Ziff Energy Group Charts of the Month

Gas is Worth (a lot) Less than Oil

Mon, 16 Jan 2012 07:00:00 GMT

Chart shows the relative value of gas versus oil when measured on an energy equivalent basis (the gas to oil ratio). The energy equivalency is roughly 6:1, - when oil is trading at $100 per barrel, the natural gas equivalent should be approximately $17/MMBtu. The chart shows that natural gas has historically traded at a discount to oil. During some periods of gas supply disruption, the ratio has shrunk to near parity, and even a premium, as happened during the hurricane induced supply disruptions in 2005. With the explosion of low cost shale gas supply in North America, the ratio has widened to current unprecedented levels of 24:1, and 32:1 going forward into 2012 as valued on the New York Mercantile Exchange. The value disconnect is a driver for Proposals to liquefy North American natural gas for export to countries where natural gas is priced relative to oil on an energy equivalent basis.

For further information please contact:

Edward Kallio, Director, Gas Consulting, edward.kallio@ziffenergy.com, 403-234-4275
Richard M. Tucker, Vice President, Marketing & Client Relations, richard.tucker@ziffenergy.com, 713-985-5183

WCSB Average Unit Cost & Price - Gas

Mon, 09 May 2011 06:00:00 GMT

Operating Cost vs. Commodity Prices charts demonstrate the correlation between average unit operating cost and prices for oil and gas over the past 17 years. Both oil and gas operators have shown strong correlation with the market price for many years. However, while oil and gas prices dropped sharply in 2009, average operating cost only declined slightly. The industry is still experiencing week gas prices in 2011. The challenge for oil and gas operators is whether they can reduce operating costs. For the past 17 years, our studies have highlighted quick and direct cost reduction opportunities. Our unbiased review will be a valuable tool for managers to quickly see the areas of opportunities and prioritize their work schedules accordingly to maximize the value for every dollar spent.

For further information please contact:

Sergey Turchin, Manager, Operations Consulting Services, sergey.turchin@ziffenergy.com, 403-234-4298
Paul H. Ziff, CEO, paul.ziff@ziffenergy.com, 713-985-5180
Jenny Jackson, Executive Marketing Coordinator, jennifer.jackson@ziffenergy.com, 403-234-4297

WCSB Average Unit Cost & Price - Gas

Mon, 09 May 2011 06:00:00 GMT

For further information please contact:

Sergey Turchin, Manager, Operations Consulting Services, sergey.turchin@ziffenergy.com, 403-234-4298
Paul H. Ziff, CEO, paul.ziff@ziffenergy.com, 403-234-4276
Jenny Jackson, Executive Marketing Coordinator, jennifer.jackson@ziffenergy.com, 403-234-4297

WCSB Average Unit Cost & Price - Oil

Mon, 09 May 2011 06:00:00 GMT

WCSB Average Unit Cost & Price - Oil

Mon, 09 May 2011 06:00:00 GMT

For further information please contact:

Sergey Turchin, Manager, Operations Consulting Services, sergey.turchin@ziffenergy.com, 403-234-4298
Paul H. Ziff, CEO, paul.ziff@ziffenergy.com, 403-234-4276
Jenny Jackson, Executive Marketing Coordinator, jennifer.jackson@ziffenergy.com, 403-234-4297

Canada LNG Liquefaction

Fri, 27 Jan 2012 07:00:00 GMT

Because Asian gas prices are generally set based on a basket of crude oil (roughly 85% of Japanese Crude Cocktail or JCC), and western Canadian gas can be liquefied and shipped to Asia, there is a natural arbitrage opportunity for Western Canadian producers. Currently, gas prices in Asia are over $16/MMBtu, and Western Canadian gas is selling for sub $3 - a very large differential and attractive for Producers to exploit. Several projects have been proposed to liquefy Western Canada supply for transport to Asian markets. The most advanced is KM LNG, located in Kitimat, and owned by Apache, EOG, and Encana, all with large land holdings in the Horn River Basin. The Canadian National Energy Board (NEB) conducted an Export Licence Hearing in June and a decision providing an unconditional 20 year permit was released in October 2011. Ziff Energy provided an expert report that presented a view to the year 2035 on North American supply, demand, and markets and testified at the Hearing. Shell, China National, Korea Gas, and Mitsubishi are planning to start shipping LNG from Kitimat, British Columbia, as early as 2016. The companies aim to export 1.8 Bcf/d to 3.6 Bcf/d, which could double or triple KM LNG volumes. Nexen is selling 40% of its BC Shale Gas holdings to Inpex Corp for Cdn$700 million. Inpex Corp is a Japanese Consortium that owns controlling stakes in LNG projects in Australia and Indonesia and is building a regasification terminal in Japan. Canadian Progress Energy has closed an agreement with Malaysian Petronas to develop the emerging Hybrid Montney Silt/Shale Play and evaluate LNG export opportunities. For US$1.1 Billion, Petronas gained a 50% stake in Montney assets in Northeast BC.

For further information please contact:

Edward Kallio, Director, Gas Consulting, edward.kallio@ziffenergy.com, 403-234-4275
Cameron Gingrich, Senior Manager, Gas Services, cameron.gingrich@ziffenergy.com, 403-234-4296

PRICING: Natural Gas vs. Oil

Mon, 30 Jan 2012 07:00:00 GMT

North America is a deregulated market for natural gas and the current ratio of oil to gas prices underlines the huge discount in the value of gas vs. oil. Gas is not traded in North America based on an energy-equivalent basis of 6:1 which provides opportunities for the substitution of natural gas for crude oil products. The high oil to gas ratio is the driving force to move to liquids plays in North America. It is also the reason for several Gas to Liquids plants and LNG export facilities that have been proposed.