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New Interior rules will require well inspections, chemical disclosure


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Compiled By: Larry Persily


(Bloomberg; Feb. 14) - New federal rules will require natural gas drillers to inspect their wells after hydraulic fracturing on public land to ensure the safety of drinking-water supplies, Interior Secretary Ken Salazar said. The agency in coming weeks also will propose standards under which companies must disclose the chemicals in the fracking mixture injected underground to free trapped gas, demonstrate the well isn't leaking and check the work after fracking, Salazar said Feb. 14 in a speech in Cleveland.

"To me, those rules are common sense," Salazar said. "You have some people say that this will kill the natural gas industry - that's very far from the truth." Republicans in Congress and energy trade groups such as the American Petroleum Institute oppose the agency's rules, saying compliance will increase production costs and slow development of the resources.

Interior also will require that drilling on federal land meet guidelines for handling fracking water that returns to the surface after being injected into the rock to make sure streams aren't contaminated. Fracking opponents say the process leads to tainted water that may cause cancer among people living near the wells.

Energy Department to weigh consequences
of U.S. LNG exports

(Reuters; Feb. 16) - The Energy Department will not make a decision on future LNG exports until it has weighed the potential consequences of sending U.S. gas abroad, Energy Secretary Steven Chu said Feb. 16. Chu said there is concern that exporting the nation's surplus natural gas could lead to higher prices, but that has to be balanced against the economic benefits of increasing U.S. exports.

"We're not going to do anything until we make a determination what the impact would be," Chu told lawmakers at Senate Energy Committee hearing on the Obama administration's budget request. "Certainly we don't want to see natural gas prices rise dramatically," he said. But, "there's a flip side we have to consider that it does create American jobs, and if prices are kept moderate it does bring money to United States."

Plentiful gas supplies have transformed the U.S. energy picture, leading companies to pursue LNG export opportunities when just a few years ago industry was preparing to import LNG. The Energy Department has approved one export application from Cheniere Energy for its Sabine Pass, La., terminal, while several other export applications are on hold as the department waits for a study due out this spring that will analyze the economic effects of allowing LNG exports.

House Democrats want to block U.S. natural gas exports

(Environment and Energy Daily; Feb. 14) - The ranking House Natural Resources Committee Democrat introduced two bills Feb. 14 to block U.S. natural gas exports. Massachusetts Rep. Ed Markey's proposal would bar the Federal Energy Regulatory Commission from approving any LNG export terminals until 2025. FERC is currently reviewing two proposals to build export facilities in Louisiana and Texas. Companies must get a separate approval from the Energy Department to actually export gas.

Sen. Ron Wyden, D-Ore., who has voiced concern about potential domestic gas price spikes tied to LNG exports, told reporters he would be open to a Senate counterpart to Markey's bill. The effort will face strong opposition in the GOP-controlled House. Rep. Darrell Issa, R-Calif., chairman of the House Oversight and Government Reform Committee, has pledged to push back against any bills that would restrict exports of LNG from the United States.

Markey was joined by New Jersey Democratic Rep. Rush Holt in a second bill requiring the Interior Department to ensure that any natural gas extracted from federal lands be resold to American consumers. The measure would also ban pipelines that cross federal lands from shipping gas destined for foreign markets. Blocking LNG exports would protect consumers from price spikes and allow American businesses to maintain a competitive edge, Markey said.

India LNG importer in talks with U.S. suppliers

(Bloomberg; Feb. 15) - Petronet LNG Ltd., India's biggest importer of liquefied natural gas, is in talks with suppliers in the U.S., including Cheniere Energy, which has sold almost 90 percent of the annual export capacity from its proposed U.S. Gulf Coast liquefaction and export terminal.

"Cheniere still has some capacity left," A.K. Balyan, Petronet's managing director, said Feb. 15. Cheniere has sold all but about 200 million cubic feet a day of capacity at its proposed terminal. It has contracts with BG Group, GAIL India Ltd., Spain's Gas Natural SDG and Korea Gas Corp.

Petronet is expanding capacity and seeks new long-term supplies for its terminals on India's west coast, Balyan said. Spot cargo prices may ease this year as supplies increase, declining below $15 per million Btu, Balyan said. "Prices should fall because there's more capacity in the market and companies are holding back supplies."

Talisman will cut Marcellus exploration
until prices recover to $4

(Platts; Feb. 15) - Canada's Talisman Energy is making even heavier cuts to its rig count in Pennsylvania's Marcellus Shale natural gas play and will not reverse that trend until gas prices return to $4 per thousand cubic feet, CEO John Manzoni said Feb. 15. Along with slashing its Marcellus 2012 spending to $600 million from $1.2 billion in 2011, he said, the number of rigs at work in the play in 2012 will be cut to three from 10 in 2011 because of a North American gas price that clearly reflects an excess of supply.

Manzoni said prevailing gas prices are "unsustainable in the medium term, but we think they may last a year." Paul Smith, executive vice president of Talisman's North American operations, said the decisions are based on the external environment and not Pennsylvania's decision earlier this month to impose a shale gas drilling fee. But given low gas prices, "the fee clearly doesn't help in any way, shape, or form," Smith said. "It couldn't have come at a worse time."

The company also said it will reduce its program in the Montney Shale play of northeastern British Columbia to four rigs from 11 in the final quarter of 2011, while continuing to evaluate options for its two joint-venture programs with South Africa's Sasol. Talisman executives said the primary focus with Sasol is on establishing a gas-to-liquids project in western Canada, although LNG exports remain an option, too.

Study shows heavier methane leakage
from gas wells in Colorado

(Science News; Feb. 16) - Wells that pump natural gas from the ground in Colorado have leaked about twice as much gas into the atmosphere as previously thought, a new study finds. Natural gas, comprised mostly of methane, gives off far less carbon dioxide than coal when burned, but methane itself strongly warms the atmosphere, which means even relatively small releases can have a big impact on the climate.

Gabrielle Pétron, an atmospheric scientist at the National Oceanic and Atmospheric Administration and the University of Colorado Boulder, and her team will report the new findings, based on data gathered in 2007 and 2008, in an upcoming issue of the Journal of Geophysical Research. Pétron and her colleagues monitored air quality using a 300-meter tower southwest of the Denver-Julesburg Basin, an area that feeds more than 20,000 natural gas wells.

When winds blew in from the basin, levels of methane detected by sensors on the tower spiked. Landfills, cattle feedlots and wastewater treatment plants probably belched some of the gas into the sky. But methane from gas wells was accompanied by other components that allowed it to be "fingerprinted" in the analysis. These measurements suggested that about 4 percent of the methane in the gas wells was leaking. Previous EPA and industry studies had pegged the loss at between 1 percent and 2 percent.

Study points to surface spills, not fracking,
for water contamination

(PostMedia News; Feb. 16) - Scientists say the controversial and fast-growing practice of hydraulic fracturing to get at natural gas pockets underground has been unfairly blamed for contaminating water wells. It is more likely the cases are linked to ground spills and problems that are not unique to fracking, says Chip Groat of the University of Texas.

He led a study, released Feb. 16 in Vancouver at the annual meeting of the American Association for the Advancement of Science, which found "no direct connection" between groundwater contamination and fracking. He and his colleagues could find no link between cases of flammable tap water and the fracking process going on thousands of feet underground.

Their study, which looked at areas where fracking has taken place in Texas, Pennsylvania and New York, found that groundwater contamination often can be traced to above-ground spills or mishandling of wastewater associated with the gas extraction process. The study was funded by the Energy Institute at University of Texas.

Eni says second Mozambique find brings
total to 30 trillion cubic feet

(Bloomberg; Feb. 15) - Eni, Italy's largest oil company, reported a second "giant" natural gas discovery off Mozambique, near the Mamba South find that it made last year. The new discovery adds 7.5 trillion cubic feet of gas in place, bringing total resources in the Mamba complex to 30 trillion cubic feet, Eni said Feb. 15. That's more than three times the U.K.'s remaining gas reserves.

The find about 28 miles from the coast - in water 5,500 feet deep - reinforces East Africa's status as home to some of the biggest natural gas strikes in a decade, attracting drillers from Shell to Statoil as exploration spreads to neighboring Tanzania. Eni CEO Paolo Scaroni said in December Eni's "super-giant" find is big enough to justify an LNG plant to export fuel by tanker to Asia. The company said it plans to drill at least five additional wells this year to evaluate the potential of the Mamba complex.

"The key take-out is very encouraging flow rates, Theepan Jothilingam, an analyst at Nomura Holdings, wrote in an e-mailed report. Eni reported its exploration well flowed at a rate of 35 million cubic feet a day. Eni holds 70 percent of Mozambique's offshore area where the discoveries were made. Korea Gas Corp. holds 10 percent. In a neighboring area, a group led by Anadarko Petroleum said it has discovered fields that may yield as much as 30 trillion cubic feet of recoverable gas.

Qatar LNG tanker makes first voyage to Japan

(Bloomberg; Feb. 15) - A liquefied natural gas tanker that usually shuttles between Qatar and the U.K. made its first trip to Japan, where the fuel costs almost twice as much, according to data compiled by Bloomberg.

The Zarga, owned by Qatar Gas Transport, arrived in Nagoya, Japan, on Feb. 9, its first voyage to the Asia nation since the ship was built in 2010, according to AISLive Ltd. ship-tracking data compiled by Bloomberg. In the past year, the vessel has sailed six times to the U.K.'s Milford Haven terminal and once to China. The vessel is under long-term charter to Qatar Liquefied Gas Co., a venture between state-controlled Qatar Petroleum and international oil companies.

One million Btu of Qatari LNG cost $17.12 in Japan, compared with $8.87 in the U.K., according to January data from New York-based shipbroker Poten & Partners. 

Japan's largest refiner to buy LNG from Shell

(Bloomberg; Feb. 16) - JX Nippon Oil & Energy Corp., Japan's biggest refiner, agreed to buy about 165 billion cubic feet of liquefied natural gas over 17 years from Shell, according to a statement. Shell Eastern Trading Ltd. will supply three cargoes a year starting in 2015, JX Nippon said in a statement on its website Feb. 16.

Japanese buyers are seeking LNG from international companies in addition to purchases from countries such as Qatar or Indonesia to ensure security and diversity of supply. Chubu Electric Power Co., the third-largest utility in Japan, last week agreed to buy almost 400 billion cubic feet of gas from BP over 16 years.

TransCanada sets new 2015 in-service date for Keystone XL

(Calgary Herald; Feb. 14) - TransCanada has set back the launch of the Keystone XL bitumen pipeline until early 2015, saying it expects to receive approval for the controversial line by early 2013. The Calgary-based pipeline company said "simple math" dictated the extended timeline as it would take two years to complete the 820,000 barrel per day Alberta-to-Texas line after being given the green light.

TransCanada originally slated a startup of 2013 for the pipeline, proposed to ship Alberta oilsands production to refiners on the U.S. Gulf Coast. But despite the numerous setbacks on the massive project, including rerouting to avoid an aquifer in Nebraska, the head of TransCanada said the company and shippers remain committed to the project. "I don't have any reservations that this pipeline will be completed," chief executive Russ Girling said Feb. 14.

"The U.S. needs to import some 10 million barrels per day of oil, every day, and now gets it from places like Venezuela, Saudi Arabia and Nigeria. We're just going to replace that oil with Canadian oil," Girling said. The company said it would be reapplying for a presidential permit in the near future. TransCanada also increased the cost of the line to $7.8 billion from $7 billion to include costs of a lateral line to Houston and links to the Bakken oilfield in North Dakota and to the storage hub Cushing, Okla.

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