 Peru’s Surging Natural
Gas Business
Peru's phenomenal economic growth 12/5/08 energytribune.com
In recent years economic growth has
boosted the country's prominence in Latin America. It has also caused
more than a few headaches for government planners, as energy demand has
expanded faster than expected. Inadequate transmission and natural gas
pipeline capacity has further exacerbated the problem, putting Peru
under threat of power outages and forcing generators to increase
imports of high-cost diesel.
If the government is to be believed, the problem will be short lived,
as projects are underway to increase generation and transmission
capacity and expand natural gas pipelines. But the current energy
crisis will have long-lasting consequences, as it has forced the
country to rethink how best to take advantage of its newfound natural
gas wealth. It's becoming increasingly clear that Peru will not expand
its natural gas export program beyond the one liquefied natural gas
project that is on track to start operations in about a year.
peru_nat_gas_locomotive_by_ECI_Tacoma_WA.jpg
 That's not to say,
however, that the LNG project is under threat, as work is proceeding on
schedule to start operations in the first half of 2010, according to
the project leader, Dallas-based Hunt Oil. And a key part of the puzzle
fell in place earlier this year when the project consortium, which
includes SK Energy of South Korea with a 20 percent stake, Spain's
Repsol YPF (20 percent) and Marubeni of Japan (10 percent), secured
$2.25 billion in loans for the $3.8 billion initiative. When complete,
the LNG terminal will boast nominal capacity of 4.45 million tons per
year with a daily supply of 625 million cubic feet transported through
a 34-inch, 254-mile pipeline.
Meanwhile the project's upstream portion is progressing well. In
October, the E&P consortium Consorcio Camisea started production
from the Pagoreni well in Block 56. Led by Argentina's Pluspetrol, the
consortium aims to continue drilling in coming years to ramp up output
to 1.8 billion cubic feet per day from the current 1.22 Bcfd.
Hopefully the Camisea consortium's upstream success will continue in
coming years, as the government plans to change its deal and set aside
production from the nearby Block 88 for domestic use. That would force
the LNG project to rely exclusively on Block 56 for supply. The
government decision, which would violate an agreement it has with the
consortium, reflects Peru's increasing concern that fast-growing demand
for natural gas could outstrip supply in coming years.
The government is largely behind the soaring demand, as it has tried to
promote the use of domestic gas in the Peruvian economy. The state
provides incentives to convert cars to run on vehicular natural gas,
which in October this year was running about 30 percent cheaper than
gasoline. And the government has kept natural gas prices low at less
than $5 per million Btu, thereby encouraging generators to build
natural gas-fired capacity rather than hydro. The government is also
expanding the use of gas for petrochemical production.
Meanwhile, the government in September 2008 awarded a group led by New
York-based private equity investment firm Conduit Capital Partners to
build a $1.2 billion pipeline to transport Camisea gas 675 miles to the
port city of Ilo on the Pacific coast. And Peruvian transport company
TGP is investing to expand existing capacity and relieve the natural
gas bottleneck to existing generators by the second half of 2009.
The LNG consortium is not likely to put up much of a fight against the
government, as it's widely believed there is more than enough gas in
block 56 to supply the export contract. In fact, the original deal for
gas exports only included block 56 but was later expanded to include 88
to give the export consortium peace of mind.
But previous hopes of expanding the export project to include
additional trains are becoming increasingly unrealistic, as the state
clearly wants to keep as much gas as it can to itself. Peru undoubtedly
will become South America's first LNG supplier, with much of its output
heading for Mexico or California. But it is unlikely to be a major part
of the global export trade for the foreseeable future.
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Marcellus shale gas INDIANA County XTO agreement
At last week's meeting, the commissioners announced they
reached an agreement with XTO Energy of Forth Worth, Texas, for
possible drilling of natural gas on Indiana County Airport property.
Ruddock said the county was contacted about a month and a half ago by
XTO about the possibility of drilling on the property. The county
negotiated a 15 percent royalty rate for all the gas taken from that
area.
XTO is hoping to recover gas from the deep Marcellus shale layer, which
is believed to contain a vast amount of untapped resources of natural
gas.
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Bahraini MPs to
Promote Vehicles Import Using Gas
Suad Hamada 5 December 2008 MANAMA
Five Bahraini lawmakers will promote the import of vehicles using gas
instead of petrol to protect the environment. The lawmakers said
efforts would be made to convert at least 10 per cent of vehicles in
Bahrain to gas from petrol in the coming five years. MPs from Al Wefaq,
the largest bloc in parliament, tabled a proposal calling for steps to
be taken by the government to promote investment in importing vehicles
using gas.
In their proposal, the lawmakers said the gas-using vehicles are the
best to combat pollution. They are fuel-efficient,
environmentally friendly and are cheaper to maintain.
Lawmakers call upon the government to charge lower customs fees for
such cars compared to other vehicles as well as establish gas-filling
stations at appropriate places. They said those with low and
limited income could buy vehicles fitted with gas-based engines as the
cost of natural gas is much low as compared to diesel and petrol.
They also stressed its importance in protecting the environment.
According to the proposal, such vehicles use compressed natural gas or,
less commonly, liquefied natural gas as a clean alternative to other
automobile fuels.
There are more than 7
million gas-based vehicles plying in different parts of the world.
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LA-LB
tests CNG trucks
December 4, 2008 The JOURNAL of COMMERCE ONLINE
The ports of Los Angeles-Long Beach have launched a 12-month
demonstration of compressed natural gas-fueled drayage trucks. Four
heavy-duty CNG trucks on Tuesday began moving containers between the
San Pedro Bay ports and nearby freight-consolidation yards. Their
engines are certified to meet the Environmental Protection Agency's
stringent 2010 on-road emission standards, reducing nitrogen-oxide
emissions by 80 percent compared to the 'cleanest' diesel truck.
The test is
co-sponsored by Southern California Gas Co. and the South Coast Air
Quality Management District.
The ports on Oct. 1 launched a clean-trucks program aimed at
reducing harmful emissions by 80 percent by 2010. The overall
cost of the demonstration project is about $1.7 million. The ports each
contributed about $112,000, with $1.1 million from the gas provider and
$421,000 from the AQMD.
Cal Cartage, the largest motor carrier operating at LA-Long Beach, will
operate the natural gas-powered trucks, which are manufactured by
Autocar and powered by Cummins Westport ISL G engines.
Following the initial demonstration, Southern California Gas hopes to
further reduce emissions from the CNG drayage trucks by switching to a
CNG/hydrogen blend. The blended fuel is seen as a key to hydrogen's use
in the transportation sector, since it reduces nitrogen-oxides
emissions from natural gas engines by as much as 50 percent.
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Quebec Shale Gas
Well Questerre Drilling
Results
Questerre Energy Corp. 12/4/2008
Questerre has announced today that the operator has completed drilling
of the La Visitation-1 well in the St. Lawrence Lowlands, Quebec.
The well was drilled to target depth of 2770m and logged to evaluate
the Utica and Lorraine shale/siltstone zones as well as the carbonates
of the Trenton Black-River Group. Based on an analysis of the logs, the
well has been cased for shale gas testing, which will be undertaken
when equipment is available.
Michael Binnion, President and Chief Executive Officer of Questerre,
commented, "Drilling results were encouraging as we encountered several
naturally fractured intervals in the Lorraine and Utica and promising
gas shows."
Drilling operations on the next well, St. David, are expected to
commence later this month.
Questerre also reported on the status of re-completion operations on
the Gentilly-1 vertical well. Following the stimulation and 800 mcf/d
test from the Utica, two intervals in the shallower Lorraine horizon
were also fracture stimulated. The clean up and flow-back of these
intervals has been delayed due to operational issues with a packer. The
preliminary results from this well are expected in early 2009. Results
from the two stimulated horizontal wells on the Yamaska permits are on
schedule for release by year-end.
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Alabama shales Energen to pursue elusive
By OGJ editors HOUSTON, Dec. 1
Energen Corp., Birmingham, Ala., plans further tests in 2009 of
Conasauga and Chattanooga shales in Alabama without partner Chesapeake
Energy Corp., Oklahoma City.
A three-well test program this year "generated neither positive nor
conclusive results," said Energen, which plans to detail the results in
a conference call Tuesday morning. The 2009 tests may include
drilling more wells, testing alternative completion techniques, and-or
completing other zones, Energen said.
Chesapeake chose not to participate due to financial considerations,
opportunities presented by other known shale plays, and lack of
positive results, but Energen has the financial capacity to pursue the
plays on its own and will proceed in a low-risk manner, the company
said.
Energen has a 330,000-acre
net lease position in the shales.
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