Thursday, November 30, 2006

The Energy Department said natural-gas inventories fell 32 billion cubic feet for the week ended Nov. 24. Global Insight expected a decline of 18 billion. Total stocks now stand at 3.417 trillion cubic feet, up 185 billion cubic feet from the year-ago level, and 230 billion cubic feet above the five-year average, the government data said. January natural gas rose 12.9 cents to $8.99 per million British thermal units after reaching an over two-month high of $9.05 before pulling back to $8.86 in mid-day trading.
Working gas in storage was 3,417 Bcf as of Friday, November 24, 2006, according to EIA estimates. This represents a net decline of 32 Bcf from the previous week. Stocks were 185 Bcf higher than last year at this time and 230 Bcf above the 5-year average of 3,187 Bcf. In the East Region, stocks were 62 Bcf above the 5-year average following net withdrawals of 28 Bcf. Stocks in the Producing Region were 113 Bcf above the 5-year average of 897 Bcf after a net withdrawal of 5 Bcf. Stocks in the West Region were 55 Bcf above the 5-year average after a net addition of 1 Bcf. At 3,417 Bcf, total working gas is above the 5-year historical range.

Wednesday, November 29, 2006

Pengrowth Corporation, administrator of Pengrowth Energy Trust, (collectively, "Pengrowth") is pleased to announce that it has entered into a definitive agreement to acquire Canadian oil and natural gas producing properties and undeveloped lands (the "CP Properties") through the acquisition of the shares of four subsidiaries of Burlington Resources Limited, a subsidiary of ConocoPhillips, for a purchase price of $1.0375 billion, subject to customary adjustments.

The CP Properties are high working interest, largely operated interests, similar to those that Pengrowth has extensive experience in managing. These properties currently produce approximately 21,625 barrels of oil equivalent (boe) per day (before royalties), comprised of 42 percent crude oil, 52 percent natural gas and six percent natural gas liquids. The transaction is expected to be strongly accretive to the unitholders of Pengrowth on a per unit basis in terms of distributable cash flow, production and reserves.

Based upon an independent evaluation by GLJ Petroleum Consultants Ltd. (GLJ) dated November 1, 2006, the CP Properties have proved plus probable reserves of 65.8 million boe and proved reserves of 51.4 million boe (on a company interest before royalties basis using escalated prices). The purchase price of $1.0375 billion represents attractive transaction metrics of $47,975 per boe per day based on current levels of production, $15.77 per boe of proved plus probable reserves and $20.17 per boe of proved reserves.

The CP Properties are expected to provide Pengrowth with a wide range of opportunities to add value through effective deployment of capital, including opportunities identified by Pengrowth on developed lands and approximately 375,000 additional net acres of undeveloped land.

Following completion of the recent business combination with Esprit Energy Trust and the acquisition of the Carson Creek property from ExxonMobil Canada Energy, Pengrowth had unused credit capacity of over $500 million on a syndicated bank credit facility of $950 million. The material terms and conditions of Pengrowth's bank credit facility remain unchanged.

The acquisition will be supported by a committed senior bank facility fully underwritten by the Royal Bank of Canada in the full amount of the purchase price with a term of 12 months commencing on the scheduled closing of the transaction on or about January 18, 2007.

The acquisition is effective as of November 1, 2006, and is subject to customary conditions and regulatory approvals. Pengrowth was advised in respect to the transaction by RBC Capital Markets and Scotia Waterous.

The transaction also provides Pengrowth with an opportunity to optimize the value of its core holdings through selective property sales. Pengrowth expects to pursue a comprehensive asset rationalization program on its entire portfolio of oil and natural gas properties through independent industry agents. In total, Pengrowth expects to divest of assets producing approximately 7,700 boe per day (before royalties) with proved plus probable reserves of 25 million boe (on a company interest before royalties basis using escalated prices). This includes properties Pengrowth currently has listed for sale through a third party sales agent. The terms of reference in respect to this disposition process have been established and several initial expressions of interest have been received representing approximately 4,300 boe per day of production (before royalties) and 17 million boe of proven plus probable reserves (on a company interest before royalties basis using escalated prices). The assets marked for divestiture are located in non-core areas or tend to have higher operating costs or a shorter reserve life and total proceeds from asset divestments are expected to be approximately $300 to $400 million.

The purchase of the CP Properties is the largest property acquisition made to date by a Canadian energy royalty trust. The agreement followed a competitive bidding process and close cooperation with management of ConocoPhillips. Pengrowth has an established history of completing transactions with major oil and gas companies based upon its long-term relationships, financial strength and experience in effective negotiations.

Tuesday, November 28, 2006

Natural-gas futures touched their highest levels in over a week ahead of the expiration of the December contracts, while growing expectations that key oil producers will agree to further cut output at a meeting next month helped lift crude prices closer to $61 a barrel.

Natural-gas for December delivery rose 12.2 cents to $8.22 per million British thermal units on the New York Mercantile Exchange after a high of $8.14, its strongest intraday level since Nov. 17.
January natural gas, which will become the lead-month contract at the session's end, was at $8.57, up 21.3 cents.

January crude was last up 53 cents at $60.85 a barrel in New York, after earlier climbing as much as 1% to $60.90.

"Some forecasters are making the daring prediction that it might actually get cold in December," said Phil Flynn, a senior analyst at Alaron Trading, in e-mailed commentary.

"Though the eastern third of the country is enjoying an atypical warm spell for this time of year ... change is on the way in the form of an Arctic air mass currently chilling the Northwest and Rocky Mountains," said John Kilduff, an analyst at Fimat USA.

Still, "winter readings don't appear to have much staying power and should diminish by the middle of next week," he said. "Until cold with some longevity blankets the high consumption regions, prices will have difficulty over $8," he said, adding that "right now, the coming cold just doesn't seem severe enough to eat up much storage."

Early estimates for Thursday's weekly Energy Department update on natural-gas supplies calls for a decline between 5 billion and 40 billion cubic feet, according to Fimat.
Oil prices rose toward $61 a barrel Tuesday on concerns about winter weather, a December OPEC meeting and violence in Iraq.

Accuweather.com is calling for wintry U.S. weather in the West to gradually move to the East. On Monday, oil prices were lifted by more than $1 a barrel after an attack on an Iraqi oil facility and comments from Saudi Arabia's oil minister suggesting further production cuts by the Organization of Petroleum Exporting Countries, which meets in Nigeria next month.

Light, sweet crude for January delivery rose 60 cents to $60.92 a barrel on the New York Mercantile Exchange. January Brent crude at London's ICE Futures exchange rose 58 cents to $61.02 a barrel.

Nymex heating oil futures gained 1.12 cent to $1.7164 per gallon, unleaded gasoline fell less than a penny to $1.59 a gallon and natural gas futures rose 21.1 cents to $8.209 per 1,000 cubic feet.

Natural gas futures reversed three days of losses Monday on forecasts calling for colder weather across the U.S. over the next two weeks.

London-based newspaper Al-Hayat reported Monday that Saudi Oil Minister Ali al-Naimi had indicated that OPEC would evaluate the effect of October's decision to cut output when it meets next month in Abuja, Nigeria, and if necessary authorize another cut.

"We think that as the meeting's date closes in, the cartel will close ranks and coalesce around a position of supporting a cut," said Edward Meir at Man Financial. "If members leave the meeting without cutting, prices could sink even further."

Oil prices have fallen by about 23 percent since hitting an all-time trading high above $78 a barrel in mid-July. They haven't settled above $62 a barrel since Oct. 1, despite the OPEC's announcement in mid-October that it would reduce output by 1.2 million barrels a day.

Skepticism that OPEC members are committed to production cuts, as well as milder-than-normal U.S. temperatures this fall, have moderated prices.

Monday, November 27, 2006

Apache Corp. has received necessary approvals to build a fourth processing unit and increase output at its Salam natural gas plant in Egypt's Western Desert.

The Houston-based independent oil and gas producer said in a statement today that the Egyptian General Petroleum Corp. and the Egyptian Natural Gas Holding Co. have approved construction of a so-called processing train. Combined with another recently approved third train, the additions will increase gas processing capacity to 710 million cubic feet per day from current production of 512 million cubic feet per day.

The expansions, slated to be finished before the end of 2008, also will increase capacity to process condensate, or natural gas liquids, to 66,000 barrels a day from 18,200 barrels a day.

Apache has awarded $375 million in contracts to Petrofac Limited to build the third and fourth trains. Each of the units will be able to process 100 million cubic feet per day of sales gas and 14,000 barrels of sales condensate per day.

Production of natural gas in Russia in January-October 2006 increased 2.6% year-on-year to 538.444 billion cubic meters, a source in the Industry and Energy Ministry told Interfax.

Gas production at gas and gas condensate fields amounted to about 502.28 bcm (up 2.6%), and at oil fields - 36.163 bcm of associated gas (up 3.2%).

According to the statistics, Gazprom companies in January-October 2006 produced 443.351 billion cubic meters of crude oil, or 88.3% of total production at gas fields.

Friday, November 24, 2006

The first electronic natural-gas trading session was held in Moscow on November 22 by decision of the government.

The event marked the beginning of an experiment that will last through 2006 and 2007. At first, trading will take place once a month, and later, every ten days.

Gas exchanges operate in the United States, the United Kingdom and Belgium. To be fair, it should be mentioned that several years ago Russia did try to sell gas at free prices. In 2003, for example, it offered 40 million cubic meters for sale. A volume 250 times bigger (10 billion cu m) was allocated for the latest experiment.

Half of it will come from Gazprom and the other half from independent producers. Hence the 5 + 5 trading formula. If all goes well, then next year the Industry and Energy Ministry will increase sales to 30 bcm, or 10% of all gas supplied to the domestic market. Among the mandatory government conditions is that Gazprom's sales must not exceed independent sales.

What is new compared to the earlier auctions? Incidentally, it would be an exaggeration to describe them as such - then, a buyer was invited either to agree or disagree with the seller's price. Vyacheslav Kravchenko, head of the gas department at the Ministry of Industry and Energy, said prior to the sales that Gazprom has liberalized information about available pumping capacities, because without giving independent producers access to pipes, free trade is nonsense. This time the gas concern guaranteed delivery in December of all the gas purchased on the exchange, regardless of who sold it. Perhaps spot deliveries will be made within several days in the future. The system of bidding has also been made transparent and easy to understand. Another important point is that Gazprom and independent producers now enjoy full parity, with no distinction made in values depending on the supplier.

Trading was done via central compression stations on long-distance gas pipelines covering the principal consumer areas. Buyers included mainly energy and metals companies, firms selling gas in the regions and Mezhregiongaz subsidiaries, as well as free traders.

Most of the gas - 70 million cu m (60%) - was sold to OGK-4 (Generation Company Four). The deal was large enough to affect the price. After the first two auctions, the price was above $60 per thousand cubic meters. The final average weighted price at compression stations was $36.89, and at regional gas distribution stations it was $51.07.

Ahead of trading, experts had forecasted a 45% to 47% rise, but the real figures proved modest - 31.6%. All in all, 119 million cu m was sold, although 150-200 million cu m was expected to be bid on. Many explain the relatively small quantities sold by the warm weather in most of the country.

Specialists forecasted that between 150 and 200 companies might trade. Itera, Novatek, TNK-BP, LUKoil, Rosneft and others were supposed to be among the sellers. In the end, however, only Gazprom and Novatek took part in the gas auction, while the other producers held back.

Long before trading began, experts commented on the lack of interest among independent suppliers. The main reason is that the latter can always sell their gas at negotiated, or free, prices, at least inside the country. Gazprom takes a different approach. It benefits from exchange trading because it can sell a combination of its own gas and gas imported from Turkmenistan.

The exchange has sold less gas than it was expected to. Is this a poor result? Perhaps it would be wrong to think so. According to Deputy Industry and Energy Minister Andrei Dementyev, the experiment will help to improve the trading technology, get adequate price signals, and create incentives for more effective use of gas.

The second exchange session is scheduled for December 15 and is expected to generate more interest because its gas volumes will be counted on the 2007 balance sheet.

Wednesday, November 22, 2006

Working gas in storage was 3,449 Bcf as of Friday, November 17, 2006, according to EIA estimates. This represents a net decline of 1 Bcf from the previous week. Stocks were 174 Bcf higher than last year at this time and 240 Bcf above the 5-year average of 3,209 Bcf. In the East Region, stocks were 72 Bcf above the 5-year average following net injections of 2 Bcf. Stocks in the Producing Region were 114 Bcf above the 5-year average of 901 Bcf after no net change in stock levels. Stocks in the West Region were 54 Bcf above the 5-year average after a net drawdown of 3 Bcf. At 3,449 Bcf, total working gas is above the 5-year historical range.

Tuesday, November 21, 2006

Please note........Natural Gas Inventory Numbers will be released on Wednesday due to the Thanksgiving holiday. InsideThePipelines will have the numbers immediately after they are released at 12 Noon Eastern Time.

January crude closed at $60.17 a barrel, up $1.37, to mark its highest closing level since Wednesday, while December natural gas declined 3.1 cents to end at $7.088 per million British thermal units.


Reduced oil flow at Alaska's Trans-Alaska Pipeline helped support oil prices Tuesday. Oil production in Alaska fell below 360,000 barrels per day as of Sunday, from a month high of more than 836,000 bpd a week earlier, due to weather-related disruptions to tanker operations at the port of Valdez last week, state data showed on Tuesday.

The Trans Alaska Pipeline, which connects the oil fields of the North Slope to the Valdez tanker terminal, cut rates to 25 percent of normal Monday amid high stocks at the Valdez tank farm, forcing North Slope oil producers to slash production.

Crude futures climbed Tuesday morning to trade back above the $59-a-barrel level as traders weighed expectations for a climb in U.S. crude inventories against predictions for a sixth-weekly decline in motor gasoline supplies.

The Energy Department will release its weekly data on petroleum supplies on Wednesday. January crude was up 50 cents at $59.30 a barrel. December natural gas fell by 8.9 cents, or 1.1%, to $7.93 per million British thermal units.

Monday, November 20, 2006

Natural Gas Weather Alert................

Freezing temperatures expected as far South as Florida

Southwest Florida residents should start digging out those heavy sweaters and even a glove or two, as another strong cold front is expected to move into the area Monday night.

Cold air blowing down the Florida peninsula today could lower temperatures as much as 20 degrees, according to the National Weather Service. It could also bring some scattered rain showers.

The cold air will be moving over the area from the gulf and mixing with the warm surface air. That could form sparse rain clouds around the area, according to forecaster Ryan Sharp.

"The chance of rain for (today) and Tuesday will increase, but just slightly," Sharp said Sunday.

After the front moves in Monday night, Tuesday morning is expected to be very cold with temperatures falling into the lower to mid-30s in the more inland areas, and near 40 on the Gulf Coast.

"If that prediction nudges down a degree or two, inland areas could see near-freezing lows," Sharp said.

Iran is confident deals to sell liquefied natural gas to India and build a pipeline linking Iranian gas fields with energy-hungry South Asia will both be agreed by the year's end, its foreign minister said on Friday.

Manouchehr Mottaki and Oil Minister Murli Deora said after talks in New Delhi that the two countries were negotiating the price of LNG to be supplied by Tehran.

"I am hopeful and somewhat confident that before the current year is over we will be able to finalise these two important projects," Mottaki told a news conference. Deora said he too hoped the process would soon bear fruit.

Last year the National Iranian Gas Export Company said it would export liquefied natural gas to India for 25 years from the end of 2009, but the deal was subject to ratification by the Iranian government.

The two countries have since been in dispute over the price India will pay for up to five million tonnes of LNG a year, and the haggling had become a stumbling block in attempts to build a pipeline to bring Iranian gas to Pakistan and India.

Mottaki said after the meeting Iran was keen to press ahead with both the LNG deal and the gas pipeline.

"I am sure with further negotiations with a specific formula we will finalise the LNG imports from Iran to India," he said. "Based on political will, India will receive gas very soon."

New Delhi accuses Tehran of seeking to increase the price tag, while Iran says the Indian offer is too low.

Iran has the second-largest natural gas reserves in the world behind Russia -- about 940 trillion cubic feet -- while growing Asian economies, including India and Pakistan, are scrambling to find energy sources to feed industrial expansion.

Deora said the Iranians had submitted a proposal on the pricing of gas and India would get back to them. He was hopeful of fixing a price acceptable to both sides.

He said new proposals had been added to the contract signed in June 2005 in Tehran, and these were being reviewed.

"I cannot say when we will get LNG, but not very late."

Separately, Mottaki and Deora said both sides were awaiting a report on the price to be paid for Iranian gas to be delivered through the proposed $7 billion pipeline.

India, Pakistan and Iran agreed last month to appoint an outside consultant to suggest a price for the pipeline gas. Iranian officials had offered a price linked to Dated Brent crude that equated to about $8 per million British thermal units (mmBtu), while New Delhi wants to pay about $4.25 per mmBtu.

Deora said the consultants were expected to submit their report soon and this would be followed by secretary level talks between the three countries in Tehran.

Saturday, November 18, 2006

Natural gas closed at a three-month high on speculation that cooler weather will hit the northern U.S. in the last two weeks of this month.

AccuWeather Inc. revised its forecast to show colder-than- normal air over much of the western and central U.S. from Nov. 23 through Nov. 27. The State College, Pennsylvania-based forecaster yesterday predicted warmer-than-average air over much of the country, including the northern third.

``You keep getting speculative dollars flowing in here on any news of a cold front,'' said Carl Neill, an analyst with Risk Management Inc. in Chicago.

Gas for December delivery gained 42.4 cents, or 5.5 percent, to $8.179 per million British thermal units on the New York Mercantile Exchange, the highest close since July 31. Benchmark futures are 8.6 percent higher this month. They gained 4.9 percent this week.

MDA EarthSat Energy's revised outlook today showed a shot of colder-than-average air pushing across the northern Plains and Midwest from Nov. 27 through Dec. 1.

The Midwest is the biggest gas-consuming region in the U.S. Seventy-nine percent of households there burn the fuel for heat, according to Energy Department data.

Mild Weather

Mild weather last week let utilities add to the underground caverns that hold excess supplies. U.S. gas inventories rose 5 billion cubic feet to 3.45 trillion last week, the Energy Department reported yesterday. The increase was the first in three weeks and left stockpiles the highest they've ever been at this time of the year.

``Warmer weather across all major U.S. natural gas markets likely undermined heating demand for natural gas in the week ending Nov. 10, causing underground inventories to rise,'' Antoine Halff, vice president and head of energy research at Fimat USA Inc. in New York, told clients in a report on Nov. 15. ``Nuclear plants continued to boost power generation, further trimming requirements from gas-fired plants.''

Gas inventories are 7.4 percent higher than the average for the past five years and 5.4 percent above a year ago at the comparable time.

Technical traders have made several attempts this week to bring gas prices past the $8.26 three-month high from Nov. 9. Each time, they have been turned back. The closest was a price of $8.25 during today's session.

``We should fail at the same levels that we've been failing at,'' said Michael Guido, director of hedge-fund marketing at Societe Generale in New York. ``Fundamental traders are not going to buy natural gas above $8.30. It's just chart-based traders trading off numbers.''

Friday, November 17, 2006

December crude fell 14 cents to $58.62 a barrel in New York, reversing from an earlier high of $59.30.

December natural gas dropped 20 cents, or 2.5%, to $7.92 per million British thermal units. "The natural-gas injection number was a bit bearish and it caused crude traders to book profits," said Phil Flynn, an analyst at Alaron Trading.

The Energy Department said natural-gas supplies rose 5 billion cubic feet last week, while data from tanker-tracking firm Petrologistics showed that key oil producers were following through with their promised cuts in crude output.

Thursday, November 16, 2006

The Energy Department said natural-gas inventories rose 5 billion cubic feet for the week ended Nov. 10, marking the first increase in three weeks. Global Insight expected a rise of 2 billion. Total stocks now stand at 3.45 trillion cubic feet, up 176 billion cubic feet from the year-ago level, and 238 billion cubic feet above the five-year average, the government data said.
Natural gas producer and distributor Williams Cos. on Thursday said it has agreed to sell its 74.9 percent interest in its Four Corners gas-gathering business to minority owner Williams Partners LP for $1.22 billion.

The partnership originally acquired a 25.1 percent stake in Williams Four Corners LLC from Williams for $360 million in June 2006. Williams spun off Williams Partners in 2005 but retains a majority stake.

The Four Corners business is located in the San Juan Basin of New Mexico and Colorado and includes about 3,500 miles of gathering lines and five natural gas processing plants. The system has capacity to collect 2 billion cubic feet of gas per day.

Williams Partners expects the deal to immediately boost cash flow. The company expects to finance its purchase evenly split between debt and equity.

The transaction is expected to close by the end of the fourth quarter, subject to closing conditions.

Williams Four Corners LLC earned $113.5 million in 2005.

Tuesday, November 14, 2006

It is the biggest fear for the Western Europe. It is even a bigger fear for countries like Poland and Romania. They are dependent on Russian natural gas. The economies in US, India and China are also dependent on natural gas more than crude oil. The rise in natural gas price can hurt the world economies beyond any imagination.

Russia is planning to set up a gas cartel. That will include Algeria, Qatar, Libya, the countries of Central Asia and Iran. It can be devastating for Indian and Chinese economies. It can be devasting for the world economic growth if natural gas price quadruple over the next two years.

The biggest problem comes from the fact many countries including developing countries have converted to natural gas using claen fuel technologies. They thought they can get away from the crude oil price control by OPEC. Now they face a new cartel headed by the Russia.

Regular contacts already tale place among gas exporting countries.

The world's top natural gas producers launched the Gas Exporting Countries Forum (GECF) in May 2001. The 15-member group includes OPEC oil producers Iran, Qatar, Saudi Arabia, the United Arab Emirates, Algeria, Nigeria and Venezuela, as well as leading European supplier Russia.

The group straddles about two-thirds of the world's gas reserves. Energy ministers of GECF stress the forum is a talking-shop rather than a cartel in the making.

However, the European Commission has said it is watching closely a cooperation deal agreed in August by Russian gas monopoly Gazprom and Algeria's Sonatrach company after concern it could lead to higher gas prices in Europe.

At the same time, the Commission is pressing the 25-nation European Union to adopt a common energy policy that would reduce its reliance on individual suppliers and strengthen its collective voice in dealings with Moscow.

Russia's energy might came to the fore at tense talks between European leaders and Russian President Vladimir Putin in Finland last month, where EU officials said Putin pledged to avoid a "politicisation" of oil and gas.

EU leaders sought to maintain a common front at the meeting but there are splits within the bloc between those who want to explore closer national energy ties with Moscow and those who view Russia as a neighbourhood bully using its gas power.

Poland threatened on Monday to scupper a Europe-Russia summit later this month by refusing to give its go-ahead for EU talks on a new cooperation pact with Moscow unless the bloc sought Russian commitments on food imports and energy security.

Monday, November 13, 2006

China National Offshore Oil Corp., the third-largest offshore oil producer in the country, said that it has signed deals for spot cargoes of liquefied natural gas with three foreign companies.

CNOOC said it had concluded master agreements with France's Total SA (TOT), Franco-Belgian supplier Suez (SZE) and a unit of Royal Dutch Shell PLC (RDSA). They were all signed between Oct. 5 and Oct. 10.

The prices and volumes will be determined by each shipment purchased by CNOOC under the terms of the master agreements, with the supply dates to be decided later.

Friday, November 10, 2006

PetroChina, the country's biggest oil producer, expects natural gas output to surpass 70 bln cubic meters in 2010 amid growing demand as the country shifts to more environmentally-friendly energy.

Tang Yali, vice president of PetroChina unit Natural Gas and Pipeline Co, said at the China Gas Summit that PetroChina plans to sell 37 bln cubic meters of natural gas this year, with the sales target accounting for 80 pct of output in 2006.

China's natural gas consumption is expected to grow at 15 pct in the 15 years to 2020, Wang Jing, an official with the National Development and Reform Commission's energy department said recently.

China's consumption of natural gas in 2005 was 47.9 bln cubic meters.

Thursday, November 09, 2006

El Paso Corp., the nation's largest natural gas pipeline operator, on Thursday said it expanded its natural gas hedging for 2007.

The company said it hedged 210 billion cubic feet (Bcf) of natural gas production at an average floor price of $7.64 per million British thermal unit (MMBtu). Of that production, 121 Bcf carry an average capped price of $11.80 per MMBtu.

Previously, El Paso hedged 130 Bcf of collars for 2007 with an $8 per MMBtu floor and a $16.02 per MMBtu ceiling. In addition, the company placed fixed-price swaps on approximately 5 Bcf of production with an average hedge price of $3.57 per MMBtu.

None of the derivatives are subject to margin calls, the company said.

Shares of El Paso advanced 26 cents to $14.04 in midday trading on the New York Stock Exchange.
Working gas in storage was 3,445 Bcf as of Friday, November 3, 2006, according to EIA estimates. This represents a net decline of 7 Bcf from the previous week. Stocks were 225 Bcf higher than last year at this time and 246 Bcf above the 5-year average of 3,199 Bcf. In the East Region, stocks were 74 Bcf above the 5-year average following net withdrawals of 10 Bcf. Stocks in the Producing Region were 116 Bcf above the 5-year average of 894 Bcf after a net injection of 2 Bcf. Stocks in the West Region were 56 Bcf above the 5-year average after a net addition of 1 Bcf. At 3,445 Bcf, total working gas is above the 5-year historical range.

Wednesday, November 08, 2006

Russian prosecutors are seeking to annul licenses held by BP PLC's Russian joint venture to develop major gas fields, according to an official statement posted late Tuesday.

The move marks the latest step against foreign interests in the Russian oil and gas sector, where the Kremlin is actively increasing its control.

The statement posted on the Prosecutor General's Web site said prosecutors had sent a letter to the federal subsoil agency Rosnedra asking for the licenses to the Novo-Urengoyskoye and Vostochno-Urengoyskoye gas fields to be revoked due to environmental and licensing violations.

The licenses are held by the Rospan International unit of TNK-BP, which is owned jointly by BP and a group of Russian billionaires.

"We are not aware of any legal violations committed at Rospan," TNK-BP spokeswoman Marina Dracheva was quoted as saying by Dow Jones Newswires.

TNK-BP's license to develop the massive Siberian Kovykta gas field has also come under threat over complaints of violations similar to those made against Rospan International.

While the announcement served to turn up the pressure on TNK-BP, analysts noted that a decision to revoke the license would be unprecedented.

"The investment environment has become less friendly to foreigners in the oil and gas sector over the last two years," Dmitry Loukashov, an analyst with Moscow's Aton investment bank, was quoted as saying by Dow Jones Newswires. Loukashov noted, however, that "there are no precedents of enforced license revocations."

Rosnedra said it had not yet taken a decision to formally consider revoking the license. At the next stage the company would be given three to six months to resolve the problems at the fields before the licenses could be annulled, a spokesman told Dow Jones Newswires.

Monday, November 06, 2006

Crude oil prices are not expected to react to the results of the U.S. midterm elections Tuesday, although a Democratic victory could have implications for energy legislation, analysts said on Monday.

To take away Republican power in U.S. Congress in Tuesday's elections, Democrats must gain 15 seats in the House of Representatives and six Senate seats. Polls show Democrats are likely to take the House, but the contest for the Senate still is seen as too close to call.

"Obviously, the feeling is out there that if Democrats do well, its going to have an impact on the oil industry, but I don't see any immediate impact on price," said Tom Bentz, analyst at BNP Paribas.

Analysts pointed to a perception that a Democrat victory would mean some attempt to take away tax credits or incentives from oil companies, but any such action would need to pass both the House and the Senate and get President George W. Bush's signature.

"I'm not sure that anything Democrats want to do concerning energy will make their short list of things to do if they win," said Peter Beutel, analyst at Cameron Hanover.

He noted that the new Congress will not be seated until January and said Democrats may give energy legislation a lower priority than the Iraq war and issues such as raising the minimum wage.

U.S. Rep. Nancy Pelosi, who stands to be House speaker if her party takes control, has vowed to try to roll back billions of dollars in tax breaks and financial incentives given to big oil companies.

Pelosi also backs higher fuel efficiency requirements for cars and trucks.

But crude oil futures markets in recent weeks have been reacting to a perception of ample supply in the world's oil markets, and the efforts of OPEC producers to implement an output cut of 1.2 million barrel per day decided last month.

U.S. crude oil futures rose on Monday after Saudi Arabia's oil minister said OPEC will take more action in December if the current imbalance in the market remains.

Crude oil for December delivery settled on the New York Mercantile Exchange at $60.02 a barrel, gaining 88 cents,

One analyst said the oil market could feel a knock-on effect if the stock market reacts to the vote.

"It could have some impact if Democrats take both houses of Congress and it puts some downside pressure on the stock market," said Jim Ritterbusch, president at Ritterbusch and Associates in Galena, Illinois. "You could see that cause some long liquidation in the crude market."

Nowhere in the world do oil companies pay taxes on oil or gas before it is pumped from the ground. Exxon Mobil Corp., BP Plc and ConocoPhillips want to make sure Alaska doesn't become the first.

Voters there will decide tomorrow whether to impose a $1 billion-a-year tax on natural gas that the three companies own and have left in the ground. The ballot question is meant to force them to build a $25 billion gas pipeline to the lower 48 states that was proposed three decades ago.

Voters already have shown their frustration by defeating Republican Governor Frank Murkowski in a primary in August after his efforts to get the pipeline under way failed. Even so, the oil companies may win the day. Their campaign ads have helped turn a 7-percentage-point deficit for ``no'' votes in a poll less than a month ago into an 18-point lead in a late-October survey, according to Ivan Moore, an Anchorage-based pollster.

``A few months ago, Alaskans were in an anti-establishment mood,'' said Moore, 42, whose Ivan Moore Research has been tracking sentiment about the proposed tax for more than a year. ``Then the companies basically said the tax would be a huge, economy-chilling nightmare that would turn Alaska into a wasteland.''

The oil companies have been unwilling to build the gas pipeline on their own and have rejected proposals by other companies, according to Eric Croft, the Democratic state representative who sponsored the initiative. Calgary-based TransCanada Corp. and Warren Buffett's MidAmerican Energy Holdings Co. both failed to get shipping commitments when they proposed Alaska gas pipeline projects.

Penalty

``If you're going to get a gas line built, you've got to do two things: Make delay expensive and make sure that building the line is profitable,'' Croft said. ``We're talking about $1 billion a year as a penalty for them warehousing our gas.''

Some of the tax would be refunded once gas begins to flow, Croft said.

A portion of the profit from the gas would be paid to Alaska's treasury, as is the case now with oil. This year, the state will pay every adult Alaskan $1,106.96 from its energy fund.

The plan to ship Alaska's gas south was proposed in the mid- 1970s by a group of pipeline companies. The reserves were held then by Exxon Corp., Atlantic Richfield Co. and Phillips Petroleum Co. -- predecessors to the three now involved.

Feasibility Study

A route was surveyed and rights-of-way acquired before the plan was shelved because of low gas prices. The oil companies spent $100 million for a feasibility study in 2001 and concluded it would yield a return on investment of about 10 percent, less than the 15 percent they sought.

Benchmark New York natural-gas futures soared to a record $15.78 per million British thermal units in December 2005. While they have fallen by about half since then, prices are still four times as high as the average through the 1990s.

Even so, the cost of new energy facilities has also soared, with steel and labor in short supply.

A tax on reserves is ``inherently unfair and without merit,'' Exxon Mobil said in a statement. ``Exxon Mobil has been diligently working for over 30 years and spent more than $150 million to commercialize Alaska North Slope gas,'' according to the statement.

Murkowski

Murkowski had negotiated a tax plan with the companies designed to make it more profitable to produce Alaska's gas. The legislature, controlled by his fellow Republicans, rejected his plan three times, calling it too generous. The initiative was placed on the ballot after 46,722 voters signed petitions.

``There's a very real sentiment against the oil companies, and that's unusual, seeing as we live off them,'' said Gerry McBeath, a political science professor at the University of Alaska in Fairbanks.

Any tax probably won't be imposed quickly should the initiative pass, McBeath said. ``It will go to court right away, and the issue could be litigated for 10 to 20 years.''

Moore's statewide poll of 500 Alaskans, taken Oct. 28-29, showed that 58 percent said they would vote against the tax, 29.5 percent were for it, and 12.5 percent were undecided. The results are accurate within 4.4 percentage points, Moore said.

A similar poll Oct. 7-8 showed the initiative would pass by a 7 percentage-point margin, he said.

The oil companies have spent more than $1.6 million to sway voters, according to campaign finance reports.

Ad Campaign

A full-page newspaper ad paid for by Houston-based ConocoPhillips promises lawsuits and delays that will cost Alaska jobs should the initiative pass. More than $1 million of the companies' spending has gone to AlaskaFirst.org, a political action committee registered in late September.

Our Gas, Our Decision, the only registered group supporting the tax, has raised less than $5,000, according to the Alaska Public Offices Commission.

For now, the cost of the project probably dooms it, regardless of what Alaska's voters or politicians do, according to Ron Denhardt, an analyst with Strategic Energy and Economic Resources in Winchester, Massachusetts. ``If Alaska gas was economic, it would come on.''

Saturday, November 04, 2006

Spectra Energy is likely to become Houston's newest Fortune 500 company come January, when the newly named Duke Energy spinoff becomes a publicly traded stock.

The natural gas pipeline, storage and processing company will have a market capitalization of about $15 billion and annual revenue of between $4 billion and $4.5 billion, said Fred Fowler, CEO of Spectra. This would rank it at about 460th on this year's Fortune 500 list.

The new name is the plural of spectrum and is meant to reflect the range of businesses the company is in, from gas transport to processing to end-user delivery, the company said.

Like other natural gas pipeline and product companies, including Kinder Morgan Energy and Enterprise Products Partners, Spectra will also create a master limited partnership, a business structure that pays most of its profits to shareholders, thus avoiding corporate taxes.

"It's a structure we need to use since there are a lot of competitors who are also MLPs," Fowler said.

The MLP would be formed some time in the first half of 2007 and have its own publicly traded stock.

600 in Houston

About 600 of the company's 7,400 employees are based in Houston.

The spinoff of Charlotte, N.C.-based Duke Energy's natural gas business has been planned since 2005. It was put on the back burner when Duke acquired Cinergy in May for about $9 billion, but it should be ready to hit the New York Stock Exchange on Jan. 1 under the symbol "SE," Fowler said.

The new company will combine Duke's natural gas transmission business unit, which is already based in Houston, the Denver-based Duke Energy Field Services business and Union Gas, a retail arm that serves 1.3 million people in Ontario, Canada.

The new entity will be one of the largest natural gas companies in North America, with 17,500 miles of pipelines and extensive natural gas storage capacity.

Friday, November 03, 2006

Electricity and natural gas distributor Pepco Holdings Inc. said Friday its third-quarter profit fell 38 percent, as mild weather reduced energy demand.

For the quarter ended Sept. 30, the company reported net income of $104 million, or 54 cents per share, versus a prior-year profit of $168 million, or 89 cents per share.

Excluding charges for impaired assets, profit would have totaled $111.9 million, or 58 cents per share, compared with $135.6 million, or 72 cents per share, in the year-earlier period.

Revenue rose to $2.59 billion from $2.48 billion in the year earlier period.

Wall Street had forecast a profit of 74 cents per share, the average estimate of six analysts surveyed by Thomson Financial.

Earnings for the quarter were hurt by a 15 percent decline in cooling degree days, Pepco said. Sales were also tempered as customers conserved energy amid rising energy prices.

Shares of the company shed 6 cents to $25.28 in morning trading on the New York Stock Exchange.

Thursday, November 02, 2006

Cascade Natural Gas Corp. said on Thursday that it has canceled a fourth-quarter conference call scheduled for Nov. 16 and has postponed its annual meeting in February due to a pending merger with MDU Resources Group, Inc.

The company said that fourth-quarter earnings will be released Nov. 15.

U.S. supplies of natural gas fell last week but remain above their average level for this time of year, the Energy Department said Thursday.

Inventories declined by about 9 billion cubic feet in the seven days ending Oct. 27. That`s unusual because normally at this time of year inventories of natural gas are rising, the department said.

However, despite that decline, the nation`s supply of natural gas is about 9 percent above its five-year average.

Further, current natural gas inventories exceeded last year`s level by 288 billion cubic feet and the five-year average by about 276 billion cubic feet.

'This is the earliest weekly withdrawal approaching the heating season since 1994 when the weekly data series began,' the Energy Department said in a statement. 'The only other instance of a withdrawal in October was reported for the week ending October 31, 1997. Unusually colder-than-normal temperatures that prevailed during the report week in large sections of the country likely contributed to the withdrawal from working gas stocks as the unseasonably cool temperatures would have increased heating demand for natural gas.'

Working gas in storage was 3,452 Bcf as of Friday, October 27, 2006, according to EIA estimates. This represents a net decline of 9 Bcf from the previous week. Stocks were 288 Bcf higher than last year at this time and 276 Bcf above the 5-year average of 3,176 Bcf. In the East Region, stocks were 99 Bcf above the 5-year average following net withdrawals of 14 Bcf. Stocks in the Producing Region were 121 Bcf above the 5-year average of 887 Bcf after a net injection of 4 Bcf. Stocks in the West Region were 56 Bcf above the 5-year average after a net addition of 1 Bcf. At 3,452 Bcf, total working gas is above the 5-year historical range.
Natural gas producer and pipeline company Williams Cos. Inc. (NYSE WMB) on Thursday reported higher third-quarter earnings on increased natural gas output and sales margins.

Net income rose to $106.2 million, or 18 cents a share, from $4.4 million, or 1 cent a share, a year earlier.

Earnings from continuing operations were $172.4 million, or 28 cents per share, beating analysts' average forecast of 26 cents per share, according to Reuters Estimates.

Williams also raised its expectations for full-year recurring consolidated segment profits after mark-to-market accounting adjustments to a range of $1.8 billion to $2.02 billion from $1.69 billion to $2.01 billion.

Wednesday, November 01, 2006

Independent oil and gas explorer Devon Energy Corp. on Wednesday said its third-quarter earnings fell 5 percent, due mostly to lower natural gas prices and greater operating expenses.

Quarterly earnings after paying preferred dividends decreased to $703 million, or $1.57 per share, from $742 million, or $1.63 per share, during the same period last year.

Excluding special items totaling $38 million, or 9 cents per share, related to the use of derivatives and a reduction in the carrying value of oil and gas properties, the company earned $1.66 per share, in the latest period.

Analysts polled by Thomson Financial forecast a profit of $1.52 per share. Thomson estimates usually exclude special items.

Revenue grew less than 1 percent to $2.72 billion from $2.7 billion during the same period a year ago, but came in above analysts' estimate of $2.65 billion.

The company said its realized price for natural gas shrank 21 percent to $5.62 per thousand cubic feet in the quarter, compared woth $7.13 per thousand cubic feet in the year-ago period. Devon Energy said it also incurred higher operating expenses, such as higher oil field service and supply costs, lease operating expenses, higher production taxes and greater labor costs.

Devon Energy drilled 740 wells in the period, with 731 successful. Combined oil, gas and natural gas production in the quarter averaged 602,000 oil equivalent barrels per day, an increase of 1 percent versus last year.