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December 9, 2011 Energy Data Highlights Crude oil futures price 12/7/2011: $100.49/bbl up$0.13 from week earlier up$11.80 from year earlier Natural gas futures price 12/7/2011: $3.421/mmBtu down$0.129 from week earlier down$0.972 from year earlier Weekly coal production 12/3/2011: 22.106 million tons up1.299 million tons from week earlier up0.273 million tons from year earlier Natural gas inventories 12/2/2011: 3,831 Bcf down20 Bcf from week earlier up102 Bcf from year earlier Crude oil inventories 12/2/2011: 336.1 mmbbl up1.3 mmbbl from week earlier down19.8 mmbbl from year earlier

Natural Gas/ Power News

EIA Storage Release 12/8/11 (Actual): -20 Bcf Previous Week: -1 Bcf +2.7% Change from 1 Year Ago +8.7% Change 5-year Average From King Coal to King Gas If the bible for energy policy wonks is the International Energy Agencys annual World Energy Outlook, industry executives have ExxonMobils The Outlook for Energy. The 2012 edition of Exxons long-term report, released on Thursday, offers an insight on one of the biggest talking points in Big Oils boardrooms: the golden age of natural gas. The increasing importance of natural gas is behind some of the tectonic shifts in the hydrocarbon industry, including Royal Dutch

Shells efforts to brand itself as a gas rather than an oil company; Exxons acquisition of US gas producer XTO Energy for $25bn last year; and BHP Billiton takeover in July of US-based gas developer Petrohawk for $12bn.Exxon believes that over the next three decades natural gas will overtake thermal coal to become the worlds second most important source of energy, only behind oil. The company says on the closely watched report that while crude oil will remain the most widely used fuel until 2040, overall energy demand will be reshaped by a continued shift towards greener energy sources, particularly natural gas. The company goes as far as to predict that the energy market will start to wave goodbye to thermal coal. http://www.ft.com/intl/cms/s/0/21ba5860-2248-11e1-acdc00144feabdc0.html#axzz1g2c14fyD

Update: Exxon says natural gas will support energy demand growth The worlds energy demand will grow 30 percent by 2040, but coals reign in electricity generation will decline in favor of cleaner-burning natural gas, Exxon Mobil said in its annual energy outlook. Developing economies in Latin America, China, India and Africa, will largely drive the surging global demand, said Bill Colton, ExxonMobil vice present of Corporate Strategic Planning. More energy will be needed to power their growing commercial and industrial sectors and their citizens improved standards of living. Electricity remains the largest draw on energy and rapid improvements in the energy efficiency of buildings and appliances wont be enough to curb demand, Colton said in a press conference Thursday morning. In the near-term, prospects for the global economy might look uncertain, but over the next 30 years, the world will continue to experience economic growth, he said. As the world population expands and living standards improve, the world will need more energy, even as we learn to use energy more efficiently. In 2040, coal, oil and natural gas will supply nearly 80 percent of the worlds energy, the report noted. Renewable fuels, primarily wind, will be the fastest growing energy sources, but they will remain a minor slice of the global energy supply, increasing from 1 percent today to 4 percent in 2040, the report projects. http://fuelfix.com/blog/2011/12/08/exxon-report-says-natural-gas-will-be-king/

EPA Says Fracking Likely Polluted Wyoming Aquifer Fluids caused by a company employing a drilling technique known as "fracking" likely polluted an aquifer in Wyoming, the U.S. Environmental Protection Agency said in a draft report that countered industry claims the technique has never led to water contamination. The EPA said "the best explanation" for the pollution seen in the deep monitoring wells in Pavillion, Wyoming, is a release of hydraulic fracturing, or fracking, fluids into the aquifer above the production zone. The pollution includes benzene, alcohols and glycols, the report said. http://www.cnbc.com/id/45601713

Gas prices: Low enough for consumers, high enough for producers? WPC Long term oil-linked gas contracts are likely to persist and coexist with spot pricing though the percentage of the oil price in the indexation may change, Alan Haywood, Chief Operating Officer of Global Gas at BP said Thursday. Gas consumption rose by 7.4% in 2010, the fastest rate since 1984, he said. Natural gas trade increased by 10.1% and LNG by 22.6%. Between 2000 and 2010, demand in Japan grew from 12.7% to 17%, in South Korea from 9% to 15% and in Europe from 21% to 25%. BP projects natural gas to continue to grow at 2% a year to 2030 with gas accounting for more than 50% of growth in fossil fuels, Haywood said at the World Petroleum Congress in Doha. Gas was affordable when compared with coal when the cost of carbon is considered and affordable versus oil when higher production costs are taken into account, Haywood said at a session on the theme of whether gas prices were low enough for consumers and high enough for producers. http://www.platts.com/RSSFeedDetailedNews/RSSFeed/NaturalGas/8677812

Green/ Alternative Energy News

Renewable energy umbrella launched Four leading renewable energy associations have announced their intention to launch an umbrella body to act as a single voice championing the importance and relevance of the renewable energy industry in South Africa. The announcement comes in the wake of the Green Economy Accord recently concluded through a series of engagements among the government, business, labour and community at Nedlac. This accord envisages aggressively addressing climate change concerns and the need to grow the SA economy by simultaneously stimulating the green economy and creating green jobs. "Creating a united voice for renewable energy custodians is imperative at this juncture in the development of the industry," said Pancho Ndebele, chair of the South African Solar Thermal Industry Association. http://www.fin24.com/Economy/Renewable-energy-umbrella-body-launched20111209

Crude Oil News

OPEC Daily Basket Price 12/8/2011- $109.02 (OPEC Daily Basket Price 12/7/2011- $110.105)

Crude Heads for Biggest Weekly Drop Since September as Europe Disappoints

Oil headed for the biggest weekly decline since September as economic rescue measures by European leaders failed to assuage concern that growth is slowing. West Texas Intermediate futures have lost 2.2 percent this week, as euro-area countries resolved on steps to ease the regions crisis without forging an agreement among all European Union members. Chinese industrial production slowed last month. Saudi Arabia, the worlds largest crude exporter, is in no rush to agree to new output quotas when OPEC meets next week, Oil Minister Ali alNaimi said. The details have failed to impress the market, said James Zhang, a strategist at Standard Bank Plc in London, referring to the European measures. We expect the euro zone crisis to drag on well into next year. http://www.bloomberg.com/news/2011-12-09/crude-heads-for-biggest-weeklydrop-since-september-as-europe-disappoints.html Brent rises over $108 on China investment report Brent crude oil rose above $108 on Friday after a Reuters report that China's central bank will create a new investment vehicle worth $300 billion, part of which would be focused on Europe.The report, which also boosted the euro, raised hopes that funds from the world's second-biggest and fastest growing major economy could be used to support European growth and soften the impact of the euro crisis. Markets had earlier fallen after a European Union summit left the bloc divided over moves to build a fiscal union and tighten integration in an attempt to rescue the euro. Thorbjoern Bak Jensen, analyst at Global Risk Management, said the exclusive Reuters report from Beijing had helped reverse negative sentiment after the division at the summit. http://www.reuters.com/article/2011/12/09/us-markets-oilidUSTRE7AD06820111209 Brent Falls Below $108 on Euro Zone, China Output Brent crude oil fell below $108 on Friday after a European Union summit left the bloc divided over moves to build a fiscal union to rescue the euro and following Chinese and German data pointing to slower global growth. Twenty-three of the 27 EU leaders at a summit in Brussels agreed on tighter integration with stricter budget rules for the euro zone, but Britain rejected proposed amendments to the EU treaty after failing to secure concessions for itself. The split deepened worries that policy makers would fail to tackle the euro zone debt crisis, leading to slower economic activity and lower demand for oil. Sentiment also softened after Chinese industrial output growth hit its slowest pace in two years, although this was offset by the prospect of further policy easing at the world's no.2 oil consumer after inflation plunged to a two-year low. http://www.cnbc.com/id/45604393 Syrian pipeline attack raises supply threat A Syrian oil pipeline has been blown up in the first significant rebel attack on the oil industry since the uprising started nine months ago. Damascus confirmed the attack yesterday. The state-run Syrian Arab News Agency said: A destructive terrorist group targeted a crude oil pipeline in Tal Al-Shur, northwest of Homs refinery.The Homs refinery is the second largest in Syria, with a capacity to process about 107,000 barrels a day from domestic oilfields, according to the US Department of Energy. The countrys largest refinery is at the Mediterranean port of Banias. The so-called Arab spring has disrupted oil markets through 2011, with

lower oil supplies in Libya due to the civil war, in Yemen and more recently in Syria. http://www.ft.com/intl/cms/s/0/e648a0e6-21c2-11e1-a19f00144feabdc0.html#axzz1g2c14fyD Oil Price Paralysed by Lack of Forward Visibility Like a rabbit trapped in the headlights of an oncoming car, Brent prices have remained static in the past fortnight despite an exceptionally heavy news flow. The market has been hit by a series of large shocks ranging from the deepening debt crisis in Europe to possible sanctions on Iran's exports and speculation about a military strike on the country's nuclear facilities. News that would normally have a significant impact has had none at all, however. Instead the market is paralysed by informational and analytical overload, unable to process the unusually large number of economic and political risks. "Forward visibility" has shrunk from the usual months to just weeks or even days. Daily price movements have been unusually small. Realised volatility has fallen to 22.6 percent over the last 30 trading days, down from more than 35 percent in October, putting it in the 23rd percentile of the 2006-2011 distribution, and the trend is still lower. Front-month Brent futures prices have ranged less than 2.25 percent a day in the last fortnight compared with an average of more than 3 percent since the start of 2006. http://www.commodities-now.com/commodities-now-news/power-andenergy/9195-oil-price-paralysed-by-lack-of-forward-visibility.html Gas prices up slightly over last week Gas prices are up slightly over last week in Houston and Texas, according to AAA gas gauge. The average price of gasoline rose to $3.10 in Houston, up a penny from last weeks price. The state average also edged up a penny to $3.11. Nationally, prices remained at last weeks average of $3.29. Gas prices have steadily falling since peaking this summer near the $4-per-gallon range, but they still remain more than 30 cents over the average price last year. Houston drivers paid $2.78-per-gallon last year. However, the price gap between last years average and this year has been shrinking as gasoline demand declines during the sluggish economy, Tom Kloza, chief oil analyst at Oil Price Information Service. http://fuelfix.com/blog/2011/12/08/gas-prices-up-slight-over-last-week/ US Republicans dig in heels on linking Keystone to payroll tax cuts US House Republican leaders Thursday said they had no plans to drop an effort to accelerate approval of TransCanada's Keystone XL pipeline from a key end-of-year tax package. President Barack Obama promised Wednesday to reject any attempts by Congress to link expiring payroll tax cuts and unemployment insurance with the controversial permitting process for the 1,600-mile crude oil pipeline. House Speaker John Boehner appeared emboldened by the White House's veto pledge. He told reporters that his members had agreed to move a bill that would extend unemployment benefits and the payroll tax credit and would contain riders speeding Keystone and delaying environmental rules for industrial boilers. "You know, the president says that the American people can't wait on jobs," he told reporters at the US Capitol. "Well, guess what? We agree wholeheartedly with the president. The Keystone pipeline project will create tens of thousands of jobs immediately." http://www.platts.com/RSSFeedDetailedNews/RSSFeed/Oil/6745332

Is the CME Preparing for the death of WTI? The CME Group's announcement that it is considering the launch of a new Gulf Coast oil futures contract has perplexed some market participants. Why would the exchange announce the idea on Wednesday, less than a month after news of the Seaway pipeline reversal, which should end the dislocation of the CME's crown jewel, the West Texas Intermediate crude oil futures contract? A simple explanation is that the exchange is simply trying to innovate and provide new ways for market participants to engage with the market. Another is that the exchange wants to transition away from an inland delivery point at Cushing, Oklahoma to another in Houston that will be better connected to global markets. After all, markets tend to prefer a single futures contract with deep liquidity over a fragmented market split between shallower pools of trade. When contacted on Thursday, a CME spokesman rebuffed the suggestion the proposal aimed to create a substitute for WTI and said the exchange was delighted with the Seaway reversal which it says ensures that WTI remains well connected with global markets. So it is safe to say that the CME is not interested in unilaterally forcing market participants to shift their preference to a new contract, especially in the case of WTI, its most lucrative product. But there is demand for a Gulf Coast product for hedging, as evidenced by the growth in CME-cleared swaps based on physical Gulf Coast crude prices. http://www.commodities-now.com/commodities-now-news/power-andenergy/9194-is-the-cme-preparing-for-the-death-of-wti.html Recent Rig Counts Date of Last Year's Count 24 Nov 10 24 Nov 10 September 2010

Area U.S. Canada

Last Cou Change from Count nt Prior Count 2 Dec 1993 11 2 Dec 11 484 -7 Unchanged

Date of Prior Count 23 Nov 11 23 Nov 11 Septembe r 2011

Change from Last Year +280 +35 +98

Internatio October 1197 nal 2011

+23

http://investor.shareholder.com/bhi/rig_counts/rc_index.cfm

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