Cheniere Energy Inc. has closed on two investment agreements for 70% interest in its proposed Freeport, TX liquefied natural gas (LNG) receiving terminal project, bringing the facility one step closer to fruition. The Houston-based Cheniere will retain a 30% interest. In one agreement, Cheniere will sell a 60% stake to Freeport Investments LLC. Freeport Investments, run by Michael S. Smith, agreed to pay Cheniere $5 million in four installments and contribute an additional $9 million for development of the project without further capital contribution by Cheniere. Cheniere and Smith’s company formed Freeport LNG Development LP, a to develop the project. Smith is the CEO of Freeport LNG Development LP. Also, Houston-based Contango Oil & Gas Co. has exercised its option to acquire a 10% interest in the proposal for $2.3 million, payable in installments. Since acquiring the option on the Freeport site, Cheniere has conducted technical, feasibility, marketing, engineering and environmental studies to validate the project. The company holds a 30-year lease at the site and expects to file its application with the Federal Energy Regulatory Commission in March. Cheniere also has secured options on three additional sites for LNG receiving terminals in Sabine Pass, Corpus Christi and Brownsville, TX.
As it prepares to open its enterprise to outside contractors, Mexico’s Petroleos Mexicanos Exploration & Production (Pemex E&P) has signed a $60 million, two-year contract with Schlumberger Ltd. to manage its upstream asset information. Among other things, Schlumberger will provide lifecycle information management and change management expertise to enable Pemex E&P enhanced data access, administration and analysis. Pemex E&P is a division of Pemex, the state-owned petroleum company. In February, Pemex said it was moving forward on its proposed multiple service contracts (MSCs), which will allow outside contracts to invest privately in the country’s E&P sector. The first MSCs are scheduled to be announced in September, and will be worth about $8 billion in development contracts to private companies. The 10- to 20-year contracts would be awarded for production of non-associated natural gas from the Burgos field in northeastern Mexico.
The Public Utility Commission of Texas (PUCT) has raised the threshold for power companies seeking natural gas price-related rate hikes to ensure that requested increases reflect longer-term fuel price jumps instead of short-term spikes. The PUCT also approved electricity rate hikes requested by the state’s largest providers, Reliant Resources Inc. (RRI) and TXU Corp. The threshold was raised to 5% from 4%, and the commission also extended the period during which prices must rise to 20 days from 10 days. Before the rules were amended, retail providers were allowed to request increases to the fuel component of the “price-to-beat” (PTB) up to two times a year if the price of natural gas rose at least 4% in a 10-day period. The PTB is a benchmark used by customers to compare providers in the deregulated market. In 2004, the PUCT also plans to consider whether to reduce the fuel portion of the PTB if natural gas prices fall. The PUCT also approved a 12% fuel price hike for TXU and a 8.2% increase for RRI. The increase for TXU will add about $10.33 a month to average residential bills; for RRI, the increase averages about $7.66 a month.
If Ontario were to extend its electricity price subsidiaries to industrial power users, it would cost the Canadian province about C$1 billion more in the first year and could “deal Ontario’s wholesale electricity market a final, crushing blow,” according to a new study. Ontario’s power prices shot through the roof last year when the province’s deregulation plan first was implemented, and after heavy criticism, the government proposed capping electricity prices paid by residential and small business consumers (see Power Market Today, Nov. 19, 2002 ). In December 2002, the provincial government passed legislation to set the price at C4.3 cents through 2006, retroactive to May 1, 2002. Now, it is considering capping the rates for industrial users. Aegent Energy Advisors of Toronto, researched what it would cost to extend the cap to industrial users. Aegent found that the extended cap would cost Ontario C$2.65 billion in the first year, which is C$983 million more than the small customer fixed rate. With the rebates retroactive to last May, Ontario has lost about C$10 million a month since the new rate was implemented, according to the Energy Minister’s office. Nearly 3,000 MW of new generation are scheduled to come online this summer in Ontario, which is expected to ease supply shortages and lower prices.
Three Texas cities are considering an appeal to the state’s supreme court after a multi-million lawsuit they won in 1999 against Houston Lighting & Power Co. (HL&P, now CenterPoint Energy) was overturned in February by the First Court of Appeals in Houston. The lawsuit, filed in 1996 as a class-action case by 47 Texas cities, accused the power company of shortchanging their franchise fees illegally for about 30 years. In the 1999 decision, a Houston jury awarded the cities $4.2 million in actual damages, $30 million in punitive damages and $13.5 million in attorneys’ fees. The cities accused HL&P of fraud and unjust enrichment, and claimed the company had underpaid their franchise fees by about $113 million. In the first trial in 1999, Judge John Wooldridge agreed to hear the claims of only Pasadena, Wharton and Galveston. He said he then would decide whether to apply the findings to the other cities’ claims. Following the jury’s award, Wooldridge threw out the $30 million award, which would have been evenly split among the cities. He also reduced the actual damage award to $1.18 million, but agreed to the legal fees. HL&P in turn appealed, and on Feb. 27, the 1st Court of Appeals in Houston threw out the judgment against the power company as well as the attorneys’ fees. In the ruling, the court said the Texas cities of Pasadena, Wharton and Galveston had unreasonably delayed their claims against the company although they accepted franchise fee payments for more than 30 years.
Based on an independent petroleum engineer review, XTO Energy Inc. said its estimated proved oil and gas reserves on the first of the year were a record 3.37 Tcfe, up 26% from the 2.68 Tcfe figure that the company posted at the beginning of last year. From its analysis, Miller and Lents Ltd. said that the Fort Worth, TX-based exploration and production company added 918 Bcfe in 2002 at a cost of $0.78/Mcfe, replacing 404% of production. The company noted that its development program replaced 572 Bcfe or 252% of production at a cost of $0.63/Mcfe. In the review breakdown, natural gas reserves increased 29% to 2.88 Tcf, and natural gas combined with natural gas liquids of 25.4 million bbls equaled 90% of total reserves. The company’s oil reserves increased 4% to 56.3 million bbl due to higher oil price assumptions. XTO Energy said that proved developed reserves accounted for 72% of total proved reserves on an Mcfe basis. The company’s noted that at the end of 2002 its reserve-to-production index was 14.6 years.
Calgary-based Devlan Exploration Inc. said Wednesday that its established reserves as of the first of the year were 5.27 million boe (gas converted at 6:1), an increase of 92% over the prior year. The evaluation conducted by Sproule Associates Limited showed the reserves consisted of 2.1 million barrels of oil and natural gas liquids plus 19.3 Bcf of natural gas. The Sproule report added that Devlan’s proven reserves increased 116% on the year, with the addition of 1.9 million barrels of proven oil and natural gas liquids plus 3.9 Bcf of proven natural gas reserves. Devlan said the valuation has a net present value at 10% of C$65,756,000, representing a 126% increase over last year, split 61% and 39% between natural gas and oil/natural gas liquids respectively.
Continuing its current exploration and production acquisition strategy Houston-based Rocky Mountain Energy Corp. (RMEC) said it has signed an agreement to purchase a group of oil and gas properties located in Wyoming, Utah, Nebraska and Colorado for $11.2 million. The properties currently generate in excess of 240 b/d of oil and 2 MMcf/d of natural gas, equating to $400,000 per month net to interest purchased. RMEC said proved reserves on the properties are 3.2 million boe with 95% of these reserves needing no further operations to produce cash flow. The company added that an additional 4 million barrels of oil ($20 million net) is thought to exist in waterflood potential. Closing is scheduled for April 1. Over the past couple of months, RMEC has announced three other acquisitions (see NGI, Dec. 9, 2002; Feb. 10, 2003).
Updating its progress on the Sunrise-Mayel No. 2H natural gas well near Delano, CA, Tri-Valley Corp. reported that it is expanding operations to the upper Shafter-Wasco zone of the McClure Shale formation because the current zone has a significant amount of clay content that can swell and block gas delivery. The Bakersfield, CA-based company noted that the content of the formation surrounding the 3,100 feet of horizontal wellbore apparently “reduced the effectiveness of the horizontal fracture process,” resulting in the failure to produce at commercial rates at this time. Tri-Valley said it has a better chance to achieve a commercial production rate from the upper zone. Preparing, drilling and fracturing the upper zone is expected to take 90-120 days. The company added that the location also contains three other zones that bring the total to nearly 300 net feet of gas-charged zones. Tri-Valley’s 8,300-acre lease covers approximately 6,600 acres of mapped closure that the company speculates may contain a potential 3 Tcf of natural gas in place in all five zones.
Â©Copyright 2003 Intelligence Press Inc. Allrights reserved. The preceding news report may not be republishedor redistributed, in whole or in part, in any form, without priorwritten consent of Intelligence Press, Inc.
© 2021 Natural Gas Intelligence. All rights reserved.
ISSN © 2577-9877 | ISSN © 1532-1266 |