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THE “Hottest oil Play in the United States” OWNED AND OPERATED BY CHINA AND VENEZUELA?
September 8, 2011

http://www.pittsreport.com/2011/09/the-hottest-oil-play-in-the-united-states-is-owned-by-china-and-venezuela-perry-is-the-governor-of-this-state/

IS THIS GOVERNOR PERRY’S IDEA OF JOB CREATION?
FOREIGN MULTI NATIONALS, SOCIALIST COUNTRIES, HAVING FREE REIGN OVER OUR RESOURCES IN TEXAS, WILL THEY THROW SOME TEMPORARY JOBS OUR WAY WHILE THEY STEAL OUR TECHNOLOGY?
SHORT SIGHTED POLICIES FROM RICK PERRY ARE ALLOWING MULTI NATIONALS TO RAPE TEXAS OF IT’S NATURAL RESOURCES WHILE THEY GIVE TEXAS TOKEN TEMPORARY JOBS.
IS THIS A RERUN? I HAVE SEEN THIS MOVIE BEFORE.
SEPT 7,2011
JOSHUA PITTS
WHO OWNS Eagle Ford Shale, THE hottest oil play in the United States?
WOULD YOU BELIEVE VENEZUELA’S VALERO, NUSTAR AND, CHINA’S CNOOK , STATOIL, AND TALISMAN.
CHINA COULD NOT BUY AMERICAN OIL TECHNOLOGY AND OIL COMPANIES IN 2005, SO THEY CIRCUMVENTED AMERICAN PUBLIC OUTRAGE AND BOUGHT INTO SEVERAL CANADIAN OIL COMPANIES, TO AQUIRE THERE TECHNOLOGIES AND ACCESS AMERICA’S HOTTEST OIL MARKETS.


[-chart]www.pittsreport.com/wp-content/uploads/2011/09/eagle-ford-shale-map-of-play-300x300.jpg[/chart]

1 NuStar to add to pipelines in deal with Valero
2 Nustar to modify, expand South Texas pipelines as Valero seeks more Eagle Ford crude
3 VALERO OIL VENEZUELA CONNECTION

3. VALERO IS NU STAR AND SOCIALIST VENEZUELA, BUT THEY TRY TO HIDE THEIR RELATIONSHIP

3 Valero Energy Corporation
Valero Energy Corporation (NYSE: VLO) is a Fortune 500 international manufacturer and marketer of transportation fuels, other petrochemical products, and power based in San Antonio, Texas, United States.[1] The company owns and operates 15 refineries throughout the United States, Canada, United Kingdom, and the Caribbean with a combined throughput capacity of approximately 2.9 million barrels per day, 11 ethanol plants with a combined production capacity of 1.1 billion gallons per year, and a 50-megawatt wind farm. Valero is also one of the US’s largest retail operators with approximately 6,800 retail and branded wholesale outlets in the United States, Canada, United Kingdom, and the Caribbean under the Valero, Diamond Shamrock, Shamrock, Ultramar, Beacon, and Texaco brands.[2]

Valero was created on January 1, 1980, as a spinoff from the Coastal States Gas Corporation. At the time, it was the largest corporate spin off in U.S. history. Valero took over the natural gas operations of the LoVaca Gathering Company, a defunct subsidiary of Coastal States Gas. The name Valero comes from Misión San Antonio de Valero, better known worldwide as The Alamo.

The company acquired a small oil refinery in Corpus Christi, Texas, in 1981, and began refining operations in 1984.

In 1997, Valero spun off its refining and retail divisions into a separate company, which kept the Valero name. At the same time, the remaining divisions, which consisted primarily of natural gas operations, were acquired by the Pacific Gas and Electric Company. Later that year, Valero acquired Basis Petroleum, which left it with four refineries in Texas and Louisiana. They then acquired a Paulsboro, New Jersey, refinery in 1998, the company’s first refinery outside of the Gulf Coast area.

In 2000, Valero purchased ExxonMobil‘s Benicia, California, refinery and interests in 350 Exxon-branded service stations in California, mainly in the San Francisco Bay area. The company also began retailing gasoline under the Valero brand. In June 2001, the company acquired the Huntway Refining Company, along with two asphalt plants on the west coast.

Shamrock gas station, a division of Valero EC

On December 31, 2001, Valero completed its acquisition of Ultramar Diamond Shamrock. This merger left Valero with over 4,700 Ultramar, Diamond Shamrock, and Beacon retail sites in the U.S., Canada, and the Caribbean. With this acquisition, Valero also received ownership of Shamrock Logistics L.P., which was renamed Valero L.P. In 2006, this division was spun off as NuStar Energy. Starting in 2002, Valero has been expanding its marketing to the East Coast, specifically the Northeast and Florida, using the Valero brand.

On April 25, 2005, Valero agreed to buy Premcor, Inc., for 8 billion in cash and stock to become the largest U.S. refiner, as record prices for gasoline and other fuels boost profits, and on June 30 announced it was beginning a two-year process of converting Diamond Shamrock stations to the Valero brand. The next year, on May 5, 2008, the company agreed to buy 72 Albertsons gas stations.

4 NuStar Energy supports Eagle Ford foreign investments
Will politics kill the deal allowing a Chinese government-owned company to invest in South Texas’ revived energy fields?

Bloggers raised the possibility last week after Oklahoma City-based Chesapeake Energy Corp. announced that China’s CNOOC Ltd. is investing up to $2.2 billion for a one-third stake in Chesapeake’s acreage in the Eagle Ford shale formation in South Texas.

Blog writers recalled how political opposition blocked the attempt by CNOOC in 2005 to buy California-based Unocal Corp. in an $18.4 billion deal.

“It seems reasonable … to assume that at least one politician will openly ask about the wisdom of allowing China to own ‘American oil and gas’ and learn the operating strategies of one of America’s best-run energy companies,” wrote Stephen Simpson of Investopedia Research Inc. for Newstex Blogs.

If there’s a San Antonio company that has a solid perspective on both the Eagle Ford shale and China, it’s NuStar Energy LP.

NuStar would hate to see any political interference in the CNOOC-Chesapeake deal. The Chinese investment – along with investments from other foreign nations – is jumpstarting drilling activity in South Texas, creating oil and natural gas flows that must go to various markets.

NuStar is a pipeline and storage company for oil and liquefied natural gas with facilities in South Texas. The Eagle Ford shale activity promises to bring more business to NuStar.

NuStar does business with PetroChina International with oil storage services in the Western Hemisphere. PetroChina supplies NuStar with ship fuel oil.

NuStar also is engaged in talks with a Chinese government-owned oil-and-gas exploration, drilling and production company, Sinopec. “There are no deals yet, but we are talking about lots of possibilities,” said Curt Anastasio, NuStar Energy president and CEO.

“Energy is a global business, and China is emerging as a world power,” Anastasio said.

“The question is: Who gets the benefit of Eagle Ford? It doesn’t always have to be someone here. Chinese and other foreign investments mean jobs and raising property values. South Texas could use some economic development. South Texas has some of the poorest communities (in the nation),” Anastasio said.

The NuStar CEO said the China deal reminds him of the Japanese investment spree in the 1980s, which led to fear and protectionism in the United States.

“But Japan developed a good record, and the criticism dissipated. I am hopeful and believe this will be the pattern for Chinese investments. The Chinese will show good stewardship of the investments and be good employers. People will end up competing for Chinese investment dollars,” Anastasio said.

NuStar announced Monday it was reactivating an idle pipeline extending from Goliad County to Corpus Christi. NuStar will lease the pipeline’s capacity to Wichita, Kan.-based Koch Pipeline Co. LP to convey Eagle Ford oil to Corpus Christi refineries.

Some of that oil could be produced from CNOOC’s acreage.

“A lot of people are interested in teaming up with us. We’re talking to a number of (Eagle Ford) producers,” Anastasio said. “We hope to have more deals of this type,” he added.

“The money can come from anywhere in the world,” he said, “and it will do some good.”

Read more: http://www.mysanantonio.com/business/article/David-Hendricks-NuStar-Energy-supports-Eagle-713846.php#ixzz1XQRiDHp2
5 Nustar buys assets to process Eagle Ford Crude
6 China buys $1 billion interest in U.S. Eagle Ford shale
In June, 2005, China National Offshore Oil Company Ltd. (CNOOC), a subsidiary of the state-owned China National Offshore Oil Corporation, attempted to buy U.S. oil company Unocal for $18.5 biillion. Forty days later CNOOC withdrew its offer citing unprecedented political opposition, political pressure and a political storm in the U.S. The Chairman of the Chinese company was quoted at the time, “The bid met unexpected political opposition from the US political circle, where certain people had viewed the proposed merger as a threat to American security.”

But political times change, and in October, 2010 the same Chinese company bought one-third of the 600,000-acre Eagle Ford, Texas, shale oil and gas project from Chesapeake Energy Corp of Oklahoma City for $1.08 billion. The deal was described at the time as “a pact which was the first major investment by a China state-run company in onshore energy reserves in the U.S.”

7 NuStar Energy L.P
NuStar Energy L.P.’s history has been filled with dramatic growth and success, rising from humble beginnings in 2001 to become the rising star of the energy industry today.

The partnership made its successful initial public offering (IPO) on April 16, 2001, with one of the best one-day performances of any master limited partnership IPO ever. On its first day, the partnership, then known as Shamrock Logistics L.P. and part of the former Ultramar Diamond Shamrock Corp., sold 5.175 million partnership units at $24.50, nearly twice the expected price range for this IPO. The partnership was soon renamed Valero L.P. after Valero Energy Corp. acquired UDS later in 2001. And since that time, the partnership has had outstanding results and demonstrated how a limited partnership can have unlimited potential.

“One of the best bonuses of the UDS acquisition was its limited partnership,” NuStar Chairman Bill Greehey said in 2002, who at the time was also Chairman and CEO of Valero Energy. “We plan to aggressively grow the L.P. to benefit the shareholders of both companies.”

Initially, Valero Energy Corporation owned about 74 percent of the partnership. In its first year, the L.P.’s network included 2,800 miles of refined product pipelines, 11 refined product terminals, 800 miles of crude oil pipelines and crude oil storage facilities with a capacity of 3.3 million barrels.

With a strong financial base of about $92 million in annual revenues in its first year, the partnership’s steady financial and asset growth began with several acquisitions that helped to strengthen the network and build synergies within the L.P.’s system.

The first acquisitions, in 2001, included the Southlake, Texas refined product terminal, which has connections to pipelines that move refined product produced at several refineries, and crude oil storage tanks in Ringgold, Texas.

The growth continued in early 2002, when the partnership purchased the Wichita Falls, Texas crude oil storage facility and a 272-mile crude oil pipeline that extends from Wichita Falls to the Texas Panhandle. As a result of these early acquisitions, throughput volumes at the partnership’s refined product terminals increased 23,000 barrels per day (BPD) and throughput volumes transported through the L.P.’s crude oil pipelines increased by 9,000 BPD.

The growth continued to flow in 2003. The partnership expanded to the West Coast with the purchase of an asphalt terminal and storage facility from Telfer Oil Company. Located in Pittsburg, California, the 350,000-barrel-capacity storage facility served the fast-growing Northern California asphalt market.

But the L.P.’s most exciting project for 2003 was its move into Mexico, through the Dos Laredos project in which NuStar agreed to transport propane into Mexico. It was the partnership’s first international project. The partnership acquired and built pipeline connections to move the propane from refineries in Corpus Christi and Three Rivers, Texas, to Nuevo Laredo, Mexico. The partnership also constructed a terminal in Nuevo Laredo that was completed in June 2004.

Another major turning point for the L.P. occurred in 2003 when it acquired several key assets from Valero. The partnership purchased 58 crude oil and intermediate storage tanks, which had a storage capacity of 11 million barrels, plus a 468-mile South Texas pipeline system, five product terminals and one asphalt terminal from Valero Energy. The L.P. also redeemed 3.8 million common units from Valero Energy to reduce Valero’s ownership interest in the partnership from nearly 74 percent to about 49 percent. This move deconsolidated Valero L.P. from Valero Energy’s financial statements, providing greater growth opportunities for both companies.

With its continued successful expansions, the partnership decided to “go global.” In 2005, the partnership became one of the largest petroleum liquids pipeline and terminal operators in the United States. With the nearly $2.8 billion acquisition of Kaneb Pipe Line Partners, L.P., The partnership now had pipelines, terminals and bulk storage facilities located in most of the U.S., as well as Canada, Mexico, the Netherlands Antilles, the United Kingdom and the Netherlands. “The L.P.’s growth strategy is based upon our mission statement, which is to solve the logistical needs of our customers by moving products where and when they want them better than anyone else. To do that requires us to offer a safe, reliable operation that meets or exceeds customer expectations,” said Curt Anastasio, NuStar Energy L.P. President and CEO.

By 2006, it became clear that complete separation of Valero Energy and the L.P. would be advantageous to both. “It is necessary to continue the process of separating Valero Energy and Valero L.P. to allow both companies to pursue their own strategic initiatives,” Greehey said at the time. “We expect that the complete separation of the L.P. from Valero Energy will better position the partnership for future growth.”

A new organization, Valero GP Holdings, LLC, which was subsequently renamed NuStar GP Holdings, LLC, was formed to assume Valero Energy’s ownership in the L.P. In July 2006 the GP had its IPO that consisted of approximately 41 percent of the units previously owned by subsidiaries of Valero Energy. A follow-on offering in December 2006 consisted of the remaining 59 percent, reducing Valero Energy’s ownership in the L.P. to zero. Both offerings were tremendously successful, and within eight months of the IPO, the GP had achieved 25 percent unitholder return, nearly double the S&P 500 Index’s 13 percent return over the same period.

Also in December 2006, the L.P. completed the purchase of the St. James Crude Oil facility located in Louisiana from Koch Supply and Trading, L.P. The acquisition included 17 crude oil tanks and three heated refined product tanks with a total capacity of approximately 3.3 million barrels. Additionally, the facility has a rail-loading facility and three docks with barge and ship access.

Throughout most of its history, the L.P. had grown and succeeded as Valero L.P., but with its separation from Valero Energy, it was time for the L.P. to forge a new path. And one important part of that path was a “Nu” name. The NuStar Energy L.P. name and eye-catching, blue-and-yellow logo, which features a shooting star, were unveiled in February 2007, and became official in April 2007 when the L.P. began trading as NuStar, with the NYSE ticker symbol, “NS.” And NuStar GP Holdings, LLC began trading under the symbol, “NSH.”

“Our new name says it all,” said Greehey. “We are the new star in the energy business, and because of our employees’ contributions to our success, we are at a very important turning point in the history of our company. With our newfound independence, we are now in a better position to continue growing and achieving even greater success in the years ahead.”

The name change also dovetails with the L.P.’s move to a new corporate office in north San Antonio. The 84,000-square-foot building is in a highly visible location in one of the fastest-growing areas of the city.

A big part of NuStar’s strategy was to become a major player in the asphalt marketing business. This new strategy harkened back to Greehey’s contrarian view of the refining industry in the late ‘90s, which of course paid off handsomely for Valero’s shareholders. Now, NuStar’s leaders were taking a contrarian view of the asphalt refining business – a specialty that many companies didn’t see much of a future in. But with so many refiners now investing in coker units to make premium products from the bottom of the barrel, there would obviously be less of the bottom of the barrel available to make asphalt. And, of course, less supply typically translates into higher margins. NuStar executives had so much confidence in their vision that they began aggressively looking for asphalt assets to acquire. And on November 7, 2007, NuStar hit paydirt! The company announced an agreement to acquire CITGO Asphalt Refining Company (CARCO) for $450 million – propelling it into the major leagues of asphalt refining. The deal, which included two asphalt refineries and a network of asphalt terminals on the East Coast, would make NuStar the No. 1 asphalt producer on the U.S. East Coast and the No. 3 asphalt refiner in the nation. The Express-News announced the news under a banner headline that read, “NuStar Joining Big Guys.” Greehey was quoted as saying, “This is a new direction for NuStar, a new line of business. It separates us from our peer group.” Meanwhile, Anastasio promoted the deal to Wall Street, making live appearances on CNBC and Bloomberg TV, as employees cheered him on from a viewing party at corporate headquarters.

While NuStar executives planned to close on the acquisition at the end of 2007, officials with Petróleos de Venezuela, S.A., CITGO’s parent company, put up road blocks as the closing date approached. December 31, 2007 came and went without the agreements being signed. Political maneuvering ensued. More negotiations followed. Agreements were revised. And after many frustrated attempts to close the deal, it was finally completed on March 20, 2008. No one was more excited than Bill Greehey and Curt Anastasio. They started out the employee announcement by saying, “At long last, we are happy to tell all of you that we have finally closed on the CARCO acquisition. It took a lot of hard work, patience and persistence to complete this acquisition, so we want to take this opportunity to thank everyone who helped bring it to a successful close. It obviously took far longer than originally anticipated! But we made it!”

NuStar continued to search for ways to expand its footprint in the U.S. In May of 2010, the company acquired Denham Capital’s equity holdings in Asphalt Holdings Inc. for $44.1 million. NuStar added three new storage terminals in Mobile, Alabama, that included 24 storage tanks with a total capacity of approximately 1.8 million barrels. In addition, the facilities included rail and truck loading facilities and three docks with ship and barge access. Anastasio pointed out that, “Through this acquisition, we expanded our terminal presence into a new market in the U.S. Gulf Coast and have the opportunity to expand into a new asphalt market as well.”

NuStar officials were also looking to expand their international operations. And they accomplished this goal with the completion of a joint venture with Turkish companies S-Oil and Aves in February of 2010. NuStar gained majority ownership and operational control of two terminals located in Mersin, Turkey, which have 44 tanks with a combined storage capacity of over 1.3 million barrels. This transaction also presented NuStar with the opportunity to significantly expand these operations through internal growth projects and explore other opportunities for growth in Turkey.

In April of 2011, the company acquired key refining and terminal assets from AGE Refining for $41 million. This acquisition included a low-cost 14,500 BPD refinery on the South Side of San Antonio, and a 200,000-barrel terminal in Elmendorf, Texas. “This relatively small transaction is a great acquisition for our investors, employees and community,” said Anastasio. The acquisition of the AGE refinery was seen as a prudent business move on NuStar’s part. “The refinery’s proximity to the Eagle Ford Shale is a big plus, said Anastasio. “The light crude oil that is coming out of the Eagle Ford Shale is well suited to the refinery, and it is in our backyard, so our transportation costs are low. We expect this will provide a significant economic benefit because we’re able to take advantage of these lower costs, South Texas sweet crudes and realize transportation cost savings which will enhance the refinery’s profitability.”

As a result of its successful growth strategy, NuStar has grown from 160 employees at the time of its IPO in 2001 to over 1,900 today; from $387 million in assets to $5.2 billion; and from $99 million in revenues to an amazing $4.4 billion. Based on this growth, it’s no surprise that at the end of 2010 NuStar was ranked as the second fastest growing energy company in the Americas by Platts!

As NuStar has continued to grow, so have its investments in health, safety and environment, as well as staff, programs and systems. These investments resulted in one of the best safety and environmental track records in the industry. At NuStar, safety is the top priority and running a safe and ecologically sound operation is a core business value.

NuStar’s tremendous growth and success is the result of a strong corporate culture. “Our employees are NuStar’s biggest asset and the reason that the partnership has continuously achieved record-breaking results,” said Anastasio. “NuStar has the best and brightest employees who care about the company, their co-workers and the communities where we have operations. We are excited about working with them to continue expanding our presence, improving our assets, increasing our unitholder value, making the company an even greater place to work, and making a positive difference in our communities.”

8 CNOOC buys into Eagle Ford
China’s top offshore oil producer, CNOOC Ltd., will pay $1.1 billion to Chesapeake Energy Corp. for a stake in a U.S. shale oil and gas field.

The deal could be the start of more outbound acquisitions as the Chinese company races to meet its aggressive production growth forecasts to feed the country’s fast-growing economy, analysts and bankers said.

“We expect them to expand their footprint in the Canadian oil sands and also in Brazil’s deepwater,” said Gordon Kwan, head of Asian energy research for Mirae Asset Securities.

Most of the outbound acquisitions by China’s oil companies have been in risky areas such as Africa, which Western rivals have avoided, or in locations with aging assets. Now they are also eyeing the United States, which was once deemed off-limits to the Chinese due to protectionist sentiment.

“Ninety-five percent of the world’s E&P (exploration and production) companies are in North America,” said an investment banker who has advised Chinese oil companies on deals. “If you have to move the reserve needle, you have to buy U.S. companies.”

U.S. oil and gas companies are gradually warming to Chinese investment, partly because they are now short of cash, Kwan of Mirae Asset said.

The Chesapeake agreement shows China is confident the purchase of a 33 percent stake in the Eagle Ford acreage in South Texas will win the backing of U.S. regulators and politicians, who stepped in five years ago to block CNOOC’s effort to buy U.S. oil company Unocal.

“We are basically taking money from India, Russia and other foreign countries for energy deals,” said Fadel Gheit, oil analyst with Oppenheimer & Co. “If we single out the Chinese and say their money smells, it’s not going to sit well. Obviously, Chesapeake tested the waters in Washington before they did this.”

9 Cnooc Buys Shale in China’s Biggest U.S. Oil Deal
Oct. 11 (Bloomberg) — Cnooc Ltd. will pay $1.08 billion for a one-third stake in Chesapeake Energy Corp.’s Eagle Ford shale project in Texas, in the biggest acquisition of a U.S. oil and gas asset by a Chinese company.

Cnooc, listed in Hong Kong, plans to buy 33.3 percent of Chesapeake’s 600,000 oil and gas leasehold acres in Eagle Ford, the companies said in separate statements. Cnooc will also pay $1.08 billion of Chesapeake’s drilling costs in the basin, Chief Executive Officer Aubrey McClendon said in an interview.

The purchase would give Cnooc its first onshore energy asset in the U.S., five years after it dropped an $18.5 billion bid for Unocal Corp. amid political opposition. China’s third- largest oil company has spent at least $3.8 billion on overseas acquisitions in the past year as the nation’s energy demand surges.

“The deal reflects the ambition of Chinese companies to enter the global oil and gas industry, especially when China’s gas demand is expected to rise sharply,” said Grace Liu, an energy analyst with Guotai Junan Securities in the southern city of Shenzhen.

The Cnooc purchase was the second announced in one day for drilling rights in the Eagle Ford shale, which lies across a swath of southern Texas. Statoil ASA of Norway agreed to pay $843 million, or $10,900 an acre, to set up an equal joint venture in the region with Talisman Energy Inc. Cnooc is paying $10,800 an acre, which includes the upfront cash and drilling costs in the basin, McClendon said.

‘Confirming Value’

“Both deals, which were independent, do a nice job of confirming value in the area,” he said.

The per-acre prices are “solid” and should buoy the stock of Chesapeake and other U.S. producers with large holdings in the Eagle Ford shale including EOG Resources Inc., Pioneer Natural Resources Co., SM Energy Co. and Petrohawk Energy Corp., Scott Hanold, an Austin, Texas-based analyst for RBC Capital Markets, said in an e-mail today.

Cnooc jumped 4.5 percent to close at HK$16.80 in Hong Kong trading, the highest level since Oct. 30, 2007. The shares have advanced 38 percent this year, outpacing the 6.1 percent gain in the benchmark Hang Seng Index.

Chesapeake, based in Oklahoma City, rose as much as 5.5 percent. The shares gained 25 cents, or 1.1 percent, to $23.30 at 4:02 p.m. in composite trading on the New York Stock Exchange.

Chesapeake has 10 wells in the Eagle Ford and will increase to about 40 rigs by the end of 2012 with the Cnooc funds, according to its statement. The company said the project will reach peak production of 400,000 to 500,000 barrels of oil equivalent a day in the next decade.

Chinese Capital

U.S. regulatory approval isn’t needed for the Eagle Ford stake purchase, Jim Gipson, a Chesapeake spokesman, said by e- mail.

“This deal is completely consistent with what U.S. government has said they would like to see Chinese energy companies do, which is to provide capital into America to acquire minority interests and for American companies to use that capital to go out and develop American oil fields and to reduce oil imports,” McClendon said.

Cnooc bought minority interests last year in four exploration licenses Statoil ASA holds in the U.S. Gulf of Mexico. That purchase may have cost less than $80 million, Gordon Kwan, the head of energy research at Mirae Asset Securities, said in November.

Largest Investment

The Cnooc-Chesapeake deal would be the largest investment by a Chinese company in the U.S. oil and gas industry, after Hopu Investment Management Co. bought $100 million of Chesapeake’s convertible preferred shares in May, according to Bloomberg data.

Cnooc joins Reliance Industries Ltd. in buying shale assets in the U.S. as China and India compete for global energy resources. India’s biggest company by market value has spent $3.4 billion since April investing in U.S. shale gas, including a $1.3 billion purchase of areas in the Eagle Ford formation from Pioneer Natural Resources Co.

“You have all these companies that have big acreage positions, but they don’t have the capital to develop the assets,” said Ralph Eads, the Houston-based chairman of energy investment banking at Jefferies Group Inc. Jefferies is advising Chesapeake on the transaction. Tudor Pickering Holt & Co. is advising Cnooc.

Liquid-Rich Shale

The Cnooc purchase at $10,900 an acre is similar to the $11,100 an acre that Reliance paid to Pioneer in June, Neil Beveridge, a Hong Kong-based analyst at Sanford C. Bernstein & Co., said in a report.

“Cnooc has struck a good deal given the assets are liquid- rich, which is about three times more valuable than gas on an energy equivalent basis,” according to Beveridge.

Crude oil futures have averaged $77.86 a barrel this year on the New York Mercantile Exchange, up 25 percent from last year’s average of $62.10.

Eagle Ford is estimated to have reserves equaling more than 80 billion barrels of oil. Shale is rock that can be heated or treated with chemicals to release oil and gas.

The formation is about 50 miles (80 kilometers) wide and 400 miles long, extending from Texas’s southern border to the east, according to the Railroad Commission of Texas, which regulates the oil industry. Eagle Ford delivers natural gas and “appears to produce much more oil” than other shale fields, the agency wrote on its website.

–With assistance from Zachary Mider in New York. Editors: Tina Davis, Charles Siler

To contact the Bloomberg staff on this story: Ying Wang in Beijing at [e-mail]; Jim Polson in New York at [e-mail]

To contact the editors responsible for this story: John Viljoen at [e-mail]; Susan Warren at [e-mail].

10 Talisman, Statoil to Buy, Operate Texas Oil Shale
Talisman Energy Inc., the Canadian oil and natural gas explorer, and Statoil ASA, Norway’s largest oil and gas company, said they agreed to pay $1.33 billion for oil shale properties in the Eagle Ford formation in South Texas and form a joint venture to develop the fields.

Talisman will initially operate the 97,000 acres (39,254 hectares) of oil shale prospects purchased from Enduring Resources LLC, the company said in a statement. Statoil will also buy for $180 million 50 percent of Talisman’s existing Eagle Ford holdings. For both transactions, Statoil will pay a total of $843 million, according to a statement on its website. Talisman said its net cost for the acquisition will be $485 million.

The companies have an option to buy as much as 22,000 additional acres. Talisman also has stakes in the Marcellus shale in the northeastern U.S. and the Montney shale in British Columbia.

In April, Talisman agreed to sell C$1.9 billion ($1.87 billion) worth of natural-gas fields in Alberta and Ontario to free cash for shale projects. North American gas producers are increasing output from shale formations, where rocks hundreds of feet below the ground are fractured to unlock fuel deposits.

11 The Eagle Ford Shale Play
12 Statoil, Talisman Make Eagle Ford Purchase
Statoil (NYSE: STO), Norway’s largest oil company, and Canada’s Talisman Energy (NYSE: TLM [FREE Stock Trend Analysis]) said they will pay $1.33 billion to buy oil shale properties in the Eagle Ford Shale in south Texas.

Statoil also will pay $180 million a 50% stake in Talisman’s existing Eagle Ford holdings, Bloomberg News reported.

Statoil will spend $843 million on both transactions while Talisman will spend $485 million. The two companies have an option to buy 22,000 additional Eagle Ford acres.

Talisman said there are as many as 1,000 drilling sites and an estimated 800 million barrels of oil equivalent, about 50% of which will be condensate or natural gas liquids, on the acquired property, Bloomberg reported.

13 China National Offshore Oil Corporation Buys into Eagle Ford Shale
14 Is Statoil the Perfect Stock?
15 Talisman Energy, Statoil joint venture buys 97,000 acres of Texas oil shale for $1.325 billion



16 Statoil ASA Mergers and Acquisitions
17 Talisman Energy Inc. (TLM)
Talisman Energy Acquires Material Position in the Liquids Rich Window of the Eagle Ford Shale Play
CALGARY, ALBERTA, Oct. 10, 2010 (Marketwire) — Talisman Energy Inc. (TSX:TLM) (NYSE:TLM) today announced that it has reached an agreement to acquire additional properties in the Eagle Ford shale play in south Texas. Talisman and Statoil have agreed on a joint-venture to acquire 97,000 net acres of high-quality, liquids rich Eagle Ford shale properties from Enduring Resources for a total consideration of US$1.325 billion.

“This transaction is an excellent fit with Talisman’s strategy,” said John A. Manzoni, President and CEO. “Talisman now has material positions in three world-class shale plays in North America. This acquisition is in the liquids rich window of the Eagle Ford and complements our existing acreage. We are very pleased to be working with Statoil, a respected global company with whom we have an excellent working relationship.”

The Transaction

Talisman and Statoil have agreed to create a 50/50 joint-venture across the Eagle Ford shale play, with Talisman as the initial operator. The net cost to Talisman of this new acreage will be approximately US$485 million, after Statoil purchases a 50% working interest in Talisman’s existing 37,000 net acres in the Eagle Ford. Upon completion of these transactions, Talisman will hold approximately 70,000 net acres, predominantly in the liquids rich heart of the play.

Talisman and Statoil have agreed that Statoil will operate approximately 50% of the joint assets within three years. The transaction is expected to close by year end.

The Assets

The acquisition includes 97,000 net acres of land (50/50 joint-venture between Talisman and Statoil) in the liquids rich window of the Eagle Ford shale. The purchase price equates to about US$10,900 per acre, taking into consideration Enduring’s existing production of 5,500 boe/d, as well as gas processing infrastructure that comes with the acquisition. In addition, the companies have an option to jointly acquire up to an additional 22,000 net acres.

Approximately 55,000 net acres are held by existing production. There are currently three horizontal rigs operating on the leases, which is more than sufficient to hold this land. The land position consists of large contiguous blocks across the Eagle Ford, with a thick, high-porosity shale section, and high expected ultimate recovery factors (EURs). EURs are expected to average at least 660,000 boe per well.

There is currently 5,500 boe/d of production, including six Eagle Ford wells which are on-stream. An additional eight wells have been drilled; three wells are drilling, with nine additional wells planned by year-end. Initial production rates on the two most recent wells have averaged 3,700 boe/d (including 1,000 bbl/d of liquids) and 2,300 boe/d (including 425 bbl/d of liquids). There are numerous egress options available to support future production growth.

Strategic Context

The company believes there is an estimated 800 million boe of net contingent resource on the acquired properties, of which approximately 50% is expected to be condensate or natural gas liquids. Talisman estimates there are over 1,000 net drilling locations on the newly acquired acreage. The company believes that similar to its Marcellus and Montney shale plays, its Eagle Ford play will have a full-cycle break even of less than US$4 per mcf.

Shale gas and liquids development is an important part of Talisman’s strategy for long-term, profitable growth. The company has established large, high-quality land positions in the Marcellus shale (Pennsylvania), Montney shale (British Columbia) and Utica shale (Quebec).

The addition of this new acreage gives Talisman a material core position in the liquids rich window of the Eagle Ford shale play. The company believes its shale plays have the critical mass needed to support Talisman’s objective of becoming a leading, returns focused shale producer in North America.

The company is committed to operating in a safe, environmentally responsible manner and to maintaining good working relationships with local communities near our areas of operations.

Barclays Capital acted as an advisor to Talisman on this transaction.

Talisman Energy Inc. is a global, diversified, upstream oil and gas company, headquartered in Canada. Talisman’s three main operating areas are North America, the North Sea and Southeast Asia.

18 China offshore CNOOC Purchase Canadian Oil Sand producer OPTI
The OPTI board of directors voted unanimously in favor of the CNOOC transaction as being in the company’s best interests.

“CNOOC Ltd. is a technically experienced and well-capitalized company that is equipped to support further development at Long Lake and future expansions in the Canadian oil sands,” OPTI President and Chief Executive Officer Chris Slubicki said.

CNOOC CEO Yang Hua said the OPTI acquisition strengthens his company’s Canadian presence in the oil sands market.

“We believe that upside potential of the assets will facilitate local energy supply and our production growth in the long term,” he said.

The OPTI deal isn’t China’s first foray into Canadian oil sands assets. In April 2010 Chinese company Sinopec spent $4.65 billion to acquire a stake in the Syncrude Canada Ltd., which owns the world’s largest oil sands mining operation north of Fort McMurray in Alberta. It also has a 50 percent stake in Total E&P Canada’s Northern Lights project.

19 Norway’s Statoil kicks up its profile a notch
The oil giant has been in North America for a decade, but its recent moves will pull spotlights in its direction

BRETT CLANTON, Copyright 2010 Houston Chronicle
The North American company is based in Houston and will be run by Bill Maloney, now a senior vice president for global exploration. Beginning Jan. 1, he will oversee a wide swath of projects on which the company has spent $14 billion to assemble since 2001. Those include one of the largest leasehold positions in the deep-water Gulf of Mexico, a Canadian oil sands project and two joint ventures in U.S. shale gas formations.

“Since this is such an important part of our activity and growth in the last few years, I really felt that we needed to organize our activities so we could be even closer to the day-to-day activities and the particular development of the business in North America,” Lund said.

Today, North America represents a relatively small portion of Statoil’s global oil and gas portfolio. Daily production sits at 75,000 barrels of oil equivalent out of nearly 2 million BOE worldwide. About 80 percent of that is from Norwegian offshore fields.

Lund declines to give targets for North America, but predicts several thousand barrels per day of additional production as projects come on line in the coming years.

Statoil’s prospects may be brightest in the deep-water Gulf, where it is pursuing a large exploration program and is a minority partner in several major projects, including Chevron’s $7.5 billion Jack-St. Malo facility, expected in 2014.

Oil spill’s effects
Those prospects suffered a setback with BP’s deadly Macondo well blowout in April and the government-imposed ban on deep-water drilling in the Gulf that followed. Though the moratorium was lifted in October, the company is still awaiting drilling permits and in the meantime has moved one drilling rig to Egypt and sublet a second to Exxon Mobil Corp.

“We really hope this will start in early 2011, but I don’t dare to predict any specific date,” Lund said of exploration, adding that despite the delays, Statoil remains committed to the Gulf.

Statoil also hopes production will start next year at a Canadian oil sands project called Kos Dehseh, which it acquired in 2007 with the $2 billion acquisition of North American Oil Sands Corp. Last month it sold a 40 percent stake in the project to Thailand’s PTTEP.

The company’s latest bets have been onshore in the U.S., with deals to enter emerging shale gas plays. In 2008, it paid nearly $1.3 billion for a 32.5 percent stake in Marcellus shale gas acreage operated by Oklahoma City-based Chesapeake Energy. Then in October it shelled out $1.3 billion to establish a joint venture with Canada’s Talisman Energy to develop fields in the Eagle Ford shale play in South Texas, including 97,000 acres jointly acquired from Enduring.

Lund said Statoil contemplated buying a company outright to gain access to U.S. shales but decided the joint venture arrangement would let the company gain technical expertise from more established shale operators. But he didn’t rule out wholesale acquisitions in the future.

Houston office to grow
As Statoil grows in the U.S. and Canada, its 300- employee Houston office should grow significantly, Lund said. The CEO expects to spend more time here as the region assumes a bigger role in Statoil’s business.

Statoil, 67 percent owned by the Norwegian government, was established in the early 1970s and grew dramatically through a 2007 merger with Norsk Hydro. But the company, which operates in more than 30 countries around the world today, remains heavily tied to Norway.

“From a portfolio point of view, it makes perfectly good sense for them to look to other opportunities around the world, and they’ve done that,” said Bill Arnold, professor of energy management at Rice University in Houston.

And the U.S. presents a ripe area for expansion, partly because the company does not carry the same political baggage as some other national oil companies, Arnold said.

While Statoil is bullish on North America, Lund said he remains cautious about the global economic recovery.


NuStar GP Holdings LLC at Barclays CEO Energy Power Conference (Replay)
09/08/11 at 9:00 a.m. ET


Corporate Profile

NuStar GP Holdings, LLC (NYSE: NSH) is a publicly traded limited liability company that owns the two percent general partner interest, a 15.5 percent limited partner interest and the incentive distribution rights in NuStar Energy L.P. (NYSE: NS), one of the largest asphalt refiners and marketers and independent terminal and petroleum liquids pipeline operators in the nation with operations in the United States, Netherlands Antilles, Canada, Mexico, the Netherlands and the United Kingdom.
20 The Eagle Ford Shale Blog, Maps and News
The Eagle Ford shale (often misspelled Eagleford,) is not the next big thing in oil and gas plays, it is the “right now” big thing. You may have never heard of the Eagle Ford shale if you live outside of South Texas or are not in the oil and gas business but it will be big news in business circles around the rest of the country in the coming months and years. First recognized as a major natural gas play it is now being seen as the sixth largest oilfield ever discovered in the United States and the largest discovery in over forty years.

What Is The Eagle Ford shale?

Shale is a sedimentary rock that is rich in organic material called kerogen. As this organic material decays. complex hydrocarbons, such as oil and gas are formed. The Eagle Ford shale is the source rock for other oil and gas bearing zones in South Texas, such as the Austin Chalk formation, which lies above it.

It was formed during the late Cretaceous geologic period, approximately 85 to 95 million years ago. It lies at a depth of between 2500 feet at the edge of the hill country to over 15,000 feet deep in southern LaSalle, McMullen, Live Oak, Bee, DeWitt and LaVaca counties. The area of oil and gas activity is over forty miles wide and four hundred miles long, spanning an area from near Mexico to East Texas. It is at the deeper or more mature end of the formation where pressures are higher and gas volumes greater. The shallower zones in the central and upper part of the play contain more liquids such as condensate and crude oil. The Eagle Ford shale is over 330 feet thick in some areas.

The Eagle Ford shale was not recognized as an economically viable oil and gas reservoir until recently.

Now, because of a technology called horizontal drilling, which allows for a hole to be drilled across shales like the Eagle Ford for up to a mile or more, and because of advances in hydraulic fracturing, which uses high pressure liquid to bust apart the shale, oil and gas can now be extracted easily.

Huge Potential

EOG Resources has estimated over 900,000 barrels of recoverable oil (net after royalty,) in the 550,000 acres they hold in the oil and condensate windows. As this is only a small part of the huge play, the Eagle Ford shale may indeed hold billions of barrels of recoverable oil and trillions of cubic feet of natural gas. At the Developing Unconventional Gas convention in San Antonio, Pioneer Natural Resources offered a presentation suggesting that the amount of oil and natural gas liquids in the Eagle Ford shale could be as much as 25 billion barrels and the amount of natural gas at 150 trillion cubic feet. That amount would equal more than known reserves in Alaska and in Federal offshore areas combined. Oil and gas companies are discovering that there are “stacked pay” opportunities in formations that lie above and below the Eagle Ford such as the Olmos sand, furthering the potential for oil and gas production from the area.

The Eagle Ford shale is not a typical shale, but closer to marlstone. It is high in carbonate content, making it very brittle and therefore able to be fractured easily with a frac job. Porosity and permeability are greater in the Eagle Ford shale than other shale plays. Core samples of the shale contain as much as 70% calcite with an average clay content of eleven percent.

An Oil and Natural Gas Producer

The Eagle Ford shale is producing impressive amounts of both oil and natural gas in wells all the way from Maverick county near the Mexican border to Dewitt county farther east. The current epicenter of activity in terms of horizontal drilling is along the Stuart City Reef and Sligo shelf trend from Maverick, McMullen, Dimmitt, Frio, LaSalle, Live Oak, Gonzales, DeWitt, Atascosa and a number, of other counties farther east. Farther north, in those areas where the Austin Chalk has been productive in the past, oil companies are finding oil in the Eagle Ford shale as well. The two formations are highly correlated, with the Eagle Ford shale being one of the major “source rocks” for oil that is found in the Austin Chalk formation. The maps on this website shows the Eagle Ford shale oil and gas producing areas.
The northern part of the Eagle Ford shale is the “oily” section, with lower pressure and high volumes of crude oil. The middle section of the play is the “condensate or wet gas window”. A “sweet spot” exists in the wet gas window where high concentrations of light oil or “volatile oil” are being produced. These wells have the advantage of gas “drive” pushing out liquids from the formation into the wellbore. There are horizontal wells in the “volatile oil window” with initial production rates well over 1500 barrels a day. (One must take into consideration that some of these large producing wells have laterals, or horizontal sections, of up to a mile long, so it is not possible to compare production from E.F. wells to typical vertical oil wells.) The deeper section farther south, plunging as deep as 15,000 feet, is a producer of large volumes of drier gas.

Most of the major players in the Eagle Ford shale are focusing on the oil window and wet gas window of the play. This is mostly due to the depressed price of natural gas and the high price of oil.

The Eagle Ford Shale Has Been Known About For Years

For years there has been oil and gas activity along the Stuart City trend, from the Mexico Border on through the prolific South Texas Syndicate field in LaSalle county, through the Dilworth field in McMullen county curving on back toward the coast and then trending northward, upwards towards East Texas . Numerous Edwards, Olmos, Wilcox and Austin Chalk formation wells exist in this area. In past years drillers of deeper wells into formations below the Eagle Ford shale noticed a lot of gas coming back, though the mudloggers and wireline well logs showed the zone where it was coming from, the Eagle Ford shale, to be 100% shale rock. Shale in earlier years was not seen as a potential reservoir of oil and gas.

Once Thought To Be Worthless

Since the 1970's geologists have known that the Eagle Ford shale contained high volumes of oil and gas throughout a wide geographic area stretching from East Texas to Mexico.

It was not thought of as any kind of resource that could be productive since a well that was drilled in the Eagle Ford shale would quickly deplete down to nothing. There was not enough porosity or natural permeability to allow for much oil or natural gas from the couple hundred feet of exposed shale to seep out. A few years ago companies like Halliburton, Weatherford, Baker Hughes and Schlumberger began to perfect horizontal drilling assemblies, along with accurate down-hole direction sensors called MWD or “measure while drilling” instruments, to guide these drilling assemblies. Starting in the 1990's in the Barnett shale near Ft. Worth these two technologies were applied and it was proven that shale could be a productive source of oil and natural gas.

Mud motors, which consist of a rotor and stator unit and a bit that are turned by the force of drilling fluid, are placed at the end of the drill string. The whole drill string, as hard as the steel drill pipe is, can actually turn ninety degrees to vertical and drill a horizontal oil or gas well. Without any rotary motion from above, the drill pipe can remain stationary as the mud motor all the way down at the bottom of the well turns by the force of the drilling fluid and thereby turns the drill bit, eating away at the Eagle Ford shale until several thousand feet of horizontal lateral is drilled. This long lateral (horizontal section of the well) is later hydraulically fractured using very high pressure fluids, by a company such as Halliburton or Schlumberger. Thousands of gallons of water are used in this process and in this notoriously dry part of the country that will be one of the challenges to development. Far above the Eagle Ford shale lies the freshwater Carrizo – Wilcox aquifer, which is currently being used for frac water, possibly depleting this valuable resource.

Deeper But Cheaper

The break even point for making a profit from Eagle Ford shale gas is about $3.88 per Million BTU’s, compared to $5.19 in the Barnett shale. Part of the reason is that there are less impediments to drilling in sparsely populated South Texas. Also, the Eagle Ford shale is proving to hold far greater quantities of valuable liquids than the Barnett, Marcellus or Haynesville shales.

Oil and Natural Gas Liquids Now The Main Focus


Due to lower natural gas prices companies are now focusing more on the upper and central oil and liquids laden section of the Eagle Ford. Since the price of oil is high due to international demand, this part of the Eagle Ford shale play is where much of the new drilling activity will likely take place in the coming years.

Lease Area Growing Daily

Petrohawk Energy (A BHP Billiton company) has identified over 2,700 potential well locations on the more than 330,000 acres they have leased. . Pioneer Natural Resources has over 310,000 acres under lease and a host of other companies from EOG Resources to ConocoPhillips have similar amounts of acreage leased. EOG Resources, a major player in the Barnett shale, has leased up over a half million acres, mostly in the oil window. They have plans to drill between 2,000 and 3,000 wells. The significance of the Eagle Ford shale has not gone unnoticed by international companies. China’s state owned oil company, CNOOC, has partnered with Chesapeake Energy in the play. Australian companies are even getting in on the action with Antares Energy, BHP Billition, (acquired Petrohawk Energy), Texon Petroleum, all Aussie firms, active in the play. The number of wells eventually drilled in the shale could be in the tens of thousands.

What Is In Store For South Texas

South Texas residents are finally seeing the kind of economic boom that many have always dreamed of. Oil and gas exploration companies have leased up hundreds of thousands of acres of land in South Texas, over an area over 400 miles long. Sleepy South Texas towns such as Tilden, Cotulla, Pleasanton, Three Rivers, Pawnee and others are in the midst of a major change, one which may be hard for some residents to comprehend or cope with.

What Will The Boom Look Like In South Texas?

In the Barnett shale play, near Dallas and Ft. Worth, the economy has seen massive growth, which the Fort Worth Chamber of Commerce once compared to having ten Boeing Aircraft plants plunked down on the prairie overnight. Jobs were created in record numbers and as royalty payments of billions of dollars poured into the hands of landowners, this money began to circulate through the economy. The two shale plays have a lot of similarities, however the economy and population density of South Texas differ greatly from that of North Texas.

How the flow of money that will occur over the next decade will affect the area remains to be seen. In much of the region owners of large ranches will be the the recipients of the oil and gas royalties. Undoubtedly they will spend some of the money on ranch improvements such as fences, ponds, barns, etc, as we are already seeing in many South Texas counties, and this will create a few local jobs, but much of the revenue from Eagle Ford shale wells will end up being spent elsewhere. This will benefit the Texas economy as a whole. Oil and gas service companies in existing hubs like Alice and Freer will hire more workers and a few companies will open satellite offices in smaller towns such as Tilden, and Cotulla, near the production. For county governments, tax coffers will swell and this will lead to new schools and road construction. However, due to the low population density and high number of non-resident landowners, the billions in Eagle Ford shale royalties may not leave quite as visible an effect on South Texas as Barnett shale money did near Fort Worth. That being said however, the effects on the economy of South Texas and the rest of the state will nonetheless be dramatic. Texas Railroad Commissioner David Porter stated that “The Eagle Ford shale has the potential to be the single most significant economic development in our state’s history.”

Pioneer Natural Resources Company’s CEO Scott Sheffield was quoted as saying “when you have a 25 billion barrel play in south Texas, just the amount from severance taxes on oil and condensate and NGLs – the amount of ad valorem taxes that goes into hospitals and schools – that’s a tremendous boon to the economy of south Texas,”


Boom Times Coming. Why This Time It Is Different

If you live in this area of Texas you are already witnessing a boom such as you may have never imagined in your wildest dreams. Many small towns are starting to grow again, lots of farmers and ranchers who own land with mineral rights are becoming rich overnight, and there are good, high paying jobs being created. (Since 2008, an estimated 12,600 jobs were created in Texas by the Eagle Ford shale play.) This is not some kind of pipe dream, it is real and it is happening right now. All the evidence from well logs, seismic surveys and new well production figures point to one of the largest oil and gas finds in the past half century. The economic effects are already being seen. All you have to do to notice is look at all the cars of landmen parked at the courthouses and the flow of oilfield traffic up and down the roads. Anywhere from $200 to $8000 an acre for Eagle Ford shale leases is flowing into the hands of landowners and they are starting to spend it. Booms like these have their upside and their downside, such as much more traffic (and accidents) on the roads.

What makes this oil and gas boom dramatically different from others that the region has seen is the widespread nature of the Eagle Ford shale. While not every well drilled will be productive, with shale plays like this one, the odds are much better. Unlike the relatively small fields and pockets of oil and gas that exploration companies have chased over the years, this field is all over, underneath a very wide swath of country, all the way from Southeast Texas to Mexico. The full implications of this massive oil and gas field have not yet been reported by the mainstream media in Texas but it will be major news very soon.

How productive will the play be? Petrohawk Vice President Richard Stoneburner had this to say in a July, 2009 meeting about the Eagle Ford in their McMullen and LaSalle county leasehold area: “The gas-in-place numbers are “so exceptional,” because the shale is some 250 feet thick over a 50-by-25-mile swath and is 100% net pay.”

It should be noted that Stoneburner is talking only about their focus area, not the entire Eagle Ford shale play.

How Long Will Eagle Ford Shale Oil Wells Last?

How long will the boom last? Past oil and gas booms , such as the Austin Chalk play, which promised to make the region the next Saudi Arabia, were an eventual letdown as initially high production rates fell to only a few barrels per day. One oil company CEO recently stated that he estimates Eagle Ford shale wells to produce in the eight to ten year range. It is true that unlike those drilled in sandstone oil reservoirs, shale oil plays like this one tend to make most of the production in the first few years. EOG investor reports show Eagle Ford shale wells with production curves over 20 years, with much of the production coming in the first four years. What this play has going for it is that is spans such a wide area and companies are able to drill essentially “risk free”oil wells in a time when bankers are reluctant to lend any oil company money for exploratory drilling. With the vast amount of infill drilling that will occur as the play is exploited we may see several decades worth of production. Some companies are already experimenting with well spacing as low as 50 acres, which could double the amount of wells to be drilled in the play. Add to that the potential for future secondary recovery efforts and more laterals at different depths in the thickest part of the shale and the potential is enormous. Chances are, most of those who are reading this article will be dead and gone when the last Eagle Ford shale well is drilled.

Winds Of Change Blowing In South Texas.

It is the purpose of this site to get the word out. In a region where folks are not accustomed to change, one of the biggest economic transformations in American history is happening. State, county and city agencies will have to rapidly gear up for this transformation and plan wisely. On the societal level, there will be scores of newly rich landowners and this wealth will have both dramatically positive and negative consequences for some of the recipients.

You read it here first. This is the most exciting thing to ever happen to the economy of South Texas and the state in general. The next few years will be a wild and crazy ride as the Eagle Ford shale is developed, so hang on with us and save our site in your favorites to stay informed all the news.

Below is a map of the latest Eagle Ford shale drilling activity from the Texas Railroad Commission


[-chart]eaglefordshaleblog.com/wp-content/uploads/2010/02/eagle-ford-shale-map-of-play.jpg[/chart]

For more maps of the Eagle Ford shale See: More Maps

Thanks for stopping by the Eagle Ford Shale Blog. Bookmark this site for news updates on this exciting resource play.

Posted by Nolan – February 12, 2010 at 2:38 pm. Other pages on this site updated weekly.
See the pages in this site for maps and news about drilling activity.

21 Well Permits filed in the Eagle Ford Shale Play, December 2010

Submitted by Rob Walter on Fri, 01/07/2011 – 14:55

Filed in:

•Newsroom
•Tobin Trends
•Tobin Map Data
•Tobin GIS Studio

Drilling permits filed in the Eagle Ford Shale took a big jump in December, pointing to a big year in 2011 for drilling in the south Texas shale play. The county with the most permits filed in December was McMullen County, with 161 drilling permits filed with the state.

Well Permit Data, December 2009 – December 2010

The above chart shows aggregate well permit data for the following counties:




•Atascosa County, Texas
•Austin County, Texas
•Bee County, Texas
•Brazos County, Texas
•Burleson County, Texas
•Colorado County, Texas
•DeWitt County, Texas
•Dimmit County, Texas
•Fayette County, Texas
•Frio County, Texas
•Goliad County, Texas
•Gonzales County, Texas
•Grimes County, Texas
•Karnes County, Texas
•LaSalle County, Texas
•Lavaca County, Texas
•Lee County, Texas
•Live Oak County, Texas
•Maverick County, Texas
•McMullen County, Texas
•Milam County, Texas
•Washington County, Texas
•Webb County, Texas
•Wilson County, Texas
•Zavala County, Texas


[-chart]www.p2energysolutions.com/sites/default/files/userfiles/image/tobin-map-data/tobin-trends/2011/january/Eagle-Ford-Shale_wellpermits_dec10_small.jpg[/chart]

Whose wells and where?



By licensing Tobin well location data, not only will you find out which companies are drilling in the shale plays, but also the locations of the wells they’re permitting and completing. Our well location data offerings include well updates as well as historic well data of more than 2.8 million wells. Click here to receive a quote.




Eagle Ford Shale
Since the oil and gas business began over 100 years ago, mineral rights owners have sold mineral rights. Sometimes, it just makes sense. And with a “play” such as the Eagle Ford shale of South Texas, it certainly applies. The main reason being that, at this time, a very nice payday can be had by selling mineral rights. And if you want to sell part and keep part, you can do that. Sell 3/4 or 1/2 and keep the rest to gamble on. In the meantime, in this lifetime, haha, you can enjoy the cash while you’re here! Because development of the Eagle Ford shale, if it does pan out long-term, is going to be just that — very long-term. As in decades! It’s a very large area and for any given mineral owner, the odds of getting significant money from production royalty right away is slim.

As for understanding why some sell mineral rights, here is an article — why sell mineral rights in the Eagle Ford shale.

If you own Eagle Ford shale mineral rights and/or producing royalties and wish to sell mineral rights, here is a reputable buyer who has closed many millions of dollars in mineral rights sales. Whether all or part, you can sell Eagle Ford shale mineral rights by visiting Eagle Ford shale mineral rights buyer.

By Jack Z. Smith

VICKI VAUGHAN
, STAFF WRITER at chron.com
CARRIZO SPRINGS – It’s lunchtime at Lee’s Steakhouse, and the restaurant has few empty seats.

At a nearby convenience store, there are long lines at the two registers, and there’s a wait to fill up at the gas pumps. Roads are clogged as tankers barrel through to deliver equipment to remote oil rigs.

Welcome to a county that’s at the heart of the Eagle Ford shale, which some have called the most promising oil play in the nation.

Just two year ago, no one would have suspected that Dimmit County, pegged by the U.S. census as the 19th-poorest county in the United States, would be at the heart of a boom. There were few wells being drilled in the region, and local businesses were begging for customers.

But drilling in the Eagle Ford, a 400-mile-long formation stretching from East Texas to Webb County, has touched off a hiring frenzy in South Texas that is generating thousands of jobs. Now, drilling is moving so swiftly that the scramble for workers has caught some short. Drug-testing companies don’t have enough employees to administer tests. The Texas Railroad Commission, the industry regulator, has openings because oil and gas companies have hired away longtime veterans from its field offices.

Not all of the jobs are in the oil patch. Oil companies have quickly opened field offices to supervise drilling in San Antonio and nearby cities. A Canadian oil-services company is now the biggest employer in Cibolo, and oil field service companies are bidding top dollar for space in Pleasanton’s once- moribund industrial park.

The job explosion is expected to continue.

Last year, the Eagle Ford shale generated 6,800 full-time jobs and paid $311 million in salaries and benefits, according to a study completed in February by the University of Texas at San Antonio‘s Center for Community and Business Research.

When spinoff jobs are included — from wholesalers to waiters – the study found the development in the shale play supported 12,600 jobs and paid $512 million in salaries.

Because development is just beginning, the UTSA study estimates that by 2020, 5,000 new wells will be drilled, and the Eagle Ford will support almost 68,000 full-time jobs, account for almost $21.5 billion in total annual economic output, and add almost $1.2 billion to Texas’ revenues.

There’s buzz that drilling in the Eagle Ford shale could continue for 20 or even 30 years.

“The only thing I can compare this to is the drilling boom in the 1940s and ’50s,” said South Texas educator Glynis Holm Strause, whose father was a tool pusher, or rig supervisor, during Texas’ post-World War II boom. “But those years were nothing like this. This is exponentially larger. It’s just so very big.”

How big is it?
Some are predicting that development of the Eagle Ford shale will be another Spindletop for Texas.

Railroad Commissioner David Porter wrote in a recent opinion piece that development of the Eagle Ford shale “has the potential to be the single most significant economic development in our state’s history.”

“The extent of the oil play is quite large, more than 6 million acres of potential development,” said Manuj Nikhanj, vice president of the Ross Smith Energy Group in Calgary, Alberta.

“You could eventually see 20,000 to 30,000 wells drilled in the play. You could have more than 10 billion barrels of oil through time. And the oil economics just keep getting better, so companies want to expand in this region.”

Last year, permits in the Eagle Ford shale soared to 1,010, up from 94 permits in 2009, according to Railroad Commission data.

Oil extracted from the shale increased tenfold from 2009 to 2010 to more than 3 million barrels, and natural gas production jumped from 17 billion cubic feet to 79 billion cubic feet, the Railroad Commission said.

Add to that the untold millions that energy companies have paid to landowners for mineral rights, along with royalties from producing wells, and Eagle Ford development is transforming parts of South Texas that haven’t seen job growth in decades.

“A lot of the employers are telling us that their operations are just starting, so we think the job orders are going to increase significantly,” said Leodoro Martinez Jr., executive director of the Middle Rio Grande Development Council in Carrizo Springs.

The council, along with local organizations and educational institutions, has formed the Middle Rio Grande Workforce Consortium. The consortium plans to launch a nonprofit foundation that would match workers with jobs.

Workers in demand
Competition for experienced workers is so intense, a few companies are even willing to take on neophytes.

Dustin Tallant, U.S. recruiting supervisor for Sanjel (USA), said it expects to train about half the drivers it hires for its Cibolo center.

Entry-level floor hands on a Chesapeake Energy rig can make $22 to $25 an hour, and they can boost their pay to as much as $80,000 a year if they work extra days, drilling superintendent Shane Wilkerson said. The tool pusher on the rig, an experienced hand who is in charge of the rig’s crew, can earn from $114,000 to as much as $140,000 a year.

“They earn every single penny of it,” Wilkerson said. “You get covered in drilling mud, and you work whether it’s 105 degrees or freezing. There are lots of pressures and hazards, and sometimes you’ll go three days with no sleep.”

A motorman, who’s one step up from a floor hand, can make $24 to $26 an hour, while a derrick man makes about $28 an hour. Pay for the driller, who answers to the tool pusher, is almost $30 an hour.

Most of the drilling jobs require work in remote areas, and employee work seven days on and seven off.

Truck drivers
Workforce experts say the workers most in demand are experienced truck drivers who hold a commercial driver’s license, or CDL, and are certified to transport hazardous materials and who also are certified to drive commercial tank vehicles.

Average pay for drivers of heavy trucks and tractor-trailers averages $16.30 an hour, while pay for more experienced drivers approaches $20 an hour, said Strause, dean of institutional advancement at Coastal Bend College, a community college with locations in Alice, Beeville, Kingsville and Pleasanton.

“If you have a CDL, that’s your ticket in,” Strause said, because so many companies need drivers for hydraulic-fracturing trucks, saltwater disposal trucks, drilling-mud trucks, equipment trucks and “just anything that goes on a rig pad.”

So many drivers are needed that “we’ve had drug-testing companies contact us because they need more qualified people to do drug tests to hire CDL drivers,” said Eva Esquivel, communications manager for Workforce Solutions Alamo.

“There is a vast array of opportunities related to this, and it’s not just field work,” Esquivel added. Workforce Solutions Alamo is working with 22 employers in Atascosa, Frio, Medina, and Karnes counties that seek laborers, office clerks, inventory controllers, dispatchers and field-service technicians.

Field office field day
So many drilling companies and oil field services companies are opening offices in South Texas that “I’d be willing to say that there’s not an empty building from George West to Three Rivers,” Strause said.

Joan Dunlap, a spokeswoman for Houston-based Petrohawk Energy Corp., one of the largest operators in the Eagle Ford shale, said: “We landed down in South Texas early on, and it looked like a moonscape. Now, a year and a half into it, it’s not just oil and gas jobs. People can make a living locally, and that’s important.”

Petrohawk has scores of open positions. The company is adding jobs in small towns, including Cuero and Tilden, that rarely see new positions added for skilled workers.

As drilling ramps up, other companies are moving into South Texas. Oil field services giant Halliburton Co. will hold a job fair June 7 in Floresville to hire about 100 employees for jobs in Alice, Laredo, Pleasanton and Caldwell, a spokeswoman said.

And Cisco-based Frac Tech Services, which engages in hydraulic fracturing and well stimulation services, invested in a 113-acre site in Pleasanton, where it has 350 employees and is looking to hire more.

Cities near the Eagle Ford shale are benefiting, too, as support jobs are added. San Antonio, as the biggest city near the Eagle Ford shale, is poised to become a mini-hub for energy, as companies open offices to supervise drilling to the south.

Chesapeake Energy and EOG Resources already have opened offices in San Antonio, while Sanjel has opened an office in Cibolo and is now the city’s biggest employer.

Keith Phillips, senior economist at the San Antonio branch of the Federal Reserve Bank of Dallas, said while he’s still working on his analysis, he believes San Antonio may add 4,200 jobs as a result of the shale development, and that the city’s job growth may exceed that of Texas as a whole by half a percentage point.

“San Antonio is a pretty big economy,” Phillips said, “But 4,200 jobs? That’s a nice kick.”

[e-mail]

Utica Shale – Eagle Ford Shale Debate Pits Texas vs. Ohio
Posted on August 19, 2011 by rtdukes
The Utica Shale vs. the Eagle Ford Shale debate has drawn a lot of attention since Chesapeake announced a 1.25 million acre position in the Utica Shale. Aubrey McClendon’s comments have gotten a lot of traction:

As a result of its analysis, the company believes the Utica Shale will be characterized by a western oil phase, a central wet gas phase and an eastern dry gas phase and is likely most analogous, but economically superior to, the Eagle Ford Shale in South Texas.

That quote sent many articles to the press touting the Utica Shale as the new great shale play and made many Texans wonder if we’d lose some drilling rigs to Ohio. You can track the rig count yourself with the Eagle Ford Shale Drilling Index that is updated each Friday, but if you don’t have the time, the counties where the Eagle Ford is present have seen more than 40 rigs come into the play over the past three months. That’s more than 10% of the total U.S. onshore rig count (230+ rigs) working in an area that is economically inferior. The catch, it’s possible, but the Eagle Ford shouldn’t lose much if anything.

We’d like to see an open debate between Chesapeake and other operators like Anadarko, BHP, EOG Resources, Petrohawk, and Marathon Oil. I doubt the guys that have poured billions into the Eagle Ford will agree. But if the hype is true, you’ll see rigs working in both plays and will not have to worry about the Utica pulling resources away from Texas.

While the Utica Shale likely has areas that provide better economics than parts of the Eagle Ford, it is hard to imagine any drilling rigs leaving for Ohio. Natural gas rigs deployed in other parts of the country are far more likely to make the move. Natural gas is trading below $4 per mcf as of August 2011. That’s not what most plays need to make an economic return and you’ll see more drilling shift to liquids plays like the Utica and Eagle Ford.

Not every acre in any play will be economic. We’ve seen how a highly touted play can do a 180 in the Haynesville Shale and we’ve even experienced a little of that in South Texas. Most recently, Petrohawk abandoned its Red Hawk Field in Zavala County. That means that Zavala County might face more challenges than we thought, but Dimmit County, DeWitt County, Gonzales County, Karnes County, LaSalle County, and Webb County will likely benefit as rigs move within the Eagle Ford.

In summary, I don’t think the entire Utica will prove to be economically superior to the entire Eagle Ford, but I do believe you could read between the lines and say that Chesapeake’s Utica Shale acreage looks to be better than Chesapeake’s Eagle Ford Shale Acreage.

In short, the Eagle Ford and the Utica look to be big resource wins for the U.S.

Reagan (R.T.) Dukes is an oil & gas industry analyst with EagleFordShale.com



Eagle Ford Information

Wells Permitted and Completed as of 08/01/2011
Click on map to view higher resolution image

Updated: August 3, 2011

General Information | Statistics | Counties Affected | Tell Us What You Think | Benefits of Natural Gas | Jurisdiction Information | Water Issues | FAQs

What is the Eagle Ford Shale?

The Eagle Ford Shale is a hydrocarbon producing formation of significant importance due to its capability of producing both gas and more oil than other traditional shale plays. It contains a much higher carbonate shale percentage, upwards to 70% in south Texas, and becomes shallower and the shale content increases as it moves to the northwest. The high percentage of carbonate makes it more brittle and “fracable”. The shale play trends across Texas from the Mexican border up into East Texas, roughly 50 miles wide and 400 miles long with an average thickness of 250 feet. It is Cretaceous in age resting between the Austin Chalk and the Buda Lime at a depth of approximately 4,000 to 12,000 feet. It is the source rock for the Austin Chalk and the giant East Texas Field. The name has often been misspelled as “Eagleford”. A great picture can be found at the Energy Information Administration (EIA) http://www.eia.gov/oil_gas/rpd/shaleusa9.pdf which shows the structural contours and windows for the oil, wet gas/condensate and dry gas.

Eagle Ford Statistics
Gas Production Statistics
Oil Production Statistics
Drilling Permits Issued
Condensate Liquid Production

There were 72 producing oil leases in 2010 and 40 producing oil leases in 2009. There were 67 producing gas wells in 2009 and 158 producing gas wells in 2010.

History of the Eagle Ford

It is named for the town of Eagle Ford, Texas where it can be seen on the surface as clay soil. Eagle Ford, Texas is approximately 6 miles west of Dallas, Texas. An outcrop of the Eagle Ford Shale can be seen in the Dallas-Fort Worth Metroplex. Wikipedia shows a nice picture of the outcrop of the Austin Chalk and Eagle Ford shale at the following link http://en.wikipedia.org/wiki/File:Austin_Chalk_-Eagle_Ford_Contact.JPG

Petrohawk drilled the first of the Eagle Ford wells in 2008, discovering in the process the Hawkville (Eagle Ford) Field in La Salle County (District 1). The discovery well flowed at a rate of 7.6 million cubic feet of gas per day from a 3,200-foot lateral (first perforation 11,141 feet total vertical depth) with 10 frac stages. Originally, there were 30 plus fields, however, due to field consolidations, the number of fields has been reduced to currently 16 fields located within the Railroad Commission Districts 1 thru 6 and the fields cover 24 counties . The wells in the deeper part of the play deliver a dry gas, but moving northeastward out of District 1 and updip, the wells produce more liquids. One of the fields discovered in District 2 is actually an oil field (Eagleville (Eagle Ford)). The major operators joining Petrohawk in drilling the Eagle Ford Shale Play are Anadarko, Apache, Atlas, EOG, Lewis Petro, Geo Southern, Pioneer, SM Energy and XTO to name just a few.

Benefits of Natural Gas

Natural gas is a relatively clean burning energy source. Producing additional domestic natural gas may reduce dependence on foreign energy sources. For more information about natural gas, please visit the United States Department of Energy, Natural Gas home page.

What the Railroad Commission has jurisdiction over and who to contact

The Railroad Commission regulates the exploration and production of oil and natural gas in Texas. The Commission’s primary responsibilities include: preventing waste of oil and gas resources; protection of surface and subsurface water; and, ensuring all mineral interest owners have an opportunity to develop their fair share of the minerals underlying their property.

The RRC has provided an information page containing links to city, county, state, and federal governments within the Eagle Ford area.

For further information, please contact our district offices.

What the Railroad Commission does NOT have jurisdiction over and who to contact

The Railroad Commission does not have jurisdiction over roads, traffic, noise, odors, leases, pipeline easements, or royalty payments.

Roads and Traffic: The Railroad Commission does not have jurisdiction over, and exercises no regulatory authority with respect to, private or public roads or road use. Permits issued by the Commission for oil and gas exploration, production, and waste disposal do not limit any independent authority of a municipality, county or other state agencies with respect to road use.

The Texas Department of Transportation oversees the construction and maintenance of state highways within their jurisdiction. In addition, TXDOT is responsible for issuing access permits to well sites from a roadway on the state highway system. Please review letter for specific access permit requirements. To contact the appropriate district office, please visit the Texas Department of Transportation, Local Information web site. For county or city contact information, please visit the RRC information page.

Noise: The Commission has no statutory authority over noise or nuisance related issues. Noise and nuisance related issues would be governed by local ordinances.

Odors and Air Contaminants: The Railroad Commission does not have regulatory authority over odors or air contaminants. However, for a well within the city limits, the city may enact ordinances regarding odors or other nuisances. In addition, the Texas Commission on Environmental Quality (TCEQ) has jurisdiction over odor and air contaminants. Please see http://www.tceq.state.tx.us/compliance/complaints/odor_complaint.html.

Oil and Gas Exploration and Surface Ownership: For general information pertaining to exploration and surface ownership, please visit the Oil and Gas Exploration and Surface Ownership web page.

Royalty payments: For general information pertaining to leases and royalities, please visit the General Information Pertaining to Leases and Royalties web page.

Water Issues

Water Use in Association with Regulated Oil and Gas Activities

cation
The Eagle Ford Shale Counties page provides a list and detail on the 30 counties where the Eagle Ford is actively targeted. The core counties include an area that stretches from north of Gonzales down to Webb County at the Texas-Mexican border.

Eagle Ford Shale wells have been tested in Mexico, but not significant results have been reported.

http://oilshalegas.com/eaglefordshale.html

http://oilshalegas.com/eaglefordshale.html

Eagle Ford Shale Companies
Petrohawk Energy is given credit for drilling the first Eagle Ford wells in 2008, when the company began testing several areas across South Texas. The discovery horizontal well was completed with 10 frac stages along a 3,200 ft lateral. The well produced more than 7.6 mmcfd. Lewis Energy also claims part of the prize of leading the way. The company reports to have drilled the first Eagle Ford targeted well in 2002. Read about other companies through our Eagle Ford Shale Operators page.



Eagle Ford Shale hottest oil play in the United States in 2010.

If you don’t want to finance the thuggish Hugo Chavez “democratically” “elected” “leader” of Venezuela, don’t buy gas from VALERO gas stations.

You may have noticed Valero stations popping up all over America. They are really CITGO stations. Because of the deserved stigma attached to the Chavez-controlled gas stations, many Americans are not buying gas at CITGO, and the stations are losing money . . . big-time.

So, with the smoke and mirrors of a name-change, many CITGO stations are quietly changing from CITGO signs and emblems to Valero. The excuse is that Valero, a San Antonio-based oil refiner, is merely “branding” CITGO stations. Whatever. New Venezuela-affiliated stations are opening up at Valero, as well. Yes, Valero and CITGO are separate companies, but they benefit the same parties when the name Valero is on a gas station: Venezuela and Chavez.

Source(s):
http://www.debbieschlussel.com/archives/…
The e-mail read like something sent by your quasi-Internet-literate uncle with a hearing aid and conspiracy theory streak:

IN ORLANDO LAST WEEK, AT A CITGO STATION, REGULAR GAS WAS PRICED AT $2.82 PER GALLON, AND NO CUSTOMERS…
HOWEVER, ACROSS THE STREET FUEL WAS SELLING FOR$2.85 PER GALLON AND ALL PUMPS THERE HAD CARS WAITING TO FUEL UP. What’s going on? Word is getting around!!!!! Read on:
Have you noticed how the CITGO signs have disappeared in the past 7-8 months? A very clever move by Chavez. But guess what, “CITGO” IS CHANGING ITS NAME, too …
PETRO EXPRESSSS

Being in the refining capital of the U.S., I regularly get readers irate about anything related to Hugo Chavez and Venezuela. The country nationalized Western oil and gas assets there when Chavez came to power and U.S. refiner Citgo is now owned by the Venezuelean national oil company. There’s actually a certain amount of glee some readers show at the recent bad turn of events there. (Full disclosure: I had a soft spot for Citgo from my early days as a driver, pre-Chavez mind you).
But the Petro Express e-mail caught my attention for personal reasons…
I remember Petro Express from the 1990s when I lived in North Carolina. Its parent company — Pantry Inc. — used to be based in the small city of Sanford, N.C. , where I worked previously (the paper did not have a Web site waaay back then). Could the good people of Sanford really have sold out to South American socialists?
Not exactly. It turns out Petro Express is still part of Pantry, but they do get some of their gasoline from Citgo. According to their 2009 annual report:

Gasoline Operations. We purchase our gasoline from major oil companies and independent refiners. At our locations we offer a mix of branded and private branded gasoline based on an evaluation of local market conditions. Of our 1,655 stores that sold gasoline as of September 24, 2009, 1,141, or 68.9%, were branded under the BP ® , CITGO ® , Chevron ® , Shell® , Texaco® or ExxonMobil ® brand names. We purchase our branded gasoline and diesel fuel from major oil companies under supply agreements. We purchase the fuel at the stated rack price, or market price, quoted at each terminal as adjusted per the terms of applicable contracts. The initial terms of these supply agreements have expiration dates ranging from 2010 to 2013 and generally contain provisions for various payments to us based on volume of purchases and vendor allowances. We purchase the majority of our private branded gallons from CITGO Petroleum Corporation (“CITGO”). There are approximately 64 gasoline terminals in our operating areas, allowing us to choose from more than one distribution point for most of our stores. Our inventories of gasoline (both branded and private branded) turn approximately every four days.

Turns out this e-mail is pretty old. It has been the subject of vetting by a couple of online myth-busters in the past.
But would boycotting Petro Express take a bite out of Hugo Chavez’ budget?
Maybe. But there’s no way of really knowing if the gas going in your tank (even at a Citgo branded station) necessarily came from a Citgo refinery. The many arms of gasoline distribution system in the U.S. means a station could be getting fuel from a terminal that is being supplied from some other refinery around the country. Citgo has said in the past such boycott efforts haven’t had an impact on their sales.
And as Citgo has been emphasizing in recent ad campaigns, all of its outlets are independently owned. So a boycott would certainly hurt the mom-and-pop owner of that service station.



Valero Energy on Friday announced an 11-year agreement to supply fuel for and brand 300 convenience stores operated by Susser Petroleum, 19 of which are in Oklahoma.

The 19 stores include 15 in Lawton, three in Altus and one in Duncan.

Susser has 324 retail stores in Oklahoma and Texas. A family- owned company, it was founded in the 1930s in Corpus Christi, Texas.

Most of Susser’s stores currently operate under the Citgo brand. Under the new agreement, most of the stores will operate under the Valero brand.

Citgo announced plans in mid-July to halt gasoline distribution in Oklahoma and nine other states. Citgo also plans to end distribution in parts of Texas, including Amarillo, Wichita Falls, Dallas and Fort Worth.

Houston-based Citgo is leaving geographic areas where gasoline is not supplied by one of the company’s three refineries. Citgo has refineries in Lake Charles, La., Corpus Christi, Texas, and Lemont, Ill.

The decision to halt gasoline distribution in Oklahoma and the other areas came two years after Citgo moved its headquarters from Tulsa to Houston, taking with it 700 jobs.

Valero has a refinery in Ardmore with capacity of 90,000 barrels per day and about 250 employees. Valero is the largest refiner in North America with 18 refineries in the United States, Canada and the Caribbean with a combined capacity of 3.3 million barrels per day.

“We are very excited about partnering with Susser because it is a very well-known and well-respected company, especially in Texas where it is the state’s largest independent convenience-store operator,” said Ken Applegate, Valero’s vice president of wholesale marketing. “Susser has a great network of high-quality sites and we’re proud to put the Valero name on these locations.”

With Susser’s sites, Valero will have 3,500 branded wholesale outlets.

Valero made its retail debut in June 2000 when the company acquired Exxon Mobil’s Benicia, Calif., refinery. Included in the sale were 80 retail sites in the San Francisco Bay Area and 270 branded wholesale locations throughout California.

Valero purchased Ultramar Diamond Shamrock Corp. in December 2001.


Copyright 2006 Dolan Media Newswires

By Tim Boyle, Getty Images

But in fact there’s nothing ordinary about Citgo. One of the USA’s largest refiners, Citgo is a subsidiary of Venezuela’s state-owned oil company, Petroleos de Venezuela S.A. (PDVSA). As such, it ultimately belongs to Venezuelan President Hugo Chávez, an avowedly anti-American leader who counts Fidel Castro among his closest friends and mocks President Bush as a “genocidal murderer.”

The question of Chávez’s influence over Citgo was highlighted by the company’s recent provision of 25 million gallons of subsidized home-heating oil to poor people in the northeast USA. More than 100,000 households in four states should eventually benefit from the low-cost heating aid.

But some worry that Venezuela’s ownership of more than 6% of U.S. refinery capacity gives Chávez, a former paratrooper given to wearing red berets and military fatigues, the power to cripple as well as comfort.

As Hurricanes Katrina and Rita demonstrated, any disruption to the nation’s refining industry instantly increases gas prices. What if Chávez, who periodically threatens to curtail oil shipments to the USA, closed Citgo’s refineries?

“He’d only have to do that for 90 days, and he’d destroy our economy,” worries Matthew Simmons, a prominent energy investment banker. “He actually has our livelihood in his hands.”

Others note that imported oil from elsewhere eventually could compensate for any interruption in Citgo supplies. And, because Chávez depends on the company’s specialized refineries to process Venezuela’s sulfur-rich crude oil, a shutdown would cost him and his country dearly.

“His capacity to make life difficult for George Bush would be at the cost of burying himself,” says Claudio Loser, a former International Monetary Fund official.

Late last year, as winter’s first chill sent consumers reaching for their thermostats, a dozen U.S. senators asked 10 major oil companies to donate a portion of their record profits to help the poor. Only Citgo responded, dispatching tankers to housing projects in New York and Massachusetts in what Felix Rodriguez, the company president and chief executive, called a purely “humanitarian” gesture.

Today, the program expands to homeless shelters and Native American tribes in Maine. Friday, Rhode Island gets its initial delivery.

Many analysts, however, saw the move as a stunt by Chávez aimed at embarrassing the Bush administration. And some say Citgo’s generosity — likely to cost it more than $20 million — suggests the company may be turning into a political tool for Chávez.

“It has had a turn for the worse, perhaps the much worse. … Now it’s a different entity. It’s not completely run like a business,” says Antonio Szabo, a former PDVSA official and the president of Stone Bond Technologies, a Houston energy software firm.

Citgo executives say the company, founded in 1910 as Cities Service Co., is solidly profitable and can afford to offer the poor 40% discounts on heating oil. In an interview, Rodriguez said Chávez, 51, ordered the giveaway so poor Americans wouldn’t have to choose between food and heat.

“The only difference between Citgo and other companies is that Citgo has only one shareholder,” he said, referring to the Venezuelan president.

State Department spokesman Adam Ereli welcomed the heating aid, saying, “Citgo is an American company. They are helping Americans in need. That is a good thing.”

Earlier, the company’s Hurricane Katrina aid efforts earned a nod from Bush. “The good works of Citgo demonstrate the character and great strength of our nation,” the president wrote Citgo Sept. 27.

About Citgo Petroleum

President and CEO: Felix Rodriguez.
What it does: Citgo refines, markets and transports petroleum products; operates 14,000 independent retail outlets in the United States, mainly east of the Rockies; and owns oil refineries in Illinois, Louisiana and Texas.
Employees: About 4,000.
2004 net revenue: $32 billion.
2004 net income: $625 million.

Sources: Citgo, Hoover’s







Yet, there are echoes in Citgo’s recent performance of what has transpired elsewhere in Venezuela’s oil industry since Chávez was elected in 1998. After a coup in 2002 briefly ousted him from power, Chávez retaliated by purging the state-owned oil company. Thousands of veteran executives and petroleum engineers were cashiered, replaced by those politically loyal to the president’s revolutionary aims.

Anti-American foreign policy

Today, PDVSA’s oil production is down to 1.5 million barrels a day from 3.3 million barrels in 1999, says Luis Giusti, who quit as national oil company president when Chávez took over. But thanks to oil prices above $60 a barrel, Chávez’s control of PDVSA has allowed him to lavish billions of dollars on social projects and an anti-American foreign policy.

Citgo, which sells gasoline through more than 13,500 retail stations and is known for its iconic sign towering over Fenway Park’s left-field wall, paid the Venezuelan government $697 million in dividends in 2005, up from the previous year’s $400 million, Rodriguez said.

PDVSA — the acronym is pronounced Ped-a-vay-sa — first acquired 50% of Citgo in 1986. Four years later, the Venezuelans bought the remaining half of the company from Southland, better known for its ownership of the 7-Eleven convenience stores. The company’s six refineries, with a capacity of 1.1 million barrels of oil a day, are ideally suited for Venezuela’s sulfurous, heavy crude oil.

Throughout the 1990s, Venezuelan oil officials allowed the company’s American managers enormous autonomy. “Citgo was an American company. We happened to own it,” said Giusti, who headed PDVSA until Chávez took over. “We managed it at arm’s length.”

That changed under Chávez. In October 2000, the new president tightened control over Citgo by naming as company president a former army general, Oswaldo Contreras. He was the first Venezuelan to hold the position.

Bush was elected president the following month, but relations didn’t completely sour until after Sept. 11, 2001, when Chávez likened the U.S. war in Afghanistan to the terror attacks in New York. Washington later publicly welcomed the coup that toppled him for two days in 2002. Chávez has accused the Bush administration of planning his assassination.

In November, two weeks after leading anti-American protests at a hemispheric summit in Argentina, Chávez told a business group in Caracas: “The planet’s most serious danger is the government of the United States. … The people of the United States are being governed by a killer, a genocidal murderer and a madman.” The comment followed congressional testimony by a State Department official that labeled Venezuela “a threat to regional stability.”

Asked how the persistent bilateral friction was affecting Citgo, Rodriguez replied, “No effect. Nothing at all.” But Chief Operating Officer Jerry Thompson, the most senior American remaining at the company, acknowledged Citgo’s customers are concerned. “What it introduces is an element of anxiety, and our competition takes full advantage of that,” he says.

The uncertainty was exacerbated for much of last year by a protracted and costly relocation of corporate headquarters, management upheaval and Venezuelan officials’ repeated suggestions that they might sell some or all of Citgo.

After decades in Tulsa, Citgo last year completed an $82 million shift to its new five-story headquarters in the heart of Houston’s Energy Corridor. The move was designed to benefit the company by planting it squarely in the world’s self-proclaimed “energy capital.”

But asked whether the move was worth the cost, Thompson says, “In my personal opinion, no.”

New management team

The relocation also cost the company managers who opted not to leave their longtime home, compounding executive turnover that saw several top American executives and the entire board replaced with Venezuelans.


By Stan Honda, AFP/Getty Images
Residents wave Venezuelan and American flags as Citgo CEO Felix Rodriguez speaks in front of a large banner that says “From the Venezuelan Heart to the U.S. Hearths” at a housing project in the Bronx.


Giusti, the former PDVSA president, says the current Venezuelan management team is weak. He criticized CEO Rodriguez for lacking substantial international experience and fluency in English. “Felix Rodriguez belongs to a group of engineers who never made it to the top. They only took their positions as a result of being loyal to the revolution of Chávez,” he says.

In an interview, Rodriguez, 56, noted he is a petroleum engineer with 32 years experience. Speaking in heavily accented English, with occasional help from an interpreter, he said he had held a series of planning and supervisory positions, traveled to the North Sea oil fields on “special assignment” and had been vice president of PDVSA before being named Citgo’s CEO.

Even as Rodriguez moved into the top job, Venezuela’s energy minister said he was discussing a sale of some or all of Citgo with “several companies.” But Rodriguez says there are no sales plans and despite political tensions between Washington and Caracas, the commercial relationship remains “win-win.”

Profit lags behind some rivals

Citgo executives also point to their financial record to rebut suggestions that politics are taking precedence over profits. For the first nine months of 2005, the company reported net income of $419.3 million on revenue of $31 billion compared with $430.3 million in profit on revenue of $23.7 billion for the same period last year.

Asked if he was satisfied, Rodriguez replied, “So far, so good.” Thompson said the company enjoyed a strong fourth quarter that will push net income above last year’s figure. But at a time when industrywide profit margins are fat, some competitors have done much better. Industry leader Valero, for example, earned $2.7 billion on $56.3 billion in revenue for the same period. For every sales dollar, Valero earned 4.7 cents in profit. Citgo reaped just 1.3 cents.

Citgo’s most notable recent financial deal involved refinancing its outstanding corporate debt. In October, the company secured bank financing of $1.85 billion, which it used to pay off its bond holders. Among the bonds paid off was an issue of $250 million in 6% senior notes the company had issued just one year earlier.

The move was the corporate equivalent of refinancing a home twice in 12 months. “They did what we thought was a fairly strange thing,” said John Addeo, portfolio manager for the MFS High Income fund, which owned $5.7 million of Citgo bonds.

Citgo says it refinanced to obtain greater financial flexibility. The terms of its bond offerings restricted the company’s ability to take actions, such as selling assets and paying dividends, according to filings with the Securities and Exchange Commission.

Meanwhile, company executives say drivers pulling up to Citgo gas pumps aren’t worried about who owns the refineries that produce the gas. “Being owned by a political entity ultimately means, from time to time, you have to do things with a political bent to them. Heating oil is an example of that,” says Thompson. But “By and large, people see us as an American company.”



•Keystone XL Oil Headed for China, Not Boosting U.S. Energy Security
On his work blog at Heartland Consumer Power District, McDowell copies and pastes an entire Robert Samuelson essay (without providing a link to the original) on how tapping the Canadian oil sands will promote America’s energy security. McDowell tacks on a paragraph touting the connection of the Bakken oil deposits to Keystone XL:

Added to the Canadian oil for pipeline transportation is what the USGS says is 3 to 4.3 Billion Barrels of technically recoverable oil in the Bakken Formation in Montana, North Dakota, and a small portion of South Dakota that could also use the proposed pipeline. All that oil could replace a significant amount of what we currently import from delightful dictators in countries such as Venezuela and repressive regimes in several unstable Middle East countries [Mike McDowell, "Saying Yes to Canadian (and Bakken) Oil," HCPDBlog, 2011.08.31].

(read the full report from Oil Change International: PDF document)

Keystone XL could indeed help American national security… if the oil it carried were intended for use in America. But Newly appointed South Dakota Transportation Commission member McDowell evidently missed the memo that the Keystone XL pipeline will transport oil straight across the Great Plains to the global export market.

Another memo to that effect came yesterday:

The facts:

•Keystone XL is an export pipeline. The Port Arthur, Texas, refiners at the end of its route are focused on expanding exports to Europe, and Latin America. Much of the fuel refined from the pipeline’s heavy crude oil will never reach U.S. drivers’ tanks.
•Valero, the key customer for crude oil from Keystone XL, has explicitly detailed an export strategy to its investors. Because Valero’s Port Arthur refinery is in a Foreign Trade Zone, the company can carry out its strategy tax-free.
•In a shrinking U.S. market, Keystone XL is not needed. Since the project was announced, the oil industry acknowledges that higher fuel economy standards and slow economic growth mean declining U.S. oil demand, even as domestic production is booming. Oil from Keystone XL will therefore displace American crude from new, “unconventional” domestic fields in Texas or North Dakota.”
Oil is a fundamentally global market – the idea that the pipeline enhances our energy security is a scam…. Let’s hope the Obama Administration doesn’t fall for it. In fact, the only way to truly reduce our dependence on foreign oil is to reduce our dependence on all oil. Let’s not fool ourselves that we will achieve ‘energy independence’ by serving as a middleman for access to overseas markets [emphasis mine; Steve Kretzmann, "Report: Exporting Energy Security: Keystone XL Exposed," Oil Change International, 2011.08.31].

Samuelson’s and McDowell’s and the State Department’s claims that Keystone XL somehow makes America safer are a scam. We won’t burn a drop of Keystone XL oil in the U.S. Pipe the Bakken oil into the mix, and that shale oil too will go straight to tax-free Port Arthur and eager Chinese buyers.

This is not the first time McDowell has waved the flag and Hugo Chavez in our faces in his shillery for TransCanada. Such is to be expected from an electric industry representative. McDowell’s industry doesn’t view TransCanada as an energy supplier; they see TransCanada as a big energy consumer to whom they can sell lots of electricity for those pipeline pumping stations.

Bonus Keystone XL Bits!

•The Watertown Public Opinion editorial board commits the same error as McDowell, claiming Keystone XL will “make a dent” in our dependence on foreign oil. One more time, everyone: Keystone XL’s oil will become foreign oil.
•Energy Secretary Steven Chu, who usually has really good ideas (like painting roofs white to reduce energy usage!), also appears to be facilitating the Keystone XL = energy security scam.
•Nebraska Governor Dave Heineman wins my Nice Republican of the Week award by putting water over oil and asking President Obama to deny TransCanada its pipeline permit