Friday, February 29, 2008

Amex Natural Gas Shares Up All Time High

NEW YORK (MarketWatch) - The Amex Natural Gas Index hit an all-time high Thursday, gaining ground on the heels of lower inventories reported by the government and on a big move up by EOG Resources.

Meanwhile, oil stocks fought their way back into positive territory as crude futures pushed to a record close of $102.59 after trading as high as $102.64 a barrel during the session and moving up to a fresh record of $102.77 in electronic trading after the bell. See Futures Movers.

U.S. gas inventories fell by 151 billion cubic feet in the week ended Feb. 22, the Energy Information Administration reported. Also, stockpiles were 133 billion cubic feet less than last year at this time, data showed. April natural-gas futures rallied 38 cents to end at $9.44 per million British thermal units.

Thursday, February 28, 2008

Natural Gas Discovery Off India West Bengal Coast

Feb. 27 (Bloomberg) -- Reliance Industries Ltd., owner of the world's third-biggest oil refinery, gained after saying it discovered natural gas in a field off India's east coast.

The Mumbai-based company said yesterday the discovery was made in the shallow-water area of NEC-Mahanadi field, off the eastern Indian state of Orissa.

Reliance rose 11.8 rupees, or 0.5 percent, to 2,587.55 on the Bombay Stock Exchange, after rising as much as 1.9 percent. The shares have fallen 10 percent so far this year, compared with a 12 percent decline in the benchmark Sensitive Index.

Reliance owns 90 percent of the field, and Canada's Niko Resources Ltd. holds 10 percent, according to a statement. This is the eighth gas discovery in the field, the company said.

Wednesday, February 27, 2008

Kazakhstan to Increase Natural Gas Production for Export

ASTANA (RIA Novosti) -- Kazakhstan intends to increase natural gas production from 29.6 billion cubic meters in 2007 to 114b cu. m. in 2020, the president of national oil and gas company KazMunaiGaz said Tuesday.

""Natural gas production is expected to grow from 29.6b cu. m. in 2007 to 114b cu. m. in 2020,"" Uzakbai Karabalin told a Cabinet meeting.

He said most of the increase would be secured by putting new gas fields on stream in the west of the republic, as well as utilizing ""the resources of the Kazakh and Turkmen sectors in the Caspian shelf.""

The company head said gas consumption in Kazakhstan is expected to grow from 13.3b cu. m. in 2007 to 18.7b in 2020.

Tuesday, February 26, 2008

Russia & Serbia Natural Gas Pact

Russia cemented its partnership with Serbia on Monday, signing a deal to direct a key gas pipeline through its territory and promising to stand by the troubled Balkan nation in its dispute with the West over Kosovo.

Underscoring the message of friendship, Russian President Vladimir Putin sent his likely successor, Dmitry Medvedev, to Belgrade to supervise the signing of the pipeline agreement, and reassert Moscow's opposition to the Kosovo's independence declaration.

"Serbia needs support now," Medvedev said.

By turning Serbia into its main political and economic partner in the Balkans, Russia will secure a loyal ally in the heart of Europe and reaffirm its position as a key global player, while retaining crucial influence in energy supplies for the continent.

The deal can also be seen as an extension of the Kremlin's confrontational approach to the West, which has raised fears that Russia could use energy supplies for political leverage, rewarding Western countries that support their policies and cutting off the rest.

The Russian gas monopoly Gazprom's South Stream pipeline would run under the Black Sea from Russia to Bulgaria before extending to Western Europe. The Serbia deal is expected to be worth as much as US$1.5 billion (€1.01 billion), officials said.

The Tanjug news agency reported that a joint Russian-Serbian company will be formed to outline and coordinate the work in building the pipeline which could become operational in 2013.

"This is the first step in turning Serbia from a blind alley into a motorway on the energy map," said Sasa Ilic, the acting head of Srbijagas, Serbia's natural gas monopoly.

In a visit to Hungary later in the day, Russian news agencies quoted Medvedev as saying Russia and Hungary will create a joint venture to build a portion of the South Stream Pipeline in Hungary. The joint venture will belong to Russia and Hungary on a 50/50 basis, ITAR-Tass quoted Medvedev as saying.

However, few specifics of the deal were available and analysts suggest the agreements give the Russians some of the country's most valuable assets at a bargain basement price.

Some analysts argued that Russia's initial offer of US$600 million (€400 million) for a controlling stake in the Serbian oil monopoly NIS represented just one-fifth of the company's market value.

"To say it is a sweetheart deal is an understatement," said James Lyon, the special Balkans adviser for the International Crisis Group. "Russia came knocking and said they wanted to collect the price for its support on Kosovo."

Sijka Pistolova, the editor of Energy Observer, a Belgrade-based trade online publication, said the lack of transparency has only added to the controversy.

"The deal itself has been shrouded in secrecy," she said. "We are in the dark about details."

Though the pipeline deal was at the center of Medvedev's visit, the Russian leader also used the opportunity to criticize Kosovo's declaration of independence from Serbia, as well as Western support for the move. Medvedev said Kosovo's self-styled independence "absolutely" violates international rules.

Monday, February 25, 2008

Beirut Natural Gas Coming Via Egypt

BEIRUT: Lebanon should start receiving natural gas from Egypt through the Pan-Arab Natural Gas Pipeline by the middle of this year, acting Energy and Water Resources Minister Mohammad al-Safadi said after a meeting in Damascus Saturday of energy officials from countries involved in the pipeline project.

Suffering from a chronic shortage of power, Lebanon could expect gas from the pipeline to trim the country's energy bill by 30 percent, an adviser to Safadi told The Daily Star last week.

Safadi's visit to Syria also marked the first official journey by a minister from Prime Minister Fouad Siniora's government to Damascus since six Syrian-backed ministers resigned from the Cabinet in November 2006. Relations between the neighbors have been frosty since the February 2005 assassination of former Prime Minister Rafik Hariri, a killing blamed by the March 14 governing coalition on the Syrian regime, although Damascus denies any involvement. Lebanese daily An-Nahar said Safadi, a member of the Future Movement founded by Hariri, received a warm welcome from his Syrian hosts.

The $1.2-billion, 1,200-kilometer pipeline will commence sending gas from Al-Arish in Egypt to Syria in March, with volumes equating to an annual flow of 900 million cubic meters slated for Syria this year. Syria will be able to receive up to 2 billion cubic meters annually through the pipeline, which will be connected to Syria's Deir Ali power plant.

The first phase of the project - linking Egypt with the Jordanian Red Sea port of Aqaba - was finished in 2003, while the second stage - linking Aqaba with the town of Rihab north of Amman - was completed two years later.

Sunday, February 24, 2008

Argentina Natural Gas Problem Still Long Term Issue

The presidents of Argentina, Brazil and Bolivia failed to resolve a natural gas dispute Saturday, but agreed to study how to divide Bolivian supplies to avoid an energy crunch, an official said.

Bolivian Energy Minister Carlos Villegas said the three leaders amicably discussed ways to divide up limited Bolivian supplies, but reached no immediate solution during talks at Argentine President Cristina Fernandez's suburban residence.

"We need to assure the overall supply of energy for the long term," Villegas said after Fernandez met Bolivia's Evo Morales and Brazil's Luiz Inacio Lula da Silva.

He said they agreed to create a committee made up of the three energy ministers "that is going study the structural issue of gas supplies in moments of greatest demand."

He said the ministers would meet in "coming weeks." The presidents made no public comments upon leaving the talks. But Argentine Foreign Minister Jorge Taiana released a statement confirming the creation of a "coordinating group" of energy ministers that said it will permanently analize "the evolution of the respective energy demands."

Bolivian officials have assured the two energy-hungry neighbors they can meet needs this year, but growing demand for gas could mean shortages in 2009. Natural gas is a critical energy source for Brazil and Argentina.

Brazil gets about half its natural gas from Bolivia — between 27 million and 29 million cubic meters daily — while Argentine generally buys between 3 million and 5 million cubic meters each day.

Bolivian officials say they expect demand from both countries to jump by as much as 7 million cubic meters daily in 2009.

Bolivia's natural gas industry, suffering from tepid foreign investment following Morales' 2006 nationalization, will be hard-pressed to match the increase and that has raised fears of shortages.

Argentina last year signed a contract with Bolivia to dramatically expand the amount of gas it will import and the two countries are moving forward on a $1.9 billion pipeline to quadruple the daily capacity of gas exports.

The threat of future energy shortages is a headache especially for Argentina, where bitter cold last winter led to natural gas shortages as Argentines turned up gas heaters.

The country also weathered summer blackouts caused by heavy air conditioner use.

Saturday, February 23, 2008

Isramco in Houston Buying Natural Gas Properties

Isramco Inc. (NASDAQ:ISRL) said Friday is has agreed to acquire working interests in certain producing oil and natural gas properties located in Texas, New Mexico and Oklahoma for $102 million from GFB Acquisition I LP and General Electric's (NYSE:GE) GE Financial Services.

The transaction, expected to close in March, includes mainly operated oil and natural gas properties in 40 fields.

Net daily production from the properties is 600 barrels of oil and 3.5 million cubic feet of natural gas. Total net proved developed producing reserves are 2.7 million barrels of oil and 14 billion cubic feet of natural gas.

Isramco expects to fund up to 5% of the purchase price from working capital and said it will obtain third party loans to fund the rest of the purchase price.

The Bank of Nova Scotia (TSX:BNS.O) (TSX:BNS.N) (TSX:BNS.M) (TSX:BNS.J) (NYSE:BNS) (TSX:BNS) (TSX:BNS.K) agreed to provide or arrange a secured revolving credit facility, under which Isramco expects to initially borrow up to $54 million.

GFB Acquisition I LP is a Midland, Texas-based oil and gas properties operator that was formed in a partnership with GE Financial Services.

Shares of Isramco, a Houston-based oil and gas properties company closed the regular session at $42.60.

Friday, February 22, 2008

T. Boone Short on Oil & Gas - For Now

NEW YORK (Reuters) - Oil investor T. Boone Pickens said on Thursday he has a short position on oil and natural gas on expectations that prices will fall in the near term.

Pickens, speaking on CNBC television, said he expects the price of oil to fall $10 to $15 a barrel in the second quarter from the $100 it hit on the U.S. market this week. But he said he expects the price of oil to be back above $100 a barrel in the second half of year.

He also called natural gas prices unusually high and said he expects them to back off also.

Investors who sell securities short make a profit by betting stock or commodity prices will fall. Short-sellers borrow securities and then sell them, waiting for the asset price to fall so they can buy the asset back at the lower price, return them to the lender and pocket the difference.

Pickens, who heads the $4 billion BP Capital hedge fund, had said in September he expected oil prices to reach $100 based on growing global demand.

U.S. oil prices peaked at $101.32 per barrel on Wednesday, surpassing the highs near $100 hit early in January, on expectations that OPEC will maintain or even cut its supplies when ministers meet on March 5.

Pickens earned more than $1 billion in 2006, putting him among the highest paid fund managers in the country, according to Trader magazine.

April crude oil futures in New York dropped 44 cents to $99.26 per barrel on Thursday after inventory data from the U.S. government showed a sixth consecutive weekly increase.

Thursday, February 21, 2008

Canadian Natural Gas Prices Look Good Long Term

CALGARY — After a winter of five-year lows for oil and gas drilling rates in Western Canada, there are signs of recovery in the natural gas sector as higher prices spur more activity.

Last week, producers hired 593 drilling rigs, almost as many as the 603 in service at the same time last year, according to weekly rates recorded by the Canadian Association of Oil Drilling Contractors. That's a major advance from earlier this winter, when about 20 per cent fewer wells were being drilled.

A resurgence in natural gas prices, which hit 15-month highs on Tuesday and are trading at more than $9 (U.S.) a million British thermal units at the New York Mercantile Exchange, is driving the increased activity.

The oil sands of Alberta – Canada's main energy-producing region – have boomed, thanks to high prices for crude oil, which Wednesday hit an all-time high of $101.32. But most of the province's production still comes from shallow natural gas wells that don't produce for long, and are more sensitive to price fluctuations.

Western Canada's gas generally sells for over a dollar less than U.S. futures prices, so producers are currently getting less than $8 per million BTUs for their output. That price is enough to make some deep, productive wells profitable.

But higher costs in Canada – because of Alberta's oil boom – mean prices of between $9 and $10 per million BTUs would be required to make most wells economically viable and cause drilling to bounce back fully, according to Roger Soucy, president of the Petroleum Services Association of Canada (PSAC).

“The gas price for Canada, and particularly Alberta, is going to have to be north of where it is now, and on some level of permanence, before people start getting excited,” Mr. Soucy said.

PSAC forecasts don't point to sharp increases; it expects only 14,500 wells to be drilled in Western Canada in 2008, down from 18,500 in 2007 and 23,000 in 2006.

Only once, have prices been sustained above that level for any amount of time – when hurricane Katrina hit in the fall of 2005, and the impact lasted until the following summer. Low prices have pushed major producers such as EnCana Corp., Canadian Natural Resources Ltd., Talisman Energy and Husky Energy Inc. to slash millions of dollars of spending on conventional gas exploration since 2006.

Over the longer term, gas prices could benefit from stronger demand. According to ARC Financial Corp., demand in the United States for natural gas is increasing, due to the construction of more power generation plants that consume natural gas, which is seen as being more environmentally friendly than oil or coal.

“This is bullish news for gas consumption,” ARC chief economist Peter Tertzakian said in a research note. “Natural gas is taking market share away from coal and nuclear power, with environmental issues and policies being the main drivers … It's yet another factor that supports sustainably higher prices for natural gas going into the next era.”

Tuesday, February 19, 2008

ConocoPhillips Bids UAE Natural Gas Project

ConocoPhillips confirmed it's participating on the bid to develop the Shah natural-gas field in Abu Dhabi in the United Arab Emirates and that the company hope to be the winner, the company said.

"ConocoPhillips has participated in the Shah tender process along with a number of international oil companies," said the company's spokesman Bill Tanner on Monday.
ConocoPhillips' Chief Executive officer Jim Mulva said last Tuesday that the company "hopes" to be the winner of the process, but that Abu Dhabi National Oil Company has not confirmed yet who is the winner.

It has been expected that Conoco and Adnoc will sign an agreement later this month.
The Shah field is the type of big energy development where Western oil companies are still welcome because of their technical experience. The field's gas is laced with heavy concentrations of sulfur, making it both poisonous and corrosive.
The project is crucial to Abu Dhabi's desire to meet rising regional demand for gas, which has surged as the Emirates build gas-fired power stations and desalination plants. Abu Dhabi National Oil Co., or Adnoc, was expected to name a partner for the project last year, and oil companies have become frustrated by the delays.

Monday, February 18, 2008

Pennsylvania Natural Gas Found in the Coalbed Methane

While drilling for coalbed methane gas has drawn the spotlight, natural gas quietly has become the new prize of the region, with a half-dozen national companies chasing land and leases in Cambria and Somerset counties.

With new technologies such as horizontal drilling, along with new estimates that the 6,000-foot-deep Marcellus Shale is swollen with an untapped reservoir of natural gas, the region could see record-breaking production of both natural and methane gas.

But the similarities stop there.

While methane gas rights go along with underground coal rights, most of which were sold to now-defunct coal companies long ago, natural gas is a separate mineral right that must be newly negotiated with landowners.

Besides, some say, natural gas drillers do more courting.

“Yes, there is more natural gas in Pennsylvania they’re going after, but natural gas folks treat people differently, more nicely,” said state Rep. Tom Yewcic, D-Jackson Township.

The lawmaker, who recently saw his bill to protect landowners against abuses by methane gas drillers advance to the House floor, said he is not hearing of problems with natural gas drillers.

In fact, he said, the courting has begun.

Letters have gone out in this region from Michigan-based Western Land Services Inc., offering property owners oil and gas leases.

“We are very excited about the geology of this area and feel this is an excellent opportunity for land/mineral owners to get involved,” the letter says.

Western Land Services offers an initial payment, and if a producing well is drilled, royalty checks while it produces.

Competition for oil and gas leases in Somerset and Cambria counties is the most competitive it’s been in 20 years, say officials at the state Department of Environmental Protection.

Some companies seek to buy both methane and natural gas rights, but most are expressing interest in natural gas, hoping to tap into the deep Marcellus Shale gas pockets.

“Because the price of gas has gone up so steeply, it’s suddenly worth the effort to drill much deeper,” DEP spokeswoman Helen Humphries said.

Some companies do both methane and natural gas drilling, but they would not be doing it at the same time and in the same spot, she said.

There are 52 active permits for natural gas drilling in Cambria County, she said. There are none in Somerset, but companies that have negotiated for leases are expected to file for permits this year.

Even government agencies have been approached for gas leases or agreements, including the Johnstown-Cambria County Airport and the Windber Borough Council.

But experts advise landowners to be cautious about entering into any agreement and to consult with an attorney or other knowledgeable person before signing anything.

Landowners packed a forum Thursday night on the ins and outs of natural gas leasing, sponsored by the Cambria County Farm Bureau.

A geologist who acts as an agent between groups of landowners and gas companies talked about how to get the best possible deal.

Farm Bureau President Robert Davis said the message is that landowners are better off if they act together, rather than separately.

The average consumer price for natural gas in the United States is expected to have risen 78 percent between 2001 and the end of 2008, according to the federal Energy Information Administration.

Penn State researchers estimate that companies could retrieve 50 trillion cubic feet of gas if they tap into the Marcellus Shale in this region.

Sunday, February 17, 2008

Turkey Natural Gas Pipeline Set to Go - Maybe!

Turkey and the European Union appeared ready yesterday for greater co-operation in the construction of the Nabucco natural gas pipeline aimed at enhancing Europe's energy security and reducing its dependence on Russian gas supplies.

The EU had become worried about Turkey's apparent lack of commitment to the $5bn project. But Jozias van Aartsen, EU co-ordinator for natural gas projects in southern Europe, said after meeting Turkish officials yesterday that the project was nearer to realisation than before his visit.

Agreement on a pricing mechanism, one of the main stumbling blocks in getting more Turkish involvement, should be reached in three weeks, Mr van Aartsen said.

Saturday, February 16, 2008

Eagle Rock Energy Explosion in Natural Gas Pipeline

HOUSTON, Feb 15 (Reuters) - Natural gas has been shut off to a south Texas pipeline after a Friday morning explosion and fire, owner Eagle Rock Energy Partners LP (EROC.O: Quote, Profile, Research) said on Friday afternoon.

The Texas Railroad Commission said a person working near the pipeline was injured in the explosion. An Eagle Rock spokeswoman said the company could not confirm any injuries. No one was killed by the blast in a remote rural area near the U.S.-Mexico border.

No work was being done on the pipeline at the time of the explosion, said Eagle Rock's Elizabeth Wilkinson.

The fire following the explosion in the 20-inch line lasted for three hours, a local TV reporter at the scene told Reuters.

The pipeline had been carrying 35 million cubic feet per day of gas. All but 5 million cubic feet has been diverted to alternate outlets, the company said. (Reporting by Bruce Nichols; Additional reporting by Erwin Seba;Editing by Marguerita Choy)

Friday, February 15, 2008

Bolivia May Limit Natural Gas Exports to Brazil

Bolivia may place a cap on its natural gas exports to Brazil during the coming southern winter, freeing up production for Argentine consumers facing a renewed energy crunch.

YPFB, Bolivia's state-owned oil and gas group, is expected to increase supplies to Enarsa, its Argentine counterpart, which pays $7 (€4.8, £3.6) per British thermal unit (BTU), the standard measure of thermal value.

Supplies to Petrobras, the Brazilian government-controlled oil group which pays $5.6 per BTU, are likely to be capped.

Luiz Inácio Lula da Silva, Brazil's president, held talks with Álvaro García Linera, Bolivia's vice-president, on Wednesday. Yesterday Mr Garcia Linera also visited Petrobras.

Mr Lula da Silva is expected to meet presidents Evo Morales of Bolivia and Cristina Fernández of Argentina in Buenos Aires at the end of next week to discuss the issue.

"It is probable that there will be an increase in demand in Brazil and Argentina during the winter months," Mr García Linera told reporters. "These new volumes will be discussed by the three presidents. They will reach an agreement to the satisfaction of everybody."

Both Brasília and Buenos Aires import Bolivian natural gas, which is increasingly in demand for Brazilian industry and to make up for shortfalls in Argentine domestic production.

Argentina is already facing severe energy shortages. In Brazil, where most electricity is generated by hydro-electric plants, low rainfall has increased reliance on fossil fuels.

As the southern hemisphere winter approaches, demand from both customers will surge and exceed YPFB's production capacity.

YPFB has contracts to supply up to 30m cubic metres of gas per day to Petrobras and 7.7m to Enarsa. It must also supply about 6m cubic metres per day to meet domestic demand.

But YPFB is only supplying about 27m cubic metres per day to Petrobras and about 3m to Enarsa.

"Bolivia has very limited capacity," said Carlos Alberto Lopez, a former Bolivian hydrocarbons vice-minister. He predicted the talks would go Bolivia's way.

"They won't step on each other's toes," he said. "Brazil wants to win back some of the influence it had over Bolivia, which it has lost to Venezuela."

Petrobras has been unwilling to invest in Bolivia since its assets were seized by Bolivian troops in 2006, when the country's oil and gas industry was nationalised. But a person familiar with the situation said Mr Lula da Silva would overrule Petrobras's objections in favour of Brazil's foreign policy interests, and most likely relieve YPFB of any fines payable for supply shortfalls under its contract.

Thursday, February 14, 2008

China & Qatar Discussing Natural Gas Deal

BEIJING - China is close to signing a deal to buy liquefied natural gas from Qatar to fuel the fast-growing Chinese economy, a news report said Wednesday.

Government-owned PetroChina Ltd. has signed a nonbinding preliminary agreement with Qatargas Operating Co. and they plan to sign a formal contract later, Dow Jones Newswires reported, citing two unidentified people familiar with the situation.

It gave no financial details or information on the scale of purchases.

China has spent billions of dollars to secure access to foreign oil and gas supplies, including some in Western Canada, to fuel a booming economy that expanded by 11.2 per cent last year. It is especially interested in natural gas, which burns more cleanly than coal or oil.

The Qatar gas would be supplied to a new terminal in the northeastern Chinese port of Dalian with a planned annual capacity of three million tonnes, Dow Jones said.

The agreement would be China's first long-term LNG deal in the Middle East outside Iran, where Chinese companies are investing in developing gas fields despite U.S. complaints that such ties are helping the isolated Tehran government.

Qatar is the world's largest LNG producer and Asian consumers have been eagerly courting it as a supplier.

Chinese government plans call for natural gas to supply 5.3 per cent of China's total energy by 2010, up from 2.8 per cent in 2005.

PetroChina also has signed deals to import gas from fields off Australia.

Wednesday, February 13, 2008

Gazprom Position in Russia is Go Go Go

Russian President Vladimir Putin and Ukraine President Viktor Yushchenko announced on Tuesday they had reached agreement on the gas issue at a news conference in Moscow following their talks.

The Russian natural gas company, Gazprom, had threatened to stop supplying gas to Ukraine on Monday, then extended the deadline until Tuesday evening while talks continued.

The two leaders said several other issues between the countries had been resolved, as well.

Yushchenko said Ukraine will pay its gas arrears of 2007 and will be a stable transit supplier to Western Europe.

A final agreement will be signed in the next few days and payment for gas already used will begin shortly, Putin said.

After the gas cut-off in 2006, EU leaders called for solutions that would allow the union to avoid being a victim of disputes between Russia and other former Soviet republics.

A consortium of countries banded together to fund the Nabucco pipeline, a $7.4 billion (5 billion euros) project that will bring gas from Turkey's borders with Georgia and Iran to Turkey, Bulgaria, Romania, Hungary and Austria, and then on to Central and Western Europe, according to the Nabucco Web site.

Construction is to begin in 2009 on the 3,400-km (2,113-mile) pipeline, and it's expected to be operational in 2013.

But Gazprom, along with Italy's ENI, is planning a 900-km (560-mile) pipeline following a similar route to feed into Austria and Italy, a project that would cost between $14.6 billion and $17.5 billion (10 billion to 12 billion euros).

Last week, the managing director of Nabucco Gas Pipeline International, Reinhard Mitschek, announced that Gazprom may also send gas through the Nabucco pipeline. Critics say the move would undermine the purpose of the project, which was to reduce European dependence on Russian gas.

Tuesday, February 12, 2008

Canadian Natural Gas Update

CALGARY, ALBERTA -- 02/11/08 -- Vast Exploration Inc. ("Vast" or the "Company") (TSX VENTURE: VST) is pleased to provide the following update on its operations and strategic initiatives.

The Company's principal assets are concentrated in the Boyer Area ("Boyer") of northern Alberta and the Barrhead Area ("Barrhead") of central Alberta. Currently, Vast has combined net production from these properties of 190 mcfd (32 boepd).

BOYER - Alberta

Vast is the Operator at Boyer with a working interest of 37.5% in approximately 25,000 gross acres of land. Natural gas production from this property is derived from the Bluesky formation.

In 2006 and 2007, Vast drilled a total of twenty five (25) wells on the property. Ten (10) wells are currently on production at a combined average rate of 425 mcfd (net 155 mcfd or 26 boepd). Vast is pleased to report that as of February 7, 2008 a further ten (10) wells have commenced production following the receipt of approval for a Downspacing Application from the Energy Resources Conservation Board (ERCB). The company expects to add incremental production of approximately 300 mcfd (net 110 mcfd or 18 boepd) from these wells.

During the first quarter of 2008, the Company plans to re-enter a previously drilled and produced well on a 7,138 acre block of Company land situated west of current producing properties. Vast has a 37.5% working interest in these lands. The objective of the re-entry is to determine if commercial production from the Bluesky formation can be established. The well was abandoned in 1987 producing at rates in excess of 250 mcfd. The Company believes that the well should be capable of production of 75 to 100 mcfd, similar to current rates of producing offsetting wells. If successful, four (4) additional wells on Company lands could be re-entered and re-activated. Pipeline infrastructure is in place across this block of land.

Monday, February 11, 2008

Gazprom & Ukraine Negotiating Natural Gas Agreement - Again

"Naftogaz is ready to commit to full repayment of its debt in exchange for an agreement to sign a direct contract and relevant documents with Russia's Gazprom," it said.

Gazprom supplies Ukraine with natural gas that it buys from Turkmenistan and other Central Asian countries through RosUkrEnergo. The trading company is half-owned by Gazprom and half by two Ukrainian businessmen.

Both Russia and Ukraine have assured Europe - which receives a quarter of its natural gas from Russia, most of it via Ukraine - that the latest disagreement would not disrupt westward natural gas flows.

The dispute "will have no consequences for other consumers of our gas or Central Asian gas," the Russian first deputy prime minister, Sergei Ivanov, told a news conference in Munich, where he was attending an international security conference. "If you pay for the gas, then you'll get it."

A disagreement over the price of Russian natural gas imports led to a brief supply cut at the start of 2006, which affected some European countries, but a similar dispute over debts last October was resolved without affecting supplies.

Ivanov said that Central Asian nations, which have experienced an unusually cold winter, had been unable to supply Ukraine with all its natural gas needs and that Gazprom had stepped in to help a "brotherly" country.

Ukraine accepted Gazprom's offer and agreed to pay on monthly basis, he said, but the payments had not been received so Russia had withdrawn the offer.

"We are not doing billions of dollars charity anymore," Ivanov said.

The latest dispute burst as the Ukrainian president, Viktor Yushchenko, was set to visit Moscow on Tuesday and weeks before Tymoshenko was scheduled to visit Russia. Both are expected to talk about natural gas agreements.

Tymoshenko has long accused the energy sector of corrupt practices and Moscow of politicizing energy issues. Besides abolishing the intermediaries, she also wants to raise the price Russia pays for transit through Ukrainian territory.

A Gazprom spokesman said Friday that Russian supplies to Ukraine could be cut off as early as Tuesday morning if the debts were not settled.

Sunday, February 10, 2008

Bugs Making Natural Gas in Canada's Tar Sands

Avery is a senior fellow for the Hudson Institute in Washington, D.C., and is the director for the Center for Global Food Issues.

Scientists said recently in the journal Nature they can radically speed up the underground bacterial fermentation that turns Canada's tar-like Athabasca sands into natural gas at far less cost and with far less environmental pollution.

This is huge global news because the world has about 6 trillion barrels of such heavy oil, more than 20 times the proven oil reserves in Saudi Arabia. They're focused in Canada's Athabasca, in Venezuela's Orinoco tar belt, and in the oil shale of the U.S. Rocky Mountains. All may be economically recoverable with bacterial refining.

Dr. Steve Larter of the University of Calgary says understanding how anaerobic bacteria ferment heavy oil into clean-burning methane underground opens the door to recovering the gas from deeply buried oil sands.

"The main thing is you'd be recovering a much cleaner fuel," he says. "Methane is, per energy unit, a much lower carbon dioxide emitter than bitumen."

A separate family of microbes that produces CO2 and hydrogen from partly degraded oil offers a way to capture the CO2 from the tar sands as methane, for burning in a closed-loop system would keep the CO2 out of the atmosphere.

Larter's research team combined microbiological studies, lab experiments and oil field case studies to demonstrate the anaerobic degradation of oil into methane. The findings offer the potential of "feeding" the microbes and rapidly accelerating the gas production process. Says Larter, "Instead of 10 million years, we want to do it in 10 years. We think it's possible. We can do it in the laboratory. The question is can we do it in a reservoir?"

No longer would huge diesel shovels have to dig up three tons of sand for each ton of heavy oil recovered. Nor would refiners inject expensive steam to liquefy the heavy oil so it can flow to the surface. With bacterial refining, the tar and the contaminating sulfur can be left deep underground -- along with most of the sand.

The oil-eating bacteria have been used for some years to clean up contaminated soils and lagoons near oil refineries. Lab results have been encouraging, and the team expects to do field tests as early as 2009.

At almost the same moment, a Penn State professor said drilling newly feasible horizontal gas wells across the Marcellus black shale in northern Appalachia could earn the U.S. $1 trillion worth of additional clean-burning energy. The rock deposits run from southern New York westward through Pennsylvania into West Virginia and Ohio.

Dr. Terry Engelder says the vertical fractures in the Marcellus shale can't effectively be tapped with vertical wells. A horizontal well costs three times as much, but can collect gas from dozens of the fractures. He says the horizontal wells could bring in 50 trillion cubic feet of gas, the equivalent of a Super Giant gas field.

Eco-activists have been telling us we should renounce fossil fuels because they're nearly gone anyway. However, the U.S. has centuries worth of coal that could be burned in "clean" high-tech systems. Bacterial refining and Engelder's horizontal drilling offer other examples of high-tech energy. Cambridge Energy Research Associates predicted in June that world oil production would rise another 30 percent by 2017, with nearly half of the increase from unconventional sources such as natural-gas liquids.

Man-made global warming alarmists have failed to offer any cost-effective substitute for coal, oil and nuclear in base-load energy production. Solar and wind power are costly and erratic. Biofuels take too much land away from nature. The problem is to bridge the energy gap between today and some as-yet-unproven energy technology for humanity's future

Saturday, February 9, 2008

Natural Gas Demand Up if Coal & Nuclear Aren't Built

Roadblocks to building new coal and nuclear plants in the United States have some industry observers expecting a natural gas boom that could contribute to higher energy prices in Ontario over the coming decade.

Dozens of proposals for new coal and nuclear plants from U.S. utilities have been shelved or cancelled because of rocketing construction costs, financing risk, regulatory uncertainty and community resistance:

San Francisco-based Coal Moratorium Now reported last month that 59 coal plant proposals in the United States were derailed in 2007.

Nuclear power projects are also losing steam.

Just last week MidAmerican Energy Holdings Co. said it was abandoning plans to build a nuclear plant in Idaho because costs were too high.

By the end of 2009 the U.S. Nuclear Regulatory Commission expects to receive 21 applications to build 32 new reactors. So far the NRC has received only four applications to build seven reactors.

The New York Times reported Tuesday that U.S. utilities are getting frustrated and beginning to choose a path of least resistance: natural gas.

They're further motivated by the fact that investment banks Citigroup, JPMorgan Chase and Morgan Stanley said Monday that decisions whether to finance new plants will weigh potential charges for carbon emissions and other financial and project risks.

The attraction to gas is that plants are much easier to build.

"Gas can be built in smaller increments and more quickly, and you reduce your risk by not committing as much capital up front," said Paul Mortensen, natural gas analyst with the National Energy Board.

Natural gas contains roughly half the carbon emissions of coal and burns cleaner, though relying more heavily on gas for power generation could come at a premium.

"All the historical evidence would say there would be a profound impact on price, and that's obviously concerning," said Revis James, a spokesperson for the U.S. power industry's Electric Power Research Institute.

Norm Rubin, an analyst with Energy Probe, said such a trend would also affect Ontario businesses and consumers, who rely on natural gas for heating and will grow more dependent on it for electricity as the province moves to phase out all coal-fired plants by 2014.

"Increased demand for natural gas will not only drive up the price, but it will drive us more toward liquefied natural gas," said Rubin, adding that increased reliance on so-called LNG means relying on imports coming in by ship – and, as with oil, being left more vulnerable to the volatility of global trading markets.

Rubin said energy is required to liquefy the natural gas and some of the fuel – what he calls "fugitive methane emissions" – is lost during transportation, bringing it closer to coal in terms of greenhouse gas emissions.

It's also unclear whether LNG would be enough to bridge the supply-demand gap that will drive up prices.

"Our preliminary analysis is that LNG will help but it won't be able to handle everything, because there's a lot of global demand for it as well," Revis said.

The Ontario Power Authority's long-term power supply plan, now in hearings before the province's energy board, anticipates 6,000 megawatts of new natural gas plants coming into service between 2011 and 2018 – assuming that nuclear reactors at Pickering B have been refurbished on time.

Amir Shalaby, vice-president of system planning at the power authority, said natural gas now generates about 8 per cent of Ontario's electricity and will nearly double as part of the province's 20-year plan before settling back down.

This comes as the National Energy Board, in a recent report, warned that Canada's role as a natural gas exporter is being hurt by "relatively flat to declining overall production and growing natural gas demand," mostly for power generation and oil-sands extraction.

But Shalaby said Ontario, compared to many U.S. states, will be somewhat sheltered by price increases because of its diverse energy mix. He added that new natural gas plants will also be used sparingly.

"Our strategy is to not use it very much, not run it very often, knowing precisely that we're vulnerable to price fluctuations," Shalaby said. "We're building it only as a flexibility option."

Consumers and businesses that rely on natural gas for heating would likely feel the greater impact, experts say, forcing many toward conservation or alternatives such as solar thermal, geothermal, heat-recovery systems and co-generation.

Friday, February 8, 2008

China's Natural Gas Production up 23.1% in 2006 - 69.31 BCMeters

BEIJING, Feb. 8 (Xinhua) -- China's production of natural gas rose 23.1 percent last year, faster than in 2006, to 69.31 billion cubic meters as the country used more "clean" energy, an industry association said.

In 2006, output jumped 19.2 percent to 58.55 billion cubic meters, the China Petroleum and Chemical Industry Association (CPCIA) said. It also said that output would likely hit 76 billion cubic meters this year.

China used 55.6 billion cubic meters of gas in 2006, an increase of 21.6 percent from a year earlier, according to statistics from BP.

China has set a target of raising the proportion of natural gas in its total energy consumption to 5.3 percent in 2010 from 2.8 percent in 2005, amid efforts to curb pollution. Coal now accounts for about 70 percent of total energy consumption.

The expansion of the natural gas infrastructure, including pipelines, reflected the rapid increases in output and consumption, the CPCIA said.

China plans to start building a second east-west gas pipeline this year. The first such pipeline went into commercial operation in 2004.

The new pipeline is scheduled to become operational in 2010 and will have a designed annual transport capacity of 30 billion cubic meters. It will mainly move natural gas from Central Asia to the Yangtze and Pearl River Deltas, the country's two most developed regions.

Construction on another pipeline, which will link the Puguang Gas Field in the southwestern province of Sichuan, one of the country's largest, with the Yangtze River Delta, started last August.

Wednesday, February 6, 2008

Natural Gas from Mozambique to South Africa for 2009

OHANNESBURG, South Africa, Feb 05, 2008 /PRNewswire-FirstCall via COMTEX/ -- Sasol (JSE: SOL ; NYSE: SSL) iGas and Compania Mozambicana de Gasoduto, as joint partners in the Republic of Mozambique Pipeline Investment Company (ROMPCO), today announced construction of a R1.1 billion gas compression station to facilitate a 20% expansion of natural gas delivery from Mozambique to South Africa by the end of 2009.

The gas compression station will be based at Komatipoort in South Africa and will increase gas delivery capacity from a current 120 million gigajoules a year to about 147 million gigajoules a year. Construction will commence by mid 2008.

Two gas-turbine driven compressor units and ancillary equipment will be used at Komatipoort to increase gas flow rates in ROMPCO's 865 km long transborder pipeline that transports the natural gas from the Pande and Temane gasfield in Mozambique to Sasol's operations at Secunda and Sasolburg in South Africa.

The engineering, procurement and construction management contract has been awarded to Foster Wheeler South Africa (Pty) Ltd.

The pipeline forms part of the US1.2 billion Natural Gas venture, inaugurated by former President Joachim Chissano of Mozambique and President Thabo Mbeki of South Africa on 1 June 2004. It is designed to have a capacity to transport 240 million gigajoules of gas a year.

The ROMPCO shareholding partners are the South African government through iGas (25%); the Mozambican government though Compania Mozambicana de Gasoduto (25%); and Sasol Gas (50%).

The project will provide short-term employment for about 450 people of whom about 150 will be skilled artisans and 300 local workers. Preference will be given to local and South African suppliers as far as equipment and material sourcing is concerned.

The additional gas will be used as part of the first phase of a planned 20% expansion of Sasol Synfuel's capacity at Secunda over the next eight years.

Three quarters of the eventual additional Synfuels capacity will use natural gas as feedstock with its more benign effects on the environment and the balance will be based on fine coal reserves.

Some of the first phase additional gas is earmarked for the gas turbine driven electricity generators recently ordered by Sasol Synfuels in Secunda. Commissioning of both the pipeline compressor station as well as the gas turbines is expected by late 2009.

Sasol is an integrated oil and gas company with substantial chemical interests. Based in South Africa and operating worldwide, Sasol is listed on the NYSE and JSE stock exchanges. We are the leading provider of liquid fuels in South Africa and a major international producer of chemicals. Sasol uses proprietary Fischer-Tropsch technologies for the commercial production of synthetic fuels and chemicals from low-grade coal and natural gas. We manufacture more than 200 fuel and chemical products that are sold worldwide. In South Africa we also operate coal mines to provide feedstock for our synthetic fuels plants. Sasol operates the only inland crude oil refinery in South Africa. The group produces crude oil in offshore Gabon, supplies Mozambican natural gas to end-user customers and petrochemical plants in South Africa, and with partners involved in gas-to-liquids fuel joint ventures in Qatar and Nigeria. Internet address:

Tuesday, February 5, 2008

Devon Locks in Minimum Price $7.50 for MMBTU

OKLAHOMA CITY, Feb. 4 /PRNewswire-FirstCall/ -- Devon Energy Corporation announced today that it has entered into natural gas and oil hedges for the year 2008. The hedges cover approximately 40 percent of Devon's total 2008 forecasted production on an oil-equivalent basis. The company reported volumes and average prices applicable to the hedges.

Natural Gas Hedges

Devon's natural gas price hedges are composed of financial price collar contracts and price swap contracts. The price collar contracts set floor and ceiling prices for a portion of Devon's natural gas production. The price swap contracts fix the price for a portion of Devon's natural gas production. The floor and ceiling prices and swap prices are based on the NYMEX price. The NYMEX price is based on first-of-the-month Henry Hub price as published monthly by Inside FERC. If the NYMEX price is outside of the ranges set by the floor and ceiling prices in the various collars, Devon and the counterparty to the collars will settle the difference. Any such settlements will either increase or decrease Devon's gas revenues for the period.

The following table lists the natural gas price collar contracts and price swap contracts for 2008 entered into through February 1, 2008.

Price Collar Contracts Price Swap Contracts
Floor Price Ceiling Price
Weighted Weighted
Floor Ceiling Average Average
Volume Price Range Price Volume Price
Quarter (MMBtu/d)($/MMBtu) ($/MMBtu) ($/MMBtu)(MMBtu/d)($/MMBtu)
First Quarter 625,495 $7.50 $9.00 - $10.25 $9.43 364,670 $8.23
Second Quarter 1,055,000 $7.50 $9.00 - $10.25 $9.42 620,000 $8.24
Third Quarter 1,055,000 $7.50 $9.00 - $10.25 $9.42 620,000 $8.24
Fourth Quarter 1,055,000 $7.50 $9.00 - $10.25 $9.42 620,000 $8.24
2008 Average 948,210 $7.50 $9.00 - $10.25 $9.42 556,516 $8.24

Oil Hedges

Devon's oil price hedges are composed of financial price collar contracts. The price collar contracts set a floor and ceiling price for a portion of Devon's oil production. The floor and ceiling prices are based on the NYMEX price. The NYMEX price is the monthly average of settled prices on each trading day for West Texas Intermediate Crude oil delivered at Cushing, Oklahoma. If the NYMEX price is outside of the ranges set by the floor and ceiling prices in the various collars, Devon and the counterparty to the collars will settle the difference. Any such settlements will either increase or decrease Devon's oil revenues for the period.

The following table lists the oil price collar contracts for 2008 entered into through February 1, 2008.

Price Collar Contracts
Floor Price Ceiling Price
Floor Ceiling Average
Volume Price Range Price
Quarter (Bbl/d) ($/Bbl) ($/Bbl) ($/Bbl)
First Quarter 21,011 $70.00 $132.50 - $148.00 $140.31
Second Quarter 22,000 $70.00 $132.50 - $148.00 $140.20
Third Quarter 22,000 $70.00 $132.50 - $148.00 $140.20
Fourth Quarter 22,000 $70.00 $132.50 - $148.00 $140.20
2008 Average 21,754 $70.00 $132.50 - $148.00 $140.23

Devon Energy Corporation is an Oklahoma City-based independent energy company engaged in oil and gas exploration and production. Devon is the largest U.S.-based independent oil and gas producer and is included in the S&P 500 Index. For additional information, visit

This press release includes "forward-looking statements" as defined by the Securities and Exchange Commission. Such statements are those concerning the strategic plans, expectations and objectives for future operations. All statements, other than statements of historical facts, included in this press release that address activities, events or developments that the company expects, believes or anticipates will or may occur in the future are forward-looking statements. These statements are based on certain assumptions made by the company based on its experience and perception of historical trends, current conditions, expected future developments and other factors it believes are appropriate in the circumstances. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the company.

Monday, February 4, 2008

Australian LNG from Coal Seem Worth A$8 Billion from BG in England

Feb. 4 (Bloomberg) -- Queensland Gas Co., an Australian producer of natural gas from coal seams, jumped the most in 15 months in Sydney trading after linking with BG Group Plc for a A$8 billion ($7.2 billion) fuel-export project in Queensland.

Queensland Gas shares rose as much as 72 cents, or 21 percent, to A$4.14 on the Australian Stock Exchange, beating a gain of as much as 2.1 percent in the exchange's benchmark energy index. The stock was at A$3.87 at 12:13 p.m. local time.

Demand for liquefied natural gas is set to more than double to 400 million metric tons a year by 2015 as utilities in north Asia, Europe and the U.S. increase imports for power generation. The venture with BG doubles the value of Queensland Gas's reserves, Managing Director Richard Cottee said yesterday. BG also bought a stake in Queensland Gas and in its reserves.

``This shows that large global organizations are seeking long-term gas and are willing to pay up for it,'' said John Colnan, senior resources analyst at Shaw Stockbroking Ltd. in Sydney. ``The project is still a long way off.''

The partners plan to build a LNG facility near Gladstone with a capacity of 3 million to 4 million metric tons a year, with deliveries starting in 2013, Brisbane-based Queensland Gas said yesterday in an e-mailed statement. The investment will include the development of coal seam gas fields, a 380-kilometer (236-mile) pipeline and a production plant.

Rival Projects

Reading, U.K.-based BG Group, the U.K.'s third-largest gas producer, agreed to pay A$250 million for a 9.9 percent stake in Queensland Gas, at A$3.07 a share, and A$415 million for a 20 percent interest in the Australian company's coal seam gas assets in the Surat Basin. It will pay a further A$207 million for another 10 percent share of the acreage once the LNG project is approved or once Queensland Gas firms up 7,000 petajoules (6.6 trillion cubic feet) of reserves.

Construction of the Australian Onshore LNG project is due to start in 2010 once the partners approve the investment. While Queensland Gas has no LNG production at present, BG has 10 million tons a year of supply and 17 million tons a year of markets, including more than 2 million tons a year into Asia, Queensland Gas said today in a presentation sent to the exchange.

The project is one of four LNG ventures being proposed for the area around Gladstone, all fueled by coal seam gas. Santos Ltd., Australia's third-biggest oil and gas producer, is planning a A$7 billion project, while Japan's Sojitz Corp. and Sunshine Gas Ltd. are proposing a smaller venture. Liquefied Natural Gas Ltd. and Arrow Energy Ltd. intend to build a $400 million plant.

Sunday, February 3, 2008

Ukraine Natural Gas Involves Russian Middlemen

The Ukrainian government on Saturday announced its first formal step toward eliminating a partly Russian-owned intermediary company from its natural gas purchase deals.

Prime Minister Yulia Tymoshenko said the country's National Security and Defense Council on Friday instructed the government to break up the contracts between the Ukrainian natural gas distribution monopoly Naftogaz and the Swiss-based trading company RosUkrEnergo because "they contain elements of corruption and are unprofitable."

Half of RosUkrEnergo is owned by Russian energy giant Gazprom and the rest by two Ukrainian businessmen. The deal has been in place since 2004.

Nearly all of Ukraine's gas imports come through Russia from the Central Asian nation of Turkmenistan.

Ukraine is seeking to buy natural gas directly. Losing influence over gas imports to Ukraine would likely anger Russia.

Ukraine and Russia have clashed over gas imports in the past. Moscow temporarily cut off gas supplies to Ukraine two years ago — a shutdown also felt in Western Europe — in a move widely seen as punishment for Ukraine's pro-Western course.

Tymoshenko said Saturday that the process of breaking up deals with RosUkrEnergo would be "gradual," to avoid supply disruptions and price hikes on the domestic market.

Tymoshenko is expected in Moscow later this month to discuss energy issues.

Saturday, February 2, 2008

Questar Natural Gas Play in NW Louisiana

Questar Corporation (NYSE:STR) subsidiary Questar Exploration and Production Company (Questar E&P) today announced that it has entered into definitive agreements with multiple private sellers to acquire two significant natural gas development properties in northwest Louisiana for an aggregate purchase price of $655 million. The properties are located in Red River and Bienville Parishes, approximately 10 miles south and east of Questar E&P's existing Elm Grove Field operations.

The acquired properties will add 276 Bcfe of net proved reserves as of the effective date, approximately 20% of which are currently proved developed. Questar E&P estimates proved plus probable and possible reserves attributable to the properties of 593 Bcfe. In addition to 74 existing producing wells, Questar E&P has identified up to 852 future development well locations on a combination of 20-acre and 40-acre density. Development targets are the same as those being successfully exploited by Questar E&P at Elm Grove Field - multiple stacked tight-gas sands in the Cotton Valley and Hosston formations at depths ranging from 6,500 to 10,500 feet. Questar E&P estimates gross reserves attributable to future vertical wells will range from 0.7 Bcfe to over 3.25 Bcfe and gross completed vertical well costs will range from $1.7 to $2.4 million.

The effective date for the transactions is January 1, 2008. The company expects to close by the end of February 2008. The purchase price is subject to usual and customary closing and post-closing adjustments.

"We're 'turning up' our Midcontinent growth with these 'bolt-on' acquisitions in our core NW Louisiana Cotton Valley / Hosston play," said Keith Rattie, Questar Chairman, President and Chief Executive Officer. "We're putting more assets in the hands of our experienced Midcontinent team - and diversifying our E&P business," Rattie added.

"If we execute, with these assets Questar E&P may double Midcontinent production over the next 4-5 years," said Charles Stanley, Questar executive vice president and president and CEO of the company's exploration and production businesses. "Combined with our existing inventory in Elm Grove Field, Questar E&P will have over 1,050 Cotton Valley/Hosston development locations in northwest Louisiana, over 950 of which will be Questar E&P-operated - and that assumes vertical wells. We're intrigued by the potential to significantly increase rate, recoveries and returns with horizontal drilling on parts of this acreage. We'll be evaluating that alternative over the next couple of years," Stanley added.

If these transactions close at the end of February as expected, the company estimates these assets could yield incremental production of approximately 12 Bcfe net to Questar E&P in 2008.

The company said it expects to fund the acquisition with a combination of short and long-term debt.

About Questar

Questar Corp. (NYSE:STR) is a natural gas-focused energy company with an enterprise value of about $10 billion. Questar finds, develops, produces, gathers, processes, transports, stores and distributes natural gas

Friday, February 1, 2008

StatOil Strikes Natural Gas - Again - Norwegian Sea

OSLO, Norway -

State-controlled oil company StatoilHydro ASA struck natural gas with a exploration well drilled in the Norwegian Sea, near existing finds of the Nordic country's coast, the Norwegian Petroleum Directorate announced Thursday.

The Norwegian company's find was about 180 kilometers (110 miles) off the west coast city of Trondheim, and has recoverable natural gas reserves estimated at being between 2 billion and 3 billion standard cubic meters (70 billion and 105 billion cubic feet), a directorate news release said.

Field operator StatoilHydro said it will study ways of connecting the find to the existing offshore field Aasgard so the gas can be produced.

The exploration block was awarded to StatoilHydro and its partners in 2003 as part of the government's Awards in Predefined Areas program to stimulate the search for oil near already producing fields as a way of shoring up slowly dwindling production.

Stavanger-based StatoilHydro and its subsidiary StatoilHydro Petroleum AS have a 59 percent stake in the field, while Mobil Development Norway AS owns 24 percent and Eni Norge AS has 17 percent.