Since 2009 the stark contrast between oil prices (high) and natural gas prices (low) in the US has prompted questions, and visions of a new future of transport fuels.
There was some excitement that this might be gathering steam when Warren Buffett’s freight train network BNSF revealed it would trial LNG powered trains. This is the sort of thing that T. Boone Pickens has been pushing for years: use domestic natural gas as transport fuel to reduce costs, reduce emissions and diminish US dependence on oil imports, while providing a ‘bridge’ to renewables-based infrastructure. Read more
Oped pages in recent months have been regular hosts to pieces extolling some of the unsung benefits of the US shale-gas revolution. Some of these have gone so far as to proclaim that shale gas is, or will be, a significant benefit for the country’s entire economy.
Lately, though, the narrative is beginning to sound hollow. Read more
We’ve been reading a lot lately about the potential for cheap natural gas to replace oil-derived transport fuels in the US — and perhaps globally.
Much of this excitement overlooks some fundamentals of energy and commodities in general and the US natural gas sector in particular. The short version is that energy markets are incredibly difficult to predict, and adding interactions between energy sources only adds to the uncertainty. Read more
Hardly anyone, it seems, believes that China’s shale gas efforts are going to hit paydirt any time soon.
Reuters wrote yesterday that the shale gas revolution risks ‘running further off track’ — and this is before it has even begun to produce any significant volumes. Read more
Move over Gulf Keystone; there’s a new wannabe supermajor in town.
It’s a small Australian exploration and development company called Linc Energy – tagline ‘Fueling our Future’ – and according to some hysterical media reports down under it’s found oil worth $20 trillion. Read more
This is a guest post from Chris Nelder, an energy expert who has spent a decade studying and writing about energy and related issues. He has written two books (Profit from the Peak and Investing in Renewable Energy) and hundreds of articles on energy and investing. He blogs at GetREALList.com and writes the Energy Futurist column for SmartPlanet.
Is peak oil dead? Read more
This. Is. A.
Hydrocracking read. We bring you:
THE UNPRECEDENTED UPSURGE OF OIL PRODUCTION CAPACITY AND WHAT IT MEANS FOR THE WORLD – Leonardo Maugeri Read more
Chinese companies have gradually gained a foothold in the North American oil and gas sector, making $17bn of deals since 2010 through a ‘passive’ strategy of buying minority stakes and avoiding political opposition, the WSJ says. A 2010 deal between Cnooc and Chesapeake Energy in 2010 has provided a template, with officials from the state-backed Chinese company keeping their distance from secondments under the agreement’s terms. The ultimate aim may however be for China to use its US partners’ technology to access vast shale gas resources within its borders, the Journal adds. Read more
Chesapeake Energy is seeking to raise up to $12bn through asset sales this year, as the company seeks to plug a funding gap that has been exacerbated by low natural gas prices, reports the FT. The second-largest US gas producer had already responded to decade-low prices by idling rigs and seeking to raise production of oil and liquid natural gas, so-called “liquids”, which fetch higher prices. But Chesapeake still needs to raise funds to meet planned expenditures in 2012. The company said on Monday that it was nearing a deal to sell future output from the liquid-rich Granite Wash in the Texas panhandle. It said it also hopes to raise up to $8bn through joint ventures and asset disposals, including a possible sale of its entire interest in the Permian Basin in Texas, a thinly developed field, but one that is thought to be rich in oil and liquid gas. Read more
The shale gas and fracking boom in America’s oil industry is attracting ever more private equity money, with funds signing three times the value of energy deals in 2011 compared to 2010, the WSJ reports. Overall deal-making in the sector rose seventeen per cent in 2011, by contrast. Oil & gas explorers need ever more capital for complicated drilling techniques to open up shale fields, offering handsome windfalls to PE investors along the way. However, the risks of entering the industry in the late stages of its boom, and amid a trough in gas prices, may store up trouble for funds. Read more
Every government needs a thick slice of luck, and this week’s has come as Chris Huhne slid off the political road into the ditch. Ed Davey has a golden chance to drive away from an energy policy which might have been designed to make energy expensive and electricity unreliable. This deadly combination might be called the Windmill Solution to oil and coal dependency, and the former Energy Secretary spent his last months flailing around like a demented turbine trying to make the numbers add up.
While Huhne was tilting at windmills, the energy game has been changed utterly by the emergence of shale gas. This rapidly emerging technology promises relatively cheap and abundant natural gas for at least the next two decades. It has already broken the link between oil and gas prices. It promises to turn the US into an energy exporter, and remove the dependency on Russian gas for the states on its borders. Read more
Chesapeake Energy, the second-largest US gas producer, said it will slash gas drilling by nearly half, the WSJ reports. The move is an abrupt turnabout by the company which calls itself “America’s Champion of Natural Gas” and helped pioneer the US shale gas boom. The announcement was greeted with exuberance by traders and investors, who have been waiting for months for a sign energy producers are willing to make dramatic changes in their gas-drilling behavior. Natural-gas futures jumped 7.8 per cent Monday to close at $2.525 per mmBTU, after two weeks of sharp declines. Read more
US natural gas prices have sunk to the lowest point in a decade as the shale drilling boom threatens to fill the nation’s underground storage network, reports the FT. Nymex February gas was $2.402 per m British thermal units early Thursday, down almost 50 per cent from a year ago to return to levels last reached in early 2002. The decline marks a stunning turnround for a market that was building sea terminals to handle an anticipated flotilla of imports just a few years ago. Drillers’ use of horizontal drilling and hydraulic fracturing techniques has instead added decades to estimated reserves, allowing the US to ponder significant liquefied gas exports. Analysts say that with production at records and mild winter temperatures leaving inventories swollen, prices could approach $1 per m Btu later this year. US gas now costs just a third of prices in European markets and a sixth of gas sold in Japan, where it’s $15 per mBtu. An analysis unit of the US Department of Energy is on Thursday expected to release a study on the impacts of exporting liquefied natural gas to higher-priced markets. Read more
Total SA has acquired a stake in Ohia’s shale region from Chesapeake Energy Corp and EnerVest Ltd, in a deal worth $2.32bn, according to Bloomberg. This will give France’s largest oil company a 25 per cent stake in the shale deposit which is rish in liquids and natural gas. The extraction of hydrocarbons from such reserves has made the US the world’s largest gas producer. Total had also bought a share in another Chesapeake shale field in Texas in 2010. Read more
PetroChina has discovered shale gas in China’s Sichuan province, confirming that the energy-hungry country is sitting on vast reserves of this unconventional fuel source, reports the FT. Shale gas, or natural gas trapped inside deposits of shale rock, is expected to transform China’s energy supply in future decades by providing a potentially cheap and plentiful new source of fuel for the world’s biggest energy consumer. Despite the apparent resources, some analysts are sceptical about how soon China can make shale gas production profitable given the relatively low price of natural gas in China and the lack of pipeline infrastructure. Two geologists contacted by the FT said that 10,000 cu m per day was not large relative to onshore US fields, adding that production from shale gas wells declines rapidly over the lifetime of the well. Read more
One of the United States’ largest natural-gas pipeline operators is buying a rival for $21.1bn in cash and stock, the WSJ says, making a big bet on the future of shale gas. Pipeline giant Kinder Morgan says that by buying rival El Paso it will become the largest operator of natural-gas pipelines in the country, and the fourth-largest energy company in the US. The combined company would own about 80,000 miles of pipe stretching from coast to coast. It was not immediately clear how regulators would view the deal, which Reuters says could demand higher transport fees from oil and gas producers, which could then raise the prices that power companies and other end users pay for gas.
BHP Billiton has made another big bet on energy in the US, announcing an agreement to buy Petrohawk, an independent oil and gas company, for $12.1bn in cash, the FT reports. In its biggest acquisition to date, the Anglo-Australian mining group said on Thursday it had agreed to pay $38.75 a share for Petrohawk, which operates in three leading areas of shale gas and oil production in the US. The deal values Petrohawk at $15.1bn including net debt. NYT DealBook says should the tender offer succeed, it may also help BHP move past its spotty history of deal-making. Last year, the Canadian government effectively blocked the company’s $38.6bn bid for the Potash Corporation. BHP has also failed to both buy its main rival, Rio Tinto, and form a joint venture with that mining company. Read more
BHP Billiton has made another big bet on energy in the US with its agreement to buy Petrohawk, an independent oil and gas company, for $12.1bn in cash, the FT reports. The Anglo-Australian mining group said on Thursday it had agreed to pay $38.75 a share for Petrohawk, which operates in three leading areas of shale gas and oil production in the US. The deal values Petrohawk at $15.1bn including net debt. The offer represents a 65 per cent premium to Houston-based Petrohawk’s shares at the close on Thursday. It will be financed from BHP’s cash balances and a new credit facility. Should BHP succeed in the acquisition, it will have more than tripled its resource base to 11bn barrels of oil equivalent within a year.
Looks like BHP wasn’t put off by that NY Times story about shale gas:
BHP Billiton [ASX: BHP, NYSE: BHP, LSE: BLT, JSE: BIL] and Petrohawk Energy Read more
The Wall Street Journal reports that the natural-gas industry is bowing to pressure to disclose more information about the chemicals it uses in the controversial process of hydraulic fracturing. Texas Governor Rick Perry has signed into law a bill that will require companies to make public the chemicals used in the process. While a handful of other states have passed similar measures, the WSJ says Texas’s law is significant because oil and gas drilling is a key industry in the state and the industry vocally supported the measure. Until recently, much of the industry opposed providing detailed information about its chemicals on proprietary grounds. Hyrdaulic fracturing, also known as “fracking”, involves blasting millions of gallons of water, sand and other chemicals into the ground to extract oil and gas from the bedrock. Read more
Kohlberg Kravis Roberts will see a return of almost treble its investment in Hilcorp Resources, a shale gas venture, the FT reports, illustrating how hydraulic fracturing technology is leading to big gains for investors. KKR last year placed $400m in a joint venture with Hilcorp Energy to develop its Eagle Ford Shale project in Texas. On Wednesday, KKR said that Marathon Oil would pay $3.5bn for the unit, of which $1.13bn goes to KKR. In its first-quarter letter to investors, KKR had valued that stake at 1.5 times its cost. WSJ Deal Journal says Chinese companies are “tripping over themselves” to plunge into shale. Read more
Kohlberg Kravis Roberts will see a return of almost treble its investment in Hilcorp Resources, a shale gas venture, illustrating how hydraulic fracturing technology is leading to big gains for investors, reports the FT. KKR last year placed $400m in a joint venture with Hilcorp Energy to develop its Eagle Ford Shale project in Texas. On Wednesday, KKR said Marathon Oil would pay $3.5bn for the unit, of which $1.13bn goes to KKR. In its first-quarter letter to investors, KKR had valued that stake at 1.5 times its cost. This is the second big gain for KKR in shale gas. In 2009, it took a minority stake in East Resources, an oil and gas business based in Pennsylvania that was sold to Royal Dutch Shell a year ago. KKR’s $330m investment returned $1.5bn. KKR has formed RPM Energy, a joint venture with a former Texaco executive. Read more
BHP Billiton has moved to bulk up its energy holdings, entering the US shale market with a deal to buy Chesapeake Energy’s Arkansas-based gas business for $4.75bn, reports the FT. The Anglo-Australian miner said in a statement on Monday that it would buy 487,000 acres of leasehold gas properties in the Fayetteville shale, funding the deal from its existing cash balances. Reuters adds that BHP Billition’s shares are up 1.9 per cent on the deal while Standard & Poor’s says the company’s rating would not be affected. Read more
Breaking pre-market news on Tuesday,
- BHP Billiton to buy Chesapeake shale gas assets for $4.75bn – statement.
BHP Billiton has moved to boost its energy holdings, entering the US shale market with a deal to buy Chesapeake Energy’s Arkansas gas business for $4.75bn, reports the FT. The Anglo-Australian miner said on Monday it would buy 487,000 acres of leasehold gas properties and pipeline in the Fayetteville shale, funding the deal from existing cash balances. The assets, which currently produce about 400m cubic feet of gas per day, will increase BHP’s oil and gas reserves from current levels by about 45%. The company sees potential to triple the production from the Fayetteville acreage during its 40-year operating lifetime. The WSJ adds that BHP plans further investment in its Fayetteville expansion plans. Read more
The surge in US “unconventional” gas production is a “bubble” and gas prices will rise sharply in the next few years, the export chief of Russia’s Gazprom has said, the FT reports. Alexander Medvedev, deputy chief executive of Russia’s state-controlled gas company, likened the shale gas boom to the internet bubble, “which first blew up enormously and then flattened itself out to some rational and logical size”. Of course, moves to shale gas production have cramped Gazprom’s hopes to export its gas to the US market. Nevertheless, analysts believe that Medvedev’s forecast will prove accurate as gas producers drop out of the market and coal also rises in price. Read more
Shares in Chinese offshore oil giant Cnooc have hit a three-year high after the company unveiled a $1.1bn stake in a US shale oil and gas field, Reuters reports. Cnooc struck the deal with Chesapeake Energy over the Eagle Ford Shale in southwestern Texas, a deposit of large and valuable liquid natural gas assets. The acquisition is the state-owned enterprise’s first into the onshore US market since failing to buy the explorer Unocal in 2005, the WSJ says, testing its American welcome — and also potentially giving it needed expertise. Eagle Ford also marks another step in China’s race for ‘unconventional’ natural resources in areas like shale, in which it faces some competition, the FT says. Indeed, Cnooc’s $1.1bn acquisition may prove to be worth double that amount, NYT Dealbook suggests. Read more
International energy groups are set to miss out on billions of dollars of future sales over the next decade as China, their most voracious customer, aggressively develops its own large gas reserves and slashes its imported gas requirements, the FT reports, citing a new study by Wood Mackenzie. China will need only half as much more liquefied natural gas from 2020 than it will require in the next decade, according to the study. Wood Mackenzie also predicts that China will overtake Europe as the world’s number two in developing unconventional gas. Read more
As BP’s oil leak disaster adds to concerns about growing regulatory and safety risks of oil, coal and other conventional energy sources, shale gas is burnishing its reputation as the sexy new energy play.
While the complex process of extracting gas from shale rock has drawn criticism about its environmental impact, the magnitude of BP’s Gulf of Mexico oil disaster might overshadow those concerns. Read more