The Obama administration’s endorsement last week of shale gas as a major pillar of its made-in-America energy vision ensures a long-term future for the resource.

The big question is: How does the North American sector survive today’s depressed market environment so it can deliver the 600,000 jobs and the economic stimulus expected from shale gas development?

For companies like Calgary-based Encana Corp., one of the top shale gas producers in the U.S., it comes down to short-term pain for long-term gain.

“You will see less and less drilling for a period of time,” Eric Marsh, executive vice-president, natural gas economy and senior vice president, USA division, said in an interview.

“We continue to produce the gas we have on, and we wait for the day to ramp the rigs back up and get after it when the price gets to a point that investment will make sense.”

Despite concerns about the environmental impacts of shale gas, ranging from underground water contamination to chemical use, U.S. President Barack Obama effectively conveyed in his State of the Union speech: “We’ll work with it rather than against it.”

In other words, the U.S. sees shale gas as a major contributor to its goal of energy independence and will encourage its use even if fossil-fuel critics don’t like it, while adopting strict regulation to ensure it’s produced safely.

But the discovery of a century’s worth of shale gas on the continent has resulted in a glut in supplies that has sunk prices to the US$2.70 per thousand cubic feet range, far below the US$5 to US$7 level required in North America to produce the resource economically. Companies like Chesapeake Energy Corp. and ConocoPhillips are shutting in gas wells. Encana may announce similar plans when it gives its year-end results on Feb. 17.

Still, Mr. Marsh said measures announced by the U.S. last Friday to support natural gas use in transportation are good news for the sector.

They include: new incentives for medium- and heavy-duty trucks that run on natural gas or other alternative fuels, the development of transportation corridors for trucks fueled by liquefied natural gas; programs to convert municipal buses and trucks to run on natural gas.

More demand stimulus is expected from power generation, which is increasingly switching from coal to natural gas, as well as rising industrial demand.

The gas producer, which is active in U.S. gas plays like the Haynesville in Louisiana and the Jonah in Wyoming, expects North American demand to rise to 100 billion cubic feet a day (bcf/d) by 2020, from today’s 75 bcf/d.

The sector’s success in winning over the U.S. administration comes after a long campaign that sought to learn from the mistakes made by the oil sands side of the industry, such as poor communication practices.

Encana was one of the leaders of that campaign, which included a meeting by its CEO, Randy Eresman, with U.S. Energy Secretary Steven Chu, to explain the immense opportunity offered by shale gas.

“We advocated with the federal government of the U.S. for at least three and a half years, more to get the information out,” said Mr. Marsh, who is based in Dallas.

“We work with all of our various state governments to do the same in areas where we operate. We work very hard in educating the public as well.”

Those lessons have not been lost on the Canadian side of the border.

Here, industry is taking the lead.

The Canadian Association of Petroleum Producers announced Monday new practices for shale gas development that include disclosing chemicals, monitoring ground water, mitigating risks, and ensuring there is a spill response plan in place.

In a speech to an industry group, president David Collyer said industry believes it can produce shale gas safely, but also acknowledges the public is concerned and those concerns need to be addressed through improved performance and greater transparency.

Mr. Collyer said the adoption of best practices will help raise the bar on regulation, which is inconsistent from province to province.

What it all points to is a new level of maturity on the part of industry, government and communities to understand and accommodate each others’ goals. It’s a great place for shale gas to be, even if the market hasn’t caught on.

Source: Financial Post

In an article for ISN Security Watch, Guler comments that shale gas is raising expectations of energy independence, improved security and reduced emissions for consumer countries.

Read the Full Article

Under the threat of cutting off gas supplies last Thursday, the state-run Gazprom, flexed its monopolistic stronghold on European gas when Russian President Dmitry Medvedev ordered Belarus to pay off a $200 million gas debt by week’s end owed to Russia for gas increases throughout 2009.

Mostly as a protest to these increases, but also in part due to strained relations between the two countries, Belarus refused to pay the debt saying it was prepared to give up control of its Beltransgaz pipeline and an oil refinery in exchange for the right to pay domestic Russian prices for oil and gas.

By Saturday, talks between the two countries were at an impasse, leading Russia to declare a reduction of gas exports to Belarus by 15 per cent if the debt wasn’t settled.

By Monday, that threat was a reality. Following an order from President Medvedev, Gazprom began gradually reducing gas supplies to Belarus. Belarus, for their part, said the debt would be paid in full within a two-week period and once again offered their pipeline and oil refinery, but Russian officials said they were more interested in cold hard cash rather than a barter of “pies or pancakes, cheese or butter.”

Tuesday, Gazprom Chief Executive Officer Alexei Miller said the Russian gas giant would further reduce its supplies to Belarus, totaling a 30 per cent cut.

The move was enough for Belarusian president Aleksander Lukashenko, who halted all transit of Russian gas to Europe via Belarus, which accounts for nearly one fifth of Russian gas exports abroad.

Belarus’s First Deputy Energy Minister Eduard Tovpinets said this halt was also due in part to an outstanding $200 million debt on Russia’s behalf for transit fees for deliveries to Europe. The Russian response was another cut in supplies, cutting deliveries by 60 per cent this time.

By Wednesday, EU Energy Commissioner Gunther Oettinger said countries throughout Europe were beginning to feel the effects of the gas war, pointing out that Lithuania had only received half its daily gas deliveries. That afternoon, Belarus said it had paid its debt to Gazprom, but demanded Russia pay up for the gas transit fees.

The crisis came to an end today when Russia made that payment, Belarus lifted the ban against Gazprom gas transport and the Russian gas monopoly announced the full restoration of gas supplies to Belarus.

The whole debacle solidified the importance of energy independence, not only in Europe but also in North America. Reducing the need for outside energy sources – such as crude oil imports in the United States – helps countries avoid external conflicts and ensures a higher degree of energy security.

With the US seeing a huge boom in unconventional resources like shale gas over the past few years, that independence could fast become a reality. The same analysts that are predicting shale gas could greatly reduce European dependence on Russian natural gas also predict that shale gas could drastically increase the US’s gas reserves, potentially leading to their independence.

Estimates say that shale gas represents 100 years of energy supply in the US alone at current consumption rates.

A 2009 New York Times article called shale “the biggest energy innovation of the decade” and just last month the Globe and Mail called shale gas “the next energy game changer.”

SOURCE:
Natural Gas For Europe

Alok Agarwal, cheif financial officer at Reliance Industries, says that the US is a hotbed of activity for shale gas and its industries right now, and is the key to reducing dependence on oil and energy from areas such as the Middle-East.

‘‘Shale gas represents a growing source of energy and is expected to constitute 20% of the overall gas production in the US over the next 10 years,” he tells The Economic Times.

READ THE FULL ARTICLE.

Thanks to developments in the shale gas industry, countries like the United States are accessing more of their own resources at home instead of relying on giant multinational gas giants to provide them with fuel.

Spectator writer George H. Wittman also shows how European countries are on their way to securing energy independence thanks to shale gas. Developments in Poland, Austria, Germany, Sweden, France and Romania are inviting exploration from companies such as ExxonMobil and ConocoPhillips who have already started test drilling in Eastern Europe and slowly breaking away from the stronghold of Russian gas giant Gazprom.

READ THE FULL ARTICLE

Companies like Exxon Mobil, ConocoPhillips and Chevron have signed deals or are in negotiations for concessions from the Polish government to explore the region for shale gas, one of the most promising but elusive sources of energy on the planet.

And while the exact size of the gas deposits and the cost of extracting them are for the most part still the subject of conjecture, experts agree that the immediate attraction of shale gas in Europe is political: a desire to diversify energy sources away from a dependence on Russia.

“Shale can be a way to increase the region’s energy security, depending on what the results are of all these projects,” said Richard Morningstar, U.S special envoy for Eurasian energy, during a recent visit to Poland. “It is not a question of being independent from Russia. It is a question of having overall energy security.”

The attraction of shale gas is already well known in the United States, where diversification is an advanced theme in energy policy. With the discovery of big shale deposits several years ago, shale gas now accounts for nearly a fifth of the U.S. natural gas supply, compared with just 1 percent in 2000, according to a recent study by IHS CERA, an independent energy research center in Cambridge, Massachusetts.

Shale’s commercial potential is already bringing big money to the table. In November, Statoil, the Norwegian state oil company, agreed to pay $3.4 billion for 32.5 percent of assets held by Chesapeake Energy in the Marcellus Shale formation, one of the biggest in the continental United States.

Shale gas “ranks as the most significant energy innovation so far this century,” IHT CERA said in a recent report. “It has the potential at least to cause a paradigm shift in the fueling of North America’s energy future.”

In Europe, until recently, governments have shown little interest in shale — a natural gas that is stored in organically rich rocks and interbedded with layers of shaley silt stone and sandstone.

But demand for natural gas is expected to rise worldwide over the next 20 years, with Europe needing to double its natural gas imports to about 476 billion cubic meters, or 16.8 trillion cubic feet, according to Cambridge Energy Research Associates.

The GeoForschungsZentrum or GFZ Institute, a German research center for geosciences in Potsdam, has estimated that Europe has 510 trillion cubic feet of shale gas, perhaps 5 percent of the world’s supply.

Europe contains “prime targets for shale gas exploration,” the institute said. Those targets include Poland, Germany, Hungary, Romania and Turkey, all of which have received overtures from U.S. energy companies.

But if any investor wants to know the costs and potential profit in exploring for shale gas in Europe, they can forget it, at least for the next few years, industry experts say.

“It is just so difficult to know,” said Andy Briston, Halliburton’s area manager for Continental Europe. Halliburton has already started talks with several companies planning to drill in Poland. “It is all at the exploration phase,” he said. “We should have some idea over the next three or five years.”

Extracting shale gas is much more complicated than drilling for traditional gas deposits, and more expensive. Because shale gas deposits are less concentrated, more wells need to be drilled to obtain the same amount of gas.

There are environmental considerations, too. Shale production forces huge amounts of briny water to the surface, which means that the water has to be siphoned off so as not to contaminate local drinking water supplies.

Nevertheless, the center-right Polish government, led by Prime Minister Donald Tusk, has decided to build a liquefied natural gas terminal despite the hefty costs, and he has invited U.S. companies to drill for shale. L.N.G. gas would be shipped from Qatar.

The long-term aim is to reduce Poland’s dependence on Russia, which supplies 95 percent of Poland’s oil imports and 92 percent of its domestic oil.

Poland also wants to link its pipelines with Western Europe, particularly Germany, and with Central Europe to allow supplies of gas to be sent in case of shortages, such as those that occurred during the Russia-Ukraine energy disputes of late 2005 and in 2008.

Above all, Poland has made a political decision to bring in foreign companies to explore for shale, according to the country’s Environment Ministry.

The ministry acknowledged that it still had no idea about the size of its shale deposits. “We will know as soon as possible, as the companies that are getting the concessions for searching the deposits finish their work,” said Magdalena Sikorska, spokesperson for the ministry.

Companies that have received the concessions are similarly closed-mouthed about their commercial potential. None of them would speculate how long the exploration would take, or indeed if it made commercial sense.

Exxon Mobil has been awarded five separate concessions, two in the Lublin Basin and three in the Podlasie Basin. “The concessions will be evaluated for their potential to produce shale gas,” said Patrick McGinn, a spokesman for the company. “We cannot speculate on how soon drilling activity will begin. We are unable to comment on the size of the potential resource or potential rates of production.”

ConocoPhillips has been given the concession to explore for shale gas in the Baltic Basin, northern Poland. Chevron has been granted four exploration licenses for about 405,000 hectares, or a million acres, in the Lublin area, according to a spokesman, Kurt Glaubitz.

One reason for their reticence could be that the costs of drilling for shale oil in Europe are difficult to quantify because the industry is so young and, for the moment, U.S.-centric.

“We are talking about a situation where any company wanting to explore, let alone drill, has to rely on U.S. expertise, be it equipment, manpower, know-how,” Ian Cronshaw, head of energy diversification at the International Energy Agency in Paris, “That can be very, very expensive.”

“We are in the very early stages,” he added. “I cannot see shale gas making any kind of impact for at least another five or seven years.”

Mikhail Korchemkin, director of East European Gas Analysis, a consulting firm in Pennsylvania, said the lack of commercial information was why the early Polish concessions would be so important. “The results in Poland will show if the investment is recoverable and commercially feasible,” he said.

By Judy Dempsey for The New York Times.

SOURCE:
Natural Gas For Europe: “Eastern Europe, Seeking Energy Security, Turns to Shale Gas”

New and plentiful natural gas resources in North America should dramatically change the energy and climate debate in Washington. The Potential Gas Committee, a non-profit academic organization, recently released the latest in a string of authoritative reports confirming the abundance of natural gas in North America. Thanks to new gas field discoveries, the U.S. has a 100-year supply of natural gas that is growing with new technology.

Over the years, the United States has become more and more dependent on energy sources from volatile regions, raising national security concerns about our reliance on energy sources from outside our borders. The Center for a New American Security, a non-profit, non-partisan national security research organization, writes in a new report that “two-thirds of all oil reserves are in the Middle East, where instability and hostility to the United States run rife and can threaten economic and national security.”

Natural gas can lead to domestically produced independence and because it is more than 50 percent cleaner than coal, it is better for the environment and can serve as the foundation for power generation and the expansion of renewable energy sources. The New York Times recently said that “natural gas could emerge as a critical transition fuel that could help to battle global warming.” And because 98 percent of natural gas consumed in the United States is produced in North America, increased use would result in more jobs and economic growth.

“Securing our nation’s independence did not come easy and neither will significantly reducing our dependence on energy from outside our borders but with innovation and new natural gas discoveries, America’s clean energy future can be made right here in America,” said Rod Lowman, president of America’s Natural Gas Alliance. “Natural gas is clean, abundant and ready now to power our homes and automobiles today and for future generations.”

America’s Natural Gas Alliance (ANGA) is a new organization representing 26 of the nation’s leading independent natural gas exploration and production companies. ANGA members are dedicated to increasing the appreciation of the environmental, economic and national security benefits of clean, abundant, dependable and efficient American natural gas. Learn more about ANGA at www.anga.us.

SOURCE: America’s Natural Gas Alliance

Posted By: C. Keddy

Pickens claims that U.S. energy security is his first priority. Mr. Pickens has taken iniatives that are based on dramatically reducing the U.S.’s dependence on foreign oil.

“It’s going to be good for America, it’s going to be good for Canada, it’s going to be good for the producers, it’s going to be good for everybody,” he said. “I can only see that the only loser in this deal is foreign oil. And I don’t call you foreign. You don’t look foreign.”
Today, the U.S. spends $484,087 per minute to buy foreign oil, an export of currency that worked out to $475-billion in 2008.
“Mr. Pickens’ solution is two-fold. First, supply 20 per cent of U.S. electricity demand with wind from a corridor through the central U.S. he calls the “Saudi Arabia of Wind.” Then use that electricity to replace natural-gas fired power, and convert vehicles to burn natural gas”.

Mr. Pickens does not expect the gas we nee to come from the Arctic. “All the gas on the Arctic coastline is 39 trillion cubic feet,” he said. “That’s not as much as you have in the Barnett Shale, that’s sitting over there underneath Fort Worth”.

Read the Globe and Mail coverage of “T. Boone Pickens Bets on Natural Gas”

Learn more about T. Boone Pickens’ Plan to Reduce Foreign Energy Dependency- watch the video!

Posted by: Caroline Keddy

Mr. Pickens is the architect of the Pickens Plan aimed at reducing America’s increasing dependence on foreign oil. The plan calls for a comprehensive energy plan that would make better use of our abundant natural resources, including natural gas. . He has called foreign oil dependence — America imports nearly 70 percent of its oil — the greatest economic and national security threat facing our nation. More than 1.5 million Americans have joined this movement through his web site, www.pickensplan.com.

In early 2008, EXCO management decided to convert its fleet of trucks in the EXCO-operated Vernon Natural Gas Field in Jackson Parish to utilize compressed natural gas rather than gasoline or diesel for truck fuel. According to Doug Miller, (Chairman and CEO), “we built our new compressed natural gas fueling station to utilize our locally-produced natural gas for our fleet. Compressed natural gas burns cleaner than gasoline, diesel or propane and we are dedicated to doing our part to help the environment.” The EXCO compressed natural gas vehicle fueling facility is the first of its kind- illustrating EXCO‘s commitment to finding innovative alternative fuel sources for its ongoing operations.

READ MORE ABOUT EXCO

C. Keddy