July 2007 Update

In the news...

• Pipeline Sabotage Fuels Anxiety In Mexican Business Politics (7/13/2007) Mexico is one of the world's largest oil producers and despite a history of leftist extremism, it has never seen disruptions in production from attacks by radical groups like those at other oil-exporting nations such as Nigeria, Columbia and Iraq. Until now. A guerrilla group calling themselves the Popular Revolutionary Army or EPR have claimed responsibility for recent attacks on natural gas, oil and other pipelines feeding industrial facilities in western Mexico. The explosions one early July 10 and at least another two the first week of July forced Honda Motor Co., Nissan Motor Co. and Vitro SA (a glass manufacturer) to stop some production. The rebel group's statement claimed the contested election of the Calderón government as "illegitimate" thus leading to speculation that the anger from last years election was a motive for the sabotage. Repairs to the pipelines by state energy company Petróleos Mexicanos are expected to be completed today. [More here]

• Tidelands Oil & Gas Corporation Subsidiary Sonora Pipeline LLC Receives FERC Permits (7/12/2007) Sonora Pipeline LLC, a wholly owned subsidiary of Tidelands Oil & Gas Corporation, received a Federal Energy Regulatory Commission (FERC) Presidential Permit and authorization to site, construct, maintain and operate two bi-directional natural gas facilities across the U.S. and Mexican border. In addition, a Certificate of public convenience and necessity to site, construct, maintain and operate 29 miles of a 30-inch pipeline system on the U.S. side of the border. The natural gas pipeline systems, known as the Burgos Hub Export/Import Project, will be located in Hidalgo County, Texas, and extend into Mexico via two border crossings. The pipelines systems will supply natural gas into Mexico for power generation and industrial customer needs. The area is expected have a dramatic increase in demand for natural gas beginning in the year 2010. [More here]

• Deal Would Boost Capacity of Oil Pipeline Through S.D. (7/4/2007) TransCanada Corp. announced it has new contracts with a Cushing, OK--based refinery that will increase the amount of oil from 435,000 to 495,000 barrels per day flowing through its proposed Keystone Pipeline. Regulatory approval is expected this year with construction to begin in 2008-09. When completed, the Keystone pipeline will be the first crude oil pipeline in South Dakota. The 30-inch diameter pipeline will originate in Hardisty, Alberta, entering the U.S. at the North Dakota border before continuing down through South Dakota and onto refineries in Oklahoma, Missouri and Illinois. Alberta has 174 billion barrels of proven reserves or around 15 percent of the world's total. Only Saudi Arabia has more according to an Alberta government report. Oil production in Alberta is expected to grow from 466,000 barrels a day in 2005 to as much as 5 million barrels a day by the year 2030. [More here]

• Revoked Leases in Alaska Prompt Oil Major's Protests (7/3/2007) Several oil companies including Exxon Mobil Corp. and BP have asked an Alaskan judge to overturn a decision by the Alaska Department of Natural Resources that revoked leases on oil and gas fields located on the state's North Slope last November. They have held leases since 1970 on a field located at Point Thompson, 50 miles east of Prudhoe Bay. The area is thought to hold 300 million barrels of oil and 8 trillion cubic feet of natural gas. The state's justification for the revocation was that the companies involved had taken too long to develop the field. In the suit, Exxon-Mobil and the others involved claim the state is trying to force them to put a field into production before it is economically viable. Although more than $800 million has been invested in the field so far, according to Exxon-Mobil, but because it is mostly a gas field the lack of a gas pipeline for the area makes it uneconomical to develop at this time. Although recent legislation was passed to encourage development, Alaska has not been successful yet in getting producers or independent pipeline companies to construct a pipeline needed for the North Slope and the Point Thompson Field. [More here]

• Pine Prairie Energy Center Announces Open Season for Phase II Capacity (7/3/2007) Pine Prairie Energy Center, LLC (PPEC), an indirect subsidiary of PAA/Vulcan Gas Storage LLC and with 50% owned by Plains All American Pipeline, L.P., is conducting a non-binding open season for 16 billion cubic foot (BCF) of natural gas storage capacity in addition to the 24 BCF first phase of its salt cavern natural gas storage capacity currently under construction. Phase I of the facility, located approximately 50 miles from the Henry Hub in Louisiana with three storage caverns each with a volume of eight BCF and an extensive pipeline header system, is expected to begin service in early 2008. Targeted completion for phase II is beginning of 2010. [More here]

• Kinder Morgan Selling Pipeline in the Midwest (7/2/2007) Oneok Partners has agreed to buy from Kinder Morgan Energy Partners a 1,600 mile pipeline system located in the Midwest for $300 million. The pipeline can deliver up to 125,000 barrels per day of petroleum and natural gas derived-liquid from hubs in Kansas to Chicago. [More here]

• Will Environmental Lobby Curb Interest in Gas Line? (7/1/2007) Although Governor Sarah Palin's signing of the Alaska Gasline Inducement Act in May is supposed to spur development of Prudhoe Bay, environmental groups may block those efforts. Professional environmental organizations such as the Sierra Club, Alaska Coalition and Wilderness Society have made a business out of opposing development of any kind in Alaska. Environmental groups operating in Alaska have become much better organized and financed over the years, spawning a whole new industry composed of lobbyists, lawyers and consultants. In 1970, environmental groups stopped construction of the then--future trans-Alaska pipeline. After more than three years, only when VP Spiro Agnew voted to break a 49-49 tie in the Senate was construction of pipeline allowed. More recently these groups have blocked construction of the Kensington Mine near Juneau with a court order. Now the Alaska Wilderness League, whose honorary chairman is former President Jimmy Carter, has stated goals to stop oil exploration and development on the coastal plain of ANWR, the National Petroleum Reserve-Alaska as well offshore oil and gas. Given this grass roots resistance transformed into an industry juggernaut, Gov. Palin will have an uphill battle to get the gas and pipeline industries interested in bidding on Alaskan exploration and development contracts. [More here]

• Enbridge Files Commercial Terms for Alberta Clipper Mainline Expansion Project (6/28/2007) Enbridge Pipelines Inc. a wholly owned subsidiary of Enbridge Inc., has filed a commercial supplement to its National Energy Board (NEB) application to construct the Canadian section of the Alberta Clipper Mainline Expansion Project for CDN $2.0 billion. The project will construct a new 36-inch diameter, 1,000-mile long crude oil pipeline from Hardisty, Alberta to Superior, Wisconsin. Initial capacity for the pipeline will be 450,000 barrels per day with allowances up to 800,000 barrels per day. Subject to regulatory approval, Enbridge anticipates the Alberta Clipper project will be in service by mid-2010. [More here]