As the company transitions, Shell is planning significant new investment in Australian liquefied natural gas (LNG) projects, on the scale of $50 billion.  Investment in LNG projects is being catalyzed by increased demand for cleaner-burning fuels, especially in Asia, as well as advancements in technology.

PetroChina, which joined with Shell to acquire Arrow Energy Ltd. and its reserves in Queensland, expects continued “long term” demand for LNG from Australia.  “Its a booming economy and more and more dirty energy is being replaced by clean energy.  There is a need,” remarked PetroChina project manager Ge Aiji.

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Greece’s  €12 billion investment plan includes urban improvement projects, new natural gas pipelines and storage facilities in northern Greece.  The government hopes to attract a total of €22 billion in external private investment in the coming decade.  Environment Minister Tina Birbili hopes the program will “decisively contribute to face recession and lead to dynamic economic growth.”

Although Greece has ample wind and solar resources, renewable energy contributed only 4% of the nation’s electricity generation in 2009.  However, by 2020 Greece has pledged to ramp up renewables’ share to 40% of its total electrical output.

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Conventional gas drilling processes use approximately 80,000 gallons of water per well.  However,  the new method of horizontal drilling combined with “fracking” uses millions of gallons of water that has been laced with a cocktail of sometimes toxic chemicals.  These new techniques have opened up gas resources in many previously inaccessible areas, and dramatically increased U.S. natural gas production.

However, environmental pollution concerns have steadily increased in New York, Pennsylvania, Ohio, and West Virginia, across which spans the giant Marcellus Shale formation.  New York has already limited drilling in certain areas because of fears of possible groundwater contamination in watershed regions.   It is likely that similar regulations will soon be put in place to ensure protection of the environment as fracking drilling expands.

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The deals, designed to increase cooperation in the sector, cover areas such as aviation biofuel, distributed energy systems using natural gas as fuel, smart meters and cellulosic ethanol, the China Daily reported. A number of Chinese and U.S. companies would be involved in the eight deals.

The report quoted analysts that the agreements between the world’s two largest energy users would encourage global collaboration in increasing energy efficiency and protecting the environment.

The agreements came at the conclusion of the two-day China-U.S. Strategic and Economic Dialogues in Beijing.

Zhang Guobo, head of the National Energy Administration, also noted bilateral collaboration in renewable energy development, adding: “The United States has advanced technology, and China has a huge market,” the China Daily reported.

U.S. Ambassador to China Jon Huntsman was quoted as saying the two countries will “take every angle” to ensure their cooperation in energy and environment.

Zhang said renewable energy development is important for China to achieve goals of increasing the use of non-fossil energy to 15 percent of primary energy use by 2020, and reducing carbon intensity by 40 percent to 45 percent in 2020 from 2005 levels, China Daily reported.

He said China will continue to focus on the development of hydro, wind, solar, and biomass energy in the renewable sector.

Earlier, U.S. Energy Secretary Steven Chu was quoted as saying improving energy efficiency would both reduce greenhouse gas emissions and boost economic growth.
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ONGC’s Chairman R.S. Sharma is reportedly petitioning the federal government to establish a sovereign wealth investment fund to continue making these investments, as India is heavily reliant on imported oil.  In fact, the relationship between India and Saudi Arabia has developed so much recently that the Saudis have committed to doubling crude oil shipments to India.

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“Unconventionals” and national oil companies were the major trends in the sector last year, the latter accounting for 17% of M&A spending during 2009.  ExxonMobil’s $41 billion takeover of natural gas company XTO and Suncor’s buyout of PetroCanada for $18 billion were two of the most notable deals.

The chart below from Wood and Mackenzie depicts the growth rate after inclusion of foreign mergers and acquisitions by NOCs:

The Marcellus Shale formation, the largest in the nation, extends over much of Pennsylvania and New York State.  According to geologic estimates, the Marcellus formation could satisfy American demand for natural gas for over a decade.

Earlier this year, New York State proposed new rules to allow drilling via a new process called hydraulic fracturing, or “fracking.”  Fracking uses a mixture of water, sand and chemicals to blast through shale rock to release trapped gas that could otherwise not be obtained.  ”Fracking” has come under a barrage of criticism recently by those who claim the process leaks poisonous chemical residue into groundwater.

New York City’s opposition to the practice may give more weight to the “Frack Act” legislation reportedly being considered by the federal government.  The legislation would require drilling companies to disclose the chemicals used when drilling, and could have implications for some of the largest energy companies in the nation, such as Halliburton and Exxon Mobil.

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The addition of XTO’s resource base will add the equivalent of 45 trillion cubic feet (tcf) of gas, including shale gas, tight gas, coal bed methane and shale oil.  New horizontal drilling and “fracking” techniques have contributed to boom in U.S. gas supply, yet kept prices low.

Exxon’s move shows strong support for the natural gas sector, which analysts say may experience a bump as demand responds to political pressure and moves away from high-emitting fuels like coal and oil.

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A series of technology firsts unlocked major new resources beneath water nearly two kilometres deep. Huge technical challenges had to be overcome to bring the fields to production. Remote-controlled submarines operating in massive pressures on the ice-cold sea floor installed the equipment needed to produce the oil from deep beneath the seabed.

A vast network of wells and pipelines connect reservoirs scattered up to 20 kilometres apart. In a double technical first, oil and gas are separated on the seabed before powerful electric pumps push the oil upwards from the low-pressure reservoirs to a specially converted production vessel on the surface that stores it for shipping to shore.

And kilometres-long umbilical cables stretching out from the vessel channel continuous power and chemicals – vital to prevent frozen solids forming in the oil – to the production machinery far below.

As long-term energy demand soars, accessing hard-to-reach resources such as those at Parque das Conchas will be increasingly vital. To develop the fields economically, the reservoirs of Parque das Conchas were connected through a single production process centred on the converted vessel.

Production from the fields – currently ramping up – is the latest step in Shell’s strategy of delivering an additional 1 million barrels per day of oil and gas production in the coming years.

At the heart of the Parque das Conchas project – formerly known as BC-10 – is a floating production, storage and offloading vessel (FPSO) with the capacity to produce up to 100,000 barrels of oil and 50 million cubic feet of natural gas a day. Shell is the operator with a 50% share with partners Petroleo Brasileiro (Petrobras) holding 35% and India’s ONGC Campos Ltda. 15%.

‘Oil and gas will continue to play a major part in meeting the world’s growing energy demands, and bringing Parque das Conchas production on-stream marks an important milestone for oil production in the region,’ says Shell Upstream Americas Director Marvin Odum. ‘This also reinforces Shell’s presence in the country with a project that has created jobs and encouraged investments.’

Pumping up the oil
To combat the low pressure in the reservoirs, Shell installed 1,500-horsepower electric submersible pumps on the seabed. Each pump uses the thrust of a Formula 1 car engine to drive the oil to the surface. The oil travels through specially-developed steel pipes that are flexible enough to move with the ocean’s persistent swell.

Production comes from the Abalone, Ostra and Argonauta B-West fields lying at depths of between 950 to 2,500 metres below the seabed, south-east of the city of Vitória. Some 5,000 men and women worked together to overcome huge technical challenges to make Parque das Conchas a reality. The first phase of the project now on-stream involves nine producing wells. A second phase currently in planning will focus on the Argonauta O North field.

The pressure of water on the seabed is about 180 bar (2,600 pounds per square inch) – 180 times the average pressure at sea level – and too much for a human diver to bear. Temperatures are near-freezing and the sun’s rays cannot penetrate. Remotely operated submarines steered by crews at sea level installed the pumps, well-head machinery and other equipment piece by piece.

Adding to the challenges, the resources lie in small to medium-sized reservoirs under a seabed terrain made unstable by shifting sands. To prevent sand, mud and shale from falling back into the well while drilling, Shell pumped in a mix of synthetic oil with additives under high pressure to hold the hole open. And the geological make-up of each reservoir varies, with the density of oil ranging from very heavy in the Ostra field to light in Abalone.

Some of the oil at Parque das Conchas has a high gas content. To prevent this gas from entering the pumps and damaging them, Shell installed machines to separate the oil from gas on the seabed, rather than on a surface platform or onshore. Instead of burning this gas off, it is being pumped back into the Ostra field for storage until construction of a gas export pipeline system is complete.

Round-the-clock operations
The oil is pumped up to an FPSO because of the remote location of the fields, far from any pipelines, The vessel – a converted tanker – can store nearly 1.5 million barrels of oil for shipment to shore, enough to fill over 600 million soft drink cans. Laid end-to-end, the cans would circle the world twice. From there, tankers take it to markets.

In a further technical breakthrough, Shell developed huge steel umbilical cables to connect the FPSO to the seabed equipment in each of the reservoirs over a 270-square kilometre area. The electrical and hydraulic power they supply, along with the anti-freeze chemicals, is vital to keep operations running around the clock.

‘Developing breakthrough technologies and being successful in Parque das Conchas will allow the development of other deep-water projects in Brazil and elsewhere,’ says Steven Grant, Subsea Team Lead of the project at Shell Brasil.