Daily Archives: August 24, 2009

Sheila McNulty

In the past year, there has been heightened interest in US natural gas resources, as new technology and expertise has expanded from 30 years to 100 years the number of years the US could continue to provide as much natural gas power as it is today. Foreigners are taking notice.

The interesting thing about this is the way they are expressing their interest. Instead of outright buyouts, these companies – including BP and BG from the UK; StatoilHydro, the Norwegian energy company; and Eni, the Italian oil company – have all bought into US natural gas plays through partnerships in which they share not only the reserves but the development of them.

Raoul LeBlanc, senior director at PFC Energy, believes it gives the international investors access to resources and expertise at a reasonable cost. Analysts note that international companies have learned from the experience of ConocoPhillips’ outright acquisition of Burlington Resources in 2005 for $35.6bn.

Late last year, Conoco was forced to disclose a 2008 fourth-quarter net loss of $31.8bn; a $34bn writedown; 1,300 job losses; and a $2.8bn cut in capital spending. The Burlington Resources natural gas acquisition was blamed in a large part for the writedown.

The Europeans are smart enough to understand they do not know how to work the new gas play – which involves extracting natural gas from shale rock – like the independents and want to learn, Mr LeBlanc said.

Martin Houston, BG’s executive director responsible for US operations, said its more than $1bn alliance with EXCO Resources provides for the joint development and growth of assets in the low cost Haynesville shale resource. This move, he said, was opportunist. BG had been looking for the right partner, with the right skills and the right acreage. BG is not new to the US gas market, but he said there is a learning to do’ element, in which BG’s access to EXCO’s skill is clearly going to be important.

It is something the US majors should be noting. While the big US oil and gas companies have some land-based natural gas positions in the country, they have not jumped into these partnerships despite the natural gas companies’ willingness to share their resources and experience in exchange for cash. The economic downturn, credit crisis, and plunge in natural gas prices has pushed many of them to the edge. Now is the time to move in to get in on these plays.

The US majors have long argued that they need big finds and for years have dismissed the onshore US natural gas play as beneath them. Yet the US natural gas reserve pool has been growing rapidly, as technology and experience has made shale gas more economic and accessible. And, given the lower carbon content of natural gas, and a concerted lobbying effort in the Senate on behalf of the industry, it should not be long before the Obama Administration recognizes the potential of this fuel. Only those who took the plunge will then be well placed to capitalize on natural gas’ rise to favor.

Carola Hoyos

In the FT:

Centrica takes controlling stake in Venture

Petrofac results outshine oil price drop


US oil refiner embraces ethanol (Chron)

Tullow narrows down its Ugandan dancecard (DJ)

Lieberman gets angry about Lockerbie deal (RTTNews)

A tale of two energy futures prices: Oil gains as natural gas looses (CNBC)

Iraqi oil minister believes Opec need to raise its oil production (Al Arabiya)

James Fontanella-Khan

Foreign energy groups buy into US natural gas
Estimates of US supplies continue to increase (FT)

Sinopec to boost expansion abroad after profit surges to record
Asia’s biggest refiner plans “rapid” overseas expansion (Bloomberg)

Budget pain spreads to energy-rich states
Falling natural-gas prices erode revenue and spark spending cuts (WSJ)

China nears climate-change deal with US over fuel efficiency
Bilateral discussions making progress but no “breakthroughs” (Bloomberg)

Iraq’s second oil bidding round needs higher fees to succeed
Iraq needs to pay more to attract foreign bidders (Bloomberg)

Brazil governor vows opposition to new oil rules
Changes would reduce Rio de Janeiro’s tax revenue (Reuters)

Adani makes lacklustre Bombay debut
Shares in power generation group fell below offer price at one stage (FT)

India urges restraint in Ambani dispute
Comments by oil ministry follow advertising campaign (FT)

Centrica deal gains EU approval
UK’s biggest utility one step closer to acquiring Venture Production (FT)

Gazprom to use Dutch gas storage
Part of government drive to make Netherlands gas hub (FT)

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