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By Todd White

Cheniere Energy Inc. (LNG) signed a second natural-gas supply contract in three weeks, boosting its chances of building the first gas-export terminal in the continental U.S.

Gas Natural SDG SA (GAS) of Spain agreed to buy 3.5 million metric tons of liquefied natural gas a year from Houston-based Cheniere’s proposed Sabine Pass terminal in Louisiana for 20 years beginning in 2017, the companies said in statements yesterday after U.S. markets closed.

Production from shale rock has made the U.S. the world’s largest gas producer and caused prices to collapse 75 percent from 2008’s highs, opening the prospect of ship-bound exports. Yesterday’s deal, following a 20-year contract with BG Group Plc, may help cash-strapped Cheniere attract financing for the first phase of its $10 billion Sabine export terminal, Societe Generale said.

“Cheniere now has an incentive to build it as fast as possible,” said Thierry Bros, a senior analyst for European gas and LNG at Societe Generale in Paris. “The banks will now have secured cash flow” to repay debt on the export facility.

Cheniere fell 1.2 percent to $11.34 at the close in New York, after earlier soaring as much as 12 percent. The shares pared gains after the Industrial Energy Consumers of America urged a Senate panel to consider the potential impact long-term gas exports could have on domestic fuel prices.

The company called the Gas Natural contract “another milestone” for Sabine. The 7 million metric-ton capacity target was met for exports, “which is expected to support the construction” of the first two export lines at the facility, Cheniere said in its statement.

‘Significant Obstacles’ Remain

Cheniere, which originally built Sabine Pass as an import terminal, is looking to switch direction to meet Asian and European demand for imported gas. U.K.-based BG announced its contract on Oct. 26, which pushed up Cheniere’s shares 69 percent that day. Standard & Poor’s last month said that deal by itself probably wasn’t enough to stave off a cash crunch at Cheniere that threatens its ability to continue paying interest to bondholders.

Cheniere’s 2.25 percent convertible bonds that mature in August fell 1.7 cents to 94.25 cents on the dollar, boosting the yield to 11.3 percent, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.

“The reality is Cheniere faces significant obstacles,” Andy DeVries, an analyst at CreditSights Inc. in New York, said today in a note to clients. With initial construction more than a year away and exports not expected to begin until 2015 at the earliest, DeVries said “it is entirely too early” to recommend buying units of Cheniere Energy Partners LP, the subsidiary that will operate the export plant.

Debt Refinancing Planned

Bros said it was unlikely that U.S. regulators will oppose the Sabine Pass project, given that the pricing used in the Gas Natural deal is fixed to domestic gas prices rather than international crude. As a result, a rocketing crude price in the future won’t tempt U.S. gas producers to stop supplying the domestic market, he said.

“BG and Gas Natural are going to buy LNG under a U.S. price, and sell it under an oil-linked price in Asia,” Bros said. “The price in the U.S. currently is too low, even below production costs right now, and these two contracts may only raise it a little,” Bros said today in an interview.

Cheniere won’t default because it will refinance its debt before a May payment is due, Chief Executive Officer Charif Souki said in an Oct. 31 interview.

The Sabine Pass terminal is set to be the first new North American export project since 1969, when exports from the Kenai terminal in Alaska started.

The contract is a landmark for both companies. Gas Natural, the biggest gas supplier in Spain and Latin America, has never imported from the U.S. and said it hopes to use its nine LNG tankers to deliver the fuel as well to Pacific destinations once the Panama Canal is expanded.

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By Yadullah Hussain

Oil tycoon T.Boone Pickens says that the United States treated Canadians like ‘step children’ by delaying TransCanada’s Keystone XL Pipeline.

“The United States is silly enough to think Canada is a part of the United States because they are both in North America and so they treat the Canadians like step children,” the candid Pickens told CNBC in an interview.

Taking broad swipes at the Obama adminstration’s energy policy, Pickens said there are close to 50 pipelines crossing the Ogalla Aquifer in Nebraska. The ecologically sensitive area was a flashpoint in the green movement’s objection to the $7-billion pipeline. The opposition prompted a State Department order to move the pipeline away from the area, further delaying the project.

“The Ogallala Aquifer extends from midland Texas to South Dakota across eight states. Now can you imagine how many pipelines cross that Aquifer? Hundreds…my ranch sits right in the middle of it in Roberts county, Texas. I have three pipelines across my ranch,” said Pickens.

The entrepreneur, who made his billions via acquisitions of energy companies and runs BP Capital Management, said the U.S. energy sector has a great story to tell: “Natural gas prices in the U.S. is under $4, making it cheaper than European gas which is $13 and at $16-18 in the Middle East. We have the cheapest energy in the world in this country. Our oil is cheaper by $15 a barrel than the global price and our natural gas is cheaper by a fraction. Why isn’t somebody saying we have the cheapest energy in the world? We can bring industry back into the country.”

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WASHINGTON, DC, Nov. 22

By Nick Snow

OGJ Washington Editor

The US Environmental Protection Agency does not anticipate meeting a mid-December deadline to issue proposed greenhouse gas emission limits for refineries. The agency expects to need more time and is working with litigants to develop a new schedule, a spokeswoman told OGJ by e-mail in response to an inquiry.

The American Petroleum Institute welcomed the news. “EPA is allowing itself more time to analyze industry data before proposing the unprecedented and enormously complex greenhouse gas rules for refineries,” said Howard Feldman, API regulatory and scientific affairs director.

Feldman said refiners recently provided more than 5 million data entries regarding their operations, and have repeatedly asked EPA to issue an advanced notice of proposed rulemaking before proposing new refinery rules. This would ensure that such rules would be based on accurate assessments of refineries’ actual emissions and risks, he explained.

“Of course, EPA’s application of the Clean Air Act in a way that was never intended by Congress threatens to unnecessarily raise the cost of producing America’s energy at a time when the administration should be focused on job creation and economic recovery,” Feldman said.

Environmental and other organizations supporting EPA’s effort to develop and implement GHG emissions limits for refineries did not immediately comment.

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By Reem Shamseddine

RIYADH | Mon Nov 21, 2011 1:29pm EST

RIYADH (Reuters) – Saudi Arabia’s state energy company said on Monday that its dominant role in world oil supply had been altered by large new reserves in North America, sapping the urgency to develop the kingdom’s own reserves.

The speech by Saudi Aramco’s chief executive was the first from the globe’s top oil exporter to acknowledge that unconventional oil was set to shift the energy balance of power and cut U.S. dependence on Middle East crude.

“The abundance of resources and the more ‘balanced’ geographical distribution of unconventionals have reduced the much-hyped concerns over ‘energy security’ which once served as the undercurrent driving energy policies and dominated the global energy debate,” Khalid al-Falih said.

For years oil markets, nervously watching pressure on limited spare production capacity, have obsessed over Saudi Arabia’s supply cushion as the last defense against prices spiraling higher.

“A few years ago, much of the global energy debate was based on the premise of acute resource scarcity and its economic and political ramifications,” Falih said.

“Rather than supply scarcity, oil supplies remain at comfortable levels, even given rising demand from fast-growing nations like China and India,” he added.

Saudi Arabian Oil Minister Ali al-Naimi said on Sunday that he saw oil markets as balanced ahead of OPEC’s Dec 14 meeting.

Unconventional oil developments are dominated by energy intensive oil sands in the United States and Canada with 2011 global production amounting to 2.3 million barrels per day (bpd) or equal to production of non-OPEC member Norway.

Falih said in early October he saw no reason for Aramco to significantly increase its oil production capacity in the mid-term because of rising conventional output from countries like Brazil and Iraq.

Weak U.S. economic data, mounting euro-zone sovereign debt and concern about the exposure of major banks to it raised “the specter of a double-dip global recession,” he told the conference in the Saudi capital on Monday.

“All that makes spending on aggressive energy programmes unlikely,” he said, adding that abundant affordable hydrocarbon supplies challenged investment in renewable technologies.

As a result, Saudi Aramco had no plans to increase its oil production capacity to 15 million barrels per day, Falih said.

“Saudi Aramco has more spare capacity than the kingdom is obligated to or has committed to,” he told reporters. “So it wouldn’t make sense.”

Tight oil is a form of light crude oil held in shale deep below the earth’s surface that is extracted with hydraulic fracturing, or “fracking,” using deep horizontal wells.

OPEC expects global output of non-conventional oil to rise 3.4 million bpd by 2015, still dominated by oil sands, to 5.8 million bpd by 2025 and to 8.4 million bpd by 2035 when tight oil would be playing a much bigger role.

In 2035, the group of conventional oil exporters expects the United States and Canada to still be dominating unconventional oil production with 6.6 million bpd, but China could be producing 1.1 million bpd of its own unconventional oil by then.

OPEC estimated in a recent report that global reserves of tight oil could be as high as 300 billion barrels, well above current estimates of Saudi Arabia’s conventional reserves of around 265 billion barrels.

SHALE GAS

A technology-led surge in North American shale gas production has created a global glut over the last few years which has reduced U.S. reliance on Middle Eastern gas imports, forced exporters to look for new buyers and cut their revenues.

With competition for crude sales rising and its own gas needs intensifying, Aramco is now focusing on tapping enough of its own gas reserves to meet the kingdom’s growing appetite for power generation and industry.

“We are drilling this year a number of (unconventional gas) wells, just to test the geology… and do some preliminary economics. We will continue that in 2012,” Falih told the conference.

“In the long term we will be doing some significant pilots as we feel the economics are favorable. Short to medium term is relying on growing our conventional gas reserves,” he said.

He said it was still too early to estimate Saudi Arabia’s own unconventional hydrocarbon resources.

“Abundance isn’t limited to gas reserves, but is also the new headline when it comes to oil,” Falih said.

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By Mark Ballard

Capitol news bureau

November 22, 2011

Though both chambers of the Louisiana Legislature remain securely with Republican majorities, Democratic Party legislative leaders say the results of this fall’s elections bode well for the minority party in state politics.

State Rep. John Bel Edwards, who chairs the Democratic caucus in the Louisiana House of Representatives, said Monday that the Republican Party had predicted grabbing 70 seats in the 105-member House, enough to win votes that require a two-thirds majority.

Edwards said Democrats still have the same number of members in the Louisiana House as the party had before the election season started in September. After the weekend finale, the House has 58 Republicans, 45 Democrats and two who are not affiliated with a political party. The state Senate has 24 Republicans and 15 Democrats.

“I don’t think we were looking for 70; 62 would have been what we could have best hoped for if all the stars aligned,” said state Rep. Chuck Kleckley, R-Lake Charles, who likely will be the next Speaker of House. “We’re 58. We’ve grown eight since the last election (in 2007). That’s pretty good growth.”

Two of the three former senators seeking to regain old posts they left over the past decade were defeated in those attempts, while former Sen. Greg Tarver, of Shreveport, is heading back to the job he held for two decades until 2004, after beating incumbent Lydia Jackson. Both are Democrats.

Four incumbent House members lost Saturday: state Reps. Sam Little, R-Bastrop; Billy Chandler, R-Dry Prong; Rick Nowlin, R-Natchitoches; and Rickey Hardy, D-Lafayette.

The only issue that was on ballots across the state was a constitutional amendment banning local governments from charging real estate transfer fees. Complete but unofficial returns showed 590,264 of the state’s 2.85 million registered voters cast ballots on the constitutional referendum, which is an indication that 20.5 percent of the state’s voters participated in the runoff election, said Sailor Jackson, spokesman for the agency.

The election season started off with U.S. Sen. David Vitter and Gov. Bobby Jindal, both Republicans, announcing they would raise money and support candidates in an effort to elect a more conservative Louisiana Legislature.

Edwards said the Democrats calculated that, once the final reports come in, they will show that the committee organized by Vitter, and the fund within the Louisiana Republican Party that Jindal supported, together, spent about $4 million on legislative races.

“Every single Democratic incumbent even those targeted by David Vitter and Bobby Jindal were re-elected in the House,” Edwards said.

Edwards attributed the outcome, partially, to Louisiana voters rejecting mean-spirited campaign tactics. He said Vitter’s group sent mailers, made phone calls and produced radio commercials that used “code language” and linked local Democratic candidates to extreme positions that President Barack Obama does not advocate.

“Vitter’s tactics were race baiting and Obama hating,” Edwards said Monday.

When Vitter was asked for a response, his spokesman, Joel DiGrado, wrote in an email Monday, “I guess being so far down, the Democrats are having to get quite imaginative with their arguments.”

Vitter emailed his supporters Monday: “I’m personally very enthusiastic about the results.”

Vitter wrote that when his Louisiana Committee for a Republican Majority began in 2005, 40 members of the House were Republican and 16 members of the Senate were GOP.

Jindal said at a news conference Monday that he endorsed 110 candidates for statewide office, BESE and the House and Senate in primary and general elections and that 96 were victorious.

He said his Victory Fund spent more than $1.4 million, sent more than 1.6 million pieces of mail and made more than 2.5 million get-out-the-vote phone calls.

Jindal said he spent about $420,000 from his own campaign funds on BESE and legislative races.

Senate-winner Tarver said Jindal did not endorse him or help his election bid. Jindal also did not back Jackson.

The governor did get involved in the runoff between state Sen. John Smith, R-Leesville, and former state Sen. John David Cain, of Dry Creek, also a Republican.

Cain aired a television ad questioning why Jindal would support a longtime Democrat. Smith, who won, only recently joined the Republican Party.

Jindal responded by spending more than $50,000 of his own campaign funds on advertising against Cain.

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With Keystone XL delay, America continues its slow economic strangulation

By Charles Campbell

6:00 a.m. EST, November 21, 2011

In 1969, three unrelated events occurred that have since been combined with political bungling to slowly strangle the U.S. economy. Moammar Gadhafi overthrew King Idris of Libya. He nationalized Western oil company reserves with no retribution from the U.S. Sensing our weakness, all of the other OPEC nations abrogated their concession agreements with U.S. companies. The Arab producers cut back production and embargoed the U.S. because of our support for Israel. Middle East despots have been in the driver’s seat ever since, and as the Arab Spring seems increasingly likely to empower Islamists, things are unlikely to get better.

Also that year, an oil spill from a drilling platform off Santa Barbara was the catalyst for the current environmentalist efforts to prevent all exploration on the continental shelves on the East and West coasts and the Arctic National Wildlife Refuge. U.S. crude production went into irreversible decline.

Finally, in 1969 synthetic crude oil from the Athabasca tar sand of Alberta, Canada, began to be produced. It has been transported without incident to U.S. refiners by pipeline for 40 years. There is now an environmental movement to prevent the construction of the Keystone XL pipeline to deliver additional tar sands crude from Alberta to the U.S. to make up for declining U.S. production. Opponents of Keystone XL won a victory this month when President Barack Obama refused to sign off on the pipeline’s proposed route, forcing at least a year’s delay as the project is reconfigured.

These are the same environmentalists, of course, who block exploration on the continental shelves and ANWR, which adds to the U.S. and global oil shortage, driving up prices that make the Athabasca tar sands projects viable. In any event, if Keystone XL is blocked, a pipeline will be built to Canada’s West Coast for Chinese deliveries. This will reduce China’s need for Middle East crude and increase our requirements for supplies from people who want to destroy the U.S.

The administration continues to push for wind and sun projects (see the Solyndra debacle). Multiple studies show that wind power does not reduce carbon dioxide because of the inefficient cycling operations in fossil fuel plants to provide instant power into the grid when the wind stops blowing.

As for solar, to provide a measurable amount of power it would be necessary to cover a major portion of the Mojave Desert with mirrors to collect heat at the peak of the day and again would require cycling of fossil fuel plants to make up for when the sun doesn’t shine.

The same radical opposition to the Keystone XL pipeline has expanded to the production of natural gas from the Marcellus shale formation, which stretches from New York through Pennsylvania and Maryland into West Virginia, with unsubstantiated claims of impending disaster for the water tables. Hydro-fracturing has been used in secondary/tertiary oil and gas recovery for 60 years in the West with no detrimental effect on the environment or water supplies, and coupled with horizontal drilling is responsible for raising crude production in the Dakotas to slow U.S. declines. Maryland has a moratorium on shale gas production.

Much-maligned Big Oil still has the only technology capable of developing additional energy supplies, shorn of government impediments. Meanwhile, anti-nuclear activists have stopped all consideration of nuclear power in the U.S. in the wake of Fukushima — which, despite being the worst nuclear meltdown in history, caused no nuclear-related deaths.

CFP of France was thrown out of the Middle East, along with the U.S. companies, in 1974. The country immediately launched a focused strategy to reduce reliance on Mideast oil. Today France has the world’s most sophisticated high-speed electric rail system, produces 80 percent of its power by nuclear plants and reprocesses its spent nuclear fuel. The Nissan Renault Leaf pure electric car is now in mass production. By 2030, France will be essentially carbon dioxide free except for jet fuel and diesel fuel for heavy truck transportation.

Sun and wind will never become a significant portion of our energy mix. High-priced oil since the 1970s has created 40 years of extensive conservation; there is little more to be gained. We can either emulate the French and in parallel aggressively expand our fossil fuel resources or face a slow, brutal economic decline against rising Asian power, coupled to increasing risks from an increasingly volatile region that controls the world’s oil supplies.

The garrote is an unpleasant execution by slow strangulation. It is extremely difficult to commit national suicide by turning the handle ourselves, but we are trying.

Charles Campbell, a Woodstock resident, is a retired senior vice president of Gulf Oil Corp. His email is lochawe@verizon.net.

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By Ben Geman and Andrew Restuccia – 11/21/11 06:12 PM ET

The collapse of the deficit supercommittee means oil companies fighting to preserve billions of dollars in tax breaks can once again breathe easy.

Many Democrats had sought to kill the tax subsidies as part of any major deal on spending cuts and revenues, prompting strong oil industry pushback.

While scuttling the subsidies was likely a long shot for inclusion even if the panel had produced a deal, its failure probably ends any remaining threats this year.

The tax incentives’ survival shows the industry’s lobbying clout even during a year that saw near-record energy prices, high profits and plenty of calls — including some from Republicans — to look at energy subsidies overall.

The oil industry has waged a vigorous lobbying and advertising campaign to keep incentives such as the ability to claim lucrative deductions on domestic manufacturing income.

The American Petroleum Institute, a major trade group, and other industry advocates argued that removing tax incentives would raise energy prices and cost jobs, while critics say the incentives are unneeded gifts to a profitable, mature industry.

Democrats have pushed Senate legislation that would repeal billions in incentives for the largest oil companies. But it has fallen well short of 60 votes in the chamber and stands no chance in the GOP-led House, showing that only a wider overhaul of energy tax policies could provide a possible vehicle for a major overhaul of oil-sector tax breaks.

While the panel’s demise takes the tax breaks off the table, it also deprives drilling advocates of an avenue to push for wider oil-and-gas leasing.

House Natural Resources Committee Chairman Doc Hastings (R-Wash.) had wanted the panel to raise revenue by expanding offshore oil-and-gas leasing and opening Alaska’s Arctic National Wildlife Refuge.

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–Weather forecasts show winter may finally be around the corner, spurring demand

–Midday bounce helps natural gas recover from October 2010 lows

–Market still suffers from weak fundamentals

By Christian Berthelsen  Of DOW JONES NEWSWIRES

NEW YORK (Dow Jones)–Natural gas futures flirted with their lowest level in a year before rallying Monday, closing 2.5% higher as revised weather forecasts began to show winter may finally be on the way.

Natural gas futures for December delivery ended the day up 8.3 cents at $3.399 a million British thermal units on the New York Mercantile Exchange. Earlier in the morning, they fell as low as $3.285, below the lowest close since Oct. 27, 2010–but then rallied intraday as much as 4.7%.

Gas prices have slid nearly 30% since June, and the market has been depressed amid a supply glut owing to a combination of abundant inventory and weak weather-driven demand. Natural gas is a key component in electricity generation, and demand rises and falls as people heat and cool their homes.

Until recently, mild fall weather and predictions that warmer-than-normal temperatures may persist into December has contributed to the low prices. But forecasts have finally begun to reflect cooler temperatures on the horizon, with the eastern half of the U.S. possibly facing a drop of three to six degrees beginning this weekend in the Midwest and reaching the East Coast next week.

“The details are still a bit vague and yet to be ironed out, but it now appears that the persistently warm pattern is coming to an end, at least temporarily,” said Dan Leonard, a senior meteorologist with Weather Services International.

Even though the forecast change is incremental at best, it may have served as a reminder to the market that winter will arrive sooner or later.

“The giddyup seemeed to come on the sense that we’re closing that proximity to early December cold,” said Pax Saunders, an analyst with Gelber & Associates in Houston. “It’s about 10 days away.”

Other analysts and traders said the bounce may have been exacerbated by a short-covering rally, as traders who were betting on a market decline closed out the bets when prices began to rise. Others cited technical charts indicating prices had fallen so far that the market was over-sold.

Despite the day’s bounce, most market watchers take a dim view of natural gas in the near future. Stored inventories have hit a record level, and Barclays Capital said in a note last week that even a winter 10% colder than normal would still leave inventories higher than average at the end of the season.

“I’m reluctant to suggest we’ve hit a bottom at this point,” said Brian LaRose, senior technical analyst at United ICAP.

-By Christian Berthelsen, Dow Jones Newswires; 212-416-2381; christian.berthelsen@dowjones.com.

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