By Duncan Sutherland- Exclusive to Gas Investing News

Contracts for August delivery of natural gas slid before the weekend as Tropical Storm Dolly appeared to be dissipating. However, the storm intensified into a hurricane early in the week, spurring precautionary shutdowns of some oil and gas infrastructure in the Gulf of Mexico. Reuters is reporting that the production shutdown was “395 million cubic feet per day”. Although Dolly should not be of particular concern, one should take this as a reminder to stay vigilant about the weather developing in the Atlantic this summer.

Futures continued to decline, reaching prices not seen since spring. Analysts are predicting that storage will increase going into the fall, and further softening of the price is likely to result. On a quirky note, the NYMEX set a record on the 18th for total daily volume of gas futures contracts.

Finally emerging from committee, the US Senate’s proposed legislation to limit speculative trading in energy futures will be debated by the full chamber. The Stop Excessive Energy Speculation Act would also force “U.S.-based oil traders to comply with U.S. trading regulations even when they are trading through foreign exchanges”. The prospects of success for the bill are uncertain. It is an election year and energy prices are high, so the bill might indeed pass with a veto-proof majority.

Alaska Governor (and dark horse Republican Vice Presidential candidate) Sarah Palin has shepherded a bill through the legislature to licence TransCanada Corp’s (TSX:TRP) massive Prudhoe to Boundary Lake pipeline. It is expected to take ten years and almost (USD) $30 billion, and will be competing against BP (NYSE:BP) and ConocoPhillips’ (NYSE:COP) Denali project of similar expense.

Last week this space noted Gazprom’s offer to buy Libya’s export gas destined for Europe. Events of the intervening week have reminded European leaders why they should be extremely worried about such a deal. After the Czech Republic agreed to host a component of the US missile defence system, Russia noticed that “technical reasons” had drastically curtailed the flow of oil to Czech refineries. The cut is reminiscent of 2006 decisions to slash exports to Lithuania and Ukraine.

Gazprom is being much more accommodating to Gas Natural (MCE:GAS) of Spain. The two agreed to general conditions for trading in LNG. This deal prefaces the Barents Sea Shtokman field coming on line for LNG in 2014, and an increasing importance of LNG for Europe.

Speaking of Europe, a recent move by Shell (NYSE:RDS.A) to shutter an existing fuel oil power plant in favour of its new natural gas unit at Europe’s biggest refinery is emblematic of a wider industry shift. The Pernis refinery switch is in response to tougher emissions regulations and bad publicity for large emitters. Investors should be examining companies’ strategies to adapt to tougher regulation. Over the next couple years it will be of greater importance, for reasons outlined here.

Terra Energy Corp (TSX.V:TTR) was one of many companies to secure new drilling leases in a huge British Columbia auction. The BC Government auctioned properties in the Montney formation and the Sunset Prairie area. “The July sale offered 149 parcels in northeast B.C. covering 134,196 hectares”, three of which remain unsold. An upcoming auction on August 13th will likely have similar results.

A heads of agreement has been reached with Gastar Exploration (TSX:YGA), partner Eastern Star Gas Ltd. (ASX:ESG) and the APA Group which owns two major Australian pipelines. Should the deal be finalized, it will involve coal bed methane being delivered to New South Wales State.
Also in Australia, Hess Corp. (NYSE:HES) declared that exploratory drilling on the Northwest Shelf was consistent with predictions.

XTO Energy Inc. (NYSE:XTO) is buying just shy of 1300 acres in Texas’ Barnett Shale formation, increasing its property to 280,000 acres. Chesapeake Energy Corp (NYSE:CHK) made a sale of 90,000 acres of Arkoma Basin-Woodford Shale property to BP (NYSE:BP) for $1.75 billion. Current prices have made shale gas plays much more attractive for big companies, giving juniors and property-holders a boost.

Indraprastha Gas (BOM:532514) will set up a joint venture with Siti Energy to deliver gas in the Indian state of Haryana (population 21 million) amid earning reports of a 13% profit increase. Approval was granted by the Chinese government for Fortune Oil Plc’s (LSE:FTO) joint venture pipeline from Xiao-Bian-Zhuang to Tianjin. As these two giant countries continue to boom, some exposure to gas companies doing business here is a smart play. The combination of growing power demand (both industrial and residential), concern over coal generation and substantial underdeveloped gas resources in the region portend a bright future.

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