ExxonMobil Corp. has filed for permission to export 30 million metric tons a year (mmty) of liquefied natural gas (LNG) from the west coast of British Columbia (BC) (see related story). The Irving, TX-based operator said in an export license application with the National Energy Board that it is assessing potential construction sites in the Kitimat and Prince Rupert, BC areas for an LNG facility that would include six processing units. The project would be a partnership with its majority-owned Canadian subsidiary Imperial Oil Ltd. If all goes as scheduled, gas exports could begin in the 2021 to 2023 time frame, the filing indicated. The BC venture, to be known as WCC LNG Ltd., would be supplied with gas from Western Canada fields. During the life of the project, gas also could be sourced from other North American basins. In May ExxonMobil and Qatar Petroleum International, which are sponsoring the proposed Golden Pass Products LNG terminal in Sabine Pass, TX, launched pre-filing for their proposed 15 mmty project (see NGI, May 20).
The Environmental Protection Agency (EPA) said its report on the potential impacts of hydraulic fracturing on drinking water resources will likely be finalized in 2016. The draft report is to be released for comment and peer review in late 2014, with the final report published after review by a panel of independent scientists. An interim update, the “Study of the Potential Impact of Hydraulic Fracturing on Drinking Water Resources,” was published in 2012, but it was found to be heavily flawed in an independent study by the Battelle Memorial Institute. The EPA’s independent Science Advisory Board then formed an expert panel (see NGI, April 1).
A request by Kern River Gas Transmission to reconsider an order that curbs the amount of collateral that may be collected from a noncreditworthy shipper to continue receiving service has been denied by the Federal Energy Regulatory Commission (FERC), whose general policy has permitted pipelines to require shippers that fail to meet creditworthiness requirements to put up collateral equal to three months’ worth of reservation charges. However, for project-financed pipelines, such as Kern River, “which are projects in which the lender secures its loans to the pipeline by the service agreements negotiated with the contract shippers, the pipelines and their lenders could require larger collateral requirements.” FERC held that the pipeline could require 12 months of collateral from noncreditworthy shippers but in an order issued in June 2012, it said at the expiration of Kern River’s debt as it existed on Aug. 12, 2010, the pipeline would no longer be able to collect collateral of 12 months from existing or new firm shippers, but rather would have to adhere to FERC policy for no more than three months [RP12-250].
The Federal Energy Regulatory Commission has approved Northern Natural Gas pipeline’s proposal to construct and operate facilities to offload liquefied natural gas (LNG) at its peak-shaving facility in Hancock County, IA, to respond more quickly in the event of outage emergencies, heightened demand and required maintenance, as well as to provide liquefaction and delivery service to third parties on an interruptible basis. The Omaha-based pipeline, which is a subsidiary of MidAmerican Energy Holdings Co., wants to have in service by November offloading services at its Garner plant in Hancock County for two LNG tractor-trailers; each holds up to about 850 Mcf, or an equivalent of about 10,000 gallons of LNG. A tractor-trailer could be loaded and dispatched within about two hours, Northern Natural said.
Pennsylvania Gov. Tom Corbett, addressing the Keystone Energy Forum in Philadelphia, defended the decision to enact an impact fee, rather than a severance tax, on oil and gas drilling. “Some in Harrisburg wanted us to do the usual thing: impose a tax on this new industry just as it was growing,” Corbett said, according to remarks. “Instead of a tax, we enacted an impact fee, which assesses a realistic fee to cover drilling’s impact on a community.” The impact fee was created by Act 13, the state’s omnibus Marcellus Shale law. Earlier this month the state Public Utility Commission said localities affected by oil and gas drilling in 2012 will collectively receive $102.7 million in impact fee revenue (see NGI, June 17). Corbett said the impact fee “is something that we got right” the first time. The state is “assessing reasonable fees that benefit people at the local level, while not slowing the economic progress being made through our shale gas industry. But we need to keep on doing this the right way.” According to the Washington, DC-based Resources for the Future’s Center for Energy Economics and Policy, the national average for severance taxes is about 11 cents/Mcf (see NGI, Aug. 13, 2012).
Trunkline Gas pipeline is seeking Federal Energy Regulatory Commission authority to reconfigure an existing receipt point on its system to accommodate increased capacity and allow for the bi-directional flow of natural gas to and from the Cheniere Creole Trail Pipeline to deliver gas to the Sabine Pass liquefied natural gas (LNG) export project in Cameron Parish, LA. The Commission already has approved the Creole Trail pipeline’s request to modify its system for the bi-directional flow. Sabine Pass has requested firm backhaul transportation capacity on Trunkline’s pipeline system with natural gas delivery to the Creole Trail Interconnect receipt point. Trunkline constructed the interconnect and placed it into service in February 2008. Via the interconnect, Trunkline was to receive up to 1 Bcf/d of revaporized LNG from the Creole Trail LNG import terminal, which was never completed; modifications would enable it deliver 2.5 MMcf/d to 1 Bcf/d into Trunkline’s system and receipts (2.5 MMcf/d to 1 Bcf/d) from the Trunkline pipeline into Creole Trail. The estimated cost of the proposed modification is $965,000, which would be fully reimbursed by Creole Trail, according to Trunkline.
Riverstone Holdings LLC has raised $7.7 billion to invest in energy businesses, exceeding its original $6 billion target, for its Riverstone Global Energy and Power Fund V LP. The fund to date already has invested about $2.3 billion in 19 companies, management said. Fund V is the first Riverstone fund raised independently of Carlyle Group, the buyout firm that helped launch the private equity 13 years ago. The private equity firm traditionally competes with other private money to buy into or form energy ventures. As of 3Q2012, the 2005 fund had a 1.7 times rate of return (ROR) on investor money, while the 2003 fund had a 2.7 times ROR, according to the California Public Employees Retirement System.
Southeastern Illinois College (SIC) and Rend Lake College (RLC) are planning an array of training opportunities for the emerging oil and natural gas industry in southern Illinois. Both colleges will provide Safeland training, a custom safety program, as well as other special training needed by the industry. SIC has submitted a custom training certificate program to the state for approval, and RLC plans on creating an associate degree program in oil and natural gas. Related educational needs for associated jobs in the industry include truck driving, welding and diesel mechanics, among other programs each college offers individually. Shale natural gas deposits in Southern Illinois carry the potential to create $9.5 billion in new investment and 45,000 jobs, according to the Illinois Chamber of Commerce (see NGI, Dec. 17, 2012). The New Albany Shale gas formation underlies a substantial portion of southern Illinois.
A wildfire along the Western Slope in Colorado south of Rangely in the Piceance Basin prompted Denver-based Encana Oil & Gas (USA) Inc. to shutter 500 conventional natural gas wells in Rio Blanco County and evacuate an eight-worker plant. The shutdown was expected to continue at least through last Friday, a a spokesman said. The overall gas production totals impacted are relatively small (12.5 MMcf/d), and officials were hoping to regain access by the weekend to assess when operations might resume. All the workers were safely evacuated from the Dragon Trail plant, and volunteer fire personnel were providing protection to the Encana natural gas infrastructure, according to a report from the U.S. Bureau of Land Management. The Wild Rose fire is the first to impact energy operations, according to the Colorado Oil and Gas Association.
Oil and natural gas severance taxes totaled $34.5 million in Kentucky in 2012 as the industry continued its comeback from the economic crisis of 2008. Permits for new wells in the state peaked at 2,014 in 2008, but “the Great Recession’s impact on natural gas and oil prices lead to a steady decline in drilling permits over the past four years,” according to the Kentucky Oil and Gas Association (KOGA). “In 2012, only 920 permits for new wells were issued by the Division of Oil and Gas. The recent uptick in natural gas prices, along with oil prices hovering above $90 barrel, is seen as an opportunity for Kentucky to reverse that trend in 2013.” KOGA’s first comprehensive research of the economic impact of the oil and gas industry found that the state had 14,632 producing natural gas wells in 2011 and produced more than 3 million bbl of oil in 2012. Virtually all of the natural gas production (98%) came from eastern Kentucky. Four eastern counties — Pike, Floyd, Knott and Letcher — each produced more than 100 Bcf of natural gas between 2002 and 2012, KOGA said.
The market will ultimately cap the amount of natural gas that the United States exports, not policymakers, said an executive with CIBC World Markets at the Energy Information Administration‘s Energy Conference in Washington, DC. Hypothetically, “if we were to see Henry Hub prices in the $5.00-7.00/Mcf range, it would make incremental [liquefied natural gas export] projects difficult,” said CIBC World’s head of commodity strategy Katherine Spector. CIBC is a unit of the Canadian Bank of Commerce. “There is a point that this [exports] will not make economic sense…I don’t know what the magic number is.” When natural gas in Asia is priced at $16.00, and gas at Henry Hub is $2.00-3.00, “it’s a no brainer.”
The Supreme Court of Ohio has agreed to hear an appeal of a dispute between Beck Energy Corp. and the City of Munroe Falls, which tried to shut down the driller’s operations. In February the Ninth Appellate District Court said state laws regulating the oil and natural gas industry preempted local ordinances and ordered a lower court to reverse its May 2011 ruling in favor of Munroe Falls (see NGI, Feb. 11). Earlier in 2011, the city had ordered Beck to stop work on a natural gas well and alleged that the company had violated several local ordinances.
In what is considered a symbolic gesture, Rochester, NY‘s city council voted unanimously to extend by one year a moratorium on natural gas exploration and extraction activities, and in particular, hydraulic fracturing (fracking). The city council voted 9-0 to extend ordinance No. 2012-269 to June 30, 2014, which specifically calls for a moratorium on accepting gas drilling applications and approving gas drilling permits, zoning certificates and variances. Independent Oil & Gas Association of New York (IOGA) spokesman Jim Smith said the organization believes the city council’s actions are illegal, but the area is not necessarily ideal for exploration. He said Monroe County, which includes the City of Rochester, is not prospective to the Marcellus Shale, and the Utica Shale is only about 100 feet thick and lies at a depth of about 2,200 feet.
XTO Energy Inc.‘s natural gas liquids (NGL) recovery facility in Butler County, PA, has entered service processing wet gas from Marcellus and Utica shale drilling in southwestern Pennsylvania. The ExxonMobil Corp. subsidiary said the 340-acre facility includes 40 miles of connecting pipeline and two compressor stations designed to treat about 125 MMcf/d, and will create 15 permanent jobs. MarkWest Energy Partners LP agreed in 2012 to extend its NGL gathering pipeline in northwest Pennsylvania to the XTO facility (see NGI, Aug. 6, 2012).
Ohio’s Fifth Appellate District Court upheld a local court’s ruling that an operator is not required to fully develop leased property, and disagreed with a landowner’s demand that the undeveloped portion be surrendered and subsequently leased to other oil and gas companies. In the ruling issued June 12, the court said a lease that stipulates that there are no implied covenants, obligations, verbal representations or promises means an operator is under no requirement to reasonably develop the property. At issue is an oil and gas lease that Bilbaran Farm Inc. signed with Professional Petroleum Services Inc. in 2003 for more than 275 acres in Brown Township, in Knox County. Bakerwell Inc. and Crescent Oil & Gas LLC acquired the interest in the property in 2007. Bilbaran filed a lawsuit in August 2012, arguing that three wells on its property were insufficient.
Noble Energy Inc. said a second appraisal well targeting the Gunflint prospect in the deepwater Gulf of Mexico (GOM) Mississippi Canyon has successfully encountered 109 feet of net pay within the primary reservoir. Drilling, wireline logs and data from the Block 992 No. 1 well confirm the reservoir’s primary structure contains an estimated gross resource — based on the 75th and 25th percentile probabilities — of 65-90 million boe, concurring with the company’s expectations for the prospect, it said (see NGI, May 9, 2011). Noble has a 31.14% working interest in the Gunflint and serves as the operator there. Other partners include Ecopetrol America Inc. (31.50%), Marathon Oil Corp. (18.23%) and Samson Offshore LLC (19.13%).
Natural gas prices trending up nationally were cited by Minnesota-based Xcel Energy for quarterly price adjustments for Colorado utility retail electric and gas rates. Under the quarterly gas cost adjustment, the cost of gas in the third quarter will be slightly higher than the second quarter. Residential gas bills in the third quarter will still be $3.15 more than they were in the third quarter last year. Typical monthly residential and small business gas bills during the third quarter are expected to be $21.98 and $81.73, respectively, compared to average bills of $18.83 and $68.81, respectively, in the third quarter of 2012.
An airfoil manufacturing technology that promises to improve the performance of natural gas turbines has been commercialized through research sponsored by the U.S. Department of Energy (DOE). Siemens Energy Inc., which licensed the technology in 2011, has opened a facility in Charlottesville, VA, employing Mikro Systems technology to manufacture improved airfoils. DOE Small Business Innovation Research grants funded the research and development that advanced the capabilities of Mikro Systems’ technology, as well as the work that led to the technology’s manufacturing readiness, DOE said.
PepsiCo‘s Frito-Lay North America division has opened a compressed natural gas fueling (CNG) station in Beloit, WI, and intends to break ground on seven other public stations this year. Executives want 75% of the 1,200-vehicle tractor-trailer fleet vehicles running on CNG or liquefied natural gas by 2020. Questar Fueling and Trillium CNG were selected as the vendors. Trillium will be building five stations in Jonesboro, AK, Orlando, FL, Charlotte, NC, Rosenberg, TX, and Perry, GA. Questar will build two in Killingly, CT, and Topeka, KS. All of the stations will be open to the public.
Sempra Energy‘s Southern California Gas Co. utility is seven months into a five-year $1.04 billion program to install more than six million advanced meter devices for residential and small business customers, its largest capital expenditure project ever. The project to affix battery powered communications devices to existing analog meters took about four years to gain state regulatory approval, even though smart meter changeouts for other electric and gas utility operations have been ongoing for several years. Customers may decline having the device installed. The gas advanced metering systems carry none of the features of electric smart meters, such as reading usage of individual appliances, having automatic on and off features, and allowing customers to more directly manage their energy use.
An explosion June 18 on the Florida Gas Transmission (FGT) pipeline in Washington Parish, LA, near New Orleans destroyed a mobile home and caused the evacuation of 55 area residents but no injuries were reported. Gas supplies moving on the west-to-east pipeline were rerouted, operator Energy Transfer Partners (ETP) said. Some gas traders were left scrambling due to pro-rata cuts. The 5,500-mile FGT system serving the Florida market, which has capacity to carry up to 3.1 Bcf/d and is owned by Florida Gas Transmission Co LLC, an ETP and Kinder Morgan Inc. affiliate. FGT announced unscheduled maintenance related to the explosion on one of the two pipeline mainlines “just downstream of FGT Compressor Station 9. The notice is due to expire Tuesday (June 25).
The first cargo of liquefied natural gas (LNG) from the Angola LNG plant is on its way to Brazil on the SS Sonangol Sambizanga, one of seven 160,000-cubic meter LNG vessels contracted to the Angola LNG project, one of the largest energy projects on the African continent. Angola LNG is a partnership of Sonangol, Chevron Corp., BP plc, ENI and Total that will gather and process gas to produce and deliver LNG and natural gas liquids (NGL). The $10 billion project will collect and transport gas from offshore Angola to an onshore liquefaction plant on the coast near the Congo River. The project has the capacity to produce 5.2 million metric tons per year of LNG, 63,000 b/d of NGL for export and 125 MMcf/d of natural gas for domestic consumption, Chevron said.
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