Industry Professionals Optimistic about N. Sea Future -Study

- Industry Professionals Optimistic about N. Sea Future -Study

Wednesday, September 07, 2011
GL Noble Denton

Oil and gas industry professionals are optimistic that there will be increased investment activity in the North Sea next year, according to a poll conducted Tuesday at the Offshore Europe conference in Aberdeen. 57% of participants believe that activity will increase, while 22% think that activity will decrease in the region. 21% of survey respondents had no opinion on the matter.

The poll forms part of a survey being conducted by the Economist Intelligence Unit and commissioned by global independent technical advisor GL Noble Denton. It will contribute to a comprehensive report on the outlook for the sector, to be published in January 2012. The report will gather the opinions of oil and gas professionals and provide a complete view of the challenges the sector expects to face next year and beyond.

Pekka Paasivaara, Member of the GL Executive Board, said, "The result of this poll clearly shows that recent concerns over hefty taxes, aging assets and increased operating costs have not dampened optimism for further investment in North Sea oil and gas operations next year.

"This finding will be valuable to the research that GL Noble Denton has commissioned the Economist Intelligence Unit to undertake, and it will be interesting to see whether this optimism for investment in North Sea operations is reflected in other regions."

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Study: Fracking Priciest for Wells

- Study: Fracking Priciest for Wells

Wednesday, August 31, 2011
Pittsburgh Post-Gazette
by Erich Schwartzel

The hydraulic fracturing process that's brought the most controversy to the natural gas industry is also the most expensive aspect of operating a Marcellus Shale well, according to a University of Pittsburgh study released Tuesday.

The fracturing, or "fracking," process that splinters shale rock and lets gas escape costs an average of $2.5 million -- nearly one-third of the total $7.6 million that it costs a company to operate a single well.

Land acquisition and leasing accounted for $2.1 million of the total well costs, with the average signing bonus for land calculated as $2,700 per acre.

This examination of the economic impact of a single Marcellus well was deliberately more narrow than other academic takes on the industry, which have accounted for indirect or induced costs brought on by cottage industries associated with drilling. The conductors of the study called the direct cost of a well a "critical information gap" in gas research.

The study, conducted by Pitt's Institute for Entrepreneurial Excellence and the Katz Graduate School of Business, worked with Downtown-based EQT Corp. to study an operational drill site in Washington County.

Costs were found to dramatically drop after the 23- to 35-day drilling phase, with the reclamation (or "completion") phase and pipeline (or "gathering") phase costing less than one-tenth of the overall price of the well.

The $7.6 million in direct costs that were found for the EQT well is higher than the industry standard of $4 million to $5 million.

EQT sites are considered more expensive on average because the company is not vertical integrated, which means its vertical and horizontal drilling processes occur separately.

The full breakdown included:

• Acquisition and leasing: $2.1 million
• Permitting: $10,000
• Vertical drilling: $663,000
• Horizontal drilling: $1.2 million
• Fracturing: $2.5 million
• Completion: $200,000
• Production to gathering: $472,000

Copyright (c) 2011 the Pittsburgh Post-Gazette

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Penn State Study Finds Smaller Marcellus Jobs Impact; 'Still Big Numbers'

- Penn State Study Finds Smaller Marcellus Jobs Impact; 'Still Big Numbers'

Tuesday, August 30, 2011
Pittsburgh Post-Gazette
by Bill Toland

Jobs related to natural gas drilling in Pennsylvania's Marcellus Shale field were about half what previous studies had estimated for 2009, but the industry still supported about 23,500 jobs that year, according to a new study issued by Penn State researchers.

"It's still big numbers," said Timothy W. Kelsey, professor of agricultural economics with Penn State's College of Agricultural Sciences, and one of the study's authors.

"It's just not as big as what the industry is talking about."

The study, issued Monday by the Marcellus Shale Education & Training Center, a partnership of the Pennsylvania College of Technology and the Penn State Extension, also said that about half of the land being leased by drillers was owned by people living in those counties in 2009 -- the rest was owned by people or firms based out of state or elsewhere in Pennsylvania, or owned by the state itself.

That means much of the leasing and royalty money derived from drilling goes out of the county in which the drilling takes place, according to the study.

It's an economics phenomenon known as "leakage" -- money that looks as if it is benefitting a particular area is actually going elsewhere. And it's not an economic phenomenon native to gas drilling: Coal interests, limestone and gravel deposits and other mineral-related economic activity is subject to the same kind of leakage.

The study, "Economic Impacts of Marcellus Shale in Pennsylvania: Employment and Income in 2009," bills itself as the first paper to look at not just the number of jobs and amount of revenue generated by drilling but also where that money is going and how quickly it's being spent.

The jobs figure, as with previous studies, accounts for actual jobs created -- front office jobs, drilling jobs, engineering jobs -- as well as "induced" and "indirect" jobs, which are those not created by the industry itself but by the money the industry spreads around to local suppliers, hotels and restaurants, for example.

The study suggested that the industry generated around $3.1 billion in economic activity -- $1.2 billion in income and $1.9 billion in "added value."

Also of note was that locals who benefit from the gas play do not spend their lease and royalty checks immediately, meaning the money is not a direct, immediate benefit to the local economy. By surveying landowners in Bradford and Tioga counties, the study's authors estimate that leaseholders save or invest about 55 percent of leasing proceeds and about 66 percent of royalty payments in the year they are received, instead of spending the money.

The study's attempt to get a more accurate read on who -- and which areas -- benefit from drilling activity was hampered, Mr. Kelsey said, by the absence of any state or county database for who owns mineral rights (and thus owns the royalty rights to gas and shale deposits).

While it was relatively easier to find out who owns the land being leased -- about 51 percent of drilling plots are owned by people in that county -- it's far less clear who owns the rights to the gas below the surface and where those people live. The researchers, in calculating the economic benefits of the shale play, assumed an identical local ownership share (51 percent) for the mineral rights as well as the surface rights.

"We know that's not accurate," Mr. Kelsey said. "But there isn't anybody who has that data."

In many cases, mineral rights were separated from surface rights decades ago. It's more likely, he said, that the mineral rights owner lives out of state than the actual landowners, which means that it's also more likely gas royalty payments are going out of state.

But suspecting that and finding data to prove it are two different things, he said.

The state and county assessment offices need to do a better job of tracking that information if they want to have a more accurate picture of where mineral rights royalties are going, he said.

The study also surveyed 2,000 randomly selected businesses in Bradford and Washington counties to "identify the impacts they are experiencing from Marcellus Shale development." The responses "indicated positive economic impacts are occurring broadly across the economy in the communities where drilling is very actively occurring."

About 23 percent of Washington County business respondents said that natural gas drilling had helped to improve sales, while only 2 percent of respondents said that the drilling had hurt sales.

The full paper is available at http://extension.psu.edu/naturalgas/publications.

The study was paid for by funding from state Department of Community and Economic Development and money from Penn State and the Pennsylvania College of Technology.

(c)2011 the Pittsburgh Post-Gazette. Distributed by MCT Information Services.


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Estimates for Greenhouse Emissions from Shale Production Overstated -Study

- Estimates for Greenhouse Emissions from Shale Production Overstated -Study

Wednesday, August 24, 2011
IHS CERA

Estimates used by the United States Environmental Protection Agency (EPA) and others for greenhouse gas emissions from upstream shale gas production are likely significantly overstated, according to a new report by IHS Cambridge Energy Research Associates (IHS CERA). The estimates are based on assumptions that do not reflect current industry practice and should be reevaluated, it says.

"Methane emissions have become a very important and controversial issue given their potency as a greenhouse gas," said Mary Barcella, IHS CERA director of North American natural gas. "Unfortunately, such emissions are not being measured. Estimates are being used that are not supported by data, do not reflect current industry practice and would be unreliable to use as a base for decision-making."

The report cites as one example the EPA's 2010 revised estimates of methane emissions during well completion—the period after the well has been drilled but before it is placed into production. The current EPA methodology for estimating methane emitted during this phase was based on a small sample of wells and primarily measured methane that was captured rather than released into the atmosphere, the report says.

The EPA estimates were based on two workshop presentations describing methane captured during "green completions"—operations designed to capture as much methane as possible. The EPA assumed that (1) similar levels of methane were produced at every other well in the United States and (2) that those emissions went completely uncaptured. Such assumptions do not conform to current industry practices, the report says.

"The assumption that all methane recovered from these sample wells would otherwise have been flared or vented is questionable at best, given that common industry practice is to capture gas for sale as soon as it is technically feasible," said Surya Rajan, IHS CERA director. "Gas that cannot be sold is generally flared rather than vented for safety reasons. If the methane emissions at wells were as high as some methodologies assume, you would have extremely hazardous conditions at the well site that neither regulators nor industry would permit."

Another key mis-characterization found in the EPA estimates and other recent reports, such as a study led by Cornell University professor Robert W. Howarth, is the assumption that wells in flowback contain methane in quantities equal to their post-completion daily production, the report says. This assumption results in a significant overestimation of methane emissions. (The flowback phase is the phase of production when fluids injected into the well flow back out ahead of the tapped gas.)

The IHS CERA report notes that data on unconventional gas well GHG emissions is currently lacking due to the fact that they are not adequately measured. More reliable data is needed in order to produce estimates with any degree of certainty.

The report says that the most productive result of additional regulations proposed by the EPA in July could be better documentation of actual GHG emissions which would provide the accurate measurement that is needed. Some of the other proposed regulations, such as requiring green completions and flaring of any produced gas that is not suitable for sale, are already common practice in the industry, it says.

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GOM Regulatory Regime Delays Cost Revenue, Jobs, Oil Supplies - Study

- GOM Regulatory Regime Delays Cost Revenue, Jobs, Oil Supplies - Study

Friday, July 22, 2011
Rigzone Staff
by Barbara Saunders

Bottlenecks in oil and gas plan and permit approval activity in the Gulf of Mexico (GOM) since 2010's Macondo well disaster are costing some $44 billion in U.S. gross domestic product and 230,000 jobs, according to a new IHS CERA/IHS Global Insight study.

The study, Restarting "the Engine" — Securing American Jobs, Investment and Energy Security, examined the "activity gap," or the difference between the investment capacity of oil and gas companies and the regulatory capacity to process and oversee this activity. Based on data from the Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE), the study identified a growing backlog of exploration and development plan applications awaiting approval and a significant reduction in plan and drill permit approvals.

The costs of delays in the regulatory "new regime" are "economically significant and not just in Gulf states" such as Texas and Louisiana, said Daniel Yergin, chairman of IHS CERA and author of the Pulitzer prize-winning book on the oil industry, The Prize, during a press conference on the new study.

Daniel Yergin – Regulatory delays take "economically significant" toll outside Gulf States

The leading states outside of the GOM to benefit from oilfield supply, service and software jobs would be California, followed by New York, Florida, Illinois and Georgia, the study found. Other manufacturing-dependent economies such as Pennsylvania and Ohio also would receive significant benefits.

"There is a need to better align the new regulatory environment with industry capacity, as the current pace of plan and permit approval is congested," said Jim Burkhard, IHS CERA managing director for global oil. "With that alignment, then the country can realize the economic and energy security benefits of a restarted Gulf of Mexico."

Among the study's key findings, the lost opportunity from an inability to close the activity gap would amount to:

• 150 million barrels of oil next year, or 411,000 barrels of oil per day (bopd) from the deepwater Gulf of Mexico alone– five times the amount recently released from the U.S. Strategic Petroleum Reserve.
• $44 billion of U.S. gross domestic product growth in 2012
• 230,000 additional jobs in 2012
• $22 billion improvement in 2012 wages and compensation
• Realizing $19 billion in pent-up capital investment over a three-year period
• $18.6 billion more of federal, state and local, royalties, bonuses and rents tax payments over the next three years

The study also found that one billion barrels of oil reserves that the Gulf of Mexico in the form of new discoveries were not realized in the past 12 months. This could affect the future production outlook, IHS CERA noted.

Federal agencies that regulate energy exploration were restructured last year and the regulatory approval process has not returned to previous levels, IHS CERA reported. "Each month that passes without closing the gap reduces the potential economic benefits," the company said in a statement.

The study examined plan and permit activity levels in the six months since the lifting of the moratorium in the GOM in October, 2010. The analysis found:

• 86 percent decline in the pace of regulatory approvals for plans
• 38 percent increase in the time to reach each regulatory approval for plans
• 250 percent increase in the backlog of deepwater plans pending approval (from an average of 18 per year to a current pace of 67 per year)
• 60 percent decline in drill permits (combined shallow water and deepwater)

"An increase in oil and gas activity reverberates throughout the broader economy," said James Diffley, senior director of IHS Global Insight's U.S. Regional Economic Group. "Each new hire of a platform worker, machinist or other specialist to work in the Gulf's oil and gas industry results, on average, in more than three additional jobs in an array of industries around the country, whether it be in the Gulf region or a subsea power cable provider in Ohio, a steel manufacturer in Pittsburgh or a software firm in California's Silicon Valley."

The report also noted that the increased activity in the upstream oil and gas sector of the Gulf of Mexico will have substantial impact on income and would lead to increased consumer spending since oil and gas jobs are higher paying, on average, than wages paid to workers in many other sectors. In turn, more offshore development and the jobs it creates would lead to the enhancement of federal, state and local tax revenues by some $12 billion in 2012 and $20 billion through 2013, IHS CERA projected.

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US Shale Gas Weakening Russian, Iranian Petro-Power -Study

- US Shale Gas Weakening Russian, Iranian Petro-Power -Study

Thursday, July 21, 2011
Rice University

Rising U.S. natural gas production from shale formations has already played a critical role in weakening Russia's ability to wield an "energy weapon" over its European customers, and this trend will accelerate in the coming decades, according to a new Baker Institute study, "Shale Gas and U.S. National Security." The study, funded by the U.S. Department of Energy, projects that Russia's natural gas market share in Western Europe will decline to as little as 13 percent by 2040, down from 27 percent in 2009.

"The geopolitical repercussions of expanding U.S. shale gas production are going to be enormous," said Amy Myers Jaffe, the Wallace S. Wilson Fellow for Energy Studies and one of the authors of the study. "By increasing alternative supplies to Europe in the form of liquefied natural gas (LNG) displaced from the U.S. market, the petro-power of Russia, Venezuela and Iran is faltering on the back of plentiful American natural gas supply."

The study concludes that timely development of U.S. shale gas resources will limit the need for the United States to import LNG for at least two to three decades, thereby reducing negative energy-related stress on the U.S. trade deficit and economy. By creating greater competition among gas suppliers in global markets, shale gas will also lower the cost to average Americans of reducing greenhouse gases as the country moves to lower carbon fuels.

The Baker Institute study dismisses the notion, recently debated in the U.S. media, that the shale gas revolution is a transitory occurrence. The study projects that U.S. shale production will more than quadruple by 2040 from 2010 levels of more than 10 billion cubic feet per day, reaching more than 50 percent of total U.S. natural gas production by the 2030s. The study incorporates independent scientific and economic literature on shale costs and resources, including assessments by organizations such as the U.S. Geological Survey, the Potential Gas Committee and scholarly peer-reviewed papers of the American Association of Petroleum Geologists,

"The idea that shale gas is a flash-in-the-pan is simply incorrect," said Kenneth Medlock III, the James A. Baker III and Susan G. Baker Fellow for Energy and Resources Economics and co-author of the study. "The geologic data on the shale resource is hard science and the innovations that have occurred in the field to make this resource accessible are nothing short of game-changing. In fact, we continue to learn as we progress in this play, and it is vital that we understand and embrace the opportune circumstances that shale resources provide. U.S. policymakers should not get diverted from the real opportunities that responsible development of our domestic shale resources present."

Other findings of the study include that U.S. shale gas will:

• Reduce competition for LNG supplies from the Middle East and thereby moderate prices and spur greater use of natural gas, an outcome with significant implications for global environmental objectives.
• Combat the long-term potential monopoly power of a "gas OPEC."
• Reduce U.S. and Chinese dependence on Middle East natural gas supplies, lowering the incentives for geopolitical and commercial competition between the two largest consuming countries and providing both countries with new opportunities to diversify their energy supply.
• Reduce Iran's ability to tap energy diplomacy as a means to strengthen its regional power or to buttress its nuclear aspirations.

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Pennsylvania Shale Gas Output to More Than Double This Year - Study

- Pennsylvania Shale Gas Output to More Than Double This Year - Study

Thursday, July 21, 2011
Dow Jones Newswires
HOUSTON
by Ryan Dezember

Natural gas production from Pennsylvania's Marcellus Shale should reach the equivalent of 3.5 billion cubic feet per day this year, more than double 2010's output, according to new research by a trio of Pennsylvania State University professors.

The study, released Wednesday, further estimates that production in the state from the deeply-buried rock formation will rise to the equivalent of 6.7 billion cubic feet per day in 2012 and 17.5 bcfe in 2020.

That level of production would make the Pennsylvania basin the largest supplier of natural gas in the U.S., able to meet about 25% of the country's demand, said Kathryn Klaber, who heads the Marcellus Shale Coalition, an oil and gas industry advocacy group.

The Marcellus Shale underlies parts of several Mid-Atlantic and Midwestern states but production is centered in Pennsylvania.

In 2010 1,405 wells were drilled there, yielding the equivalent of 1.3 billion cubic feet of gas per day, according to the study. The professors, who obtained data from producers through the advocacy group, said that 2,300 wells are planned to be drilled this year and forecast that the number will steadily rise to about 2,500 a year by 2020.

While producers have focused on Pennsylvania with some forays into Ohio and West Virginia, several are eying an expansion into New York.

Many initially believed that southwest Pennsylvania held the most productive fields. But a string of recently drilled wells in northern Pennsylvania have made exploration in New York -- where a ban on hydraulic fracturing, the controversial technique needed to crack open the energy-bearing rock, was recently lifted -- more attractive.

Twenty-four of Pennsylvania's 25 highest producing wells are in counties that border New York, according to the Pennsylvania Department of Environmental Protection.

In May, Houston-based Cabot Oil & Gas said two of its wells in that border area are producing nearly 30 million cubic feet of natural gas per day -- significantly more than any previous Pennsylvania wells.

Copyright (c) 2011 Dow Jones & Company, Inc.

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Aker Awarded FEED Study at Statoil's Mariner Field

- Aker Awarded FEED Study at Statoil's Mariner Field

Tuesday, July 12, 2011
Aker Solutions

Aker Solutions has won a contract to conduct the topside FEED (front-end engineering and design) study for Statoil on the Mariner field on the UK continental shelf in the North Sea. The contract value is approximately NOK125 million.

The study will be delivered in the summer of 2012, after which the customer may proceed with the final investment decision.

"We are pleased to have won another important topside FEED study from Statoil. The Mariner field presents an exciting opportunity on the UK shelf, which suits our strategy of boosting our presence in the UK further," said Valborg Lundegaard, executive vice president of Aker Solutions' engineering business.

The engineering and design work will be carried out from Aker Solutions' engineering hub in Oslo, together with engineers from the drilling technologies business in Kristiansand, Norway.

Aker Solutions is also strengthening its UK engineering capacity, hiring experienced engineering professionals to its London office, which could offer future support for the Mariner project.

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GOM Employment Could Increase if Admin. Allows -Study

- GOM Employment Could Increase if Admin. Allows -Study

Monday, July 11, 2011
American Petroleum Institute

Almost 190,000 new jobs could be created in 2013 if permitting in the Gulf of Mexico for offshore development returned to levels before the Obama administration's moratorium, a study by Quest Offshore Resources, Inc., says. The study, "United States Gulf of Mexico Oil and Natural Gas Industry Economic Impact Analysis," also projects a 71 percent increase in Gulf development spending to $41.4 billion and a 70 percent increase in economic activity related to Gulf development to $44.5 billion.

"The slow pace of Gulf development since the accident has cost jobs, revenue and energy production," said API President and CEO Jack Gerard. "The study shows what could be accomplished on jobs if project approvals and permits could get back to a normal pace. We've done the necessary work raising the bar on safety. We cannot continue to delay developing energy and hiring people in the Gulf. The disappointing unemployment numbers from the government last week make this more important than ever," Gerard added.

Quest Offshore conducted the study for API and the National Ocean Industries Association. Quest based its forecasts on actual project development data and historical benchmarks of spending for specific equipment and services.

"Total employment related to offshore Gulf of Mexico oil and natural gas industry operations could reach 430,000 jobs in 2013 if the permitting slowdown is reversed," Gerard said. "As large as the jobs numbers are, however, they are just a fraction of all the jobs our industry could create with more forward-looking development policies in all federal onshore and offshore areas. And along with the increased jobs and energy production could come hundreds of billions of dollars of desperately needed additional revenue to the government. Policymakers now debating tax increases on the industry should understand that producing at home more of the oil and natural gas our nation will need is a far better way to help fix our economy and pay down our debt," Gerard said.

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Foreign Scientists in East Java to Study Lapindo Mudflow

- Foreign Scientists in East Java to Study Lapindo Mudflow

Thursday, May 26, 2011
Asia Pulse Pte Ltd.

Scientists from a few foreign countries including Germany and Britain have arrived in Sidoarjo to observe and study the center of the 5-year-old Lapindo mudflow in the Porong area.

"We have come here to observe from close quarters the conditions of the Lapindo mudflow," Jeffrey Richard, executive director of Humanitus, said on Wednesday.

The center of the mudflow is located near the Banjar Panji I well drilled by Lapindo Brantas oil and gas company in Porong.

The scientists would study the hot mud that has been surging from a hole in the ground for the past five years without any sign of abating.

"We have assembled scientists from several countries who will try to determine what had created the continuing mudflow considered to be the biggest of its kind in the world," Jeffrey said.

He said it had been estimated the phenomenon could last for up to 25 to 30 more years.

All the members of the scientists team would each do their individual observations on the mudflow`s center and later meet to discuss their findings.

There had so far been a difference of views among geologists about what caused the mudflow. Some of them had said the mudflow came into being by a drilling mistake but others attributed it to a natural development.

British geologist Richard Davies was "99 percent" convinced the mudflow had been caused by a drilling mistake.

"We will also conduct a further study on what impacts the mudflow will have in the future," Davies said.

Meanwhile, Russian geologist Sergey Kadurin said the mudflow was a result of a natural occurrence, as had been the case in similar phenomena in other countries.

"It could have been related to the existence of an underground volcano in the past that had been forgotten by the local populace," he said.

The results of the studies of the foreign scientists would eventually be written down and published in a book.

(C) 2011 Asia Pulse Pte Ltd.

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Texas Researchers to Study Fracking of Shale Gas

Texas Researchers to Study Fracking of Shale Gas

Tuesday, May 10, 2011
Fort Worth Star-Telegram, Texas
by Jack Z. Smith

University of Texas at Austin researchers will conduct "a comprehensive review of the science, policy and environmental issues surrounding hydraulic fracturing of shale gas," the school's Energy Institute announced Monday.

North Texas' Barnett Shale will be included in the study, which will examine the controversial process that pumps huge volumes of water and sand, plus much smaller amounts of chemicals, under extremely high pressure to create fractures in rock and release trapped oil and natural gas.

The project "will for the first time combine an independent assessment of alleged groundwater contamination and seismic events" ascribed to hydraulic fracturing, or "fracking," of shale formations "with a detailed analysis of the scope and effectiveness of laws and regulations" related to the process, the announcement said.

The project is expected "to get started straight away," Gary Rasp, communications director for the Energy Institute, told the Star-Telegram. Preliminary findings are expected by the end of October and a final report by the end of this year, he said.

The Environmental Protection Agency is conducting its own fracking study but doesn't expect to have initial findings before the end of 2012. The EPA study is also expected to include portions of the Barnett Shale.

The Energy Institute is providing the approximately $300,000 for its study, Rasp said.

"What we're trying to do is separate fact from fiction," Dr. Raymond L. Orbach, director of the Energy Institute, said in a statement. "Unlocking huge reserves of natural gas could be vital to our nation's energy security. If proven to be safe and environmentally benign, fracking could unleash a bountiful supply of domestic energy for generations, if not centuries, to come."

The research team "will investigate specific claims of groundwater contamination, seismic events, fugitive air emissions and other concerns" associated with fracking in the Barnett, Marcellus and Haynesville shales, the announcement said.

The Barnett Shale underlies more than 20 North Texas counties, including Tarrant and Johnson, the leading natural gas-producing counties in Texas. The Marcellus is in the Appalachian region of the eastern U.S, most notably in Pennsylvania and West Virginia, and the Haynesville is in northwest Louisiana and East Texas.

Copyright (c) 2011, Fort Worth Star-Telegram, Texas. Distributed by McClatchy-Tribune Information Services.

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Study: Tax Grab Undermines Confidence in UK Energy Sector

Study: Tax Grab Undermines Confidence in UK Energy Sector

Tuesday, May 10, 2011
Aberdeen & Grampian Chamber of Commerce

Rising confidence and increased investment in the oil and gas sector has been severely undermined by the UK Government’s sudden Budget tax grab in March, reveals the 14th Aberdeen & Grampian Chamber of Commerce Oil and Gas Survey.

The survey found that the tax changes have raised many serious concerns as to current investment plans and the potentially changed value of North Sea assets. This has arguably made the North Sea less competitive and more marginal which will lead to less investment and a reduction in drilling activity and production.

The survey, sponsored by national law firm McGrigors and conducted by the Fraser of Allander Institute, is the 14th in the survey series and draws on responses from oil and gas operators and contractors to identify current trends, investment, research and development, exploration and employment. The findings are used to identify how the performance of this sector might impact on the wider business community.

Data was being gathered when the Chancellor made his shock announcement and a number of respondents had completed and returned their questionnaires. In marked contrast those returning surveys after the announcement tended to be less optimistic about the future.

The majority of operators reported rising exploration and development activity in 2010 and expect these trends to continue through 2011 although they are now re-assessing future projects. A large number of both operators and contractors reported rising trends in employment in 2010 and anticipate increasing trends in 2011.

Robert Collier, Chief Executive of Aberdeen & Grampian Chamber of Commerce, said: “This survey has come at a critical time for the oil and gas sector in this region. Until recently there were consistent signs of recovery and optimism, together with a developing upturn in investment. The sector had more confidence about the future potential until the March Budget put this optimism in doubt by introducing the tax changes without consultation. Trust between the industry and government is now at an all-time low.

“Our findings show that current business optimism is higher in the UKCS than the last survey, but this is a lagging indicator. The forward indicator of business optimism in the UKCS over the next year shows a drop in confidence which is a clearer representation of what the industry is expecting.”

Bob Ruddiman, McGrigors’ Head of Energy, said: "This is the first empirical data I have seen to demonstrate the very tangible damage which the Westminster Government's so-called 'tax raid' has had upon investor confidence around the North Sea.

“The research clearly highlights the divergence in attitude between respondents who completed the survey before and after the changes were announced. There is a clear appetite for investment but new markets seem increasingly attractive.

“We can only hope that, although the Westminster government retains control over UK oil and gas rights, the First Minister-elect Alex Salmond will stick to his pledge to ‘batter down the door of Chancellor George Osborne’ and put this at the top of the new administration’s agenda during any negotiations with Whitehall."

“This survey does however highlight the areas in which there is considerable confidence and the industry has proved in the past that it is resilient and will survive unexpected events. The challenge for the industry is to rebuild confidence and to continue to demonstrate our world class capability on the world stage.”

The key findings from this 14th survey are:

•   This survey was being conducted when the Chancellor announced the unexpected tax increase, and a number of respondents had completed and returned their questionnaires; those returning after the announcement tended to be less optimistic and more cautious as to the year ahead. It is important to remember the timing of the survey and the Chancellor’s actions when considering the main trends.
•   At the turn of the year there was widespread evidence of rising confidence, increasing investment in both conventional and new areas (carbon capture and storage and renewables), global oil prices were remaining high and on an upward trend and demand was increasing.
•   The unexpected tax changes in the March budget raised many concerns as to current investment plans, the potentially changed value of North Sea assets to both potential sellers and buyers arguably made the UKCS less competitive and more marginal and would lead to less investment, drilling activity and production.
•   Business confidence remained on a level trend amongst operators in 2010, the adverse effects of the budget changes undercutting the optimism of our previous survey, and underpinning the expectations that net trends in business confidence will ease over the next year. Amongst contractors, confidence continued to improve, however, unlike our previous three surveys contractors are more cautious as to the business situation in the year ahead.
•   The majority of operators reported rising exploration and development activity, and level production activity in 2010, and expect these trends to continue through 2011. Although one operator noted “following the 2011 budget several areas will be closely analysed and revised before any commitment” is made. Rising trends in the value of UKCS based work in 2010 were reported by a third of contractors and a further 62% reported a level trend. Looking forward more than 50% anticipate rising trends in the value of UKCS based contract work in 2011.
•   The majority of operators and contractors reported rising trends in employment in 2010 and anticipate increasing trends in 2011.
•   Investment continues to be directed towards improving the extraction process and improving yields. Amongst contractors investment in staff and new markets were most frequently cited, and more are seeking to develop both a decommissioning and a renewables capacity.
•   The UKCS continues to be seen as competitive, especially in the areas of subsea, deep water and brown field development.
•   The main business constraints/drivers as seen by operators continue to be the commodity price, economic climate, tax relief and allowances, level of demand and lift costs. Amongst contractors the level of demand, loss of staff to other companies and oil companies’ Opex were the most highly rated factors.

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Study More Than Doubles B.C. Gas Resources Estimate

Study More Than Doubles B.C. Gas Resources Estimate

Monday, May 09, 2011
B.C. Ministry of Energy & Mines; NEB

A new joint report on the shale-gas potential of Northeastern B.C.'s Horn River Basin more than doubles a previous assessment of gas resources within the province.

The report released by the National Energy Board (NEB) and British Columbia Ministry of Energy and Mines (BC MEM) titled "Ultimate Potential for Unconventional Natural Gas in Northeastern British Columbia's Horn River Basin" is the first publicly released probability-based resource assessment of a Canadian shale basin.

The report says the ultimate potential for marketable unconventional shale gas in the Horn River Basin is 78 trillion cubic feet (Tcf), including three Tcf of discovered resources and 75 Tcf of undiscovered resources. The Horn River Basin is part of the larger Western Canada Sedimentary Basin.

"This innovative report on shale-gas resources provides Canadians with valuable information about our energy future, particularly as it relates to the Western Canada Sedimentary Basin," said Gaetan Caron, chair of the National Energy Board.

Energy and Mines Minister Rich Coleman said, "This report should provide residents of our province with a sense of optimism about the future. B.C. is recognized for its significant shale gas reservoirs as well as for having world-class regulations."

Placing the Horn River numbers in context, the NEB currently estimates that there is 197 Tcf of conventional and unconventional natural gas remaining in the WCSB -- although this number does not take into account known but as-yet-unassessed unconventional gas resources.

The estimate of total remaining conventional and unconventional natural gas in Northeast B.C available for future demand is 109 Tcf. That includes 78 Tcf of shale gas as well as 31 Tcf of remaining natural gas resources identified in a joint assessment of conventional natural gas resources in Northeast B.C. The conventional gas assessment was released by the NEB and B.C. Ministry of Energy and Mines in 2006.

According to the new report on unconventional gas resources, the medium-case estimate of 78 Tcf for Horn River shale gas is the most realistic scenario. However, the study produced a range of numbers for shale gas potential in the Horn River Basin with the low estimate being 61 Tcf and the high being 96 Tcf.

Remaining Ultimate Potential by Province (Tcf)

The NEB is an independent federal agency that regulates several parts of Canada's energy industry. Its purpose is to promote safety and security, environmental protection, and efficient energy infrastructure and markets in the Canadian public interest, within the mandate set by Parliament in the regulation of pipelines, energy development and trade.

The B.C. Ministry of Energy and Mines manages the responsible exploration and development of British Columbia's energy sector.

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Mexico May Become Oil Importer by 2020 -Study

Mexico May Become Oil Importer by 2020 -Study

Friday, April 29, 201
Baker Institute

Without sufficient investments in upstream oil field activities utilizing new and advanced technologies, Mexico faces the prospect of becoming a net oil importer in 10 years, according to new research by Rice University's James A. Baker III Institute for Public Policy and Oxford University. The stakes of the current political stalemate over oil are quite high, the study concluded. Were Pemex, Mexico's national oil company, able to fully develop its oil in line with international standards and technology, Mexican citizens could earn $1,055 per capita per year by 2020, versus $546 if current trends continue.

The two-year study will be released April 29 at a roundtable in Mexico City, co-hosted by Mexican Council on Foreign Relations. The study consists of 14 specialized academic papers authored by scholars from Oxford University, Rice University, Centro de Investigación y Docencia Económicas, National Autonomous University, Instituto Technológico Autónomo de México, Instituto de Investigaciones, Instituto Mora and Monterrey Institute of Technology and Higher Education.

Mexican petroleum production has been falling -- more than 25 percent since its peak in 2004 of 3.9 million barrels per day. Mexico produced 2.98 million barrels per day in 2010. The giant Cantarell field, in particular, has seen a significant drop in production. Meanwhile, domestic demand for oil has grown from 500,000 barrels per day in 1971 to roughly 2.15 million barrels per day in 2010. At present, Mexico is a net oil exporter, with total net exports in 2009 running at just under 1 million barrels per day.

These two trends -- lower overall production and growing internal demand -- pose serious challenges for the Mexican government. The Baker Institute study examines three basic questions: What does Mexico want from its oil policies? What are the Mexican oil sector’s medium- to long-term prospects? And how can Mexico best manage the foreseeable obstacles to achieving its underlying goals for the future of oil in Mexico?

Mexico, the study found, has "three fundamental long-term objectives for its oil sector: to retain ownership and control of subsoil resources ('resource nationalism'); to protect the national economy from external shocks and predation ('energy security'); and to distribute any surpluses generated from this national patrimony to the benefit of the Mexican people as a whole." These goals could generate conflict, the study noted. But despite these goals, the study also concluded, a more equitable distribution of oil revenues could wipe out poverty in the country and thereby create more grassroots political backing for energy reforms. Instead, existing federal spending practices benefit the country's most wealthy citizens.

Mexican leaders are keenly aware of the potential problems caused by falling oil exports and rising public expectations. Pemex has taken steps to slow the declining production by increasing investment in two newer fields. However, the study warned, enhanced recovery techniques for both onshore and offshore oil take years to have an effect.

Moreover, the study questioned whether the Mexican leadership has the will and the ability to reach long-term energy goals. "Political decision-making in the Mexican energy sector, like in many democratic societies, can become highly captive of vested interests," the study said, "with outcomes that are less than optimum for the stakeholder, in this case, the Mexican people." The study argued that for many of those vested interests, the status quo is quite advantageous.

"The study's final determination is that the decline in Mexican oil revenues is likely to be gradual rather than rapid and reduce the chances that a sudden, deep crisis will create the political will to make hard choices or unpopular reforms. For instance, if Pemex is able to maintain production levels through new finds and better efficiency, it could postpone the export crisis for three decades. But even with this expanded time frame, it is not assured that Mexico will undertake an orderly adjustment. Rather, the study's authors concluded, "it can also generate incentives to postpone it or adjust to the fall in government revenues through the least-costly short-run solution, such as cutting public investment, which can, at the same time, generate the greatest adverse effects in the long run."

Inpex: Agreement Signed for Vladivostok LNG Joint Study

Inpex: Agreement Signed for Vladivostok LNG Joint Study

Wednesday, April 27, 2011

Inpex Corp.

Inpex announced that the Company Japan Far East Gas Co., Ltd., newly established by INPEX, ITOCHU, Japan Petroleum Exploration Co., Ltd. (hereinafter JAPEX), Marubeni and ITOCHU (hereinafter CIECO), has signed an agreement on the implementation of a joint study for the natural gas utilization project in Vladivostok area with Russia's Gazprom. The Agreement was signed on April 25, 2011 in Moscow, Russia.

The Joint Study consists of a Pre-FEED for the construction of a liquefied natural gas (LNG) plant with production capacity of 10 million tons per year, a preliminary feasibility study on the compressed natural gas (CNG) pilot project and a preliminary study on gas-chemical complex project. The Joint Study is scheduled to be completed by the end of 2011.

The Agency for Natural Resources and Energy of Japan's Ministry of Economy, Trade and Industry, ITOCHU, JAPEX and Gazprom implemented a preliminary feasibility study (Pre-FS) from May 2009 to July 2010. Following the result on the Pre-FS as well as the discussions between the related parties, an agreement was signed between the Agency and Gazprom in January 2011 on the framework and cooperation for the Joint Study. This Agreement was hereby signed on the details of the Joint Study in furtherance of the above-mentioned agreement between the Agency and Gazprom.

On March 19, 2011 at the meeting on the comprehensive development of the fuel and energy industry in Eastern Siberia and the Far East held in Sakhalin Oblast, Prime Minister Putin revealed his intentions to increase LNG supply to Japan and alluded to the construction of a new LNG plant in that area. This Joint Study and realization of its future potential projects are considered to be very important for Russia-Japan relations, as well as for the stable LNG supply to not only Japan but also to the Far East and other Asian countries, and will contribute to the diversification of Russia's gas (LNG) export sources.

New Study of Recoverable Oil in ND Urged

New Study of Recoverable Oil in ND Urged

Tuesday, April 05, 2011
Grand Forks Herald, N.D.
by  Chuck Haga

As North Dakota marks the 60th anniversary of the discovery of oil in the Williston Basin, Sen. John Hoeven, R-N.D., has announced he'll host a meeting in Bismarck later this month with leaders of the U.S. Geological Survey to urge a new study of recoverable oil reserves in the region.

A 2008 USGS study identified more than 2 billion barrels of recoverable oil in the basin's Bakken Formation and said there is evidence of much more in place.

Oil companies operating in North Dakota have told the senator they believe that the area holds "significantly more recoverable reserves," and Hoeven conveyed that belief to Interior Secretary Ken Salazar when he appeared recently before the Senate Energy and Natural Resources Committee.

At that hearing, Hoeven urged Salazar to support a new study, calling it "a real opportunity," according to a statement released today by Hoeven's office.

Salazar agreed and said he would follow up on the study proposal, according to the statement.

The meeting on April 28 will be at the Bismarck State College Energy Center and will include technical discussions between USGS scientists and industry geologists and engineers, Hoeven said.

The USGS will need updated information from oil companies operating in North Dakota -- production curves, recovery rates, the use of new technologies and any new geological analyses -- to determine whether a new study is warranted, Hoeven said.

"Timely updates are an important part of attracting investments not only in new oil development but also in the associated development needed to support growing communities," he said. "It will help bring oil resource development to oil companies, but it will also help bring infrastructure, housing, restaurants and other service businesses."

Ed Murphy, state geologist at the North Dakota Geological Survey in Grand Forks, said a new study would be appropriate because "there have been so many more wells dug since 2008," and the industry has made big advances in hydraulic fracturing. "So much more information has been generated," he said.

Sixty years ago, on April 4, 1951, that a well operated by Amerada Corp. struck oil south of Tioga in northwestern North Dakota.

According to records maintained by the North Dakota Industrial Commission, the oil industry has produced 1.85 billion barrels since the discovery on Clarence Iverson's wheat farm.

Earlier state estimates indicated that at least twice that amount remains untapped in the Bakken and the Three Forks formation below it. The Bakken shale formation has received most of the attention recently, but it has accounted for just 11 percent of the crude recovered in the state so far. Close to half of the oil pumped from the basin since 1951 has come from the Madison formation.

China #1 In Clean Energy Investment, U.S. Slips Behind Germany To #3

China #1 In Clean Energy Investment, U.S. Slips Behind Germany To #3



The Pew Environmental Group today released the 2010 edition of "Who's Winning the Clean Energy Race?" The report showed China retaining its #1 spot on the list, having invested $54.4 billion in 2010, up from $39.1 billion in 2009.

Germany jumped the U.S. to come in at #2, investing $41.2 billion, even though American investment increased 51% to $34 billion. The top 3 were far ahead of the rest of the pack, with Italy, at $13.9 billion, and Brazil, at $7.6 billion, rounding out the top 5.

The report also noted that China is the world's leading producer of wind turbines and solar energy units, and that the country overtook the U.S. as the nation with the most installed clean energy capacity in 2009.

Total worldwide installed wind energy capacity grew 20.6% in 2010 to 193 gigawatts, with global solar capacity increasing a whopping 65.3% to 43 gigawatts.