Half-a-dozen or so stories of interest:
I wrote earlier today about the pickup in gasoline demand that EIA had reported, and this was also noted by other folk, and the resurgence has led to a rise in the price of crude to $42 a barrel. . EIA aren’t the only ones trying to explain the situation, the Canadians also have some words on gas prices. Then there is the Rolling Stone interpretation. But rather that the technical explanation others are just blaming the rise on inflation.
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U.S. production of crude has slightly increased in the recent past, and industry are urging Congress and the Obama administration to expand drilling offshore, because although renewable energy sources will provide some future volume, at present we still need to grow basic oil production to meet the existing need. However that argument is not strong enough to stop Interior Secretary Ken Salazar from withdrawing leases for oil shale production on federal land, while he works out a plan for higher royalty rates. The Administration is however offering a second round of leases but there is opposition from local mayors near the operations. The techniques used in getting gas out of shale in the US has proved quite successful in generating production from shales that were thought impractical, and so now the Europeans are considering using them over there . Gas from shale is still only 5% of production in the USA though it is expected to reach levels of up to 50% before too long. The Canadians are now trying it, and proving along the way that just because the technique works doesn’t means it will make money. On the other side of the country, however, shale production is already making money .
It does appear that the Shotkman field is finally going to start development, with the initial engineering work being awarded to Aker Solutions who with Technip France and SBM Offshore been awarded a 25 million EUR contract on the development of a concept definition and engineering design for the project floating production unit. Recognizing that a business opportunity lies out there Russian authorities are now ready to elaborate a new EU-Russia energy agreement, to regulate relations and help speed up progress in projects like Shtokman, the Russians say. Royal Dutch Shell however remain to be convinced. They need to be sure that they will receive production rights after exploration and development, and in Russia this is no safe bet even with a local partner.
One example of potential problem comes from the Karachaganak field, where Gazprom and the Kazakhstan Government are thinking of suspending the joint venture Of course not all projects fail for political reasons Chevron has just pulled out of Northern Taiga Neftegaz a venture with Gazprom Neft after reserves in the Pyakutinsky and Aikhettinsky fields in the Yamalo-Nenets Autonomous Area, did not meet the original projections of some 45 million tons of oil.
The latest scheme is for Total to join with Gazprom and fund a pipeline to carry Nigerian gas through the Sahara to Europe, some 2,580 miles away.
As the planting season starts in South Asia the Bangladesh Prime Minister has directed authorities to ensure power to agriculture to protect food production.
The ministry of power, energy and mineral resources has stated that 130 MW of additional electricity has been added to the national grid and 700 MW more will be added by June. However the demand from the people of Bangladesh is that the government should cut the price of fuel oils.
This year the price is 10% up on the last Boro season when the price was Tk 40. Bangladesh is still trying to find ways to economically exploit its high quality coal reserve . The proven gas resource are widely believed to soon be exhausted. In the absence of a decision the energy deficit is widening. This summer will witness massive load shedding.
Iranian and Russian technicians are conducting a test run of Iran’s first nuclear plant, a major step toward full operations. Work on Bushehr started 34 years ago, during the reign of the shah with the help of the German contractor Siemens but was suspended after the 1979 revolution. Pilot operations at the 1,000-megawatt light-water reactor, built with Russian assistance under a $1 billion contract, have long been delayed and it's unclear when the reactor could be switched on. Wednesday's tests were a computer run to ensure that the reactor's processes work properly. For the tests, technicians loaded a "virtual fuel" of lead into the reactor to imitate the density of enriched uranium, said Iranian nuclear spokesman Mohsen Shirazi.
There is an interest to form strong bilateral relations between Bulgaria and Italy to move forward with the South Stream gas pipeline.
More stories can be found at The Energy Bulletin and Drumbeat at The Oil Drum.
Showing posts with label leases. Show all posts
Showing posts with label leases. Show all posts
Thursday, February 26, 2009
Wednesday, February 4, 2009
P30 Pick Points
Half-a-dozen or so stories of interest:
Moving to undo some of the last actions of the Bush Administration Interior Secretary Salazar has cancelled the lease agreements that had earlier been approved (but then delayed when the government did not cash the checks) in Utah for oil and natural gas. At the same time, in Wyoming some sales are proceeding, while other leases have been withdrawn at the Governor’s request.
Adding additional numbers to the costs for drilling wells in the gas shales, Encore Acquisition have stated that their goal this year, in the Bakken, is to reduce costs from $5 million per well to $4 million. They are also planning refracs of some of the wells. These are done some 9 – 18 months after initial completion, and at a cost of $500,000 each can increase reserves by up to 80,000 boe. Over in the Woodford, Newfield Exploration have lowered (on a lateral foot basis) the cost of drilling wells by some 38% and are hoping to continue this trend by drilling longer wells (out to 5,000 ft from 4,436 ft last year and 2,700 ft in 2007.) Lease rates in the Marcellus were reported to be up to $4,000 an acre and 17.5% royalty, prior to the slackening of demand.
Public relations in the Barnett still appear to be becoming more difficult, as an application for a compressor station has just been withdrawn. Without the dramatic reductions in well costs, and without an increase in gas prices unlikely in the present glut of gas, the current economics of many operations are being further questioned by Arthur Berman.
Royal Dutch Shell said that the cost of producing oil from the oil sands of Alberta rose to $38 a barrel last year. Their production dropped last year to 80,000 bd falling 7,000 bd from 2007, while costs rose by $9 a barrel. More than $60 billion worth of projects have now been delayed, including the expansion of the Shell output to 250,000 bd, which was scheduled for next year. Meanwhile Marathon has written down the $1.4 billion cost of its oil sand operation. Canadian Oil Sands trust, the largest shareholder in Syncrude Canada cut its dividend 80% because of the drop in oil prices. Meanwhile BP and Husky have not yet gone forward with their investment on the Sunrise assets in Alberta. Yet the prospects are such that a firm that specializes in the construction side of the development has just been taken over by Aecon. They, however, do not have to deal with the stronger environmental rules that are now being applied to the tailings ponds.
Merrill Lynch says non-OPEC oil production has peaked, expecting that such production will be in the 49-50 mbd range by next year, while the IEA were predicting last summer that the peak would be next year at around 51 mbd. The Merrill Lynch projection is based on an increase in field decline rates which they set at 4.5% against the IEA figure of 4.2%. The IEA recognizes that the decline rate will rise to 4.7% in the next seven years, but this will slow, not stop increases in production. In contrast ML argue that some of the decline will come from the loss in capital availability and this will carry decline above 5% (and perhaps as high as 6%). Should this happen then within a year oil prices will be back where they were earlier last year. A year ago CERA were saying that a 4.5% rate was typical but they were saying this as rumors and reports of figures already above 5% were starting to circulate.
It looks as though Croatia is going to be the next meal for Gazprom as plans for the Pan European Pipeline start to collapse, and their experts head off to Moscow. With Nabucco also still not having enough gas commitment to be viable and Gazprom is making promises to Turkey about providing natural gas their dominance becomes more evident. With the upcoming North and South Stream deliveries giving Russia the chance to provide for 50% of Western European gas needs (up from the current 25%), the only question becomes where does Gazprom get all the money to fund these developments? It must find $10 billion in debt payments by the end of July, and just lost up to $2 billion in the dispute with Ukraine. As a result they are sweetening their stock offers, even as their production of natural gas falls 14% y-o-y . On the other hand, as deliveries through the Baku-Tblitsi-Ceyhan rise, those through the Baku-Novorossisk pipeline are falling.
Over at the European Tribune Luis has just finished his 3-part review of the plan to Secure the Energy Future of the EU, with earlier posts on the Action Plan and an Introduction. Given the outreaching hand of Gazprom, it is worth getting to know this background, before it gets more serious.
More stories can be found at The Energy Bulletin and Drumbeat at The Oil Drum
Moving to undo some of the last actions of the Bush Administration Interior Secretary Salazar has cancelled the lease agreements that had earlier been approved (but then delayed when the government did not cash the checks) in Utah for oil and natural gas. At the same time, in Wyoming some sales are proceeding, while other leases have been withdrawn at the Governor’s request.
Adding additional numbers to the costs for drilling wells in the gas shales, Encore Acquisition have stated that their goal this year, in the Bakken, is to reduce costs from $5 million per well to $4 million. They are also planning refracs of some of the wells. These are done some 9 – 18 months after initial completion, and at a cost of $500,000 each can increase reserves by up to 80,000 boe. Over in the Woodford, Newfield Exploration have lowered (on a lateral foot basis) the cost of drilling wells by some 38% and are hoping to continue this trend by drilling longer wells (out to 5,000 ft from 4,436 ft last year and 2,700 ft in 2007.) Lease rates in the Marcellus were reported to be up to $4,000 an acre and 17.5% royalty, prior to the slackening of demand.
Public relations in the Barnett still appear to be becoming more difficult, as an application for a compressor station has just been withdrawn. Without the dramatic reductions in well costs, and without an increase in gas prices unlikely in the present glut of gas, the current economics of many operations are being further questioned by Arthur Berman.
Royal Dutch Shell said that the cost of producing oil from the oil sands of Alberta rose to $38 a barrel last year. Their production dropped last year to 80,000 bd falling 7,000 bd from 2007, while costs rose by $9 a barrel. More than $60 billion worth of projects have now been delayed, including the expansion of the Shell output to 250,000 bd, which was scheduled for next year. Meanwhile Marathon has written down the $1.4 billion cost of its oil sand operation. Canadian Oil Sands trust, the largest shareholder in Syncrude Canada cut its dividend 80% because of the drop in oil prices. Meanwhile BP and Husky have not yet gone forward with their investment on the Sunrise assets in Alberta. Yet the prospects are such that a firm that specializes in the construction side of the development has just been taken over by Aecon. They, however, do not have to deal with the stronger environmental rules that are now being applied to the tailings ponds.
Merrill Lynch says non-OPEC oil production has peaked, expecting that such production will be in the 49-50 mbd range by next year, while the IEA were predicting last summer that the peak would be next year at around 51 mbd. The Merrill Lynch projection is based on an increase in field decline rates which they set at 4.5% against the IEA figure of 4.2%. The IEA recognizes that the decline rate will rise to 4.7% in the next seven years, but this will slow, not stop increases in production. In contrast ML argue that some of the decline will come from the loss in capital availability and this will carry decline above 5% (and perhaps as high as 6%). Should this happen then within a year oil prices will be back where they were earlier last year. A year ago CERA were saying that a 4.5% rate was typical but they were saying this as rumors and reports of figures already above 5% were starting to circulate.
It looks as though Croatia is going to be the next meal for Gazprom as plans for the Pan European Pipeline start to collapse, and their experts head off to Moscow. With Nabucco also still not having enough gas commitment to be viable and Gazprom is making promises to Turkey about providing natural gas their dominance becomes more evident. With the upcoming North and South Stream deliveries giving Russia the chance to provide for 50% of Western European gas needs (up from the current 25%), the only question becomes where does Gazprom get all the money to fund these developments? It must find $10 billion in debt payments by the end of July, and just lost up to $2 billion in the dispute with Ukraine. As a result they are sweetening their stock offers, even as their production of natural gas falls 14% y-o-y . On the other hand, as deliveries through the Baku-Tblitsi-Ceyhan rise, those through the Baku-Novorossisk pipeline are falling.
Over at the European Tribune Luis has just finished his 3-part review of the plan to Secure the Energy Future of the EU, with earlier posts on the Action Plan and an Introduction. Given the outreaching hand of Gazprom, it is worth getting to know this background, before it gets more serious.
More stories can be found at The Energy Bulletin and Drumbeat at The Oil Drum
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