Petronas wants longer LNG export license in B.C.
(Natural Gas Intelligence; Feb. 19) - At the same time that the Canadian Environmental Assessment Agency has issued its draft review of the proposed Pacific NorthWest LNG project near Prince Rupert, B.C., the developer has applied to add 15 years to its existing 25-year export authorization from the National Energy Board. The time extension is intended to add supply-security value to export sales of the venture, which includes Malaysia’s state-owned Petronas and partners from Japan, India and Brunei.
No additional environmental assessments would be needed to obtain a longer-term export license. The 40-year export permits were created last year by federal legislation that responded to industry requests to enhance the overseas appeal of Canadian gas with a regulatory regime that refrains from interfering with projects for their full life spans.
The project’s draft environmental assessment is in its formal public comment stage. Pacific NorthWest has pledged to make a final commitment to start construction as early as this spring if it receives full regulatory approval and resolves remaining issues with First Nations.
First LNG tanker docks at Cheniere export terminal
(Reuters; Feb. 22) - A liquefied natural gas tanker docked Feb. 21 at the Sabine Pass terminal in Louisiana, with only days to go before the United States ships its first export cargo of seaborne gas from the Lower 48 states. U.S. exports will add to a wave of new supply coming from Australia at a time when demand is faltering in major consuming countries and prices plummeting in line with oil. The Asia Vision LNG tanker docked at Cheniere Energy's Sabine Pass terminal, Reuters ship tracking data showed.
The tanker arrived in January in the Gulf of Mexico, but has been anchored offshore in a delay due to mechanical problems at the plant. Another tanker, the Energy Atlantic, has also been waiting offshore since January. Cheniere said it expects its to ship first cargo by the end of this month or in early March; the destination has not been announced. First exports from Sabine Pass comes within days of the world's most expensive LNG plant — the $54 billion Chevron-led Gorgon project in Australia — loading its first cargo.
"The timing is incredible," said Bernstein analyst Neil Beveridge. Companies including Chevron, Shell and ExxonMobil have invested some $180 billion in seven Australia LNG export plants ramping up production from 2015 to 2017, moving the country to pass Qatar as the world’s top exporter. "Sabine Pass will just add to the global oversupply," said Beveridge, although he expects it to run below capacity for the time being because of weak demand and low prices. Four other U.S. projects have already broken ground.
IHS estimates 1,400 tcf of North America gas could break even at $4
(Oil & Gas Journal; Feb. 18) - North America’s natural gas resource continues to expand as break-even development costs fall, reports energy consultants IHS. A new IHS study estimates that 1,400 trillion cubic feet of gas in the U.S. Lower 48 and Canada can be produced at a break-even Henry Hub gas price of $4 per million Btu. That’s 66 percent more gas than the firm estimated in a study published in 2010. About 800 tcf can be produced at a break-even price of $3 or less, the new study finds.
New discoveries, recent reductions in drilling and completion costs, and “major gains” in productivity are the main reasons for the expansion of potential gas supply, IHS said. Key factors in these trends, the study said, are improved understanding of subsurface geology, greater use of technology, development of specialized fracturing techniques, and emergence of new plays such as the Utica Shale.
Also contributing to the resource expansion is the addition to the resource base of associated gas in emerging oil-shale plays as development methods first used for shale gas spread to oil. IHS estimates the gas resource associated with the Bakken, Eagle Ford, Permian basin and other shale oil plays totals about 250 tcf.
Maine considers law backing LNG storage facility for winter demand
(The Associated Press; Feb. 18) - Lawmakers looking to Maine's energy future often focus on pipeline deliveries of natural gas and Canadian hydropower, but some say stored liquefied natural gas should be part of the fix. They want to give regulators the ability to reserve storage space in yet-to-be-built LNG tanks to smooth over supply problems in cold winter months. A legislative panel Feb. 18 expressed strong support for a bill to create the program.
The tanks would be located near existing gas pipelines. Gas would be removed from a feeder pipeline when prices are lower, supercooled to a liquid and stored as LNG, then warmed (regasified) and piped into the distribution system as needed when demand spikes. Ratepayers, however, would have to back a contract for reserved space in the tanks. The Legislature's Energy, Utilities and Technologies Committee is expected to endorse the bill next week after working on final language.
Northern LNG, which wants to build a $200 million liquefaction, storage and regas facility, is pushing the bill. The company is a joint venture between Boston-based Energy Management and a Japanese construction firm. Companies that own existing fuel storage say it's unfair to give one company an advantage. If Northern LNG wants to build a facility, it should do it without ratepayer support, said Daniel Riley, a lobbyist for Maine Energy Marketers Association, which represents oil dealers and fuel suppliers.
Al Gore’s climate-action group tells B.C. to drop LNG plans
(Vancouver Sun; Feb. 19) - British Columbia should abandon its plan to build a liquefied natural gas industry given the rapidly dropping cost of renewable energy, the head of former U.S. vice president Al Gore’s Climate Reality Project said Feb. 18. Ken Berlin, president and CEO of the climate-action group, said that within a decade, natural gas will likely be more costly than solar and wind energy production, leaving the province with little financial benefit from the LNG industry.
“Natural gas is playing an important role in replacing coal, but it is still a fossil fuel. I think you are going to see, certainly in 10 years and more likely in three to five years, solar and wind being more competitive than natural gas,” Berlin said. “Your product is not going to be easily economically viable at that point in time. I would say to do that would be very, very risky for the province.” Berlin’s comments came as Gore expanded on a fiery TED talk he gave the day before, telling an invited Vancouver lunch audience that Canada, like other countries, is making significant efforts to arrest climate change.
The pressure coming from Gore’s group was no more evident than in Berlin’s comments about B.C.’s push for an LNG industry. Berlin said resourced-based economies like those in B.C. and Alberta must change. “It is not going to happen in a day. There is time to transition. We’re not going to stop using oil for LNG tomorrow; it is going to take time,” he said. “But in the long run the trend is that we are going to start replacing that with renewable energy. … The world is changing so if you stick with the past, you will keep running into trouble.”
Massachusetts protestors say ‘make sweaters, not pipelines’
(MassLive.com; Feb. 16) - Protesters bundled up against the brutal cold picketed a Berkshire Gas office building in northern Massachusetts on Feb. 15, charging that the company's "bogus moratorium" on new natural gas service hook-ups in Hampshire and Franklin counties is a ploy to drum up support for the proposed Norheast Energy Direct pipeline that would move Marcellus Shale gas into New England.
Andra Rose, a coordinator for the climate group Mothers Out Front, said Berkshire Gas should explore other alternatives before considering new pipeline capacity. "Natural gas is a fossil fuel, not a clean, renewable fuel," she said. "This is not the energy future we want to leave to our children." Rosemary Wessel, director of No Fracked Gas in Mass, said people should "turn down the heat" and "make sweaters, not pipelines."
The pipeline sponsor, a subsidiary of Kinder Morgan, has applied to the Federal Energy Regulatory Commission for authority to build the $5 billion, 419-mile pipeline through Pennsylvania, New York and Massachusetts. The project is undergoing FERC review.
Earthquakes prompt Oklahoma to reduce wastewater injection
(Wall Street Journal; Feb. 16) - Oklahoma regulators, in an attempt to curb earthquakes rocking the area, have asked dozens of oil and gas companies to cut the amount of wastewater they inject into hundreds of disposal wells across the state. The Oklahoma Corporation Commission in recent weeks has requested that companies reduce their wastewater injections underground by more than 500,000 barrels a day.
More than 2,500 earthquakes with a magnitude of 2.5 or higher shook Oklahoma in 2015, up from just three in 2005, according to the U.S. Geological Survey. In recent months, stronger quakes have been hitting the state. A 5.1-magnitude tremor Feb. 13 hit about 100 miles northwest of Oklahoma City. A growing body of scientific research has linked quakes in oil and gas producing states to wells used by industry to dispose of the wastewater that flows up when producers draw oil and gas from the ground.
The issue prompted a lawsuit Feb. 16 in Oklahoma against three energy companies over wastewater disposal. The Sierra Club and Public Justice said in a news release that disposal wells have “contributed to an alarming increase in earthquake activity.” State regulators have tried to get a handle on the issue by asking operators to curtail the amount of water they pump back down wells near earthquake-prone areas. In some cases, they have even asked for wells to be completely shut down. Their latest request affects 245 wells and covers a nearly 5,300-square-mile swath of Oklahoma.
Gulf of Mexico oil production is forecast to reach record in 2017
(U.S. Energy Information Administration; Feb. 18) - U.S. Gulf of Mexico crude oil production is estimated to increase to record high levels in 2017, even as oil prices remain low. The U.S. Energy Information Administration projects production will average 1.63 million barrels per day in 2016 and 1.79 million in 2017, reaching 1.91 million in December 2017. Gulf of Mexico production is expected to account for 18 percent and 21 percent of total forecast U.S. crude oil production in 2016 and 2017, respectively.
Production in the gulf is less sensitive than onshore production in the Lower 48 states to short-term price movements, the agency said. However, decreasing profit margins and reduced expectations for a quick oil-price recovery have prompted many operators to pull back on future deep-water exploration spending, reduce their active rig fleet by scrapping and stacking older rigs, and restructure or delay drilling rig contracts. These changes add uncertainty to the timelines of many projects, the agency said.
During 2015, eight fields in the Gulf of Mexico came online. With the exception of Anadarko's Lucius field, each of the fields was developed as a subsea well tied back to nearby existing production facilities. The use of subsea tiebacks allows producers to reduce project costs and start-up times. The Lucius field produces oil using a type of floating production platform that supports drilling, production and storage operations. Four fields are expected to start up in 2016, including Anadarko’s Heidelberg field.
Heavy job losses at Alberta oil sands
(Financial Post; Canada; Feb. 16) – Alberta’s oil sands sector is in danger of losing its reputation as a job-creating machine. An industry report shows the sector may require 84 percent fewer construction workers in 2020 compared to 2015 as project delays pile up amid low oil prices. “Overall workforce requirements for the oil and gas industry has been severely impacted by a reduction in investment,” said Carol Howes, of Petroleum Labour Market Information, part of the industry-funded Enform based in Calgary.
As crude prices plunged, capital expenditures in the oil sands declined 30 percent last year from $35 billion in 2014. Canada has led the world in project deferrals during the 16-month downturn, as oil sands projects with a total production of 3 million barrels per day have been shelved, according to Tudor Pickering Holt. The freeze on new projects and expansions means the oil sands will employ 54,000 workers in direct construction, ongoing maintenance and operations jobs by 2020.
While a number of projects will continue to keep construction workers engaged, job prospects further out look bleak in the oil patch. “The lack of oil sands capital investment to 2020 is likely to have an impact on production and operations employment growth after 2020,” the report said. The downturn has wiped out 100,000 direct and indirect jobs, according to one industry estimate. “Hiring has pretty much seized, unless it’s for a critical position,” said Neil Gascoigne, a business development expert in Houston.
North Dakota oil production fell 2.5% in December
(Platts column; Feb. 19) - For months, analysts have said that reports of the death of the Bakken oil boom have been greatly exaggerated. Despite the historic collapse in oil prices and North Dakota’s rig count falling to levels not seen since 2009, producers have largely maintained steady supply levels as they employed better technology in the most promising geology.
While production wasn’t nearing 2 million barrels per day as some state officials had dreamed of a year earlier, it held stable in a range of about 1.16 million to 1.21 million throughout much of last year. When monthly production did fall off, it was incremental and often blamed on secondary factors, like flaring reduction targets or oil conditioning rules. But the long-awaited drop in Bakken production may have officially begun, as data released by North Dakota’s Department of Mineral Resources this week shows.
Daily production averaged just over 1.15 million barrels in December, down 2.5 percent from November. It marks the lowest daily production in the state since August 2014 and the first real downturn attributed to persistent low prices. “This looks like it’s a real number, based on real activity,” said Lynn Helms, the state’s top oil and gas regulator. Helms expects production to remain above 1 million barrels throughout early 2017, but noted that would require West Texas Intermediate oil prices of $45 a barrel.