General Interest - Quick Takes Salazar cancels oil shale lease solicitation

The US Department of the Interior will offer another round of oil shale leases in Colorado and Utah and withdraw the former Bush administration's proposal for expanded offerings, Interior Secretary Ken Salazar said on Feb. 25.

"We need to push forward aggressively with research, development, and demonstration [RD&D] of oil shale technologies to see if we can find a safe and economically viable way to unlock these resources on a commercial scale. The [RD&D] leases we will offer can help answer critical questions about oil shale, including about the viability of emerging technologies on a commercial scale, how water and power would be required, and what impact commercial development would have on land, water, wildlife, and communities," he said.

Salazar said he was withdrawing the previous oil shale RD&D lease solicitation because it contained several flaws, including locking in low royalty rates that would shortchange taxpayers.

"The previous administration offered their RD&D oil shale leases just days before leaving office, made the parcels four times the size of the current six RD&D leases, and then locked in low royalty rates and a premature regulatory framework for those leases. If oil shale technology proves to be viable on a commercial scale, taxpayers should get a fair rate of return from their resource," he said.

Offering leases for 640 acres instead of 160 acres was likelier to provide sufficient reserves to support a commercial operation, BLM said on Jan. 14 when it announced the proposal that Salazar withdrew. The new lease would go to applicants not using technologies used in the first round of oil shale leases, it said at the time.

Salazar said DOI has submitted a notice, which will appear in the Feb. 27 Federal Register, asking the oil and gas industry, local communities, states, and other stakeholders for their advice on what the terms and conditions of the second round of oil shale RD&D leases should be. Comments will be accepted for 90 days.

"Following that, the department will move ahead with a solicitation for RD&D leases, based on sound policy and public input. This will help us restore order to a process that, under the previous administration was turned upside down. We look forward to hearing from the public, industry, and local communities as we move toward offering a second round of [RD&D] leases," the secretary said.

NEB: LNG demand grows in world market

The LNG industry will capture a growing segment of the global market as demand for natural gas increases, said Canada's National Energy Board (NEB).

The current global recession should not bear too heavily on the growing demand for natural gas in the long run. Countries are scrambling to secure new sources of gas, "and LNG is definitely in the running," NEB reported in a recent energy market assessment.

"LNG provides an option to diversify and enhance the reliability of natural gas supply, but ultimately it's the market conditions, stakeholder involvement, and contractual arrangements that will set the extent of LNG imports," said Gaetan Caron, NEB chair and chief executive. "In North America alone, the supply of LNG is projected to exceed 5% (5 bcfd) of the total natural gas requirement by 2020."

LNG was once considered the most likely source to offset the continued decline in production of conventional gas, but the expected increase in LNG imports has not yet materialized, said NEB. Ln North America, shale gas and other unconventional gas resources have filled part of the gap.

The only Canadian facility equipped to import LNG is the Canaport regasification terminal in St. John, NB. It is expected to become operational this year and will serve markets in Atlantic Canada and New England, where LNG has historically provided up to 25% (184 bcf) of the annual gas requirement.

Indonesian watchdog urges LNG contracts review

Indonesia Corruption Watch (ICW) has urged Indonesia to review contracts on Tangguh as well as Senoro LNG sales and expose the price formulas transparently, according to a press report.

Bisnis Indonesia said a review by ICW shows that the state received 440.44 trillion rupiahs ($37.4 billion) from LNG sales in 2000-08, while ICW calculates the amount should have reached 515.04 trillion rupiahs, a 17% difference.

The state has incurred the losses due to the lack of transparency and accountability in the management of the extractive industries, especially the oil and gas industry, according to Firdaus Hy as, coordinator of ICW 's data and analysis division.

"The government has never been transparent in explaining their formulas to calculate prices in the closed sales contracts," Firdaus told reporters in Jakarta.

"The prices have also been below the market prices. Contracts on LNG sales from Tangguh and Senoro really incur losses to the state. This should be reported to the public," Firdaus said.

He said the profit split is 65% for the state and 35% for the partner contractors, some 5% lower for the state than "the usual" 70%.

Exploration & Development - Quick Takes

Woodside has gas find in Greater Pluto area

Woodside Petroleum Ltd. has made a natural gas discovery the first well of its 2009 gas exploration drilling campaign in the Greater Pluto region off Western Australia.

Pressure testing of the Martell-1 wildcat on permit WA-404-P in the Carnarvon basin has confirmed a gross gas column of about 110 m thickness and the presence of a gas-water contact.

Woods ide requires the extra gas to secure its proposed second LNG train at the Pluto project and roll over the construction workforce currendy constructing the project's first train on the Burr up Peninsula near Karratha.

Martell- 1 was drilled with the Atwood Eagle semisubmersible to 3,330m TD. The find is 100 km northwest of Pluto field. It will be followed up with further drilling on this structural trend later in 2009.

Woods ide is operator of WA-404 and has a 50% interest in it. Hess Exploration holds the remaining 50%.

Chevron says Wheatstone can support LNG

Chevron Australia's wholly owned Wheatstone LNG project off Western Australia has moved a step closer to commercialization following the company's announcement that the Wheatstone and nearby Iago fields hold sufficient gas resources to support a two-train export LNG development onshore and a domestic gas component.

This assessment comes after a successful seven-well exploration and appraisal program. Chevron declined to put a figure on the reserve estimates.

Wheatstone field is on offshore permit WA-253-P and retention lease WA-17-R and lies about 200 km north of the Pilbara town of Onslow Western Australian. The field was found in 2004.

Iago field spans two retention permits WA-17-R, owned 100% by Chevron, and WA-16-R, in which Shell Development Australia has a one- third share. This field was discovered in 2000.

Late in 2008, Chevron announced plans to locate the Wheatstone LNG plant at Ashburton North near Onslow. The company expects to begin front-end engineering and design for the project during the second half of this year.

In the meantime, Chevron says that, in support of the Wheatstone and Gorgon projects, it will use two drilling rigs to drill multiple exploration wells in its operated acreage in 2009. One of the rigs is the large Ensco 7500 ultradeepwater semisubmersible, which has been contracted until the end of August 2010 at a day rate of $550,000.