N.Y. rules would limit access to shale gas acreage
(Reuters; Oct. 21) - As companies delve into proposed regulations for natural gas drilling in New York, they're discovering a bitter reality: Half the land they had leased for drilling may now be out of bounds. In the proposed rules, which are expected to be finalized next year, the state has imposed an off-limits buffer around its waterways. The buffers are as much as 20 times larger than neighboring, industry-friendly Pennsylvania.
After looking at maps of thousands of potentially forbidden acres, some companies are considering leaving the state altogether, Reuters has learned. Shell, which has leased about 90,000 acres for drilling in New York, reckons that 40% could be off-limits under the proposed laws, a company source said. Inflection Energy, a small independent company with 15,000 acres in New York, is reconsidering drilling there after studies showed that about 60% of its acreage might not be drillable.
The New York rules highlight how tougher state regulations could rein in the rampant expansion of natural gas produced using hydraulic fracturing. "This (lease buying) was all done without the knowledge that ... (the state) was going to propose these increased setbacks," said Thomas West, an attorney in Albany New York who represents oil and gas companies. "It has a significant impact on the drillability of this acreage."
Barnett Shale drilling rigs
at lowest level in seven years
(Fort Worth Star-Telegram; Oct. 21) - The boom is no more in the Barnett Shale.
Drilling in the natural gas-rich North Texas field has sunk to its lowest level in more than seven years and is barely more than one-quarter of its 2008 peak.
Meanwhile, new drilling booms are focused on oil and natural gas liquids in other areas of Texas, such as the long-standing Permian Basin in West Texas and the up-and-coming Eagle Ford Shale in South Texas. Those "oily" plays are sending the U.S. and Texas drilling rig counts soaring, with companies diverting rigs from gas plays to oil.
Amid the new craze for crude, the Barnett Shale rig count plummeted to 53 active rigs Oct. 14, the fewest since June 2004. That's barely more than one-fourth of the peak count of 203 active Barnett rigs on Sept. 5, 2008, a year when gas prices soared above $13 per million British thermal units. Though the Barnett rig count has fallen sharply, higher natural gas prices could bring a turnaround.
Maine community grants
property tax break for gas line
(Kennebec Journal, Maine; Oct. 22) - Augusta became the first municipality to approve a tax break for a proposed natural gas pipeline that would run through 11 communities in Maine. Municipal and company officials said the Kennebec Valley Gas Co. project could boost economic development in the region by bringing businesses, organizations and residents cheaper fuel - 30% to 40% cheaper than the fuel oil they currently use.
Augusta city councilors approved a deal, similar to that being sought in the other communities, that would return 80% of the property taxes paid on the pipeline in Augusta for the first 10 years of the 15-year agreement. In years 11 through 15, 60% would be returned. After the 15-year period, company officials said the firm should have enough clients on the line, and enough debt paid off, to pay its full taxes for the pipeline.
Over the 15-year agreement, the tax break would return about $1.2 million in Augusta property taxes back to the pipeline developer. Company officials said the project would be cost-prohibitive without the tax deals in the 11 communities.
Opponents object to gas pipeline across Puerto Rico
(The New York Times; Oct. 21) - A proposed $450 million, 92-mile natural gas pipeline across Puerto Rico has provoked demonstrations on the island and widespread opposition over environmental and safety concerns. However, Gov. Luis G. Fortuño says the project represents one of the island's best attempts at revving up its flailing economy, by reducing stratospheric electricity costs.
Puerto Ricans pay almost three times the national average for electricity, the result of a heavy reliance on imported oil. Puerto Rico depends on oil to generate 68% of its power; coal provides 15%; and natural gas makes up 16%. If the pipeline is built, the natural gas percentage will increase each year until 2016, when it is expected to account for half of all energy production on the island.
But opponents accuse the governor of trying to rush construction, financed by the government. The governor declared an energy emergency last year to speed up approval by government agencies. Opponents say the line would be ecologically unsound, taking down 270,000 trees across 1,500 acres and potentially threatening 32 species of endangered plants and animals, as well as part of the country's water supply.
Environmental groups object
to gas pipelines in New Jersey
(WHYY radio, Philadelphia; Oct. 24) - Environmental groups say the expansion of natural gas drilling in Pennsylvania will have a negative impact on New Jersey.
They're worried about the impact of proposed new pipelines.
"Right off the bat, it's going to cause huge destruction to the environment," said Matt Elliott, the clean energy advocate for Environment New Jersey. "So we're going to see pipelines literally ripping through some of the most pristine areas of New Jersey. Then, with the pipeline, there's always the risk that there's some kind of risk or some kind of explosion."
The most likely routes cut "through our reservoirs and trout streams and our state and national parks, and then they cut through some of the most highly densely populated areas anywhere in the country in Jersey City," said New Jersey Sierra Club director Jeff Tittel. Environmental groups are urging New Jersey to promote development of alternative energy sources such as wind and solar instead of relying on more gas.
Developer proposes gas-fired power plants
to serve Portland
(The Oregonian, Portland; Oct. 21) - An energy developer based in New York wants to build two natural gas-fired power plants - with the option for a third - on the site of the old Reynolds Aluminum plant in Troutdale, Ore. The site is about a mile from the boundary of the Columbia Gorge National Scenic Area and the potential impact on air quality in the gorge is sure to make the proposal controversial.
The Troutdale Energy Center will compete with other proposals to satisfy energy needs of Portland General Electric's 800,000 customers. Its backers say the $850 million plant will not only meet emissions limits, but eliminate the need for expensive transmission upgrades that ratepayers would otherwise be stuck paying for.
The utility's latest resource plan calls for a new base-load gas plant to meet day-to-day demand, as well as a flexible unit that could be cycled up and down to meet peak demand or back up the intermittent output of wind farms in the gorge. PGE may also be looking for a second base load plant eventually to replace the output of its existing coal-fired power plant in Boardman, which it has agreed to close by 2020.
Duke looks to recover overruns
on clean-coal power plant
(The Wall Street Journal; Oct. 21) - Duke Energy said Oct. 20 it will take a $220 million charge against earnings to cover some of the huge cost of building its marquee "clean coal" power plant in Indiana. The disclosure comes less than a week before Indiana regulators begin hearings to determine how much Duke's customers will have to pay toward the cost of the facility. Duke now projects the plant's cost at $3 billion - $1 billion more than originally forecast.
Consumer groups and large industrial power users in the state argue that much of that cost should be absorbed by Duke and its shareholders. The 600-megawatt plant will be one of the most expensive nonnuclear power plants ever built in the U.S. The project had been intended to show how coal could be converted into a clean-burning gas and used to make affordable electricity, but its rising costs make that goal more challenging.
The plant is expected to boost electricity rates in Indiana when it enters service next year. Regardless of the plant's eventual price tag, state regulators have agreed to let Duke's Indiana utility charge customers for $2.35 billion of the cost. The Charlotte, N.C., company and the Indiana Utility Regulatory Commission are wrangling over the remainder, which tops $700 million.
Asia buyers balk at high prices
for December LNG cargoes
(Gulf Times; Oct. 23) - Asian LNG spot prices for November and December delivery were flat last week as buying for November appeared to have concluded and Asian buyers balked at prices for December cargoes.
Some sellers were holding out for $18 per million Btu for December cargoes into Northeast Asia, but were finding no buyers at that price with most already well-supplied ahead of winter. "It looks like a lot of the buyers built up significant inventories in August and September and now are taking things easier," one Asia-based trader said.
With stockpiles of LNG higher in Japan and South Korea, the world's two top buyers, some expected to see a further drop in prices. "It's just not viable and I think traders are only just coming to realize that demand in December could also be subdued," Tony Regan, an analyst with Tri-Zen International said.
China paid average $10.65
for September LNG deliveries
(Bloomberg; Oct. 24) - China's LNG imports rose 17% in September from a year earlier, customs data showed. Meanwhile, coal imports surged to a record. LNG purchases increased to 55 billion cubic feet of gas, about 1.8 bcf per day, according to data from the Beijing-based General Administration of Customs.
The average September cost of LNG rose to $10.65 per million Btu, according to Bloomberg calculations based on customs data. China buys LNG on a term basis from Indonesia, Malaysia, Qatar and Australia. Spot, or short-term purchases comprised about 20% of China's LNG imports in September, according to the data. Spot supplies cost an average $15.33 per million Btu.
The country bought almost as much gas in September - 47 bcf - delivered via pipeline from Turkmenistan at an average cost of a little under $10 per million Btu, according to the data.
Japan utility paid $9 for
Trinidad and Tobago LNG in August
(Platts; Oct. 24) - Japan's second-largest power utility, Kansai Electric, imported almost four times as much LNG from Trinidad and Tobago this year than last, as of August, according to Platts' analysis of Japan's import data. Over January-August 2011, it had taken more than 10 billion cubic feet of gas, compared with 2.8 bcf in the same period last year.
So far this year, Kansai Electric has been Japan's sole buyer of Trinidad and Tobago LNG. Japan's LNG imports from Trinidad and Tobago are unusual because of its longer-than-usual voyage from the Atlantic Basin compared with other suppliers. Sources said the LNG comes from a short-term contract signed before the devastating March 11 earthquake as part of Kansai Electric's strategy to fulfill its requirements from short-term and mid-term contracts.
Kansai Electric's August cargo of almost 3 bcf of gas from Trinidad cost just $8.99 per million Btu, while the Japan LNG Crude Cocktail, or JLC price, stood at $16.372, according to customs data. The low Atlantic LNG price appears to reflect prices prevailing when the deal was done.
Iraq says ExxonMobil, BP, Eni plan big spending
(The Wall Street Journal; Oct. 19) - ExxonMobil, BP and Eni will spend around $100 billion to upgrade three oil fields in southern Iraq, an Iraqi official said. The huge investment would help unleash Iraq's massive oil reserves, whose development was stunted by years of sanctions under Saddam Hussein's regime and then continued strife after his downfall.
The three fields now pump around 2 million barrels a day, comprising the bulk of Iraq's total output of 2.9 million barrels a day. Production from the three fields is to reach at least 6.8 million barrels a day in 2017, according the deals signed by the companies two years ago. That could turn Iraq, a member of the Organization of Petroleum Exporting Countries, into one of the world's largest producers of crude oil.
The companies' 20-year contracts stipulate that they invest to develop the fields and then would start receiving costs and remuneration fees for barrels produced above a 10% baseline output increase.
Nations will have trouble
replicating U.S. shale gas success
(The Financial Times; Oct. 23) - In the past five years, shale gas has moved the United States from being a net importer of natural gas to becoming self-sufficient in low-priced, domestically produced gas. The shift in the U.S. market has led to great excitement in other nations as governments look to reduce their energy dependence and perhaps build an export industry of their own. Significant shale reserves have been discovered in Europe, Australia and China, among others.
However, there are a number of reasons to be cautious about the likely impact of shale outside the U.S., which had 2,000 land rigs involved in drilling in declining oil fields and thus readily available to switch to shale gas exploration, a dense service sector and a highly skilled workforce, along with supportive economics, says Luis Barallat, head of gas and LNG at Boston Consulting.
"Almost none of this applies in Europe," he added. "There are fewer than 50 rigs operating in Europe today. The amount of resources in terms of drilling rigs, human capital and know-how are not comparable with the U.S." Another stumbling block is property rights. Landowners in the European Union do not generally own subsurface rights, giving them less incentive to allow drilling on their property.
Governor calls special session
to fight oilsands pipeline
(Calgary Herald; Oct. 24) - Nebraska Gov. Dave Heineman said he will call a special session of the legislature starting Nov. 1 to consider a law to force TransCanada to reroute its proposed Keystone XL oilsands pipeline. The Republican leader wants the company to move the line away from the Ogallala aquifer that supplies most of the region's water.
Recognizing that ultimate approval rests with the State Department, the governor said he wants to push for the rerouting while waiting for a federal decision on the project, expected by year end. "I will be calling a special session of the Nebraska legislature to have a thoughtful and thorough public discussion about alternative solutions that could impact the route of the pipeline in a legal and constitutional manner."
Nebraska has become a key battleground for Keystone XL, a $7 billion pipeline that would transport up to 900,000 barrels per day of oil to Texas Gulf Coast refineries from Hardisty, Alberta - most of it oilsands bitumen - picking up U.S. crude volumes along the way. The legislature's special session will consider giving the Nebraska Department of Environmental Quality the power to regulate routing of hazardous liquids pipelines.