Word on the street is that PetroChina, China’s biggest oil-and-gas producer and distributor, plans to pay slightly more than $1 billion for a 20% stake in a Shell shale gas property in Canada.

For PetroChina to purchase Shell’s Groundbirch operations, located in British Columbia, the companies need approval from both nations, which appears to be in place. MORE

About 141 trillion cubic feet of gas can be recovered from the Marcellus shale using current technology, down from the previous estimate of 410 trillion, the department said today in its Annual Energy Outlook. About 482 trillion cubic feet can be produced from shale basins across the U.S., down 42 percent from 827 trillion in last year’s outlook.  MORE

Right now in the US, 1m British thermal units of gas can be had for about $2.40. That is not only the lowest in a decade; it is the cheapest ever compared with an equivalent amount of oil, at about 14 per cent of the price. A little over six years ago, natural gas peaked at 140 per cent of oil’s price.

Read more HERE (registration required)

The study by the US Energy Information Administration was issued as eight companies are seeking permission to liquefy and export as much as 19 per cent of domestic production. The plans have run into opposition from manufacturers who worry the exports will weaken US competitiveness.

Read more HERE (registration required)

The Mayan calendar prophesied the end of the world this December.  But for Latin America’s energy scene, the year is shaping up to be anything but a march toward the end of time.  There are several themes to consider as 2012 unfolds.

For starters, the year counts several elections with important geopolitical and energy implications.  Without Leonel Fernandez on the ballot, residents of the Dominican Republic will choose from a new slate of candidates in May. Mexico goes to the polls on July 1st to choose Felipe Calderon’s successor.  In October, Venezuela conducts another referendum on Hugo Chavez’s 21^st Century Socialism.  November’s election in the United States will decide the fate of Barack Obama’s presidency.

The topic of unconventional sources of hydrocarbons remains vital. What these long-unexploited resources are now doing to upend the conventional wisdom when it comes to energy policy debates across the hemisphere shows no sign of abating. Indeed, the focus on shale gas and its potential will continue to impact natural gas and liquefied natural gas developments across the hemisphere.

Read more from Jeremy Martin of the Institute of the Americas of HERE

The multibillion-dollar facility was procured before the US began producing abundant quantities of natural gas from hydraulic fracturing – or “fracking” – a process used to unlock the gas in shale rock.

“I think yes, why not?” said Abdullah bin Hamad Al Attiyah, who is also a former chairman of QP, when asked whether QP’s Golden Pass liquefied natural gas (LNG) regasification terminal in Texas would be converted.

“It’s not very attractive to sell gas into the US market,” Mr Al Attiyah said.

“The world needs a lot of gas, and I think [US] shale gas will play a role in that.”

His comments came as QP’s minority partners in the project enter discussions over exporting shale gas as LNG from Alaska, and the first conversion of an import terminal is drawing close.

With a production capacity of 77 million tonnes per year, Qatar is the world’s largest exporter of LNG.

The US, a long-time importer of gas, was a natural target market untilfracking made the production of gas in deep rock formations commercially viable.

“People used to say that shale gas couldn’t compete with natural gas … In my 40 years in the industry, I have learnt one thing: don’t believe in forecasts,” Mr Al Attiyah said at the Gulf Intelligence Forum held in Abu Dhabi this week.

Shale gas has pushed US domestic gas prices below the international average and has opened the door to the US becoming a gas exporter. A host of import terminals, built on the assumption of continued inflows, stand ready to be converted for export.

Converting a terminal involves the expensive task of adding cooling units to liquefy gas.

A terminal in Texas owned by Cheniere Energy is tipped to become the first facility to be repurposed, and the reconfiguration could be complete by 2015.

Last week, the three major gas producers in Alaska, BP, ConocoPhillips and ExxonMobil, announced that they were in discussions about building an LNG terminal to export the state’s gas to the Asia-Pacific market.

“What we see is a strong, good Asian-Pacific market and that’s where we think Alaska gas should go,” said Jim Mulva, the ConocoPhillips chief executive. ExxonMobil and ConocoPhillips are QP’s minority partners in the Golden Pass terminal, which became operational last March.

Golden Pass will not be used to ship Alaskan gas, and ambitions to export US gas could be hampered by the government’s caution.

After approving Cheniere’s terminal adaption, the US department of energy has initiated a study over the impact of the project on domestic gas prices. The department could stall on further permits until the study is complete, and the results could also prove prohibitive, said Mike Zenker, a gas analyst at Barclays Capital in the US.

The high cost of adding liquefaction units, and a limited demand for gas internationally, will restrict the number of export terminals in North America for the foreseeable future.

“We peg it at two, partly because there is not an unlimited appetite on the market to take volumes, and partly because of the limitations of putting projects together that are financeable,” Mr Zenker said.

Source: The National

“GAIL has signed a sales and purchase agreement [SPA], for supply of LNG over 20 years, with Sabine Pass Liquefaction, LLC, a subsidiary of Cheniere Energy Partners, LP, the United States, for supply of 3.5 million tonnes per annum of LNG,” GAIL announced. The supplies may start as early as 2016.

“Under the SPA, GAIL will pay Sabine Liquefaction as per contractual provisions on a Henry Hub (U.S. gas benchmark) basis after transfer of custody on FOB. LNG will be loaded onto GAIL’s vessels,” the statement said.

The 20-year term would commence upon the date of first commercial delivery, and there was an extension option of up to 10 years. The LNG from Sabine Pass shall form a part of the basket for feeding LNG to Dabhol terminal in Maharashtra and Kochi in Kerala.

Charif Souki, chairman and CEO, said GAIL would join BG and Gas Natural Fenosa as the next foundation customer for our Sabine Pass liquefaction project.

The growth in extraction from shale has made the US the world’s largest producer of natural gas. It is now poised to enter the global liquefied natural gas export market.

Read the Full Article at the Financial Times HERE (registration required)

In a release early Tuesday, the Calgary-based oil company said it will sell a 40 per cent working interest in its properties in the Horn River, Cordova and Laird basin to Inpex Corp.

“This joint venture represents a significant milestone in the advancement of our shale gas strategy and the premium over our invested cost show the value we have created in a short time,” Nexen chief executive officer Marvin Romanow said in the release.

“The transaction provides us with world-class partners that have significant upstream and LNG expertise.”

The Nexen deal is only the latest to bring Asian investors in Canada’s oil and gas sector, particularly the shale gas play in northeastern B.C., where producers are eager to build LNG capacity to tap lucrative Asian markets.

Natural gas in Asian sells for three to four times the price in North America, where a glut of gas has driven down gas prices to bargain-basement levels.

Royal Dutch Shell PLC is working on a plan to build an LNG facility on the B.C. coast with three Asian partners: Korea Gas Corp., China National Petroleum Co. and Japan’s Mitsubishi Corp. That facility would compete with a LNG plant in Kitimat being build by a consortium of North American producers led by U.S.-based Apache Corp.

At the same time, Chinese companies have becoming increasing aggressive in investing in oil and gas production, with the latest deal involving a $2.1-billion acquisition by Chinese National Offshore Oil Corp. (CNOOC) of oil sand producer Opti Canada Inc.

The Harper government is encouraging the diversification of Canada’s energy export markets to Asia and Natural Resources Minister Joe Oliver says it is an “urgent priority” that pipelines be completed to the west coast.

UBS analyst George Toriola said the INPEX deal is a positive for Nexen.

In a note Tuesday morning, Mr. Toriola said the INPEX investment brings “the dual benefits of recouping sunk capital and providing a capital investment carry.”

Less positive was Nexen’s outlook for the North Sea Buzzard project, which Mr. Toriola said has a more downside potential than was expected, and higher than anticipated expenditures as the company ramps up production at its Long Lake oil sands project.

Source: The Globe and Mail

News that Houston-based Cheniere Energy had signed a liquefied natural gas, or LNG, purchase agreement with the BG Group roared across the energy world recently.

In May, Cheniere announced approval by the U.S. Department of Energy to export over 800 billion cubic feet of natural gas per year from its Gulf Coast Sabine Pass project.

But the late-October announcement of the Cheniere-BG contract turns speculation into the reality of a long-term LNG purchase agreement to move natural gas from the United States to international gas markets.

The deal further upends the U.S. natural gas world. For one, it firmly underscores the 180 degree pivot away from building dozens of LNG importation projects ringing the coast of the United States over the past decade. And it stresses that the surplus of inexpensive natural gas could enable the U.S. to become an important exporter of LNG to the global marketplace.

Two other critical points and impacts should be considered as part of the Cheniere announcement and the broader story unfolding: the implications for natural gas prices and its significance for hemispheric energy security.

Let’s take the price issue first.

For years, natural gas has had linkages to oil prices, especially in Europe. But, unlike oil, gas has not traditionally been a globally traded commodity. Historically, it was primarily moved by pipeline hence creating regional markets with fairly distinct prices across the globe.

LNG has dramatically altered that framework and set off the notion of a price convergence. But despite such prognostications, the Atlantic and Pacific Basins have remained markets with distinct prices. Natural gas sells for roughly 4 dollars per million BTU in the U.S. but as high as 16 dollars in Japan and Asia.

The shale gas revolution may be the final piece that will mark a new era that sees the U.S. as a global natural gas exporter and, perhaps most importantly, driving the natural gas price convergence long expected from LNG.

Beyond price, another key impact is Western Hemisphere energy security.

For years, Trinidad and Tobago has been the leading exporter of LNG in the region, providing the heretofore natural gas-starved U.S. market with 70 percent of its LNG imports.

LNG from Trinidad and Tobago has also been dispatched across the hemisphere to re-gasification facilities in Canada, Chile, the Dominican Republic, and Argentina. Indeed, it was Trinidadian gas delivered to Chile’s Quintero port and LNG receiving terminal in 2009 that officially marked that country’s integration into the global LNG market.

Long a natural gas exporter, Argentina has since 2004 been incapable of meetings its own natural gas demand. Indeed, LNG imports from Trinidad & Tobago in recent years have increasingly served as crucial natural gas supplies for Argentina’s tenuous and complicated energy matrix, particularly during the southern hemisphere winter.

But it is perhaps the Dominican Republic that provides the most useful discussion point. In just under ten years, Trinidadian LNG gas has come to represent one-third of the nation’s total energy matrix and is increasingly used in the transport sector. And it impact on the nation’s strapped power sector has been immense with annual power sector savings of roughly $600 million according to some accounts.

The example of the Dominican Republic and imports from Trinidad & Tobago bears mentioning for two reasons.

First is that the success of Trinidadian LNG for the nation has led to a boom in natural gas demand not entirely satisfied of late.

Secondly, and perhaps most interesting, is that the same firm at the center of the LNG export news in the U.S. also inked an MOU earlier this year to send LNG from the U.S. to the Dominican Republic. Indeed, Cheniere’s February agreement with Basic Energy to provide the power producer with natural gas supplies could serve to both further diversify the nation’s energy matrix as well as its newfound natural gas dependency.

Trinidad & Tobago, pioneers of the Western Hemisphere’s LNG market, may be suddenly faced with competition for what has long been a relatively captive market.

Trinidad and Tobago energy experts express confidence that the nature of their gas pricing contracts remain sound in the face of these emergent issues. But there are also important voices in the twin island nation calling for greater attention by the national gas industry to the potential for small LNG trades, especially in the Caribbean.

Cheniere’s LNG export deal has served to shine an increasingly intense spotlight on the question of how great and at what pace LNG exports from the U.S. will unfold.

U.S. LNG’s impact and reconfiguration of the regional energy market and price is an important corollary. A new era and restructuring of where and how natural gas importing nations of the hemisphere source their supplies could be at hand.
What is unquestionable is that the widely-circulated maps of proposed U.S. LNG import facilities that made their way around the natural gas conference circuit in the early 2000’s have been completely altered.

Jeremy M. Martin is the director of the Energy Program at the Institute of the Americas at the University of California, San Diego. The institute is a nonprofit inter-American organization focused on economic development in the Western Hemisphere. Martin can be reached at jermartin@ucsd.edu.

Re-published with the kind permission of Latin Business Chronicle