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19 September 2011


  Unconventional                                                                                                                                                      
                                                                                                                                                                                 Week 37

                                                                                                                                                                            Issue 74
                                                                                                                                                                          News
                                  OIL & GAS                                                                                                                       
                                                                                                                                                                    Analysis
                                                                                                                                                                   Intelligence

                                  MONITOR                                                                                                                  
                                                                                                                                                            NewsBase
                                                                                                                                                                             Published by



COMMENTARY                                            2         NEWS THIS WEEK…

 Exiting Stelmach encouraged by
   progress
 seeks to explore French shale
 Total
  despite ban                                         3
                                                       2
                                                                    One man’s legacy
POLICY                                                5             In office as Alberta’s premier since late-2006, Ed

 CAPP issues fracking guidelines                      5             Stelmach has overseen major development of the
SHALE GAS                                             6
                                                                    province’s oil sands. Prior to his departure on

 ConocoPhillips launches campaign to
   improve opinion of fracking                         6
                                                                    October 1, UOGM speaks to Stelmach about about

 German authorities claim fracking is                               progress, his legacy and the future for Alberta.
   more dangerous than CCS                             6
 partners with UT for
 Shell                                                               province is home to the world’s second
                                                                     The
  unconventional gas research                         7
                                                                          largest oil reserves – more than 173 billion barrels
SHALE OIL                                             8
                                                                          of crude.                                      (Page 2)
 increases estimate of US shale oil
 DoE
  potential                                           8
OIL SANDS                                             8
                                                                    
                                                                     Stelmach spoke optimistically about the Keystone
 Canada to focus on brownfield
 Shell
                                                                          XL project, which will add 591,000 barrels per day
   expansions                                          8                  of capacity to the Keystone pipeline.         (Page 2)

 Connacher hoping to complete
   financing to add to Algar output                    9             said that transporting LNG to Asia would
                                                                     He

 CNRL preparing for second train at                                       become important for Alberta in the future.                                                                   (Page 2)
  Horizon plant                                      9


                                                                    Totally behind shale search
HEAVY OIL                                           10

 Madagascar Oil upgrades heavy oil
  estimates for Tsimiroro block                      10
OIL SHALE                                           10
                                                                    A moratorium on fracking has put the brakes on

 Kivioli plant running out of oil shale,                            France’s bid to produce unconventional resources.
  says CEO                                           10             However, Total has announced it will explore for
COAL TO LIQUIDS                                     11
 bets on India CTL
 KBR                                                 11
                                                                    shale gas in the south of the country.
GAS TO LIQUIDS                                      11
                                                                    
                                                                     Total has stressed it will not use the banned

 Sasol plans GTL debut in US                         11
NEWS IN BRIEF                                       12
                                                                          fracking technique while prospecting in the area.(Page 3)
STATISTICS                                          18
                                                                    
                                                                     Torreador holds licences for shale oil in the Paris
TENDERS & CONTRACTS                                 19
                                                                          Basin, and has said it will not use fracking.                                                                 (Page 4)
CONFERENCES                                         23


For analysis and commentary on these and other stories, plus the latest unconventional developments, see inside…
                                                                            Copyright © 2011 NewsBase Ltd.
                                                                                www.newsbase.com                                                         Edited by Ryan Stevenson
   All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All
         reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents
Unconventional OGM                                                       19 September 2011, Week 37                                                                                       page 2


                                                                        COMMENTARY

Exiting Stelmach encouraged
by progress
UOGM speaks to outgoing Albertan premier Ed Stelmach about progress, his legacy and
the province’s future
By Ashok Dutta
 premier has been in office since late-2006, and his rule will come to an end next month
 The

 Alberta is home to the world’s second largest oil reserves – more than 173 billion barrels of crude

 Stelmach said he was confident that the US would give approval to the Keystone XL pipeline project

With Alberta being home to more than                              involves adding 591,000 barrels per day                              appointment of Carlos Pascual as the
173 billion barrels of crude oil reserves,                        of capacity to bring the Keystone                                    special envoy and co-ordinator of
the second largest worldwide after Saudi                          pipeline system capacity to around 1.1                               international energy affairs by Hillary
Arabia, the job of its premier is probably                        million bpd. The project would originate                             Clinton [US Secretary of State], we feel
one of the most challenging in the four                           in Hardisty, Alberta, and ultimately bring                           more hopeful. He is acting in between
western Canadian provinces.                                       crude supply to the Texas Gulf Coast                                 the US regulators and the province to get
   Yet, Ed Stelmach – who will probably                           region.                                                              things sorted out,” Stelmach said.
be known for his unpopular decision in                              “With so many years in public life and                               “We have not heard anything in the
late 2007 to review the existing royalty                          having seen several decision-making                                  past few days, but we have had
regime that led to the flight of large                            processes, I am confident we will receive                            discussions recently with the developer
volumes of capital to the neighbouring                            approval,” he said.                                                  [TransCanada] and our ambassador in the
provinces of British Columbia (BC) and                              His statement comes in the wake of the                             US [Gary Doer] and the feedback we are
Saskatchewan – will be leaving behind                             recent environmental impact statement                                hearing is that Americans want this
an imprint.                                                       from the US government and the holding                               pipeline,” he said.
   He was elected the 13th premier of the                         of several public meetings.
province in December 2006 by the                                    “It may still be a bit stretched before                            Backup plan
Progressive Conservative party and will                           we get the final go-ahead, but in the past                           On what would be Alberta’s lifeline in
leave his post on October 1.                                      few months Washington has given                                      case approval were rejected, Stelmach
   “From a legacy view point, it will be                          positive responses and their body                                    said: “Asia is our big market and we
for Albertans to decide where I went                              language is encouraging. With the                                    need to get there by adding new capacity
right and wrong,” Premier Stelmach told                                                                                                to pipelines that would exit through the
UOGM in an exit interview. “From an                                                                                                    Port of Vancouver. At the end of the day,
industry perspective, we had to look at                                                                                                whether Keystone gets through or not,
the lack of infrastructure investment at                                                                                               we will still need a pipeline to the west
Fort McMurray [the main oil sands                                                                                                      coast. The Asian market will also be
production centre], which was emerging                                                                                                 important for the province from an
as the bread basket not just for Canada                                                                                                [liquefied natural gas (LNG)]
but also North America. As a provincial                                                                                                perspective,” he said.
government, we have invested C$2.2                                                                                                        According to Stelmach, hydraulic
billion [US$2.24 billion] and there is still                                                                                           fracturing (fracking) for shale gas will
lots to do,” he said.                                                                                                                  bring trillions of cubic feet to the market
                                                                                                                                       that will need to find export destinations.
Approval                                                                                                                                  “Having returned from India, I see a
The verdict will be forthcoming, but in                                                                                                potential to ship LNG there from the
the meantime he is more confident now                                                                                                  West coast. It may still take a while
than before of receiving the approval of                                                                                               before natural gas prices in North
the US government for the Keystone XL                                                                                                  America improve, but Asian prices are
pipeline.                                                                                                                              double compared to the US and we need
  The 1,700-mile (2,736-km) XL project                                                                                                 to get there,” he said.


                                                                            Copyright © 2011 NewsBase Ltd.
                                                                                www.newsbase.com                                                         Edited by Ryan Stevenson
   All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All
         reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents
Unconventional OGM                                                       19 September 2011, Week 37                                                                                       page 3


                                                                        COMMENTARY
  Alberta has also placed its might                               pipelines, we are confident there will be                              Commenting on the energy policy his
behind the Northern Gateway pipeline                              more investments. There are a few                                    successor should pursue, he replied: “We
that will transport 525,000 bpd of                                proposals and they are in their infancy,                             will need to continue along the same
bitumen from Hardisty to Kitimat in BC                            but given the social unrest in the Middle                            path, keeping a hawk’s eye on [the]
for export to the Asian market and import                         East and a slow-down in the US                                       environment and guarding our interests
193,000 bpd of condensate through a                               economy, [prospective] investors are                                 zealously. One issue that I have not been
parallel pipeline to dilute bitumen for                           doing their due diligence now before                                 able to figure out as yet is whether the
pipeline transportation, Stelmach said.                           taking a final decision,” Stelmach said.                             province should put the brakes on the
  “At the national level, I have written to                          In March, the provincial government                               billions of dollars of planned investments
the Prime Minister [Stephen Harper]                               signed an agreement with North West                                  into the oil sands sector by oil
requesting for streamlining of the various                        Upgrading and Canadian Natural                                       companies.”
regulators and avoiding duplications. We                          Resources Ltd. (CNRL) to supply 37,500                                 Around C$51 billion (US$52 billion) is
are also working with the developer                               bpd of bitumen under its bitumen royalty                             earmarked for investment over the
[Enbridge], the government of BC and                              in-kind (BRIK) programme for a 150,000                               coming five years in Alberta by both
the First Nations to clear any roadblocks.                        bpd diesel refinery to be built in central                           Canadian and international majors.
We need to work jointly and there has to                          Alberta. The refinery is due to start                                  “Some in the province have advocated
be clarity and certainty,” he said.                               production at 50,000 bpd by 2014 under                               we adopt a staggered approach to oil
                                                                  its first phase of development.                                      sands development to ensure the
Upgrading                                                            BRIK is the feedstock bitumen that the                            construction market is not overheated.
Meanwhile, the Department of Energy is                            provincial government makes available                                But if oil companies come with proposals
in “initial” discussions with oil                                 for investors in refineries and upgraders                            to invest billions of dollars, what can you
companies to invest in new bitumen                                in Alberta. By 2020, the volume of                                   say? Investment is liquid and will go
upgraders in the province.                                        bitumen to be available under BRIK will                              away somewhere else. It is a rare
  “Margins are improving and although                             be 400,000 bpd, compared with 75,000                                 opportunity ... how can we delay it?” he
some bitumen will be exported via                                 bpd now.                                                             concluded.




Total seeks to explore
French shale despite ban
A moratorium on fracking has put the breaks on France’s bid to produce unconventional
resources, however, Total has announced it will explore for shale gas in the south of the
country
By Kevin Godier
 shale gas drilling has yet taken place in France, and a ban was introduced this year
 No

 Total has stressed it would not use the banned fracking technique while prospecting in the area

 Torreador holds licences for shale oil in the Paris Basin, and also has said it will not use fracking

Seemingly undaunted by the controversy                              The company’s stance is that it has                                   The move by Total was revealed via an
that has erupted in France over the use of                        purchased exploration rights for five                                application that was lodged for a project
hydraulic fracturing (fracking), French                           years on the site and therefore wants                                to restart drilling on its Montelimar site,
energy giant Total is still planning to                           more information on the reserves that sit                            a zone covering 4,327 square km that
explore the country southern region for                           below the ground. The energy ministry                                follows the Rhone from the north of
prospective shale gas deposits.                                   has said that it will announce its decision                          Montelimar to Montpellier. Total
  Total stressed it would not use the                             on the plans on October 13, after taking                             believes the block could hold as much as
banned fracking technique while                                   advice from officials. Left-wing senators                            2.38 trillion cubic metres of shale gas,
prospecting in an area for which it won a                         have already protested about the plans,                              although it has stressed that this is not a
5-year exploration licence in 2010,                               questioning the government’s silence on                              recoverable reserves figure.
Reuters reported on September 12.                                 the project.


                                                                            Copyright © 2011 NewsBase Ltd.
                                                                                www.newsbase.com                                                         Edited by Ryan Stevenson
   All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All
         reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents
Unconventional OGM                                                       19 September 2011, Week 37                                                                                       page 4


                                                                        COMMENTARY
Targeting shale gas                                                                                                                           “After that we have one month to
France is a natural target for the                                                                                                         decide the fate of the permits,” she
Paris-headquartered oil super-                                                                                                             was quoted by Bloomberg. “If a
major, which has turned to a                                                                                                               company says it’s planning to use
number of countries across the                                                                                                             hydraulic fracturing, their permit will
world in an emerging strategy to                                                                                                           be cancelled. It’s the law,” she added.
tap unconventional energy                                                                                                                  France’s fracking ban took effect in
resources, especially shale gas, to                                                                                                        July and could lead to fines and
compensate for its depleting                                                                                                               imprisonment if a company is found
conventional reserves.                                                                                                                     to be using the technique.
  The prospects in the pipeline for                                                                                                           France opened its doors to shale
Total include a proposed                                                                                                                   gas exploration in March 2010, when
partnership with ExxonMobil to                                                                                                             former Environment Minister Jean-
explore Poland’s enormous shale                                   that fracking demands millions of litres                             Louis Borloo granted three permits for
reserves, two Danish exploration permits                          of scarce water and that the low-pressure                            periods between three and five years. The
and six licences in Argentina.                                    gas requires drilling sites that would have                          move – which was seen to have been
  But it has proved impossible to ignore                          to be set very close to each other and                               heavily influenced by the positive
the lure of France’s sizeable shale gas                           nearby housing, scarring the landscape.                              publicity in the US about its so-called
reserves – estimated to comprise some of                          French Environment Minister Nathalie                                 “shale gas revolution” – involved the
the biggest natural gas reserves in Europe                        Kosciusko-Morizet spoke publicly of the                              extension of permits for shale oil and gas
– and its economic need for domestically                          “devastated countryside” and “sullied                                exploration to companies such as Total,
produced gas. Having produced around                              water tables” in US regions where                                    Vermillion Energy, Toreador Resources
33% of its gas consumption in the 1970s,                          fracking had occurred.                                               and Schuepbach Energy.
France was importing 98% of the gas it                               Opponents had forecast during the run-                              Kosciusko-Morizet has already warned
consumed in 2009, at an enormous cost                             up to the parliamentary vote on the                                  lawmakers that companies holding the
to the French treasury and French                                 prospective ban in the second quarter that                           permits and planning shale probes may
consumers.                                                        exploration companies would attempt to                               resort to legal challenges to help rescind
  No shale gas drilling has yet taken                             continue exploration without specifying                              the parliamentary ban.
place in France, but hopes that shale gas                         the extraction method. Their fear is that
could drastically cut back the import bill                        if vast reserves of gas were found then                              Toreador’s persistence
were dashed this summer, when the                                 the companies would put pressure on the                              Paris-based Toreador has said it will
French Parliament imposed an outright                             government to find a way to go back on                               continue to work to develop the shale oil
moratorium on fracking, the first country                         its fracking standpoint.                                             resources of the Paris Basin, in which it
to do so, in the wake of months of                                   The bill – drafted by the country’s                               holds the most acreage of any explorer.
protests by environmental activists                               ruling UMP party – did not ban shale gas                                The company’s CEO, Craig
following a temporary freeze on shale                             exploration itself, only fracking. An                                McKenzie, said in early July that the
gas exploration in February.                                      earlier version of the bill, which Socialist                         company’s initial evaluation activity at
  Total did not give any details of how it                        factions supported, would have banned                                its Paris Basin licences would not
would recover any gas found, but said                             any kind of development of the deposits.                             involve fracking. “We will not conduct
that any exploration push would not                                                                                                    hydraulic fracturing operations within
include fracking, which is the only                               October deadline                                                     any of our permit areas. We will make
known method to extract hydrocarbons                              The timetable for whether the                                        full disclosures and representations to the
from shale rock formations.                                       government will need to revoke existing                              French regulatory authorities as may be
                                                                  exploration licences was specified on                                required.”
Fracking furore                                                   September 1 by Kosciusko-Morizet.                                       Toreador subsequently stated on
Green groups and politicians have led                                Oil and gas companies that were                                   August 10 that its Liassic drilling
active protests across France, contending                         planning to explore for shale                                        programme in the Paris Basin
that the method could cause major                                 hydrocarbons under previously granted                                “comprising six wells (without the use of
environmental damage after having been                            licences had until September 13 to                                   hydraulic fracturing) is expected to
shown to be a water pollutant.                                    inform the government whether they                                   commence by year-end, pending final
  Apart from fears over the pollution of                          were planning to use fracking, the                                   review of permits by the French
aquifers, the anti-gas lobby has argued                           minister said.                                                       Administration.”




                                                                            Copyright © 2011 NewsBase Ltd.
                                                                                www.newsbase.com                                                         Edited by Ryan Stevenson
   All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All
         reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents
Unconventional OGM                                                       19 September 2011, Week 37                                                                                       page 5


                                                                        COMMENTARY
   The small-cap E&P firm opted to                                                                                                     watched with intensity by the shale
focus on its French portfolio in 2009,                                                                                                 exploration industry elsewhere in
offloading its interests in other                                                                                                      Europe. A UK House of Commons select
countries and staking its future on the                                                                                                committee has called for an investigation
success of shale oil drilling near Paris,                                                                                              into the link between shale gas tests in
where it says an estimated 65 billion                                                                                                  northwest England and two minor
barrels of oil may be held within shale.                                                                                               earthquakes which occurred in the area
   It received an infusion of support in                                                                                               shortly after the start of operations.
May 2010, when US independent Hess                                                                                                        As a result, the Dutch Ministry of
farmed into the acreage, bringing                                                                                                      Economics, Agriculture and Innovation
US$120 million of financial firepower                                                                                                  has said there can be no green light for
to the venture. The firms were                                                                                                         shale gas exploration in the Netherlands
intending to conduct exploration                                                                                                       until results from the UK government
drilling of oil shale in the town of Doue                           In the light of the fracking ban,                                  investigation can be assessed. Certain
(Seine-et-Marne) under a data capture-                            Toreador’s medium-term strategy                                      parts of Germany have also banned
oriented first phase of a two-phase work                          remains to be divulged. Some analysts                                fracking, which has only begun in earnest
programme.                                                        have suggested that the company could                                in Europe in Poland.
   McKenzie has stressed that the                                 participate in scientific research into                                 French developments will occur
geology of the Paris Basin – in which                             shale gas exploration that France’s Prime                            against a background where the country’s
there is around 2,000 metres of                                   Minister Francois Fillon has favoured, so                            strong nuclear energy industry gives it
separation between the shale and the                              as not to rule out forms of the technology                           far less incentive to explore new
freshwater strata – will avoid                                    that would not harm the environment.                                 approaches in comparison with a country
contamination problems experienced in                                                                                                  such as Poland, where shale gas has
the US’ Marcellus shale, which is close                           Intense scrutiny                                                     become a national priority to win
to freshwater aquifers.                                           Developments in France will now be                                   independence from Russian imports.


                                                                                     POLICY

CAPP issues fracking guidelines
A new set of guidelines issued on                                 in British Columbia to produce feedstock                             a statement. “These principles articulate
September 8 by the Canadian                                       for a grassroots liquefied natural gas                               our water management objectives and
Association of Petroleum Producers                                (LNG) plant on the Canadian west coast.                              water protection practices, as well as our
(CAPP) for hydraulic fracturing of shale                             The salient features of the new                                   focus on improving our water
gas developments in the country is                                guidelines include: safeguarding the                                 performance over time.”
probably going to be more stringent than                          quality and quantity of regional surface                                CAPP’s guiding principles for
those in the US, a Progress Energy                                and groundwater resources through                                    hydraulic fracturing apply in all
Resources marketing analyst, Kurtis                               sound wellbore construction practices;                               jurisdictions in which the upstream
Barrett, said.                                                    sourcing fresh-water alternatives and                                industry operates and have been issued
   “In the US, there is no need to disclose                       recycling water for re-use as much as is                             with the understanding that some
fracking fluids,” he said. “We will have                          practical; measuring and disclosing water                            provinces are working on regulations.
to take a closer look at the new CAPP                             to reduce environmental impact;                                      The expectation is for the new guidelines
guidelines, as this issue is already being                        supporting the development of fracturing                             to complement future regulatory needs,
discussed between regulators and                                  fluid additives with the fewest                                      the CAPP announcement said.
producers. Most companies have their                              environmental risks, and supporting the                                 “The Canadian natural gas industry
own mix of fracking fluids and that is                            disclosure of fracturing fluid additives.                            supports all regulations that govern
proprietary. Public disclosure of that                               “With the increase in natural gas                                 hydraulic fracturing, water use and water
would be [tantamount to] losing                                   production from unconventional sources                               protection, as we recognise water is a
competitiveness in the market place.”                             such as shale, Canadians have told us                                valuable resource,” an executive vice-
   Progress Energy, in a joint venture                            they want more information as to how                                 president at Encana, Michael McAllister,
with Petronas, is aiming to develop shale                         industry uses and protects water,”                                   said in a statement.
gas deposits in the North Montney basin                           CAPP’s president, Dave Collyer, said in

                                                                            Copyright © 2011 NewsBase Ltd.
                                                                                www.newsbase.com                                                         Edited by Ryan Stevenson
   All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All
         reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents
Unconventional OGM                                                       19 September 2011, Week 37                                                                                       page 6


                                                                                     POLICY
  “Strong regulations exist in regions of                         resources are being developed                                           “The composition of fluids is vital, as
active unconventional gas development.                            responsibly.”                                                        there are several chemical cocktails that
Similar regulations are being developed                             A Weatherford sales manager, Randal                                are not environment-friendly. Depending
in regions with an emerging                                       Biedermann, while welcoming the                                      on the formations, there are various toxic
unconventional natural gas sector to                              decision to disclose fracturing fluids,                              fluids that could potentially affect a
ensure protection of water resources and                          expressed concern about the                                          water-bearing area.”
provide the public confidence that these                          environmental impact.


                                                                             SHALE GAS

ConocoPhillips launches campaign
to improve opinion of fracking
ConocoPhillips has launched a public                              equipment or well failures that could                                There have been some problems. But
relations campaign to address the                                 potentially contaminate water supplies,”                             they are rare. And they were caused not
negative public perception of hydraulic                           it added.                                                            by fracturing, but faulty drilling and well
fracturing (fracking), and the benefits of                           Fracking and horizontal drilling have                             completion work, or improper handling
natural gas.                                                      been a “game-changer” and natural gas is                             of fluids on the surface. Fracturing is not
   The oil and gas super-major has kicked                         the fuel of the future, Mulva told the                               inherently risky to groundwater. It occurs
off the campaign, which includes a                                Detroit Economic Club recently. “Since                               far below drinking-water aquifers.”
website and speeches by CEO Jim                                   shale gas has breathed new life into the                                Mulva concluded: “to address the
Mulva, to reach both the public and                               natural gas industry, it’s unfortunate to                            public’s concerns, our industry must
policymakers. ConocoPhillips is one of                            see a serious threat emerge to further                               follow good practices. These exist, and
the US’ largest natural gas producers.                            development: that is the perception that                             we must adopt them as standard
   The website specifically touts fracking                        hydraulic fracturing pollutes                                        procedure. There is a role for government
as “safe extraction” and natural gas as                           groundwater.”                                                        oversight in this. Also, we must de-
clean, as a job-creator and as ‘made in                              He added: “The record is in our favour,                           mystify fracturing. ConocoPhillips
the US.’                                                          those million wells safely fractured since                           supports disclosure of the non-
   “At ConocoPhillips, we believe the                             the 1940s. The [Environmental                                        proprietary substances contained in
risk associated with well operations,                             Protection Agency (EPA)] studied the                                 fracturing fluids.”
including those involving horizontal                              environmental record of fracturing in the                               In response, Susan Harley, Michigan
drilling and hydraulic fracturing, is very                        past. It concluded that no additional                                policy director for Clean Water Action, a
low, yet it is important for us to manage                         federal regulation was required. A new                               national watchdog group, told the Detroit
these risks effectively,” it said. “Proper                        study is now under way. We expect the                                Free Press: “Companies are doing deep
site selection, well design, construction                         results [in 2012].”                                                  fracking in Michigan, putting our natural
and operating procedures are critical to                             He continued, “That’s not to say that                             resources at risk, including 20% of the
protect against spills and surface                                there is no reason for public concern.                               world’s useable fresh water.”




German authorities claim fracking
is more dangerous than CCS
Hydraulic fracturing (fracking) is more                           Federal Environmental Office (UBA),                                  water table cannot be ruled out. It’s a
dangerous than carbon capture and                                 told German press agency DPA: “We                                    very extensive use of chemicals that’s
storage (CCS), the head of Germany’s                              know that some of the substances [used                               required to make the gas in deep rock
environmental authority has claimed.                              in hydraulic fracturing] can cause cancer.                           layers accessible.”
  Jochen Flasbarth, president of the                              In particular, the endangering of the


                                                                            Copyright © 2011 NewsBase Ltd.
                                                                                www.newsbase.com                                                         Edited by Ryan Stevenson
   All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All
         reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents
Unconventional OGM                                                       19 September 2011, Week 37                                                                                       page 7


                                                                             SHALE GAS
  He added: “Until now, fracking wasn’t                           public in detail which chemical                                      opposed local campaign groups.
especially in focus because its                                   compounds and which processes will be                                Opponents of fracking claim that some
application was not immediately                                   used,” he added.                                                     companies conducting tests in Germany
imminent. As the UBA, we assume that                                 Flasbarth backed federal environment                              have used techniques which are banned
the dangers caused by chemical use alone                          minister Norbert Roettgen’s decision to                              in the US or no longer used there.
during fracking are greater than in the                           commission a study of the risks                                         Politicians in the two states believed to
case of CCS.”                                                     associated with fracking. He added that                              have Germany’s largest shale gas
  The UBA implements various                                      he considered it necessary for                                       reserves – Lower Saxony and North
environmental legislation in Germany,                             environmental assessments of projects                                Rhine-Westphalia (NRW) – have turned
and advises the federal government on                             using fracking to be enshrined in law.                               against fracking on environmental
the environmental impact of policies.                                In recent months, fracking has come                               grounds, with some calling for a blanket
  “As the national environmental                                  under intensifying public pressure in                                ban. The NRW state government, a
authority, we consider a transparent                              Germany as public knowledge of the                                   coalition between the social-democratic
application process essential – with                              process increases.                                                   SPD and The Greens, has been vocal in
participation from the water authorities                             Companies wishing to carry out                                    its opposition, while the more business-
and the public,” Flasbarth continued. “In                         fracking or CCS in Germany face                                      oriented government in Lower Saxony
this case, it must especially be made                             opposition from a patchwork of fiercely                              has tended to be more supportive.




Shell partners with UT for
unconventional gas research
Energy giant Shell has signed a five-year                         research and develop innovative                                      in recent years, leading to a drastic drop
research deal worth US$7.5 million with                           technology continually that will help to                             in the cost of natural gas at a time of
the University of Texas (UT) to study                             meet global demands by bringing more                                 soaring oil prices. Shale gas, tight gas
improved methods of unconventional oil                            energy resources to market,” said Shell’s                            and CBM accounted for 50% of US
and gas recovery.                                                 president, Marvin Odum, in a statement.                              natural gas production in 2009, a figure
  The programme will be overseen by                                 “We chose to collaborate with the UT                               that the US Energy Information
the university’s Bureau of Economic                               because it brings together an                                        Administration (EIA) has said could rise
Geology (BEG), and will focus on                                  extraordinary amount of talent from both                             to 75% by 2035.
increasing understanding of the                                   organisations that will push the                                       Despite this, environmental concerns
subsurface characteristics of shale, coal-                        technological envelope in the field of                               over the extraction methods used – in
bed methane (CBM) and other tight,                                developing even the most challenging                                 particular hydraulic fracturing (fracking)
complex formations. This will hopefully                           hydrocarbons safely and responsibly,” he                             – have led to moratoria on shale drilling
lead to new techniques to extract the                             added.                                                               in countries such France, Germany and
resources in a more efficient and                                   The unconventional oil and gas sector                              the UK.
environmentally sensitive way, said Scott                         has transformed the US energy industry                                 “The pursuit of unconventional energy
Tinker, director of the BEG.                                                                                                           resources is a complex, integrated
  The majority of the funding will be                                                                                                  problem that requires uniting the
split between the university’s
                                                                    “This agreement marks an                                           scientific and engineering efforts below
geosciences and petroleum geoscience                                  important milestone in                                           ground with above-ground efforts in
engineering departments, but experts in                                                                                                water, regulation and public awareness,”
economics, environmental policy,
                                                                      Shell’s commitment to                                            said William Powers, president of UT.
business and energy law are all expected                                research and develop                                             “As a major research university and
to participate in the research.                                                                                                        leader in energy, we’ve got the integrated
  “This agreement marks an important
                                                                       innovative technology                                           expertise to help solve it,” he added.
milestone in Shell’s commitment to                                          continually”




                                                                            Copyright © 2011 NewsBase Ltd.
                                                                                www.newsbase.com                                                         Edited by Ryan Stevenson
   All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All
         reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents
Unconventional OGM                                                       19 September 2011, Week 37                                                                                       page 8


                                                                               SHALE OIL

DoE increases estimate
of US shale oil potential
An advisory panel to the US Department                            assessment of North American oil and                                 “the conventional wisdom that North
of Energy (DoE) has said the country’s                            gas resources. The National Petroleum                                American oil production is on an
shale oil production has the potential to                         Council is led by Anadarko Petroleum’s                               inevitable decline.”
top 2-3 million barrels per day by 2035.                          CEO, Jim Hackett, and also includes the                                He continued: “The potential is very
However, if hydraulic fracturing                                  CEO of Shell’s North American unit,                                  significant, and if choices are made to
regulations stand in the way, production                          Marvin Odum, and the CEO of                                          develop those resources, that decline that
could be restricted to just 600,000 bpd.                          Chesapeake Energy, Aubrey McClendon.                                 we’ve seen over the last 10-15 years
  According to state regulators and                                 It said the growth in supplies could be                            could actually turn up, and turn into
industry estimates, shale oil output in                           equivalent to about a 50% boost in                                   growth.”
July accounted for about 580,000 bpd of                           current domestic output. But even an                                   The report noted that the public mood
production in North Dakota and Texas                              increase to 2-3 million bpd of oil would                             had lost confidence since BP’s oil spill in
combined. The report, compiled by the                             not be enough to replace imports, as the                             the Gulf of Mexico in April 2010. It
industry-led National Petroleum Council                           US consumes about 20 million bpd of oil                              recommended that a new network of
for US Secretary of Energy Steven Chu,                            and imports about half this amount.                                  regional councils to promote best
urged policies to aid expansion.                                    A Shell official, Andrew Slaughter,                                practises for the oil and gas industry be
  It was drafted in response to a request                         who led the council’s study of resources,                            set up to work with communities on their
made by Chu in 2009 for a fresh                                   told Reuters that the report contradicted                            concerns.


                                                                               OIL SANDS

Shell Canada to focus on
brownfield expansions
Shell Canada will focus more on                                   Jackpine project. For our target of                                  Conservation Board to get regulatory
brownfield expansions – rather than                               770,000 bpd, we will need to take slow                               approval to expand the Jackpine and
investing in new facilities at this time –                        steps to ensure [capital] costs of projects                          Pierre River mines.
as part of efforts to nearly triple its                           remain in check and that we also reduce                                “The Pierre River expansion will help
bitumen production in northern Alberta                            our environmental footprint and improve                              us learn even better what we did in our
to 770,000 barrels per day, a senior                              both water and land usage.”                                          earlier oil sands projects. In Canada our
company official said at the recently                                The Muskeg River and Jackpine                                     aim will be to produce more
concluded annual oil sands trade show                             facilities are part of Shell Canada’s                                bitumen/synthetic crude oil to replace the
and conference in Fort McMurray.                                  Athabasca Oil Sands Project (AOSP).                                  conventional sources of crude oil and
   Christian Houle, general manager of                            Shell Canada is the 60% owner and                                    also supply to our refineries in the US,”
Shell Albian Sands project, told UOGM:                            operator of AOSP, with Chevron Canada                                Houle said.
“Earlier, we were thinking of a cookie-                           and Marathon Oil Canada each holding                                   Shell Canada is also pursuing a mega
cutter method of expanding our                                    20% interest in the joint venture.                                   carbon capture and storage (CCS) project
production, but now that will be changed                             AOSP is an integrated oil sands project                           – Quest – in Alberta.
and we are talking first of                                       that consists of bitumen-mining facilities                             In late June, the provincial and federal
debottlenecking existing plants.”                                 in the Fort McMurray area and a 255,000                              governments signed final agreements
   He added: “We are currently producing                          bpd upgrader at Scotford near Edmonton,                              with Shell Energy that allotted C$865
a total of 255,000 bpd, of which 155,000                          around 450 km south.                                                 million (US$879 million) for the
bpd is from the Muskeg River and the                                 At present, Shell Canada is working                               proposed facility.
remaining 100,000 bpd is from the                                 with Alberta’s Energy Resources


                                                                            Copyright © 2011 NewsBase Ltd.
                                                                                www.newsbase.com                                                         Edited by Ryan Stevenson
   All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All
         reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents
Unconventional OGM                                                       19 September 2011, Week 37                                                                                       page 9


                                                                               OIL SANDS
   Estimated to cost C$1 billion (US$1.02                         diameter pipeline to injection wells                                 us to make that happen. A [final
billion), the CCS project will have three                         located north of Thorhild county, and                                investment decision (FID)] on the
components: capture of 1.2 million                                permanent storage of CO2 in a 2.1-km                                 proposed venture will be taken in 2012,
tonnes per year of carbon dioxide (CO2)                           subsurface geological structure.                                     with onsite construction due to be
from the Scotford bitumen upgrader; its                             “CCS is until now not an economical                                completed in 2015,” Houle said.
transportation through a 90-km, 12-inch-                          project globally, but technology will help




Connacher hoping to complete
financing to add to Algar output
Calgary-based Connacher Oil and Gas is                            a third party to develop the asset. Also, in                         Amec-BDR is carrying out detailed
aiming to complete a financing deal and                           May 2010 we filed an application with                                design work and will also help us in
also receive regulatory approval by the                           Alberta’s [Energy Resources                                          firming up project costs. We aim to start
end of 2011 to add 24,000 barrels per day                         Conservation Board (ERCB)], and hope                                 production from the expanded facilities
of additional production to its Algar                             to receive final regulatory approval by                              in late 2013/early 2014,” Sametz said.
bitumen project in northern Alberta.                              the year-end. Our aim is to conclude both                               At present, Connacher is the owner and
   “Initial estimate of the capital cost is                       deals by the year end and move ahead                                 operator of the Algar project – also
C$800 million-1 billion [US$812                                   with procurement of long-lead items and                              known as Great Divide Pod 1 and Pod 2
million-1.02 billion], but we are still                           construction work,” he added.                                        – of nameplate capacity 20,000 bpd.
fine-tuning that aspect,” company                                    The Algar facility – located on the                                  “The facilities were constructed in two
president and CEO Peter Sametz, told                              Great Divide acreage – has a nameplate                               phases, each of equal capacity. Output is
UOGM on the sidelines of the annual oil                           production capacity of 20,000 bpd, with                              now standing at 14,000 bpd and is being
sands trade show and conference in Fort                           the total bitumen resources being 500                                ramped up. Capital expenditure required
McMurray.                                                         million barrels, he said. The plant utilises                         to construct facilities for Pods 1 and 2
   “Rothschild [of the US] is acting as our                       the steam-assisted gravity drainage                                  was C$270 million (US$274 million) and
exclusive financial advisor and our aim                           (SAGD) technology.                                                   C$360 million (US$366 million)
would be to establish a joint venture with                           “UK/Canadian engineering firm                                     respectively,” he added.




CNRL preparing for second
train at Horizon plant
Canadian Natural Resources Ltd.                                   a bid for the work. A decision on the bids                           crude oil again from its Horizon project,
(CNRL) has invited firms to bid for work                          “will be made by October 15,” Platts                                 eight months after the plant’s operations
to expand its Horizon oil sands project in                        quoted the official as saying on the                                 were shut down by a fire.
northern Alberta. The work is expected                            sidelines of the annual Oil Sands Trade                                 Production began in the first week of
to double the project capacity to 270,000                         Show and Conference in Calgary.                                      September and has averaged around
barrels per day by adding a second train.                           Four companies were originally                                     75,000 bpd of crude oil. Full production
   A report from Platts on September 14                           prequalified to participate in the tender,                           rates of 110,000 bpd will be reached by
said that a tender issued by CNRL, seen                           the two others being Japan’s Toyo                                    mid-September, the company said. The
by the news agency, was soliciting bids                           Engineering and UK-based AMEC.                                       Horizon plant uses upgraders to process
for an estimated C$650 million (US$662                              The tender is part of a capital                                    heavy oil sands crude oil into a lighter
million) contract to build a second train                         expenditure programme announced in                                   crude oil. A coker fire at the upgrader
at the site near Fort McKay, Alberta.                             August by CNRL. This involves                                        facility on January 6 shut down
   An official from Calgary-based SNC                             spending nearly C$2 billion (US2.04                                  operations. CNRL is Canada’s second
Lavalin, one of the contractors bidding                           billion) on increasing production from                               largest oil and natural gas company, with
for part of the work, confirmed that                              Horizon in 2012. The news came one day                               operations in the west of the country, the
Snamprogetti of Italy had also submitted                          after CNRL said it had begun producing                               North Sea and offshore West Africa.


                                                                            Copyright © 2011 NewsBase Ltd.
                                                                                www.newsbase.com                                                         Edited by Ryan Stevenson
   All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All
         reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents
Unconventional OGM                                                       19 September 2011, Week 37                                                                                     page 10


                                                                               HEAVY OIL

Madagascar Oil upgrades heavy
oil estimates for Tsimiroro block
Madagascar Oil (MOIL) has announced a                             Block 3104 [Tsimiroro] and the                                       these significant projects. The approval
significant upgrade of its oil-in-place                           government’s agreement to revise the                                 by the government of our 2011-2012
(OIP) estimates for the Tsimiroro block                           terms of our joint venture with Total                                work programme at Tsimiroro affirms its
(Block 3104) in Madagascar.                                       E&P on Block 3102 [Bemolanga], we are                                support of the company’s presence and
  Around 1.69 billion barrels of heavy                            pleased to be pressing forward on both                               contributions to the country.”
oil are now said to be in place, according                                                                                               MOIL reached an important agreement
to the best estimate provided by                                                                                                       with the country’s government in June
independent reservoir engineers                                                                                                        that has allowed it to press ahead with its
Netherland, Sewell & Associates. This                                                                                                  Tsimiroro heavy oil project and to return
represents a 75% increase on previous                                                                                                  to London’s junior AIM market
estimates of 965 million barrels that                                                                                                  following a six-month suspension of its
ensued after 18 of the 24 wells drilled on                                                                                             shares.
Tsimiroro in 2010 discovered oil.                                                                                                        “Tsimiroro remains our primary focus,
  “We are delighted to report these new                                                                                                so we do not believe that the curtailment
resource estimates, which further                                                                                                      of activity on the exploration blocks will
demonstrate the enormous potential of                                                                                                  adversely affect our near-term business.
Tsimiroro. What we are seeing is the new                                                                                               However, we are hopeful that once the
‘best estimate’ scenario exceeding the                                                                                                 country’s political issues are resolved,
previous high estimates, whilst the                                                                                                    key government officials will move to
updated high estimate provides an                                                                                                      address approval of our continuing
indication of just how large a prospect                                                                                                exploration programme,” said Hunter.
Tsimiroro could be,” said CEO Laurie                                                                                                     MOIL said facilities construction was
Hunter.                                                                                                                                under way for its Tsimiroro steam flood
  Speaking on September 14, after the                                                                                                  pilot. Drilling of the 28 pilot wells is
announcement, he added: “Following the                                                                                                 expected to proceed in the fourth quarter
resolution of the dispute with the                                                                                                     of 2011, with first production anticipated
government of Madagascar regarding                                                                                                     in the second half of 2012.


                                                                                OIL SHALE

Kivioli plant running out
of oil shale, says CEO
Estonia’s Kivioli Oil Shale Processing                            planned investments.”                                                the country’s government to threaten him
and Chemicals Plant is under pressure                                In 2008, the company warned that oil                              with expropriation if he did not agree to
from declining oil shale reserves and a                           shale reserves in its acreage were close to                          the significantly lower price of 320,000
lack of investor confidence, the                                  being depleted. In order to keep the plant                           euros (US$437,000) – a move that was
company’s CEO has said.                                           – which employs almost 10% of                                        later rejected by Estonia’s courts.
   On September 14, Estonian news                                 Kivioli’s population of 7,000 – running,                                The company has been mining a
agency ERR reported that Robert                                   it attempted to purchase 330 hectares (3.3                           second Kivioli oil shale quarry, but a
Karpelin, head of the Kivioli facility, had                       square km) of mining land from local                                 March injunction by landowners
said that it was “running out of oil shale,”                      businessman Nikolai Reisman.                                         concerned over the project’s
while a messy land dispute was “costing                              However, Reisman set the price at 50                              environmental impact forced it to stop.
it the trust of its creditors and stalling                        million euros (US$68 million), forcing

                                                                            Copyright © 2011 NewsBase Ltd.
                                                                                www.newsbase.com                                                         Edited by Ryan Stevenson
   All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All
         reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents
Unconventional OGM                                                       19 September 2011, Week 37                                                                                     page 11


                                                                                OIL SHALE
   As a result, Karpelin said, a number of                        costing 3.8 million euros [US$5.19                                   electricity output had been boosted by a
projects have had to be self-financed.                            million], a container park over 1 million                            hike in oil shale production.
   “We have just finished the construction                        euros [US$1.37 million] and the                                        “As more than 90% of electricity is oil
of a semi-coke dump, and next we are                              exchange of the turbine project will cost                            shale-based, the [growing] demand for
planning a thermal power plant (TPP)                              1.8 million euros [US$2.46 million].”                                electric energy led to a 20% increase in
steam turbine and change of generator,”                             Despite Kivioli’s struggles, the outlook                           oil shale production” it said. “Over a half
he said.                                                          for Estonia’s shale sector is largely                                of produced shale oil was exported.”
   Karpelin added: “The investments are                           positive, with Statistics Estonia reporting
quite large, with landfill construction                           earlier this month that the country’s


                                                                   COAL TO LIQUIDS

KBR bets on India CTL
KBR is seeking to cash in on India’s                                 Jindal Steel and Power (JSPL), which                                 Two coal blocks in Orissa’s Talcher
proposed coal gasification and coal-to-                           is building a CTL plant in the coal-rich                             coalfields were allocated for the CTL
liquid (CTL) projects.                                            eastern state of Orissa, signed a                                    projects in 2009, with the North of
   The company recently said that it                              technology deal with KBR in late                                     Arkhapal-Srirampur block awarded to
intended to compete for contracts for                             August. “KBR has received the contract                               SETL and the Ramchandi block going to
CTL ventures in India, three of which                             for gasification project from JSPL for                               JSPL. State-owned monopoly Coal India
have already been announced. India is                             production of syngas for their direct                                Ltd (CIL), meanwhile, has also proposed
pushing CTL businesses to produce                                 reduced iron production,” Gualy said.                                a joint venture with NMDC and the
diesel and naphtha from the large                                    Two CTL projects with production                                  government of West Bengal for a CTL
available deposits of inferior coal, as it is                     capacity of 80,000 barrels per day are                               scheme.
a major importer of crude oil.                                    being implemented in Orissa. The                                        While India has achieved success in
   KBR’s vice president, Ron Gualy, said                          investors are JSPL and Strategic Energy                              coal-bed methane (CBM) output and the
that with the “continuous rise [in the                            Technology Systems (SETL), a Tata-                                   government is due to announce a shale
price] of crude oil, CTL seems to be one                          Sasol joint venture. Output is likely to                             gas policy this year, there is pressure to
of the viable options in India. Crude oil is                      begin by 2018.                                                       make progress on CTL projects as well.
projected to remain around US$100 per                                JSPL and Tata have opted for the                                     Apart from procuring the latest
barrel. If a low-cost feedstock like low-                         cheaper indirect liquefaction process,                               technology and capital, co-ordination
rank coal is used, owners can take                                which condenses syngas produced from                                 between federal and state governments,
advantage of the spread in prices, which                          coal gasification. The two CTL plants are                            land acquisition, environment issues and
makes it possible for CTL to be                                   expected to cost 900 billion rupees                                  violent Leftist threats are matters that
competitive.”                                                     (US$18.8 billion).                                                   also need to be addressed.


                                                                     GAS TO LIQUIDS

Sasol plans GTL debut in US
The US is on its way to having its first                          week, said the company’s proprietary                                   The company is to carry out its
gas-to-liquids (GTL) facility, as South                           GTL technology could “help unlock the                                feasibility study on the project, planned
African energy firm Sasol has announced                           potential of Louisiana’s clean and                                   for Calcasieu Parish in southwest
a feasibility study for a plant in                                abundant natural gas resources and                                   Louisiana, over the next 18 months.
Louisiana.                                                        contribute to an affordable, reliable and                              The study will look at two capacity
   Sasol’s managing director of new                               high-quality fuel supply for the US.” The                            options, one for 2 million tonnes per year
business development, Ernst Oberholster,                          planned project would be the country’s                               and the second for 4 million tonnes per
speaking at a press conference with                               first to produce GTL transportation fuels                            year.
Louisiana Governor Bobby Jindal last                              and other products.

                                                                            Copyright © 2011 NewsBase Ltd.
                                                                                www.newsbase.com                                                         Edited by Ryan Stevenson
   All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All
         reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents
Unconventional OGM                                                       19 September 2011, Week 37                                                                                     page 12


                                                                     GAS TO LIQUIDS
   Officials anticipate 850 permanent jobs                        that, unlike other proposed alternatives to                          procurement, and construction
will be created by the plant, and as many                         conventional petroleum-based fuels,                                  management (EPCM) contract was
as 5,500 positions during peak                                    GTL fuel could be used in existing                                   awarded to Texas’ S&B Engineers and
construction.                                                     vehicles and fuel delivery infrastructure                            Constructors in May.
   “GTL fuels are an important part of the                        without modifications.                                                 In March of this year, the South
energy mix because they can advance                                  Sasol announced plans for the world’s                             African company set out plans for a joint
energy independence in a way that is                              first ethylene tetramerisation unit in                               venture with Talisman Energy in
both cost-efficient and environmentally                           December 2010, also for Louisiana’s                                  Canada’s Montney basin, which included
friendly,” Oberholster said. He added                             Calcasieu Parish. The engineering,                                   a GTL study.


                                                                       NEWS IN BRIEF
                                                                  water underground and fracturing rocks
POLICY                                                            with chemicals to release shale gas, is                              Encana holds talks
                                                                  setting up outside the Lancashire village                            with PKN Orlen
Despite probe, SEC                                                of Banks. It is close to a drilling rig that
                                                                                                                                       Encana, Canada’s biggest natural-gas
not regulating                                                    Cuadrilla Resources is using to drill up to
                                                                                                                                       producer, is holding talks with PKN
fracking
                                                                  3.5km deep. The company, which is
                                                                                                                                       Orlen SA on developing shale gas in
                                                                  backed by the former BP chief Lord
                                                                                                                                       Poland, Alan Boras, an Encana
The US Securities and Exchange                                    Browne and money from Australia, has a
                                                                                                                                       spokesman, said in an e-mail. Encana
Commission wants to ensure drilling                               licence to explore 437 square miles of
                                                                                                                                       doesn’t have an agreement with the
companies are not misleading investors                            Lancashire, but suspended operations this
                                                                                                                                       largest Polish oil refiner, Boras said,
about their natural gas reserves but is not                       summer after two earthquakes struck
                                                                                                                                       denying a report in Poland’s
cracking down on a practice of hydraulic                          Blackpool. It has so far sunk two
                                                                                                                                       Rzeczpospolita newspaper yesterday.
fracturing, its chairman said on                                  exploratory wells and says a further three
                                                                                                                                       “The company’s focus” is on “operations
Thursday.                                                         may be needed.
                                                                                                                                       and opportunities” in North America, he
The SEC issued subpoenas to ExCo                                  Britain has around 150bn cubic metres of
                                                                                                                                       said. Exxon Mobil Corp., Chevron and
Resources Inc and Quicksilver Resources                           recoverable shale resources, according to
                                                                                                                                       Talisman Energy Inc. are among
Inc last month in a probe into whether                            the British Geological Survey, which
                                                                                                                                       companies that bought about 100 licenses
companies are overstating the                                     could meet the nation’s gas requirements
                                                                                                                                       from the Polish government to explore
productivity of their natural-gas wells.                          for 18 months. Cuadrilla is expected to
                                                                                                                                       the possibility of extracting the estimated
That has led to complaints from some                              disclose its first estimate for the amount
                                                                                                                                       5.2 trillion cubic metres (of gas in shale
lawmakers, including Bill Posey, a                                of shale gas found inside its Lancashire
                                                                                                                                       rock formation that the country may
Republican of Florida, that the SEC was                           licence area next week. According to the
                                                                                                                                       hold, according to the Energy
straying from its traditional area of                             chief executive, Mark Miller, the signs
                                                                                                                                       Information Administration. Orlen is
securities abuse into regulating                                  are “encouraging”.
                                                                                                                                       working to find a partner to help it
environmental issues.                                             “Acre for acre, I think the gas in place
                                                                                                                                       develop shale gas licenses, Beata
   REUTERS, September 15, 2011                                    here is very comparable to – and in some
                                                                                                                                       Karpinska, a spokeswoman, said in an e-
                                                                  cases exceeds – some of the good
SHALE GAS                                                         [resources] in the US,” he said last
                                                                                                                                       mail today, declining to give other
                                                                                                                                       details.
                                                                  month.
                                                                                                                                          BLOOMBERG, September 13,
Camp Frack                                                        But local people and green activists have
                                                                                                                                          2011
mobilises against UK
                                                                  argued that the “fracking” process is

shale gas well
                                                                  inherently risky due to the effect of the
                                                                                                                                       Poland’s Siekierki
                                                                                                                                       tight gas appraisal
                                                                  chemicals used, explosions, links with
                                                                  seismic activity and allegations of illness.
                                                                                                                                       well falls short
The first of an expected 150 climate
activists and local residents began to                            Environmentalists are calling for a delay
converge on a field near Southport on                             in fracking until a major review of the                              Aurelian Oil & Gas is suspending plans
Friday to protest against the                                     practice has been published by the US                                for a sidetrack at the Trzek-2 well and
environmental impacts of one of the                               Environmental Protection Agency. But                                 reviewing the possibility of gas sales
UK’s first shale gas wells.                                       the UK government says it is confident                               from the existing three wells at its
“Camp Frack”, named after “fracking”,                             its own safety regulations are strict                                Siekierki tight gas project near Poznan in
the process of pumping vast quantities of                         enough.                                                              west-central Poland.
                                                                     GUARDIAN, September 16, 2011

                                                                            Copyright © 2011 NewsBase Ltd.
                                                                                www.newsbase.com                                                         Edited by Ryan Stevenson
   All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All
         reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents
UOGM - Ed Stelmach interview
UOGM - Ed Stelmach interview
UOGM - Ed Stelmach interview
UOGM - Ed Stelmach interview
UOGM - Ed Stelmach interview
UOGM - Ed Stelmach interview
UOGM - Ed Stelmach interview
UOGM - Ed Stelmach interview
UOGM - Ed Stelmach interview
UOGM - Ed Stelmach interview
UOGM - Ed Stelmach interview
UOGM - Ed Stelmach interview
UOGM - Ed Stelmach interview
UOGM - Ed Stelmach interview
UOGM - Ed Stelmach interview
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UOGM - Ed Stelmach interview

  • 1. 19 September 2011 Unconventional  Week 37 Issue 74 News OIL & GAS  Analysis Intelligence MONITOR  NewsBase Published by COMMENTARY 2 NEWS THIS WEEK…  Exiting Stelmach encouraged by progress  seeks to explore French shale Total despite ban 3 2 One man’s legacy POLICY 5 In office as Alberta’s premier since late-2006, Ed  CAPP issues fracking guidelines 5 Stelmach has overseen major development of the SHALE GAS 6 province’s oil sands. Prior to his departure on  ConocoPhillips launches campaign to improve opinion of fracking 6 October 1, UOGM speaks to Stelmach about about  German authorities claim fracking is progress, his legacy and the future for Alberta. more dangerous than CCS 6  partners with UT for Shell  province is home to the world’s second The unconventional gas research 7 largest oil reserves – more than 173 billion barrels SHALE OIL 8 of crude. (Page 2)  increases estimate of US shale oil DoE potential 8 OIL SANDS 8  Stelmach spoke optimistically about the Keystone  Canada to focus on brownfield Shell XL project, which will add 591,000 barrels per day expansions 8 of capacity to the Keystone pipeline. (Page 2)  Connacher hoping to complete financing to add to Algar output 9  said that transporting LNG to Asia would He  CNRL preparing for second train at become important for Alberta in the future. (Page 2) Horizon plant 9 Totally behind shale search HEAVY OIL 10  Madagascar Oil upgrades heavy oil estimates for Tsimiroro block 10 OIL SHALE 10 A moratorium on fracking has put the brakes on  Kivioli plant running out of oil shale, France’s bid to produce unconventional resources. says CEO 10 However, Total has announced it will explore for COAL TO LIQUIDS 11  bets on India CTL KBR 11 shale gas in the south of the country. GAS TO LIQUIDS 11  Total has stressed it will not use the banned  Sasol plans GTL debut in US 11 NEWS IN BRIEF 12 fracking technique while prospecting in the area.(Page 3) STATISTICS 18  Torreador holds licences for shale oil in the Paris TENDERS & CONTRACTS 19 Basin, and has said it will not use fracking. (Page 4) CONFERENCES 23 For analysis and commentary on these and other stories, plus the latest unconventional developments, see inside… Copyright © 2011 NewsBase Ltd. www.newsbase.com Edited by Ryan Stevenson All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents
  • 2. Unconventional OGM 19 September 2011, Week 37 page 2 COMMENTARY Exiting Stelmach encouraged by progress UOGM speaks to outgoing Albertan premier Ed Stelmach about progress, his legacy and the province’s future By Ashok Dutta  premier has been in office since late-2006, and his rule will come to an end next month The  Alberta is home to the world’s second largest oil reserves – more than 173 billion barrels of crude  Stelmach said he was confident that the US would give approval to the Keystone XL pipeline project With Alberta being home to more than involves adding 591,000 barrels per day appointment of Carlos Pascual as the 173 billion barrels of crude oil reserves, of capacity to bring the Keystone special envoy and co-ordinator of the second largest worldwide after Saudi pipeline system capacity to around 1.1 international energy affairs by Hillary Arabia, the job of its premier is probably million bpd. The project would originate Clinton [US Secretary of State], we feel one of the most challenging in the four in Hardisty, Alberta, and ultimately bring more hopeful. He is acting in between western Canadian provinces. crude supply to the Texas Gulf Coast the US regulators and the province to get Yet, Ed Stelmach – who will probably region. things sorted out,” Stelmach said. be known for his unpopular decision in “With so many years in public life and “We have not heard anything in the late 2007 to review the existing royalty having seen several decision-making past few days, but we have had regime that led to the flight of large processes, I am confident we will receive discussions recently with the developer volumes of capital to the neighbouring approval,” he said. [TransCanada] and our ambassador in the provinces of British Columbia (BC) and His statement comes in the wake of the US [Gary Doer] and the feedback we are Saskatchewan – will be leaving behind recent environmental impact statement hearing is that Americans want this an imprint. from the US government and the holding pipeline,” he said. He was elected the 13th premier of the of several public meetings. province in December 2006 by the “It may still be a bit stretched before Backup plan Progressive Conservative party and will we get the final go-ahead, but in the past On what would be Alberta’s lifeline in leave his post on October 1. few months Washington has given case approval were rejected, Stelmach “From a legacy view point, it will be positive responses and their body said: “Asia is our big market and we for Albertans to decide where I went language is encouraging. With the need to get there by adding new capacity right and wrong,” Premier Stelmach told to pipelines that would exit through the UOGM in an exit interview. “From an Port of Vancouver. At the end of the day, industry perspective, we had to look at whether Keystone gets through or not, the lack of infrastructure investment at we will still need a pipeline to the west Fort McMurray [the main oil sands coast. The Asian market will also be production centre], which was emerging important for the province from an as the bread basket not just for Canada [liquefied natural gas (LNG)] but also North America. As a provincial perspective,” he said. government, we have invested C$2.2 According to Stelmach, hydraulic billion [US$2.24 billion] and there is still fracturing (fracking) for shale gas will lots to do,” he said. bring trillions of cubic feet to the market that will need to find export destinations. Approval “Having returned from India, I see a The verdict will be forthcoming, but in potential to ship LNG there from the the meantime he is more confident now West coast. It may still take a while than before of receiving the approval of before natural gas prices in North the US government for the Keystone XL America improve, but Asian prices are pipeline. double compared to the US and we need The 1,700-mile (2,736-km) XL project to get there,” he said. Copyright © 2011 NewsBase Ltd. www.newsbase.com Edited by Ryan Stevenson All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents
  • 3. Unconventional OGM 19 September 2011, Week 37 page 3 COMMENTARY Alberta has also placed its might pipelines, we are confident there will be Commenting on the energy policy his behind the Northern Gateway pipeline more investments. There are a few successor should pursue, he replied: “We that will transport 525,000 bpd of proposals and they are in their infancy, will need to continue along the same bitumen from Hardisty to Kitimat in BC but given the social unrest in the Middle path, keeping a hawk’s eye on [the] for export to the Asian market and import East and a slow-down in the US environment and guarding our interests 193,000 bpd of condensate through a economy, [prospective] investors are zealously. One issue that I have not been parallel pipeline to dilute bitumen for doing their due diligence now before able to figure out as yet is whether the pipeline transportation, Stelmach said. taking a final decision,” Stelmach said. province should put the brakes on the “At the national level, I have written to In March, the provincial government billions of dollars of planned investments the Prime Minister [Stephen Harper] signed an agreement with North West into the oil sands sector by oil requesting for streamlining of the various Upgrading and Canadian Natural companies.” regulators and avoiding duplications. We Resources Ltd. (CNRL) to supply 37,500 Around C$51 billion (US$52 billion) is are also working with the developer bpd of bitumen under its bitumen royalty earmarked for investment over the [Enbridge], the government of BC and in-kind (BRIK) programme for a 150,000 coming five years in Alberta by both the First Nations to clear any roadblocks. bpd diesel refinery to be built in central Canadian and international majors. We need to work jointly and there has to Alberta. The refinery is due to start “Some in the province have advocated be clarity and certainty,” he said. production at 50,000 bpd by 2014 under we adopt a staggered approach to oil its first phase of development. sands development to ensure the Upgrading BRIK is the feedstock bitumen that the construction market is not overheated. Meanwhile, the Department of Energy is provincial government makes available But if oil companies come with proposals in “initial” discussions with oil for investors in refineries and upgraders to invest billions of dollars, what can you companies to invest in new bitumen in Alberta. By 2020, the volume of say? Investment is liquid and will go upgraders in the province. bitumen to be available under BRIK will away somewhere else. It is a rare “Margins are improving and although be 400,000 bpd, compared with 75,000 opportunity ... how can we delay it?” he some bitumen will be exported via bpd now. concluded. Total seeks to explore French shale despite ban A moratorium on fracking has put the breaks on France’s bid to produce unconventional resources, however, Total has announced it will explore for shale gas in the south of the country By Kevin Godier  shale gas drilling has yet taken place in France, and a ban was introduced this year No  Total has stressed it would not use the banned fracking technique while prospecting in the area  Torreador holds licences for shale oil in the Paris Basin, and also has said it will not use fracking Seemingly undaunted by the controversy The company’s stance is that it has The move by Total was revealed via an that has erupted in France over the use of purchased exploration rights for five application that was lodged for a project hydraulic fracturing (fracking), French years on the site and therefore wants to restart drilling on its Montelimar site, energy giant Total is still planning to more information on the reserves that sit a zone covering 4,327 square km that explore the country southern region for below the ground. The energy ministry follows the Rhone from the north of prospective shale gas deposits. has said that it will announce its decision Montelimar to Montpellier. Total Total stressed it would not use the on the plans on October 13, after taking believes the block could hold as much as banned fracking technique while advice from officials. Left-wing senators 2.38 trillion cubic metres of shale gas, prospecting in an area for which it won a have already protested about the plans, although it has stressed that this is not a 5-year exploration licence in 2010, questioning the government’s silence on recoverable reserves figure. Reuters reported on September 12. the project. Copyright © 2011 NewsBase Ltd. www.newsbase.com Edited by Ryan Stevenson All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents
  • 4. Unconventional OGM 19 September 2011, Week 37 page 4 COMMENTARY Targeting shale gas “After that we have one month to France is a natural target for the decide the fate of the permits,” she Paris-headquartered oil super- was quoted by Bloomberg. “If a major, which has turned to a company says it’s planning to use number of countries across the hydraulic fracturing, their permit will world in an emerging strategy to be cancelled. It’s the law,” she added. tap unconventional energy France’s fracking ban took effect in resources, especially shale gas, to July and could lead to fines and compensate for its depleting imprisonment if a company is found conventional reserves. to be using the technique. The prospects in the pipeline for France opened its doors to shale Total include a proposed gas exploration in March 2010, when partnership with ExxonMobil to former Environment Minister Jean- explore Poland’s enormous shale that fracking demands millions of litres Louis Borloo granted three permits for reserves, two Danish exploration permits of scarce water and that the low-pressure periods between three and five years. The and six licences in Argentina. gas requires drilling sites that would have move – which was seen to have been But it has proved impossible to ignore to be set very close to each other and heavily influenced by the positive the lure of France’s sizeable shale gas nearby housing, scarring the landscape. publicity in the US about its so-called reserves – estimated to comprise some of French Environment Minister Nathalie “shale gas revolution” – involved the the biggest natural gas reserves in Europe Kosciusko-Morizet spoke publicly of the extension of permits for shale oil and gas – and its economic need for domestically “devastated countryside” and “sullied exploration to companies such as Total, produced gas. Having produced around water tables” in US regions where Vermillion Energy, Toreador Resources 33% of its gas consumption in the 1970s, fracking had occurred. and Schuepbach Energy. France was importing 98% of the gas it Opponents had forecast during the run- Kosciusko-Morizet has already warned consumed in 2009, at an enormous cost up to the parliamentary vote on the lawmakers that companies holding the to the French treasury and French prospective ban in the second quarter that permits and planning shale probes may consumers. exploration companies would attempt to resort to legal challenges to help rescind No shale gas drilling has yet taken continue exploration without specifying the parliamentary ban. place in France, but hopes that shale gas the extraction method. Their fear is that could drastically cut back the import bill if vast reserves of gas were found then Toreador’s persistence were dashed this summer, when the the companies would put pressure on the Paris-based Toreador has said it will French Parliament imposed an outright government to find a way to go back on continue to work to develop the shale oil moratorium on fracking, the first country its fracking standpoint. resources of the Paris Basin, in which it to do so, in the wake of months of The bill – drafted by the country’s holds the most acreage of any explorer. protests by environmental activists ruling UMP party – did not ban shale gas The company’s CEO, Craig following a temporary freeze on shale exploration itself, only fracking. An McKenzie, said in early July that the gas exploration in February. earlier version of the bill, which Socialist company’s initial evaluation activity at Total did not give any details of how it factions supported, would have banned its Paris Basin licences would not would recover any gas found, but said any kind of development of the deposits. involve fracking. “We will not conduct that any exploration push would not hydraulic fracturing operations within include fracking, which is the only October deadline any of our permit areas. We will make known method to extract hydrocarbons The timetable for whether the full disclosures and representations to the from shale rock formations. government will need to revoke existing French regulatory authorities as may be exploration licences was specified on required.” Fracking furore September 1 by Kosciusko-Morizet. Toreador subsequently stated on Green groups and politicians have led Oil and gas companies that were August 10 that its Liassic drilling active protests across France, contending planning to explore for shale programme in the Paris Basin that the method could cause major hydrocarbons under previously granted “comprising six wells (without the use of environmental damage after having been licences had until September 13 to hydraulic fracturing) is expected to shown to be a water pollutant. inform the government whether they commence by year-end, pending final Apart from fears over the pollution of were planning to use fracking, the review of permits by the French aquifers, the anti-gas lobby has argued minister said. Administration.” Copyright © 2011 NewsBase Ltd. www.newsbase.com Edited by Ryan Stevenson All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents
  • 5. Unconventional OGM 19 September 2011, Week 37 page 5 COMMENTARY The small-cap E&P firm opted to watched with intensity by the shale focus on its French portfolio in 2009, exploration industry elsewhere in offloading its interests in other Europe. A UK House of Commons select countries and staking its future on the committee has called for an investigation success of shale oil drilling near Paris, into the link between shale gas tests in where it says an estimated 65 billion northwest England and two minor barrels of oil may be held within shale. earthquakes which occurred in the area It received an infusion of support in shortly after the start of operations. May 2010, when US independent Hess As a result, the Dutch Ministry of farmed into the acreage, bringing Economics, Agriculture and Innovation US$120 million of financial firepower has said there can be no green light for to the venture. The firms were shale gas exploration in the Netherlands intending to conduct exploration until results from the UK government drilling of oil shale in the town of Doue In the light of the fracking ban, investigation can be assessed. Certain (Seine-et-Marne) under a data capture- Toreador’s medium-term strategy parts of Germany have also banned oriented first phase of a two-phase work remains to be divulged. Some analysts fracking, which has only begun in earnest programme. have suggested that the company could in Europe in Poland. McKenzie has stressed that the participate in scientific research into French developments will occur geology of the Paris Basin – in which shale gas exploration that France’s Prime against a background where the country’s there is around 2,000 metres of Minister Francois Fillon has favoured, so strong nuclear energy industry gives it separation between the shale and the as not to rule out forms of the technology far less incentive to explore new freshwater strata – will avoid that would not harm the environment. approaches in comparison with a country contamination problems experienced in such as Poland, where shale gas has the US’ Marcellus shale, which is close Intense scrutiny become a national priority to win to freshwater aquifers. Developments in France will now be independence from Russian imports. POLICY CAPP issues fracking guidelines A new set of guidelines issued on in British Columbia to produce feedstock a statement. “These principles articulate September 8 by the Canadian for a grassroots liquefied natural gas our water management objectives and Association of Petroleum Producers (LNG) plant on the Canadian west coast. water protection practices, as well as our (CAPP) for hydraulic fracturing of shale The salient features of the new focus on improving our water gas developments in the country is guidelines include: safeguarding the performance over time.” probably going to be more stringent than quality and quantity of regional surface CAPP’s guiding principles for those in the US, a Progress Energy and groundwater resources through hydraulic fracturing apply in all Resources marketing analyst, Kurtis sound wellbore construction practices; jurisdictions in which the upstream Barrett, said. sourcing fresh-water alternatives and industry operates and have been issued “In the US, there is no need to disclose recycling water for re-use as much as is with the understanding that some fracking fluids,” he said. “We will have practical; measuring and disclosing water provinces are working on regulations. to take a closer look at the new CAPP to reduce environmental impact; The expectation is for the new guidelines guidelines, as this issue is already being supporting the development of fracturing to complement future regulatory needs, discussed between regulators and fluid additives with the fewest the CAPP announcement said. producers. Most companies have their environmental risks, and supporting the “The Canadian natural gas industry own mix of fracking fluids and that is disclosure of fracturing fluid additives. supports all regulations that govern proprietary. Public disclosure of that “With the increase in natural gas hydraulic fracturing, water use and water would be [tantamount to] losing production from unconventional sources protection, as we recognise water is a competitiveness in the market place.” such as shale, Canadians have told us valuable resource,” an executive vice- Progress Energy, in a joint venture they want more information as to how president at Encana, Michael McAllister, with Petronas, is aiming to develop shale industry uses and protects water,” said in a statement. gas deposits in the North Montney basin CAPP’s president, Dave Collyer, said in Copyright © 2011 NewsBase Ltd. www.newsbase.com Edited by Ryan Stevenson All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents
  • 6. Unconventional OGM 19 September 2011, Week 37 page 6 POLICY “Strong regulations exist in regions of resources are being developed “The composition of fluids is vital, as active unconventional gas development. responsibly.” there are several chemical cocktails that Similar regulations are being developed A Weatherford sales manager, Randal are not environment-friendly. Depending in regions with an emerging Biedermann, while welcoming the on the formations, there are various toxic unconventional natural gas sector to decision to disclose fracturing fluids, fluids that could potentially affect a ensure protection of water resources and expressed concern about the water-bearing area.” provide the public confidence that these environmental impact. SHALE GAS ConocoPhillips launches campaign to improve opinion of fracking ConocoPhillips has launched a public equipment or well failures that could There have been some problems. But relations campaign to address the potentially contaminate water supplies,” they are rare. And they were caused not negative public perception of hydraulic it added. by fracturing, but faulty drilling and well fracturing (fracking), and the benefits of Fracking and horizontal drilling have completion work, or improper handling natural gas. been a “game-changer” and natural gas is of fluids on the surface. Fracturing is not The oil and gas super-major has kicked the fuel of the future, Mulva told the inherently risky to groundwater. It occurs off the campaign, which includes a Detroit Economic Club recently. “Since far below drinking-water aquifers.” website and speeches by CEO Jim shale gas has breathed new life into the Mulva concluded: “to address the Mulva, to reach both the public and natural gas industry, it’s unfortunate to public’s concerns, our industry must policymakers. ConocoPhillips is one of see a serious threat emerge to further follow good practices. These exist, and the US’ largest natural gas producers. development: that is the perception that we must adopt them as standard The website specifically touts fracking hydraulic fracturing pollutes procedure. There is a role for government as “safe extraction” and natural gas as groundwater.” oversight in this. Also, we must de- clean, as a job-creator and as ‘made in He added: “The record is in our favour, mystify fracturing. ConocoPhillips the US.’ those million wells safely fractured since supports disclosure of the non- “At ConocoPhillips, we believe the the 1940s. The [Environmental proprietary substances contained in risk associated with well operations, Protection Agency (EPA)] studied the fracturing fluids.” including those involving horizontal environmental record of fracturing in the In response, Susan Harley, Michigan drilling and hydraulic fracturing, is very past. It concluded that no additional policy director for Clean Water Action, a low, yet it is important for us to manage federal regulation was required. A new national watchdog group, told the Detroit these risks effectively,” it said. “Proper study is now under way. We expect the Free Press: “Companies are doing deep site selection, well design, construction results [in 2012].” fracking in Michigan, putting our natural and operating procedures are critical to He continued, “That’s not to say that resources at risk, including 20% of the protect against spills and surface there is no reason for public concern. world’s useable fresh water.” German authorities claim fracking is more dangerous than CCS Hydraulic fracturing (fracking) is more Federal Environmental Office (UBA), water table cannot be ruled out. It’s a dangerous than carbon capture and told German press agency DPA: “We very extensive use of chemicals that’s storage (CCS), the head of Germany’s know that some of the substances [used required to make the gas in deep rock environmental authority has claimed. in hydraulic fracturing] can cause cancer. layers accessible.” Jochen Flasbarth, president of the In particular, the endangering of the Copyright © 2011 NewsBase Ltd. www.newsbase.com Edited by Ryan Stevenson All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents
  • 7. Unconventional OGM 19 September 2011, Week 37 page 7 SHALE GAS He added: “Until now, fracking wasn’t public in detail which chemical opposed local campaign groups. especially in focus because its compounds and which processes will be Opponents of fracking claim that some application was not immediately used,” he added. companies conducting tests in Germany imminent. As the UBA, we assume that Flasbarth backed federal environment have used techniques which are banned the dangers caused by chemical use alone minister Norbert Roettgen’s decision to in the US or no longer used there. during fracking are greater than in the commission a study of the risks Politicians in the two states believed to case of CCS.” associated with fracking. He added that have Germany’s largest shale gas The UBA implements various he considered it necessary for reserves – Lower Saxony and North environmental legislation in Germany, environmental assessments of projects Rhine-Westphalia (NRW) – have turned and advises the federal government on using fracking to be enshrined in law. against fracking on environmental the environmental impact of policies. In recent months, fracking has come grounds, with some calling for a blanket “As the national environmental under intensifying public pressure in ban. The NRW state government, a authority, we consider a transparent Germany as public knowledge of the coalition between the social-democratic application process essential – with process increases. SPD and The Greens, has been vocal in participation from the water authorities Companies wishing to carry out its opposition, while the more business- and the public,” Flasbarth continued. “In fracking or CCS in Germany face oriented government in Lower Saxony this case, it must especially be made opposition from a patchwork of fiercely has tended to be more supportive. Shell partners with UT for unconventional gas research Energy giant Shell has signed a five-year research and develop innovative in recent years, leading to a drastic drop research deal worth US$7.5 million with technology continually that will help to in the cost of natural gas at a time of the University of Texas (UT) to study meet global demands by bringing more soaring oil prices. Shale gas, tight gas improved methods of unconventional oil energy resources to market,” said Shell’s and CBM accounted for 50% of US and gas recovery. president, Marvin Odum, in a statement. natural gas production in 2009, a figure The programme will be overseen by “We chose to collaborate with the UT that the US Energy Information the university’s Bureau of Economic because it brings together an Administration (EIA) has said could rise Geology (BEG), and will focus on extraordinary amount of talent from both to 75% by 2035. increasing understanding of the organisations that will push the Despite this, environmental concerns subsurface characteristics of shale, coal- technological envelope in the field of over the extraction methods used – in bed methane (CBM) and other tight, developing even the most challenging particular hydraulic fracturing (fracking) complex formations. This will hopefully hydrocarbons safely and responsibly,” he – have led to moratoria on shale drilling lead to new techniques to extract the added. in countries such France, Germany and resources in a more efficient and The unconventional oil and gas sector the UK. environmentally sensitive way, said Scott has transformed the US energy industry “The pursuit of unconventional energy Tinker, director of the BEG. resources is a complex, integrated The majority of the funding will be problem that requires uniting the split between the university’s “This agreement marks an scientific and engineering efforts below geosciences and petroleum geoscience important milestone in ground with above-ground efforts in engineering departments, but experts in water, regulation and public awareness,” economics, environmental policy, Shell’s commitment to said William Powers, president of UT. business and energy law are all expected research and develop “As a major research university and to participate in the research. leader in energy, we’ve got the integrated “This agreement marks an important innovative technology expertise to help solve it,” he added. milestone in Shell’s commitment to continually” Copyright © 2011 NewsBase Ltd. www.newsbase.com Edited by Ryan Stevenson All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents
  • 8. Unconventional OGM 19 September 2011, Week 37 page 8 SHALE OIL DoE increases estimate of US shale oil potential An advisory panel to the US Department assessment of North American oil and “the conventional wisdom that North of Energy (DoE) has said the country’s gas resources. The National Petroleum American oil production is on an shale oil production has the potential to Council is led by Anadarko Petroleum’s inevitable decline.” top 2-3 million barrels per day by 2035. CEO, Jim Hackett, and also includes the He continued: “The potential is very However, if hydraulic fracturing CEO of Shell’s North American unit, significant, and if choices are made to regulations stand in the way, production Marvin Odum, and the CEO of develop those resources, that decline that could be restricted to just 600,000 bpd. Chesapeake Energy, Aubrey McClendon. we’ve seen over the last 10-15 years According to state regulators and It said the growth in supplies could be could actually turn up, and turn into industry estimates, shale oil output in equivalent to about a 50% boost in growth.” July accounted for about 580,000 bpd of current domestic output. But even an The report noted that the public mood production in North Dakota and Texas increase to 2-3 million bpd of oil would had lost confidence since BP’s oil spill in combined. The report, compiled by the not be enough to replace imports, as the the Gulf of Mexico in April 2010. It industry-led National Petroleum Council US consumes about 20 million bpd of oil recommended that a new network of for US Secretary of Energy Steven Chu, and imports about half this amount. regional councils to promote best urged policies to aid expansion. A Shell official, Andrew Slaughter, practises for the oil and gas industry be It was drafted in response to a request who led the council’s study of resources, set up to work with communities on their made by Chu in 2009 for a fresh told Reuters that the report contradicted concerns. OIL SANDS Shell Canada to focus on brownfield expansions Shell Canada will focus more on Jackpine project. For our target of Conservation Board to get regulatory brownfield expansions – rather than 770,000 bpd, we will need to take slow approval to expand the Jackpine and investing in new facilities at this time – steps to ensure [capital] costs of projects Pierre River mines. as part of efforts to nearly triple its remain in check and that we also reduce “The Pierre River expansion will help bitumen production in northern Alberta our environmental footprint and improve us learn even better what we did in our to 770,000 barrels per day, a senior both water and land usage.” earlier oil sands projects. In Canada our company official said at the recently The Muskeg River and Jackpine aim will be to produce more concluded annual oil sands trade show facilities are part of Shell Canada’s bitumen/synthetic crude oil to replace the and conference in Fort McMurray. Athabasca Oil Sands Project (AOSP). conventional sources of crude oil and Christian Houle, general manager of Shell Canada is the 60% owner and also supply to our refineries in the US,” Shell Albian Sands project, told UOGM: operator of AOSP, with Chevron Canada Houle said. “Earlier, we were thinking of a cookie- and Marathon Oil Canada each holding Shell Canada is also pursuing a mega cutter method of expanding our 20% interest in the joint venture. carbon capture and storage (CCS) project production, but now that will be changed AOSP is an integrated oil sands project – Quest – in Alberta. and we are talking first of that consists of bitumen-mining facilities In late June, the provincial and federal debottlenecking existing plants.” in the Fort McMurray area and a 255,000 governments signed final agreements He added: “We are currently producing bpd upgrader at Scotford near Edmonton, with Shell Energy that allotted C$865 a total of 255,000 bpd, of which 155,000 around 450 km south. million (US$879 million) for the bpd is from the Muskeg River and the At present, Shell Canada is working proposed facility. remaining 100,000 bpd is from the with Alberta’s Energy Resources Copyright © 2011 NewsBase Ltd. www.newsbase.com Edited by Ryan Stevenson All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents
  • 9. Unconventional OGM 19 September 2011, Week 37 page 9 OIL SANDS Estimated to cost C$1 billion (US$1.02 diameter pipeline to injection wells us to make that happen. A [final billion), the CCS project will have three located north of Thorhild county, and investment decision (FID)] on the components: capture of 1.2 million permanent storage of CO2 in a 2.1-km proposed venture will be taken in 2012, tonnes per year of carbon dioxide (CO2) subsurface geological structure. with onsite construction due to be from the Scotford bitumen upgrader; its “CCS is until now not an economical completed in 2015,” Houle said. transportation through a 90-km, 12-inch- project globally, but technology will help Connacher hoping to complete financing to add to Algar output Calgary-based Connacher Oil and Gas is a third party to develop the asset. Also, in Amec-BDR is carrying out detailed aiming to complete a financing deal and May 2010 we filed an application with design work and will also help us in also receive regulatory approval by the Alberta’s [Energy Resources firming up project costs. We aim to start end of 2011 to add 24,000 barrels per day Conservation Board (ERCB)], and hope production from the expanded facilities of additional production to its Algar to receive final regulatory approval by in late 2013/early 2014,” Sametz said. bitumen project in northern Alberta. the year-end. Our aim is to conclude both At present, Connacher is the owner and “Initial estimate of the capital cost is deals by the year end and move ahead operator of the Algar project – also C$800 million-1 billion [US$812 with procurement of long-lead items and known as Great Divide Pod 1 and Pod 2 million-1.02 billion], but we are still construction work,” he added. – of nameplate capacity 20,000 bpd. fine-tuning that aspect,” company The Algar facility – located on the “The facilities were constructed in two president and CEO Peter Sametz, told Great Divide acreage – has a nameplate phases, each of equal capacity. Output is UOGM on the sidelines of the annual oil production capacity of 20,000 bpd, with now standing at 14,000 bpd and is being sands trade show and conference in Fort the total bitumen resources being 500 ramped up. Capital expenditure required McMurray. million barrels, he said. The plant utilises to construct facilities for Pods 1 and 2 “Rothschild [of the US] is acting as our the steam-assisted gravity drainage was C$270 million (US$274 million) and exclusive financial advisor and our aim (SAGD) technology. C$360 million (US$366 million) would be to establish a joint venture with “UK/Canadian engineering firm respectively,” he added. CNRL preparing for second train at Horizon plant Canadian Natural Resources Ltd. a bid for the work. A decision on the bids crude oil again from its Horizon project, (CNRL) has invited firms to bid for work “will be made by October 15,” Platts eight months after the plant’s operations to expand its Horizon oil sands project in quoted the official as saying on the were shut down by a fire. northern Alberta. The work is expected sidelines of the annual Oil Sands Trade Production began in the first week of to double the project capacity to 270,000 Show and Conference in Calgary. September and has averaged around barrels per day by adding a second train. Four companies were originally 75,000 bpd of crude oil. Full production A report from Platts on September 14 prequalified to participate in the tender, rates of 110,000 bpd will be reached by said that a tender issued by CNRL, seen the two others being Japan’s Toyo mid-September, the company said. The by the news agency, was soliciting bids Engineering and UK-based AMEC. Horizon plant uses upgraders to process for an estimated C$650 million (US$662 The tender is part of a capital heavy oil sands crude oil into a lighter million) contract to build a second train expenditure programme announced in crude oil. A coker fire at the upgrader at the site near Fort McKay, Alberta. August by CNRL. This involves facility on January 6 shut down An official from Calgary-based SNC spending nearly C$2 billion (US2.04 operations. CNRL is Canada’s second Lavalin, one of the contractors bidding billion) on increasing production from largest oil and natural gas company, with for part of the work, confirmed that Horizon in 2012. The news came one day operations in the west of the country, the Snamprogetti of Italy had also submitted after CNRL said it had begun producing North Sea and offshore West Africa. Copyright © 2011 NewsBase Ltd. www.newsbase.com Edited by Ryan Stevenson All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents
  • 10. Unconventional OGM 19 September 2011, Week 37 page 10 HEAVY OIL Madagascar Oil upgrades heavy oil estimates for Tsimiroro block Madagascar Oil (MOIL) has announced a Block 3104 [Tsimiroro] and the these significant projects. The approval significant upgrade of its oil-in-place government’s agreement to revise the by the government of our 2011-2012 (OIP) estimates for the Tsimiroro block terms of our joint venture with Total work programme at Tsimiroro affirms its (Block 3104) in Madagascar. E&P on Block 3102 [Bemolanga], we are support of the company’s presence and Around 1.69 billion barrels of heavy pleased to be pressing forward on both contributions to the country.” oil are now said to be in place, according MOIL reached an important agreement to the best estimate provided by with the country’s government in June independent reservoir engineers that has allowed it to press ahead with its Netherland, Sewell & Associates. This Tsimiroro heavy oil project and to return represents a 75% increase on previous to London’s junior AIM market estimates of 965 million barrels that following a six-month suspension of its ensued after 18 of the 24 wells drilled on shares. Tsimiroro in 2010 discovered oil. “Tsimiroro remains our primary focus, “We are delighted to report these new so we do not believe that the curtailment resource estimates, which further of activity on the exploration blocks will demonstrate the enormous potential of adversely affect our near-term business. Tsimiroro. What we are seeing is the new However, we are hopeful that once the ‘best estimate’ scenario exceeding the country’s political issues are resolved, previous high estimates, whilst the key government officials will move to updated high estimate provides an address approval of our continuing indication of just how large a prospect exploration programme,” said Hunter. Tsimiroro could be,” said CEO Laurie MOIL said facilities construction was Hunter. under way for its Tsimiroro steam flood Speaking on September 14, after the pilot. Drilling of the 28 pilot wells is announcement, he added: “Following the expected to proceed in the fourth quarter resolution of the dispute with the of 2011, with first production anticipated government of Madagascar regarding in the second half of 2012. OIL SHALE Kivioli plant running out of oil shale, says CEO Estonia’s Kivioli Oil Shale Processing planned investments.” the country’s government to threaten him and Chemicals Plant is under pressure In 2008, the company warned that oil with expropriation if he did not agree to from declining oil shale reserves and a shale reserves in its acreage were close to the significantly lower price of 320,000 lack of investor confidence, the being depleted. In order to keep the plant euros (US$437,000) – a move that was company’s CEO has said. – which employs almost 10% of later rejected by Estonia’s courts. On September 14, Estonian news Kivioli’s population of 7,000 – running, The company has been mining a agency ERR reported that Robert it attempted to purchase 330 hectares (3.3 second Kivioli oil shale quarry, but a Karpelin, head of the Kivioli facility, had square km) of mining land from local March injunction by landowners said that it was “running out of oil shale,” businessman Nikolai Reisman. concerned over the project’s while a messy land dispute was “costing However, Reisman set the price at 50 environmental impact forced it to stop. it the trust of its creditors and stalling million euros (US$68 million), forcing Copyright © 2011 NewsBase Ltd. www.newsbase.com Edited by Ryan Stevenson All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents
  • 11. Unconventional OGM 19 September 2011, Week 37 page 11 OIL SHALE As a result, Karpelin said, a number of costing 3.8 million euros [US$5.19 electricity output had been boosted by a projects have had to be self-financed. million], a container park over 1 million hike in oil shale production. “We have just finished the construction euros [US$1.37 million] and the “As more than 90% of electricity is oil of a semi-coke dump, and next we are exchange of the turbine project will cost shale-based, the [growing] demand for planning a thermal power plant (TPP) 1.8 million euros [US$2.46 million].” electric energy led to a 20% increase in steam turbine and change of generator,” Despite Kivioli’s struggles, the outlook oil shale production” it said. “Over a half he said. for Estonia’s shale sector is largely of produced shale oil was exported.” Karpelin added: “The investments are positive, with Statistics Estonia reporting quite large, with landfill construction earlier this month that the country’s COAL TO LIQUIDS KBR bets on India CTL KBR is seeking to cash in on India’s Jindal Steel and Power (JSPL), which Two coal blocks in Orissa’s Talcher proposed coal gasification and coal-to- is building a CTL plant in the coal-rich coalfields were allocated for the CTL liquid (CTL) projects. eastern state of Orissa, signed a projects in 2009, with the North of The company recently said that it technology deal with KBR in late Arkhapal-Srirampur block awarded to intended to compete for contracts for August. “KBR has received the contract SETL and the Ramchandi block going to CTL ventures in India, three of which for gasification project from JSPL for JSPL. State-owned monopoly Coal India have already been announced. India is production of syngas for their direct Ltd (CIL), meanwhile, has also proposed pushing CTL businesses to produce reduced iron production,” Gualy said. a joint venture with NMDC and the diesel and naphtha from the large Two CTL projects with production government of West Bengal for a CTL available deposits of inferior coal, as it is capacity of 80,000 barrels per day are scheme. a major importer of crude oil. being implemented in Orissa. The While India has achieved success in KBR’s vice president, Ron Gualy, said investors are JSPL and Strategic Energy coal-bed methane (CBM) output and the that with the “continuous rise [in the Technology Systems (SETL), a Tata- government is due to announce a shale price] of crude oil, CTL seems to be one Sasol joint venture. Output is likely to gas policy this year, there is pressure to of the viable options in India. Crude oil is begin by 2018. make progress on CTL projects as well. projected to remain around US$100 per JSPL and Tata have opted for the Apart from procuring the latest barrel. If a low-cost feedstock like low- cheaper indirect liquefaction process, technology and capital, co-ordination rank coal is used, owners can take which condenses syngas produced from between federal and state governments, advantage of the spread in prices, which coal gasification. The two CTL plants are land acquisition, environment issues and makes it possible for CTL to be expected to cost 900 billion rupees violent Leftist threats are matters that competitive.” (US$18.8 billion). also need to be addressed. GAS TO LIQUIDS Sasol plans GTL debut in US The US is on its way to having its first week, said the company’s proprietary The company is to carry out its gas-to-liquids (GTL) facility, as South GTL technology could “help unlock the feasibility study on the project, planned African energy firm Sasol has announced potential of Louisiana’s clean and for Calcasieu Parish in southwest a feasibility study for a plant in abundant natural gas resources and Louisiana, over the next 18 months. Louisiana. contribute to an affordable, reliable and The study will look at two capacity Sasol’s managing director of new high-quality fuel supply for the US.” The options, one for 2 million tonnes per year business development, Ernst Oberholster, planned project would be the country’s and the second for 4 million tonnes per speaking at a press conference with first to produce GTL transportation fuels year. Louisiana Governor Bobby Jindal last and other products. Copyright © 2011 NewsBase Ltd. www.newsbase.com Edited by Ryan Stevenson All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents
  • 12. Unconventional OGM 19 September 2011, Week 37 page 12 GAS TO LIQUIDS Officials anticipate 850 permanent jobs that, unlike other proposed alternatives to procurement, and construction will be created by the plant, and as many conventional petroleum-based fuels, management (EPCM) contract was as 5,500 positions during peak GTL fuel could be used in existing awarded to Texas’ S&B Engineers and construction. vehicles and fuel delivery infrastructure Constructors in May. “GTL fuels are an important part of the without modifications. In March of this year, the South energy mix because they can advance Sasol announced plans for the world’s African company set out plans for a joint energy independence in a way that is first ethylene tetramerisation unit in venture with Talisman Energy in both cost-efficient and environmentally December 2010, also for Louisiana’s Canada’s Montney basin, which included friendly,” Oberholster said. He added Calcasieu Parish. The engineering, a GTL study. NEWS IN BRIEF water underground and fracturing rocks POLICY with chemicals to release shale gas, is Encana holds talks setting up outside the Lancashire village with PKN Orlen Despite probe, SEC of Banks. It is close to a drilling rig that Encana, Canada’s biggest natural-gas not regulating Cuadrilla Resources is using to drill up to producer, is holding talks with PKN fracking 3.5km deep. The company, which is Orlen SA on developing shale gas in backed by the former BP chief Lord Poland, Alan Boras, an Encana The US Securities and Exchange Browne and money from Australia, has a spokesman, said in an e-mail. Encana Commission wants to ensure drilling licence to explore 437 square miles of doesn’t have an agreement with the companies are not misleading investors Lancashire, but suspended operations this largest Polish oil refiner, Boras said, about their natural gas reserves but is not summer after two earthquakes struck denying a report in Poland’s cracking down on a practice of hydraulic Blackpool. It has so far sunk two Rzeczpospolita newspaper yesterday. fracturing, its chairman said on exploratory wells and says a further three “The company’s focus” is on “operations Thursday. may be needed. and opportunities” in North America, he The SEC issued subpoenas to ExCo Britain has around 150bn cubic metres of said. Exxon Mobil Corp., Chevron and Resources Inc and Quicksilver Resources recoverable shale resources, according to Talisman Energy Inc. are among Inc last month in a probe into whether the British Geological Survey, which companies that bought about 100 licenses companies are overstating the could meet the nation’s gas requirements from the Polish government to explore productivity of their natural-gas wells. for 18 months. Cuadrilla is expected to the possibility of extracting the estimated That has led to complaints from some disclose its first estimate for the amount 5.2 trillion cubic metres (of gas in shale lawmakers, including Bill Posey, a of shale gas found inside its Lancashire rock formation that the country may Republican of Florida, that the SEC was licence area next week. According to the hold, according to the Energy straying from its traditional area of chief executive, Mark Miller, the signs Information Administration. Orlen is securities abuse into regulating are “encouraging”. working to find a partner to help it environmental issues. “Acre for acre, I think the gas in place develop shale gas licenses, Beata REUTERS, September 15, 2011 here is very comparable to – and in some Karpinska, a spokeswoman, said in an e- cases exceeds – some of the good SHALE GAS [resources] in the US,” he said last mail today, declining to give other details. month. BLOOMBERG, September 13, Camp Frack But local people and green activists have 2011 mobilises against UK argued that the “fracking” process is shale gas well inherently risky due to the effect of the Poland’s Siekierki tight gas appraisal chemicals used, explosions, links with seismic activity and allegations of illness. well falls short The first of an expected 150 climate activists and local residents began to Environmentalists are calling for a delay converge on a field near Southport on in fracking until a major review of the Aurelian Oil & Gas is suspending plans Friday to protest against the practice has been published by the US for a sidetrack at the Trzek-2 well and environmental impacts of one of the Environmental Protection Agency. But reviewing the possibility of gas sales UK’s first shale gas wells. the UK government says it is confident from the existing three wells at its “Camp Frack”, named after “fracking”, its own safety regulations are strict Siekierki tight gas project near Poznan in the process of pumping vast quantities of enough. west-central Poland. GUARDIAN, September 16, 2011 Copyright © 2011 NewsBase Ltd. www.newsbase.com Edited by Ryan Stevenson All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents