[Pops]

It changes a lot of things, ROCK.
Another headline this morning is the China/Russia gas deal has been signed The EUs hopes that we'll drill baby and export to them are now much less likely I think.

[Pops]

I forgot the link to the gas deal
http://www.nytimes.com/2014/05/22/world ... picks=true

[ROCKMAN]

Pops - Yes...another bit of foolish optimism being feed to the EU NG consumers. Just went over this in another thread. Not only is the US a net NG importer we are a big net LNG importer to the tune of 7X times as much as we currently export. And in addition to competing with the EU for LNG from the MENA we import LNG from Norway...FREAKING NORWAY! LOL. But EU consumers are being feed optimistic BS that the US will save them from Russian NG imports when in reality we are competing with them. How foolishly misleading is that? The problem for the EU isn't the availability of LNG but the price. Last year the Brits lost half their LNG imports due to Asian outbidding for it. And the future? The gov't just approved a license for a LNG IMPORT terminal in Maine that would take 180 bcf/year from the global market. There's already concern that we won't have enough NG in storage to meet demand if we have another harsh winter. And how well could the NE US compete with the EU for LNG on a price basis next winter? Here's what happened last winter: From January 1 to February 18, the day-ahead wholesale (spot) natural gas price at the Algonquin Citygate hub serving Boston averaged $22.53 per MMBtu. That's more than twice the price the EU was paying for NG at the same time.

The US isn't going to be a supplier of NG to Europe anytime soon...if ever. But today and into the foreseeable future the US will be a competitor for the EU for the LNG available in the market place. And the vast majority of the public in the US and EU don't have a freaking clue thanks to misleading statements by politicians and the MSM.

[westexas]

Rock,

No worries. According to the following op-ed, just the possibility that the US--currently a net natural gas importer--might be able to export material amounts of LNG to Europe at some point many years hence is already having an impact on the rascally Russians:

US Natural Gas Hurting Putin
http://www.star-telegram.com/2014/05/20/5834404/us-natural-gas-hurting-putin.html

$this->bbcode_second_pass_quote('', 'F')or years, European consumers haven’t had alternatives to Russian gas.

That’s on the verge of changing.

Already, seven U.S. LNG export terminals have received at least partial Department of Energy approval to ship gas to countries with which the U.S. doesn’t have free trade agreements. That includes all of Europe.

While these projects will take years to complete, the writing is on the wall: Russia is going to have a major new competitor in European energy markets.

The question for Europe is: How much is energy security worth? If the full-court press European political leaders have been putting on the Obama administration and Congress to expedite the LNG export approval process is any indication, the answer is: Energy security is worth a lot.

The Russians are pivoting East in response. They’re turning to China as a new Gazprom customer, but the U.S. shale revolution is hanging over contract negotiations there as well. Some reports suggest that to get a long-term purchase contract from China, Putin may be forced to sell them gas at rock-bottom prices.

[Plantagenet]

The oil in the Monterey Shale is still there---it just isn't recoverable with current technology and at current prices.

Thats exactly what the Feds said about the Bakken in 2004 and look at the Bakken today.

[ROCKMAN]

Wt - "...seven U.S. LNG export terminals have received at least partial Department of Energy approval to ship gas to countries." And from what I understand most, if not all, of these terminals will be designed to also import LNG as well as exporting it. Regasification is a much cheaper process than liquefaction especially when so much of the infrastructure can be dual purposed. Interesting that they don't want to mention the Downeast LNG IMPORT TERMINAL the gov't just authorized to bring 180 bcf/year into the US thru just this one facility. And that would be LNG supplied by exporting countries that are the primary source of NG for the EU. With one of those countries being Norway from which the US is currently importing LNG.

[dinopello]

My financial advisor wanted me to buy Cheniere Energy (LNG) sometime around mid 2013. It seems it continues to run up. From what I remember it is converting the NG import terminals to export and there were some approvals they were looking for. With the run up prior to mid 2013, the permit risks and the fact I had no spare liquidity, I passed on that.

[ROCKMAN]

Dino - Cheniere became a capex black hole when their LNG import plan blew up in their face. And they are still losing money but have some prospects of creating some income...in about 18 months. I suspect much of the run up is the foolish hype that the US is on the verge of becoming a major LNG exporter despite the fact we are still a net LNG importer:

Cheniere Energy reiterated that it will be ready to begin producing liquefied natural gas at its terminal in Sabine Pass, La., in late 2015, a step that will lead to the first exports of natural gas extracted in the contiguous U.S.The announcement underscores how Cheniere, the only company to possess the necessary government permits to export natural gas to countries not in free-trade agreements with the U.S., is on schedule with its first two processing units while government regulators pore over about two dozen permit applications from competing projects. Cheniere said Friday that construction was about 20% complete on the first two Sabine Pass LNG processing units, known as trains. Cheniere has signed a 20-year contract to sell 4.6 million short tons of LNG a year to a subsidiary of BG Group.

Cheniere was among a handful of companies that built LNG import terminals in the last decade, as the U.S. was expected to become a major natural-gas importer due to declining production. But hydraulic fracturing helped energy producers unlock natural gas from shale formations, leading to an unexpected supply glut that has sunk prices and opened up the possibility of exports. Cheniere moved before others to turn its idle Sabine Pass LNG import terminal, sitting in a deep-water shipping channel less than four miles from the Gulf Coast, into an export facility. Overall, Cheniere has signed contracts to sell 16 million metric tons a year from four processing units at Sabine Pass to customers including Gas Natural Fenosa, Korea Gas Corp. and GAIL (India) Ltd. Cheniere has also agreed to sell 2 million metric tons a year to Total at a proposed fifth processing unit at Sabine Pass.

U.S. natural-gas prices have fallen 76% since June 2008, making them among the lowest in the world and attractive to buyers in Asia and Europe. Exxon Mobil Corp, Freeport LNG and other would-be LNG exporters are still waiting for government approval to ship natural gas to countries not in a free-trade agreement with the U.S., a group that includes such lucrative markets as Japan.

But as the company makes headway in building its terminal, rising costs caused Cheniere and its Cheniere Energy Partners LP unit to post wider fourth-quarter losses Friday. Cheniere Energy reported a loss of $94.3 million, compared with a loss of $57.8 million a year earlier. Revenue dropped 7.1% to $67.4 million. The per-share loss narrowed to 44 cents from 66 cents, due to more shares outstanding in the most recent quarter. Excluding items such as terminal and pipeline development expenses and early debt extinguishment, the adjusted loss was 19 cents a share this year. Cheniere Energy Partners reported a loss of $63.5 million, compared with a loss of $7.46 million a year ago. Excluding items such as expenses for the liquefaction project and early debt extinguishment, the adjusted loss was $18.4 million.

[dolanbaker]

$this->bbcode_second_pass_quote('Plantagenet', 'T')he oil in the Monterey Shale is still there---it just isn't recoverable with current technology and at current prices.

Thats exactly what the Feds said about the Bakken in 2004 and look at the Bakken today.

[Pops]

Bakersfield sits at the south end of California's Central Valley and the biggest part of the Monterey, its long been home to the oil biz out there. Here's what the Kern River field just outside Bakersfield looks like today - this picture has nothing to do with fracking:



This story is from the Bakersfield Californian.
$this->bbcode_second_pass_quote('', 'B')Y JOHN COX Californian staff writer jcox@bakersfield.com

Short of a technological breakthrough, the vaunted Monterey Shale oil formation underlying much of the southern Central Valley will yield no more than about 600 million barrels, or 96 percent less than previously believed, according to the U.S. Energy Information Administration.

The lower estimate, reported Wednesday by the Los Angeles Times, could be a big disappointment to Kern County's oil industry, which in recent years has attracted large investments from companies anxious to tap what the EIA had said was nearly 14 billion barrels of California shale oil.

The biggest single investor, Los Angeles-based Occidental Petroleum Corp., declined to comment, instead referring questions to the trade group Western States Petroleum Association.

WSPA spokesman Tupper Hull said techniques will eventually open up the Monterey.

"We have a lot of confidence in the intelligence and skill of our engineers and geologists to find ways to adapt," Hull told The Times. "As the technologies change, the production rates could also change dramatically."

The EIA's earlier estimate of the Monterey's potential has not only lured large national companies to Kern County, but it has prompted warnings from politicians including Rep. Kevin McCarthy, R-Bakersfield, that new regulation of hydraulic fracturing -- the controversial but effective oil field technique known as "fracking" -- could hamstring the state's Monterey oil-fueled economic boom.

University of Southern California researchers projected last year that developing the Monterey would add nearly 3 million jobs and close to $25 billion in tax revenues by 2020. Some of their conclusions were based on the shale energy boom under way in North Dakota and other states.

But local oil executives have expressed doubts about the deep and geologically diverse "source rock" thought to be the largest deposit of its kind in the country. Joined in their skepticism by Wall Street analysts and other industry observers, executives including Aera Energy LLC President and CEO Gaurdie Banister have said over the past year that it could be at least several years before local geologists and engineers figure out how to efficiently tap the Monterey.

They say the problem is that California's seismic history has made its geology far more complex than that of the prolific Bakken Shale in and around North Dakota. Geologists say Monterey Shale oil wells tend to produce well at first but then their flow tapers off sharply.

[Pops]

It is pretty amazing to me that shares of Occidental Petroleum who controls 12 million acres of the Monterey - that about as large an area as New York - are up 2-1/2% today.

I'll never figure out the markets, lol

http://www.bloomberg.com/quote/OXY:US

[ROCKMAN]

Pops - As any honest broker would tell you (if you can find one) they don't sell the steak...they sell the sizzle. The trick is sell before the sizzle stops and you're left with just a cold chunk of meat that might be difficult to digest.

[steam_cannon]

I posted up the following summary on Slashdot.org and backlinked to po. Maybe they will pick up the story, it's a big deal!

$this->bbcode_second_pass_quote('', '[')b]EIA Trillion Dollar Monterey Shale Estimate Cut By 96%, US Shale Oil Cut By 2/3

"The U.S. Energy Information Administration (EIA.gov) is planning to release a major 96% reserve downgrade to the amount of oil and gas recoverable from the Monterey Shale formation, one of the largest oil/gas reserves in the United States. After several years of intensified exploration the Monterey oil shale play seems to have much less recoverable oil and gas then previously hoped. This is due to multiple factors such as the more complex rippled geology of the shale and over-hyped recovery estimates by investors. By official estimates the Monterey Shale formation makes up 2/3 of the shale reserves in the US and by some estimates 1/3 of all crude reserves in the US. Not a drop in the bucket. Next Month the EIA.gov will be announcing cutting it's estimates for Monterey by 96%. That's a huge blow to the US energy portfolio, trillions of dollars, oil and gas the US might have used for itself or exported. Presently the White House is evaluating making changes to US oil export restrictions so this downgrade may result in changes to US energy policy. As well as have a significant impact on US economy and the economy of California.

[ROCKMAN]

P - And they were correct: at $30/bbl or less the Bakken had limited potential. A potential that has now been realized with oil selling for more than 3X as much. Which should lead one to ask why hasn't thousands of MS wells been drilled since prices increased? There are many thousands of leases still being hold by those old wells and the MS exists under most of them. Lots of infrastructure still left in CA as well as many independent operators. Makes one wonder what is lacking? Perhaps what's needed is another huge increase in oil prices. I've little doubt there wouldn't be a surge in MS drilling if oil prices increased another 300%.

I'm currently drilling my second horizontal well to recover residual oil from a trend that has already produced 4.5 billion bbls of oil. Came up with the idea more than 10 years ago. A damn brilliant bit of work if I do say so myself. LOL.If I showed the results of the first well to every geologist and pet engineer in Houston the vast majority would call me a liar. But I couldn't sell my idea to anyone when we had low oil prices. But given $100 oil and a math Ph.D. billionaire that I was able to fool into believing I was smart I'm doing it now.

[Pops]

"Which should lead one to ask why hasn't thousands of MS wells been drilled since prices increased? "

You're the rock man ROCK but a WAG is the shale has already been fracked by mother nature. You can pump frack-water down till the cows come home but you can't build pressure, it just leaks away along the seismic faults.

[Pops]

From Platts

$this->bbcode_second_pass_quote('', 'T')he US Energy Information Administration on Wednesday said it has never expected much actual crude production from California's Monterey Shale, due to the fraught economics of drilling into the complex formation.

The agency drastically cut its estimate of "technically recoverable resources" from the Monterey Shale by 96%, from 13.7 billion barrels in a 2012 study to 600 million barrels in a study to be released next month.

But though the cut made headlines Wednesday, EIA spokesman Jonathan Cogan downplayed its significance, saying the agency has long noted the unlikelihood that anywhere close to the entire resource would be produced.

"Clearly, there is not a proportional relationship between [total recoverable resources] and production estimates," Cogan said in an email. "Economics matters, and the Monterey play faced significant economic challenges regardless of the TRR estimate."

[ROCKMAN]

Pstarr - No...this is the only group I deem worthy to share my brilliant observations. LOLLLLLLL. Heck...I couldn't publish anything I post here that wouldn't get me sued for plagiarism. Except for my bits of personal anecdotes everything I post here is swiped off the web. I've gotten into the habit of just posting long excerpts instead of links (you can easily find that story and a lot more by just searching "Cheniere LNG") because I suspect many here don't go to them links that often. I also tend to edit out all those filler words writers use to fatten their piece up. I think my strength in that regards is my experience allowing me to filter all the BS out. Being stuck in a chair almost 24/7 allows me a lot of time to scan the web while doing my job.

[Pops]

I've read this a dozen times today from EIA head Adam Sieminski:
$this->bbcode_second_pass_quote('', 'T')he rocks are still there . . .

[westexas]

$this->bbcode_second_pass_quote('', 'B')ut though the cut made headlines Wednesday, EIA spokesman Jonathan Cogan downplayed its significance, saying the agency has long noted the unlikelihood that anywhere close to the entire resource would be produced.