page Newfoundland premier Danny 8 Williams goes to the mat — again Vol. 12, No. 4 • www.PetroleumNews.com A weekly oil & gas newspaper based in Anchorage, Alaska Week of January 28, 2007 • $1.50 ● NATURAL GAS January Mining News inside Export extension filed Nikiski plant partners Conoco, Marathon apply to extend LNG license 2 years By KRISTEN NELSON Petroleum News ohn Barnes, manager of Alaska production operations for Marathon Oil, broke the news at J The Alliance Meet Alaska conference Jan. 19: Nikiski LNG plant co-owners Marathon and ConocoPhillips had filed for a two-year extension of the export license for the plant. Why the extension application, with concerns about Cook Inlet gas supplies? Barnes said “the industrial use of natural gas in Cook Inlet is good, it’s important, it creates jobs, it creates opportunities.” The Nikiski LNG plant. And, he said, the LNG plant “provides supply extreme cold weather event or upset in the sys- security to Southcentral utilities. Having that plant tem.” running provides for the ability to move gas away Southcentral industrial users will be necessary from the plant to serve local utilities if there’s an see EXTENSION page 19 ● NATURAL GAS Inlet gas usage sets record Enstar, Cook Inlet gas producers scrambled to meet peak; new interconnects planned By KRISTEN NELSON Dieckgraeff said there was a “very Petroleum News intricate dance” the night of Jan. 8, but Mining News stories this month include an interview with Alaska's new DEC commissioner by columnist J.P. Tangen; Earthworks report ook Inlet uses more natural gas on cold days the gas got to Anchorage, although to do on water pollution at mines and industry and agency reactions to it; — and delivering those peak needs is trickier that, gas had to be pulled from the latest on B.C.'s Prosperity project; Wolverine project's prospects come than in the past. alive on heels of favorable feasibility study; Wolfden advances Izok C liquefied natural gas plant at Nikiski, Enstar Natural Gas, the Southcentral gas and High Lake Arctic copper-zinc projects; and much, much more. which was shorted 35 million cubic feet. distribution company, set a throughput record Jan. 9 of 292.4 million cubic feet, and the company and Competition key to Palin gas line This was the second record set this season, he Cook Inlet natural gas producers had to scramble said; the first occurred in November. bill; Alaska Legislature waiting to meet that demand, says Dan Dieckgraeff, the Dieckgraeff said there was a “very intricate company’s regulatory and gas supply manager. for administration’s proposal dance” the night of Jan. 8, but the gas got to The short-term peak actually hit 305 million Anchorage, although to do that, gas had to be As the 25th Alaska Legislature got cubic feet, he told the Regulatory Commission of started in mid-January, the North Slope Alaska Jan. 24 in a winter update. gas pipeline project was a topic of high see USEAGE page 18 interest, one Gov. Sarah Palin discussed PATRICK JUDY ● at some length in her state-of-the-state NATURAL GAS address Jan. 17 (see story in Jan. 21 issue of Petroleum News). Even before that, House Republicans, Not a time to think small in a Jan. 16 press conference, pegged the gas pipeline — along with ethics reform NWT minister: Mac job training program is springboard to 100-year industry GOV. SARAH PALIN and energy prices — as topics of concern to the House majority. By GARY PARK House Speaker John Harris, R-Valdez, said energy cost has For Petroleum News Hands across the border The Northwest Territories government has see BILL page 17 orthwest Territories Industry Minister offered “help and support” to Alaska once it N Brendan Bell is a vision- settles on an option for developing North Slope ary on a grand scale. gas to ensure that Arctic gas on both sides of BREAKING NEWS For him, the Mackenzie Gas the border plays a role in a continental solution, Project opens the door to a 100- NWT Industry Minister Brendan Bell said. Company adds 5 Royal Dutch sweetens Shell Canada bid: year oil and gas industry in Following meetings Jan. 19 with Alaska another C$1 billion to offer for minority shares Northern Canada. officials, he said the NWT is ready to facilitate And Bell counts a socio- any contacts with the Canadian and provincial governments that can help Alaska get its gas to Pipeline boom in the offing: Possible link to U.S. East Coast economic agreement between 7 BRENDAN BELL market. one of lines that could bring 1.32 million bpd of oil sands output his government and the MGP proponents as one small, but vital step in that direc- Bell told Petroleum News his government is tion. “indifferent” to whatever route Alaska takes to 13 Ethics debate on in Juneau: Experts advise Alaska legisla- Of all the elements in a complex 67-page pact, the monetize its gas. tors on strategies to restore public trust via overhaul of rules of conduct see BORDER page 18 see TRAINING page 18 2 PETROLEUM NEWS • WEEK OF JANUARY 28, 2007 contents Petroleum News A weekly oil & gas newspaper based in Anchorage, Alaska ON THE COVER 3 Bad news for United States from Mexico Export extension filed 4 Crude oil price down, but Alaska on track for big surplus says Williams Nikiski plant partners Conoco, Marathon apply to extend LNG license 2 years 5 Royal Dutch sweetens Shell Canada bid Inlet gas usage sets record Company adds another C$1 billion to offer for minority shares; Jan. 23 C$45 per share Enstar, Cook Inlet gas producers scrambled offer replaces earlier offer of C$40 per share to meet peak; new interconnects planned 11 Synenco has Northern Lights dancing Not a time to think small 14 Return to normal cited for sagging oil prices NWT minister: Mac job training program is springboard to 100-year industry 14 House OKs taxes on oil companies Hands across the border 15 Flaherty selling China on Canadian oil Competition key to Palin gas line bill 15 Canadian energy trusts pare payouts Alaska Legislature waiting for administration's proposal GOVERNMENT EXPLORATION & PRODUCTION 7 Grappling with the nuclear genie 6 Noble plans fast-track development Canadian, Alberta governments uncertain how to handle public debate; reactor sales Raton startup expected in 2008 from subsea by Atomic Energy of Canada also an issue development of natural gas interval, Pony sidetrack recovers record drilling core 8 Premier Williams goes to mat — again 11 Barnes: Alaska needs to fix permitting, regs 6 State opens upper foothills to tundra travel 13 Ethics debate heats up in Juneau 9 FEX pushes forward in NPR-A 15 Ex-Alberta-premier stokes home fires But warns that oil and gas industry needs improved Alaska business environment; PPT shaves NATURAL GAS 25% off NPV of exploration projects 5 Exxon: Alaska gas can meet N.A. demand 10 Conoco continues Alaska investments Richard Guerrant tells Meet Alaska that ExxonMobil, 11 Chevron moving forward in inlet, on North Slope other Prudhoe owners, have financial strength, expertise, for gas project 12 Koreans quick to probe oil sands lease 17 Partnership weighs 'syngas' plant 12 BP 'ready to go' on slope gas line FINANCE & ECONOMY PIPELINES & DOWNSTREAM 3 Herrera: Oil price drop temporary 7 Sandahl: pipeline boom in the offing 14 Flint Hills Refinery reports building fire Sees oil price average in 2007 similar to 2006 with gradual annual increase in years to come PETROLEUM NEWS • WEEK OF JANUARY 28, 2007 3 ● FINANCE & ECONOMY Herrera: Oil price drop temporary Alaska-based energy consultant sees oil price average in 2007 similar to 2006 with gradual annual increase in years to come; conservation, oil sands won't fill gap as oil output declines By KAY CASHMAN Petroleum News Bad news for United States from Mexico n June 2006, Petroleum News asked its Following Petroleum News interview with Roger Herrera (see adjacent arti- favorite oil price guru, energy consultant cle), Mexico’s state-owned oil company Pemex released estimates showing crude I Roger Herrera, if crude oil would plum- exports from Mexico dropping 13 percent over the next six years as the country’s met to $40 a barrel in the foreseeable proven reserves continue shrinking. future as predicted by BP’s CEO Lord John Sixty percent of Mexico’s reserves are in the aging Cantarell field. Pemex said Browne. it expects production from Cantarell to fall by an average of 14 percent a year “That’s quite a reasonable proposition,” between now and 2015. Herrera said two weeks after Browne’s Another report in the Mexican edition of The Herald said Calderón adminis- comments were pub- tration documents acquired by El Universal indicate Pemex will be forced to cut lished in a June 12 back on exports to the United States from the present 1.5 million barrels per day report by German to as low as 1 million barrels per day in the final two years of the Calderón admin- weekly Der Spiegel. istration. “But if price pres- PATRICK JUDY The Herald said analysts contacted by El Universal agreed that Pemex’s inabil- sures ease and oil ity to increase production was due to waning reserves. drops to $40 a barrel, Pemex has already canceled shipments of crude to the Deer Park, Texas, refin- it will be a short-term ery that it owns along with Shell for the next 12 months, the article said. aberration. I have a Raúl Muñoz Leos, a former Pemex director, said the primary problem lies in hard time believing the rapid decline of Cantarell reserves and the failure to develop other fields.