Drilling

Oilfield Helping Hands (OHH), a Houston-based non-profit specializing in providing financial assistance to oilfield workers in crisis, has announced a benefit to be held in Fulshear, Texas, on September 24-25. The benefit will host a Sporting Clays Tournament and plans to donate the proceeds to The Deepwater Horizon Fund.

The special benefit has been organized to assist families affected by the Deepwater Horizon blowout in the Gulf of Mexico. Registration began as early as May 26 and OHH continues to offer sponsorship opportunities for the event. In addition to sponsorships, the organization is also accepting applications for volunteers and donations. To get more information on the event, or to sign up and view a map of the event’s location, visit one of the following websites:

www.deepwaterhorizonbenefit.org or www.oilfieldhelpinghands.org

A recent report published by MIT’s Energy Initiative  (MITEI) outlines the future of natural gas and it’s relation to energy security worldwide.

According to the report, unconventional shale gas deposits in the US and abroad will play a major role in developing the world’s low-carbon future. The 83 page report outlines and explores necessary steps to provide a competitive marketplace conditioned by a CO2 emissions price. It also emphasizes the growth of unconventional shale gas as a feedstock for future development claiming, “Natural gas will double its share of the energy market from 20% to 40% by 2050.”

The comprehensive report takes a broad view at the global natural gas and provides a special focus in the recent development of unconventional shale gas reserves. The report took two years to compile between 30 MIT faculty members. Aside from reserves and market price, the report also provides in depth views on geopolitical concerns, economics, national security, and the environment.

Due to the multiple end uses for conventional and unconventional gas resources, i.e. electric generation, industrial manufacturing, and heating, and its capacity to lower greenhouse gas emissions, MIT’s report shows that unconventional shale gas will maintain a vital role well into the future.

According to MITEI Director Ernest J. Moniz, “Much has been said about natural gas as a bridge to a low-carbon future, with little underlying analysis to back up this contention. The analysis in this study provides the confirmation — natural gas truly is a bridge to a low-carbon future.”

To download a pdf of the full report visit http://web.mit.edu/mitei/research/studies/naturalgas.html.

With most of the attention on Secretary Kenneth Salazar’s attempt to stop offshore drilling in the Gulf, some of you may be unaware the same battle is being won a different front.

Shortly after President Obama took office, John Podesta, a key member in President Obama’s transition team brought into question 77 leases in Utah. Due to pressure from the environmental lobby these leases, which border national parks in the region, were recalled on the assertion that the sales were improper. The belief at the time was that these 77 leases were rushed through in the waning days of the Bush administration.

As a result, the leases were withdrawn from the bid round and have been sequestered from exploration since December 2008. According to Kathleen Sgamma, Western Energy Alliance’s Director of Government Affairs, this assumption was incorrect. “The withdrawn lease were offered based on the culmination of a seven year environmental management study,” Sgamma said.

The Western Energy Alliance (formerly Independent Petroleum Association of Mountain States or IPAMS) is currently calling on Secretary Salazar to reinstate the 77 leases based on an internal investigative report filed by the Dept. of Interior stating that the leases were carried out properly. The investigative report claims that the reasons for canceling these leases were unfounded. Although the report was completed in December 2009, it was only released this week.

According to Sgamma, the real issue is jobs. “This week the House Subcommittee on National Parks, Forests and Public Lands will hold a hearing on ‘Creating Rural Jobs with America’s Public Lands,’ and the US Chamber of Commerce is holding a Jobs for America Summit.” Sgamma added, “Secretary Salazar could take immediate steps to create energy jobs by reinstating the leases and taking other measures to enable western producers to develop the clean American energy on federal lands that our nations needs to survive,” Sgamma said.

The reinstatement process is ongoing. To view the full Investigative Report conducted internally by the Dept. of Interior visit http://westernenergyalliance.org/wp-content/uploads/2010/07/BLM-Lease-Report.pdf

“If you like big oil then this is your bill,” said Congressman Pete Olsen, R-Texas in reference to the reworked regulatory bill currently underway in Washington. Although tongue-in-cheek, Brady’s statement was made on the recent move to raise liability limits from US $75 million to $1.5 billion — a move that would ultimately eliminate independent operators from competing with super majors in the US Gulf of Mexico (GoM).

Olsen was speaking along with fellow Congressman Kevin Brady, R-Texas at the IADC sponsored Town Hall Meeting on Wednesday, July 7, in Houston, Texas. Olsen authored legislation, co-sponsored by Brady, to end the current moratorium on offshore drilling.

Pride International CEO and IADC Chairman Louis Raspino opened the meeting, “The events following the Deepwater Horizon blowout have challenged our industry like we’ve never seen before,” he said. Raspino cited that uncertainty espoused by the Obama administration is forcing many operators to use their current capitalization to get out of the GoM. “This is not an item that can wait six months,” Raspino said.

Olsen described the current legislation as being driven by a job-killing agenda. “The oil and gas industry is caught in the cross hairs,” Olsen said. This is in spite of the fact that, according to Olsen, the majority of experts used by the Dept. of the Interior in the 30-day evaluation period prior to the moratorium claimed that shutting off activity in GoM would not make offshore drilling safer. Although Secretary Kenneth Salazar cited safety issues as the cause of the moratorium, Olsen added, “A blanket moratorium in the Gulf is the wrong decision.”

For the new regulatory bill, Olsen described his own initiative that would prevent pricing small independents out of Gulf activity with increased liability limits. His suggestion involves an amendment to consider risks as they apply to each individual rig, including parameters such as well depth, well pressure, and special considerations for the company’s safety record.

Congressmen Brady followed Olsen with a similar tone. “Being involved in the political process is no longer a choice; it’s a matter of survival for your industry,” Brady said. In addition, Brady attempted to provide perspective on the members of Congress who oppose offshore drilling. “Some of our colleagues don’t see energy workers; they see energy executives,” Brady said. He went on to suggest that each member of the audience take time to make face-to-face visits with their representatives. “Emails won’t work; letters aren’t as effective as making eye contact and explaining the true cost of this current moratorium,” Brady said.

Wednesday’s Town Hall Meeting was aligned with the Obama administration’s appeal to overturn US District Court Judge Martin Feldman’s June 22 ruling that the government lacked clear reasons for the six-month moratorium. Hornbeck Offshore filed its lawsuit on the grounds that the company would suffer severe economic consequences.

The Dept. of the Interior filed its brief late Tuesday in the US 5^th Circuit Court of Appeals challenging the judge’s decision.

Both Congressmen assured the crowd that a fight was at hand. “We’ll fight for you, but you will also have to fight for yourself.”

The Associated Press reported that 28 of 634 manned production platforms and three of 51 drilling rigs have been abandoned in the western Gulf of Mexico as a result of tropical storm Alex. According to The Bureau of Ocean Energy Management, Regulation, and Enforcement, the current evacuation has halted one-quarter of the oil production in the GoM and more than 9% of the regions natural gas production.

According to API, energy production from the GoM was 1.6 million b/d and 6.4 Bcf of gas as of March 2010. The closures are expected to interrupt production by a factor of 395,878 b/d (24.7% of US oil output in the Gulf).

Despite the shortage, oil prices edged to $77/bbl today, which will be its first quarterly drop since 2008. Crude price dropped 12 cents for August delivery to stay at $75.82, according to Reuters. Overall, oil prices have dropped approximately 10% since the end of March.

The API has reported that crude inventories fell 3.4 million bbl last week. Additional information from the Energy Information Administration shows that April’s US oil demand exceeded previous estimates by 45,000 b/d.

The Associated Press also stated that the ships working on the BP response would remain at sea. With the current stoppage in the western Gulf, prices may not drop for much longer.

The US Energy Information Administration (EIA) has issued its short term outlook with a special section on preliminary estimates of reductions in production resulting from a 6-month deepwater drilling moratorium announced by Secretary Salazar on May 27.

The report estimates an average reduction of about 26,000 b/d of oil in Q4 2010 and roughly 70,000 b/d of oil in 2011.

From a consumer standpoint, the EIA projects WTI crude oil spot prices to average US $79 per bbl this year and $83 per bbl in 2011, which are both down approximately $3 from May’s Outlook. Regular-grade motor gasoline retail prices are expected to average $2.79 per gal throughout the summer driving season (April 1 through September 30). This is an increase of only $0.35 from last summer and this current projection is down $0.15 from EIA projections last month.

So far, the short term looks relatively manageable. However, the EIA has also issued its 2010 Outlook for Hurricane-Related Production Outages in the Gulf of Mexico, which estimates a possible total shut-in of 26 million bbl of crude and 166 Bcf of natural gas for the season (June through November).

The EIA plans to update its reporting with the addition of new information. For a full view of its most recent outlook visit http://www.eia.doe.gov/emeu/steo/pub/

The International Association of Drilling Contractor’s 2010 World Drilling Conference is now underway in Budapest, Hungary. The trip from Houston, Texas, only took 23 hours (NOTE TO SELF: Get a new travel agent!). So far, there’s been plenty to talk about from advances in drilling technology to improved risk management programs. However, the Gulf of Mexico is no small topic either.

A brief review of Monday’s June 14, 2010 issue of USA Today featured several pages of news concerning the current efforts to kill the oil leak just offshore Louisiana. Apparently, President Obama has paralleled the spill to an environmental 9/11, labeling the event an “assault” on the US coast. Rhetoric is in no short supply, unlike oil and natural gas.

A separate article expressed the UK’s reaction to tough talk by the US President against one of the country’s largest, most profitable companies. Nothing important there, just more rhetoric. Finally, someone is attempting to write about technology.

HEADLINE: “Relief wells aim at 7-inch pipe 18,000 feet below the surface”

The article is well written at least with viable sources to offer credibility to the account. However, the tone seems a bit dry. The article begs to be on the front page as the “latest failed attempt.” And even though the headline says it all, the author still isn’t convinced when he writes, “Instead of drilling for oil, workers are targeting the 7-inch-wide steel-casing pipe located just above the spot where the oil reservoir 18,000 feet deep.”

In reality, that is the story that needs to be told. However, Vergano accounts for his three obligatory sources and ends with the projected 100 days it will take to stop the leak. As an editor at E&P, the fact that a team of engineers can send a 5 1/2-in. pipe more than three miles down and accurately target another pipe with a diameter of 7-in. is without a doubt an amazing feat.

Despite the obvious problems with the spill, the technology (much of which is being highlighted in Budapest this week) speaks volumes for an industry that is only 63 years old. The problem, for most Americans is that we’re too close. We see the rigs on tv, we hear the bad press on the evening news, we listen to the government convince us that oil companies are robbing us at the pump (even though nearly half the price of a gallon is taken out in taxes). Combine all of these observations, and the average person thinks they know something about the oil and gas industry.

For weeks, the evening news has barraged the public conscious with derogatory images of the oil and gas industry. From ruined tourist destinations to fishermen unable to ply their trade. Now, the government has stepped in and put the industry at a complete standstill. Watching the “Anderson Coopers” of the world, you’d think that every person living on the Louisiana coast is as mad he is. We’re all frustrated, that goes without saying. However, the average American living in close proximity to the spill, either works in the oil and gas industry or at least has relatives and close friends in the business.

For a time, I thought it was just me. At least, until I traveled to Europe.

ZURICH, SWITZERLAND (Custom Agent): “You from Texas? You have oil rig in backyard?”

ME: “No. But I am in the oil and gas industry.”

CUSTOM AGENT: “Why don’t they fix leak?”

ME: “They’re trying. It’s very deep. It’s never happened before at this depth?”

CUSTOM AGENT: “AH, why not just put thing on the thing and wah lah (wiping hands clean)?”

ME: “I’ll let them know when I get back to Houston [?]”

OK, so not everyone.

[ARRIVE IN BUDAPEST]

My point is this. A reporter from the BBC was broadcasting live from the Louisiana coast on Tueday evening. She said the following: “There is a lot of ambivalence toward the oil industry here in Louisiana. While many of these residents make the living fishing in these waters, many and possibly more work in the oil and gas industry. They’re really not happy about the moratorium. One resident said he feels like they’ve been punished twice.”

Truth is, sometimes you have to step away from things to see a bigger picture. With the situation in the Gulf of Mexico we are damned if we do, and we are certainly damned if we don’t.

If your like me, you’ve been groaning at every turn of the channel during your evening news as countless professional journalists sum up the technological malfunctions that led up to the Deepwater Horizon blowout.

For weeks, anchors like CNN’s Anderson Cooper have espoused, “The American public has a right to know!” Then these same journalists proceed to mangle the facts surrounding the current situation in the Gulf of Mexico. It’s become such an issue, that film director James Cameron has now become a viable solution provider to the current spill. Seriously?

So, if you think engineers are the true heroes in the Deepwater Horizon story, there may be hope for at least a semi-credible source of information. A website known as gCaptain (News and Resources for the Maritime Professional) hosts a forum for students, enthusiasts, and offshore specialists, which began its Deepwater Horizon thread at approximately 10 p.m. on April 20, 2010. While the early posts are quite harrowing due to the number of posters who actually had friends and relatives on the rig, the thread has been updated consistently throughout the passed 50 days. To date, the thread has garnered 2,291 replies with more than 284,515 views.

After the initially tragic phase was alleviated, this thread has hosted some in depth conversations on the technology involved including what failed as well as the various relief efforts that have been tried. While this post is not unlike any other blog in respect to the validity of information provided, it at least boasts a number of contributors who obviously “know something” about the things they discuss.

If you need a respite from the gross errors of fact introduced by the mainstream media where the industry is concerned, give this post a view. At a minimum, you’ll be entertained and the contributors are at least marginally informed about the topic, which is more than we can say about the mainstream media.

http://gcaptain.com/forum/offshore/4805-deepwater-horizon-transocean-oil-rig-fire-92.html

According to The Times-Picayune companies suffered some confusion on Tuesday as the Interior Department’s 4 p.m. deadline for deepwater drilling shutdown plans neared. Last Thursday, President Barack Obama and Interior Secretary Ken Salazar announced a six-month freeze on exploratory drilling in the deepwater regions of the Gulf of Mexico and offshore Alaska.

The announcement originally specified deepwater projects. In all, the moratorium is expected to impact at least 33 operators in the GoM. However, a separate notice filed late Sunday night by the Mineral Management Service implied that the ban could be expanded to more rigs. The MMS notice stated that the order applied to all rigs in more than 500 ft of water without any mention of any type (namely jack-up versus floating drillships). The Time-Picayune article stated, “The notice puts a moratorium on new drilling permits for six months, but it does not put a time limit on the deepwater drilling hiatus.”

An Obama administration official was quoted as saying, “The moratorium on deepwater drilling is ‘only’ for six months. It does not affect shallow water drilling and does not affect ongoing production,” the administration official said.

According the Times-Picayune, “The Interior Department has refused to issue a list of the 33 deepwater operations that will be affected, saying that the information is proprietary.” Although, the story reports an in depth list of companies that will most likely be affected by the stoppage.

It appears that the current move to incur public support for the recovery effort in the GoM will do so at the cost of a recently recovered oil industry. While much of the mainstream media has focused on the plight of the fishing industry within the past month, no one seems to pay much attention to the nearly 8,000 (good paying) jobs that will be lost as a result of the moratorium. This is in addition to the nearly $3 billion lost to idle rigs taken out of service.

Industry proponents are unsure of the long term effects of the moratorium. If the period is set at a definite six months, drilling companies may be willing to wait it out. However, is the term is left to further determination with no end in sight; these rigs may be taken abroad to foreign offshore plays. This could make these drillships unavailable for up to two years.

According to The Mid-Continent Oil and Gas Association, each offshore oilfield job is estimated to create four other jobs. With these workers displaced and with the fishing industry at bay, Louisiana—the state worst affected by the spill—may find itself in a dire economic situation.

For a full version of the original story visit http://www.nola.com/news/gulf-oil-spill/index.ssf/2010/06/energy_companies_race_to_meet.html

In the face of what has now become the largest environmental disaster in the history of the United States, some people are having fun with statistics. Ireland’s largest bookmaker, Paddy Power plc, announced this morning that it is currently taking bets on the first species to become extinct as a direct result of the current spill.

With odds of 4/5, the already endangered Kemp’s Ridley Turtle heads the list. The Ridley Turtle earned its place as a favorite due its annual migration to the Gulf of Mexico (GoM) at exactly this time of year. The second-favorite Bluefin Tuna follows with 6/4 odds. According to the press release, this brand of fish recently failed to make the UN’s list of protected fish.

The Leatherback Sea Turtle and Brown Pelicans hold the third and fourth position in the list respectively (both at odds of 8/1). For those who prefer the long shot, the following list rounds out the top ten species expected to fall by the wayside as a result of the spill:

4/5    Kemp’s Ridley Turtle
6/4    Bluefin Tuna
8/1    Leatherback Sea Turtle
8/1    Brown Pelicans
12/1  Loggerhead Turtle
16/1  Sperm Whale
16/1  Blue Whale
20/1  Gulf Sturgeon
20/1  Smalltooth Sawfish
20/1  Elkhorn Coral

It’s obvious that this bookie’s list is done tongue-in-cheek, but it goes without saying that the GoM spill is certainly no laughing matter. While this list is somewhat hyphenated, it does cover some of the better-known species to inhabit the Gulf. Nevertheless, it is simply incomplete until you add offshore drillers somewhere in the Top Five. What are the odds?