Plains Exploration & Production Co. will become part of mining conglomerate Freeport-McMoRan Copper & Gold Inc. after a majority of shareholders voted to approve the $6.6 billion merger. Freeport, based in Phoenix, in December offered close to $9 billion total to buy Plains, as well as to bring back into the fold McMoRan Exploration Co., which it had spun off in 1994 (see NGI, Dec. 10, 2012). McMoRan shareholders are scheduled to vote June 3 on the merger, comprised of about $2.4 billion cash and a share of future royalties on some assets. The approval came after Freeport and Plains agreed to give Plains shareholders $3.00/share in a one-time special cash dividend and another $1.00 for each Freeport share when the merger is completed. The one-time dividend will cost Freeport an estimated $1 billion. Assuming the merger is completed as scheduled by Friday (May 31), Freeport plans to also complete $1.5 billion in asset sales from the combined company as a way to reduce capital spending. Freeport claims that it would become the fifth-largest U.S.-based natural resource company by enterprise value once the mergers are complete, trailing ExxonMobil Corp., Chevron Corp., ConocoPhillips and Occidental Petroleum Corp.
The U.S. Energy Information Administration (EIA) reported that coal has regained some of the market share for power generation it had lost to natural gas. According to the EIA, preliminary data shows that coal was the source fuel for at least 40% of the nation’s electricity every month from November 2012 to March 2013, the most recent month with figures available. Natural gas accounted for about 25% of power generation during the same five-month period. The EIA said that heading into the spring shoulder season, when electricity demand is typically lower, higher prices for natural gas had eroded its market share from April 2012, when natural gas and coal each accounted for 32% of power generation (see NGI, July 2, 2012). In its Short Term Energy Outlook for May, the EIA predicted that coal would account for 40.1% of power generation in 2013, while natural gas would account for a 27.8% share.
Laredo Petroleum Holdings Inc. agreed to sell all of its Granite Wash properties in the Anadarko Basin to affiliates of EnerVest Ltd. for $438 million cash. The deal includes about 58 MMcfe/d, proved reserves of 171 Bcfe, 104,000 net acres and associated gathering assets in Western Oklahoma and the Texas Panhandle. Output in 1Q2013 totaled 4.9 Bcf of natural gas and 49,600 bbl of crude oil and condensate. Estimated proved reserves at the end of 2012 totaled about 162 Bcf and 1.5 million bbl. Once the Granite Wash assets are sold, expected by the end of September, Laredo wants to add two horizontal rigs to its Permian program, which would give it a total of six horizontals drilling on multi-pad wells by the end of this year. The sale requires approval by interest holders in some of Laredo’s Anadarko properties; they would have to give up preferential rights, the operator noted.
Cabot Oil & Gas Corp. plans to use natural gas to power hydraulic fracturing (fracking) equipment in northeastern Pennsylvania’s Marcellus Shale. The operator has about 200,000 net acres in the play and averaged more than 1.05 Bcf/d gross in 1Q2013. The dual-fuel technology, which displaces 70% of the diesel normally used to power stimulation equipment, would be a first in the Marcellus specifically for fracking, it said. Cabot is partnering with well completion specialist FTS International and Caterpillar Global Petroleum, the oil and gas division of Caterpiller Inc. To operate using gas, FTS’s mobile pressure pumping unit was retrofitted with a dynamic gas blending kit from Caterpillar, which is compatible with field gas, compressed natural gas and liquefied natural gas.
Virginia Democratic Sens. Mark Warner and Tim Kaine have introduced legislation to provide an alternative to the Obama administration’s proposed 2012-2017 offshore oil and gas leasing plan, which excludes Virginia. “I have long advocated for additional exploration and the responsible production of domestic energy resources off of Virginia’s coast,” said Warner. “Our legislation includes appropriate environmental protections and an equitable formula for sharing revenues between the state and federal governments. I believe that changes in the membership of the Senate after the 2012 elections have helped to produce a potentially more supportive atmosphere for our legislation.” The Virginia Outer Continental Shelf Energy Production Act of 2013 would expand U.S. offshore energy production with a revised five-year leasing plan and provide revenue sharing. The bill is similar to House legislation proposed by Virginia Republican Rep. Scott Rigell.
The Environmental Defense Fund (EDF) has allowed itself “to be co-opted by industry interests on the issue of hydraulic fracturing [fracking] for shale gas,” and does not speak for local communities on the issue, representatives of 67 grassroots organizations said. EDF’s participation in the Center for Sustainable Shale Development (CSSD), which recently began issuing drilling standards to protect air and water quality in the Marcellus Shale, was disheartening to “those of us concerned with charting a rational and sustainable energy policy for the United States,” according to a letter to signed by the organizations and sent to EDF President Fred Krupp. Among those signing the letter were the Civil Society Institute, Earthworks, Friends of the Earth (US), Greenpeace, Delaware Riverkeeper Network, Gasland director Josh Fox, and anti-fracking advocates Mark Ruffalo, Debra Winger and Robert Kennedy Jr., along with dozens of small organizations from across the country. In a response, Krupp defended EDF’s participation in CSSD. “We have made it clear that there are places where fracking should never be permitted. But if fracking is going to take place anywhere in the U.S. — and clearly it is — then we need to do everything in our power to protect the people living nearby.”
Kinder Morgan Energy Partners LP‘s Tennessee Gas Pipeline Co. LLC has signed a binding, 20-year firm transportation precedent agreement with Mitsubishi Corp. of Japan to ship 600,000 Dth/d of gas earmarked for the proposed liquefied natural gas (LNG) export facility, Cameron LNG, in Hackberry, LA, which is set to begin service in the second half of 2017. Mitsubishi would serve as foundation shipper for Tennessee’s Southwest Louisiana Supply Project. Sempra Energy, Mitsubishi and Mitsui & Co. Ltd. have signed 20-year tolling capacity and joint venture agreements for the terminal.
The nonprofit Environmental Integrity Project (EIP) said after an eight-year decline, carbon dioxide (CO2) emissions from power plants jumped 7.1% in 1Q2013, due in part to rising natural gas prices and the lure of cheap coal. In an eight-page report, EIP said coal’s rebound was “modest,” but higher natural gas prices were partially to blame. The group cited a U.S. Energy Information Administration forecast that predicts gas prices will rise to about $4.55/MMBtu in 2013, a price about 34% higher than 2012. Meanwhile, coal prices will remain flat. In 2012, gas-fired power generation reached a record 1.23 billion MWh, a more than 60% increase from 2005, while the use of coal declined nearly 25%.
Ohio’s Muskingum Watershed Conservancy District agreed to sell up to 38 million gallons of water from Piedmont Lake to Gulfport Energy Corp. for Utica Shale drilling activities. The district’s governing board is selling the water at a rate of $8.00/1,000 gallons. The water would be withdrawn from June 15-Aug. 15, at rates of up to 2 million gallons per day (gpd) in June and July, and 1 million gpd in August. The board also agreed to adopt a policy for short-term sales of water to the oil and gas industry, effectively limiting water sales to producers operating near lakes managed by the district. In August the board agreed to sell Gulfport up to 25 million gallons from Clendening Lake in Harrison County through June 12 (see NGI, April 29).
Encana Corp.‘s Deep Panuke natural gas field offshore Nova Scotia, which has been in development in some form for more than 10 years, is scheduled to begin production before the end of June, according to builder and operator SBM Offshore NV, which is more than two years late in ramping up the platform. At one time Panuke was considered a top prospect for Encana and predecessor PanCanadian Petroleum Ltd., which discovered the field, about 155 miles southeast of Halifax, was sanctioned with a redesigned plan in 2007 and is expected to be able to produce up to 300 MMcf/d from four deep sea wells (see NGI, Oct. 29, 2007). Spain’s Repsol YPF SA agreed to buy all of the production for the life of the field, estimated to be eight to 18 years, which would be trnansported by the Maritimes & Northeast Pipeline (see NGI, Feb. 23, 2009).
Frustrated by progress at the federal level, the state of Alaska has launched a plan to assess oil and natural gas resources in the Arctic National Wildlife Refuge (ANWR) 1002 Area. Gov. Sean Parnell said planning for the region cannot be done unless the energy resource is known. The state’s plan is to unfold over seven years and would include seismic surveys, environmental studies and exploration drilling on the ANWR coastal plain. The “Oil & Gas Resource Evaluation & Exploration Proposal for the ANWR 1002 Area” was produced by the Alaska Division of Oil & Gas, and it is being shared with Alaska stakeholders, the U.S. Department of the Interior and members of Congress, and was outlined in a letter to Interior Secretary Sally Jewell. The state is seeking $50 million to fund the program.
The Pennsylvania Public Utility Commission approved petitions of Peoples Natural Gas Co. and Peoples TWP to implement long-term infrastructure improvement plans (LTIIP) in addition to a distribution system improvement charge. Peoples is to replace an average of 47 miles of pipeline per year during the five-year period of the LTIIP. Peoples plans to spend between $55 million and $71 million per year on pipeline, meter and service replacement over the five-year period. Peoples TWP is to replace an average of 28 miles of pipeline per year during the five-year period. Peoples TWP anticipates spending a minimum of $9.1 million a year over five years.
Alaska Gov. Sean Parnell has signed HB 4, which gives the Alaska Gasline Development Corp. (AGDC) authority to develop, finance and operate a gas pipeline from the North Slope, serving Fairbanks and Southcentral Alaska; and SB 21, the “More Alaska Production Act,” intended to attract investment and increase oil production on the North Slope. The bill also directs AGDC to consider ways to get gas and propane to more Alaskans using other transportation mechanisms.
The Texas Senate has passed HB 2767, intended to encourage wastewater from drilling and hydraulic fracturing to be recycled for reuse rather than injected as waste into disposal wells. The legislation aims to clear up legal ambiguities around responsibility for transferred drilling waste. If signed by Gov. Rick Perry, the legislation would stipulate that it is necessary to conserve water resources and reduce the amount of liquid waste from drilling activities. Under the legislation, the party in possession of the waste is responsible for it. Backers asserted that a lengthy permitting process for facilities to treat wastewater away from the drilling lease area, and legal ambiguity about the ownership and legal liability for transferred waste have been obstacles to more recycling.
A group of landowners has filed a lawsuit in U.S. Bankruptcy Court in Buffalo, NY, against Norse Energy Corp. USA after the company declared a force majeure and extended its oil and gas leases in western New York (Blackman et al v. Norse Energy Corp. USA, No. 1-12-13685-CLB). The company filed for bankruptcy protection in December (see NGI, Dec. 10, 2012) and has cited an ongoing state moratorium on high-volume hydraulic fracturing as the rationale for declaring the force majeure. According to court documents, the leases cover about 6,314 acres in Broome, Chenango and Madison counties. All but four of the leases have since expired, with the remainder would expire in July. Norse began issuing notices of force majeure to its leaseholders in January 2011, extending the leases for 1,500-2,000 landowners (see NGI, March 7, 2011).
Rapid City, SD-based Black Hills Corp. has begun construction of a natural gas-fired 132 MW generation plant near Cheyenne, WY, by its utility units serving the area, Cheyenne Light, Fuel & Power and Black Hills Power. The Cheyenne Prairie Generating Station is to be five miles southeast of downtown Cheyenne, deploying three gas-fired turbines, including one simple-cycle peaking unit. The plant is scheduled to start commercial operations in the fourth quarter of 2014. Black Hills Power will use part of the facility as replacement for 82 MW of coal-fired generation that it has determined cannot be economically retrofitted with emissions equipment to meet more stringent federal regulations.
Plans for a 346 MW natural gas-fired generation plant in Washington state are on hold for the Kalama Energy Center after Calgary-based Veresen Inc. ended its participation on market concerns, said Energy Northwest. Energy Northwest is conducting a “thorough risk assessment,” a spokesperson told NGI. Energy Northwest has until January 2015 to decide if it wants to retain 50-year lease on a plant site designated near Longview, WA. Given the uncertainty, Williams Northwest Pipeline has withdrawn an application to build a three-mile pipeline lateral to service the proposed project.
Nevada’s Senate has given unanimous approval to SB 123, endorsed by Las Vegas-based NV Energy, to retire coal-fired generation and usher in more natural gas-fired and renewable generation. The bill now heads to the Assembly. NV plans to retire at least 800 MW of coal-fired generation by the end of 2019 and plans to develop up to 350 MW of renewables and 550 MW of gas-fired or other generation. If SB 123 passes and the Nevada Public Utilities Commission approves NV’s plans, it would accelerate closing some coal units. It now operates 10 generation plants in Nevada, seven of which are gas-fired.
A panel of marketing representatives for Siemens, General Electric (GE), and Wartsila was convened by the Wyoming Infrastructure Authority (WIA) to look at how quick-start natural gas-fired generation may mitigate the increased variability on the electric grid due to increased wind and solar-based power supplies. Panelists touted their technologies in the quick-start, efficient realm of gas-fired combined-cycle baseload generation plants as part of WIA’s spring board meeting in Jackson Hole, WY. Representatives provided details on the performance capabilities of their companies’ technologies, including ramping capabilities from start to full power output; impact of performance based on elevation, heat rates, cooling methods and other attributes.
Energize West Virginia with Natural Gas and America’s Natural Gas Alliance is holding town hall meetings in West Virginia where industry experts will discuss hydraulic fracturing and answer questions. Meetings will be held June 11 in Roanoke, WV, and July 25 in West Union, WV.
Pioneer Natural Resources Co.‘s first horizontal Wolfcamp Shale well in Martin County, TX, the Mabee K #1H had an initial 24-hour peak natural flow rate of 1,572 boe/d with 77% oil content. The well was completed in the Wolfcamp B interval using a 27-stage hybrid fracture stimulation over a perforated lateral length of 6,671 feet. The initial flow rate “compares very favorably” with that of the DL Hutt C #1H well, Pioneer’s first horizontal Wolfcamp Shale B interval well in Midland County, TX.
In an attempt to lure foreign investment back to its shale natural gas plays, Polish Finance Minister Jacek Rostowski said a severance tax on unconventional production will take effect in 2015 but no tax would be levied until 2020. According to reports, Poland is considering a tax exemption on gross receipts for coalbed methane production to 1.5% and reduced severance taxes on offshore production of 3%. A bill that would raise the severance tax on oil and gas to 40% of gross receipts also is being considered. Earlier this month, Marathon Oil Corp. and Talisman Energy Inc. separately said they were pulling out of the country. ExxonMobil Corp. ended its exploration efforts in Poland last year, but Chevron Corp. and ConocoPhillips still have operations there (see NGI, March 19, 2012; Oct. 31, 2011).
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