TPT July 2011

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Global Marketplace
As reported by Business News Americas (1 April), domestic energy
costs have nearly doubled over the last six years, making the cost
of electric power in Brazil the third most expensive in the world. Mr
Spalding said, “That hinders investment. And, if nothing is done over
the next 10 years, the cost of power for industries will increase by
another 20%.”
The ABAL executive noted that, in 2003, energy represented
33% of Brazilian aluminium production costs of $1,069 per ton.
In 2008, energy accounted for 44% of production costs totalling
$1,991 per ton.
Oil and gas
After a slow period for American
chemicals producers, shale gas
extraction is proving a boon
“Shale gas has transformed the US energy market in the last four
years, unleashing a huge supply of cheap, relatively clean fuel
on the North American market at precisely the time many people
thought we’d be importing liquefied natural gas from overseas.”
Writing in Forbes, senior editor Daniel Fisher noted that the new gas
supply has disrupted the renewable-energy market and provided a
comforting ceiling to electricity prices. He also identified a beneficiary
that has largely escaped notice: the US chemicals industry, whose
fortunes had been dim for the better part of a decade. (“Shale Quietly
Enables US Chemicals Renaissance,” 9 April)
Defying the expectations of all but a handful of exponents of
unconventional technologies, two of the world’s three largest gas
fields ― the Marcellus Shale spanning Pennsylvania and New
York, and the Barnett Shale in Texas ― have come on line since
2008, and shale gas is expected to supply 45% of the US market
by 2025. Already, improvements in the technology of shale gas
extraction (directional or horizontal drilling; and “fracking,” fracturing
dense rocks and drilling vertical wells that turn and run horizontally
underground) have gas supplies growing faster than storage
capacity.
As a result, one high-ranking chemicals executive told Forbes,
the outlook is now surprisingly rosy for his notoriously low-margin
business. Mr Fisher explained: “With a steady supply of raw
materials, whether it’s NGL [natural gas liquids] feedstocks or simply
gas as a heat source for industrial processes, manufacturers can
take this dollar-denominated commodity, transform it to a higher
value, and export it to countries whose currencies are rising.”
› Currently there is only one US facility for the training of
pipeline inspectors, in Oklahoma City. With the huge boom in
Marcellus Shale gas drilling, much of it in the southwestern part of
Pennsylvania, construction of a new training facility for natural gas
pipeline inspectors is being discussed for that area. As reported
by the Pittsburgh Post-Gazette (11 April), the state’s Public
Utility Commission told the governor’s Marcellus Shale Advisory
Commission that the PUC needs more than the eight inspectors
now monitoring thousands of miles of underground natural gas
pipeline.
Tom Barnes of the Post-Gazette noted that the PUC also conducts
inspections for the federal Pipeline and Hazardous Materials Safety
Administration, a division of the US Department of Transportation
that has only 132 inspectors to cover the entire country.
Of related interest . . .
› The 19 April meeting of Idaho’s Oil and Gas Conservation
Commission ― its second in two months ― was also the
second to be held in 18 years. As noted by George Prentice in the
Boise Weekly, the accelerated schedule and the standing-room-only
attendance reflect a burgeoning interest in natural gas exploration in
the Pacific Northwest state.
The session considered the application of Bridge Resources
(Denver, Colorado) to conduct what it calls “mini-fracking,” a process
of shooting liquids and sand down its wells at high pressures to
enhance natural gas flows. The commission, which until recently
had little to say about well treatments, voted unanimously to adopt
temporary rules for the process, using Wyoming’s regulations as a
base model. Mr Prentice reported that Bridge, whose wholly-owned
UK subsidiary is Bridge North Sea Limited, “is planning a busy
summer in the wake of [the] vote.”
› Exxon Mobil Corp (Houston, Texas) said its first-quarter
earnings surged 69% as a benefit of high oil prices, stronger
refining margins, and a rise in natural gas production. The results
posted by the world’s largest publicly traded oil company reflected
the recovery from recession of the broader American energy sector,
which seems poised for a return to boom conditions. Other US oil
companies also reported soaring profits.
› As their spending on exploration and production rises by more
than half over the next three years, US drilling companies such
as Nabors Industries, Helmerich & Payne, and Patterson-UTI Energy
will also see demand for their services go up. This is the expectation
of analysts with the Australian financial services company Macquarie
Capital, as outlined in an 8 April report. The analysts also look for the
number of onshore horizontal rigs to rise by more than half.
High oil prices are spurring demand in the US for oil produced
offshore and overseas, tending to confirm Macquarie’s bright
outlook for diversified oil services companies such as Halliburton. As
the recovering American economy boosts the demand for gasoline,
energy companies will be seeking to extract more fossil fuels ― good
news for companies that own the rigs needed to reach domestic oil
and gas.
Dorothy Fabian, Features Editor (USA)
Shale has offered an unexpected source of gas to the US market