www.cedigaz.org by ConstancioSilva

N° 92 – September 2014

Main News

COALBED METHANE Indonesia • Indonesia’s state energy firm Pertamina will seek to renegotiate the terms of its agreements with

government for exploiting coal bed methane. SHALE GAS South Africa • South Africa’s Mineral Resources Minister Ngoako Ramatlhodi said recently that the state is looking to

drill for shale gas itself. Pakistan • Drilling for shale likely to begin in Pakistan next year. China • Sinopec Corp and PetroChina have upgraded their outlook on the country's shale gas industry, citing

steadily declining costs, but stopped short of predicting a near-term boom.

India • India's ONGC likely to start commercial shale drilling next year. United Kingdom • Ineos has bought rights to explore for shale gas in the area surrounding its Grangemouth refinery

complex in Scotland. Poland • Poland will invest about $1.57 billion in shale gas exploration by 2016. China • Water shortages pose a huge hurdle to China's development of its shale gas reserves. United Kingdom • Shale gas exploration in the U.K. lacks adequate regulation to protect public health and the environment

including water shortages. TIGHT GAS Pakistan • The production of tight gas has started from Zarghun South Block in Balochistan with initial flows from

the field stated to be 4 mmcfd.

UGas - 92

CBM

EXPLORATION

INDONESIA:

Indonesia's Pertamina seeks renegotiated terms for CBM development

Indonesia’s state energy firm Pertamina will seek to renegotiate the terms of its agreements with government forexploiting coal bed methane. “We have to meet to discuss either a better pricing deal or larger share in theproduction sharing contract,” the newspaper quoted Pertamina’s upstream director Muhamad Husen as saying.

Pertamina has witnessed discouraging results from its CBM assets in in South Sumatra’s Muara Enim district duringthe two years of exploratory drilling. Husen said the estimated reserves were only half of what was expected, JakartaGlobe reported. CBM development has also been hampered by the problems of land acquisition and slow permitissuance, Husen added.

Pertamina holds contracts to exploit CBM resources in four blocks of Muara Enim district, with participating interestsranging from 45% to 73%, the newspaper said.

In 2008 the Indonesian government started development projects on unconventional gas with the aim of producing500 million standard cubic feet of natural gas per day by 2015. Current output stands at less than 1 mmscfd. Thegovernment has since revised its objective downward to only 8.9 mmscfd. (September 2, 2014)

09/10/2014

UGas - 92

PRODUCTION

INDIA:

Essar expects to boost CBM output from its Bengal block

Essar Oil plans to increase CBM production from its flagship Raniganj block in the Indian state of West Bengalfive-fold in the next year, according to Business Standard newspaper. Currently, the company has 137 wellsproducing 220,000 scmd, expected to rise to 1.2 million scmd by mid-calendar year 2015. According to BusinessStandard, the company is selling the gas at an average price of $10 (mBtu top local customers in and aroundDurgapur through cascades and pipelines.

In December last year, Greka Drilling and Essar Oil signed a $65 million contract where Greka will provide turnkeyand allied services to Essar in India. Earlier this month Greka announced that further progress has been madefollowing mobilization orders from Essar Oil in relation to the contract for 100 wells to be drilled in latter’s RaniganjEast coal bed methane block in Durgapur.

Five GD75 rigs are at present being prepared for drilling at designated well sites. Two of the rigs are at present nowfully erected and will begin drilling shortly. The remaining three rigs are still mobilizing to the Essar pre-prepareddrill sites. The first wells will be spud in mid-September, commencing the 100 well programme for Essar, Greka said.The drilling campaign is expected to last about 12 months.

Essar holds five CBM blocks, with an area of 2,700 sq km and prospective resources of about 10 trillion cubic feet.Raniganj is the first of five CBM blocks Essar holds, which it has put on stream. (September 7, 2014)

09/09/2014

UGas - 92

SHALE GAS

EXPLORATION

WORLDWIDE:

40% of countries with largest shale energy resources face water stress

Right now, dozens of countries around the world are deciding whether or not to develop their shale gas and tight oilresources. It’s easy to understand why: shale gas could boost the world’s recoverable natural gas resources by 47percent, cut greenhouse gas emissions compared to coal, create new revenue and jobs, and raise national energysupplies.

However, extracting natural gas and tight oil from shale poses environmental risks, especially when it comes to water.Hydraulic fracturing requires up to 25 million liters of fresh water per well, meaning shale resources can be hard todevelop where fresh water is hard to find—including in some of the world’s fastest-growing economies andpopulations.

Water stress at shale plays around the world. 20 labeled countries have the world’s largest technically recoverableshale gas resources. Circle color indicates average water stress level across a country’s shale plays—circle sizeindicates overall volume of recoverable shale gas resources.

As interest in shale resources grows, the time is ripe to understand these constraints and act to mitigate risks tocompanies, farms, and people around as-yet undeveloped shale plays. A new WRI report, Global Shale GasDevelopment: Water Availability and Business Risks, analyzes water availability across all potential commercial shaleresources worldwide for the first time, and shows that limited water availability could pose challenges to shaleresource development on six continents.

In the 20 countries with the largest shale gas and tight oil resources, WRI analyzed the level of water stress acrossevery play in each country. For shale gas, we found plays in 40 percent of those countries face high water stress orarid conditions: China, Algeria, Mexico, South Africa, Libya, Pakistan, Egypt, and India.

But water availability and shale resources vary from country to country, making hydraulic fracturing’s promise andperil unique in almost every location. For instance, China has the world’s largest commercially viable shale gasresources.

But over 60 percent of those resources are in areas with high water stress or arid conditions—a worrying fact given thecountry’s existing environmental concerns.

Compare China to other countries, and the complexity of this water-energy trade off becomes clear. Argentina isshale rich, with the world’s second-largest technically recoverable shale gas resources. And we found only low tomedium stress for 72 percent of its shale resources. In countries like the United Kingdom, it’s more complicated. TheU.K. is Europe’s third-largest natural gas producer, but it’s densely populated, and 34 percent of its shale resourcesface high water stress.

In general, shale-energy production is vulnerable wherever surface or groundwater is limited. As water demandsincrease, other water users like farms and homes around these plays face higher competition for water. This couldpotentially spur water conflicts for the 386 million people who live on land above shale plays, particularly in regionswhere changes in precipitation and temperature could alter water supplies. (September 2, 2014)

09/02/2014

UGas - 92

SOUTH AFRICA:

South African minister says state interested in drilling for shale gas itself

South Africa’s Mineral Resources Minister Ngoako Ramatlhodi said recently that the state is looking to drill for shalegas itself, reports Independent Online, a local news website. “We should ensure that, should at some point the statewant to walk into the shale gas arena on its own, it should be possible for the state to do so, side by side with theprivate sector,” Ramatlhodi said.

Ramatlhodi said shale gas exploration regulations were “drafted and ready”, but declined to give a date when theywould be made public. He defined shale gas and off-shore oil and gas exploration as game changers in the country'sresource development history, reports Independent Online.

The South African government has introduced a bill that gives the state 20% in new gas and oil exploration andproduction ventures, with the option to increase that at an agreed price. (July 15, 2014)

07/16/2014

UNITED KINGDOM:

Sussex says ‘No’ to South Down fracking bid

An energy company’s bid to drill for shale oil and gas in the UK’s newest national park has been rejected. Therefusal has thrown into doubt the future of the fracking industry in southern England. On Thursday, September 2,11 officials on the planning committee of the South Downs National Park Authority voted unanimously to turn downan application by Celtique Energie to start exploratory drilling for shale oil as a precursor to fracking at Fernhurst inWest Sussex.

Margaret Paren, the authority’s chair, said: “The applicant has failed to demonstrate exceptional circumstances existand that it would be in the public interest for such exploration to take place within the protected landscape of theSouth Downs. Planning permission was also refused because of the adverse impact on the tranquility and amenity ofthe national park.”

Geoff Davies, Celtique Energie’s CEO, said: “The decision fails to take into consideration the importance of thisproject to the nation and the comprehensive steps Celtique would be taking to ensure that all exploration work wouldbe done sensitively during the very temporary period we would be working in the national park.”

The decision followed the planning officer's recommendation that Celtique had "failed to demonstrate exceptionalcircumstances exist for such exploration" in the protected landscape or that exploration would be in the publicinterest. (September 11, 2014)

09/12/2014

3rd China International Shale Gas Summit 2014 16th-17th October, 2014 I Beijing, China China’s Premier Shale Gas Event! Dear Colleague, Building on the massive success of the past 2 shale gas programs that has generated huge success by attracting 500+ industry players, and intriguing great enthusiasm and pursuit of China’s shale gas market, the 3rd China International Shale Gas Summit will be take place on October 16th-17th in Beijing China, which is Organized by Polaris and endorsed by CUCBM, Chinese Academy of Sciences, Energy Industries Council (EIC), CEDIGAZ, and WADE. And up to 300 delegates and 35 media partners are expected to attend over the 2-day festive event. On behalf of the Organizing Committee, we cordially invite you join this 2-day conference that will eventually benefit your business in China. And you can take this opportunity to be introduced to new business partners, business connections, renew acquaintances and catch up with friends at this exciting networking event. PROMINENT SPEAKERS under prior consideration Peng Qiming, Director of the Geological Exploration Department, Ministry of Land and

Resources Zhang Yuqing, Director of the Oil & Gas Department, National Energy Administration Howard K. Gruenspecht, Deputy Administrator, U.S. Energy Information Administration Michael Engell-Jensen, Executive Director, International Association of Oil & Gas Producers Joseph C. Geagea, Senior Vice President, Technology, Projects and Services, Chevron Guo Xusheng, General Manager, Sinopec Exploration Southern Company Yang Qingli, General Manager, CNPC Technical Service Company Zhu Weilin, Chief Geologist, China National Offshore Oil Corporation Maarten Wetselaar, Executive Vice President, Integrated Gas Business, Shell Zhang Tingke, Vice President, China Huaneng Group Zhang Xin, General Manager, Huadian Hubei Shale Exploration Company Usman Ahmed, VP and Chief Reservoir Engineer, Global Unconventional Resources Business

Unit, Baker Hughes Xian Chenggang, Principal Reservoir Engineer, Schlumberger Ronald W. Jibson, Chief Executive Officer and President, Questar Corporation Lamar McKay, Chief executive, Upstream, BP

KEY ISSUES to be discussed China's Shale Gas Policy Promises More Financial Support Shale Gas Development in China Shale Gas and Oil: Fundamentally Changing Global Energy Markets Shale Gas 'Revolution' in the United States: Global Implications, Options for Others Industry Players Eye Opportunities in China's Shale Gas Industry Investment Opportunities and Difficulties for Private Companies Entering into Shale Field Shale Gas Drilling and Fracturing Technology Shale Gas Reserves Evaluation Technology Shale gas equipment needs China Market Outlook & Leading Players’ Strategy Created by Official Partners

About organizer: China Polaris Consulting Company

China Polaris Consulting Company (Polaris) is one of China’s leading event companies, which has been

Successfully organized two shale gas events in Chongqing and Chengdu in 2012 and 2013, and more

that 500 senior executives have participated in this event. Polaris also organize event related to new

energy vehicles, rail and nuclear industries. We are dedicated to facilitating industry development and

helping our clients improve their performance by providing timely and cutting-edge information and world

class networking platform. We look forward to meet you in Beijing.

For more information please go to: http://www.ourpolaris.com/2014/cisgs. Or Contact: Michael NI: Tel: +86 755 2306 4858 Email: michael.ni@ourpolaris.com

UGas - 92

DENMARK:

Danes in favour of shale gas

A majority of Danes think that shale gas should be part of Denmark’s energy future should upcoming exploratorydrilling reveals a treasure trove of natural gas, according to a survey conducted by Jyllands-Posten and the researchfirm Wilke. More than half of Danes surveyed supported exploiting shale gas in the future as an energy supply,while a quarter said no, and the remaining group chose 'do not know' as their response.

Radikale environmental spokesperson Lone Loklindt believes that environmental considerations should be givenhigh priority.

The value of any shale gas in Denmark remains to be seen. Frederikshavn council recently agreed to drill the first testwells in conjunction with the French company Total and the state’s oil company, Nordsøfonden. They will attempt todetermine if extracting Danish shale gas is economically viable.

Several green organisations have claimed that support for shale gas is contrary to the government’s stated plans for afossil-free Denmark by 2050. Greenpeace expressed disappointment with the embracing of fracking. "It shows thatthere has not been an adequate public debate on shale gas and the basic environmental problems,” saidGreenpeace climate and energy expert Tarjei Haaland. (July 24, 2014)

07/24/2014

PAKISTAN:

Drilling for shale likely to begin in Pakistan next year

Federal Minister for Petroleum and Natural Resources Shahid Khaqan Abbasi announced recently that thegovernment is working on a shale gas policy framework and drilling for this yet-to be- explored energy source will startnext year, The Express Tribune newspaper reported.

The minister said that some energy companies were interested in venturing into the exploration of shale gas. He wasspeaking at the signing of an exploration licence and petroleum concession agreement for the Karak North block withTallahassee Resources in Islamabad.

Earlier this year the newspaper had reported that Zaver Petroleum Corporation, an oil and gas exploration firm and apart of Pakistan’s Hashoo Group is eyeing investment in country’s oil and gas sector, especially shale gas. In January,Eni and Pakistan discussed the need of enhancing country’s gas production by exploiting shale gas.

Pakistan has been facing severe energy shortage for last few years and is trying to source natural gas from varioussources. It has been in discussion with Qatar to import LNG. Pakistan is also working to get gas from Iran through theproposed Iran-Pakistan pipeline project, which at the moment is stuck due to US sanctions on Tehran, although Iranhas completed the section of pipeline that lies on its soil. (August 25, 2014)

08/26/2014

UGas - 92

CHINA:

Drilling furiously: Chinese energy giants turn upbeat on shale gas

Sinopec Corp and PetroChina have upgraded their outlook on the country's shale gas industry, citing steadilydeclining costs, but stopped short of predicting a near-term boom.

China, estimated to hold the world's largest technically recoverable shale resources, is hoping to replicate the shaleboom that has transformed the energy landscape of the United States. Industry experts caution that it would be muchmore difficult for China to monetise its shale gas reserves than the U.S. as it faces serious challenges from watershortages to complicated geological structure and a lack of infrastructure. But top executives at China's two biggestenergy companies conveyed a bullish assessment of the country's shale gas potential this week, citing rapidly fallingdrilling costs and rising domestic gas prices. That's a far cry from two years ago when they overwhelminglyfocused on the hurdles faced by China. "It took the U.S. nearly four decades to achieve large-scale production. Weare at the early stage, but we don't need to spend three decades. Cost will come down sharply," Sinopec ChairmanFu Chengyu told recently.

The cost of shale gas drilling at Sinopec's Fuling field in southwestern China – the country's largest shale gas project- has been falling steadily to about 60 million yuan ($9.8 million) per well, Fu said. That is still double the averageshale gas drilling cost in the U.S. but represented a significant fall from 100 million yuan in China just several yearsago, analysts say. Fu said he expected costs to decline to 50 million yuan per well within three to five years. Butsome shale gas experts say the Fuling success is hard to repeat due to its unique geological structure.

At Fuling, where Sinopec is building the first phase of the project, the company aims to put in annual productioncapacity of 5 bcm by end-2015, Fu said. By end-2017, Sinopec will double it to 10 bcm. PetroChina's Wang said hiscompany will have annual shale capacity of 2.6 bcm by end-2015 and overtake Sinopec in terms of shale gas outputin the next few years. "We are confident we will have a breakthrough in shale gas development in China," he said.(August 29, 2014)

08/29/2014

INDIA:

Essar Energy planning shale gas development in India

Essar Energy is setting up plans to develop shale gas in India’s Gondwana region where it already has five coal bedmethane blocks. The emphasis would be on simultaneous development of the CBM and the shale gas blocks,according to Financial Chronicle newspaper. “We expect to get couple of blocks for shale gas that government plansto announce for development by the private players in the Gondwana region out of the six regions identified by thegovernment,” a company official told.

India is planning to devise a new gas price regime and the government will most likely announce a new gas priceformula by September end, country’s oil minister Dharmendra Pradhan recently stated.

He said a decision will be taken keeping in mind the interest of investors and public and a new formula will beannounced by September 30. Till then, the $4.2 per mmBtu price will continue.

Meanwhile, government has approved proposals of three coal bed methane (CBM) operators, which includes Essar,to charge prices equivalent to other domestic natural gas once a new gas price formula is approved, India has shalegas prospective reserves of around 2,100 tcf, out which recoverable reserves stand at around 96 tcf. (August 21, 2014)

08/26/2014

UGas - 92

INDIA:

India's ONGC likely to start commercial shale drilling next year

India’s public sector energy company Oil and Natural Gas Corp. Ltd (ONGC) aims to commence commercial drillingfor shale gas next year. “We hope to take up at least 10 wells for parameters this year and to start commercial drillingnext year,” chairman Sudhir Vasudeva told reporters. ONGC and Oil India have identified 56 shale gas blockswhich have potential to be explored, country oil minister Dharamendra Pradhan informed the parliament last month.

These blocks are located in the states of Assam (7 blocks), Arunachal Pradesh (1 block), Gujarat (28 blocks),Rajasthan (1 block), Andhra Pradesh (10 blocks) and Tamil Nadu (9 blocks).

ONGC has drilled one well where coring has been completed. In addition, ONGC has collected cores from another 7wells.

The Cabinet Committee on Economic Affairs (CCEA) approved the proposal of the Ministry of Petroleum and NaturalGas on the policy on exploration and exploitation of shale gas and oil by National Oil Companies (NOCs), namelyONGC and Oil India Limited, on acreages they already own.

According to U.S. Energy Information Administration India may have as much as 96 tcf of recoverable shale gasreserves. (September 30, 2014)

09/01/2014

UNITED KINGDOM:

Ineos joins search for shale gas in Scotland

Ineos has bought rights to explore for shale gas in the area surrounding its Grangemouth refinery complex inScotland, in the petrochemicals giant's debut move into the fracking industry. The company, which requires gas andgas by-products to run the plant, said recently that it had bought a 51% stake in the shale section of the PEDL 133licence area from BG Group for an undisclosed sum. The licence covers 127 square miles in the Midland Valley,spanning the Firth of Forth and including Grangemouth, Falkirk and much of Stirling. The remaining 49% of theshale section is owned by Dart Energy, which is in the process of being taken over by fracking firm IGas Energy.

No shale gas exploration has so far taken place in the area, but Dart estimates it could contain 4.4 tcf of gas. If 10%were recoverable, estimates suggest it could provide enough gas to meet Scotland's needs for more than ayear.

However plans to produce another type of gas, coal bed methane, in the area have already proved highlycontroversial.

Ineos has been a vocal supporter of the need for shale gas exploration in the UK after the decline in natural gasproduction from the North Sea left it struggling to secure supplies of ethane – a by-product of natural gas - as afeedstock for the Grangemouth petrochemicals site, pushing it to the verge of closure last year. The plant was savedafter Ineos decided to press ahead with building a $600m project to build an import terminal at Grangemouth tobring in cheap ethane produced from shale gas in the US.

step" for the company,…“over the last year Ineos Upstream has been drawing together a team of experts in the sector,including a number of leading shale exploration and development specialists from the US. This expertise gives usthe perfect platform to move into onshore exploration". (August 18, 2014)

08/26/2014

But it had made no secret of its desire to help push shale gas development in the UK and has been eyeing optionsfor direct involvement in recent months.

Gary Haywood, chief executive of Ineos Upstream, said the deal to acquire exploration rights was "a logical next

POLAND:

Poland to invest $1.6 billion in shale gas exploration by 2016

Poland will invest about Zloty 5 billion ($1.57 billion) in shale gas exploration by 2016, the country's treasuryminister Wlodzimierz Karpinski said recently.

"It's based on the search for our own raw materials and the maximum use of national resources. We want to takeadvantage of this opportunity for energy independence, which in Poland may derive from shale gas reserves, andthat's why state companies will invest not less than Zloty 5 billion in unconventional exploration to 2016," he added.

State-controlled energy companies PGNiG and PKN Orlen are leading shale gas exploration in Poland, which is themost advanced in Europe. Both domestic and foreign operators have drilled 65 exploration wells since mid-2010.However, the geology has proved more diff icult than originally predicted and none has yet flowed gas at acommercial rate.

Karpinski said the government has drafted a bill to speed up exploration for unconventional hydrocarbons. Thedraft law would shorten the statutory time limits for the consideration of upstream activities, establish regional leadersas the single decision makers in administrative matters and remove certain levels of bureaucracy.

The bill will be sent to parliament for review and a vote in the coming months. (August 27, 2014)

08/28/2014

UGas - 92

CHINA:

Shell to scale back Sichuan shale gas project

Royal Dutch Shell is thinking of scaling back its Sichuan shale gas project due to geological challenges and thearea’s dense population, news agency Bloomberg reported. In 2012, Shell and PetroChina, a subsidiary of ChinaNational Petroleum Corp. (CNPC), signed China’s first contract for the exploration, development, and production ofshale gas. The contract covers shale gas resources in the Fushun-Yongchuan block in the Sichuan basin.

According to news agency, Shell now plans to focus chiefly on the development of the Changbei tight gas field inthe Shaanxi region. “In Sichuan progress has been slower and more difficult than we might have hoped: partlygeological reasons, partly some of the challenges of operating in the very highly populated agricultural region,”Shell Chief Financial Officer Simon Henry told investors in New York. “It’s likely it will be smaller than originallyenvisaged.” (September 5, 2014)

09/09/2014

UGas - 92

PRODUCTION

CHINA:

Water shortage may cast doubt on shale extraction

Country has large reserves but location makes exploration difficult. Water shortages pose a huge hurdle to China'sdevelopment of its shale gas reserves, a report warned recently. The Washington-based World Resources Institutefound that 38% of global shale resources face high to extremely high water stress or arid conditions. Water iscritical in hydraulic fracturing.

"In China, we found large amounts of shale resources. However, most of these are located in areas of water stress,"Paul Reig, an associate at the WRI and the lead author, told a conference call. More than 60% of China's shaleresources are in areas of high to extremely high baseline water stress or arid conditions. This situation placesChina among eight of the top 20 countries with the largest shale gas resources that also face water constraints indeveloping those deposits. Baseline water stress refers to the ratio of total water withdrawals to available renewablesupply in an area.

According to the report, Global Shale Gas Development: Water Availability & Business Risk, the Sichuan play, nowChina's most commercially viable shale resource, combines areas of low and very high baseline water stress. Morethan 95% of the Tarim play in the Xinjiang Uygur autonomous region is subject to extremely high baseline waterstress or arid conditions. In the exploration industry, plays are formations with significant accumulations of natural gasthat have similar geologic and geographic properties.

These conditions pose major challenges for companies that want to develop these resources, which are also often inareas of high population density, the report said. "With many countries already facing arid conditions and high waterstress ... this report can help to ensure that there's enough water available for industries, farms and people, even ifshale development advances," Reig said. "There are smart and practical steps that countries and businesses can taketo help reduce the water risks posed by future shale development."

The report made recommendations to help governments, companies and the public protect water security whileminimizing business risks. They include conducting water risk assessments; increasing transparency; establishing tieswith local regulators, communities and industries; and minimizing fresh water use. (September 4, 2014)

09/04/2014

UGas - 92

SUPPLIES - IMPORTS - EXPORTS

INDIA-USA:

Shale gas tops PM Narendra Modi's agenda for US visit

Exploration of unconventional resources such as shale gas in India would be one of the top agendas for discussionwhen Prime Minister Narendra Modi visits the US later this month. Energy-deficit India, which has taken preliminarysteps towards mining such hydrocarbon, needs technology to drive exploration. Also, the two sides are expected totalk about export of shale gas to India, officials privy to the development told FE.

“There have been ongoing discussions with the US about the shale gas to meet country’s energy needs. We need tohave a clarity on how to incentivize the companies to invest in the oil and gas exploration,” one of the officialsadded. India has been talking to the US for collaborative efforts to exploit shale resources for past many years.However, on-ground developments are yet to be witnessed.

A US-India Energy Partnership Summit is also scheduled for September 30 and October 1. The summit is a multi-stakeholder platform to address US-India collaboration on energy access, efficiency, security and technology. OnSeptember 8, petroleum secretary Saurabh Chandra said that government-owned companies such as ONGC and OilIndia have started looking for shale resources. ONGC has started exploration in nearly 50 blocks while Oil India isworking on 3 blocks, he said at an industry event.

Former Prime Minister Manmohan Singh-led UPA government allowed PSU players — ONGC and Oil India — todiscover shale resources in the country. However, private companies are not allowed to exploit unconventional shaleoil or gas in India. The Modi government is working towards a unified licensing regime that would allow a blockowner to exploit any hydrocarbon found at its acreage. (September 12, 2014)

09/12/2014

UGas - 92

UNITED KINGDOM:

Thousands of jobs secured as Grangemouth gets £230m loan pledge for shale gas import plant

Ineos said it was one of the most important infrastructure projects of recent times in Scotland and would protectthousands of jobs across the country. The company said confirmation of the loan guarantee would allow it to raisefunds to invest in a new terminal to import, store and process ethane from shale gas in Grangemouth as NorthSea supplies dwindle.

The future of the site was in doubt last year because of an industrial dispute, but Ineos said it had invested £300million as part of a long-term survival plan for Grangemouth to manufacture petrochemicals beyond 2017.

"Our ability to import US shale gas underpins the future of manufacturing at Grangemouth and across manybusinesses in Scotland. It is a vital step towards preserving the long term future of the Grangemouth site and thosebusinesses that depend upon its continued presence in Scotland" Chairman Jim Ratcliffe said.

The loan guarantee from the UK government enables Ineos to raise financing on £230 million specifically to coverthe import facility and storage tank to be built at the site. Chief Secretary to the Treasury Danny Alexander said:"Over £1 billion of infrastructure projects have now been brought forward as a result of the UK guarantees schemeand £36 billion worth of projects are pre-qualified.

Ineos said the announcement was a major step forward that ensured the long-term future of petrochemicalmanufacture at Grangemouth. The ethane tank will be the largest in Europe and is central to the company's plans toimport shale gas from the US. By 2016 Grangemouth will be a shale gas-based facility, which Ineos said wasessential if it is to compete in world markets beyond 2017.

Ineos said it had finalised contract agreements with specialist engineering company TGE Gas Engineering for theconstruction of the storage tank. (July 17, 2014)

07/22/2014

ARGENTINA:

YPF, Petronas sign $550 million Vaca Muerta shale accord

YPF SA and Petroliam Nasional Bhd., state-controlled companies from Argentina and Malaysia, signed a $550million accord to develop shale oil at the world’s fourth-largest deposit in Vaca Muerta. Miguel Galuccio andShamsul Azhar Abbas, chief executive officers for YPF and Petronas, respectively, signed a deal to develop a187-square kilometer area (72 square miles) at Petronas’s Kuala Lumpur headquarters, the Buenos Aires-basedproducer said in a statement. YPF will invest $75 million and Petronas $475 million to drill more than 30 wells inthree years in southwestern Argentina. Depending on the results the program could be expanded to a five-year $1billion investment, YPF said.

YPF is seeking partners to develop Vaca Muerta, a formation the size of Belgium that contains at least 23 billionbarrels of oil. Chevron Corp. signed a memorandum of understanding with YPF in August 2012 that 11 months laterled to a development accord. Chevron’s initial Vaca Muerta investment in Loma Campana of $1.24 billion was laterexpanded to $16 billion. (August 28, 2014)

08/29/2014

UGas - 92

ENVIRONMENT

UNITED KINGDOM:

U.K. shale regulation inadequate for safety

Shale gas exploration in the U.K. lacks adequate regulation to protect public health and the environment includingwater shortages, according to a report by scientists. Exploitation of the resource may also undermine efforts to tackleclimate change, according to the document published recently by the Scientists for Global Responsibility and theChartered Institute of Environmental Health.

The hydraulic fracturing process, which pumps water, sand and chemicals at high pressure to release fuel trapped inunderground shale rock, may cause water shortages in parts of the country. It may also cause house prices to drop,according to the report. “There is widespread concern that, even with strong regulation, the safety of fracking forthe U.K. is in doubt,” according to the report.

The government is offering tax breaks to drillers to spur development to counter declining North Sea oil and gas andrising energy imports.

An area in northern England known as the Bowland basin may hold 1,300 trillion cubic feet of gas, enough to supplythe country for almost half a century, even if just 10% is extracted. Opponents fear earthquakes, water contaminationand an industrialization of the English countryside. A group of landowners launched a legal action to prevent shaledril l ing in Sussex, southern England, according to an e-mailed statement from Greenpeace. Local councilauthorities tomorrow are scheduled to decide on whether to grant Celtique Energie Ltd. planning permission for itssite at Wisborough Green.

Celtique said its drilling will take place entirely within land it has a leasing agreement for. “If horizontal drilling wereproposed as part of a future planning application, we would also fully comply with the planning and regulatoryregime in place and the law with respect to drilling under the land of neighbouring landowners,” the company said.

The U.K. last month proposed legislation to make it easier for companies to explore for shale oil and gas by nothaving to seek permission from every landowner under whose property a well may pass. Celtique was forced towithdraw a planned horizontal well at a second site in the area in May. (July 21, 2014)

07/23/2014

UGas - 92

TIGHT GAS

PRODUCTION

SAUDI ARABIA:

Foster Wheeler awarded Saudi Aramco unconventional gas contract

Saudi Aramco awarded a front-end engineering and design (FEED) contract to Foster Wheeler for work on SaudiAramco’s unconventional gas program. The FEED contract is expected to last f ive years and involve thedevelopment of tight gas fields around the Kingdom in the Empty Quarter, South Ghawar, and Jalamid regions.The tight gas projects come as Saudi Aramco is prioritizing such projects over development on shale gas.Recent assessments suggest that tight gas production costs may be as low as $2-3 per million British thermal units,substantially lower than preliminary shale gas production cost estimates. (July 16, 2014)

07/16/2014

PAKISTAN:

Tight gas production starts from Zarghun block

The production of tight gas has started from Zarghun South Block in Balochistan with initial flows from the field stated to be 4

mmcfd, according to one of the partner companies that control the lease. Approximately 80% of Zarghun South’s reserves are

certified as tight gas under the Pakistan’s Tight Gas (Exploration and Production) Policy 2011 that is entitled to a price of $6.74 per

mmbtu, said Canada-based Jura Energy Corporation.

Jura owns Frontier Holdings Limited and Spud Energy Limited, which together holds interest in nine fields across Pakistan. The

information related to Zarghun was shared with Canadian securities regulators last month. The corporation said it expects monthly

revenue of $170,000 from Zarghun South, a lease that covers 124 square kilometres in the western part of the Sulaiman Fold and

Thrust Belt of the Middle Indus Basin. Jura holds 40% working interest in Zarghun, which is operated by Mari Petroleum Company

Limited with 35% stake.

Tight gas is priced higher than the output of a conventional field. The contribution of tight gas is minimal in the 4,000 mmcfd

produced locally. The 4 mmcfd being sold to Sui Southern Gas Company is off-specification but the Zarghun joint venture

partners will be commissioning an Amine Sweetening Unit, used to remove unwanted chemical components, by October 2014, it

said.

In the six months to June 2014, Jura Energy reported a loss of $1.577 million and accumulated losses amounted. (September 3,

2014)

09/03/2014