_

A new law went into effect this week that aims to get local workers hired on to state and federal coastal restoration jobs.

As of Wednesday, contractors overseeing major oil spill or state master plan coastal restoration projects will be required to take steps to bring on local workers.

The hope is that the bill, signed into law in June, will spur long-term relationships between contractors and government agencies and also encourage retraining and employment of local workers who have been hurt by the 2010 Gulf oil spill or other recent disasters.

Under the new law, within 10 days of winning a bid on certain coastal projects, a contractor must contact the Louisiana Workforce Commission to report on its hiring plans for the project.

The contractor must tell the commission what types of jobs will be required on the project, what skill level is needed, how much workers will get paid and how it aims to recruit disadvantaged, low-wage and unemployed applicants.

Within 10 days, the Louisiana Workforce Commission will send back referrals of workers who are qualified for the job.

Under the law, an eligible person is defined as a “resident of a parish within the coastal zone.” This includes all of Terrebonne and Lafourche parishes.

The law specifically targets projects paid for through the Restore Act, which dedicates 80 percent of Clean Water Act oil spill fines to coastal restoration and economic recovery. It also applies to any settlements or fines related to the oil spill, as well as any projects covered under the state’s master plan for coastal protection and restoration, which contains more than $50 billion in coastal work.

Studies have indicated the Restore Act will create as many as 58,000 jobs along the Gulf Coast.

Jeffrey Buchanan, senior domestic policy advisor for Oxfam America, said the hope is to connect unemployed or underemployed coastal residents, such as fishermen, with some of the high-wage jobs and “great upward economic potential” that will come with the state’s master plan for coastal restoration.

Many of the jobs in coastal restoration use skills already common in the local maritime and oil and gas industries.

“We’d done research talking with contractors about what kind of training this will demand and what these new jobs will look like,” Buchanan said. A lot of the jobs will be ones already in demand in the Houma-Thibodaux area, like “welders, deckhands, U.S. Coast Guard-certified captains and pipefitters.”

After the 2005 hurricanes, many companies from out-of-state moved into Louisiana to participate in the rebuilding, bringing employees with them.

The coastal master plan spans 50 years and provides an opportunity to do some forward thinking, Buchanan said.

Last month, Oxfam America partnered with the nonprofit Nature Conservancy, local coastal advocacy group Restore or Retreat and the Coast Builders Coalition to hold a workshop on the issue. They brought together engineering firms and contractors that work in coastal restoration with environmental groups to talk about economic and workforce opportunities.

State Coastal Restoration and Protection Authority Executive Director Jerome Zeringue said the opportunity is out there, with more than $400 million in coastal restoration projects going to bid in the next six months alone.

Jane Arnette, executive director of the South Louisiana Industrial Association, said the bill will provide a great opportunity for local students and will expand opportunities in the workforce.

But she added it’s up to local high schools, technical colleges and industry leaders to make sure the proper job training and education is available locally.

“We need to be experts in the field because this is going to take place on our back door,” Arnette said. “It’s up to us to make sure we have the qualified, trained workforce and the qualified, trained teachers.”

original article

_

Chinese oil companies went on a buying spree this week. On Monday, Cnooc, the offshore component of China’s three-headed, state-owned oil apparatus, agreed to pay $15 billion cash for Canada’s Nexen (NXY). Not to be outdone, Cnooc’s state-owned cousin, Sinopec, quickly cut a deal to buy a 49 percent stake in Talisman Energy (TLM)‘s British unit for $1.5 billion, giving it access to North Sea oil and natural gas fields. Two days later, Royal Dutch Shell announced it had signed a handful of partnerships with Cnooc and CNPC, China’s largest oil and gas company, for offshore exploration projects ranging from the coast of China to West Africa.

While the immediate thought might be that China is looking to feed its voracious demand for energy, only a scant amount of what’s produced from these projects is likely to flow back into mainland China for consumption. Assuming the Nexen deal gets approved (Senator Charles Schumer [D-N.Y.] wants to block it), Cnooc will acquire assets all over the world, including reserves in the Canadian tar sands, the deep water Gulf of Mexico, the North Sea, and West Africa.

“Whether any of that oil goes back to China will depend on where the Cnooc traders can make the most money on it,” says Erica Downs, a foreign policy fellow at the Brookings Institution’s John L. Thornton China Center. “In most cases, it doesn’t make sense to send it to China, so I really don’t think this is a resource grab.”

Rather, it’s the revenue they’re after—and the technology. Under pressure from Beijing, Cnooc, Sinopec, and CNPC are keen to transform themselves into international players that can compete with the big integrated oil and gas companies around the world. “The Chinese government really wants its oil companies to be internationally competitive,” says Downs. “They’re asking themselves: ‘Why can’t we have world class oil companies, too?’”

That means getting into North America, as China has been quietly doing for the last two years, taking minority stakes in a handful of projects and thus avoiding all the outrage that Cnooc’s failed $18.5 billion takeover of Unocal provoked in 2005. Last year, Cnooc made two quick deals with Chesapeake (CHK) for stakes in shale projects in Colorado and Wyoming. In January, Sinopec inked a $2.5 billion joint venture with Devon Energy (DVN) on five unconventional shale projects around the U.S. When one Chinese company cuts a deal, a second usually follows.

“There’s a clear herd mentality among these Chinese state-owned entities,” says Derek Scissors, an Asia economic policy fellow at the Heritage Foundation. And right now, the herd is moving toward North America, where the most advanced drilling equipment is being deployed in horizontal shale fracking and deep water methods. Not only that, but Chinese companies’ attempts to go elsewhere haven’t worked out so well. “First of all, people are getting tired of the Chinese showing up in their backyard,” says Scissors. “And the Chinese aren’t thrilled with having to deal with Nigeria or Venezuela either. They want stability.”

During the first half of 2012, the U.S. was by far the biggest target of Chinese money, says Scissors, with $7.16 billion worth of investments. China typically overpays. The estimated premium Cnooc paid for Nexen is about 60 percent. “There’s a China premium for everything they buy,” says Scissors. That’s because so many Chinese deals struggle or outright fail. According to Scissors’s research at the Heritage Foundation, since 2005 the value of investments that have either failed or faced serious delays as a result of bad execution is $150 billion.

Yet China tends to be happy to overpay, particularly when it comes to the oil and gas sector, where its companies can get access to technology, a sticky subject to say the least. The Devon and Chesapeake deals were carefully crafted to ensure that Cnooc and Sinopec were taking minority stakes and not operating stakes, meaning Chinese workers can’t go stand on the drilling rig. But they do get access to the boardroom. “They could be getting something useful from that, but in terms of a pure technology transfer, they’re clearly not getting all that they came for,” says the Brookings Institution’s Downs. Hence the Nexen deal, which should give Cnooc full access to its drilling technology.

Just where might they hope to apply that expertise? In China, of course. According to an EIA report, China has by far the most recoverable shale gas reserves, nearly 50 percent more than the U.S. Right now, China is tapping none of that. But Beijing has ambitious goals: The government plans to produce 6.5 billion cubic meters of shale gas by 2015—and 60 to 100 bcm by 2020. They’d better get fracking.

original article

_

The rush to capture natural gas from hydraulic fracturing has led to giant compressor stations alongside backyard swing sets, drilling rigs in sight of front porches, and huge flares at gas wells alongside country roads.

Air pollution from fracking includes the fumes breathed in by people nearby, as well as smog spread over a wide region and emissions of the greenhouse gas methane.

On Tuesday, the Environmental Protection Agency is expected to announce the first national rules to reduce air pollution at hydraulically fractured – fracked – wells and some other oil and gas industry operations. The agency estimated that the plan it proposed in July would reduce smog-forming, cancer-causing and climate-altering pollutants from the natural gas industry by about one-fourth.

The White House in recent weeks has been reviewing the EPA plan to consider possible changes, the normal procedure for regulations. Industry groups have lobbied for exemptions that would reduce the impact of the rule, saying the original requirements are too costly. Environmental and health advocates have been talking to White House officials as well, opposing the industry’s proposed changes.

The final version on Tuesday will show how President Barack Obama’s administration navigates between the nation’s needs for energy and health. Obama supports fracking because it yields vast amounts of natural gas, a fuel that burns cleaner than coal. He also has said that it should be done “without putting the health and safety of our citizens at risk.”

Pam Judy of Carmichaels, Pa.., says she fears that her family already is at risk from fumes from a large natural gas compressor station 780 feet from their home in the hills. When they built it, they were far from everything. Three years later, a natural gas compressor station was built on neighboring property.

“We have fumes that are in our yard almost constantly,” she said. “There are times when it smells like diesel or a kerosene smell. It’s very difficult to pinpoint the exact smell. Then there are times we get a smell like chlorine. When we get that chlorine smell it literally will scorch your eyes and your throat.”

Air tests found 16 chemicals in her yard, including benzene, a chemical the EPA classifies as a carcinogen. She said test of her blood also showed exposure to benzene and other chemicals. Benzene can cause dizziness and headaches, symptoms she’s had. Her adult children have had runny noses, headaches and sore throats that go away when they aren’t at their parents’ home.

The family worries about long-term exposure and is wrestling with whether to stay. Their land was handed down in her family since her great-grandparents’ day, Judy said. “It’s really heart-wrenching for us to make the decision to move.”

Paul Parker, a retired vice president of an engineering company who worked with energy companies, has lived for 36 years in an area south of Pittsburgh where natural gas development has sprung up in the last few years. Parker said no to leases on his own property, but sees the development around him and says the area has been ruined.

“When you go outside, it’s like living in a chemical complex,” he said. Pollution comes from vents on storage tanks near his property, he said, as well as nearby flaring to burn gas in early stages of well development and the diesel emissions of hundreds of trucks needed to haul water and equipment to well sites.

Fracking involves pumping water, sand and chemicals deep underground to release gas. After the injection, the fracking fluids and gas flow back for a period of several days or more.

The EPA’s rule would require companies to use portable equipment to capture this gas that otherwise escapes to the atmosphere or gets burned off in flares, a process known as green completion. The equipment would reduce volatile organic compounds, which are part of what forms smog. The same equipment would capture methane, the primary constituent of natural gas, and make it available for sale.

The industry estimates that more than 25,000 wells are fractured or refractured each year.

The American Petroleum Institute, the lobby for the oil and gas industry, has asked the Obama administration to make the requirement apply only to wells where the gas stream is 10 percent or more of volatile organic compounds.

That approach would exclude many wells.

The EPA’s existing rule for volatile organic compounds in the gas industry was issued in 1985 and applied only to leak detection at new and upgraded gas processing plants. That arrangement leaves much of the volatile organic-compound emissions from the oil and gas industry unregulated.

API told the EPA earlier that the average well is 2.95 percent volatile organic compounds. API spokesman Carlton Carroll said on Friday that API had to correct that number because it was wrong. “We believe the average is closer to 10 percent,” he said.

API president and CEO Jack Gerard said in a letter three weeks ago to senior White House adviser Valerie Jarrett that emissions controls on low volatile organic-compound gas would not be cost-effective. He also asked for other changes, including at least two years for building the equipment needed for green completions.

Environmental groups oppose those requests. They say that even small percentages of volatile organic compounds add up, because the volumes in fracking are so large. They also say that the industry over-estimated the costs of green completions, and they point out that in states such as Colorado and Wyoming, where the equipment is already required, the gas industry has continued to grow.

Other parts of the EPA’s plan would require equipment on compressors, storage tanks and new pneumatic controllers, the instruments that control pressure and other conditions.

“This industry produces an astonishing amount of air pollutions,” and the emissions have been largely ignored, said Joe Osborne, legal director of the Group Against Smog and Pollution.

Some pollutants on a local level can mean greater risks for cancer and neurological and reproductive problems, Osborne said. Other pollutants combine to form smog, which spreads over a much wider area. Smog can make it hard to breathe, aggravate asthma and other lung diseases and permanently damage lungs

In Pennsylvania, where GASP is based, parts of the state, along with much of the rest of the Eastern U.S., already don’t meet health standards for smog. The good news is that smog levels have gone down in the past 20 years, Osborne said. But the development of shale gas “has the potential to halt that progress or potentially even reverse it.”

original article

_

Cheniere Energy Inc. (LNG) (LNG) won federal approval to build the largest U.S. natural-gas export terminal as drillers who extract the fuel from shale formations struggle to find domestic buyers to absorb a glut.

The Federal Energy Regulatory Commission approved an order yesterday that will let Cheniere build a $10 billion plant adjacent to its Sabine Pass gas-import terminal in Cameron Parish, Louisiana, about 170 miles (274 kilometers) west of Baton Rouge. The Houston-based company said its 91 percent owned Cheniere Energy Partners LP hired eight financial institutions to borrow $4 billion to help fund the construction.

A surge in U.S. shale-gas production has led owners of liquefied natural gas import terminals to propose exports, increasing competition to supply Asia. Ventures in Australia and Qatar sell LNG to Asian buyers at prices linked to crude oil, while Cheniere’s supplies will be tied to U.S. natural gas futures, which have tumbled to a 10-year low.

“Cheniere has been a first mover and a fast mover,” John Hirjee, an analyst at Deutsche Bank AG, said by phone today from Melbourne. “This will potentially help others who are looking to export LNG from the U.S. to use Cheniere as a template.”

The stock has more than doubled in New York trading in a year, even as Standard & Poor’s said Cheniere was close to defaulting for a lack of demand for its gas-importing services.

Lowest in a Decade

U.S. gas futures rose 1.8 percent yesterday to $2.016 per million British thermal units, after touching $1.959 on April 13, the lowest since January 2002. The fuel has lost 87 percent of its value since reaching a record $15.78 in 2005.

“Today’s order finds that the project can be constructed and operated safely and with minimal environmental impacts,” the federal agency known as FERC said in a statement yesterday.

Environmental groups including the San Francisco-based Sierra Club opposed the project, saying converting natural gas to liquid form emits carbon dioxide, which is linked to climate change. Some critics of the plan had also said exporting the gas would drive up costs for domestic users.

Cheniere plans to super-chill the gas and ship it to Asia and Europe, where the fuel sells at a premium to U.S. prices, Charif Souki, chairman and chief executive officer, said in a March 15 interview.

Customers Lined Up

Souki has lined up customers for much of the terminal’s planned export capacity. The clients are London-based BG Group Plc (BG/), Barcelona-based Gas Natural Fenosa, GAIL India Ltd. (GAIL) and Korea Gas Corp. (036460)

Korea Gas, the world’s biggest LNG importer, agreed in January to buy 3.5 million metric tons of the fuel annually from Cheniere. The contract may help the utility buy the fuel at prices about 30 percent cheaper than supplies from Asia, the state-owned South Korean company said in an e-mail today.

South Korea, Japan and Spain are the world’s largest gas buyers, according to the U.S. Energy Department. Japanese utilities were paying $20.87 per million Btus for Yemeni gas in January, more than 10 times current U.S. prices.

International gas prices have soared because of rising consumption by power generators and chemical plants, and to plug the energy gap stemming from the Fukushima nuclear meltdown in Japan last year. Overseas prices haven’t been pressured by the U.S. glut because North American supplies are mostly inaccessible to the rest of the world.

The U.S. Energy Department granted Cheniere a permit last year to export to countries that aren’t free-trade partners with the U.S., a group that includes Japan and Spain. The terminal is scheduled to begin operations in 2015 or 2016.

Funding Arrangements

Bank of Tokyo-Mitsubishi UFJ Ltd, Credit Agricole SA, Credit Suisse Group AG, HSBC Holdings Plc, JPMorgan Chase & Co., Morgan Stanley, Royal Bank of Canada and SG Americas Securities will arrange the $4 billion in borrowings announced yesterday, Cheniere Energy Partners said.

Cheniere on March 14 announced a stock offering, the fourth in less than a year, and it is negotiating a $2 billion pledge from Blackstone Group LP (BX) (BX) to cover costs of the export terminal.

The Sabine Pass export facility was backed by Louisiana lawmakers including Senator Mary Landrieu, a Democrat, and by General Electric Co. (GE) (GE), which will make equipment for the plant.

Cheniere is planning another export facility near Corpus Christi, Texas, which may begin operating by 2017 or 2018, CEO Souki said.

North American LNG

Aside from Cheniere’s Sabine Pass project, other pending export venture include Freeport LNG Development’s proposal for a plant at Freeport, Texas. Seven companies, including Freeport, are seeking U.S. Energy Department’s permission to export to non-free-trade agreement nations.

Apache Corp., the second-largest U.S. independent oil and natural-gas producer by market value, said last month it’s moving toward a decision to go ahead with its Kitimat LNG project in Canada this year.

“The dawn of North American LNG has arrived,” Neil Beveridge, a Hong Kong-based analyst at Sanford C. Bernstein & Co. said in a research note today. “We expect Sabine Pass to be the first of several LNG projects to be approved in North America, which will become a major new LNG exporting region.”

original article

_

The Senate is scheduled to vote late this afternoon on legislation that would eliminate what Democratic sponsors say are tax subsidies for the highly profitable oil and gas industry. The proposal is likely to fall short of the 60 votes needed to move the bill forward.

It will, however, give both parties a political issue for the fall elections, with Democrats likely to accuse Republicans of protecting major oil and gas companies while Americans pay very high prices for gasoline. Republicans likely will counter that the Democratic bill would have further increased already high pump prices.

“People I talk to in New Jersey want to know why they’re stuck paying close to $4.00 for a gallon of gasoline while these companies rake in billions of dollars in subsidies and record profits,” said Sen. Robert Menendez, D-N.J., the bill’s lead sponsor. “And they want to know why these oil companies should continue to enjoy billions of dollars in subsidies when we could be using that savings to invest in alternatives to oil and lower the deficit.”

Over the last 10 years, the Big 5 oil companies have made $1 trillion in profits, while retaining tens of billions of dollars in taxpayer subsidies, Menendez said. Last year, the five companies — BP, ExxonMobil, Shell, Chevron and ConocoPhillips — reported $137 billion in profits.

Menendez said his bill would use the $4 billion in savings to continue subsides for alternative energy sources and to pay down the federal deficit.

In addition to canceling some oil and gas tax breaks, the legislation would make it harder for speculators to drive up the price of oil by limiting how much future trading any investor could do in a single day.

Louisiana two senators, Democrat Mary Landrieu and Republican David Vitter, oppose the bill, as would be expected for a member from an oil producing state.

“The bill from Sen. Menendez is a wrong-headed approach that pits sectors of the energy industry against one another in an effort to assign blame for high gas prices, instead of promoting the all of the above energy strategy our country needs,” Landrieu said. “I support alternative renewable energy, but the advance of this sector cannot come at the expense of the oil and gas industry that powers our nation and supports more than 9 million jobs in the United States and more than 375,000 in Louisiana.”

Vitter said the Democratic bill would have the “wrong sort of impact.

“It would drive the price even higher than it is now,” Vitter said.

The American Petroleum Institute has been running advertisements urging Congress not to increase energy taxes. Says an API radio ad: “It’s another bad idea from Washington.

President Barack Obama and Senate sponsors of the legislation to cancel some oil industry tax breaks said that many oil tax breaks were intended to provide incentives for domestic drilling when prices are low. With prices well over $100 a barrel, companies shouldn’t need incentives to explore for oil.

original article

Comstock Resources (NYSE:CRK) plans to suspend all operated drilling in the Haynesville Shale by March 2012, as falling natural gas prices continue to trigger major reductions in dry gas drilling in the onshore United States. The company will also cut back total overall spending on drilling in 2012.

Haynesville Shale
The company has 79,000 net acres prospective for the Haynesville and an additional 51,000 net acres of exposure to the Bossier Shale, another dry gas play on its property. The acreage is spread across many different counties in northern Louisiana and eastern Texas.

It has been scaling back development of the Haynesville for several years. The company operated seven rigs in this play in 2010, and then began shifting capital to crude oil and other liquid plays. During 2011, it moved two rigs to the Eagle Ford Shale and released three other rigs working in the Haynesville, ending the year with only two rigs in this play.

The company plans to move the final two rigs working the Haynesville to the company’s recently acquired properties in the Permian Basin.

Despite the reduction in Haynesville Shale drilling, it will still expend significant capital here in the early part of 2012. The company will spend approximately $45 million to drill 5.1 net wells and another $61 million to complete 13.3 net wells. Most of this activity will be on a non-operated basis.

2012 Capital Spending
Comstock Resources revised the 2012 capital budget which calls for spending $458 million to drill 60.6 net wells and complete 19.1 net wells drilled in 2011. The company’s previous plan called for spending approximately $545.0 million in 2012 for drilling and completion activities.

One company increasing capital expenditures in 2012 is Oasis Petroleum (NYSE:OAS), which is active in the Williston Basin. The company expects to spend approximately $884 million this year, compared to between $660 million and $667 million in 2011.

Property Impairment
Comstock Resources will also record an impairment of some of its natural gas properties due to the decline in natural gas prices. The company plans an impairment charge of approximately $61 million or 86 cents per share after tax.

Other Haynesville Shale Operators
Other operators that may announce cuts in dry gas drilling include EXCO Resources (NYSE:XCO). The company announced in November 2011 that it would operate 13 rigs in this play. QEP Resources (NYSE:QEP) is also active in the Haynesville, and previously announced a reduction in drilling here in November 2011.

The Bottom Line
The industry flight from dry gas drilling in the onshore U.S. is gaining traction with Comstock Resources, the latest company to cut drilling in these areas. There is every indication that these cuts will eventually have a meaningful impact on natural gas supply in North America.

original article

Chinese, French, and Japanese companies were among recent investors making long-term financial commitments to US unconventional oil and gas plays in a trend that is expected to continue despite economic uncertainty.

State-run Oil India Ltd. (OIL) has indicated an interest in acquiring shale assets in the US and Australia. Oil India Finance Director T.K. Ananth Kumar told reporters Oil India hopes to buy shale assets worth up to $200 million. Reliance Industries Ltd. and Gas Authority of India Ltd. already have US shale gas acreage.

Kumar said Oil India prefers a joint venture partnership rather than fully owning the asset. “This is our strategy for acquisition of shale gas,” he said.

Rick Roberge, PwC US principal for energy mergers and acquisitions, said international investment in US shale is well under way and likely to continue.

IHS Herold Inc. statistics showed international transactions involving US shale plays accounted for 40 deals totaling $60 billion during 2008-11 of which 33 transactions were announced within the last 2 years.

Roberge said 22 transactions involved drill-and-carry arrangements, and Chesapeake Energy Corp. was the most active player, participating in 8 deals.

“Every major global oil company is looking at US shale,” Roberge said. “They desperately want a position and will pay up for it.”

Roberge noted Russian investors are the lone exception, adding that Russia has a large conventional oil and gas reserve base.

Meanwhile, Asian companies have been very prominent investors in the US shale market. Roberge said Asian companies invest in US shale to acquire both financial reward and technical knowledge about unconventional oil and natural gas development.

China is very keen on acquiring shale expertise given its hope to tap into its own unconventional resources. Andy Brogan, Ernst & Young global oil and gas transactions leader, said China holds the largest estimated shale gas resources worldwide.

“If the potential in this asset base can be unlocked, this could transform the oil and gas landscape in years to come,” Brogan said.

The US Energy Information Administration estimates China has 1,275 tcf of technically recoverable shale gas compared with 862 tcf in the US. The estimate was part of an analysis of world shale gas that EIA released in April 2011.

Jim Dillavou, US leader of Deloitte’s energy M&A practice, said some Chinese companies have made multiple investments.

These partnerships provide US operators with capital to continue development while the drill-and-carry joint venture partners gain unconventional technical expertise.

Relationships continue evolving, he said. Recent low gas prices are unlikely to discourage international investors who already expect to wait several years for a financial return from their shale investments, he said, adding that unconventional liquids assets currently attract the keenest interest from buyers.

“Most development plans are 6-10 years at least,” Dillavou said. “We see a lot of big pockets coming into this space. We haven’t seen any signs of it slowing. We think it will continue for awhile.”

Trend continues

The M&A trend from investors abroad into US shale continued robustly going into 2012 with three transactions announced in early January.

Total E&P USA Inc. signed a joint venture agreement with Chesapeake Exploration LLC and affiliates of EnerVest Ltd. in which Total acquires a 25% stake in Chesapeake-EnerVest holdings in the Utica shale in Ohio (OGJ Online, Jan. 3, 2012). Total paid $700 million upfront and agreed to pay up to $1.63 billion during 7 years in the form of a 60% carry of Chesapeake-EnerVest’s future drilling and completion expenditures.

Devon Energy Corp. agreed to sell one third of its interest in five plays to China Petrochemical Corp. (Sinopec) for $2.2 billion (OGJ Online, Jan. 3, 2012).

Terms call for Sinopec International Petroleum Exploration & Production Corp. (SIPC) to reimburse Devon for drilling costs. Previously, Devon assembled 1.2 million net acres in the Tuscaloosa Marine shale, Niobrara, Mississippian, Ohio Utica shale, and the Michigan basin.

The Eagle Ford JV results in SIPC paying 80% of the overall development costs during the carry period, Devon said.

Marubeni Corp. subsidiary Marubeni Eagle Ford Ltd. agreed to buy a 35% stake in Hunt Oil Co.’s holdings in South Texas. Terms call for Marubeni to pay future drilling expenses (OGJ Online, Jan. 9, 2012).

The Japanese trading house said the JV with the Dallas-based Hunt plans to drill several hundred wells during 5-10 years across 52,000 acres. Marubeni and Hunt plan to jointly acquire additional Eagle Ford acreage.

Other Japanese companies also are investing in US shale plays. Corporate conglomerate Itochu Corp. was part of an investor group led by Kohlberg Kravis Roberts & Co. LP that acquired Samson Investment Co., Tulsa, Okla., one of the largest private US exploration and production companies, for $7.2 billion.

Samson has positions in oil and liquids-rich plays such as the Bakken, Powder River, Green River, Granite Wash, Cana Woodford, and Cotton Valley as well as in the Haynesville and Bossier gas shales.

Previously, Itochu became the first Japanese company to participate in a US shale oil project upon buying a 25% stake in the Niobrara shale oil play in Wyoming from MDU Resources Group.

Separately, a subsidiary of Mitsui & Co. Ltd. acquired 12.5% working interest in the nonoperated Eagle Ford shale position of SM Energy Co., Denver. Mitsui agreed to carry 90% of SM Energy’s drilling and completion costs on its nonoperated acreage until it has spent $680 million for the benefit of SM Energy (OGJ Online, June 29, 2011).

Norway’s Statoil ASA announced plans to acquire independent Brigham Exploration Co. for $4.4 billion in a transaction marking Statoil’s entry into the Bakken and Three Forks unconventional oil plays in the Williston basin in North Dakota and Montana (OGJ Online, Oct. 17, 2011).

SandRidge Energy Inc. of Oklahoma City struck a $1 billion deal with Spain’s Repsol YPF last year involving SandRidge’s Mississippian oil fields.

Repsol agreed to pay SandRidge $250 million and to finance $750 million in drilling expenses over 3 years for a nonoperated stake in two areas, one straddling the Oklahoma-Kansas line and another in southern Kansas. While not shale, the Mississippian formation requires horizontal drilling and multistage fracturing. In a separate joint venture, South Korean firm Atinum Partners Co. Ltd. acquired a nonoperated working interest in SandRidge’s Mississippian fields for $500 million. Atinum will pay $250 million in cash at closing. Atinum has also committed to a drilling carry obligation to pay 13.2% of SandRidge’s share of drilling and completion cost for wells up to a total amount of $250 million during a 3-year period.

BHP Billiton Petroleum of Australia agreed to buy all of Chesapeake Energy Corp.’s interests in the Fayetteville shale in Arkansas for $4.75 billion (OGJ Online, Feb. 22, 2011).

J. Michael Yeager, BHP Billiton chief executive, said his company obtained an operated position in 487,000 net acres in the Fayetteville to “immediately make BHP Billiton a major North American shale gas producer. Longer term, the expertise we gain here will be usable elsewhere as we continue to grow our business.”

A few months later, BHP Billiton announced an agreement to acquire Petrohawk Energy Corp., Houston, for $12.1 billion, giving BHP operated positions in the Eagle Ford and Haynesville shale resource plays and the Permian basin (OGJ Online, July 25, 2011).

original article

Oil and gas exploration and production in the Gulf of Mexico will some day return to pre-BP spill levels, the president of Chevron North America Exploration and Production Company, Gary Luquette said Thursday.

But the rigorous permitting, safety and verification requirements imposed after the April 2010 BP disaster are here to stay, Gary Luquette said during an interview with The Daily Advertiser before the Greater Lafayette Chamber of Commerce annual banquet, where he was keynote speaker.

“It’s a new normal,” Luquette said.

The industry hasn’t found its stride since the Deepwater Horizon platform operated by BP off the coast of Louisiana exploded and sunk, creating the largest oil spill in U.S. history.

That disaster, which killed

11 workers, led the federal government to impose a six-month moratorium on deepwater drilling that was followed by more stringent permitting and safety regulations.

“I think activity levels can and will return to pre-Macondo (spill) levels,” he said. “The effort and rigor in getting permits approved won’t return.”

Luquette said that’s a good thing for Louisiana and the industry. The BP disaster tainted the entire industry.

Tighter permitting, regulations and oversight will help the industry rebuild public trust, he said.

The “new normal” may be too costly for some of the small independent companies to survive, Luquette said.

“In the end,” he said, “the standards are going up. It’s your responsibility to enact them.”

The Gulf of Mexico is still a major source of oil and natural gas and Chevron maintains a presence there, in deepwater and shallow water, said Luquette, a 1978 civil engineering graduate of UL Lafayette.

More than half of the company’s 2012 budget is allocated to Gulf of Mexico activity. Today, Chevron has 10 rigs operating in shallow water, he said.

Lafayette plays an important role in the industry with numerous supply and service companies operating here.

Chevron alone has 300 workers in its Lafayette office and another 300 or so working offshore out of the Lafayette office, Luquette said.

President Obama said last week in his State of the Union address that he wants to end “subsidies” to the oil and gas industry which makes billions of dollars in profits. Luquette said the energy industry creates jobs and creates wealth for the federal government.

In 2011, the oil and gas industry paid $86 million a day to the federal government in royalties, rents and tax revenue, he said. The industry also employs more than nine million either directly or indirectly.

The industry doesn’t need bailouts and such, just a level-playing field, the same so-called subsidies and breaks the federal government provides other U.S. industries and those from foreign nations, Luquette said.

original article