Fracking Potential Moving Past Obstacles

story first appeared on usatoday.com

Political obstacles to oil and gas production are starting to fall away at the state and local levels as voters, elected officials and courts jump on the energy boom bandwagon.

Voters are rewarding local politicians who support production. Ballot measures are distributing potential tax windfalls broadly. And most state legislatures are focused on managing the economic and environmental consequences of hydraulic fracturing, or fracking, so the drilling boom can speed up rather than slow down.

The trend is crucial to the nation's energy future because oil and gas production is regulated and taxed almost entirely by state and local governments. The federal government's role is largely advisory, except on federal lands and on pipelines.

Most states were caught off guard when fracking turned Pennsylvania into a major natural gas producer in 2009. Fracking could produce oil or gas in as many as 36 states. Result: The USA will become the world's No. 1 producer of natural gas in 2015 and oil in 2017, overtaking Russia and Saudi Arabia, respectively, predicts the International Energy Agency.

Clearing the way:

Elections. Pro-drilling candidates are winning at the local level, including a sweep in southern New York. It is a hot issue, according to Broome County executive Debbie Preston, who won re-election Nov. 6. She's creating a department to help drillers. The state now has a moratorium on fracking.

Pipelines. The industry is winning approval to build pipelines. Williams Partners. the largest pipeline company, got a thumbs-up Nov. 7 to expand one pipeline and has applied to build another to move natural gas to Boston and New York City.

Even the controversial Keystone XL pipeline from Canada looks more likely. Pro-pipeline Democrat Heidi Heitkamp, winner in North Dakota's U.S. Senate race, predicts federal approval early next year.

Natural Resources Defense Council lawyer Kate Sinding says loopholes in federal law make it hard to stop fracking.

Reliance Ind. Cuts Gas Reserve Estimates

Story first appeared in The Wall Street Journal.

Reliance Industries Ltd. Wednesday cut its estimate of total proven natural gas reserves by 6.6% as it struggles with disappointing and declining output at its key D6 block in Krishna Godavari, which was intended to help it meet India's surging demand for the fuel.

Lower-than-expected output at D6 has hurt India's gas-based power plants and investment in the sector because banks have become cautious about lending due to the absence of committed fuel supplies. It has also hit the nation's steel, petrochemical and refining plants, which have been forced to import costlier gas.

Reliance, the country's largest private refiner by capacity, lowered its estimate of proven total natural gas reserves by 12.42 billion cubic meters to 103.958 billion cubic meters due to lower-than-projected output from D6.

The revision comes a day after the Oil Minister said production at the D6 block would tumble to 20 million standard cubic meters a day by March 2015, way below the 70 mmscm/d targeted for last financial year through March. Actual output for last year was 42 mmscm/d.

The Oil Ministry last week notified Reliance that it intended to prevent the company from recouping about $1 billion of its investment in D6 because it had failed to meet production targets included in the cost-recovery agreement.

In its annual report to shareholders, released late Tuesday, Reliance said the production decline at D6 has been steeper than anticipated because volume at existing wells was lower than expected and gas outside the main channel was too scarce to produce economically.

The company holds a 60% stake in D6. BP PLC owns 30% and Canada's Niko Resources 10%. Reliance also owns 30% of the Panna-Mukta-Tapti gas fields along India's west coast.

Reliance said in the annual report that it was conducting extensive reservoir studies in conjunction with BP to find a way to raise production at D6.

The company has formed an equal joint venture with BP -- India Gas Solutions Pvt -- to import and sell gas in India.

India's gas demand will rise 40% by March 2015 to 356.16 mmscm/d, but output will only grow 8.7% to 113 mmscm/d.

To tap gas resources overseas, Reliance entered into three shale-gas joint ventures in North America in 2010.

Reliance said shale-gas production would be challenging this financial year, in part because of historically low gas prices.


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