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Oil and Gas Energy News Update

Wednesday, March 23, 2011

Shell and HP advance seismic sensing capabilities

Shell and HP advance seismic sensing capabilities

March 23, 2011

Shell and HP have announced a breakthrough in the capability of their jointly developed inertial sensing technology to shoot and record seismic data at much higher sensitivity and at ultra-low frequencies.
The new onshore wireless seismic acquisition system is designed to provide a clearer understanding of the earth's subsurface, thus increasing prospects for discovering greater quantities of oil and gas to meet the world's increasing energy needs.

The sensing technology has now been demonstrated to have a noise floor - a measure of the smallest detectable acceleration over a range of frequencies - of 10 nano-g per square root Hertz (ng/rtHz), which is equal to the noise created by the earth's ocean waves at the quietest locations on earth as defined by the Peterson Low Noise Model. The tests were conducted in the seismic testing vault at the U.S. Geological Survey's (USGS) Albuquerque Seismological Laboratory facility in New Mexico.

"Responding to the energy challenge, the oil and gas industry is tackling ever deeper and more complex reservoirs, as well as reservoirs in very tight rock systems," said Dirk Smit, chief scientist for Geophysics and vice president of Exploration Technology, Shell.

"In particular, for onshore settings, this requires enhanced quality seismic data as well as the cost-efficient, flexible deployment of seismic sensor networks. The collaboration with HP demonstrates Shell's strategic approach to driving innovative technology solutions through active partnering."

"This new sensing milestone is the latest step in the collaboration between HP and Shell, which is on track to produce a leap forward in onshore seismic data quality to improve the exploration risk evaluation and decisions, illustrating the industry-wide benefits that can be achieved through cross-company innovation," said Rich Duncombe, senior strategist, Technology Development Organization, Imaging and Printing Group, HP.

At the test facility, HP was able to compare the seismic response of the new sensor side by side with a USGS reference sensor when an earthquake occurred in the Gulf of California during the testing period. The signal from the reference sensor was matched by the new sensor down to 25 mHz, verifying the sensor's response at low frequencies.

The seismic system uses the breadth of HP's technology development capabilities as well as Shell's advanced geophysical expertise in seismic data acquisition systems and operations. As such, this collaboration builds on the core strengths of each company to advance technology in this field.

The system will be delivered by HP Enterprise Services and the company's Imaging and Printing Group (IPG). It is based in part on the high-performance sensing technology originally co-developed by HP Labs - the company's central research arm - along with IPG and Shell research in seismic network design.

HP and Shell's collaboration is a cornerstone for an information ecosystem that empowers people to make better, faster decisions to improve safety, security and environmental sustainability while transforming business economics. Sensing solutions are positioned to provide a new level of awareness through a network of sensors, data storage and analysis tools that monitor the environment, assets, and health and safety.

Additional information on HP's integrated sensing solutions, and the collaboration between HP and Shell, is available at


ConocoPhillips Plans to Sell Additional $5-$10B of Assets

ConocoPhillips Plans to Sell Additional $5-$10B of Assets

March 23, 2011

Ottawa and Quebec reach deal on Old Harry oil and gas prospect

Ottawa and Quebec reach deal on Old Harry oil and gas prospect

March 23, 2011 - 23:22

The Canadian Press
OTTAWA - Ottawa and Quebec have reached a deal on a disputed underwater energy prospect that could mean billions of dollars for the province.

The Canadian Press has learned that federal Natural Resources Minister Christian Paradis and his Quebec counterpart, Nathalie Normandeau, will sign a deal Thursday on the Old Harry oil and natural gas deposit.

Such a deal would come on the eve of an expected federal election call and could prove a boon to the Conservatives as they push to boost their support in Quebec.
Sources within the federal government said the new deal will see Quebec get 100 per cent of the royalties from the area.

Old Harry is located in the Gulf of St. Lawrence and straddles the border between Quebec and Newfoundland and Labrador border. It has been at the centre of a feud between the two provinces for years.

The dispute has centred around ownership of the seabed and the territorial divide between Quebec and Newfoundland.

The reservoir could represent billions of dollars in revenue and has a potential output of two billion barrels of oil and 5,000 billion cubic feet of natural gas.

Newfoundland and Labrador has already laid claim to the bulk of the offshore oil reserve and granted a permit to a company to explore the area.

Quebec meanwhile has been pushing for exclusive rights to the deposit and called on Ottawa to stop any new drilling or seismic testing permits for Old Harry until ongoing environmental studies have been completed.

The environmental work is scheduled for completion in 2012.


How to Pay Down the Federal Deficit: Sell America's Icons, Assets and Gold?

How to Pay Down the Federal Deficit: Sell America's Icons, Assets and Gold?


For most Americans, it is unimaginable that the U.S. could put its iconic properties on the market. But as the nation struggles to balance its balance sheet, should the federal government take a look at selling some of its most valuable assets?

It wouldn't be the first time that a large nation has pondered taking such drastic steps in recent years. Just two years ago, the Greeks and the British probably never would have thought that some of their famed assets would hit the auction block.
But since then, Greece has been saddled with such onerous budget restrictions due to E.U. bailout guarantees that some have suggested that it sell some of its popular islands. A number of the country's politicians are attempting to block the transactions. One of the jokes about Greece -- which sadly now has some basis in reality -- is that it will have to sell the Parthenon. The Greeks don't find the joke very funny.

The British have also begun the sale of assets, which could eventually include the Royal Mail.

Asset sales by governments have a long history. A large percentage of the geographic area of the United States was acquired through the purchase of land from other governments. In the Louisiana Purchase, Napoleonic France, strapped for cash due to its wars in Europe, sold the United States land that is now part or all of 14 states for the 2010 equivalent of $219 million.

24/7 Wall St. has identified nine U.S. assets that could generate a total of $543 billion -- or about a third of the annual budget deficit for the government's current fiscal year. The list is by no means comprehensive, but shows that the U.S. has salable assets that, in some cases, are worth hundreds of billions of dollars.

Each of the nine assets on this list were compared to private companies or entities that already have established public valuations. For example, to put a value on the U.S. Postal Service, 24/7 Wall St. looked at FedEx (FDX) and United Parcel Service (UPS), and to estimate a sale price for the New York Federal Reserve building, they examined nearby Wall Street real estate. We looked at cash flow and revenue figures when comparable values were not available. We determined the size and dimensions of each asset using U.S. government data, which was taken from dozens of departments and agencies.

It's worth noting, though: While these nine sales and licensing agreements might make a big dent in a single year's budget deficit, they wouldn't balance the budget, and the current federal debt -- the overall amount we owe -- is around $14 trillion. That $543 billion is just a drop in the bigger bucket -- we'd need to find many, many more assets to put on the auction block to significantly reduce the debt. But this is a huge country, and this list is just the tip of the iceberg.

1. New York Federal Reserve Building
Guesstimated price tag: $750 million
Location: Manhattan, New York
U.S. ownership: 87 years
Who should buy it: Donald Trump, SL Green, Tishman Speyer
Why it's valuable: Location

The Federal Reserve Bank of New York is located in a massive building that takes up an entire block in Manhattan's Financial District. Construction of the building was completed in 1924. It's 14 stories tall and features an additional five floors underground. If the bank relocated to less valuable real estate, the government could make a significant amount of money. A recent notice issued by the New York City Department of Finance estimated the building's value for the 2011 to 2012 tax year to be $88,594,000. While this may be the value for tax purposes, a review of comparable buildings in Manhattan revealed this wold likely be significantly less than its market price. On Madison Avenue, a similar building was sold for just under $1 billion. In all likelihood, considering its location and the historical significance of the building, the government could fetch closer to $750 million from a buyer like Donald Trump or SL Green.

2. Hoover Dam

Guesstimated price tag: $415 million
Location: Nevada/Arizona
U.S. ownership: 75 years
Who should buy it: Duke Power, Con Edison, Southern Company
Why it's valuable: Hydroelectric power

The Hoover Dam includes one of the largest hydroelectric installations in the country. If a company were to purchase the structure, it would most likely do so to privatize the dam and reap the benefits from the sale of the power it generates. According to the Department of the Interior, the average annual net generation for the Hoover Dam from 1947 through 2008 was about 4.2 billion kilowatt-hours. The Energy Information Administration calculates the average retail price of a single kilowatt-hour, as of 2010, at 9.88 cents. That means the energy produced by the dam each year is worth roughly $415 million. Of course, the operators of the power plant must deal with additional, necessary costs, such as flood control. Without the benefit of a profit and loss statement for the dam, one year's revenue is a reasonable -- though quite conservative -- valuation.
3. Randolph Air Force Base
Guesstimated price tag: $1 billion
Location: San Antonio, Texas
U.S. ownership: 81 years
Who should buy it: City of San Antonio
Why it's valuable: Could be converted to a commercial airport
There are many cases of former Air Force bases being converted into commercial airports, including the fields that are now Bangor International in Maine and Southern California Logistics in the Golden State. This usually happens only after a base has been closed, but there's no reason to believe the government wouldn't sell an operating base in an area where it could get a premium price for it. According to the Census Bureau, San Antonio is the fourth fastest-growing city in the U.S. The metropolis also happens to have a nation-high three Air Force bases within its city limits. Randolph AFB has two substantial runways capable of supporting all but the largest jetliners. Incorporating the costs the city of San Antonio would have to sustain to upgrade facilities and build a new terminal, Randolph could be sold for as much as $1 billion.
4. Naming Rights to the Grand Canyon

Guesstimated price tag: $1 billion
Location: Arizona
U.S. ownership: Became a national monument 103 years ago
Who should buy it: Large international brand
Why it's valuable: Brand recognition
It's very common for large venues, like stadiums and convention centers, to sell naming rights for tens of millions of dollars.
The new Citi Field in New York (formerly the Met's Shea Stadium) sold naming rights to Citigroup for $400 million. The U.S. government would likely get much more for a major national attraction like the Grand Canyon, which has more than twice as many visitors each year as Citi Field, and has the added branding value of being a major national landmark. This trend could spread to any of the hundreds of national monuments in the U.S., such as Mount Rushmore or the Washington Monument.
5. Yellowstone National Park
Guesstimated price tag: $5 billion
Location: Idaho, Montana, Wyoming
U.S. ownership: 139 years
Who should buy it: Plum Creek, Weyerhaeuser
Why it's valuable: Timber
Yellowstone, spread across parts of Wyoming, Idaho and Montana, is a popular destination for tourists trying to experience the best of the great outdoors. But if the federal government reaches a point where it is desperate for cash, it could try to sell the land to foresting and paper companies like Plum Creek or Weyerhaeuser for its timber value. Based on the current price per acre of Wyoming timberland, the 2.2 million acre park (more than twice the size of Rhode Island) could fetch approximately $5 billion from a major logging concern.

6. Interstate Highway System
Guesstimated price tag: $25 billion
Location: Across the U.S.
U.S. ownership: 55 years
Who would buy it: Carlyle, Blackstone, TPG Capital
Why it's valuable: Tolls, roadside businesses
According to the Federal Highway Administration, the Dwight D. Eisenhower U.S. Interstate Highway System is the largest in the world, spanning more than 45,000 miles. Today, the system is largely without toll roads, besides those present before the system was incorporated in 1956. While the government pays more than $5 billion each year maintaining the interstates, if an independent company purchased the system and set up tolls on half of the existing interstate roads, potential revenue for a single year would be close to $25 billion. But as with the Hoover Dam, these calculations have to be made without the benefit of a profit and loss statement, so the price tag of one year's revenues -- $25 billion -- is a quite conservative valuation.
7. U.S. Postal Service
Guesstimated price tag: $40 billion
Location: Nationwide
U.S. ownership: 236 years
Who should buy it: UPS, FedEx
Why it's valuable: Parcel delivery infrastructure
(employees, vehicles, buildings)
The U.S. postal service, mired in debt and facing steady declines in mail volume, could nevertheless be a potentially valuable enterprise for one of the country's larger parcel companies. The acquiring company would likely assume the Postal Service's facilities, employees and fleet, strip down the unnecessary elements, and incorporate the remaining parts into its own operations. As implausible as a buyout like this seems, it could happen. The British government is currently considering the same thing for its own Royal Mail, with some reports suggesting a public stock offering of $14.4 billion. The U.S. Postal Service is several times larger than its U.K. equivalent, and even incorporating the $13 billion in debt that would be assumed by a buyer, operations could go for as much as $40 billion.
8. The Gulf of Mexico
Guesstimated price tag: $70 billion
Location: Gulf of Mexico
U.S. ownership: Lease agreement
Who should buy it: BP, Exxon, Texaco
Why it's valuable: Oil drilling
The U.S. currently leases massive blocks of territory in the Gulf of Mexico through auction to the biggest oil companies in the world. At the moment, the government has only leased roughly one-fifth of the nearly 160 million acres of drillable space in the gulf. With the demand for new sources of oil rising steadily, there's good reason to believe the government, if in a dire fiscal predicament, could initiate a fire sale on the remaining property for a reduced price. Currently, blocks (a square mile or more) are being leased for an average of $550 per acre. The government could sell, rather than lease, the remaining land at this price for more than $70 billion.
9. U.S. Gold Supply
Guesstimated price tag: $400 billion
Location: U.S. Bullion Depository, Fort Knox, Kentucky
U.S. ownership: Varies
Who should buy It: China, Germany, the International Monetary Fund
Why it's valuable: Precious commodity
The advantage of gold is that holdings are completely liquid because of the demand from other large nations, for commercial use, and for private products used by consumers. At least 15 countries and organizations hold gold reserves valued at more than $20 billion.
The U.S. currently possesses the greatest hoard of gold in the world, at nearly 9,000 metric tons. The value of this gold, according to the World Gold Council is close to $400 billion.

Shell Fires Up Gas Production Offshore Qatar

Wednesday, March 23, 2011
Royal Dutch Shell
Qatar Petroleum and Shell announced the first flow of dedicated offshore gas into the Pearl GTL plant located in Ras Laffan Industrial City in the State of Qatar.

Shell, which is the operator of the Pearl GTL plant developed under a Production and Sharing Agreement with QP, has opened natural gas wells offshore allowing the first sour gas to flow through a subsea pipeline into the giant GTL plant onshore. Sections of the Pearl GTL plant will be started up progressively over the coming months.

The Pearl GTL project was launched in July 2006 and the first stone was laid by His Highness Sheikh Tamim bin Hamad Al-Thani, the Heir Apparent in February 2007.

Pearl GTL is the largest energy project ever launched in the State of Qatar, in terms of total investments. It consists of two offshore platforms 60 kilometers off the Qatar coast, connected by pipeline to the largest Gas to Liquids plant ever built, located in Ras Laffan Industrial City.

His Excellency Dr. Mohammed bin Saleh Al-Sada, Qatar's Minister of Energy and Industry said, "This project will play an important role in further enhancing our diversification of the North Field gas utilization and will support the optimization of Qatar’s competitive position in the world markets by supplying ultra clean GTL products. I would like to congratulate the Qatar Petroleum and Shell teams on first on-shore gas. The scale, technology and safety record on Pearl GTL have broken all records. This is a proud day for the State of Qatar, for Qatar Petroleum and for our partner Shell."

Peter Voser, Chief Executive Officer of Royal Dutch Shell said, "Today is an important milestone in the Pearl GTL project, and we are on a clear pathway towards the start up of gas to liquids production. I would like to thank Qatar Petroleum and the State of Qatar for their support throughout, to make such a substantial project possible."

Once fully operational, Pearl will produce 1.6 billion cubic feet of gas per day from the North Field, which will be processed to generate 120,000 barrels per day of condensate and natural gas liquids and 140,000 barrels per day of gas to liquids (GTL) products. Gas-to-liquids products are high quality, clean-burning oil products such as gasoil, high specification lubricants base oils, and chemicals feedstock.


Total to Start Gas Production Project in China

PARIS (Dow Jones Newswires), March 23, 2011

Total with partner PetroChina will start a non-conventional gas production project in China, La Tribune newspaper reported, citing the French company's Chief Executive Officer Christophe de Margerie.

PetroChina will own 51% of the operation, located in Interior Mongolia, the newspaper said.

The project will require $2 billion in investment and is expected to start production in 2012 or 2013. Output will plateau at 50,000 barrels of oil equivalent a day, La Tribune said. The reserves are estimated at 440 million barrels of oil equivalent.

Total also plans to open a second oil refinery in China, the newspaper said.

Separately, the French company's CEO said Total won the rights to operate a field in Uganda.
No officials at Total were immediately available for comment.


Melrose Resources looks elsewhere for oil

Revenue was up from $224m (£137m) to $240m (£147m).

Executive chairman Robert Adair said Egypt has traditionally been perceived as a country with relatively low political risk.

He added: "Fortunately, the situation there now appears to be calm and whilst we suffered no business disruption there, we will continue to monitor the situation closely.

"The recent events have, however, underlined the importance of asset diversification and we are particularly pleased that we brought our new Bulgarian fields on stream last year as part of that process."


Budget fuel price call by Welsh Tories and Lib Dems

23 March 2011 Last updated at 06:44 GMT

Chancellor George Osborne has been urged to help Welsh motorists with fuel prices when he delivers his Budget.

Mr Osborne has hinted that he may scrap a fuel duty rise due next month.

Conservative assembly group leader Nick Bourne said he had "to do what's right by the country" and hoped he could act on fuel.

The Chancellor has faced calls for action after a sharp rise in petrol prices

Welsh Liberal Democrat leader Kirsty Williams said household budgets were under pressure and called for the fuel duty increase to be scrapped.

The Tories and Lib Dems said the UK government had laid the foundations for economic growth by dealing with the deficit.

But the Welsh Assembly Government said spending cuts were too deep and too fast.

On Sunday, Mr Osborne told the BBC's The Andrew Marr Show that he was "looking very carefully" at freezing the duty in Wednesday's Budget.

With uncertainty in the Middle East and Libya contributing to increased oil prices, the cost of petrol has risen sharply.

Motoring organisations have called on the government to scrap the planned rise in duty. It is due to take effect in April when it will go up by inflation plus 1p, making a total rise of about 4p per litre.

The Welsh Lib Dem leader said last year's Budget was "difficult... but it laid the foundations for the sustained economic recovery that Wales needs", she said.

"Fuel duty is now a real issue for so many families, particularly in rural Wales," she added.

The Wales Office has asked the Treasury to cut the cost of petrol by up to 5p a litre in rural Wales.

Minister David Jones recently revealed that he asked for a proposed fuel duty rebate scheme to be extended to the Welsh countryside

Growing the economy

But Welsh Assembly Government Finance Minister Jane Hutt said: "My main message to the chancellor is that the cuts are too fast and too deep and they are putting families, communities and businesses at risk in Wales."

She said the Budget needed to take action to stop the UK sliding back into recession, adding: "We need to see that there is a clear plan for growth and jobs."

Prime Minister David Cameron has rejected claims that Wales has been unfairly targeted by spending cuts.
Plaid Cymru said the Westminster coalition government should have concentrated on growing the economy instead of cutting spending in its first budget last year.

Plaid MP Jonathan Edwards said: "Quite simply, they got it the wrong way around."

Trade union Unison said its research showed last October's spending review could deprive the Welsh economic of £3.6bn and warned of 52,000 job losses, with half coming from the private sector.

Unison Cymru secretary Paul O'Shea said: "The view that the private sector is going to mop up the job losses being experienced in the public sector is merely wishful thinking."


Increasing volume of legislation costs businesses £2bn

23 March 2011 Last updated at 06:33 GMT

Today's Trends: Natural Gas Funnelling

Tuesday, March 22, 2011
Rigzone Staff
by  Trey Cowan

The cylinder sections in the graph above represent a range of, plus-to-minus one, standard deviation surrounding the average annual natural gas prices for the corresponding years. Trading patterns over the last three years indicate that the price volatility of natural gas has diminished significantly. Specifically, the range has narrowed from $4.28 in 2008 to just $0.58 at present.
Average Annual Natural Gas Prices
If the cylinders were to be placed concentrically side by side, the resulting effect would be a funnel. Proceeding from the wide-end of the funnel to present day prices, it appears that natural gas has reached a period of price stability.

While much has been written about oversupply issues, the normal corrective mechanisms (i.e. participants leaving) appear to be taking root in the natural gas markets. Specifically, since October 2010, the US land gas rig count has fallen from 950 to 856 rigs, a 10% decline. Taking the conservative assumption that each rig could drill 10 wells per year implies that 940 (10 wells x 94 rigs) fewer natural gas wells will be drilled over the next twelve months.

Given the dramatic decline curves associated with shale gas, such as the depleting 70% during the first year in the Marcellus; the downward trend in rig count implies that future reserve replacement will not likely keep pace with existing production. Such a scenario points to a rebalancing of supply and demand in the U.S.
The discipline we are seeing with regards to a lower natural gas rig count is not occurring in a vacuum. These rigs that were drilling for natural gas are now drilling for oil. In fact, the US land oil rig count has increased by 153 rigs over the same time frame (i.e. from last October until now). E&P firms have made it clear that the incremental return per unit of $11, favoring oil, is a strong incentive to continue shifting resources. Thus, additional drilling to reinvigorate gas production will not resume quickly once prices begin to improve because the equipment will likely not be available.

With prices stabilizing and production normalizing, we can now envision a point in the future months where price improvement rather than price destruction can be seen as the ensuing trend. Other factors that are starting to play to the natural gas market's hand are strengthening industrial demand and a trend towards more electricity generation using natural gas as the fuel. Given the recent nuclear crisis in Japan, the backlash on nuclear energy will only make burning natural gas even more desirable.

So, even with the +7% recent surge in natural gas prices last week, we still see reasons to get more bullish on the commodity in the near future.