Is The Alaska LNG Project In A Race With Canada's Painted Pony?

Commentary on, "A Brave New World of LNG Export Competition", by Dave Harbour

Our friend, James Halloran (below, right) advises his newsletter recipients this morning that LNG Project competition is intense.  This is why Alaska cannot take its resources for granted–cannot just assume that they will be both marketable and marketed.  And, we can help!  In a Brave New World of LNG export competition, Alaska's government and people need to work with and support reasonable natural resource development in the State.  Alaska's Constitution (Para. 2) demands it.  The Alaska Statehood Act depended upon it.  And, the future of Alaska and her coming generations absolutely require an economy sustained by reasonable resource development.  We don't know if the Alaska LNG Project will ultimately be both marketable and marketed.  We do know that its sponsors will need exceptional support of Alaska's citizens to overcome the awesome forces of competition, augmented by Alaska North Slope Gas natural marketing obstacles: remoteness, climate expenses, labor expenses and logistics expenses.  We also conclude that our Canadian friends face some of the same, man-made competitive obstacles and natural resource advantages.


Governor Sean Parnell, Alaska, LNG, Nikiski, Land Purchases, Photo by Dave Harbour

LNG Competition!

Commentary by Energy Consultant, James Halloran.

There are over two dozen proposed LNG export projects in the US that, if all enacted, would involve shipping 38 Bcf of gas per day (over 50% of current domestic production).

Obviously, the actual number will be much smaller than that. The best guess (and it is no more than that) is that US LNG export capacity may reach about 8-10 Bcf/day.

About 2-4 Bcf will represent “swing capacity” for such majors as Exxon, arbitraging between the Atlantic and Pacific basins (and not operating full-time).

The total capacity ultimately built may actually go higher, but at that point some of it will be excess supply.

But the US situation can hardly be looked at in a vacuum. There are a number of major inputs to the LNG supply/demand equation. One of the biggest involves efforts by British Columbia to develop a number of LNG export terminals. The note below describes the critical issues that are headwinds to that effort. We will not repeat what is accented below. But the bottom line is that, while Canada’s only real advantage over the US at this point is closer proximity to the Asian market, with several disadvantages, this does not mean that Canada will cede the market to the US. The BC projects are highly likely to lead to overbuilding in the North American LNG export business.

This is especially likely, given BC’s dream of tax revenue riches from these projects. Rational behavior rarely accompanies government greed. The Canadian natural gas that will supply the BC projects will not come from fields that would go anywhere else, but this only accents the likelihood of competition for the Asian markets that will hold LNG prices down.

(Note: Should Halloran later add into this mix the prospect of an Alaska LNG project, competition becomes even more intense.

Tax greedy Provinces like British Columbia and States like Alaska will have to restrain the temptation to tax their golden eggs out of existence; if not, less greedy, more reasonable, producing area governments will create new nests of golden eggs at the expense of Canada and Alaska.  -dh)

On his Face Book Page, Governor Sean Parnell (NGP Photo) writes: Progress on the natural gas pipeline for Alaskans: ‪#‎Alaska‬’s LNG Project secured more than 120 acres of land near Nikiski and has nearly 100 more acres under contract. This bodes well for a liquefied natural gas plant, which would be the largest integrated LNG project ever constructed . Some good reporting here: http://goo.gl/KOIU5J 


Bloomberg News by R.  The race to build natural gas export terminals on Canada’s Pacific Coast is inspiring another competition as producers including Painted Pony Petroleum Ltd. (PPY) position themselves as potential takeover targets.

Developers of the gas-rich Montney shale that straddles Alberta and British Columbia are among the best-performing Canadian energy stocks this year, including Painted Pony, Crew Energy Inc. (CR) and Birchcliff Energy Ltd. (BIR) Regulators estimate the Montney, the supply source closest to the sites of proposed LNG terminals, contains 145 years worth of Canadian gas consumption.

As oil majors from BG Group Plc to Royal Dutch Shell (More here….)


TODAY'S CONSUMER ENERGY ALLIANCE ENERGY LINKS HERE


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NATIONAL

As oil boom continues, there's no end in sight for job growthDallas Morning News. “We have a lot of production increasing in the shale areas of Texas and North Dakota. And we’re seeing an upswing in the number of rigs in the gulf,” said Paul Caplan, president of Rigzone, which runs an online job board for the industry. “The competition for people is getting tough.”
 
Bottleneck keeps Permian oil price far below benchmarkHouston Chronicle. Five years into an oil production revival in the Permian Basin, producers tapping the West Texas formation are selling their oil for $21 below the benchmark U.S. price because it's difficult to get thecrude to market. NOTE: Bloomberg also reports.
 
New Book Documents Hydraulic Fracturing's Promise for AmericaHeartland Institute (Blog). The new book Groundswell is a highly recommended read. It is more an economics and politics book than a science treatise, and there are plenty of issues in fracking economics and politics to discuss. In an easy conversational writing style, Ezra Levant powerfully debunks a litany of myths regularly asserted by anti-fracking activists.
 
BP Hires Chief to Run its U.S. 'Lower 48' Onshore BusinessWall Street Journal. Mr. Lawler, most recently an executive vice president and chief operating officer of Sandridge, will take over a new business with "separate governance, processes and systems" from the rest of BP, the company said in a statement. He will report to BP's exploration-and-production chief, Lamar McKay. BP said in March that it would put its lower-48 onshore assets into a new business in an effort to become nimbler and "compete more effectively with the independents," BP CEO Bob Dudley told an investor meeting at the time.
 
Energy fight advances in North CarolinaWashington Post. North Carolina is down to the final weeks of a hydraulic fracturing battle that has consumed the state government for nearly two years. The state’s Mining and Energy Commission will kick off public hearings this week on the controversial drilling practice, which Gov. Pat McCrory (R) legalized in June.    (Click Below For More International and Stateside News….)

 

INTERNATIONAL

UK shale firm IGas secures rig to drill third wellReuters. British shale gas explorer IGas has leased a drilling rig to spud a third well at the end of this year in its licence area in the northwest of England, the company said on Thursday. Britain is betting on the development of its shale gas resources to reduce its growing dependence on gas imports but progress is slow due to tight environmental and planning laws.
 
UTSA looking at economic potential of Mexican shaleHouston Chronicle/Fuel Fix. The Eagle Ford in Mexico is called the Boquillas, and is part of the Burgos Basin between the Rio Grande and the city of Monterrey. With Mexico opening its oil and gas fields to foreign investment for the first time in decades, companies on both sides of the border are trying to figure out how long it will take for shale drilling to take off in Mexico and whether they want to try for a slice of the business.
 
Mexican High Court Must Decide on Energy Overhaul Referendum BidLatin American Herald Tribune. President Enrique Peña Nieto denied being concerned about a possible referendum on Mexico’s energy overhaul, saying the Supreme Court must decide whether to allow opponents to put the constitutional changes to a popular vote.
 
How Latin America Can Maximize Its Shale PotentialWorld Politics Review. Shale gas is revolutionizing the world’s energy landscape. Seemingly overnight, supplies have increased dramatically due to technological advances, including hydraulic fracturing—known as fracking—and horizontal drilling. A world accustomed to energy scarcity and declining supplies is rapidly readjusting to abundance, at just the time when concerns about global climate change and the desire to identify cleaner, relatively inexpensive fuel sources intensify.
 
CALIFORNIA

Santa Barbara Ballot Measure Aims to Ban 'Aggressive' DrillingNatural Gas Intelligence (sub req’d). California’s Santa Barbara County has an initiative (Measure P) on the November ballot aimed at restricting, if not banning, most enhanced drilling practices. A new statewide law (SB 4) sets rules, reporting and permitting requirements for what is designated as "well stimulation" drilling, which includes hydraulic fracturing and various acidization processes.
 
Activists Call for Ban in Orange CountyVoice of OC, Blog. Orange County activists are calling for a complete ban on hydraulic fracturing locally until the oil extraction method is further studied, and this week their took their message to the county’s top elected officials. Local residents and activists went to Tuesday’s county supervisors meeting this week and demanded a meeting with Chairman Nelson to discuss the issue.

COLORADO

Selections for Colorado HF commission delayed due to immense interest.Associated Press. Membership selection for a Colorado commission to study oil and gas development issues is being delayed because of immense interest from people wanting to be part of the panel.
 
Anti-energy activists cause more problems than they solveColorado Springs Gazette, Editorial. When Americans transition from fossil fuels, anti-energy activists will confront something new: solar and wind. Societies cannot survive or advance without energy. Yet, every new option becomes an object of moral strife involving water, air, birds, fish, weather or bugs. As activism obstructs one form of power, it typically enlivens another that comes with a new list of potential, perceived and legitimate horribles.
 
EPA Testing Methods To Detect Chemical ContaminationKUNC. Residents living in the midst of the oil and gas boom often wonder if their drinking water may be contaminated by the drilling process. The U.S. Environmental Protection Agency is working on improving ways to test for that. Agency scientists recently published results of a method to test for five chemicals that often appear in fracturing fluid.

MICHIGAN

Horizontal drilling helps eliminate gas storageLivingston Daily. Southwest Gas is eliminating three natural gas-storage wells for each horizontal storage well drilled at the 12,000-acre, 70-well Howell Gas Storage Field, a company representative said.
 
NORTH CAROLINA

Debate on HFWLOS. The controversial energy process known as fracking was the focus in Raleigh on Wednesday. It's the start of a series of hearings that will end in Cullowhee next month.  State officials are taking public comment in the final phase for making the rules, and clearing the way for the harvest of natural gas in North Carolina.
 
NC begins drafting HF rulesCharlotte Post. The first public hearing on draft rules that will regulate the fracking industry in North Carolina was held Wednesday, after lawmakers lifted the state moratorium on fracking earlier this year. The state's Mining and Energy Commission is now charged with making sure the practice, which involves injecting toxic liquid into the ground to extract natural gas, is safe.   (CLICK BELOW FOR MORE….)

Don't blindly oppose pipeline based on fearRoanoke Times, Op-Ed. While companies will lay pipeline deep enough to secure infrastructure from common surface activity, the costs of excavation and maintenance increase with every foot of depth. Most subsurface drinking water sources are much deeper (usually by 100 feet or more) than the typical pipeline easement. In terms of surface supplies, companies usually steer clear of any sort of substantial surface reservoir as surface water adds regulatory and financial costs to the project
 
Hundreds attend hearing in Raleigh, NCAssociated Press. Hundreds of people are attending a public meeting in Raleigh on proposed rules for the oil and gas drilling method known as hydraulic fracturing. Nearly 400 people filled an auditorium at North Carolina State University on Wednesday, with dozens addressing public officials.
 
NORTH DAKOTA

Aqua Terra Water Management expands to BakkenBakken Magazine. Aqua Terra Waste Management recently acquired two saltwater disposal facilities operated by Borejacks Energy Services. The two disposal facilities, located in the North Dakota Counties of McKenzie and Dunn, represent Aqua Terra’s first entry into the U.S. saltwater disposal industry. 

NORTHEAST

Energy sector powers Pa. paceTribune-Review. Pennsylvania's economic growth outpaced the national average at the end of the year, suggesting the state's gas drilling boom may have contributed to the improving performance as cold weather increased demand for natural gas.
 
Kiski Township OKs drilling rulesTribune-Review. Kiski Township has opened its doors for oil and natural gas exploration. Township supervisors on Wednesday enacted an ordinance that allows, for the first time, drilling and natural gas operations in the township.
 
Shell set to acquire more drilling rights in Potter CountyBradford Era. Royal Dutch Shell is set to acquire more drilling rights in northern Pennsylvania later this year – 155,000 acres in Potter and Tioga counties. Last week, the company decided to leave its Pinedale and Haynesville onshore gas assets in exchange for about $2.1 billion, plus additional acreage in the Marcellus and Utica shale areas in Pennsylvania.
 
Governor’s veto of bill can be undoneCourier-Post, Editorial. Christie’s administration has long brushed off concerns about landfill emissions and contaminated soil. Now he’s telling us we don’t have to worry about the radioactive waste that’s produced when energy companies pour a toxic mix of chemicals, sand and water deep into the ground in order to fracture the shale and extract natural gas.
 
Corbett: I kept no-new tax pledge the ‘best I can'Associated Press. Corbett also signed a major oil and gas drilling law in 2012 that allowed counties to impose an impact fee on new Marcellus Shale wells. Some of the revenue goes to state agencies and grant programs.
 
Environmental groups: Health department policy improvements fall shortWilkes Barre Times-Leader. Despite efforts this week to improve procedure, environmentalists say the state health department could still do better when handling health complaints related to natural-gas development in Pennsylvania.

OHIO

Critics: Ohio case fits wider pattern of quieting foesMidwest Energy News. A lawsuit filed by an Ohio company last month seeks to remove two anti-fracking billboards near a wastewater site it operates. While the case is a test of free speech, critics say it also reflects a broader reluctance for businesses and regulatory agencies in the state to adequately inform citizens about shale gas activities and address their concerns.
 
Visit full of energy: US Rep. tours coal, gas facilitiesNew Philadelphia Times Reporter. U.S. Rep. Bill Johnson, R-Marietta, touted the GOP’s “all-of-the-above” energy strategy as he toured coal and natural gas facilities in eastern Ohio on Wednesday with new House Republican Whip Steve Scalise of Louisiana.
 
Teacher-training program growing, while avoiding controversyColumbus Business First. Interest in an oil and gas industry-funded program for teachers keeps growing. As Ohio’s Utica shale fuels unprecedented oil and gas drilling in the state, more Ohio teachers are interested in a workshop put on by the organization funded by the state’s oil and natural gas companies.
 
'Poisoned waters' billboard sparks Coshocton well fightCoshocton Tribune. A Coshocton man who uses a biblical reference and a statement against "poisoned waters" on billboards opposing a local deep-injection gas well is fighting a legal threat from the Texas well owner on free-speech grounds. Austin, Texas-based Buckeye Brine alleges in a July lawsuit that the billboards paid for by Michael Boals, of Coshocton, contain false and defamatory attacks against its two wells, which dispose of contaminated wastewater from oil and gas drilling.

TEXAS 

Gulf Coast to benefit from refinery retrofitsHouston Chronicle. The Texas Gulf Coast will be ground zero for a push to equip refineries to handle a flood of light crude unlocked in the U.S. shale boom, but the investments will be relatively conservative, a petrochemical consultant said Wednesday.
 
Eagle Ford wave lifts Blue Dolphin Energy refineryHouston Chronicle/Fuel Fix. The Eagle Ford Shale is boosting the fortunes of Blue Dolphin Energy Co., which took a chance when it bought a rusty, mothballed refinery in the small town of Nixon about seven years ago. Blue Dolphin bought the plant out of bankruptcy before the promise of the Eagle Ford was apparent. The company spent tens of millions refurbishing the plant and restarted it in early 2012.
 
Texas must invest in infrastructureSan Antonio Business Journal. Crumbling infrastructure is threatening to slow the oil boom in South Texas and curtail the economic benefits to the region, warns Mark Plummer, CEO and founder of Dallas-based Chestnut Exploration & Production. While the oil boom has brought jobs and increased tax revenues to the area, it has also brought increased usage of the roads and bridges which are essential to the success of these operations.
 
Startup hopes to show fuel breakthrough at Houston-area plantHouston Chronicle. A San Francisco-based startup will launch a facility near Houston later this year to demonstrate chemical processes for making motor fuel from natural gas that company officials said have eluded the energy industry for decades.

WYOMING

Largest private wellhead co. opens Cheyenne shopWyoming Business Report. Stream-Flo Industries Ltd., the world’s largest privately held wellhead company, is betting that southeast Wyoming and northeast Colorado will be major oil and gas activity hubs as it opens its new Cheyenne branch Tuesday. The location, Branch Manager Chad Carter said in a phone interview, will develop into a hub for the Rocky Mountain region, which could spawn satellite locations in places like Rock Springs and Utah.