The technological advances in the oil and gas patch just keep coming. While everyone has been scrambling to catch up with the shale gas revolution, the industry has been working on another potentially significant breakthrough in gas. This one is in producing gas that has long been stranded offshore in areas too far or too small to warrant a pipeline to shore.
Royal Dutch Shell recently announced it would be the first producer to invest in a multibillion dollar project to capture this gas. The project will be a floating liquified natural gas terminal – known as a FLNG terminal in the industry – that makes it economic to get at such gas fields. No pipelines need to be built. Shell just produces the gas until it runs out and then moves along to the next field.
It was not a bluff. When Centrica warned a month ago that it might choose to leave one of Britain’s biggest gas fields off-line because of the higher taxes levied on UK energy companies, some thought this was an empty threat.
However, South Morecambe gas field has become available after a period of routine maintenance – and Centrica chose to leave it dormant on Wednesday morning.
How strong a hand will Chris Huhne, the UK energy secretary, take into the Cancun talks? Will he be able to persuade foreign ministers and negotiators that the UK is playing its part?
As recently noted by the WWF’s EU climate policy tracker, the UK rates highly for its overall government policy, being the only EU country with a legally binding long-term commitment to reduce greenhouse gas emissions by 80 per cent by 2050.
But the problem is, British MPs are now warning that progress towards those targets is “unacceptably slow”.
With just over a fortnight to go before climate talks start again in Cancun, a new report warns that the renewables share in final energy consumption will be “very difficult to meet”.
Despite growth by renewable energies generation in 2009 (15 per cent for wind and 53 per cent in solar photovoltaics) the 20 per cent target is a “very challenging target”, according to a report published today by Capgemini, the consultancy.
Here’s some news that will cheer both environmentalists and hydrocarbon producers.
The UK government is going to open up its CCS trials to gas plants as well as coal ones. After the first demonstration, the next batch of three will be open to applications from gas-fired power plants.
Chris Huhne said in a statement:
We are determined to ensure the UK continues to be at the forefront of CCS development – and this sets us on course to lead the world in the development of CCS on gas as well as coal.
The shale boom keeps getting better and better. A new report by PFC Energy, the consultancy, shows that the already generous estimates of production from the huge gas field known as the Marcellus Shale were not big enough. Apparently a Pennsylvania law kept well data closed for five years up to August. Now that the data is out, the results, PFC says, are startling.
As of August 1st, the Pennsylvania Department of Environmental Protection (DEP) required that Operators submit the 12 month production records for the dates beginning July 2009 and ending June 2010. After compiling and organizing the data, the DEP released the well production records for those companies which participated in the data submission and the results display some interesting and unique insights into why the Marcellus truly is different than the rest of the shales. An in depth review of the reported well production data shows that the Marcellus Shale appears to be behaving differently than the other shales, with decline rates now estimated at – 15% as opposed to prior view of around 60%. These results place the Marcellus wells in an entirely different category from those in other basins.
So if production is not declining as rapidly as was thought, that means US gas production has room to grow even more robustly than anticipated. And as good as that sounds, the US natural gas market already is so glutted, and prices so low, that some companies are contemplating spending millions of dollars converting natural gas import terminals to export terminals and turning the US into a natural gas exporter.
At least that was the message from a new report published today by Oil & Gas UK and written by Pöyry Energy Consulting.
The report’s authors reckon the government’s commitment to renewables is coming at the detriment to affordability, security and decarbonisation. They say the target of providing 15 per cent of energy from renewables by 2020 should be pushed back and gas should be used to help bring down carbon levels in the meantime.
This may not be an easy argument for the industry to win. The Russian-Ukrainian row of 2009 has left a lasting impression to those in western Europe that gas is simply not a secure way of providing our energy needs.
Following Bloomberg’s story on Thursday morning that Vedanta Resources is in talks “to purchase assets or take a multibillion-dollar equity stake in Cairn Energy Plc, a UK oil and gas exploration company”, Cairn confirmed the following:
The board of Cairn Energy PLC (“Cairn”) notes the media speculation and confirms that discussions are taking place with a third party in respect of the disposal of an interest in Cairn India Limited.
The full statement is on the company’s website.
Mergers and acquisitions in the US oil and gas sector shot up in the second quarter, reaching their highest level in more than seven quarters, according to a report released today by PricewaterhouseCoopers (PwC). Michael Collier, US leader of PwC’s energy M&A practice, says a key reason is that the expectations of buyers and sellers have finally aligned. In addition, he cites improved credit markets, increased CEO confidence and stabilized commodity prices.
According to the report, the US oil and gas sector had 142 announced deals in the second quarter – the highest volume seen since the third quarter of 2008, when there were 190. The total value of the deals was $36.9bn, up from $13.7bn in the year-earlier quarter – representing a 169 per cent increase year on year. Here is what Mr Collier said in the report:
Deal activity in the Oil & Gas sector rebounded significantly in the second quarter – and we expect the momentum to continue throughout the second half of the year. As commodity prices and equity markets continue to stabilize, senior managers are showing greater inclination to do transactions today than we’ve seen over the past two years. At the same time, buyers and sellers are more aligned when it comes to valuations, which is helping to drive the market and to ultimately get deals done.