China stakes claim to S. Texas oil, gas
HOUSTON — State-owned Chinese energy giant CNOOC is buying a multibillion-dollar stake in 600,000 acres of South Texas oil and gas fields, potentially testing the political waters for further expansion into U.S. energy reserves.
With the announcement Monday that it would pay up to $2.2 billion for a one-third stake in Chesapeake Energy assets, CNOOC lays claim to a share of properties that eventually could produce up to half a million barrels a day of oil equivalent.
It also might pick up some American know-how about tapping the hard-to-get deposits trapped in dense shale rock formations, analysts said.
As part of the deal, the largest purchase of an interest in U.S. energy assets by a Chinese company, CNOOC has agreed to pay about $1.1 billion for a chunk of Chesapeake’s assets in the Eagle Ford, a broad oil and gas formation that runs largely from southwest of San Antonio to the Mexican border.
CNOOC also will provide up to $1.1 billion more to cover drilling costs.
The deal represents China’s second try at making a big move into the U.S. oil and gas market, following a failed bid five years ago to buy California-based Unocal Corp.
Intense political opposition over energy security concerns derailed that $18.4 billion deal. But analysts expect few political or regulatory hurdles to the CNOOC-Chesapeake deal.
“The climate is much more hospitable now,” said Juli MacDonald-Wimbush, a partner with Marstel-Day, an energy and environmental security consulting company in Fredericksburg, Va.
Amid low natural gas prices and a largely difficult drilling climate, she said highly liquid Chinese companies will find willing partners among onshore oil and gas companies hurting for capital to drill.
“They have the cash, and energy companies in the U.S. are looking for the cash to develop these reserves,” MacDonald-Wimbush said.
Aubrey McClendon, CEO of Oklahoma City-based Chesapeake, said he has not heard objections to the sale.
Unlike China’s Unocal bid, the latest deal doesn’t involve technology transfers or a direct investment in Chesapeake, he said, and CNOOC employees won’t work for Chesapeake, which will continue to operate the project.
“This is a pretty simple business transaction,” McClendon said. “The initial feedback we’re getting is that this is something the government should be very happy to see, which is the return of American capital into our country so that we can use it to create high-paying American jobs and also reduce oil imports a few years down the road.”
He projected that the sale would create as many as 20,000 jobs, directly and indirectly, and, on CNOOC’s dime, allow the company to increase its rig count in South Texas from 10 rigs to about 40 by the end of 2012.
Analysts have suggested that much of CNOOC’s interest is in gaining technical insight. Gas and oil locked in the nation’s plentiful shale formations is abundant but difficult to extract.
The deposits, known as unconventional plays, have attracted growing interest in recent years because of improved technology in hydraulic fracturing, which frees hydrocarbons by pumping fluid and sand into reservoirs to crack the rock.
Chesapeake, one of the nation’s largest independent oil and gas companies, was an early mover in the shales, leasing up land aggressively this decade.
“From the Chinese perspective, this is a golden opportunity for them. They have identified shale resources in China, but they don’t have the knowledge or technical expertise to go after those resources,” said Ken Medlock, a fellow at Houston’s Baker Institute and adjunct professor in Rice University’s economics department.
McClendon disputed that notion, saying hydraulic fracturing is now “off-the-shelf technology” available to anyone.
Also underlying the move is China’s need to find new energy sources and the technology to develop them to feed its expansive economic growth.
Energy consumption in the world’s most populous nation has doubled in less than a decade, and the International Energy Agency reported in July that China surpassed the U.S. in total energy used in 2009.
China has increasingly been looking to the Americas for raw materials it needs to sustain the boom. As private investment dwindled with the global financial crisis, the cash-flush Chinese went on a regional shopping spree.
“It’s really kind of exploded. All of a sudden, you’ve started to see a lot of large-scale purchases,” said Evan Ellis, an expert on China’s involvement in the region who teaches at the Center for Hemispheric Defense Studies in Washington. “Basically Latin America is becoming a Pacific-oriented region.”
China has poured some $20 billion in loans and direct investments into Brazil’s offshore oil exploration and production, for example. And last spring, the Chinese government loaned $20 billion to Venezuela to develop oil fields in its Orinoco River basin, with much of the work awarded to Chinese companies.
Tom Fowler contributed to this report from Houston, Jennifer A. Dlouhy from Washington and Dudley Althaus from Mexico City.
http://www.mysanantonio.com/business/local/China_stakes_claim_to_S_Texas_oil_gas_104753969.html
BLM moves on Round 2 of Colo, Utah oil shale deals
DENVER (AP) - Nominations for three more leases of federal land in Colorado and Utah for oil shale research are advancing for more review, the Bureau of Land Management said Wednesday.
The announcement raised an outcry from an environmental group that says an initial round of six leases awarded in 2007 has yet to produce meaningful research.
Oil shale resources in deposits in Colorado, Utah and Wyoming hold an estimated 1.5 trillion barrels of recoverable oil, the BLM has said, but companies are still trying to find a commercially viable way to extract the petroleum.
The latest round of potential research leases involves nominations by Exxon Mobil Corp. and Natural Soda Holdings Inc. for land in Colorado and by AuraSource Inc. for land in Utah.
A team of representatives of the governors of Colorado, Utah and Wyoming; the Colorado School of Mines; and the Department of Energy evaluated the nominations for economic viability, technical ability and plans for managing environmental impacts before recommending that all three advance, the BLM said.
This time around, the amount of land up for grabs shrank from 5,120 acres to 640 acres under a 10-year lease term. There are also reporting requirements regarding impacts to water and climate, plus deadlines for lessees to move ahead with development plans.
Colorado Gov. Bill Ritter said the process would answer help questions about the feasibility of technologies for recovering shale oil, how the environment and communities would be affected, and how much of the states' scarce water resources might be used.
"As I have always maintained, these questions must be answered before oil shale research can transition to commercial development," the Democratic governor said in a written statement.
Western Resource Advocates said more leases aren't needed yet.
"There already are ample lands to test these technologies, and the existing first round of research leases are stuck in neutral," said David Abelson, oil shale policy adviser for the group. "Let's let those play out first and see the information which is gleaned from that research before we start committing additional public resources for this type of research."
Exxon Mobil wants to test its own technology, though, and wasn't part of the first round.
"A phased leasing program offers a balanced, gradual and protective approach that promotes the development of a wide range of technologies to maximize recovery and minimize environmental impacts," said Patrick McGinn, a spokesman for the company.
Representatives for AuraSource and Natural Soda didn't return calls seeking comment Wednesday.
The state reviews of the latest nominations could take up to 18 months. The process will include an opportunity for public comment.
"The BLM is committed to careful consultation with all affected stakeholders in the oil shale process, including states, counties and tribes," BLM Director Bob Abbey said in a written statement. "The analysis that our states will now conduct will help us chart a wise path for western shale oil resources."
http://www.wtopnews.com/?nid=111&sid=2078306
Gold Settles at Record High Above $1,370
Gold settled up to end above $1,370 an ounce on Wednesday, boosted by worries over dollar depreciation after the Federal Reserve signaled it will start buying government debt again to stimulate the economy.
Gold prices have rallied 25 percent so far this year as investors sought safe havens while the Fed and other central banks profess readiness to inject more money into the financial system.
Silver hit a 30-year peak to approach $24 an ounce, and the Reuters/Jefferies CRB index — a barometer for commodities — rose above 300 points for the first time in two years, as the dollar fell broadly on reinforced expectations of more U.S. easing.
Axel Merk, portfolio manager of the Merk Hard Currency Fund, said that the Fed and other central banks are trying to weaken their currencies to boost economic growth, prompting investors to turn to gold as an alternative currency.
"With the weaker dollar, inflation will pick up in the commodity space, which is the most sensitive to monetary stimulus. So, it's only logical that gold will do very well in that environment," said Merk, who manages $500 million in mutual fund assets.
Spot gold [XAU=X 1372.3 1.40 (+0.1%) ] hit a peak of $1,374.15 an ounce and was last bid around $1,371, against $1,349.60 late on Tuesday.
U.S. gold futures [GCZ0 1373.5 3.00 (+0.22%) ] for December delivery settled up $23.80 to end at $1,370.50 an ounce.
Silver [XAG=X 24.03 0.14 (+0.59%) ] hit $23.94, its strongest level since 1980, and was last up 2.8 percent at $23.93 an ounce.
The dollar remained a main short-term driver of gold, with the currency coming under selling pressure as market expectations grew that further Fed easing was imminent.
"Because we are in a world of quantitative easing in the developed economies, and as QE is almost synonymous with competitive devaluation ... gold and the precious metals (are) taking on the function of an alternative currency," said Ashok Shah, chief investment officer at London and Capital.
"As we go into the next 1-4 quarters, the role of precious metals as alternative currency will become much more paramount," he said. "The role of gold as an inflation hedge is not important now, but it may become important in the next cycle when the time to reverse quantitative easing comes."
The correlation between gold and the U.S. dollar was near a negative 0.6, its most pronounced in six months on a 25-day rolling basis, Reuters data showed.
Asian Demand Up
Asian dealers said physical demand remains strong, and scrap selling is scarce, as market players bet on a further rally in prices.
Edel Tully, precious metals strategist at UBS, said the bank's physical sales to India were above the year-to-date average ahead of Diwali, a key period for Indian gold buying.
Meanwhile, spot palladium rose as much as 2.5 percent to a one-week high of $594.50 an ounce, aided by the weaker dollar and evidence that investors are continuing to buy into one of the top performing commodities of 2010.
Outstanding shares in ETF Securities' U.S.-listed palladium exchange-traded fund, the world's largest palladium ETF, staged their largest one-day rise in six months on Tuesday, indicating strong inflows of the metal.
With palladium up 45 percent so far this year and close to its highest in over nine years, the platinum-palladium ratio, or the number of ounces of palladium used to buy an ounce of platinum, fell to 2.87, its lowest in more than six years.
Palladium was last near $587.93 an ounce, and platinum was last quoted around $1,696.50 an ounce.
http://www.cnbc.com/id/39641282
No comments:
Post a Comment