3/6/2013: Lawyer calls Allegheny County Airport drilling deal great; China joins U.S. shale renaissance

Allegheny County's airport gas drilling pact with Consol a great deal, lawyer says – “Some consider it the biggest economic opportunity in Allegheny County history. Others call it a bum deal that gives away the store… An attorney at the Downtown firm Bernstein-Burkley who has reviewed more than 1,000 drilling leases for landowners -- including his parents -- Mr. Pettit read over the Consol contract at the Post-Gazette's request. His analysis compared the terms of the lease with area standards, looked into the fine print and examined concerns raised on council. His opinion: Allegheny County is getting a great deal. "It is one of the best leases that I've had an opportunity to review," he said. "I own some property in Washington County, and I would sign my property under this lease without qualification."… The bottom line, however, is the bottom line. Through negotiation, the Allegheny County Airport Authority upped Consol's per-acre bonus payment to $5,000 an acre, netting $50 million in the first year. Normal leases go for $2,000 an acre in that area, Mr. Pettit said. The authority also gets annual royalty payments of 18 percent on all well revenue produced. Not only is that higher than average -- most royalties now go for between 15 percent and 17 percent -- but it also releases the authority from chipping in on gas transportation costs, a common requirement… "That is above market right now," he said.” (Pittsburgh Post-Gazette)

 

Cabinet Picks Could Take On Climate Policy – “President Obama on Monday named two people to his cabinet who will be charged with making good on his threat to use the powers of the executive branch to tackle climate change and energy policy if Congress does not act quickly. Mr. Obama nominated Gina McCarthy, a tough-talking native of Boston and an experienced clean air regulator, to take charge at the Environmental Protection Agency, and Ernest J. Moniz, a physicist and strong advocate of natural gas and nuclear power as cleaner alternatives to coal, to run the Department of Energy… But even with Ms. McCarthy and Mr. Moniz in place, Mr. Obama would have to confront major hurdles in trying to refashion the American way of producing and consuming energy, the same hurdles that stymied climate and energy policy in his first term. Among the first of those is a decision on the Keystone XL pipeline, which the administration appears inclined to approve over the vociferous objections of environmental advocates… "So these two over here," he said, gesturing toward Ms. McCarthy and Mr. Moniz, "they're going to be making sure that we're investing in American energy, that we're doing everything that we can to combat the threat of climate change, that we're going to be creating jobs and economic opportunity in the first place." It is a difficult, even paradoxical task. Addressing climate change and ensuring domestic energy independence have sometimes proved to be contradictory goals, analysts said… "The president himself has framed the challenge of going all in to cut the pollution that causes climate change while still having an 'all-of-the-above' energy policy," said Gene Karpinski, the president of the League of Conservation Voters. "We need to make sure we lean heavily on the clean energy alternatives and all the measures that cut carbon pollution, and don't in essence take two steps forward and one step back. We will not solve the problem that way."… "Putting it all together," Mr. Levi said, "it appears to reinforce the president's stated desire to push forward on a variety of different fronts. These are not people who want to use a club casually. They are not about to use rigid regulations to try to force deep changes in the U.S. economy, but they are also people who want to do big things."” (Pittsburgh Post-Gazette)

 

China joining U.S. shale renaissance – “China National Petroleum Corp., the country’s biggest oil company, is seeking its first stake in the U.S. as Chinese explorers with $40 billion of cash try to join an energy renaissance unlocking billions of barrels of crude. “We are currently studying” investing in U.S. oil, Jiang Jiemin, chairman of the state-run company, said yesterday at the National People’s Congress meetings in Beijing. Domestic rival China Petrochemical Corp. last month agreed to buy stakes in an Oklahoma field from Chesapeake Energy Corp. (CHK) for $1.02 billion. Chinese oil companies using government loans want stakes in shale fields that are fostering the most crude production in the U.S. in 21 years and helping wean it off Middle Eastern imports. They’ll be guided by the experience of China’s Cnooc Ltd. (883), whose $19 billion bid for Unocal Corp. was blocked by U.S. lawmakers eight years ago. Cnooc last month won U.S. approval for a $15.1 billion purchase of Nexen Inc. (NXY), albeit with curbs on operating the Canadian company’s Gulf of Mexico fields in U.S. waters. “Stake participation by Chinese companies in U.S. oil fields would be welcomed,” said Will Pearson, a London-based analyst for Global Energy & Natural Resources at Eurasia Group. “Full buyouts will continue to be scrutinized and opposed.”” (Bloomberg)

 

Turkey’s shale reserves ‘enough for 40 years’ – “Turkey’s estimated shale gas reserve is 1.8 trillion cubic meters and could satisfy 40 years of natural gas consumption with an annual production of 45 billion cubic meters, according to the Turkish Association of Petroleum Geologists (TPJD). “Turkey has considerable shale gas potential, particularly in the regions of Thrace and the Southeast,” said TPJD President İsmail Bahtiyar yesterday. Turkey’s natural gas consumption is around 45 billion cubic meters a year, he said, noting that the estimated shale gas reserve, which is 1.8 billion cubic meters, would satisfy Turkey’s natural gas consumption for the next four decades. “These figures are for only the Thrace and Southeast Regions. We think there are also shale gas reserves in East Anatolia, Ankara, the Toros Mountains [in the south] and the Black Sea region,” he said. Shale gas does not constitute an alternative to natural gas, it actually has the qualities of natural gas, he said, though as the traditional drilling of wells costs between $2 and $3 million, shale gas production is a higher-cost process. In spite of this, it will lower oil and natural gas prices, he stressed, adding that the Oil Law in Turkey protected risk-profit balances in favor of investors…Meanwhile, Turkey paid $60.1 billion for energy last year with an 11 percent increase from a year earlier, according to figures of state-run statistic body TÜİK. The figures show that a quarter of Turkey’s $237 billion in total imports last year consisted of energy imports and the IMF forecasts it will surpass $70 billion by 2017.”” (Hurriyet Daily News)

 

Halliburton Cut Fracking Water Costs by $400,000 a Bakken Well – “Halliburton Co. (HAL), the world’s largest provider of hydraulic-fracturing services, boosted savings from the use of recycled water in the drilling technique to as much as $400,000 a well last year. Halliburton changed the chemistry of the water, chemical and sand combination blasted underground to free trapped hydrocarbons, increasing savings from about $6,000 a well in 2011 to as much as $400,000 in 2012 for some wells in North Dakota’s Bakken field, said Walter Dale, head of water management for the Houston-based company. “It is a paradigm shift for the industry,” Dale said today in an interview at IHS CERAWeek in Houston. Bakken wells cost an average $10 million to drill and complete in the fourth quarter, Hess Corp., which holds 800,000 acres in the region, said in a slide presentation March 4. As local and federal regulators raise questions about water consumption from drilling operations, U.S. oil and natural gas producers are asking service companies to improve their handling of the millions of gallons of fluids involved in fracking an average well. Halliburton’s goal is for the entire oil and gas industry to use an average of 25 percent less fresh water in fracking jobs by the end of next year, Dale said.”” (Bloomberg)