CERAWeek Day 1: Oil-to-Gas Switch, Apache, Statoil, Total, ENI & Pemex

Experts kicked off the first day of IHS CERAWeek with discussions ranging from obstacles companies will face to extract enough energy to meet global needs to the multiplicity of global gas prices and their volatility.

Energy executives from around the world gathered at the Hilton Americas Hotel in downtown Houston Tuesday morning for breakfast to hear company executives from Ingrain Rocks, Novas, Potter Drilling, Sapphire Energy, Picarro, Ceres, Local Motors and Transonic Combustion discuss innovative technologies being used in the upstream, processing, biofuels and automotive sectors.

Guest speaker Ernest Monist, professor and director of MIT Energy Initiative, highlighted a recent trend in which universities and companies worldwide are embracing in a new kind of interaction.

Historically, universities were reluctant in forging partnerships with companies and this is a significant change for energy, he added.

Monist concluded the session by urging the industry to not get hung up on controversial government issues and instead to focus on its principal role of filling the innovation pipeline.

The Effects of the Oil to Gas Switch

Panel members in the session, "The Unconventional Service Industry: Lessons Learned and their International Application," agreed the industry is evolving, and that advanced technology will become more efficient as the industry progresses.

IHS CERA Chair and Senior Director Candida Scott said technology is at the heart of the unconventional industry, and is what has taken the industry to where it is today. Previously, oil and and gas companies were fracturing three or four stages. Today, more than 30 stages are being fracked.

The panel echoed Scott's comments saying advanced technology will become more efficient as the industry continues to evolve.

Panelist and Chief Executive Officer Marcus Rowland said the trend is moving realistically smoothly in reference to the industry's recent shift from oil to gas drilling.

Rowland said problems are created in the U.S. when a large influx of activity surfaces when there is a bottomless supply.

When the industry looks internationally, Rowland said the infrastructure network is one of the biggest challenges. As of now, foreign companies do not have enough grids or infrastructure capability in China, Argentina, Poland or the Middle East, according to Rowland.

Tim Morrison, executive vice president of Platinum Energy Solutions, discussed the industry's attitude toward the Health, Safety and Environment sector from what it was previously -- saying that 20 years ago it was OK if you had a missing finger -- to being more aware and proactive now.

Morrison also referenced the "crew change" as one of the greatest changes in hiring within the industry.

Apache Hopes to Secure Canada LNG Contract with Asian Buyer in 2012

Negotiations to find a major Asian customer for a liquefied-natural-gas exporting terminal in Canada continue and a long-term contract is expected this year, Apache Corp. Chief Executive G. Steven Farris said Tuesday.

Nailing down a long-term LNG contract typically takes a long time as it involves dealing with a government or a government-owned company that has to review volumes of papers to make sure it is satisfied with the terms of the agreement, Farris told Dow Jones Newswires in an interview on the sidelines of the IHS Cera conference in Houston. "There are a lot of things that have to be negotiated," he said. The company, however, is optimistic about finalizing a deal this year, he added.

Houston's Apache owns 40% of an LNG project in Kitimat, British Columbia, while Canada's Encana Corp. (ECA, ECA.T) and EOG Resources (EOG) own 30% each. The terminal is expected to be able to ship 700 million cubic feet a day to producers in Asia by 2015.

Last month, Encana Chief Executive Randy Eresman told analysts the company would have to consider selling out its stake in the terminal if a big customer in Asia didn't commit to the project this year.

Apache's Farris said the possible sale of the stake won't have a significant effect in the project.

Apache has no plans to build an LNG terminal in the U.S. or in any other country where there is a market for the natural gas it produces, Farris said. "If you ask me if we are going to be in the LNG business around the world, [the answer is] no." Farris said. "Only where we've got enough gas that we don't have a market for."

Separately, Apache has no plans to curtail natural-gas production in the U.S. despite low commodity prices. The company isn't drilling for natural gas but its current production is profitable as it is still being sold above the company's operating costs of 50 cents per million cubic feet of gas, Farris said.

Tuesday, natural gas rose .1 cent to $2.3560 per million British thermal units, sharply down from the nearly $14 per MMBtu it traded at in July 2008.

Farris declined to provide a natural-gas price projection, but said he isn't bullish about a prompt recovery in commodity prices. "We have a lot of natural gas in this country."

The shale-gas boom in North America has prompted observers and some entrepreneurs to assert that the U.S. will begin to ship LNG to hungry markets in Europe and Asia, where the commodity will fetch higher prices.

Speaking about the company's operations in Egypt, the executive said he is confident the political situation in the country will stabilize with time.

The company has 27 rigs running and it has a gross production of 850 million cubic feet of natural gas a day and 220,000 barrels of oil equivalent a day, Farris said. Apache still considers it "viable" to increase gross production in Egypt by 100,000 barrels a day by 2015, Farris said.

Speaking about the company's exploratory plans, Farris said Apache plans to drill in April its first exploratory well for shale oil in the 900,000 acres shale it owns in Argentina.

Apache's strategy for the country hasn't changed due to the recent attacks the oil-and-gas industry has faced from the federal government, which said companies there haven't invested enough in exploration and production, forcing the government to spend billions a year on imported fuels.

"I feel very comfortable with Argentina. We are not politicians; we try to make money," Farris said. "There is huge hydrocarbons potential, but you certainly have to think about the political and economic situation down there."

Apache is also on track to drill four vertical exploratory wells in New Zealand. Interest in exploring for oil and gas in New Zealand has increased in recent years as reserves from the largest producing fields have dwindled.

ENI CEO: Multiple Gas Prices Make It Difficult To Gauge Investment

The ever-changing nature of natural gas markets is clouding the crystal ball of the world's energy giants, Eni SpA (E, ENI.MI) Chief Executive Paolo Scaroni said at the conference Tuesday.

"The future of the gas market, to paraphrase Winston Churchill, has become a riddle wrapped in a mystery inside an enigma," Scaroni said.

The multiplicity of global prices, and their volatility, makes it difficult for companies to gauge the massive investments they need to make in order to tap the giant new fields they've been discovering in recent years. In addition, demand estimates "swing widely," as forecasters try to factor in items such as the future use of natural gas in transportation or the fate of the nuclear industry, a main competitor for the commodity in electricity generation, Scaroni said.

Scaroni's comments come amid a major transformation in the natural gas industry, spurred largely by the surprising bounty found in U.S. shale gas deposits, which turned the formerly energy-scarce super-power into a potential exporter of the commodity.

But "it remains to be seen whether American citizens" will accept export of the precious resource, which could result in higher prices, Scaroni said, adding also that shale production in other countries could also change the picture for U.S. exports.

Eventually, Scaroni said, there will be a rebalancing of the wild disparities in global prices, led by an increase of liquefied natural gas being shipped across the continents. The historically wide gap that divides oil and gas prices will also be bridged--"either gas will go up or oil will go down," Scaroni said.

Eni, the leading foreign producer in Libya, has seen its production almost reach the level it had three years ago, at 260,000 barrels a day, the executive said.

"So far so good," said Scaroni, who was in Tripoli on Sunday. "We've been quick in restarting production."

Total Executive: Ample Oil, Gas Resources Remain Unexploited

Total S.A.'s head of exploration Yves-Louis Darricarrere said Tuesday that there is plenty of oil and gas in the ground but also lots of obstacles to extract enough of it to meet growing global needs.

"I don't think in-the-ground resources are an issue," Darricarrere said at the IHS Cambridge Energy Research Associates annual conference in Houston. There are enough oil resources to last 75 years and natural gas resources to last about 130 years, he said. These projections are the result of the bounty being built by recent exploration successes around the globe.

But, despite this abundance, "for various industrial and geopolitical reasons, it'll be difficult to produce more than 95 to 97 million barrels per day (of oil and natural gas liquids) in the foreseeable future," the French executive said.

Production for 2011 for 87.4 million barrels a day.

For one, projects in the deep-water regions in other conventional drilling areas are getting more expensive. On top of that, several countries maintain barriers to investment. The amount of oil extracted won't quench the growing thirst for energy in the developing world, he said.

"We see structural support for oil and gas prices, excluding North America, in the medium and long term," Darricarrere said. In North America, the recent application of hydraulic fracturing techniques has created an abundance of energy sources, in particular depressing prices for natural gas.

Pemex CEO: Helix Board Accepted Pemex Membership

Pemex Chief Executive Juan Jose Suarez Coppel said Tuesday that the Mexican oil giant has been admitted to a consortium that offers technology to contain deep-water spills.

"We have been told that the board of Helix accepts us to be part of the consortium," Suarez told reporters, referring to the Helix Marine Well Containment Co. Helix inherited and built upon some of the systems used to quell the BP U.S. Gulf of Mexico oil spill in 2010.

Pemex still has to sign a memorandum of understanding and other agreements with Helix, but it expects to have the system in place before it begins drilling a deep-water well near the U.S.-Mexico border by mid-2012.

Pemex, which seeks to expand in deepwater to stem its flagging oil production, is also working on a longer-term solution to contain spills: a system of its own, built in collaboration with subsea services provider Cameron International (CAM).

"When we have the potential activities that we foresee, it makes sense for us to have our own facilities," Suarez said.

Statoil: Companies Should Support Fracking Transparency Legislation

The energy industry should support new legislation aimed at increasing transparency in the way publicly traded companies report their finances and operations in order to build public confidence, Statoil ASA Chief Executive Helge Lund said Tuesday.

"I believe there is a huge upside working to ensure we have the right regulations, rather than being perceived as the industry that fights regulations," Lund told the IHS CERA energy conference here.

The oil and gas companies in the U.S. have to "admit" that probably they "didn't move quickly enough" to accept disclosure of the chemicals they use in hydraulic fracturing, or fracking, Lund said. "I take the view that the industry should continue to be proactive and transparent. That is the only way we can earn the trust we need to develop these valuable resources," Lund said.

Several companies have opposed any rule that would force drillers to reveal the chemicals used in fracking, which involves sending pressurized water deep underground to release oil and natural gas trapped within rock formations. Hydraulic fracturing has allowed companies to tap vast new reserves of oil and natural gas, but critics have said the process harms the environment.

The energy industry should also endorse new legislation aimed at increasing transparency in the financial system in the U.S. and Europe, Lund said. Suggestions to introduce at a minimum country-by-country revenue for publicly listed companies "can help to avoid corruption and ensure the value of the activities benefits society at large," Lund said. "Do I think a broad industry approach along these lines would have benefited us all? That goes without saying."

-- Dow Jones Newswires' Angel Gonzalez and Isabel Ordonez contributed to this report.

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