Marathon, Nexen to Jointly Explore Shale in Poland

by OGJ editors, OGJ, Houston, Apr 27, 2011
[Calgary-based] Nexen Inc. agreed to acquire a 40% working interest in 10 [please see map below -- D.R.] of [Houston-based] Marathon Oil Corp.’s 11 concessions in Poland's Paleozoic shale gas play.

Marathon will remain operator of its concessions, which cover 2.3 million total acres. Poland has issued drilling licenses for 70 concessions to various oil companies.

During this year’s first half, Marathon plans to shoot 2D seismic surveys. The company tentatively plans to drill one or two wells in the fourth quarter and seven or eight wells during 2012.

Nexen and Marathon are targeting Lower Paleozoic shale at 8,000-13,000 ft. Currently, Nexen is developing shale gas in the Horn River region of British Columbia.

Annell R. Bay, Marathon's senior vice-president, worldwide exploration, said the partnership provides financial risk mitigation and combines the two firm’s extensive unconventional drilling and completion experience. [Full story]
                                      [Click on map to enlarge]

                                                                 Source: Mitsui & Co., Ltd. here

(Marathon is the fourth largest U.S.-based integrated oil company behind ExxonMobil, Chevron Corp., and ConocoPhillips, in the PIW's ranking---please see my post here. Also, it is the fifth largest refiner in the United States---please see my post here. On Jan 13, 2011, Marathon's Board of Directors announced that it approved moving forward with plans to spin off Marathon's downstream business, creating two independent, highly focused energy companies. Marathon Petroleum Corporation, to be headquartered in Findlay, Ohio, is expected to be the fifth largest U.S. refiner with a top-tier downstream portfolio of strategically aligned assets concentrated mainly in the Midwest, Gulf Coast and Southeast regions of the United States. Marathon Oil Corporation, which will remain based in Houston, will be a global exploration and production company with a strong portfolio of assets delivering defined growth leveraged to crude oil production with exploration upside---please see Marathon website. Marathon has operations in the United States, Angola, Canada, Equatorial Guinea, Indonesia, Iraqi Kurdistan Region/IKR, Libya, Norway, Poland and the United Kingdom. It is an integrated international energy company engaged in exploration and production; oil sands mining; integrated gas; and refining, marketing and transportation operations. Nexen Inc. is Canada's sixth largest independent oil and gas producer. Poland's technically recoverable resources of shale gas are estimated to be 187 trillion cubic feet/tcf or c. 5.3 trillion cubic meters/tcm, the highest in Europe---please see my post/table "Estimated Shale Gas Technically Recoverable Resources for Select Basins in 32 Countries -- EIA," here. Also, please see my post "World Shale Gas Resources Outside US Assessed," here. UPDATE: For Mitsui's possible participation in Polish shale gas, the first Japanese participation in European shale gas projects!, please see Mitsui's website. -- D.R.)

[United States:] Domestic Oil Production Reversed Decades-Long Decline in 2009 and 2010

EIA, Today in Energy, Apr 27, 2011

Following declines [please see remarks below -- D.R.] in all but one year [1991] from 1986 to 2008, U.S. oil production (crude oil and lease condensate) increased in 2009 and again in 2010. Due in part to Hurricanes Ike and Gustav, average annual production dipped below 5.0 million barrels per day (MMbbl/d) in 2008, then climbed to 5.4 MMbbl/d in 2009 and 5.5 MMbbl/d in 2010, with 2010 volumes representing an 11% increase over 2008.

While much of the increase in 2009 was associated with deepwater developments in the Federal Gulf of Mexico, the increase in 2010 was led by escalating horizontal drilling programs in U.S. shale plays, notably the North Dakota section of the Bakken formation.

Operators drilling at the Bakken and other shale formations are combining horizontal wells and hydraulic fracturing - the same technologies used to significantly increase shale gas production - to boost oil production. Horizontal drilling has become especially important as oil prices have risen considerably. According to Baker Hughes rig count data, horizontal rigs comprised less than one-third of oil-directed rigs in September 2008, the previous overall rig count peak. With a tripling of horizontal oil rigs since then, that share has increased to about 46%. For further information, please see today's [Apr 27] edition of This Week in Petroleum. [Also, please see interactive charts of: 1) U.S. Oil Production, annual average, 1986-2010; and 2) U.S. Oil Production, monthly average, 2008-2010. -- D.R.]

(The decline in U.S. production in 1986 was prompted by a steep fall in Lower 48 crude production. In the late 1980s, U.S. domestic oil supply squeeze was reinforced by an initiation of decline in Alaska's output---please see my posts, including remarks, here and here. Also, please see Aaron and David Rachovich (post/table), "U.S. Crude Oil Production, 1970-2010," here. In a speech at Georgetown University in Washington, March 30th, President Obama said, "Last year, American oil production reached its highest level since 2003, and for the first time in more than a decade [last time 1997 - 49% -- D.R.], oil we imported [net imports] accounted for less than half the liquid fuel we consumed [i.e., 49%]."---please watch President Obama's speech, here. For the Bakken play and map, please see my post "Continental: Bakken's Giant Scope Underappreciated," including remarks, here. For North Dakota's oil production in historical perspective, please see my post "North Dakota ... ," remarks below, here. For U.S. shale gas resources and production, please see my post, including remarks, here. For the ongoing surge in horizontal drilling rigs, please see my post here. Also, please see my post "CERAWeek: Unconventional Gas Lifts US Petrochemicals," here. -- D.R.)

EMG's Gas Supply to Israel Interrupted Due to EGAS Mandatory Shut Down Procedure after an Explosion in the Egyptian National Grid in the Sinai

Ampal website, Apr 27, 2011
Ampal-American Israel Corporation (Nasdaq: AMPL), a holding company in the business of acquiring and managing interests in various businesses, announced today that it has been advised by East Mediterranean Gas Co.("EMG"), in which Ampal has a 12.5% interest, that shortly after 03:30 last night there was an explosion at a gas metering station 2 Km [1.2 Miles] from Al Arish, Egypt and some 30 Km [nearly 19 Miles] from the EMG terminal. The station is owned and operated by Gasco, the Egyptian gas transport company, which is a subsidiary of EGAS, the Egyptian national gas company (EMG's gas supplier). Following the explosion EGAS has initiated its standard shut down procedure affecting gas transportation throughout the Sinai Peninsula and gas supply to Jordan, Lebanon, Syria [i.e., Arab Gas Pipeline/AGP network, please see remarks below -- D.R.]; to major Egyptian industries and gas consumers in the Sinai; and to EMG [i.e., Egypt's gas exporting company via the 100-kilometer/62-mile El Arish-Ashkelon submarine pipeline -- D.R.].

The extent of the damage to Gasco's metering station and the estimated repair period is unknown at this point. [Full story]

(The interruption of gas supplies is the second in almost three months to the pipeline network that sends gas to Jordan, Syria, Lebanon and Israel. On Feb 5, a fire and explosion at a gas metering station forced Gasco to cut off supplies to the Arab Gas Pipeline/AGP linking Egypt to Jordan, Syria and Lebanon, as well as the pipeline supplying Egyptian gas to Israel---please see my post, including remarks, here. Also, please see my post here. According to the Oil and Gas Journal, Egypt’s estimated proven gas reserves stand at 77.2 trillion cubic feet/tcf as of January 1, 2011, an increase from January 1, 2010 estimates of 58.5 tcf and the third highest in Africa after Nigeria (about 187 tcf) and Algeria (159 tcf)---please see Aaron and David Rachovich, "World's Top 22 Natural Gas Proven Reserve Holders," here. Egypt's natural gas sector is expanding rapidly with production quadrupling between 1998 and 2009. In 2009, Egypt produced roughly 2.3 tcf and consumed 1.6 tcf. Egypt's gas production totaled around 66 billion cubic meters/bcm or c. 2.3 tcf in 2010 too. With the ongoing expansion of the AGP and LNG facilities, Egypt will continue to be an important supplier of natural gas to Europe and the Mediterranean region. According to Cedigaz, in 2009 the Egyptian electricity sector accounted for the largest share of natural gas consumption (54 percent) followed by industrial sector (29 percent). While still a relatively small share, Egypt is beginning to incorporate natural gas into the transport sector through the use and development of compressed natural gas vehicles and fueling stations. Egypt began exporting natural gas in the mid-2000s with the completion of the two segments of the AGP in 2003-2006 and the startup of the first three LNG trains at Damietta in 2005. In 2009, Egypt exported close to 650 billion cubic feet/bcf of natural gas, around 70 percent of which was exported in the form of LNG and the remaining 30 percent via pipelines. Egyptian pipeline exports travel through the AGP that provides gas to Jordan, Syria and Lebanon with further additions being planned. The El Arish-Ashkelon pipeline addition, which branches away from the AGP in the Sinai Peninsula and connects to Ashkelon, Israel, began operations in 2008---please see EIA, Egypt Country Analysis Brief, Feb 2011, here. Egypt’s main focus is to increase gas production and to raise its profile as a regional gas and LNG exporter. But its ambitions for increasing exports have been hampered by rising internal gas demand. The need to alleviate domestic shortages has caused a drop in Egypt’s LNG exports, which fell last year to 9 bcm or 6.7 million tons from 13 bcm or 459 bcf in 2009---please see PIW, Apr 11, 2011, here. UPDATE: Egyptian gas exports to Israel resumed on Friday June 10, 2011. -- D.R.)

[United States:] Natural Gas Production/Consumption Retrospective 2010

EIA, Today in Energy, Apr 25, 2011
In 2010, the natural gas industry saw an abundance of production and strong consumption. On an average annual basis, marketed production of natural gas grew to 61.8 billion cubic feet (Bcf) per day, an increase of about 4% from 2009, despite relatively low prices. Natural gas consumption in 2010 rose to a record level of 66.1 Bcf per day, up from 62.6 Bcf per day in 2009.

In 2010, the average annual spot natural gas price at the Henry Hub increased 12% to $4.37 per million British thermal units, but remained significantly lower than average annual prices at Henry Hub for any year between 2003 and 2008.

Overall, 2010 may turn out to be an important bellwether for the industry. It represents the natural gas industry's first year without major economic upheaval since shale gas rose to prominence. Key points:

Production:

• Marketed production of natural gas grew about 4% to 61.8 billion cubic feet (Bcf) per day, and reached its highest recorded level in the lower 48 States. The production gains in the lower 48 States more than offset declines in the Gulf of Mexico, where production continued a long-term decline.
• Net imports of natural gas to the United States in 2010 were at the lowest level since 1994. This was a result of decreases in deliveries of liquefied natural gas from a variety of countries and increases in exports from the United States. Net imports of natural gas represented nearly 11% of total U.S. consumption, the lowest proportion since 1991.

Consumption:

• Consumption of natural gas for electric power generation accounted for about 31% of the total annual natural gas consumed. Natural gas-fired power generation continues to displace coal-fired generation in some regions, when delivered spot prices for natural gas approach those for Appalachian coal (after accounting for the differences in gas and coal plant efficiencies).
• Industrial use of natural gas increased 7% to 18.1 Bcf per day in 2010. Relatively low prices and an improving economy led to increase in production by gas-using industries. [Full text but please see the interactive bar chart of natural gas production, consumption and net imports -- D.R.]

(FACTS Global Energy, Singapore, said in a review of the U.S. market that rising unconventional gas output has helped contain U.S. LNG demand while higher natural gas production has helped depress U.S. gas prices---please see OGJ, Apr 20, 2011, here. According to the U.S. Energy Information Administration/EIA, in the past 10 years, U.S. shale gas production has increased more than 12-fold from 0.39 trillion cubic feet/tcf in 2000 to 4.87 tcf in 2010. In 2010, U.S. shale gas production constituted 23 percent of total U.S. natural gas production. Rising production from shale gas resources has been credited with both lower natural gas prices and declining dependence on imported natural gas---please see my post > remarks > EIA data, here. -- D.R.)

Five Campos Basin Presalt Discoveries Now on Production

by OGJ editors, OGJ, Houston, Apr 20, 2011
With the start of an extended well test (EWT) on the Brava presalt discovery well (OGJ Online, Apr. 19, 2011), Petroleo Brasileiro SA (Petrobras) now has five presalt discoveries on production in the Campos basin off Brazil.

Production started from Jubarte during September 2008, Baleia Franca during July 2010, Carimbe EWT in the Caratinga area during December 2010, Tracaja EWT in the Marlim Leste area during February (OGJ, Mar. 7, 2011, Newsletter), and Brava EWT in the Marlim area during April. [Read more]

(Petrobras Chief Executive José Sergio Gabrielli de Azevedo has been named by Energy Intelligence as its 2011 Petroleum Executive of the Year. Under Gabrielli’s leadership, Petrobras made discoveries expected to more than double its oil reserves and production in the years to come. The company has established itself as a leader in deepwater exploration and production technology with among the highest safety and efficiency standards in the business---please see my post "Brazil as a Role Model," here. Petrobras with a market capitalization of $229 billion, ranked at No. 3 in the PFC Energy 50 Ranking of World's Top Energy Companies, Jan 2011 reflecting 2010 Rank, after ExxonMobil and PetroChina---please see my post here. Also, Petrobras retained its spot as the No. 15, in the 2011 Petroleum Intelligence Weekly's/PIW's ranking for 2009---please see my blog stand-alone page "Companies" > Petrobras. In a speech at Georgetown University in Washington, March 30th, President Obama said, "And today, I want to announce a new goal, one that is reasonable, one that is achievable, and one that is necessary. When I was elected to this office, America imported 11 million barrels of oil a day. By a little more than a decade from now, we will have cut that by one-third. That is something that we can achieve. We can cut our oil dependence -- we can cut our oil dependence by a third. I set this goal knowing that we’re still going to have to import some oil. It will remain an important part of our energy portfolio for quite some time, until we’ve gotten alternative energy strategies fully in force. And when it comes to the oil we import from other nations, obviously we’ve got to look at neighbors like Canada and Mexico that are stable and steady and reliable sources. We also have to look at other countries like Brazil. Part of the reason I went down there is to talk about energy with the Brazilians. They recently discovered significant new oil reserves, and we can share American technology and know-how with them as they develop these resources [emphasis mine]."---please watch President Obama's speech, here and see my posts here and here. For the U.S. crude oil imports from Top 15 countries in 2010, please see here. Brazil was the eighth-largest supplier of crude oil to the United States in December 2010. -- D.R.)

Oil Consumption by EU-Member States, 2007-2010 (including 2010 rankings) -- EIA

by Aaron and David Rachovich

EU-27: Total Petroleum Consumption,* 2007-2010  

Rank	Country	Year 2010 (thousand barrels per day)	Share of  EU-27  total, 2010	Year 2009 (thousand barrels per day)	Year 2008 (thousand barrels per day)	Year 2007 (thousand barrels per day)
1.	Germany	2,489	17.8%	2,456	2,550	2,468
2.	France	1,814	13.0%	1,828	1,945	1,979
3.	U.K.	1,626	11.6%	1,667	1,729	1,738
4.	Italy	1,503	10.7%	1,528	1,633	1,688
5.	Spain	1,440	10.3%	1,466	1,547	1,611
6.	Netherlands	1,026	7.3%	1,016	1,035	1,081
7.	Belgium	600	4.3%	608	717	640
8.	Poland	561	4.0%	535	534	522
9.	Greece	374	2.7%	410	429	450
10.	Sweden	365	2.6%	335	345	350
11.	Austria	277	2.0%	271	283	293
12.	Portugal	272	1.9%	271	289	308
13.	Romania	213	1.5%	208	221	224
14.	Finland	212	1.5%	202	214	222
15.	Czech R.	196	1.4%	206	211	211
16.	Denmark	168	1.2%	167	181	191
17.	Ireland	164	1.2%	167	191	194
18.	Hungary	146	1.0%	157	159	161
19.	Bulgaria	128	0.9%	110	115	114
20.	Slovakia	83	0.6%	79	86	83
21.	Lithuania	77	0.5%	73	76	74
22.	Cyprus	61	0.4%	59	61	58
23.	Slovenia	60	0.4%	62	59	55
24.	Luxembourg	57	0.4%	51	61	61
25.	Latvia	41	0.3%	38	36	35
26.	Estonia	31	0.2%	30	28	28
27.	Malta	19	0.1%	19	20	19
EU-27 total**		14,003	100.0%	14,019	14,755	14,858
United States		19,148		18,771	19,498	20,680
World total		85,286		84,150	85,234	85,807

*Total Petroleum Consumption includes internal consumption, refinery fuel and loss, and bunkering. Also included, where available, is direct combustion of crude oil.

 **Figures may not add up due to independent rounding.

Source: U.S. Energy Information Administration (EIA), International Energy Statistics, here

(Figures above may be updated at any time by EIA. Also, please see our post "Top 25 World Oil Consumers, 2009-2010," here. -- D.R.)