Offshore

I got an email the other day announcing that Davis, California, the city with the nation’s first bike lanes and climate-specific energy efficiency ordinance, is teaming up with former Olympic Torch Relay director and Earth Run organizer David Gershon to achieve the impossible. Using the State of California’s 20% reduction goal as its starting point, the city has set a short-term target to cut the community’s carbon emissions by as much as 50% in three years.

According to the message, by unanimous vote of its city council, Davis is “going all the way on global warming,” with the goal of achieving total carbon neutrality by mid-century.

To get there, the city hopes that its “Cool Davis” campaign will eventually engage 75% of the city’s households to go on Gershon’s low carbon diet – a 30-day program to lose 5,000 pounds – and stay on it. The program encourages households to tailor a carbon diet following prescriptive actions and to be part of a peer-support group called EcoTeams.

City organizers claim a pilot program proves a reduction of 5,500 pounds of carbon emissions per household is possible. Households using Gershon’s do-it-yourself carbon diet in similar campaigns across the country have cut emissions by as much as 35% in a matter of months.

“We have proof of concept and the means to scale it up,” David Gershon said. “When it comes to cutting carbon, the action is at the local level, and the city of Davis is leading the way.”

Mitch Sears sustainability director of the City of Davis agrees. “As a city where 75% of our greenhouse gas emissions are coming from residential sources, it was a no brainer. When you pair the carbon reduction results Gershon is getting with the innovative Cool Community strategy and tools he offers to scale them up, Low Carbon Diet is by far the most cost-effective option for our city budget.”

Other cities reportedly have had positive results from their “Cool” campaigns. Cool Portland, the campaign’s first pilot program, more than doubled its goal of cutting carbon emissions by 10% per household, realizing an average reduction of 22%, or 6,700 pounds.

Citizen-led EcoTeams – peer-support groups of five to eight households – in Vermont similarly reduced their carbon footprint by 23%. And a Low Carbon Diet Challenge in Rochester, New York, achieved an average reduction of 10,828 pounds for every participating household.

It is apparent that working locally to reduce carbon emissions has its benefits, and any step toward reduced emissions is certainly a step in the right direction. But none of the programs to date has been on as large a scale as Davis’or with a reduction goal as high . The odds aren’t in the city’s favor, but I’ll be watching with interest to see how close the participants come to their goal.

A new report issued by GBI Research says global offshore drilling expenditure is expected to grow to more than US $490 billion in the period from 2009 to 2015.

According to the report, global offshore drilling has been going up and was especially high from 2004 to 2008. GBI Research estimates approximately $350 billion was spent on offshore drilling from 2000 to 2008, with the US Gulf of Mexico (GoM), West Africa, Brazil, and Asia Pacific receiving most of the investment.

The report says that global drilling expenditure is forecast to grow at an annual average rate of about 6.6% from 2009 to 2015. “The discovery of deep water and subsalt reserves is expected to drive investments in the sector,” the report says.

Interestingly, advances in technology leading to increased efficiency and a reduction in extraction costs are expected to reduce the total investments. But positive factors leading to increases in investments are likely to outweigh the negative factors, leading to a significant increase in offshore drilling spend.

South and Central America are expected to be a top region for offshore drilling expenditure by 2015. Signs of things to come include increased exploration in the area, leading to significant discoveries. “Brazil is the most promising region,” the report says, noting that the country “is emerging as one of the most important offshore drilling markets in the world due to the discovery of huge reserves in the offshore regions.” Discoveries like Tupi and Azulao have demonstrated the presence of vast reserves and are expected add significant reserves during the forecast period.

GBI Research says offshore drilling expenditure in South and Central America totaled more than $55 billion from 2000 to 2008 and that the area is expected to attract close to $100 billion from 2009 to 2015. “Brazil alone is expected to attract a drilling spend of more than $80 billion,” the repost says.

Not surprisingly, the trend toward deep and ultra-deep E&P continues to drive growth of the offshore drilling industry. Shallow-water activity is expected to decrease in the GoM as offshore natural gas production declines.

Technology is another major factor promoting increased deepwater activity, the report says, pointing to Perdido as “a classic example of advances in technology being put to good use.”

A panel discussion Tuesday at CERA Week in Houston had a similarly positive outlook for offshore opportunities following the global recession.  Click here for story on the discussion. And analysts across the board are sounding increasingly optimistic. If these projections are right, it looks like we could be on our way into another up-cycle.

As far as I’m concerned, it’s about time!

More information about the GBI Research report is available here.

According to a press release put out by Datamonitor Group on March 1, 2010, the global offshore drilling industry will stabilize this year. Although growth is unlikely to return before next year, this qualifies as good news!

Independent business analyst Datamonitor says after a sharp decline in 2009, global drilling will rise 12% 2010-2014 compared with the previous five years. Global spending is forecast to rise 33% over the period, translating to a total expenditure of US $387 billion. According to Datamonitor, much of this spending can be ascribed to increased costs both as a result of more expensive well types and general inflation.

Africa, which recently surpassed Western Europe in spending terms, looks set to be the boom market.

Last year saw deflation in prices and delays in both shallow-water and deepwater projects. In early 2009, however, the supply/demand balance for oil had already stabilized, and by the end of the year, the decline in service rates had ceased. The low-end rig sector is still vulnerable, but the big contractors are looking at a brighter future.

Datamonitor’s projections, contained in a newly-published report, point to a return to overall stability in 2010 within the industry.

Nearly 18,000 offshore wells were drilled over the last five years, with numbers peaking in 2007. The forecast is of a recovery in 2010, followed by consistently rising numbers up to 2013 to total more than 20,000 wells over the five-year period.

Dr Michael Smith, report author and consulting oil and gas advisor at Datamonitor, said around $291 billion was spent over the last five years on offshore drilling. “The forecast for 2010-2014 is a surge in 2011 and 2012, followed by a return to previous levels of growth, but with a small drop-off in 2014.”

Since 2005 (when it overtook North America for the first time) Asia has attracted the highest volume of drilling spend. Around 60% of this occurs in Southeast Asia and the remaining is split between North Asia (primarily China) and South Asia (mainly India).  Datamonitor forecasts that spending in Asia will rise 24% over the next five years, after the sharp decline in 2009. Well numbers for the whole period could increase by 9%.

North America is expected to attract the second highest volume of spending over the next five years, the majority directed at the Gulf of Mexico. A rise in spending of 30% is forecast over the period 2010-2014.

Africa now attracts the third highest volume of drilling spend, having just surpassed Western Europe. Nearly 75% is directed at West Africa – primarily Angola and Nigeria – while Egypt attracts most of the remainder. Spending is forecast to rise 55%, and well numbers are forecast to increase by 29%.

“Africa has enjoyed rapid growth in deepwater spending, which should continue over at least the next four years, despite a slowing of exploration activity in the older deep water regions,” Smith said. “Continued high spending levels are expected as ultra-deepwater discoveries are developed and as additional countries begin to drill deep exploration wells.

“The African market continues to boom for deep water services with high-specification rigs still in demand and many opportunities for a wide range of services in a wide range of countries,” Smith said.

Eastern Europe and the former Soviet Union (FSU) attract only a small share of global offshore drilling expenditure, primarily due to the region’s limited offshore areas outside the Caspian Sea, Sakhalin Island, the Russian Arctic, and the Black Sea.” That said, spending is forecast to rise a substantial 74%, after an only modest decline in 2009.

In Western Europe, spending is expected to rise only 5%, and well numbers are projected to fall by 8%. In the Middle East, where spending and well numbers are forecast to rise 63% and 40% respectively, the Persian Gulf region will once again become fundamental to supporting oil supply, increasing output to satisfy world demand.

New taxes on domestic energy suppliers could compromise retirement funds for millions of Americans

The Obama Administration’s proposed fiscal year 2011 budget imposes nearly US $40 billion in new taxes on the oil and natural gas industry. While some Americans think “big oil” should be heavily taxed, the fact is that many of these same American investors are dependent on revenues from operating companies for their pensions. The oil and gas industry contributes enormously to the very retirement funds now at risk.

According to American Council for Capital Formation (ACCF) Chief Economist Margo Thorning, with retirement funds already struggling to stay afloat in current economic conditions, Washington officials would be ill-advised to add additional burdens (like the $39 billion tax increase on oil and gas companies proposed in the White House’s budget) to the US industry contributing so much to millions of pension, mutual, and other retirement funds.

A recent study conducted by the Pew Center on the States found state pension funds face a staggering $1 trillion shortfall.

In response to these developments, Thorning says Washington needs to re-think its plans to tax operating companies, explaining that it is a bad plan for a federal budget to directly and dramatically impact billions of dollars paid into the mutual funds that state legislatures rely upon to pay for retirement benefits.

A 2007 study on this issue by former Clinton advisor Robert Shapiro, found that just 1.5% of America’s oil and natural companies are owned by industry executives, while the remaining ownership belongs to mutual funds and individual investors planning for their own retirement with pension and IRA funds.

“With 98.5% of all oil and gas company shares held by individual investors, retirement funds, and management companies rather than industry insiders,” Thorning said, “it’s clear that raising taxes on domestic energy suppliers ultimately harms the tens of millions of average American’s invested in the oil and natural gas industry.”

The Shapiro study also explains just how many Americans are affected by the strength and availability of mutual fund assets. According to the study, “28 million public pension accounts in over 2,650 public employee pension funds represent the major retirement security for current and already-retired soldiers, teachers, police and fire personnel, social workers, and office workers employed at every level of government.”

The proposed budget would shortchange millions of public servants.

The situation, according to Thorning, is dire. “In light of the fact that 40 states have set aside less than 7.1% of the funds required to pay for retirement benefits and half of those have no assets on hand whatsoever to cover payments, the effect an additional tax burden on domestic energy suppliers would have on Americans at this time is far reaching and devastating.”

According to a Reuters article written by Tom Doggett that ran in mid-February, not expanding domestic drilling could cost the US $2.4 trillion over the next two decades. And US imports of oil, petroleum products, and natural gas could increase by $1.6 trillion over the period without access to these energy resources.

These numbers come from a report prepared for the National Association of Regulatory Utility Commissioners by SAIC Corp., a consulting service based in McLean, Virginia.

The report also says that the US is expected to pay OPEC $607 billion for an extra 4.1 Bbbl of crude over that twenty-year period.

Congressional and presidential bans on drilling in most US offshore areas outside the western and central Gulf of Mexico ended in 2008, and the Department of the Interior is now considering whether to expand exploration in a very small part of the formerly closed areas.

The article quotes President of the American Gas Association David Parker’s view that something needs to change. “It’s clear from this report that the status quo on energy production simply won’t suffice. We encourage lawmakers to heed the results of this study and take a closer look at the energy-rich areas in our country that are currently off limits.”

Unfortunately, at a juncture where an informed decision could make the difference between ensuring energy dependence and approaching energy independence, the US is about to head down the wrong path.

According to the Reuters article, this study raised estimated US oil and gas resources available in all areas based on advanced drilling technology and easier development of shale gas.

Crude oil estimates were increased by 43 Bbbl to 229 Bbbl, and natural gas was raised by 286 Tcf to 2,034 Tcf.

Though many within the US like Republican Governor of Virginia, Robert McDonnell, want to increase offshore drilling, (see last week’s blog) legislators continue to stand in the way.

Perhaps a serious look at the numbers could alter our course.

An article in the Los Angeles Times early this week says Republican Governor of Virginia, Robert McDonnell, wants to make Virginia the “energy capital of the East Coast.”

I say more power to him!

The new governor apparently made this pledge at his swearing-in last month (following the recent expiration of an offshore drilling ban). And the state’s two Democratic senators, Jim Webb and Mark R. Warner, have joined forces with McDonnell to urge the Obama administration to begin selling leases in 2011 for drilling 50 miles offshore.

If this lease sale takes place, it will be the first one offshore the Eastern US since 1983. According to the LA Times article, “New drilling has been prohibited in much of the nation’s coastal waters since the 1980s, largely in response to a devastating 1969 oil spill in California, off Santa Barbara. Congress let the ban lapse in late 2008 as high gasoline prices became a hot political issue.”

McDonnell petitioned the US Department of the Interior with a letter in which he promoted drilling as a way to aid economic recovery and generate billions of dollars for the state.

According to LA Times editor Richard Simon, the plan has broad support. His article quotes Gerry Scimeca, an aide to state Delegate Ron A. Villanueva (a Republican and the sponsor of a pro-drilling resolution approved Wednesday by the Virginia General Assembly on a 69-28 vote) as saying, “We may have this potential bank account sitting out there.”

With finances in need of help, Virginia is understandably excited about its potential cash cow.

Unfortunately, despite their bipartisan enthusiasm, the Virginia politicians are up against some serious opposition.

According Simon, the plan has raised concern from NASA.

“The space agency, which operates a launching facility on the Virginia shore, says drilling would pose a safety risk because of the rigs’ proximity to where rocket components fall into the Atlantic,” the article says.

“You’d think 50 miles out would not be a problem,” NASA spokesman Keith Koehler said. “But for us, it is. It’s right in the middle of our launch range.”

And of course, there has been opposition from environmentalists, who think drilling could harm the fishing industry and be a deterrent to tourists.

Interior Secretary Ken Salazar is expected to decide about the lease sale soon.

My guess is that there will be a lot of talking around conciliation, but in the end, Salazar will decide true to form – despite the state’s bipartisan support and the recent statement by President Barak Obama in his State of the Union address on January 27 that the nation’s energy security relies on “making tough decisions about opening new offshore areas for oil and gas development.”

Time will tell if a “tough decision” will be made or if the Department of the Interior will take the same well-trodden path.

The University of Texas (UT) at El Paso is hosting an international engineering conference on campus to address critical problems affecting the planet.

The National Academy of Engineering has called engineers to action by identifying the 14 “Grand Challenges” that need to be solved to ensure the planet’s survival. They address issues including quality of life and health, sustainability, and renewable energy.

More than 80 research and government institutions from the US, Europe, Latin America, and Canada will participate in the three-day conference that will focus on finding innovative solutions to challenges that face our society.

The 14 “Grand Challenges” include:
1.    Providing access to clean water
2.    Preventing nuclear terror
3.    Engineering better medicines
4.    Advancing health informatics – Developing better health information systems to improve medical visits, counter pandemics and biological or chemical attacks.
5.    Making solar energy economical
6.    Developing carbon sequestration methods — capturing and storing excess carbon dioxide to prevent global warming
7.    Securing cyberspace
8.    Reverse-engineering the brain – engineers are trying to create computers capable of emulating human intelligence.
9.    Managing the nitrogen cycle – Engineers can help restore balance to the nitrogen cycle with better fertilization technologies and by capturing and recycling waste. Controlling the impact of agriculture on the global cycle of nitrogen is a growing challenge for sustainable development.
10.    Providing energy from fusion – Fusion is the energy source for the sun. Human-engineered fusion has been demonstrated on a small scale. The challenge is to scale up the process to commercial proportions, in an efficient, economical, and environmentally benign way.
11.    Restoring and improving urban infrastructure
12.    Engineering the tools of scientific discovery
13.    Enhancing virtual reality — Virtual reality is an illusory environment, engineered to give users the impression of being somewhere they are not. It can be used for training, treatment, and communication.
14.    Advancing personalized learning — Instruction can be individualized based on learning styles, speeds, and interests to make learning more reliable.

According to organizers, the mission of the conference is to enhance student interest in engineering and science and emphasize the critical role engineers play in solving issues that affect our planet.

The goal is to identify opportunities for synergetic research and strategic partnerships among research universities, Minority Serving Institutions (MSIs) and industry; to identify the actions needed to create a culture of collaboration that facilitates the formation of research partnerships; and to showcase the capabilities of faculty from MSIs.

Researchers from different disciplines, industries, and educational institutions will engage in discussions, share best practices for successfully establishing partnerships, and identify what is needed to overcome obstacles to creating alliances among universities, industries, and national laboratories.

“With a tremendous effort by the members of the organizing committee, we have been able to attract some of the brightest minds in the world in the areas of energy, urban infrastructure, and biomedical technology to UTEP for this conference” said Richard Schoephoerster, dean for the College of Engineering.

Keynote speakers include:
•    Victor Mendez, administrator of the Federal Highway Administration, who earned a Bachelor of Science degree in civil engineering from UT in 1980 and an MBA from Arizona State University. He previously served as Director of the Arizona Department of Transportation.
•    Ray Orbach, director of the Energy Institute at The University of Texas at Austin. Orbach earned his Bachelor of Science degree in physics from the California Institute of Technology in 1956 and his PhD in physics from the University of California, Berkeley. Orbach served as the US Department of Energy’s first undersecretary for science.
•    Semahat S. Demir, director of the Biomedical Engineering Program at the National Science Foundation (NSF). Demir has led, developed, and/or participated in 15 NSF and interagency funding programs. She is a fellow of the American Institute of Medical and Biomedical Engineers (AIMBE) and has received 55 professional awards and honors.

“The recommendations coming as a result of the discussions over the three-day event will set the stage for research and development into these pressing societal needs, and UTEP will be positioned as a major participant in those efforts,” Schoephoerster said.

The event is sponsored by the National Science Foundation with additional support from industry sponsors Freeport-McMoRan Copper & Gold, Lockheed Martin, Shell and Boeing.

The “Building Partnerships and Pathways to Address Engineering Grand Challenges Conference” will take place Feb. 8-10 at Union Building East, third floor, Tomás Rivera Conference Center. The event is open to the public.

To register, log on here.

According PFC Energy’s ranking of world’s top energy companies the combined value of the 50 largest publicly traded energy companies increased 35% in 2009 to US $3.9 trillion.  Interestingly, that value remains 26% below the $5.2 trillion high at the end of 2007.

Analysts see the latest data as part of a long-term trend.

J. Robinson West, chairman and CEO of PFC Energy said, “Many long-term trends that were underway before the financial crisis have reasserted themselves. We are witnessing the continuing transformation of the industry. Investors see more potential in companies with growing end-user markets and preferential access to resources, and they have soured on the refining business in mature markets.”

One year ago, five of the top six positions on the PFC Energy 50 were occupied by ExxonMobil, Royal Dutch Shell, Chevron, BP, and TOTAL. At that time, ExxonMobil had reclaimed its long-standing leadership of the PFC Energy 50 list from PetroChina.

This year, PetroChina tops the list with a market capitalization of $353.1 billion, 9% larger than ExxonMobil’s $323.7 billion. Number four ranked Petrobras listed a value of $199.2 billion, larger than either Royal Dutch Shell or BP.

In the past twelve months, the combined value of the list’s nine traded national oil companies (NOCs) rose by 66%. During the same period, the six supermajors – ExxonMobil, Shell, BP, Chevron, Total, and ConocoPhillips – increased their combined value by less than 1%, while OECD-based integrated companies gained only 6% in value.

PFC Energy called 2009 a “turnaround year” for countries as well as companies.  Russian companies, last year’s worst performers, posted a combined 88% value gain. The value of the Chinese companies grew 52%.

Early signs of industry restructuring and consolidation also were visible this year. After spinning off its integrated oil sands operations as Cenovus, a smaller Encana had the dubious distinction of falling from its ranking of 22 to 44, the list’s largest drop. The Petro-Canada merger helped Suncor increase its market capitalization by 91% to climb from 37 to 22. ExxonMobil’s acquisition of XTO was not completed at year-end, but even so, the combined value of the two companies fell short of displacing PetroChina from the number 1 position.

Over all, it looks like the NOCs are gaining on the international oil companies (IOCs). If this is truly part of a long-term trend, the big picture is changing, and IOCs will continue to slip down the list, displaced by NOCs that are growing by leaps and bounds.

An announcement published in mid-January 2010 says the Tata Nano, a.k.a. “The People’s Car,” is coming to America. Billed as the world’s cheapest car, the Nano is scheduled to come to the US in two to three years.

A press release announcing the arrival of the Nano says that if the US version of the car is comparable in price to the European version, it will cost about $8,000. At that price, it would be significantly less expensive than the Hyundai Accent, which sells for $9,970 and is currently the cheapest car available on the American market.

With the Obama Administration’s focus on increasing fuel economy, the way could be paved for the Nano to make its US debut.

Within the US, the focus has been on hybrids and electric cars. Tata’s focus is fuel economy. The company reports that the Nano gets 70 MPG on the highway and 50 MPG in the city.

It is obvious that the designers were serious about fuel economy because the Nano’s gas tank holds less than four gallons. Though the Nano specifications say the vehicle seats four, they can’t be very large passengers because the payload is about 660 pounds. The internal dimensions of the car weren’t immediately available on the Web site, so it isn’t clear how much space there is inside the car. Appearances indicate there is not much.

I’m not sure how the Nano measures up in terms of safety either because no rating appeared on the site, but given the fact that the door locks on the driver’s side and passenger side are recorded in the safety and security features as separate listings, things don’t look terribly promising.

The basic model is a little short on conveniences as well. It is equipped with air conditioning and heat. But the “magazine and coin holder on all doors,” headrests, and sun visors are listed as “comforts.” It appears that the Nano is a bit short on creature comforts.

If the primary criteria for buying a car are cost and fuel efficiency, the Nano comes out on top…..but you won’t find me in the queue to buy one!

Subsea UK has just released the shortlist for its 2010 British subsea industry awards. The list of finalists includes 14 companies that are in the running for the organization’s prized Subsea UK Business Award, which recognizes excellence and achievement across the subsea sector.

The finalists fall into several categories.

In the category of “Subsea Company of the Year” (sponsored by Brewin Dolphin), finalists include First Subsea and Dominion Gas.

In the “Emerging Talent” category (sponsored by Fugro), there are three individuals in the running: Peter Brannen with Aker Solutions, Liam Blair with Subsea 7, and Katy Wilson with Atkins Boreas

There are three finalists for the “New Enterprise Award” (sponsored by Technip): Subocean Group Ltd., IPWL Ltd., and NCS  Survey

There also are three finalists for the “Subsea Innovation & Technology Award” (sponsored by Simmons & Co. International). They are GE Oil & Gas,
Atkins Boreas, and VerdErg.

Finalists for the “Subsea Global Exports Award” (sponsored by UK Trade & Investment) include First Subsea, Optical Metrology Services, and Dominion Gas

Winners will be announced at an awards dinner sponsored by Triton Group on February 10 as part of “Subsea 2010,” a two-day conference that will be held at the Aberdeen Exhibition & Conference Centre February 10 and 11.

Subsea UK will also present an award to the individual who has made the greatest contribution to the subsea industry in 2009.

According to Alistair Birnie, Subsea UK chief executive, “These awards are an excellent and important opportunity to highlight those outstanding organizations and individuals who have shown great flair, innovation, creativity, and vision in our industry in the last 12 months. These individuals and organizations have not only helped shape the industry’s past but will be a vital part of driving forward its future.”

Hear, hear!!