said. “The range of the evaluation is still large because we have only one well at the moment.”

Socar has said Absheron may contain 300 billion cubic meters of gas and 45 million tons of condensate. Total and Socar each hold 40 percent, and GDF Suez has 20 percent.

Production at Absheron may start “somewhere in the 2020s”, Giudicelli said. The partners will invest “several billions of dollars” to develop the field.

Total, which has been in Azerbaijan for the past 15 years, is looking to expand its presence, Giudicelli said. “We are interested in growing in Azerbaijan,” he said. “We can offer our experience and knowledge in developing other prospective structures in Azerbaijan.”


http://www.bloomberg.com/news/2012-...-gas-pipeline-to-europe-from-caspian-sea.html

 

[trysail]

Shale oil: from curse to cure for East Coast refiners?
By Janet McGurty

NEW YORK (Reuters) - In 1902, the S.S. Paraguay set sail from Texas carrying the first shipment of 400,000 barrels of oil from the Spindletop field to a new refinery on the Delaware River.

The Pew family, which had large holdings in Texas, built the plant to help absorb the gusher of crude that had unexpectedly emerged in east Texas, which lacked refining capacity and sufficient demand for the fuel. The Marcus Hook, Pennsylvania plant, perched at the tip of a spit of land, would provide both.

Amid another U.S. oil market upheaval more than a century later, the roles are reversed: a new kind of oil from Texas and North Dakota may rescue some East Coast refiners from the brink of oblivion, providing a local alternative to the costly imported crude that had threatened to put them out of business.

While it appears too late to spare Marcus Hook, which has been shuttered since December, evidence of new buying interest has emerged this week for two other major plants, potentially saving the Northeast region from a summer fuel squeeze that had unnerved politicians all the way to the White House.

Sunoco Inc, which owns Marcus Hook, received a handful of bids this week for its 335,000-barrels-per-day (bpd) Philadelphia refinery, the region's biggest, sources familiar with the bidding process said. It has threatened to shut the plant if not sold by July 1.

One of those bidders is counting on the boom in light, sweet shale oil to help resuscitate the ailing sector, which has been squeezed between costly, imported light crude, falling gasoline demand and new, more sophisticated overseas rivals.

Preferred Sands LLC, which has grown in five years to become the third-largest supplier of sand and proppants to the hydraulic fracturing industry, touts its deep connections in the shale patches of Bakken, North Dakota, and Eagle Ford, Texas, plus more than 1,500 rail cars with connections to major railroads.

"We will continue to run it as a refinery and use our substantial logistics experience and leverage our oil industry knowledge," said Mike O'Neill, founder and chief executive of Preferred Unlimited, the parent company.

ConocoPhillips' 187,000-bpd Trainer refinery, also for sale, is said to have attracted some interest.

The sales have become charged on a political level over potential job losses and regional fuel shortages. But concerted efforts of federal and local legislators, union workers and others may now be paying off.

"It's gratifying to know that there are serious, well-financed prospects to purchase the Philadelphia refinery," Pennsylvania Senator Bob Casey said. "I also know Mike O'Neill to be a successful and sophisticated entrepreneur."

BY LAND OR BY SEA
The Marcus Hook, Trainer and Philadelphia refineries were in many ways casualties of the surge in U.S. shale oil production, an unexpected boon that emerged from the hydraulic fracturing technology first applied to natural gas fields.

As production in landlocked North Dakota and Canada surged, crude prices plunged in the Midwest, giving refiners there a profit advantage that allowed them to chip away at the East Coast market. Some of that oil made it as far south as Louisiana and Texas by rail, but little of it moved east.

But late last year, Sunoco and Conoco tested light, sweet Bakken crude from North Dakota at their plants, with an estimated 10,000 and 20,000 bpd of Bakken oil railed to Albany, New York and then barged down to Philadelphia, traders said.

However, Lynn Elsenhans, then Sunoco's chief executive, said in November that Sunoco Logistics lacked the assets to bring enough crude east to make it economical.

Enter Preferred, which says its train connections give it a leg up over other bidders. It already hauls tonnes of sand or silica from plants in Nebraska and Arizona to the shale patches in other states, where the "proppant" is injected into wells to allow oil and gas to flow out.

That diet of cheaper, domestic crude would help the Philadelphia plant wean itself away from the Angolan, Azeri, Nigerian and Norwegian oil that is now its mainstay -- and which costs some $20 a barrel more than U.S. benchmark West Texas Intermediate and $35-plus more than North Dakota's Bakken crude, according to Reuters data.

In January, Sunoco imported 10.3 million barrels (about 343,000 bpd) of crude from those countries, U.S. government data shows, enough to run the Philadelphia refinery.

"Any drop of midcontinent crude which replaces Brent is a drop in the right direction," said Mark Routt, senior analyst with Houston-based KBC, a refinery consultancy.

HIGH-QUALITY BOOM
Oil output from U.S. shale oil plays will top 800,000 bpd by 2016, according to estimates by energy consultancy Bentek Energy, doubling over four years. While initial results from five Utica shale wells last year in Ohio disappointed some analysts this week, that is unlikely to dim enthusiasm substantially for the sector.

It's not only about quantity. So far, the major shale oil crudes are light and sweet, increasingly a poor match for geared-up Midwest and Gulf Coast refiners that have invested billions of dollars to run cheaper, heavy grades -- but a godsend for the simpler plants on the East Coast.

Despite less-than-stellar initial results, Bentek executive Jim Simpson points out that the Utica formation is only 200 miles west of the East Coast refineries.

"Can the refineries be saved or is there too much of a disconnect?" said Simpson, who added that Utica crude with its 35 degree API -- a measure of density -- was a good match for East Coast appetites.

"It depends if the Utica comes online fast enough. It might make sense to spend the money on the refineries if you knew you had secure supply of crude at a WTI price," Simpson said.

Another shipping option comes from the north.

Canadian pipeline giant Enbridge Inc is mulling the reversal of a 240,000-bpd Montreal-to-Sarnia line to carry oil sands from the west. The reversed Line 9 would then feed the Portland pipeline, which could carry shale oil from Montreal to Portland, Maine and onto tankers where it could be shipped down the coast.

Still more may come by sea, retracing the S.S. Paraguay's voyage 110 years ago.

At least 100,000 bpd of Eagle Ford shale oil will reach the port of Corpus Christi this summer as new pipelines come onstream, allowing oceangoing barges to carry 100,000 to 150,000 barrels each or small ships carrying 300,000 barrels to the Gulf and East coasts.

"Eagle Ford shale, and the other shale oils like Bakken, Niobrara, will make winners out of the U.S. refining industry as a whole," said John Auers, senior vice president of Houston-based refinery consultants Turner Mason.


http://www.reuters.com/article/2012/04/04/us-eastcoast-refineries-shale-idUSBRE8330GW20120404

 

[trysail]

http://www.bloomberg.com/news/2012-...ds-to-rise-to-u-s-shale-gas-challenge-1-.html



Putin Says Russia Needs to Rise to U.S. Shale-Gas Challenge
By Ilya Arkhipov and Anna Shiryaevskaya
April 11, 2012

Russian President-elect Vladimir Putin urged energy producers from the world’s biggest natural- gas exporter to “rise to the challenge” of a changing market as the U.S. increases output of shale gas.

U.S. shale gas production may “seriously” restructure supply and demand in the global hydrocarbons market, Putin said today in an address to the Russian lower house of parliament.

The U.S. overtook Russia as the biggest producer of gas in 2009 as it extracted fuel trapped in shale rocks. That has cut prices and led nations from China to Poland to explore for such resources, potentially cutting their reliance on Russian gas.

OAO Gazprom, Russia’s biggest gas producer, has played down the threat of U.S. competition and said the gas industry will benefit from the shale boom. The Moscow-based exporter is seeking to join a U.S. project to liquefy the fuel for shipment by tanker, Frederic Barnaud, LNG executive director at the company’s London marketing unit, said last month.

The U.S. plans to be a net exporter of LNG from 2016, with initial sales of 1.1 billion cubic feet (31.1 million cubic meters) a day doubling after three years.

Exports may begin in a decade, Gazprom Deputy Chief Executive Officer Alexander Medvedev said in February.



http://www.bloomberg.com/news/2012-...ds-to-rise-to-u-s-shale-gas-challenge-1-.html

 

[trysail]

http://www.bloomberg.com/news/2012-...t-verges-on-u-s-approval-amid-shale-glut.html



LNG Export Plant Verges on U.S. Approval Amid Shale Glut
By Joe Carroll
April 13, 2012

Cheniere Energy Inc., the natural gas importer that lost $1.2 billion in a decade, is poised to become the sole U.S. exporter of fuel from the shale bonanza that’s turned the nation into the world’s biggest gas producer.

The government may decide as soon as next week on Cheniere’s request to build a $10 billion Louisiana plant that would be the largest in the U.S. to liquefy gas and load it onto ocean-going tankers. Regulators will discuss the project April 19. Cheniere’s shares rose as much as 11 percent in New York.

As the only company with a 20-year Energy Department license to export continental liquefied gas to nations without U.S. free-trade agreements, Cheniere will have a near-monopoly on selling LNG to some of the biggest gas importers -- Japan and Spain -- which currently pay as much as nine times more for the fuel than it costs in U.S. markets. All rival export-license requests are on hold while the Energy Department studies the potential economic impacts of shipping abroad.

“The global LNG market is tight and spot prices are going to be quite high at least until 2018,” when several new Australian LNG export projects are scheduled to ramp up, said Asish Mohanty, senior global LNG analyst at Wood Mackenzie, the Edinburgh-based energy researcher.

U.S. exporters that start shipping before 2018 have the best chance of recovering capital costs and reaping a profit within a few years, “before prices start softening,” he said.

Houston-based Cheniere probably will get the go-ahead to build, although the timing is uncertain and approval will come with conditions attached, David Wochner, a partner in the Sutherland Asbill & Brennan LLP law firm’s energy practice, said during a March 22 Argus Media Ltd. conference in Houston.

Reviewed Next Week
The Federal Energy Regulatory Commission, or FERC, is scheduled to discuss Cheniere’s project at an April 19 meeting in Washington, according to an agenda posted on the commission’s website yesterday.

Gas output from U.S. wells has surged, pushing prices to a 10-year low as intensive drilling techniques enabled explorers such as Devon Energy Corp. (DVN) to tap reserves in shale formations.

Cheniere, which as recently as October was judged by Standard & Poor’s to be on the verge of default, has more than doubled in the stock market in the past year on its exporting prospects, even as the company sold shares four times. The Texas company counts hedge funds D.E. Shaw & Co. and Steve Cohen’s SAC Capital Advisors SP among its larger investors, according to data compiled by Bloomberg.

Asian and European utilities are eager to buy U.S. supplies that are about 90 percent cheaper than gas from traditional producers such as Yemen, Mohanty said.

Rival Proposals
Aside from Cheniere’s Louisiana project, there are two other proposed export plants pending before the FERC: a second Cheniere project, planned for Corpus Christi, Texas, and Freeport LNG Development’s proposal for Freeport, Texas.

Seven companies, including Freeport, are seeking Energy Department permission to export to non-free-trade agreement nations.

Cheniere Chief Executive Officer Charif Souki’s next step after clearing U.S. approvals will be to complete fundraising for the project. The liquefaction terminal will be built next to Cheniere’s LNG import facility that has been mostly idle since opening in 2009, thanks to the same domestic supply glut now driving Souki’s export plans.

The new plant he envisions will begin operations in 2015 or 2016 and be able to ship 18 million tons of LNG annually, worth about $1.7 billion at current prices.

Blackstone Group LP, the New York-based private-equity firm, agreed in February to invest $2 billion in Cheniere’s export plant, a pledge that Souki said will help attract other financing.

Four Share Sales
Separately, Cheniere sold shares four times in the past year to avoid a cash crunch while awaiting a construction permit from FERC. The company had $1.2 billion in losses during the 2002-2011 period, according to data compiled by Bloomberg.

Cheniere’s most-valuable asset may be its Energy Department license to ship domestic gas to nations that aren’t U.S. free- trade partners. The U.S. has free-trade agreements with 18 nations, of which only South Korea is a major gas importer, according to a Commerce Department website. South Korea’s free- trade agreement went into effect on March 15.

Japan and Spain -- neither of which are within the circle of U.S. free-trade partners -- imported 4.12 trillion cubic feet of gas in 2009, the most recent year for which data was available, the U.S. Energy Department said in a June 2011 report. The Energy Department is scheduled to update its global LNG import data on June 29.

Japanese Demand
Japan alone imported 3.21 trillion cubic feet of the fuel in 2009, or 37 percent of all the gas exported worldwide that year, Energy Department figures showed. Japanese demand is expected to climb to replace power generation lost as a result of the 2011 earthquake and tsunami that triggered a nuclear meltdown at the Fukushima power complex.

With no gas reserves on their own soil, Japanese companies were paying $20.87 per million Btus to attract Yemeni LNG in January and $18.43 for Algerian shipments, according to figures from Japan’s Customs Bureau.

The question for would-be U.S. LNG exporters is whether the spread between North American and overseas gas prices will persist long enough to capture profits, said Michelle Michot Foss, chief energy economist at the University of Texas’ Center for Energy Economics in Houston.

As exports add to growing demand for North American gas, prices will rise and narrow the gap that made the U.S. an attractive fuel source in the first place, she said.

‘Tricky to Pull Off’
“It’ll be marvelous if anyone can pull this off but it’s going to be pretty tricky,” Foss said in a telephone interview. “The arbitrage is huge but the problem with the arbitrage is that no one is positioned to take advantage of it right now, and when everyone jumps in, the arbitrage will disappear.”

Given rising political pressure from U.S. chemical producers and power generators alarmed by the potential for an export-driven rally in domestic gas prices, federal regulators probably will restrict the number of export licenses, Mohanty and fellow Wood Mackenzie analysts said in a March 28 report.

After issuing Cheniere’s export permit last year, the Energy Department put all other pending applications on hold while it studies the future economic impacts of exporting gas.

In the past 6 1/2 years, U.S. gas lost 87 percent of its value as wells drilled into shale formations disgorged more of the fuel than domestic markets could absorb. As the surfeit expanded, prices plunged to $1.971 per million British thermal units yesterday from a record $15.78 in December 2005.

Price Rise Impact
As early as 2018, exporting LNG could raise U.S. prices above $9 per thousand cubic feet, which is roughly equivalent to a million British thermal units, or Btus, the Energy Department said in a Jan. 19 report.

The price shock would prompt power producers to burn more coal as a cheaper alternative, and spur more imports of gas from fields in western Canada, the department said.

“Increased natural-gas exports lead to higher domestic natural-gas prices, increased domestic natural-gas production, reduced domestic natural-gas consumption and increased natural- gas imports from Canada via pipeline,” the department said in the January report.

After 2018, U.S. exports will have a tougher time winning supply deals as the new Australian plants add to world LNG supplies, pressuring prices and erasing some of the current price advantage of U.S. gas, Mohanty said.

“Post-2018, the picture becomes quite uncertain,” Mohanty said in a telephone interview from Houston.

Rich Gas
Asian demand for North American gas also will be muted because of differing content standards between the continents, Mohanty said.

In the U.S., liquid components of the gas stream such as butane and ethane tend to be separated from the methane to prevent pipeline clogs and so that they can be used by chemical producers. Asian import plants designed to handle so-called rich gas from Indonesia or Malaysia won’t run as efficiently on stripped-down U.S. supplies, he said.

The only current LNG producer exporting U.S.-produced gas outside the group of free-trade partners is Houston-based ConocoPhillips, owner of a liquefaction plant on Alaska’s Kenai peninsula that opened in 1969.

 

[rosco rathbone]

I'm naming my new band "The Breakout Tongs". Just thought I'd notify the oil thread.

 

[trysail]

I'm naming my new band "The Breakout Tongs". Just thought I'd notify the oil thread.

Cool, though I suspect there will be people who think the name has something to do with Chinese gang members that have been sprung from the big house.

 

[rosco rathbone]

Cool, though I suspect there will be people who think the name has something to do with Chinese gang members that have been sprung from the big house.

I kinda like that ambiguity.

 

[trysail]

Little known factoid:

...Exxon[Mobil] already relies on Russian fields for 1 of every 15 barrels it pumps worldwide...

Source: http://www.bloomberg.com/news/2012-04-26/exxon-first-quarter-profit-drops-as-output-gas-decline.html

For BP, the number is much, much higher ( something on the order of ~25% of its production comes from Russia ).


The portion of ExxonMobil's production coming from Russia is likely to rise in the coming years as its joint venture with Rosneft comes to fruition.

 

[thør]

Little known factoid:



For BP, the number is much, much higher ( something on the order of ~25% of its production comes from Russia ).


The portion of ExxonMobil's production coming from Russia is likely to rise in the coming years as its joint venture with Rosneft comes to fruition.

ENI is now working with Rosneft.

 

[trysail]

ENI is now working with Rosneft.

As you know, Russia is one of the earth's last lightly explored geological regions. If one is interested in finding and developing liquid hydrocarbon "elephants," it is an obvious place to look.


If you happen to have a crystal ball that reveals the future of "the rule of law," democracy and respect for property rights in Russia, there are a lot of people who would like to borrow it.


Analysis and description of "national character" is always a fun and interesting game of generalizations. We know that Germans and Japanese are more comfortable in groups and possess a love of efficiency. We know that proper Englishmen will "queue up" and have an affinity for "fair play" but also perfected buccaneering. We know that Venezuelans and Argentines have a nasty habit of permitting the rise of expropriating demagogues to political power. We know that— notwithstanding a brief 20th century episode of insanity— China has a millenial long tradition of capitalist entrepreneurs and merchants. The Middle East, too, has a long tradition of mercantile activity.


Russia— on the other hand— has had a long history of autocracy and totalitarianism. It's going to be very interesting to watch history unfold. V. Putin had an opportunity to do the "Cincinatus/George Washington" thing (i.e., walk away from power, thereby establishing the precedent of a regular and peaceful transfer of power). It's not a good sign that he didn't use that opportunity.


Western companies ( everybody from Nestlé to BP to Ikea to Shell ) have not-insubstantial investments in Russia. As you know, Shell's experience ( see Sakhalin ) hasn't been 100% happy.

 

[thør]

As you know, Russia is one of the earth's last lightly explored geological regions. If one is interested in finding and developing liquid hydrocarbon "elephants," it is an obvious place to look.


If you happen to have a crystal ball that reveals the future of "the rule of law," democracy and respect for property rights in Russia, there are a lot of people who would like to borrow it.


Analysis and description of "national character" is always a fun and interesting game of generalizations. We know that Germans and Japanese are more comfortable in groups and possess a love of efficiency. We know that proper Englishmen will "queue up" and have an affinity for "fair play" but also perfected buccaneering. We know that Venezuelans and Argentines have a nasty habit of permitting the rise of expropriating demagogues to political power. We know that— notwithstanding a brief 20th century episode of insanity— China has a millenial long tradition of capitalist entrepreneurs and merchants. The Middle East, too, has a long tradition of mercantile activity.


Russia— on the other hand— has had a long history of autocracy and totalitarianism. It's going to be very interesting to watch history unfold. V. Putin had an opportunity to do the "Cincinatus/George Washington" thing (i.e., walk away from power, thereby establishing the precedent of a regular and peaceful transfer of power). It's not a good sign that he didn't use that opportunity.


Western companies ( everybody from Nestlé to BP to Ikea to Shell ) have not-insubstantial investments in Russia. As you know, Shell's experience ( see Sakhalin ) hasn't been 100% happy.

I'll get a first hand look at some development in the Russian Arctic this summer. I'm not so sure that I want to work or even partner over there. Getting paid is always an issue.

 

[trysail]

I'll get a first hand look at some development in the Russian Arctic this summer. I'm not so sure that I want to work or even partner over there. Getting paid is always an issue.

I look forward to reading all about it.

 

[thør]

I look forward to reading all about it.

I doubt Lit will be the right forum to report on my trip.

 

[trysail]

I doubt Lit will be the right forum to report on my trip.

*grinning*

Nevertheless, I'd be interested.

I've had a little dough ( and more, when taking derivative amounts [e.g., BP, Shell, ExxonMobil ] into account) in several Russian companies for nearly a decade— no complaints--- so far.

 

[thør]

Gas hydrates shown harvestable in fed test

Hot ice is pretty cool.

I'd seen it before in a Canadian Oil and Gas Conference flier so I knew some photos like it existed. I simply Did a Google image search for 'hydrate on fire' and found it. This one is less dramatic as a photo, but still a good pic:

http://polipundit.com/wp-content/uploads/2011/05/flaming_hydrate.jpg

"The U.S. Department of Energy has completed an unprecedented successful test of harvesting the vast storehouse of methane hydrates on Alaska's North Slope, essentially natural gas locked in ice crystals under the permafrost.

It is still a long way from being commercial but the potential is huge. The U.S. Geological Survey has estimated that the North Slope holds 590 trillion cubic feet of methane hydrate, potentially at least three times as much as the huge amount of conventional natural gas on the North Slope.

The Department of Energy said it also has the potential to eventually unlock massive reservoirs of methane hydrates that are believed to exist under the ocean floor of the Gulf of Mexico."

Full Story

 

[trysail]

"The U.S. Department of Energy has completed an unprecedented successful test of harvesting the vast storehouse of methane hydrates on Alaska's North Slope, essentially natural gas locked in ice crystals under the permafrost.

It is still a long way from being commercial but the potential is huge. The U.S. Geological Survey has estimated that the North Slope holds 590 trillion cubic feet of methane hydrate, potentially at least three times as much as the huge amount of conventional natural gas on the North Slope.

The Department of Energy said it also has the potential to eventually unlock massive reservoirs of methane hydrates that are believed to exist under the ocean floor of the Gulf of Mexico."

Full Story

Very interesting. Qatar's North Field (which is the source of gas for Shell's Pearl GTL plant )— the world's largest known gas field— is said to be 1,000 TCF.

...The researchers injected a mixture of carbon dioxide and nitrogen into the hydrate formation, which took in the carbon dioxide and released the methane. They also lowered the pressure in the well to make the hydrate flow and get the gas out...

The last guesstimate I saw of stranded Prudhoe Bay gas was 35 TCF !

...The U.S. Geological Survey has estimated that the North Slope holds 590 trillion cubic feet of methane hydrate, potentially at least three times as much as the huge amount of conventional natural gas on the North Slope...

 

[thør]

The last guesstimate I saw of stranded Prudhoe Bay gas was 35 TCF !

Sometimes the numbers are big, sometimes they are small, depending on the reporter or researcher.

 

[trysail]

Verrrry interesting. It's yet another aspect of the "great game" of Asian natural gas supply. While Europe complains bitterly about the cost of Russian natural gas (which is based on petroleum prices), Gazprom has made overtures to the East. The emergence of potentially cheaper North American natural gas is and will concern Russia, Qatar and Australia.


All consumers of natural gas (this means you) can— at least in part— give thanks for hydraulic facturing (a/k/a "fracking").





________________


http://www.bloomberg.com/news/2012-...-start-discussions-on-canada-lng-project.html



Korea Gas, Shell Start Discussions on Canada LNG Project
By Sangim Han and Yuriy Humber
May 16, 2012

Royal Dutch Shell Plc and three Asian partners will jointly develop a liquefied natural gas export project in Canada’s British Columbia province and are in talks with local communities to win their support.

Consultation with First Nations and local residents of Kitimat began after Shell, Korea Gas Corp., China National Petroleum Corp. and Mitsubishi Corp. completed a feasibility study for building a 12-million-metric-ton LNG terminal, Korea Gas and Mitsubishi said in separate statements today. Local communities and the Canadian government would need to approve the project, due to start production by 2020, Mitsubishi said.

Asian companies including Korea Gas and GAIL India Ltd. are investing in North American LNG projects as gas prices in the U.S. slumped to a decade-low after a surge in shale output. Imports from North America will cost about a 10th of what LNG producers in Indonesia, Yemen, Qatar and Australia charge customers in Japan and South Korea.

Shell has a 40 percent stake in the LNG Canada project, while the other partners have 20 percent each, Korea Gas said. A final decision to move the planned terminal into development will be taken “around the middle of the decade,” according to the project’s website.

The Kitimat project includes the construction of LNG production and storage units and harbor facilities, Korea Gas said. The terminal will initially have two LNG units, each with a 6 million ton annual capacity, and use gas from fields in western Canada, including Horn River and Montney, Mitsubishi and Korea Gas said, without providing a planned investment amount.

Export Licenses
...The terminal may cost 1 trillion yen ($12 billion), the Nikkei newspaper reported April 12, without saying where it got the information.

Canada has granted licenses for two LNG export projects in the Kitimat area. BC LNG Export Co-operative LLC, jointly owned by Haisla Nation and Houston-based LNG Partners LLC, was given a 20-year license, according to a statement on April 11. In October, the National Energy Board approved an LNG terminal planned by Encana Corp., Apache Corp. and EOG Resources Inc.

The Horn River basin may hold 165 trillion cubic feet of shale resources, while Montney is estimated to have 49 trillion cubic feet, according to an April 2011 report by the U.S. Energy Information Administration.

Australia Supplies
Australia, the world’s fourth-largest LNG supplier, is poised to lose the most from Canada’s new terminals, Andy Flower, an independent LNG analyst in the U.K., said in October. Australia may be capable of producing about 80 million tons of LNG annually by 2017, surpassing Qatar as the world’s largest exporter of the fuel, Total SA Chief Executive Officer Christophe de Margerie said May 14.

The west coast of Australia is 4,400 nautical miles from Japan, according to Eurasia Group, a New York-based consultant. The journey to Tokyo from Kitimat is 4,200 miles.

Australia and Qatar sell the commodity to Asia at prices linked to oil. Gas from the U.S. is tied to Henry Hub futures, which tumbled 32 percent last year amid record output driven by extraction from shale.

South Korea, which relies on overseas gas for all of its needs of the fuel, imported 36.7 million metric tons in 2011, according to Korea Customs Service’s website. Japan imported 99 billion cubic meters, or 3.5 trillion cubic feet, in 2010, according to the International Energy Agency.



http://www.bloomberg.com/news/2012-...-start-discussions-on-canada-lng-project.html

 

[trysail]

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http://c3352932.r32.cf0.rackcdn.com/1332662321_0.png


http://c3352932.r32.cf0.rackcdn.com/1332662260_0.png


http://c3352932.r32.cf0.rackcdn.com/1332662584_0.png





​

ShaleGas
Marcellus
Haynesville
EagleFord
Fayetteville
Barnett

http://www.forexpros.com/analysis/why-us-natural-gas-prices-are-so-low---are-changes-needed -118082