Jan 15, 2013
Reuters photographer Akintunde Akinleye recently gained rare access to an illegal oil refinery near the river Nun in Nigeria‘s oil state of Bayelsa. There, he was able to document the secret and dangerous practice of oil bunkering, where locals hack into oil pipelines, steal the crude oil, and refine or sell it abroad. For over 50 years now, crude oil and natural gas have been extracted from the Niger Delta by large corporations, which have had their share of environmental disasters. The ongoing damage from the tapped pipes and these makeshift refineries continue to take a terrible toll on the environment and the local population. See also “Nigeria: The Cost of Oil” from 2011. [30 photos]
More photos: Source
(Reuters) – About six years ago, an army of agents hired by energy companies started desperately courting landowners across the United States whose farms and ranches happened to sit atop some of the richest oil and gas deposits in the world. And so began one of the biggest land grabs in recent memory.
Those days are over.
U.S. energy titan Chesapeake Energy is quickly cutting back on an aggressive land-leasing program that in recent years has made it one of America’s largest leaseholders, putting an end to half a decade of frenzied energy wildcatting.
Beset by growing governance and financial problems, and a sharp slump in natural gas prices, the No. 2 U.S. gas driller is reducing by half the ranks of its agents, known in the industry as landmen.
With little evidence that its competitors are taking on the role of leading industry lease-buyer, Chesapeake’s new found frugality is expected to usher in a more sedate period of U.S. land buying, and a sizeable cultural shift for an industry that has been acquiring new acreage at almost any cost.
A surge in drilling into rich shale-gas seams from Pennsylvania to Texas has pushed natural gas prices to 10-year lows, forcing producers, including Chesapeake, to cut output and put the brakes on new wells.
Drilling simply to hold on to leases represents about half of U.S. natural gas output, analysts say, which has helped keep production at record highs despite plummeting prices. Leases held by energy companies tend to last about three years, but will typically remain valid indefinitely if an energy company drills wells and produces fuel on the leased acreage.
It should be fairly easy for drillers to re-hire agents and secure more land when prices recover, according to landmen sources, and production is not expected to be affected immediately. But a lull in leasing could briefly affect production longer term, given that it takes up to six months to secure large tracts of land.
“Chesapeake has always been a bellwether for where the next big play is. It would come, lease large blocks and send a signal to the market,” said Adam Bedard, senior director at Bentek Energy in Colorado. “Without them, the pace of land acquisition might slow.”
In a move to mollify disgruntled shareholders, Chesapeake plans to reduce its use of contracted landmen from 1,300 now to 650 by the end of the year, said Chief Executive Aubrey McClendon, who was stripped of his chairmanship last month after Reuters reported a series of governance missteps.
The reduction, which is expected to help reduce towering debt levels, marks an 80 percent decrease from its peak of 3,400 landmen, McClendon said.
The cull has begun. Over the past month, 225 contracted landmen were cut from Chesapeake jobs, said one Ohio-based landman, who, like most in the close-knit industry, would only speak off the record.
“Chesapeake’s activity level in the Appalachian region is minimal now. It has devastated the (landman) industry,” the source said. “The Chesapeake debacle is one thing, but the rest of the industry shortfall is because a lot of the projects are intertwined with Chesapeake,” he added.
The Oklahoma-based company has become one of the largest leaseholders in the United States, amassing more than 15 million acres of land for drilling or an area about the size of West Virginia.
One mid-sized U.S. brokerage that does lease work for Chesapeake has experienced a 15 percent to 20 percent fall in business over the last 90 days due to a slowdown not just in Chesapeake activity but across the board, a manager for operations at its eastern division told Reuters. About 15 percent of that company’s business comes from Chesapeake, he said.
“We are getting to the point where companies are becoming more cautious – that is what we are seeing,” he said, asking that he not be named.
Other major producers, including Encana Corp, Royal Dutch Shell and Chevron, said they are not planning to materially change their strategy of land acquisition or staffing numbers, suggesting a gap might be left as Chesapeake, long the pioneer in drill leasing, retreats.
“We have not reduced our land staff nor have we made any changes in the way we conduct land operations,” said a spokesman for Encana, one of Chesapeake’s main land-leasing rivals. Encana employs an in-house staff of about 170 workers in its land department. Shell also said it was “not planning any major staffing level changes in our land function for leasing activity.”
Landmen in the field reckon companies are now well-placed to increase leasing again when they need to, but it could take up to six months between a decision to lease the land and the drilling, potentially creating a lull in activity, sources said.
While a fall in leasing will affect the landmen, it is unlikely to affect gas output for quite some time given the amount of land already leased and the hundreds of wells drilled that have yet to begin producing.
“The huge land grabs in the gas plays are coming to an end,” said one energy hedge fund manager. “Even without more leasing, however, these companies have backlogged a huge inventory of drilling locations.”
The backlog of 3,500 oil and gas wells in the United States is about 1,000 more than usual, according to Randall Collum, a natural gas analyst at Genscape in Houston.
It could take more than a year to exhaust the natural gas portion of that supply as pipelines come online to connect new producing regions, such as in Ohio, to areas of higher demand, he said. Moreover, the reserves accumulated over the last decade are expected to take longer to dwindle away.
That scenario is likely to put a cap on prices in the near term, with or without Chesapeake.
AFTER THE BOOM
When U.S. drillers employed new technologies during the last decade to economically tap oil and gas from shale rock, results showed the potential for a massive revival in waning domestic production.
In 2006 and 2007, companies began rushing to acquire new leases. Geologists pored over maps, in search of the sweetest acreage. Landmen were hired like never before, court houses in energy-rich regions filled with workers quickly securing leases. Rural and depressed areas in Pennsylvania, North Dakota, and Ohio became, by geological coincidence, new target areas for energy companies.
Teams of between 50 and 100 landmen were charged with securing hundreds of thousands of acres in a matter of weeks. Some would knock on landowners’ doors, while others specializing in title work would make the lease legally secure and determine, among other things, who receives royalties on the production.
Chesapeake led the charge, spending billions of dollars a year on speculative leasing, helping to push land prices higher in energy-rich regions. In 2011, it became the lead acreage holder in the Utica formation shale in Ohio with 1.5 million acres, and was the first to publish production figures from new wells there.
After Chesapeake arrived, other majors such as Anadarko and Exxon Mobil quickly followed. Much of the best drilling areas have already been swept up in what is now thought – though not fully proven – to be one of the most promising oil and gas plays in the country.
Now, five years after the boom began, natural gas output is at an all time high. The success has, in many ways, backfired. Prices have dropped so far that companies can barely afford to drill in pure natural gas plays. Chesapeake, the self-proclaimed ‘champion’ of U.S. natural gas, is facing a $10 billion cash-flow shortfall this year, forcing it to rein in spending.
“It will slow down the overall aggressiveness if Chesapeake isn’t out there leading the charge,” said Genscape’s Collum. “But it is all about prices. If prices rise then companies will come back in.”
- Chespeake Energy Seeks to Void Order to Buy Energy Rights – Bloomberg (bloomberg.com)
- Land owner caught between energy giants (business.financialpost.com)
- Report: Chesapeake engaged in price fixing on land (bizjournals.com)
NEW ORLEANS, March 27 | Tue Mar 27, 2012 3:56pm EDT
(Reuters) – Cheniere Energy Inc plans to file a formal application in July or August to build a second liquefied natural gas export plant on the U.S. Gulf Coast, the company’s chief executive officer told investors on Tuesday.
The Houston-based LNG developer said in December it plans to build the export plant at Corpus Christi in Texas, originally the site for a planned import terminal, but it will need to file for approval first.
“We expect it to be some time in July or August,” Charif Souki, Cheniere’s CEO, said at the Howard Weil energy conference.
The plant, which would have the capacity to export 1.8 billion cubic feet of gas per day, could be online by 2017, assuming permits are granted by mid-2013, the filing said.
Cheniere has signed long-term supply agreements with international buyers for its first proposed plant at Sabine Pass in Louisiana, which is expected to start up in 2015, pending regulatory approval.
Once expected to be a major importer, the United States now has up to a century’s worth of natural gas supply, prompting plans to ship the cheap fuel to thirsty markets in Europe and Asia where prices are up to five times higher.
Corpus Christi would comprise three production trains, or units, all with the capacity to export 4.5 million tonnes per year of LNG.
- USA: Cheniere CEO Sees Domestic Gas Prices at USD 2/MMBtu (mb50.wordpress.com)
- USA: Cheniere Urges FERC to Approve Sabine Pass Liquefaction Project (mb50.wordpress.com)
- Blackstone to Invest $2 Billion in Cheniere Energy in Bet on LNG Expansion (mb50.wordpress.com)
- USA: Cheniere, KOGAS Ink Sabine Pass LNG Deal (mb50.wordpress.com)
- Cheniere: Sabine 1,2 Train Construction Start in H1 2012 (USA) (mb50.wordpress.com)
- USA: SAC Capital Buys 5.7 Percent Stake in Cheniere (mb50.wordpress.com)
- USA: Sabine Pass LNG Gets Cargo (mb50.wordpress.com)
- USA (Sabine Pass): BG Ups Sabine Pass LNG Volumes to 5.5 MTPA (mb50.wordpress.com)
- USA: Seventeen LNG Cargoes Re-Exported in Jan-Nov (mb50.wordpress.com)
(Reuters) – Global oil supply outages are running at more than a million barrels a day, a Reuters survey has found, helping provide justification for the United States and Britain should they release strategic reserves in a bid to cut oil prices.
Civil unrest, adverse weather and technical glitches disrupted 1.2 million barrels per day (bpd) of global oil output in March on the 90 million bpd world market, according to a Reuters calculation from information provided by companies, government agencies and traders.
While disruptions of supply to the world oil market are commonplace, it is rare and perhaps unprecedented that such a large volume of oil is offline at any one time outside a single major disruption.
The aggregate reduction now is close to the volume of exports lost from Libya during civil war last year which at its worst knocked out 1.4 million barrels a day.
The International Energy Agency opened emergency reserves for only the third time last year to cover that loss but is resisting doing so again, arguing that it does not see a significant supply disruption.
The United States and Britain were reported by Reuters last week to be planning a bilateral release. South Korea would support a release, a government source said, but has not yet had an approach to do so. Others including Germany and France are opposed to an increase. “I think it’s pretty clear from the administration’s references to Sudan’s and other outages that if it decides to use the SPR (Strategic Petroleum Reserve) it will justify it partly on various recent disruptions,” said a former White House energy advisor, Bob McNally, who heads consultancy Rapidan Group.
Leading oil exporter Saudi Arabia has raised its own output to 9.85 million bpd in February, according to a Reuters survey, but is the only producer with significant spare output capacity to counter serious shortfalls.
Some of the current outages could ease in April, when output from Canadian and Australian oilfields is expected to resume after temporary shutdowns. In addition, Libyan output is fast rising toward pre-war levels.
Supplies from politically volatile producers Syria, Yemen and South Sudan may remain disrupted for a prolonged period. Sanctions against Iran could also offset any increase in output from other countries, tightening oil supply later this year.
“Australian productions are just about to come back after the cyclone,” said Seth Kleinman, analyst at Citigroup. “But you always want to bet on more supply outages than less. The situation in Sudan and South Sudan has shown no signs of improvement and the key to watch is oil loadings from Iran,” he said.
With Apache’s Stag likely to follow soon, about 65,700 bpd of Australian oil and about 320,000 bpd of Canadian oil, which has been unexpectedly closed off, are likely to come back to the market in April.
Still, a larger chunk of about 710,000 bpd in South Sudan, Yemen and Syria remains shut and shows no sign of an early return.
Disruptions may grow as a European Union ban on Iranian crude takes effect on July 1 and as pressure increases on Asian importers to reduce oil purchases from Iran. EU countries late last year were importing about 700,000 bpd of Iranian crude.
The IEA estimates Iran’s oil exports could be curtailed by between 800,000 and 1 million bpd from the middle of this year.
Citi’s Kleinman said Nigeria should be kept on the watch list. Although there have not been any significant outages in March, Africa’s largest producer suffers from sabotage attacks to oil production facilities, which have forced oil majors such as Royal Dutch Shell (RDSa.L) to suspend exports.
In the North Sea, the UK’s largest oilfield Buzzard has been experiencing sporadic technical glitches, which have reduced its output since last year.
Buzzard’s output fell to about 153,000 bpd earlier in March but recovered to a normal 200,000 bpd late last week.
Following is the breakdown of global oil production outages by region and country as of mid-March.
MIDDLE EAST AND NORTH AFRICA – 490,000 bpd
Syria – Export outage totals about 150,000 bpd. Syrian oil output has been severely reduced since last year and its exports suspended since September due to international sanctions.
Before the conflict, Syria exported about 150,000 bpd of mostly heavy Souedie crude.
Yemen – About 140,000 bpd of Yemen’s oil output has been reduced by months of political unrest over the last year. Output came to a near standstill in mid-February during a week-long worker strike at its largest oilfield.
Libya – Libya’s crude output as of late March was about 1.4 million bpd, or 200,000 bpd below the full production level of 1.6 million bpd before the 2011 civil war. An official with Libya’s National Oil Corporation said its exports are likely to increase to 1.4 million bpd in April, including some deliveries from tanks following some loading delays from March due to bad weather.
AFRICA – 350,000 bpd
South Sudan – South Sudan shut its crude oil output of roughly 350,000 bpd – about three quarters of the combined total from Sudan and South Sudan – in January after Sudan took some of the crude to make up for what Khartoum said were unpaid transit fees.
AMERICAS – 320,000 bpd
Canada – Oil output has been cut by about 320,000 bpd as production of Suncor Energy Inc’s (SU.TO) and Syncrude Canada has been cut by 220,000 bpd and 100,000 bpd, respectively, for unplanned outages. Both will be back online in April.
ASIA PACIFIC – 65,700 bpd
Australia – Cyclone Luna forced Apache (APA.N) and Woodside Petroleum (WPL.AX) to shut Stag, Enfield and North West Shelf oilfields last week. Woodside said on Monday it had restarted production at Enfield. After the restart, the production shut-ins total about 65,700 bpd. The figure includes the 8,800 bpd Stag field, which Apache said is expected to restart soon.
- Oil shut-ins, slow supply growth support price: IEA (business.financialpost.com)
- Murky data makes oil trading tricky (business.financialpost.com)
- Tapping oil from the SPR may be trickier than ever (business.financialpost.com)
- OPEC oil output rises to more than three-year high (business.financialpost.com)
- China urges restraint in Sudan dispute (mb50.wordpress.com)
- Analysis: More, not less, oil this year despite Iran ban (reuters.com)
(Reuters) – Apple Inc is expanding its presence in Texas with a $304 million investment to build a new campus in Austin, which will add 3,600 jobs over the next decade, more than doubling its workforce in the city.
The Cupertino, California, consumer device giant already employs thousands in Austin, whose tasks include handling customer complaints and support.
“Our operations in Austin has grown dramatically over the past decade from less than 1,000 in 2004 to more than 3,500 today,” Apple spokesman Steve Dowling said.
Apple plans to add jobs in customer support, sales and accounting.
The company is receiving an investment of $21 million over 10 years from a state fund and also possible incentives from Austin and Travis County, according to Texas Governor Rick Perry, who announced the news on Friday.
(Reporting By Poornima Gupta; Editing by Phil Berlowitz)
News wires 02 March 2012 02:57 GMT
The proposed pipeline would be about 40 miles long, Enbridge executive Brad Shamla told Reuters.
“We are shipping crude out over a dock to other destinations on the Gulf Coast,” he said.
Shamla said that pipeline will be about 80 miles in length and be done in 2014.
The plan was announced as the companies continued their purging of the 500-mile Seaway pipeline, which they said was ahead of schedule.
The pipeline will begin by carrying 150,000 barrels per day by 1 June from the oil hub of Cushing, Oklahoma, to Gulf Coast refineries, said Shamla.
The pipeline is the first of several projects to siphon the glut of crude oil sitting in Cushing to the refineries along the Gulf Coast.
The reversed Seaway pipeline capacity is expected to grow 400,000 bpd in 2014 but could increase more if the current open season seeking more firm shipping commitments is successful, Reuters reported.
- Seaway pipeline creates contango with oil glut (mb50.wordpress.com)
- TransCanada to Build Keystone XL Leg (TRP, ENB) (247wallst.com)
- Seaway crude oil pipeline purging for reversal (business.financialpost.com)
- Rail and Pipeline expansions and project to move more Bakken Oil from North Dakota and Saskatchwan (nextbigfuture.com)
- Oil Pipeline from Cushing, Oklahoma to the Gulf Coast will continue (oklahomarealestate.wordpress.com)
- Enbridge, Enterprise advance Gulf Coast pipelines (business.financialpost.com)
The European Union plans to freeze the assets of the Syrian Central Bank starting next Monday, declared French Foreign Minister Alan Juppe, as quoted by Reuters.
The new sanction will hit Syria right on the next day after the referendum on the new constitution, set for February 26.
- EU likely to adopt further sanctions against Syria (vancouversun.com)
- Syria’s Assad unbowed as sanctions tighten (cbc.ca)
The (ESM) will replace the (EFSF): EU leaders to agree on permanent bailout fund, balanced budget ???
BRUSSELS | Sun Jan 29, 2012 6:40pm EST
(Reuters) – EU leaders will sign off on a permanent rescue fund for the euro zone at a summit on Monday and are expected to agree on a balanced budget rule in national legislation, with unresolved problems in Greece casting a shadow on the discussions.
The summit – the 17th in two years as the EU battles to resolve its sovereign debt problems – is supposed to focus on creating jobs and growth, with leaders looking to shift the narrative away from politically unpopular budget austerity.
The summit is expected to announce that up to 20 billion euros ($26.4 billion) of unused funds from the EU’s 2007-2013 budget will be redirected toward job creation, especially among the young, and will commit to freeing up bank lending to small- and medium-sized companies.
But discussions over the permanent rescue fund, a new ‘fiscal treaty’ and Greece will dominate the talks.
Negotiations between the Greek government and private bondholders over the restructuring of 200 billion euros of Greek debt made progress over the weekend, but are not expected to conclude before the summit begins at 9:00 a.m. EST.
Until there is a deal between Greece and its private bondholders, EU leaders cannot move forward with a second, 130 billion euro rescue program for Athens, which they originally agreed to at a summit last October.
Instead, they will sign a treaty creating the European Stability Mechanism (ESM), a 500-billion-euro permanent bailout fund that is due to become operational in July, a year earlier than first planned. And they are likely to agree the terms of a ‘fiscal treaty’ tightening budget rules for those that sign up.
PERMANENT RESCUE FUND
Leaders hope the ESM will boost defenses against the debt crisis, but many – including Italian premier Mario Monti, IMF chief Christine Lagarde and U.S. Treasury Secretary Timothy Geithner – say it will only do so if its resources are combined with what remains in the EFSF, creating a super-fund of 750 billion euros ($1 trillion).
The International Monetary Fund says an agreement to increase the size of the euro zone ‘firewall’ will convince others to contribute more resources to the IMF, boosting its crisis-fighting abilities and improving market sentiment.
But Germany is opposed to such a step.
Chancellor Angela Merkel has said she will not discuss the issue of the ESM/EFSF’s ceiling until leaders meet for their next summit in March. In the meantime, financial markets will continue to fret that there may not be sufficient rescue funds available to help the likes of Italy and Spain if they run into renewed debt funding problems.
“There are certainly signals that Germany is willing to consider it and it is rather geared toward March from the German side,” a senior euro zone official said.
The sticking point is German public opinion which is tired of bailing out the euro zone’s financially less prudent. Instead, Merkel wants to see the EU – except Britain, which has rejected any such move – sign up to the fiscal treaty, including a balanced budget rule written into constitutions. Once that is done, the discussion about a bigger rescue fund can take place.
After nearly three years of crisis, some economists believe the combination of tighter budget rules, a bigger bailout fund and a commitment to broader structural reforms to boost EU productivity could help the region weather the storm.
“The fiscal compact and the ESM will shape a better future,” said Carsten Brzeski, a euro zone economist at ING.
“Combined with ongoing austerity measures and structural reforms in peripheral countries, and, of course, with a lot of ECB action, the euro zone could master this stage of the crisis.”
Economists say the pivotal act in recent months was the European Central Bank‘s flooding of the banking sector with cheap three-year money, a measure it will repeat next month.
While EU leaders are managing to put together pieces of legislation and financial barriers that might help them stave off a repeat of the debt crisis, immediate concerns – especially over Greece and potentially Portugal – remain.
By far the most pressing worry is the seven-month-long negotiation over private sector involvement in the second Greek rescue package. A deal in the coming days may help restore investor confidence, although Greece will still struggle to reduce its debts to 120 percent of GDP by 2020 as planned.
“If there is a deal, the heads of state and government can endorse it, welcome it and say that now it is up to Greece to agree to and deliver on reforms to get the second financing package,” the euro zone official said.
Negotiators believe they have until mid-February to strike a deal. Failure to do so by then would likely force Greece to miss a 14.5 billion euro repayment on its debt due in mid-March.
Even if Athens can strike a deal with private bondholders to accept a 50 percent writedown on the nominal value of their bonds, it may still not be enough to close Greece’s funding gap.
The IMF has suggested it may be necessary for public sector holders of Greek bonds – including the ECB and national central banks in the euro zone – to write off some of their holdings in order to close the gap.
Such a move would not necessarily involve the ECB or national central banks incurring losses, they would just be expected to forego any profit on the bonds they have bought.
But German ECB board member Joerg Asmussen told Reuters there was no possibility of the ECB taking part in the private-sector restructuring of Greece’s debt.
(Reporting By Jan Strupczewski, editing by Mike Peacock)
- German Chancellor Angela Merkel Deflects Pressure to Boost Eurozone Bailout Funds (ibtimes.com)
- Eurozone’s score card (bbc.co.uk)
- EU summit on debt crisis faces Brussels disruption as unions strike (guardian.co.uk)
- Germany opposes combining ESM, EFSF: reports (marketwatch.com)
- Germany, France press for rapid Greek debt deal (revolutionizingawareness.com)
- S&P downgrades euro zone bailout fund (jhaines6.wordpress.com)
- EU Leaders Are Considering Doubling The Euro Bailout Fund At The Last Minute (businessinsider.com)
- ESM’s & EFSF’s.. its just shuffling the chairs on the Titanic (seeker401.wordpress.com)
- Presenting Today’s Deux Ex Rumor (zerohedge.com)
- EC President Barroso: ‘EU should put hand in pockets AGAIN to beef up bailout fund’ (dailymail.co.uk)
- S&P Downgrades Eurozone’s Bailout Fund (ibtimes.com)