Unconventional Ogm

12 April 2010

Unconventional Week 01

Issue 01
News
OIL & GAS Analysis
Intelligence

MONITOR NewsBase
Published by

COMMENTARY 2 NEWS THIS WEEK…
Hail hail, gas shale 2
BP faces shareholder revolt over oil sands
strategy 5 Talking about
POLICY 7
Philadelphia calls for fracking ban
SHALE GAS
7
7
a revolution
Shift in Canadian gas production Recent advances in unconventional gas production
forecast 7 have revolutionised the energy industry and have
New gas plant approved for Horn River
Basin 8
been identified as a “game changer.”
Talisman sells conventional assets to
tighten focus on shale plays 8 Shale gas developments in North America are at
Total wins French shale gas permit 9 the vanguard of the revolution under way in the
SHALE OIL 9 global natural gas sector. (Page 2)
Platts to provide Bakken price
assessments 9 Industry observers believe some North American
OIL SANDS 10 shale gas acreages could rival the world’s largest
CAPP anticipates jump in oil sands gas fields. (Page 2)
output 10
Imperial Petroleum establishes new oil The unconventional revolution is spreading to
sands unit 10
AOSC’s roller coaster ride 11
Europe and elsewhere in the world, which would
HEAVY OIL 11 have a significant impact on global liquefied
Nexen seeks sharper focus with sale of natural gas (LNG) trade. (Page 3)
heavy oil assets 11
New foreign investors line up for Iranian The potential for gas shale development in the
heavy oil fields 12 former Soviet Union could reaffirm Russian
COAL-BED METHANE 12 dominance of Europe’s gas supplies. (Page 4)
UCG potential highlighted by fund
manager 12 BP is facing a small-scale revolt of its own over its
West Bengal pipeline planned for CBM
unconventional oil and gas strategy, specifically
transportation 13
GTL/CTL 13
with reference to its oil sands developments. (Page 5)
Alter NRG seeks strategic partner for
A group of BP shareholders opposes the
Alberta CTL project 13
Sasol to explore for shale gas in Karoo company’s oil sands plans on environmental
Basin 14 grounds and has filed a special resolution on the
NEWS IN BRIEF 14 issue to be voted upon at its AGM on April 15. (Page 5)

For analysis and commentary on these and other stories, plus the latest unconventional developments, see inside…
Copyright © 2010 NewsBase Ltd.
www.newsbase.com Edited by Ryan Stevenson
All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All
reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents

Unconventional OGM 12 April 2010, Week 01 page 2

COMMENTARY

Hail hail, gas shale
North America is an established stomping ground for shale gas, which has revolutionised
the global gas industry. Excitement is now mounting about shale developments in Europe
By Ed Reed
Shale has only really been explored in North America and even this is a recent development
First movers are snapping up acreage around Europe, hoping to replicate the successes
Development in Europe poses its own set of problems and these will dominate the industry
Shale opportunities may be best pursued beyond Europe, although this will take time to emerge

Recent advances in unconventional gas unconventional gas resources, Scott “significantly around the world in the
production have revolutionised the Reeves, told UOGM. coming decades.”
energy industry and represent an Shale gas, tight gas and CBM share a
opportunity for companies to expand number of common traits – notably the North America
reserves and output – no mean feat when amount of work that has to be done to This new resource only came to
oil is increasingly concentrated in the create and maintain producing reservoirs prominence in 2007, but it has already
hands of a few state-owned national oil – Reeves said. had a dramatic impact on the world’s
companies (NOCs). The UK-based gas company is supply profile. Before the “shale gale”
However, the North American gas glut interested in these resources in order to broke, the expectation had been that
– in tandem with the global recession – “deepen [BG’s] supply presence” in its traditional producers – primarily in the
has depressed gas prices and threatens existing markets and break into new Middle East and Russia – would exert
further growth in this market, which has areas. The three types are spread out increasing dominance on supply chains
driven the technological advances needed across the world and, in some cases, can via LNG shipments.
to exploit unconventional resources. be exploited at an attractively low cost. North America’s shale gas undercut
The unconventional tag covers a Reeves defended the company’s this, removing a substantial amount of
multitude of areas – coal-bed methane combination of LNG and unconventional predicted LNG demand and concern can
(CBM), tight gas, gas hydrates – but the gas assets, describing them as now be detected when talking to
most important is shale gas. This complementary. Although its conventional gas producers. Qatar, for
resource has diverted the US from its regasification terminals in the US have instance, built up its LNG industry in the
expected path of increasing reliance on suffered from the rising tide of domestic belief that the US would become a
liquefied natural gas (LNG) imports and shale production, its CBM interests in substantial importer. This has been
rewritten expectations for gas producers Australia provide it with liquefaction thwarted and, while Qatar has redirected
around the world. The amount of shale in feedstock. cargoes towards Asia, the sense of shock
the world is immense but development The US’ National Petroleum Council is almost palpable.
outside North America is only in its (NPC) in a report in 2007 put the world’s Shale gas is now seen as a silver bullet
infancy. total unconventional gas resources at that could transform any and every
Industry observers have said some of 32.6 quadrillion cubic feet (923.2 tcm) country’s gas balance. But scepticism is
the North American areas could rival the with around one third of this – 233 tcm – prudent.
world’s largest gas fields. Ross Smith in North America. Of this figure, shale A number of international oil
Energy Group, in an overview of the gas accounts for 16.1 qcf (455 tcm). companies (IOCs) have struck deals to
plays, picked out the Marcellus shale as The NPC reported, though, that carry out North American shale work
containing the most gas in the region, assuming lessons learned in the US can with local independents. BG has signed
with a recoverable resource of 199 be replicated, this figure should increase up with EXCO Resources; Statoil, BP,
trillion cubic feet (5.64 trillion cubic Total have formed joint ventures with
metres), which, if accurate, would make Chesapeake Energy, while Japan’s
The amount of
it the second largest field in the world. Mitsui & Co. recently struck a deal with
unconventional gas outside Anadarko Petroleum. The most
Overview significant move in the shale gas arena,
The amount of unconventional gas
North America is though, was ExxonMobil’s agreement to
outside North America is “probably “probably vastly acquire XTO Energy for US$41
vastly understated,” BG’s head of billion.
understated”


COMMENTARY
Work on the resource in the US and “seemed to make business sense,” with North African gas and LNG. It is,
Canada has gained worldwide interest. In BG forming its joint venture to work on though, complementary,” Realm
the US, the key areas are known as the the Haynesville. Much of the enthusiasm Energy’s CEO, James Elston, told
“Big Four” and are the Haynesville, from IOCs for North America’s shale UOGM.
Fayetteville, Marcellus and Barnett opportunities is based on hopes to take Pricing is a key concern when
shales. The most information is available the lessons learned here and deploy them considering investments and the apparent
on the Barnett, where there are more than elsewhere. breakdown of the gas-to-oil link has led
10,000 wells, although development has However, shale development faces some to worry.
only been going on since 2003. In obstacles in other parts of the world as While gas demand has fallen by 7%
Canada, the two most important shales different rules apply. over the last 18 months in Europe, Elston
are the Montney and Horn River. “It’s an open question as to whether said, and LNG cargoes have been
As can be seen from activity on the shale developments can be pursued to the dumped on the market, in the medium
Barnett, an important factor in exploiting same extent outside North America,” term these wrinkles should resolve
shale gas is the drilling of numerous said Reeves. themselves. “I think that excess will
wells. Reeves described this method as unwind itself over the next four years;
“more like farming” than drilling Supplies and challenges from 2014 and onwards we should see a
conventional wells; others have Europe, in particular, would seem to be return of the full linkage between gas and
described it as a “statistical” or at the forefront of locations that would oil prices in Europe.”
“manufacturing” approach. benefit from a new, additional source of The appeal of investing in Europe’s
The reason shale gas has taken so long gas. The continent is increasingly reliant shale gas is apparent, but time is running
to exploit is because the resource has low on gas imports from Russia and North out. Some industry observers have said
permeability and low porosity. In order Africa. Although the recession of 2009 that many of the best opportunities have
to exploit it, companies are forced to cut into industrial demand, recovery is already gone. For instance, Elston said
create artificial reservoirs in a “brute likely to see a return to these suppliers. licensing in Poland “is now over, in my
force” process, blasting the rock in order The European Union is not altogether opinion.”
to make it flow. happy with its import reliance, As in any frontier area, most of the
Initial production from wells is high, particularly on Russian supplies, prime movers are minnows, which are
but the decline rates are severe. Barclays following a number of mid-winter able to move quickly to secure acreage.
Capital has estimated the decline rate in stoppages caused by pricing disputes These may carry out some exploration,
the Haynesville during the first year to be with transit states. Shale gas, therefore, but the model, for Realm at least, is to
around 80% and although this is the most has been hyped as solving this reliance, offload semi-developed licences onto
dramatic, the other shales also suffer providing Europe with a route to energy newcomers.
from the same problem to varying independence. Elston was guarded about where his
degrees. “Shale gas is not a total, viable company was looking, explaining the
Reeves said shale production in the US alternative to imports of Russian gas, deals were still being worked out.
BNK Petroleum’s vice president for
exploration, Jim Hill, was more willing
to share, with the company having signed
deals recently in Poland. BNK has an
array of assets in North America, but the
company is bullish on European
prospects.
“The European market ... [has a] good
stable pipeline system, a tremendous
market and a tremendous need for gas.
The cost of entry into European markets
is a lot lower than many of the plays in
the US. Our Polish acreage we picked up
for US$0.55 per acre [US$137.5 per
square km], whereas average costs in the
US are US$250 per acre [US$62,500 per
square km] and can go as high as
US$25,000 per acre [US$6.25 million
per square km],” Hill said.



COMMENTARY
The BNK representative told UOGM Opposition do not stand to benefit from drilling and
the company’s strategy was to farm There are likely to be specific problems so are more likely to oppose it.
down its acreage. “It only makes sense to in Europe that slow shale development. Elston claimed this would not be a
share the risk,” he said. Most notably, the much higher problem for Realm, owing to the
population density than that in North company’s policy of proving up licences
Execution America will make all stages of the and selling them on, but in the grander
However, not all such operations are operation more complicated. scheme of things this would slow
successful. ExxonMobil and MOL As an example, Szabo compared development and commercialisation.
announced their intentions in February to Falcon’s seismic work around the world. Another reason opposition to drilling
pull out of a project with Falcon Oil and “When we were doing our seismic may arise are the environmental concerns
Gas in Hungary, following disappointing campaign in Australia we had to related to fracking. The US
results. negotiate with three individuals, in the Environmental Protection Agency (EPA)
Falcon’s chairman, Gyorgy Szabo, US, maybe 300 people. In Hungary – and recently began a study on the impact of
seemed undaunted by this lack of similarly in other European countries – this technique and scrutiny in New York
confidence, telling UOGM that the we had to deal with 30,000 people for a is substantial, with concerns that fluids
company would “definitely” bring in dozen square km,” he said. used will transfer to the water table.
another partner, although “we have learnt The acquisition of seismic can be Realm’s CEO predicted a positive
lessons.” He stressed that gas was present complicated, although Szabo noted outcome. “Frac water can be sensibly
in the Mako trough; the only question Falcon’s success in this case. However, disposed of – be it in safe deep
was: “how we drain these systems and moving from exploration into formations or, after extensive treatment,
how efficiently this can be done.” development is also likely to run into into above-ground water systems” and it
BNK’s Hill made similar points on problems, primarily because of the will be shown to have a “minimal to non-
sticking with development. “You cannot “statistical” approach to drilling. existent impact on the water table,”
be discouraged by disappointing results,” Shale requires numerous wells for its Elston said.
he said. “We’ve drilled good wells, exploitation and this has been successful
we’ve drilled bad wells [in North in the US and Canada, with reports that Politics
America]: everything is applicable in some shales can be developed with well Shale gas will be developed in Europe
Europe. The shales are all different, you spacing of as little as 400 feet (120 and there is increasing evidence of
have to have the experience level and the metres). Such development seems interest in this area, for instance, Total
tenacity to work your way through it ... extremely unlikely in Europe given the signed up to explore an area in France
but you can bring the experience and the population density. recently. (See: Total wins French shale
databases from the US into these Companies from North America have gas permit, page 9)
[European] shale plays and you’ll be able hailed the lack of royalties in Europe, However, there are also noticeable
to make a lot more rapid progress.” noting this will act to reduce costs and obstacles to this development. Politicians
Hill summed it up, saying: improve returns. “Resources are owned will face competing interests. Concerns
“Exploration is easy, completions are the by sovereign governments in Europe, so are growing within the EU over reliance
problem.” The BNK official went on to we’re not having to pay landowners on foreign energy, particularly from
say that service costs would be fairly direct, unlike in North America,” Russia. However, it remains open to
high in the near term, but would fall as Realm’s Elston said. question whether this long-term strategic
demand for their work picked up. However, the flip side of this royalty- goal can trump short-term opposition and
free environment is that local landowners environmental worries.



COMMENTARY
Falcon’s Szabo was confident that the Australia may well be a key production might offer contract flexibility to attract
EU would back shale work. “It is clear point, either converting the feedstock investors.
the EU would like more [domestically into LNG or consuming it domestically The largest source of shale gas outside
produced] gas and this must include for power, as the country’s reliance on North America, though, is likely to be the
unconventional,” he said. coal leads to high levels of greenhouse former Soviet Union (FSU).
The industry will grow in Europe but gas (GHG) emissions. Development here would allow Gazprom
not to the same extent as seen in North Furthermore, officials from the to retain its role as the world’s top gas
America. Looking further ahead, one Egyptian General Petroleum Corporation company. Ultimately, shale gas could
might consider South America as a (EGPC) told UOGM that the North reinforce the old ties of gas dependence
potential destination, where Total is African country was considering for Europe, rather than sever them.
reportedly considering Argentina. pursuing shale gas development and

BP faces shareholder revolt
over oil sands strategy
BP’s plans to step up activity in the oil sands has drawn criticism from a group of the
company’s shareholders
By Kevin Godier
A group of BP shareholders oppose the company’s oil sands strategy on environmental grounds
The group has filed a special resolution on the issue to be voted upon at the company’s AGM on April 15
Fellow European super-major Shell is facing a similar resolution at its AGM in May

UK super-major BP is stepping up its reality that has earned Canada near- reserves held more cost-effective growth
activity in the oil sands sector, where it is pariah status among green groups and potential. The company has subsequently
something of a late entrant. The ride is pockets of the scientific community. reversed that decision, on the grounds
not without its bumps, however, as that higher oil prices and the difficulty in
demonstrated by recent action taken by a Big problems? replacing conventional reserves have
group of over 100 shareholders who are The dissident BP shareholder grouping, made the oil sands an essential play.
concerned that the company is which includes Britain’s public-sector In 2008, a US$5 billion asset swap
underestimating the sectoral risks, workers union, Unison, and Boston with Husky Energy gave BP 50% of the
especially the potential cost of expected Common Asset Management, has filed a Sunrise oil sands project, a US$2.4
regulations on greenhouse gas (GHG) special resolution to be voted upon at the billion development whose first oil
emissions. company’s April 15 annual general production from a 200,000 barrel per day
The oil sands industry was hit hard by meeting. The resolution demands that the development facility is expected in 2014.
the global economic meltdown and a firm publish a full report next year about In March, BP then paid an undisclosed
drop in oil prices, with a glut of project the financial, environmental, social and amount for a majority stake in Value
cancellations or decisions to mothball reputational risks associated with its Creation’s undeveloped Terre de Grace
schemes evidence of the recession’s planned Alberta oil sands investments. oil sands project in the Athabasca region
impact. However, higher oil prices and BP formed an oil sands study group in of Northern Alberta.
tentative signs of economic revival have the late 1970s, which concluded that
triggered renewed investor interest. technology costs were too high and that Interrupted momentum
Despite the potential influx of fresh much of the most promising properties The call for a special report by the
capital, the environmental concerns that for “in situ” (below ground) oil recovery dissident investors will cast a minor pall
hang over the sector refuse to go away. had already been taken by rivals Shell over the growing momentum behind oil
Oil sands production is one of the and Exxon. It acquired some oil sands sands at the world’s third largest publicly
world’s largest single sources of man- properties, but then sold them in 1999, traded oil company.
made GHG emissions, an environmental after concluding that conventional oil




COMMENTARY
The group’s holdings in BP are valued But Exley said he was encouraged that motion.
at about GBP150 million (US$230 BP had made public statements about the A similar resolution is being tabled
million), according to an April 6 report in resolution. Via written declarations, BP against Shell at its AGM on May 18.
the Globe and Mail, representing just a has replied to the dissident shareholders Shell’s board has responded to this by
tiny fraction of BP’s GBP118 billion by saying it is well aware of the risks of publishing a report on its oil sands
London Stock Exchange value. the oil sands, including “the potential activities a full year earlier than
Nevertheless, FairPensions, the British impact of carbon pricing on investment expected.
consulting group that lobbies pension viability.” At a wider level, environmental groups
funds to make morally responsible It also pledged to use the latest are intensifying global campaigns to
investments, hopes the resolution, which technology to ensure the Alberta hammer home their message to the
has already received considerable media operations would emit the lowest public and lawmakers that oil sands are
attention in the UK, will “raise awareness possible amounts of carbon dioxide, and among the world’s most damaging
and prompt investors who are not really said it would consider equipping the energy sources.
engaged to get engaged” on the risks of Sunrise project with carbon capture and
the oil sands investments, said Duncan storage (CCS) technology. However this Enhanced activity
Exley, FairPensions’ campaigns director. technology is highly expensive and has On the other hand, the oil sands industry
The FairPensions campaign is being so far been resisted by oil and power has seen some significant movement in
backed by several celebrities and generation companies. recent months. Devon Energy recently
politicians in the UK, including Liberal BP also maintains that oil sands paid US$500 million to buy a 50%
Democrat MP Simon Hughes. In a developments are required to meet global interest in BP’s Kirby oil sands property,
statement, Hughes said the “tar sands are energy demand, which it expects to rise while French super-major Total
a very risky investment, financially, by 40% by 2030, with fossil fuels announced it would proceed with
environmentally and socially ... supplying most of the increase. development at its Joslyn Creek project,
Governments should lead by example despite experiencing major setbacks with
and be a responsible investor; for this Campaigners progress the property.
reason, it is essential that the MPs’ Some analysts believe that the anti-oil In another sign of renewed
pension fund supports these resolutions.” sands campaigners have made significant commitment to oil sands, Total and its
Fair Pensions has predicted that the progress, whatever fate befalls the partner ConocoPhillips agreed in January
resolution is nonetheless likely to to ramp up the production target for
fail, given that some prominent their jointly owned Surmont project
pension funds have already said they to 110,000 bpd from an early target
intend to vote against it. of 27,000 bpd by 2015.
The UK Local Authority Pension In late 2009, Chinese oil major
Fund Forum said in a March 30 PetroChina paid US$1.8 billion to
statement that it had advised its acquire a 60% stake in Athabasca
members to oppose the resolution, Oil Sands Corporation’s MacKay
arguing that BP had already River and Dover oil sands projects.
provided sufficient evidence that its This all seems to indicate that a lot
approach to oil sands was well of big players are now willing to bet
grounded. major dollars that the oil price will
“No evidence was found to move significantly higher in the
indicate BP had adopted a position years ahead, even as the oil sands
that was not supported by technical industry struggles to convince
and economic research. The forum governments outside Canada that it
also does not believe BP or their is doing all it can to minimise the
partner have failed to meet the wide impact of development and
range of local requirements set by production on the environment.
government to protect the While BP cannot yet boast any oil
environment and local sands production, it seems to have
communities,” it said in a statement. come to terms with any internal
Separately, RiskMetrics, which anxieties that oil sands
makes voting recommendations to developments may cause excessive
institutional investors, confirmed environmental damage and might
that it would also advise BP require too high an oil price to be
shareholders to reject the proposal. economically sound.



POLICY

Philadelphia calls for fracking ban
Officials for the city of Philadelphia have At issue specifically is that the the US,” he said. Moreover, Stone
asked a state agency to ban hydraulic company must receive a permit before it Energy is complying with all local, state
fracturing because of fears about the takes water from a tributary of the and federal regulations governing gas
contamination of drinking water. The Delaware River so that it can frack, a development, he said. Other municipal
controversy is starting to mirror events in process that is usually highly water- areas are expected to investigate fracking
New York State, where the dispute over intensive. A Philadelphia City on the heels of the news that the US
the safety of the gas drilling method is councilwoman, Blondell Reynolds Environmental Protection Agency (EPA)
liveliest. New York City is seeking a ban Brown, who introduced the resolution, will conduct a comprehensive US$1.9
on fracking in its vast watershed. said of fracking, “Long-term impacts can million research study into the practice.
Philadelphia has specifically asked the take years or decades to develop, and we The country-wide study, which will
Delaware River Basin Commission to have too many examples of that. Long- not be completed until 2012, will probe
deny a drilling permit to Louisiana’s term impacts can be devastating.” the “potential adverse impact” that
Stone Energy and any other company A spokesman for Stone Energy, Tim fracking may have on water quality and
that wants to use hydro fracking in its O’Leary, told Reuters that fracking was public health, said the agency in March.
watershed. Officials with the council harmless to the water supply. “Stone “There are concerns that hydraulic
contend that Stone Energy, which is now Energy believes that hydraulic fracturing fracturing may impact ground water and
seeking two drilling permits, began work technologies are a safe and proven surface water quality,” the EPA noted.
in part of the river basin without the method of accessing ample domestic
necessary approval, reported Reuters. sources of clean natural gas needed by

SHALE GAS

Shift in Canadian gas
production forecast
Canada’s National Energy Board (NEB) The move would primarily be driven “Natural gas is shifting not only in
has released a short-term report on by activity in the tight and location but also in type, which can
natural gas drilling that foresees a shift in unconventional gas plays throughout translate into opportunities for many in
production from Alberta to British northeastern BC in the Montney and the industry,” noted NEB’s chairman,
Columbia (BC) over the next two years. Horn River areas. Gaétan Caron. More than 210 wells
could be drilled in Montney and 70 wells
in Horn River in 2010 alone, said the
report, called: “Short-term Canadian
Natural Gas Deliverability 2010-2012.”
Meanwhile, Alberta’s gas production is
expected to decline over the next few
years from 12.7 billion cubic feet (360
million cubic metres) per day to 8.5 bcf
(241 mcm) per day.
Neighbouring BC will see an increase
from 2.7 bcf (76.5 mcm) per day to 3.7
bcf (105 mcm) per day.



SHALE GAS
Even so, Canada’s overall natural gas Capital spending on natural gas gas right now, the board noted, and some
production is expected to drop from 2010 projects will stabilise and then increase of the new technology that was designed
to 2012 as drilling activity slows down. over the projected time period, predicted to extract shale gas is being used for oil
In 2012, gas “deliverability” could be the board. The number of “drilling days” extraction in parts of Alberta and
down to 13 bcf (368 mcm) per day, down will increase about 11% from 45,659 Saskatchewan. Capital investment in oil
from 15.1 bcf (428 mcm) per day as days in 2010 to 50,512 days in 2012. production is drawing some investment
recently as 2009. Drilling for oil is more profitable than away from gas, it said.

New gas plant approved
for Horn River Basin
Canada’s National Energy Board last report of greenhouse gas (GHG) accommodate up to 830 mcf (23.5 mcm)
week approved a C$1 billion (US$995 emissions and on possible ways of per day of incremental gas from the
million) new gas plant to serve increased reducing and capturing carbon from the seven producers.
shale gas production from the Horn River shale gas processing. The company’s Earlier this year EnCana Corp., also of
Basin in British Columbia. existing Fort Nelson gas plant can Calgary, had secured a certificate for
Spectra Energy Transmission will process 1 bcf (28 mcm) per day of gas. environmental assessment for its Cabin
build the Fort Nelson North gas- In March 2009, Spectra announced it Gas Plant Project, to be located near Fort
processing facility – and a small pipeline had received firm customer commitments Nelson. The plant will process as much
loop – to serve the increasingly busy east – and subsequently contracts –for 760 as 800 mcf (22.7 mcm) per day and will
side of the Horn River area. The plant mcf (21.5 mcm) per day in gathering and cost between C$800 million (US$796
will be able to process around 250 processing capacity from seven million) and C$1 billion. The plant will
million cubic feet (7 million cubic producers operating in the basin. As a be built ‘capture ready’ to address the
metres) per day of gas. result of several upgrades, to be issue of GHG emissions and must
One of the conditions is that Spectra, completed in 2012 and including explore carbon capture and storage
through its Vancouver-based subsidiary construction of the Fort Nelson North (CCS).
Westcoast, will have to submit an annual plant, Spectra hopes to be able to

Talisman sells conventional assets
to tighten focus on shale plays
Talisman Energy is sharpening its focus being sold were “excellent,” it could not 40,000 boepd as it focused on freeing up
on booming North American shale gas “effectively compete for capital within capital for more investment in
plays by selling some conventional oil [its] emerging strategic asset mix. These unconventional shale gas production.
and gas assets for C$1.9 billion (US$1.89 sales are value-accretive and will help Many other large Canadian producers
billion). [it] focus on, finance and build [its] are also selling their conventional assets
The sales, announced on April 7, growing, low-cost North American shale to prepare for new investments in the
consist of five separate transactions with gas business.” growing Canadian shale gas industry,
mostly unnamed parties, covering assets The acreage being sold is located in the including EnCana Corp., Suncor Energy
producing about 42,500 barrels of oil greater Peace River Arch, central Alberta and Nexen. The rationale among these
equivalent per day, 90% of which is Foothills and greater Hinton areas in companies is that conventional gas is
natural gas production. Talisman said the Alberta, and in Ontario. unable to compete with the productivity
sales would be finalised by the end of Talisman said in January that it was and economies of scale of shale gas.
June. looking to sell non-core conventional
Talisman said that although the assets assets in North America producing about




SHALE GAS
As of the end of 2009, Talisman had the company on key assets, including unit of Toronto asset-management firm
sold assets producing 38,000 boepd for North American unconventional shale Dundee Corp., as one of the buyers, but
C$3.2 billion (US$3.19 billion) after gas plays. would not identify the other
president and CEO, John Manzoni, Talisman spokeswoman Phoebe purchasers.
announced a strategy in 2008 to refocus Buckland confirmed Eurogas Corp., a

Total wins French shale gas permit
French oil major Total has been awarded Total also operates the Lacq and The Montelimar permit will boost the
the Montelimar shale gas permit in the Meillon gas fields in the southwest of company’s bid to boost production from
south of France for a period of five years. France, in which it has a 100% interest. unconventional resources, including
Total will have a 100% stake in shale gas.
the 4,327-square km exploration Total is also seeking permits to
permit following its acquisition of explore for unconventional gas in
the French affiliate of the US Devon Argentina and earlier this year it
Energy, which was jointly allocated agreed to buy a stake in Chesapeake
the permit. Energy’s US gas assets for US$2.25
In a statement, Yves-Louis billion.
Darricarrère, president of Shale gas’ potential is said to be
exploration and production, said: exciting in Europe. Analysts believe
“Total has committed to a there are substantial amounts of shale
programme of work that is aimed at gas to be found in Sweden, Poland,
confirming the presence of shale gas Germany, France and Austria.
in the region and [at] appraising the Furthermore, unlike in the US, a
possibility of economical significant chunk of Europe’s
development of these resources. prospective shale gas resource lies
Should the first geological activities under rural land, thereby lessening the
be promising, exploration wells will fears of urban groundwater
be drilled in order to evaluate this contamination.
potential.”

SHALE OIL

Platts to provide Bakken
price assessments
Platts is to provide the world’s first price “This new high-quality crude oil stream runs down from Canada and into North
assessments to value crude oil produced is expected to help meet Midwest Dakota and Montana. The first oil flowed
from the Bakken shale field in the central refining demand and potentially that of from the Bakken shale in 1951; however,
US. the US Gulf Coast. Because of its up until recently it has been difficult to
“Thanks to favourable economics and importance, the industry needs a means extract.
advances in technology, production from of placing a value on this crude. Our new Times have now changed and
this unconventional crude oil source has price assessments address this need by horizontal drilling and fracturing
risen dramatically in recent years,” said providing a transparent price discovery techniques have been applied to drilling
Esa Ramasamy, director of Americas process and daily pricing information.” for oil in shale formations.
market reporting at Platts in a statement. The formation of the Bakken shale




SHALE OIL
Platts has reported current US Bakken The Bakken shale fields are currently using the company’s Market-on-Close
crude output at 200,000 barrels per day the largest oil reserve in the US, with (MOC) methodology, which, said Platts,
and the North Dakota Pipeline Authority estimated recoverable reserves of 4 “Identifies bid, offer and transaction data
estimates that the Bakken field’s yield billion barrels. by company of origin and results in a
could rise to between 400,000 bpd to Platts’ Bakken blend assessments of time-sensitive end-of-trading-day daily
500,000 bpd over the next 10 years Bakken Blend ex-Clearbrook and price assessment.”
before dropping back. Bakken Blend ex-Guernsey will be made

OIL SANDS

CAPP anticipates jump
in oil sands output
Industry watchdog Canadian Association in Calgary on April 7 to reignite business permanent a 5% front-end incentive on
of Petroleum Producers (CAPP) has competitiveness in the province and the drilling of new natural gas and
projected oil sands output from Alberta attract new investments. conventional oil wells; a 14% reduction
will be 1.55 million barrels per day in “Alberta’s advantage has always been of maximum royalty rate to 36% for both
2010 and will increase to 1.66 million its ability to build investor confidence unconventional and conventional natural
bpd in 2011. In 2009, production was and compete successfully for global gas output, and a reduction to 40-50%
1.34 million bpd. capital dollars. Contrary to the ‘gambler’ earlier – for crude oil production. The
“Momentum is picking up once again stereotype of the oil and gas industry, reductions will be capped off at
in the province, with [the] oil price global capital is not the kind of money maximum natural gas and crude oil
stabilising at US$80 per barrel and that goes to the race track or to a casino prices of US$9 per million British
demand increasing,” said CAPP’s looking for good luck. Rather, it looks thermal unit and US$82 per barrel
president, David Collyer. “In the current for stability and long-term return on respectively.
year, total investment in Canada’s oil and investment and does not like uncertainty “We are certainly encouraged by the
gas sector is estimated to be C$40 billion or frequent changes in policy and new fiscal measures. But, there is a great
[US$39.75 billio], compared to C$35 regulation,” Collyer said. deal more work to be done. Royalty
billion [US$34.78 billion] in 2009. Last Providing regulatory stability in the curves and other fiscal details need to be
year, investments in Alberta alone were province is very much on the agenda of firmed up by end May,” Collyer said. He
C$24 billion [US$23.85 billion], with a the Tory government in Edmonton, added: “The regulatory part of the
vast majority being in the oil sands which in early March announced changes competitiveness review is just now
sector.” to the existing royalty structure issued in getting under way and has ambitious
Collyer’s statement was made on the late 2007. Offerings under the new targets to deliver substantive process
sidelines of a major campaign launched competitiveness review include: making improvements by year-end.”

Imperial Petroleum establishes
new oil sands unit
Imperial Petroleum has formed a new Imperial said it owned a 33.3% interest processing outside of Canada, using a
company, Arrakis Oil Recovery, to in Arrakis with two other partners, non-thermal, mechanical and chemical
develop a new process to recover including the technology provider, and closed-loop process to recover the
bitumen or heavy oil from tar and oil would manage the new company. It said bitumen. The chemical employed in the
sands. that Arrakis had been granted a licence to process is not a solvent and is both non-
The Evansville, Indiana-headquartered the new technology for oil sand toxic and biodegradable.




OIL SANDS
In connection with Arrakis, Imperial Jeffrey T Wilson, Imperial’s president. research and development facility owned
also signed an engagement agreement Wilson expanded on the practice: “The by the technology provider on oil sands
with Hyde Park Capital Group and process operates without hot water or from Oklahoma, Texas and Utah. The
Charlotte Capital Partners to raise steam and without any solvents, either initial installation will process some
US$6.1 million for the initial facility hydrocarbon or otherwise, so there are no 2,400 tonnes per day of oil sands
installation planned for late summer emissions issues. The process produces a containing an average of 8% bitumen and
2010. clean sand residue while separating the should generate approximately US$20
“We believe that the technology bitumen in an eco-friendly manner. million annual cash flow. The first
developed and licensed to Arrakis is the Operating costs are significantly less than facility will be located at a site on which
most advanced, cost-effective and conventional processes because the several million tonnes of the material
environmentally friendly processing chemical medium is re-cycled and re- have already been mined.”
technology available for recovering used. The process has been pilot tested
bitumen from tar and oil sands,” said on several tonnes of material at the

AOSC’s roller coaster ride
Athabasca Oil Sands Corp. (AOSC) estimates that it will not achieve barrels of probable reserves, 26 million
raised almost C$1.35 billion (US$1.34 commercial production from Canada’s barrels of possible reserves and 7.1
billion) through its recent initial public oil sands before 2015. It will use a billion barrels of contingent reserves. It
offering (IPO), the richest Canadian technology that is unproven in carbonate recently formed a C$1.9 billion (US$1.88
share floatation since 1999. However, the reserves – steam-assisted gravity billion) partnership with state-owned
Calgary-based company’s shares quickly drainage rather than mining – to recover PetroChina for a 60% share in two oil
lost C$440 million (US$437.3 million) bitumen from oil sands deposits. AOSC sands projects in northeastern Alberta,
during its first day of trading on April 8. described its technology as having a MacKay and Dover.
At the close of the first day of trading smaller surface footprint, using less The correction in stock price was not
on the Toronto Stock Exchange, its water and not requiring tailings ponds. unexpected given the complexities of
shares were C$16.90 (US$16.79), down “The shares were simply overpriced producing from the oil sands. “Oil sands
6.1% or C$1.10 (US$1.09). The 75 compared to other early stage oil sands are a really, really labour-intensive, cost-
million shares, priced at C$18 players, given that the technology is intensive investment proposition,”
(US$17.89) each, represented a 19% unproven for 25% of the company’s Steven Conville, who helps manage
stake in the company. On April 9, the reserves, and because of the estimated about C$8 billion (US$7.95 billion) at
second day of trading, the stock fell 7.1% timing of production,” an unnamed Macquarie Private Wealth, told
to close at C$15.70 (US$15.60). analyst told the Calgary Herald. Oil Bloomberg. “I’m not sure people are
The money raised in the company’s prices had also weakened. really into the sizzle at this point in time.
IPO had startled observers. AOSC According to AOSC, it has 114 million People want steak.”

HEAVY OIL

Nexen seeks sharper focus
with sale of heavy oil assets
Calgary-based Nexen is planning to sell sell its assets. Proposals to Scotia barrels of oil equivalent per day of
some heavy oil properties around the Waterous are due by May 3, 2010. natural gas. Additionally, the area has the
Alberta and Saskatchewan border, near The bank has said Nexen’s properties – potential for enhanced oil recovery
Lloydminster. amounting to approximately 225,000 net (EOR) and large original-oil-in-place
According to Scotia Waterous, the acres (910 square km) of land – to be (OOIP) fields that could work well with
investment banking arm of Scotia Bank, sold include established production of thermal or chemical methods of
Nexen has engaged the bank’s services to 15,000 barrels per day of oil and 2,000 extraction.



HEAVY OIL
Add in the infrastructure of pipelines, A Nexen spokesperson, Carla Yuill, focus on its international operations, oil
batteries and a working field office and told reporters that the sale “is because we sands operations and shale gas. Nexen’s
this sale could well be one of the largest, want to streamline our core strategies … Lloydminster sale is estimated to fetch
if not the largest, Canadian property We do think we can get good prices, C$600-800 million (US$600-800
deals of 2010. given low differentials.” million).
The legacy of Nexen’s properties dates The property sale fits in with a It is possible the proceeds could
back to the 1970s and 1990s, when they statement from Nexen’s CEO, Marvin significantly reduce Nexen’s debt but
belonged to Occidental Petroleum and Romanow, in December 2009, when he analysts have been reported as saying
Wascana Energy. Nexen started out as said the company would be disposing of this is more of a strategic shift and that
Occidental in 1971 and acquired approximately C$1 billion (US$1 billion) the money will probably be reinvested in
Wascana in 1997. worth of assets over the next two years to the company’s core businesses.

New foreign investors line up
for Iranian heavy oil fields
Iranian media have reported a deal is Ordibehesht, which begins April 21, and dispatched envoys to visit the companies
close between the National Iranian Oil named the consortium as the Iranian– and evaluate their financial capabilities.
Company (NIOC) and an Iranian- Australian KIPC joint venture. Iran has struggled for years to find the
Australian consortium backed by Samimi said the development plan for cash and the technology to develop its
Chinese financing, for the development the three fields was signed in 2009. “The energy sector, as sanctions and political
of three heavy crude oilfields in the KIPC consortium has submitted the pressure have kept foreign firms away.
southern part of the country. master development plan on Western companies in particular are
The Iranian Oil Ministry’s SHANA Kouhmound, Kaki and Boushgan and the increasingly wary of investing in the
website reported on April 5 that Bahman plan has been approved by the ... board country because of an international
Samimi, in charge of the development of of directors of the National Iranian Oil dispute over Tehran’s nuclear ambitions.
heavy oilfield projects at NIOC, said the Company,” Samimi said, in an exclusive On March 10, Shell announced it had
contract concerned the development of interview. stopped supplying refined petroleum to
the onshore Kouhmond, Kaki, and The KIPC has introduced a number of Iran. The government has shifted to
Boushgan oilfields in Bushehr province companies as financiers, mostly Chinese, energy-hungry Asian countries such as
in southern Iran. No financial details of SHANA said, adding that buyback China, India and Malaysia for
the deal were available. contracts would be signed after the NIOC hydrocarbon investments.
SHANA said the contract was to be approved the proposed financing
signed during the Iranian month of companies. He said the NIOC had

COAL-BED METHANE

UCG potential highlighted
by fund manager
An Australian fund manager has although CBM has become one of the do share similarities … those who have
highlighted that underground coal biggest stories in the resources sector in come across underground coal
gasification (UCG) can be considered as the past three years, highly efficient UCG gasification often say, ‘We have seen
the often overlooked younger brother to techniques are starting to emerge from its some pilot plants work; conceptually it
coal-bed methane (CBM). shadow. looks good, but there are still some
According to LimeStreet Capital On April 6, the Sydney Morning question marks hanging over its head
resources fund manager Stephen Bartrop, Herald quoted Bartrop as saying: “They until it is commercialised.’”



COAL-BED METHANE
“However, given that for one cubic director, Len Walker, one of the UCG In March, Cougar announced ignition
metre of coal you get 20 times the pioneers in Australia, said that rising of its flagship Kingaroy project in
amount of energy out of a coal seam energy demand had put the technology in southeast Queensland and the successful
through UCG than through CBM play. production of synthetic gas. Cougar will
technology, it really is just a matter of “Apart from Linc Energy, Carbon soon undertake a series of trials,
time before it comes into its own.” He Energy and ourselves, which are the big underground and on the surface, which
stressed that this would have “huge three in the space, I have counted six or will be used for a pre-feasibility study
implications for Australia’s vast seven other listed companies that have and a subsequent bankable feasibility for
coalfields.” recently popped up and which are all a planned 400-MW power station.
UCG technology was developed in the promoting UCG in different ways,” he
19th century. Cougar Energy’s managing said in the newspaper report.

West Bengal pipeline planned
for CBM transportation
India’s Essar Oil plans to lay a 160-km from its Raniganj block in West Bengal of 4 million cubic metres per day, given
pipeline from Durgapur to Kolkata in in the first quarter of 2010. Initial output the PNGRB’s requirement of having
West Bengal to transport gas from its is expected to be 9,000-10,000 cubic 33% excess capacity for leasing out to
coal-bed methane (CBM) blocks to metres of gas per day, with peak third parties.
consumers in the state. production of 3.5 million cubic metres The Raniganj block holds 4.6 trillion
The company said the natural gas per day envisaged in mid-2013. cubic feet (130 billion cubic metres) in
pipeline would help ease some of the A special purpose vehicle would be set place and recoverable resources of
environmental concerns stemming from up for executing the project, Essar said. around 1 tcf (28.3 bcm).
the abundance of steel and coal plants in Besides Raniganj, the pipeline may also In the Rajmahal Block, where Essar
the region, the Press Trust of India be used to transport gas from Essar’s was declared the provisional winner in a
reported on April 7. Rajmahal CBM block in neighbouring recently concluded auction of CBM
Essar Oil has applied to the sector’s Jharkhand. Shishir Agrawal, head of areas, an in-place resource of 9.5 tcf (269
regulator, the Petroleum and Natural Gas Essar Exploration Production Division, bcm) has been estimated with
Regulatory Board (PNGRB), for said in the application that 15 test wells recoverable resources of 4.7 tcf (133
permission to lay a 24-inch pipeline, had already been drilled in Raniganj and bcm).
according to the company’s application. 500 more were planned.
Essar is likely to start producing CBM Essar has suggested a pipeline capacity

GTL/CTL

Alter NRG seeks strategic partner
for Alberta CTL project
A final investment decision (FID) is erupted in late 2008 damaged its identified, told UOGM. “We are aiming
awaited at Alter NRG for its proposed prospects. for three categories of companies – with
40,000 barrel per day coal-to-liquids “We are on the look-out for a strategic mining and extraction experience, oil
(CTL) project in northern Alberta. company to partner on the project. We companies based in Alberta and project
For the past two years, the Calgary- have huge coal reserves and the project is engineering and construction firms. The
based firm has been seeking finances to feasible, but no particular time frame has successful partner will be offered a 60%
move ahead with the project. However, been set to break ground,” an Alter NRG stake.”
the global economic downturn that official, who did not wish to be


Unconventional Ogm

Recommended

Recommended

More Related Content

Similar to Unconventional Ogm

Similar to Unconventional Ogm (18)

Unconventional Ogm