News and Information

Gulf oil lease sale bids $134 million The federal government took in nearly $134 million in high bids Wednesday during a Gulf of Mexico oil-and-gas lease sale that did not include any bids from BP. BP was suspended temporarily from entering into any new government contracts. The lease sale and BP news came the same day U.S. Sen. Mary Landrieu, D-La., spoke …

Study says methane emissions from shale wells lower than thought

Liquid Natural Gas Could be Slated as America’s Energy Surprise Weapon

In view of President Obama’s resounding election victory, the previously hoped-for outburst of fossil fuels (oil, natural gas, coal) would seem to be headed at best for a current level holding pattern. While Republican presidential nominee Mitt Romney had put fossil fuels and fracturing technology at the head of the drive toward energy independence, the …


Wyoming Governor Matt Mead Says Federal Fracking Rules Are Unnecessary

Wyoming Gov. Matt Mead is telling the Interior Department to back off on proposed rules for hydraulic fracturing, the controversial technique that boosts the productivity of oil and gas wells. The proposed U.S. Bureau of Land Management rule would require petroleum companies to disclose the chemicals they pump underground during hydraulic fracturing on public lands.Some states, including Wyoming, already have similar regulations. Mead says in a letter Monday that such rules on the federal level would be duplicative and unnecessary.
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In unlikely turn, conservationists lobby to save Gulf oil rigs 

In an ironic twist, scientists, fishermen and conservationists are urging that hundreds of dormant oil rigs be left standing in the Gulf of Mexico, arguing that a federal plan to remove them will endanger coral reefs and fish. While environmentalists might more typically be expected to oppose artificial intrusions in the marine habitat, those seeking a halt to the removal want time to study the impact of rig destruction on the Gulf Coast’s economy and to catalog the species, some rare and endangered, that are clinging to the sunken metal.

Natural gas prices projected to rise as antinuclear backlash surges

(Japan Times)

The push to move away from nuclear power because of the crisis at the Fukushima No. 1 power plant has propelled demand for gas on a global basis — and the subsequent rise in its prices will inevitably hurt Japanese buyers, according to a department head of an Edinburgh-based research and consultancy firm.

“There is an impact (by antinuclear movements) on gas demand because gas and coal will end up replacing some of the nuclear generation that is lost,” Noel Tomnay, head of global gas research at Wood Mackenzie Ltd., said in Tokyo.

“At the global level, no one can build renewable sufficiently fast enough to remove the need for either fossil fuels or nuclear generation. Consequently, you are making a political choice between carbon emissions and nuclear generation,” said Tomnay, who is on a one-week visit to the country to hold conferences and meetings with his clients amid growing demand for gas.

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Reflections of a rally(The Independent)

Don Briggs, president of the Louisiana Oil and Gas Association, predicted the moratorium would be a financial disaster for Louisiana. Gov. Bobby Jindal insisted Louisiana residents didn’t want to collect unemployment or cash BP checks. Plaquemines Parish President Billy Nungesser told the audience the moratorium would turn “Louisiana into a state of bankrupt businesses.”Nearly a year later, the dire issues these men spoke so passionately about persist. While the moratorium and equally potent “defacto moratorium” have given way to the slow trickle of deepwater permits, the total of active rigs in the deep and shallow waters of the Gulf of Mexico on April 15 was 26 – half the number of that date a year ago.

“You could hold the rally, again, today, because it’s just as relevant today as it was then,” Briggs says. “The message hasn’t changed: If we shut down the rigs in the Gulf of Mexico that are sitting out there waiting to go to work, you’ll see a tremendous impact. The story of our industry in the Gulf of Mexico isn’t over.

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Judge orders action on 6 Gulf drilling permits


A federal judge has given the Obama administration 30 days to act on six permits for deep water drilling in the Gulf of Mexico.

U.S. District Judge Martin Feldman on Tuesday ruled on a lawsuit filed by Ensco Offshore Co. and others. He rejected Interior Department arguments that the issue was moot because it already has resumed issuing permits following the moratorium that was imposed last year after the massive BP oil spill.

Three permit applications in the original lawsuit have been granted.

But Feldman said the government’s issuing of what he called “a scant few applications” does not provide the certainty Ensco needs to conduct its business in the Gulf. He said the law required the six remaining Ensco-related applications to be acted on within a reasonable period.

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Briggs: Obama’s drilling call ‘rhetoric’


President Barack Obama said last week he’d be fine with more offshore drilling, but his speech apparently did not impress people down near the Gulf of Mexico. We spoke to Don Briggs, president of the Louisiana Oil and Gas Association, and the man did not refrain from his disdain for what he considered Obama’s duplicitous message.

Acadiana Gazette: President Obama seemed to reverse his tack by saying he’d be OK with more offshore drilling. What are your initial thoughts on that?

Don Briggs: Do I believe that? No, I do not.

AG: So, you think he was just spouting political rhetoric.

Briggs: Exactly. That’s exactly what he’s spouting. That’s another of the president’s talk of, “I love oil and gas but I want to take away all incentives.” He’s already said this before. He’s all for this and all for that, but what has he done for the industry? Right now you can’t drill on the east coast and the west coast or up in Alaska. The Gulf has 29 rigs working now. This man has crippled this industry. Spare me. It’s very difficult for us to buy anything this man is saying for the oil-and-gas industry. That’s the reality.

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Growing in Power, Natural Gas Attracts Enemies

(New York Times)

Environmental groups want to extinguish the ardor many are feeling for natural gas.

As the fuel grows in market share and political power, several green groups have launched campaigns highlighting potential problems. They raise questions about everything from how natural gas is extracted to how much of a climate benefit it offers over competitors.

“Natural gas, especially newly available unconventional gas, has the potential to dramatically shift the energy landscape in the U.S.,” said Matt Watson, senior energy policy manager at Environmental Defense Fund. “Done right, it could be an important part of de-carbonizing our economy as we ramp up on truly clean energy resources. Done wrong, it could further entrench us on the losing side of the climate equation and do very real damage.”

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Poor Management of Oil and Gas Puts Interior on GAO’s Troubled Agency List

(New York Times)

The Department of Interior today is being added to one exclusive Washington list that no one wants to be on.

The Government Accountability Office is so concerned with how Interior manages the nation’s oil and gas resources that the watchdog has decided to add the department to a biennial “high risk” list of troubled federal programs.

The list, updated at the start of every new Congress, has been called a blueprint for the oversight of problematic agencies by some congressional leaders. It now includes 30 different areas within the federal government that GAO has identified as being at high risk due to their vulnerability to fraud, waste, abuse and mismanagement or in need of transformation to address major economic or efficiency challenges.

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Mendacity, Insanity And Stupidity: The Obama Administration’s Offshore Drilling Policy

On Friday, the Times-Picayune had an article touting a suspicious fact – namely, that there are more oil rigs in the Gulf of Mexico today than there were prior to the Deepwater Horizon tragedy last April.

Suspicious, of course, because it’s thoroughly misleading. While there are 125 rigs displacing Gulf water, just 34 of them are actively engaged in drilling for or pumping oil. And that number is just half as many rigs as were operating before the explosion.

From the article…

While only 34 of the 125 rigs in the Gulf are actually working — half the total that were active before the Macondo well blowout — the vast majority of the idle rigs, particularly those slated for big-ticket jobs in deepwater, will remain under contract for the rest of 2011.

La. officials ask Obama for meeting

Seeking to redirect national attention on the lack of deepwater drilling and its impact on Louisiana coastal communities still struggling to recover from the worst oil spill in U.S. history, local officials have called on President Barack Obama to meet with them on the anniversary of the Deepwater Horizon crisis.

In a letter penned Tuesday by Plaquemines Parish President Billy Nungesser and signed by eight other officials from around the region, the leaders seek a meeting with Obama in Washington, D.C., or Louisiana to discuss expediting new drilling permits to prevent further hardship on the coastal areas.

Administration’s Drill Ban Draws Blast From Judge

A federal judge Wednesday blasted the Obama administration for “determined disregard” of his order to lift a ban on offshore oil and gas drilling last year, giving fresh ammunition to the oil industry and its allies on Capitol Hill who want the Interior Department to speed approvals of new offshore drilling projects.

The ruling by Judge Martin Feldman of the U.S. District Court for the Eastern District of Louisiana means the Interior Department could have to reimburse Hornbeck Offshore Services LLC, a Louisiana drilling company, for the costs of litigation that the firm brought last year challenging the legality of the drilling moratorium.

China’s 2015 Apparent Natural Gas Demand May Rise 77%

China, the world’s biggest energy consumer, may increase apparent natural gas demand by 77 percent in 2015 from this year as the country steps up use of cleaner- burning fuels to curb carbon emissions.

Consumption may rise to 230 billion cubic meters in 2015 from 130 billion this year, state-controlled China National Petroleum Corp., the country’s largest oil and gas producer, said in a report today. Apparent demand takes into account domestic output and net imports but excludes stockpiles.

The Bakken factor

Could this oil reserve become that reliable bridge to a sustainable energy future?

The news may not rate with a No. 1 ranking in the college football polls, but residents of North Dakota have reason — make that 11 billion reasons — to have their own celebration in this new year.

Eleven billion barrels is the latest estimate of reserves in the state’s share of the Bakken Formation, which extends for some 25,000 square miles from Canada down into Montana.

$100 Oil and $4 Gasoline – A Continual Trend – by Don Briggs

As crude oil prices hover around $90 a barrel and gasoline at an average of $3.00 per gallon according to AAA, it appears that many analysts are predicting even higher prices for 2011.Due to growing global demand, analysts from companies such as Morgan Stanley, Goldman Sachs Group Inc., JPMorgan, and Merrill Lynch all see oil prices climbing to $100 in 2011. As well, other analysts are predicting even higher prices. Economist Dian L. Chu is predicting crude could hit $110 to $115 a barrel in March of 2011. In a recent blog post Chu wrote, “At that level, gasoline at the pump could hit $3.70-$3.80 a gallon range..

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Drilling Is Stalled Even After Ban Is Lifted

More than two months after the Obama administration lifted its ban on drilling in the deep-water Gulf of Mexico, oil companies are still waiting for approval to drill the first new oil well there. Experts now expect the wait to continue until the second half of 2011, and perhaps into 2012. The administration says it is simply trying to enforce new safety rules adopted in the wake of the April 20 explosion of the Deepwater Horizon drilling rig, which killed 11 workers and set off the worst offshore oil spill in U.S. history.

Environmental groups say the administration is right to take its time because the Gulf disaster exposed the risks of offshore drilling.

Chevron again will go deep in the gulf

Chevron on Thursday gave another multibillion-dollar vote of confidence to the future of oil and gas activity in the deep-water Gulf of Mexico.

Despite lingering regulatory uncertainty in the U.S. offshore region created by the BP oil spill, the nation’s second-largest oil company after Exxon Mobil said it will spend $4 billion over the next several years to develop its Big Foot field, 225 miles south of New Orleans.

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Angelle tells Alexandria Rotary that he’ll push for greater use of natural gas in energy policy

Scott Angelle believes there is an opportunity for a “seismic shift” in American energy policy, and the secretary of the Louisiana Department of Natural Resources is ready to push for it.

Angelle, recently returned to his post with Natural Resources after serving as interim lieutenant governor, spoke to the Alexandria Rotary Club this week.


Former Cabinet official sees U.S. security in natural gas

“Revolutions do not go backward.”

Former U.S. Secretary of Homeland Security Tom Ridge offered up that Abraham Lincoln quote Thursday as proof that Americans need to develop a sustained, coherent and forward-looking national energy policy. There isn’t one now, and time is running out to make it a reality, Ridge told his Chesapeake Energy Lecture audience at the University of Tulsa’s Allen Chapman Activities Center.

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Another CNG fueling station opens

Hickory Grove Baptist Church Pastor Mike Fort couldn’t help get a little emotional Tuesday before offering a prayer prior to the dedication and grand opening of EnCana Oil and Gas’ first compressed natural gas fueling station. Having lived in the area 30 years, Fort knows how Red River Parish has suffered blow after blow to its economy during that time. So the opening of the fueling station on U.S. Highway 84 west of Coushatta’s corporate limits served as more than just a high point for EnCana’s commitment to expand the use of natural gas as a transportation fuel. It also signaled a new future for the parish.


DRILLING BAN lifted in gulf, but hurdles loom before oil rigs can get back to workWednesday, October 13, 2010 – By Jonathan Tilove – Washington bureau –

WASHINGTON — The Obama administration lifted its moratorium on deepwater drilling Tuesday, but it could not say how quickly idled operators will be back at work.

Before they can resume drilling, the operators must file for new permits, satisfying a raft of new safety regulations that have been imposed since the BP oil disaster in April and get their rigs and drilling operations reinspected.

The announcement was met with wary praise from the industry and Louisiana political leaders, who fear that the lifting of the official moratorium will leave what amounts to a de facto moratorium in place, and condemnation from environmentalists, who warn that the administration move means drilling will be allowed to resume before it is clearly understood what led to the worst oil disaster in the nation’s history.

“The truth is there will always be risks associated with deepwater drilling, but we have significantly, in my view, reduced those risks,” said Interior Secretary Ken Salazar, who announced the end of the moratorium in a conference call with reporters.

“We are open for business,” Salazar said. “We will be taking applications for drilling in the deep water.”

Salazar was joined on the call by Michael Bromwich, director of the Bureau of Ocean Energy Management, which regulates oil and gas exploration in the Outer Continental Shelf, who said the new regulations imposed since the disaster “raise the bar of safety for deepwater drilling” to an acceptable threshold to resume permitting.

Bromwich said only the individual energy companies and drilling contractors know who among them is close to satisfying the new requirements. He said the actual inspection process is quick, taking a day or so, but the permitting process might take much longer and that no new drilling would begin immediately. He said he hoped some would be ready to go by year’s end.

The industry remains concerned that the lifting of the moratorium not be seen as a “symbolic” gesture that does not genuinely change the state of play in the Gulf, where thousands of jobs are dependent on the offshore drilling operations.

“Today the administration has taken the first step to secure America’s energy future, but we don’t know how long the next steps will take,” said Gifford Briggs, vice president of the Louisiana Oil & Gas Association. He said he expects the permitting process to be a give-and-take between industry and regulators, the dynamics of which remain unknown.

“Without additional resources and a serious commitment by the government to process and approve permits and other requirements expeditiously, the moratorium will give way to a de facto moratorium, which will continue to cripple the already hard-hit Gulf region and cost more than 175,000 American jobs a year,” said Jack Gerard, president and CEO of the American Petroleum Institute.

Plenty of griping

Salazar imposed the moratorium in May after the April 20 blowout of the Deepwater Horizon. Salazar reimposed the moratorium in July after the original was struck down by a federal judge in New Orleans, who faulted the reasoning for the shutdown.

Salazar expected criticism from those who think his announcement was overdue, and those who think it was too soon, and he was right.

“Today’s actions are premature,” said Peter Lehner, executive director of the Natural Resources Defense Council. “Multiple panels are still investigating the accident, and we need to have their answers — and their solutions implemented — before we can confidently move forward with deepwater drilling.

“We should wait for their solutions because until we address the cause, we’re still gambling with the Gulf,” Lehner said.

The Obama administration said the temporary shutdown of drilling in the deep waters of the Gulf was the only sensible response to the unprecedented catastrophe while the cause of the accident was being determined, and while the nation’s spill containment and cleanup capacity remained stressed to capacity responding in the months that oil gushed uncontrolled in the Gulf before the well was finally sealed.

But the moratorium was wildly unpopular in the Gulf and especially in Louisiana, which depends heavily on a fishing industry crippled by the spill, and an oil and gas industry hobbled by the official moratorium on deepwater drilling and what the industry considers a de facto moratorium on shallow-water drilling.

Jim Noe, who heads a coalition of shallow-water drillers, cautioned deepwater drillers that they should not “pop the cork on the champagne” because “BOEM bureaucrats will be there to stick the cork back in the bottle.”

Landrieu, Vitter not satisfied

The Louisiana political establishment, and the state’s congressional delegation, were aggressive in denouncing the moratorium as an irresponsible overreaction that was doing potentially irreparable harm to the state’s economy, even though forecasts that the suspension would lead to a mass exodus of drilling rigs for foreign shores has not materialized, as companies held on to crews in hopes they would be back in business soon.

Just before the congressional recess, Sen. Mary Landrieu, D-La., put a hold on the nomination of Jacob “Jack” Lew to be the director of the Office of Management and Budget, saying she would release it only when the Obama administration had lifted the moratorium and expedited the issuance of new permits for drilling in both deep and shallow water.

Landrieu said Tuesday that although “I applaud the administration for taking a step in the right direction by lifting the deepwater drilling moratorium,” she is keeping her hold on Lew while she sees how the permitting process goes.

White House Press Secretary Robert Gibbs said the administration was not responding to political pressure in lifting the moratorium, and he renewed his criticism of Landrieu for “playing politics” with a hold he described as “unwarranted and outrageous.”

Like Landrieu, Sen. David Vitter, R-La., offered a very wary reaction to Tuesday’s news.

“I guess this is movement in the right direction, but it’s painfully slow,” Vitter said. “It’s clear that President Obama is going to preside over a continuing de facto moratorium for months or years, with new drilling held back to a fraction of previous levels.”

“I’m glad that Secretary Salazar has finally come to understand that we can drill for oil and gas safely in the Gulf,” said Rep. Charlie Melancon, D-Napoleonville. “Our workers need to get back to work on those rigs to provide the jobs and energy security we need. If rigs comply with the regulations that are necessary to keep another BP disaster from ever happening again, they should be allowed to resume work immediately.”

It’s Time For The U.S. To Export Natural Gas –

Just a few years ago the rule of thumb was that the United States was running low on big new natural gas fields and that to meet demand (currently running at 63 trillion cubic feet a year) we would need to start importing ever larger quantities of liquified natural gas, or LNG.

It was that reckoning that led companies like Cheniere Energy (see my 2005 story: “First Mover”) and Sempra Energy (see my 2007 story: “Gas Guzzler”) to navigate the sea of NIMBYism and build LNG import terminals. Then came the shale gas revolution. The Barnett, Haynesville, Eagle Ford, and Marcellus shales promise enough gas to supply the nation for 100 years, if they can be drilled safely.

Now, facing low prices of $4.50 per mmbtu and a glut of supply, natural gas producers are curbing their investments in drilling up new fields.

Penn Virginia, Marathon Oil, Noble Energy and Apache Corp all are slowing gas drilling. The scene is so dire for gas drillers that Dave Roberts, head of exploration at Marathon Oil Corp telling investors he doubts the gas biz “is going to get better any time soon and maybe within the span of my career.”

Really? Come on Dave, use your imagination. There’s a way out of this conundrum: let’s export gas. “The U.S. shale gas revolution has resulted in a massive reduction in the need for new LNG imports into North America – possibly even turning the U.S. into an exporter,” notes E. Russell (Rusty) Braziel, Managing Director of gas market forecaster Bentek Energy.

Those exports could start soon. In recent months Sempra, Cheniere and Freeport LNG have all asked the Federal Energy Regulatory Commission for permission to tweak their import terminals and make them export terminals.

If it happens, the U.S. could join the ranks of Qatar, Australia and Indonesia as a source of LNG. And just in time too. Bentek figures that low gas prices worldwide has spurred growth in gas demand. Combine that with natural decline rates and by 2014 the world will have a shortfall of 1.5 billion cubic feet per day worth of LNG. Those three LNG terminals on the Gulf Coast could fill that void and then some.

This is a view shared by France’s Total, which warns that today’s gas glut will turn into a crunch within five years, unless energy companies keep up their investments.

The wild card: the politics of hydraulic fracturing, the process required to get the shale gas out of the ground. Some fear it will pollute groundwater; the energy companies insist it can be done safely. The EPA continues to look at the issue. Any new regulations that limit the use of the practice would dramatically slow shale gas development, boost nat gas prices, and make the U.S. reliant on foreign LNG imports all over again.

As moratorium deadline nears, concerns about oil and gas industry’s future linger – By SHELL ARMSTRONG –

Step one: Contain the spill. Done.

Step two: Cap the well. Done.

Step three: Kill the well. Done, finally.

Logic would deem lifting the moratorium the next step in reaction to BP’s Deepwater Horizon disaster. It’s set to run through Nov. 30, but with fall elections set for early November, locals are hopeful the Obama administration will show mercy on the oil and gas industry.

“The moratorium might nominally be lifted before the end of November just so [the administration] can say they did their best to expedite things,” said Eric Smith, a clinical finance professor at Tulane Energy Institute. I think most people are hoping it doesn’t go beyond that date, especially given the defacto moratorium on shallow-water drilling.”

In the five months since the Deepwater explosion, those in the oil and gas industry have found themselves tested to the core. A moratorium initially on deepwater oil exploration, but later extended to all drilling, has left oil and gas companies spending money daily while crews wait for the go-ahead to work.

All the while, pleas from state and local officials and those involved with oil and gas have fallen on seemingly deaf ears.

“We certainly hope it’s not Dec. 1 before the moratorium is lifted,” said Chris John, president of Louisiana Mid-Continent Oil and Gas Association. The organization has been working with the Bureau of Ocean Energy Management, Regulation and Enforcement to resolve concerns before the moratorium deadline date.

John said four task forces – one specific to the regulations in the Gulf of Mexico – have been developed in Washington, D.C.

In the aftermath of the BP incident, four major players in the oil and gas industry – Exxon-Mobile, Chevron, Shell and Conoco Phillips – put up $1 billion to set up a marine containment spill company. “In a nutshell, it sets up a repository or warehousing of pre-engineered, prefabricated equipment to handle any kind of incident with a well head accident like we had with the Deepwater Horizon. Coupling, fittings, riser pipes in a warehouse … ready to go,” John said.

And Monday, BP actually announced it was joining the proposed Marine Well Containment Company and making the equipment used to contain the Monacondo well available to all oil and gas companies operating in the Gulf of Mexico.

The question many are left asking, however, is will it be enough?

“The oil and gas industry has done, I believe, everything that a) has been asked of them; and b) I think they’ve gone over and above to make sure something like this doesn’t happen again,” John said. “If it does, we are prepared to handle it in a much better way than we ever were.”

Bottom line, according to Don Briggs, president of the Louisiana Oil and Gas Association, the damage … to the Gulf of Mexico, the coastline and the industry itself has been done.

Briggs estimates as many as seven companies are working on plans to abandon drilling projects in the Gulf. However, only three have actually left: a Transocean rig and two Diamond rigs are headed to Egypt and the Congo.

“They can’t afford to sit there and pay the $350,000 or $400,000 a day that’s having to be paid while the rigs are idle,” he said.

South Louisiana’s challenge is luring companies into drilling in the Gulf of Mexico. In recent years, the number of oil firms drilling in shallow water has sharply declined. Four or five years ago, the Gulf had 140 to 150 rigs in operation, Briggs said. Today, the number is closer to 14.

And after the April 20th explosion, with the stroke of a pen, President Obama discounted the biggest asset the Gulf afforded oil exploration companies: Political stability.

“If companies had a rig working here [in the Gulf], they would put up with a little higher cost because they knew that they weren’t going to be subject to expropriation or stuff like that that happens in Venezuela,” Smith said.

Long considered “the single-most expensive place to find a barrel of oil,” according to Briggs, the Gulf of Mexico’s finding cost per barrel is approximately $64.

“In other parts of the world, the finding cost isn’t that great,” he said.

But with the seemingly anti-oil sentiment emanating from the White House, the state’s oil and gas association leaders fear the Gulf may have joined the ranks of the rest of the world in regard to political safe havens.

“Uncertainty,” Briggs said, “is the magic word.”

No one knows what to expect. New rules? Stiffer rules? Required modifications to rigs in operation? Or permission to work?

“I think that enters into some decisions that will be made by companies when they are looking at where they are going to put their capital dollars,” John said. “A lot of the major companies that explore and produce in the Gulf are billion dollar outfits and have billion dollar cap budgets. They could go anywhere in the world.

“I think that this uncertainty short-term that [the moratorium] has created is going to be very difficult, not only on the oil and gas companies but the hundreds of thousands of people in the support services,” he added.

Those are the people, too, that Smith argues may have been missed in the federal government’s recent report arguing that the moratorium hasn’t resulted in the “gloom and doom” many predicted.

According to the report, only 2,000 rig jobs have been lost and 8,000 onshore positions eliminated.

“But my assumptions are a little different,” Smith admits. “Their assumptions are pitched to support the government’s case. My assumptions were always based on what was the worst case scenario.”

Although Smith and the feds worked from the same data and multipliers, the Tulane professor said his early estimates were based on all 33 of the deepwater rigs leaving the Gulf of Mexico. “Obviously, they haven’t,” he said.

But factor in the unknowns – how quickly the deepwater rigs can resume operations and how soon shallow-water permits are issued, for example – and the calculations change. Also, the federal report tallied its economic impact through July, but the moratorium remains in effect and bills continue to mount.

“Short-term, long-term, I think the damage – whether we lift the moratorium today or Dec. 1 – already has been done. It’s going to take a very long time to heal.”

Smith is even less optimistic.

“Even if these rigs stay in the Gulf and are on standby, they are not drilling,” he said. “They don’t need drilling mud; they don’t need supply boats running back and forth; they don’t need drill pipe or cement. They still need food, so the caterers might still have some business.

“But business is off the pace on 31 rigs,” the professor continued. “There might be two or three rigs out there helping with the Monacando thing, but the rest of them are parked if they haven’t left.”

Smith describes the Obama administration’s latest tome a “very self-serving report” at best. “It’s not that anything they said is not likely or plausible,” he said. “It seems to be more an effort to shift the blame … to say that none of this was caused by the moratorium.”

Whatever comes next, John said the new regulations will have to be “reasonably vetted” before the moratorium is lifted. “What I envision is an NTL that is going to make all these requirements that are going to satisfy the administration, and then they are going to lift the moratorium,” he said. “I think that would be the more common path to take, but there is not a lot of common sense in that administration.”

Group head blasts oil-drilling ban, offers suggestions –

HOUMA — The fallout over the Deepwater Horizon blowout and spill has created “a deadly pirouette of oil and politics,” that could cripple the oil-and-gas industry, the head of a top industry trade group said Tuesday.

Lee Hunt, chief executive of the International Association of Drilling Contractors, joined other critics in blasting the Obama administration’s moratorium and regulatory approach at the monthly meeting of the South Central Industrial Association, a regional trade group. But he also said the industry could do better and offered suggestions for improving regulation.

Until the April 20 explosion that claimed 11 lives and the subsequent spill, the worst in U.S. history, the successes in deep water led to a sense of complacency, Hunt said, namely a lack of planning for the worst.

“Our competence was our Achilles’ heel,” he said. “Our confidence was our hubris.”

The Obama administration imposed the drilling moratorium in May as a response to the April 20 explosion of the Deepwater Horizon rig. Backed by environmental groups, the administration ordered a halt to the 33 deepwater rigs working in the Gulf, and has said it is too dangerous to continue drilling until regulators can find out what wrong on the Deepwater Horizon and change the rules to be sure the disaster is never repeated.

The side effect has been a Gulf that is emptier than it was in April, Hunt said. Four of the 33 rigs have already left, and at least another two are in negotiations to do so.

Local officials have continued to hammer the federal government on the moratorium and rules changes. Lafourche Parish President Charlotte Randolph said after the luncheon that Bureau of Ocean Energy Management Director Michael Bromwich had given some indication the ban might be lifted ahead of its current deadline. But even lifting the ban won’t even necessarily help if the rule-making process becomes too cumbersome and permits are still delayed, Randolph said.

“It may prove to be more symbolic,” she said. “We’re working both ends of that.”

Many local businesses have said the resulting slowdown in work has impacted their businesses and livelihoods.

One affected business is J. Ray McDermott, which manufactures oil platforms in Morgan City, said Steve Becnel, general manager.

The slowdown has made for a scarcity of big projects, and at least one smaller platform project for shallow water has been cancelled because it couldn’t secure a permit, Becnel said.

Hunt suggested the United States look to the approach of the United Kingdom in the wake of the Piper Alpha platform explosion in the North Sea, the industry’s deadliest explosion in history, killing 167 men. The regulation, four years in the making, created international standards in the safety case model, which establishes performance requirements that industry must meet, rather than spelling out how those objectives are to be achieved. So far, the U.S. seems to be going in the other direction, with one proposed bill spelling out the specific ingredients in a blowout preventer, he said.

The industry has been criticized for its closeness to its regulator, the former Minerals Management Service. But collaboration, rather than an “adversarial” attitude, is necessary to be sure that the rules encompass new technologies, Hunt said.

Separation, he said, “is akin to suggesting that the best cure for a migraine headache is to remove the brain.”

The Bureau of Ocean Energy Management Intentionally Blocking Drilling in the Shallow Water – by Don G. Briggs – Louisiana Oil & Gas Association 

Currently, the deepwater drilling moratorium in the Gulf of Mexico (GOM) still remains in place. Many may not be aware that there also remains a de-facto moratorium on shallow water drilling in the GOM. While the Administration made it clear that only deepwater drilling would be affected, in the past four months, the federal government has granted only four permits for shallow water drilling.

An issue of great concern is the federal government’s ability to effectively implement new rules and regulations. One of the roadblocks to complying with the new regulations set by the BOEM (Bureau of Ocean Energy Management), formerly the MMS (Mineral Management Services), is the “worst case discharge” rule. Prior to the Deep Horizon blowout, a company requesting a permit to drill a well on the shelf (shallow water Gulf of Mexico) would have to provide proof that the company could respond to a worst-case scenario of 200%. In other words, to calculate this estimate a company must identify what would be the very most the well could blowout and then multiply that by 200%. The concluding estimate would then be what the company must be capable of responding to. The current rule is 200%, however, the BOEM’s new proposed rule for worst-case scenario response is 400%.

The 400% ruling is a deal killer for most all companies operating on the continental shelf. On a recent conference call the BOEM and a group of operators discussed the current issues concerning shallow water permitting. Specific to the conversation, operators asked the question to BOEM officials, “How did you come up with the number of 400%?” The BOEM official replied, “We did it internally. We got together and came up with 400%. We needed to do something and that’s what we did.”

It’s clear that the BOEM, in spite of what they say, are delaying and blocking the process. Michael Bromwich, Director of the BOEM, said in a recent hearing in New Orleans, “We have no desire and nobody has secretly instructed me to slow-walk these shallow-water drilling applications.” Bromwich continued by adding, “It’s in everyone’s interests to get these [permits] processed and approved and get those people back to work.” Although Bromwich’s words sound encouraging, the BOEM’s actions and implementation of new regulations prove differently.

Industry is working with the assistance of Lt. Governor Scott Angelle and others to collaborate and find common sense ways to move forward with permitting in the shallow waters of the Gulf. Unfortunately, the results of these efforts are not resonating with the feds. According to Angelle, “The talk of a federal government draft document that requires oil and gas companies to possibly have a oil spill response plan with a multiple of 400% greater than worst case discharge is another overreach and will surely end the role of the independent producer.”

There is no question that the oil & gas industry is being held to standards that other industries are not. The moratorium in the deepwaters and the subsequent de-facto moratorium on the continental shelf are keeping tens of thousands of hard-working Americans out of work. Companies and employees are waiting on the sidelines while their government decides whether they can get back to providing for their families. How could this possibly reflect the American Dream? It’s time the federal government gets out of the way and lets our people get back to work.

Gov’t forecasts higher oil, retail gasoline prices

The government’s latest energy forecast calls for higher oil and slightly higher retail gasoline prices for the rest of the year.

In its short-term energy outlook released Tuesday, the Energy Department’s Energy Information Administration forecast crude oil will average $80 a barrel in the second half of the year and $85 a barrel by the end of 2011. That’s up slightly from an average oil price of $76.32 a barrel in July.

The agency attributed rising prices to an expected increase in oil demand due to a global economic recovery. At the same time, it said there would be a gradual reduction in global oil inventories.

EIA expects retail gasoline prices to average $2.77 per gallon through 2010, up about 1 cent per gallon from the first six months of the year. Gasoline prices averaged $2.35 a gallon in 2009.

EIA said domestic crude oil production should increase by 110,000 barrels a day to 5.43 million barrels a day this year.

The agency also said a six-month government moratorium on exploratory deepwater drilling likely will lead to an average reduction of 82,000 barrels a day in Gulf of Mexico production.

EIA expects overall crude production to increase by 30,000 barrels a day to 5.46 million barrels a day in 2011.

The moratorium was imposed following the explosion and sinking of a BP PLC well on April 20, which sent millions of gallons of oil into the Gulf. BP has stopped the flow temporarily and is working to install a permanent plug.

EIA said natural gas prices this year should average about $4.69 per million BTU, an increase of 74 cents per million BTU over the 2009 average price. It forecast an average price of $4.98 per million BTU in 2011.

EIA expects residential electricity prices to average 11.6 cents per kilowatt-hour in 2010, compared with 11.5 cents in 2009.



Are President Obama’s Actions Disingenuous? – Don Briggs –

As we all know, the White House and U.S. Department of Interior instituted a six-month moratorium on deepwater drilling in the Gulf of Mexico. The ramifications of this action will in no doubt have a devastating effect on Louisiana’s families, businesses, and economies. The directive from this Administration to shut down all new deepwater drilling operations in the Gulf Coast region has little to do about safety and everything to do about politics.

On April 30, 2010, ten days after the tragic sinking of the Deepwater Horizon rig, President Obama directed Secretary of the Interior Ken Salazar to conduct a thorough review of the accident. The intention of the report was to recommend any precautions and new technologies that should be required to improve safety of offshore oil and gas operations. In order to provide the President with an adequate report, a seven member expert panel was assembled to give advice and recommendations for these increased safety measures.

On May 27, 2010, Secretary Salazar submitted his report to the President noting that the panel of seven experts reviewed his recommendations, which included a six-month moratorium on all-new deepwater drilling. In response to Salazar’s report, members of the expert panel are now expressing that the Administration has falsely implied that they supported any moratorium on offshore drilling. In fact, members of the panel stated that the decision to place the moratorium was added after the final review and not agreed to by the parties involved. In a letter directed to the White House, members of the panel made it clear that although they agreed with the detailed recommendations in the report, in no means did they support a moratorium. The letter noted, “A blanket moratorium is not the answer. It will not measurably reduce risk further and it will have a lasting impact on the nation’s economy which may be greater than that of the oil spill.”

Using the typical bait-and-switch maneuver, it’s obvious that it was the President’s intention to implement the moratorium regardless of the results of the report. Simply put, the report served as cover for a decision the President was already prepared to make. This action is just another example of this Administration’s continual deception of the American people.

It is disingenuous for President Obama to come to Louisiana showing intentions of goodwill while at the same time imposing sanctions that will cost thousands of good paying jobs. In a time of significant unemployment across the country, the President has chosen his political agenda over the viability of over 100,000 direct and indirect American jobs.

A simple question, “How can we reduce risk and increase safety while continuing to supply our country with necessary energy?” Why not have routine safety inspection of each rig and authorize the shutting down of any rig that is not in compliance with inspection standards? Or better yet, why not have an inspector present on each rig during the drilling process? These are just a few examples of rational approaches to solving this complex issue.

In support of expert panel, the illogical decision to shut down deepwater drilling will not reduce risk and will result in a devastating economic impact far worse than that of the spill. The President’s action will in no doubt curtail future production and lead to increased importation of foreign sources of oil.

Ford Adds Natural Gas Prep Package To F-450 and F-550 6.8L V-10 Chassis Cab Trucks – June 07, 2010 By Scott Evans –

Good news, fleet people: Ford is offering you even more. You already know that Ford offers Compressed Natural Gas and Propane conversion preparation packages for a number of its fleet vehicles, but today that number increases by two as Ford adds the F-450 and F-550 Super Duty trucks.

As you know, Ford’s been stepping up their game in the alternative fuel fleet arena, adding CNG and LPG prep packages to the E-Series van and the new Transit Connect Van in the past year, and fleet purchasers are ecstatic. Now, Ford’s expanding the line even further with the F-450 and F-550’s 6.8-liter V-10 engine, whose hardened exhaust valves and valve seats made it ripe for conversion.

Later this year, Ford will expand the range even further and bring CNG and LPG capability to both the F-53 motor home chassis and the new F-59 commercial strip chassis.

“Compressed natural gas and propane offer more than sufficient power for vehicles because they are high-energy fuels,” said Rob Stevens, Ford’s commercial vehicle chief engineer. “Other natural benefits for these fuels are overall lower emissions of greenhouse gases compared to gasoline and lower fuel/operating costs for their fleet.”

CNG and LPG carry significant advantages. Both burn cleaner than gasoline, reducing emissions, and CNG is typically cheaper than gasoline. What’s more, 87 percent of the natural gas consumed in the U.S. is produced here as well and there are significant tax credits for fleets that switch to the cleaner fuels. Ford even provides aftermarket outfitters with information on proper engine calibration for the conversion so that fleet operators can maintain their factory warranties.

U.S. says offshore drilling key despite oil spill – Ayesha Rascoe and Richard Cowan

WASHINGTON (Reuters) – The U.S. Interior Secretary said on Tuesday offshore drilling was vital to meet the country’s energy needs just as lawmakers pushed forward with efforts to make big oil companies fully liable for oil spills.


In Capitol Hill hearings four weeks after a drilling rig exploded and caused a massive oil spill deep in the Gulf of Mexico, Interior Secretary Ken Salazar said offshore drilling was still a necessary part of U.S. energy policy.

Salazar said about 30 percent of U.S. oil production comes from the Gulf of Mexico, where the rig leased by energy giant BP Plc exploded on April 20, killing 11 people and spewing vast amounts of crude into the ocean.

Election-year politics were evident in Congress on Tuesday when Democrats for the second time in a week tried to force a Senate vote on a bill to increase oil companies’ liability for accidents. The move, as expected, was blocked by Republicans.

“Republicans side with big oil companies,” said one Senate Democrat’s press release shortly after the failed maneuver.

Senator Robert Menendez, one of the Democrats seeking approval for the bill that would increase the liability cap per company per incident to $10 billion from $75 million, said Democratic senators were considering pushing legislation that would place no limits on the liability.

“We will be discussing whether to go to unlimited liability,” Menendez told reporters.

Republican Senator James Inhofe stopped Menendez’s bill from coming to the Senate floor on Tuesday, citing one of the same reasons used when it was stopped last week — that a new cap could hurt smaller drillers.

Salazar said the Obama administration agreed that the liability cap needed to be lifted though he would not give a specific number for how high it should be.

As part of a push to uncover more details of the impact of the explosion, another Democratic senator said BP had agreed to provide video records related to the Gulf of Mexico spill.

“These films are critical to understanding the volume of the spill, the reach of the spill, and the results of the efforts so far to contain it,” said Senator Barbara Boxer, chairman of the Senate Environment and Public Works committee.

BP had been criticized for not being forthcoming with providing more video footage or photographs of the damage, sparking questions over whether the spill was actually much bigger than the 5,000 barrels (210,000 gallons/795,000 liters) per day the company says is leaking into the ocean every day.


BP ORDERED TO SET ASIDE MONEY TO PAY OIL CLAIMSObama to visit Gulf Coast today – Monday, June 14, 2010 

In an effort to ensure that businesses and individuals left idle by the massive Gulf oil spill are compensated, White House officials said Sunday that President Obama will legally demand that the oil giant establish an independently administered escrow account to cover claims being made against the company.

Obama will announce the details of the plan in a nationally televised address scheduled for Tuesday at 7 p.m., after returning from his fourth visit to the Gulf since the April 20 blowout at the Deepwater Horizon well.

“We want to make sure that money is escrowed for the legitimate claims that are going to be made and are being made by businesses down in the Gulf, people who have been damaged by this,” said David Axelrod, a top adviser to the president, in an appearance on “Meet the Press.”

“And we want to make sure that that money is independently administered so that there won’t be slow-walk on these claims. There are people there who live from week to week and whose livelihoods have been taken away from them. We want to make sure that they can get through this,” he said.

Axelrod would not estimate how big the fund might be, but he said: “We believe that BP has the resources to meet the claims. And we’re going to make sure that they do.”

Meanwhile, BP is moving forward with its plan to expand and improve its oil-containment system, which so far has collected about 119,000 barrels of oil, at a current rate of 15,000 barrels a day, since it was put in place June 3.

BP on Sunday was also developing a response to Coast Guard officials, who on Friday said the company’s expansion plan isn’t aggressive enough to capture the 20,000 to 40,000 barrels of oil now estimated to be flowing into the Gulf each day. BP said the new containment system will be operational in mid-July.

BP spokesman David Nicholas said the Coast Guard should receive a response by today.

The president’s address will follow a two-day visit to Gulfport, Miss.; Theodore, Ala.; and Pensacola, Fla., where he will survey the response efforts, visit with Gulf residents affected by the spill and meet with local officials. All of the president’s previous trips have been to Louisiana.

Axelrod said that Tuesday will be an opportune moment for Obama to speak directly to the nation about the disaster.

“We’re at a kind of an inflection point in this saga because we now know … essentially what we can do and what we can’t do in terms of collecting oil and what lies ahead in the next few months,” he said. “And he wants to lay out the steps that we’re going to take from here to get through this crisis.”

Following his speech on Wednesday, Obama will meet with Carl-Henric Svanberg, the chairman of BP’s board. Though much has been made of the fact that the president has not talked with BP CEO Tony Hayward in the nearly two months since the explosion, officials said Svanberg was asked to bring whomever he felt appropriate to the White House meeting.

Hayward has been asked to testify before the House Energy and Commerce Committee on Thursday.

“If he brings Mr. Hayward, then Mr. Hayward will be there,” Axelrod said.

White House officials did not mention the possibility of BP declaring bankruptcy as a reason for it to create an escrow account, but The Advocate reported Saturday that Louisiana Treasurer John Kennedy, Attorney General Buddy Caldwell and Gov. Bobby Jindal have begun discussions about how to prepare for the possibility of a bankruptcy declaration.

The company has denied in published reports that it is seeking legal advice on filing for bankruptcy.

From the start, BP has insisted that it would pay “all legitimate claims,” but it has not been specific about what constitutes a legitimate claim. It has remained silent on the administration’s insistence that it is also liable to make whole those adversely affected by a six-month moratorium on deepwater drilling imposed by the Obama administration.

Caldwell last week was granted permission to proceed with an investigation of BP’s claims process and circumstances surrounding the rig explosion.

Plaquemines Parish District Court Judge Joy C. Lobrano on Thursday approved Caldwell’s petition, which requested that BP turn over data related to the oil spill claims process, information on the composition of mud used in the drilling and in the failed “top kill” operation, information on the use and effects of chemical dispersants, and information on all air- and water-quality data.

The petition alleged that BP has failed to cooperate and share important information with the state, especially about the company’s claims process.

As of June 6, the company had received 37,000 claims and paid 18,000 of them, the petition states. BP has 10 days to object to the petition, after which Caldwell’s office can begin its investigation.

Responding to the fact that the latest oil flow estimates are far higher than previously thought, Coast Guard Adm. Thad Allen said Sunday on “Face the Nation” that sensors were being deployed at the leak on Sunday to start taking independent pressure readings, which could validate measurements that have been made by scientists looking at the video and other data.

Allen maintained, however, that BP was not to blame for the inaccurate figures about the size of the oil leak.

“They were never BP’s figures. They were our figures,” he said. “We have several different methods of trying to establish the flow rate, from taking overhead satellite imagery of the oil on the water to using very high-resolution video to try to assess the volume of the flow and velocity at which it’s rising.”

Meanwhile, BP has installed key pieces of equipment that will eventually allow the company to collect more oil.

The new system, which will feature two floating riser systems that will enable ships to connect and disconnect from the gushing well 5,000 feet below the surface of the Gulf, is expected to be in place by mid-July.

During the weekend, BP installed a new manifold, or junction of pipes, which can support several floating risers, each one connected to a ship collecting oil. The manifold, which weighs about 45 tons and is 49 feet high, will also allow dispersants to be injected directly into the gushing well if the rest of the oil collection system needs to be disconnected during a hurricane.

The company also has installed one of two giant “suction piles,” tubes that are 90 feet long and 14 feet wide, which will serve as anchors for the new floating riser systems. BP said the floating risers should be in place by the end of June or early July.

BP is also moving forward with a “reverse top kill” operation using the Q4000 ship, which was used in the unsuccessful attempt to pump drilling mud into the blowout preventer to try to shut down the well. In the reverse procedure, the Q4000 will suck in oil and gas through the same lines and dispose of those materials by burning them.

Engineers have reconfigured the equipment on the Q4000 and have been testing it in preparation for increasing BP’s oil-collecting capacity by the middle of this week, said Nicholas, the BP spokesman. Once in use, it should be able to collect and burn anywhere from 5,000 to 10,000 barrels of oil a day.

“It’s going well, and in the next few days we expect it to go into operation,” Nicholas said.

In late June, the Q4000 will be joined by the Clear Leader, which will capture another 10,000 barrels in the same way. Combined with the existing Discoverer Enterprise ship, which has the capacity to process up to 18,000 barrels a day, the new system will have a total capacity of collecting up to 38,000 barrels a day, officials said.


General Motors to offer natural-gas versions of vans to fleets

In the 1990s, Detroit automakers offered an array of natural-gas-powered vehicles to both fleets and consumers. But as soon as the government moved on, so did automakers — shifting to other technologies such as hydrogen that are years from being able to market.

Now General Motors is returning to natural gas when it comes to vans for fleet customers. It will offer compressed natural gas (CNG) and liquefied petroleum gas (LPG) versions of the Chevrolet Express and GMC Savana full-size vans starting later this year. But not anyone can get one:

They will only be available to commercial fleets.

“We’re listening to our fleet customers and dealers about offering options that help them achieve their business objectives,” said Brian Small, general manager of GM’s fleet and commercial operations. “The industry commitment to expand the CNG and LPG infrastructure in key fleet markets was an enabler to allowing us to introduce these options now.”

To make the van work on natural gas, GM’s Vortec six-liter V-8 engine receives hardened exhaust valves and intake and exhaust valve seats for improved wear resistance.

Both CNG and LPG vans will carry GM’s limited new vehicle warranty including the 5-year/100,000 mile transferable GM powertrain limited warranty.

“We’ve made choosing a CNG or LPG van easier for our customers,” said Joyce Mattman, director of GM’s commercial products and specialty vehicles. “No other manufacturer offers a commercial CNG or LPG option that provides a solution with this level of support and availability.”

No prices yet.


BP disaster shouldn’t define offshore drilling – May 2, 2010 

The current situation in the Gulf of Mexico brought about by BP’s recent offshore platform disaster is certainly a tragic event. The well blowout and sinking of the Deep Horizon drilling rig off Louisiana’s coast has led to the death of 11 people and now threatens numerous and precious coastal zones.

With any disastrous event, it’s important to focus on the task at hand and solve the problem. Unfortunately, this event has renewed and heightened the debate in Washington over the need and expansion of offshore drilling.

At a time when action should be taken, this should not be a time to play politics. BP is taking every appropriate step to lead this cleanup. Taking full responsibility, the company has acknowledged taking on the entire cost of this effort. BP chief executive, Tony Hayward stated, “We are taking full responsibility for the spill and we will clean it up and where people can present legitimate claims for damages we will honor them.” With assistance from federal, state and local officials, this accident will be corrected and hopefully have less of an environmental impact as projected.

As it is important to find out what happened and determine what new safeguards must be put in place to prevent something of this magnitude, this should not serve as a moment for political posturing and grand standing. Some politicians, like Sen. Bill Nelson, D-Fla, are using this catastrophe to prompt a moratorium on new offshore drilling. Others, like Sen. Mary Landrieu, D-New Orleans, defended offshore drilling by comparing this latest disaster to the Challenger space shuttle explosion. The Louisiana senator stated, “What we did not do is end the space program. We did not stop launching. We did not stop exploring. We have to find a way to make sure it never happens again.”

As we move forward and attempt to clean up the spill, it’s important we all act on logic and not emotion. Although the environmental impact of this event may be significant, it should not underplay the importance of expanding and developing our domestic oil and gas reserves. With any risky pursuit, the potential for human error and accident is always a possibility.

Although former Alaska Gov. Sarah Palin has made her stance clear on offshore drilling, she makes a very valid point. In response to the BP spill, Palin stated, “How could I still believe in drilling America’s domestic supply of energy after having seen the devastation of the Exxon-Valdez spill? I continue to believe in it because increased domestic oil production will make us a more secure, prosperous, and peaceful nation.”

By no means should we downplay the tragic events that occurred on April 20. However, it’s important to note that the larger problem exists. Any measure to place a moratorium on offshore drilling will do less to prevent environmental disasters and do more to perpetuate our continual dependency on foreign sources of energy.

Clearly, OPEC Lost Control Of Oil In March – Vincent Fernando

Non-OPEC global oil supply increased in March and is now expected to average 51.53 million barrels per day (mb/d) for 2010, which is a 0.50 mb/d increase over 2009 according to Hellenic Shipping News (HSN).

It is also an increase of 0.10 mb/d to the 2010 forecast from just a month ago.


Russia supply in March marked a new post-Soviet record oil supply from Russia is expected to grow by 0.09 mb/d over 2009 to average 10.01 mb/d in 2010, representing an upward revision of 20 tb/d from recent evaluations. The healthy production figure in the first quarter, which came higher than previously expected, necessitated the upward revision. Russia oil production reached a new post-Soviet record in March following strong production levels in January and February.

China supply to increase by 80 tb/d in 2010 China’s oil production is estimated to average 3.93 mb/d in 2010, an increase of 80 tb/d over the previous year and an upward revision of 40 tb/d from the previous month. The strong production figures from the first two months required the upward revision, which was the highest in the first quarter compared to other non-OPEC countries’ revisions.

Meanwhile, OPEC members continue to violate their group’s production quota’s and over-produce.

OPEC output rose 5.6% year over year in March to 29.2 mb/d.

While OPEC says it would ‘mull an output boost’ at $100 oil, note they are already increasing output thanks to violations. So one has to wonder if $100 can even be reached, sustainably, despite some forecasts in the market.

OPEC’s reference price for a basket of 12 crude oil types just dropped by $1.97 to $80.89 per barrel.



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Oil Reality Check: It’s Going Higher – Mark Mills, 04.05.10, 08:39 PM EDT

Absent a nuclear war, pandemic or another Great Recession, oil demand is going back up faster than supply.

In the recent political sturm und drang, energy and oil in particular have moved off of center stage, but before this fall’s mid-term elections oil will move back into the spotlight at or likely beyond the transformational $100 per barrel price. Well before the next presidential election cycle, oil markets will almost certainly test new highs, set last time in July 2008 at a heretofore peak of $147 a barrel.

Time was, not so long ago, that energy economists and pundits went practically apoplectic at the thought that oil might cost $80 a barrel. That’s a price the world seems blissfully unexcited about today. The magic $100 number will change all that, reviving and reshaping long-standing debates around every aspect of energy policy.

How likely is $100 in 2010, considering that the U.S. Department of Energy’s recently released oil price forecast for 2011 is $85 a barrel? As I write this, oil was already hovering at $80 a barrel.

The oil price hiatus of the past couple of years came from the global recession (demand reduction) not from a supply increase from oil, or alternatives to oil. The past two years eviscerated 6 million barrels per day of Western oil demand. The emerging economies are of course the entirely new factor in the century-plus world oil market. At the same time as industrial-world demand collapsed, oil use in emerging economies grew some 5 million daily barrels per day.

Now all the world’s economies are largely in recovery, with some nations notably in Asia moving sooner and faster. Nearly every economic forecast sees 2010 global GDP growth over 4%, Goldman Sachs ( GS – news – people ) figures 4.5%. A half percentage point here or there is market-moving in the world’s $2.5 trillion per year oil market. So this year, economic forces already take global oil demand back to the peak set in 2007 and 2008. Prices soared last time demand was at those levels because supply just couldn’t match the pace. Wither supply now?

Oil supply can be divided in two basic buckets: OPEC, and everyone else. For the latter category, from Russia to Brazil, and Mexico to Canada collectively, over the last half-decade total oil production has remained essentially flat, and did so even during the last cycle of record prices and presumably incentives to produce. OPEC absorbed nearly all the production cut-backs during this recession to follow declining demand. And, more importantly, before the recession hit, nearly all the increase in supply to meet demand growth from 2005 through 2008 came from OPEC. OPEC is now almost back to its previous peak production, and will reach that level later this year to fuel recovering economies.

With no one running the country oil speculators are again forcing oil prices to ridiculous levels to take advantage of american drivers…

So, in 2010 the world’s oil production machinery will be running flat out, again. And while oil exploration in most places (outside of the U.S.) will likely go beyond flat out to bubble-like pursuits, and more oil will be found, the time-lag between discovery and delivery to the pump is measured in years, perhaps decades. The latter time frame is particularly true in the case of the tantalizing but staggeringly deep and technologically challenging offshore finds in the Gulfs of Mexico and Brazil. Drilling a single well in ultra-deep waters can cost $100 million. Finding new ever-deeper and remote fields, and stretching existing fields will create a bonanza for oil service and exploration companies like Schlumberger ( SLB – news – people ) and Transocean ( RIG – news – people ).

Then there is the reasonable possibility that many oil producing nations (keeping in mind that the majority of the world’s oil supply is controlled by nation-states, not private companies) may make the rational decision to limit increased production. Why sell more today that you could sell later at much higher prices, especially given the cash gusher that $100 or more per barrel already represents?

One key price bellwether can be seen as activity heats up at the world’s largest known single resource of hydrocarbons, Canada’s several thousand billion barrels of hard-to-extract and thus expensive Athabasca oil sands in Alberta. Devon Energy ( DVN – news – people ) recently announced buying half of BP’s ( BP – news – people )billion-dollar level oil sands acreage. Similar billion-dollar-class acquisitions or production plans have also just recently come from France’s Total ( TOT – news – people ), ConocoPhilips ( COP – news – people ) and PetroChina ( PTR – news – people ). While Athabasca’s output has doubled in the last half-decade, and current capital plans will double it again in another five years, all that growth will be absorbed in just a year or two of increased Asian demand.

With no short-term salvation derived from a dramatic growth in oil production, then all the world has to do to avoid the next oil price apocalypse is cut demand, or find alternatives.

Cut demand? We did that experiment. It’s called a recession. The only other short-term fixes are all behavioral, few of them pleasant. President Nixon tried that with the infamously unpopular and wildly ignored imposition of a national 55 m.p.h. speed limit.

Demand can also be cut more palatably with technology-driven efficiency, and technology-derived substitutes. Think of the former as radically better internal combustion engines, and the latter as biofuels and synfuels. Neither can be implemented quickly, at any price, even though both will be used more extensively if oil prices stay north of $100 a barrel. Infrastructure and economic inertia are what they are. Vehicle fleets take time to turn over, and we already use one-third of our corn crop to make biofuel that supplies only a few percent of U.S. transportation needs.

Absent a nuclear war, a pandemic or another Great Recession, there’s little that can be done about the near future demand-supply balance. Demand is going back up faster than supply.

Much of what has become a debate about the “best” alternatives will be rendered moot in an environment where we will need every alternative and will want to first pursue the least politically and economically painful. In reality, the most effective way to insulate America from high-priced oil will be a growing economy rendering energy costs in general, a declining share of GDP.

That said, most debate will focus on both physical resources and technologies to supply the world’s energy appetites, both of which are abundant and subjects for another day and column. As they say, timing is everything. The road to a bright energy future is almost certainly going to be bumpy. Buckle your seat belts.

Energy expert: Increased natural gas use good, but there are obstacles – BY JOHN-LAURENT TRONCHE

Despite an increased push to get more natural gas vehicles on highways, there is a significant barrier blocking the access roads: cost.

Natural gas is being touted as a good fuel for fleet vehicle operators, most notably by natural gas vehicle proponent T. Boone Pickens, but The Brookings Institution’s Charles Ebinger, a senior fellow, said “serious infrastructure limitations” will hamper NGV growth.

“[Compressed natural gas] would be a great fuel for 18-wheelers. Will that happen? I wouldn’t bet the ranch on it,” he said, “because somebody’s going to have to finance the infrastructure for that to occur.”

Ebinger, who has advised more than 50 governments, including the current administration, on energy policy, addressed energy security at a World Affairs Council of Dallas/Fort Worth meeting in Fort Worth on Tuesday.

The United States’ energy outlook is radically different today than it was a decade ago, having been blessed, as he puts it, by the recent discoveries of massive shale gas plays and the ability to tap them economically. Natural gas can be a transforming asset worldwide to generate electricity while reducing carbon emissions.

“Shale gas is the great story, not only domestically but perhaps less noticed internationally,” he said.

Natural gas would work well as a bridge to a renewable energy future, but it isn’t the only solution to solving the nation’s complicated and challenging energy future, he said.

All fuels, save for ethanol, must be considered if the United States and the world expect to have enough energy resources to go around in the years ahead and meet the increasing demand brought on in large part by India, China, the Middle East and the rest of the developing world.

“Every fuel has its champions that make outrageous claims that it is the solution,” Ebinger said. “I don’t believe any fuel is the solution. I believe we need a diversified fuel mix.”

For more on Ebinger’s talk, see the March 1 issue of the Fort Worth Business Press.

Apache joins Questar to convert U.S. transportation to compressed natural gas

Compressed natural gas (CNG) is a smart alternative to gasoline; clean, abundant and American. Apache Corp has begun converting its field vehicles to run on CNG and is building GNG service stations in Texas, Louisiana, New Mexico and Oklahoma. Natural gas is the cleanest-burning fossil fuel. Apache produced 1 billion cubic feet of natural gas in 2009 from its North American operations. The U.S. has a 100 year supply. The cost of fueling a 2009 Chevrolet Tahoe is 30% less than with gasoline.

Analysis: American automobile manufacturers are touting electric and hybrid vehicles while compressed natural gas vehicles are gaining ground fast. Now Apache Corp has joined Questar in moving rapidly to expand infrastructure in the U.S. to put more CNG vehicles on the road. T. Boone Pickens is also a leader in the drive to convert the American transportation system away from gasoline and diesel and to compressed natural gas. Honda currently sells CNG vehicles in California, New York and Utah. A Honda Civic GX can cut driving costs by about $2/gasoline gallon equivalent. In Utah, owners can refuel for $0.85/gallon equivalent. The Apache move adds 4 more states to the list of those where an awareness of CNG vehicles is becoming salient. Notably, California, Texas and New York are states with large populations. Another important development is the number of vendors in the U.S. who are cooperating with automobile manufacturers to convert vehicles directly over to CNG so that they can be bought from new car dealers. Altech-Eco has a network of authorized Ford dealerships with conversion facilities in most major cities in the U.S. BAF Technologies, located in Dallas, Texas supports clients with alternative fuel systems. Baytech Corporation located in Los Altos, California works with General Motors and Isuzu to design sequential multi-point fuel injection systems. The Carter Chevrolet Agency in Okarche, Oklahoma is on the cutting edge of new technology for vehicular conversions. Over 50 manufacturers in the U.S are engaged in conversion of gasoline and diesel vehicles to CNG. Considering the environment, the abundant supply and the great price advantage, it seems unlikely that this movement can be derailed. Today over 120,000 natural gas vehicles operate on the U.S. highway system. Worldwide, over 10 million are in operation.

Ford Attempts to Make Natural Gas Vehicles Relevant

Other than our current shotgun marriage with ethanol, the United States tends to stand by that most common of vehicle fuels, petroleum. There are exceptions, such as cars that run on methane or used vegetable oil, but in numbers that are the statistical equivalent of urban legends. Even hybrids, with all of their media attention and apparent cultural momentum, are still nibbling away at the edges, with a market percentage share in the single digits. While the rest of the world invests in ethanol from sugar cane and methane culled from slaughtered cows, for better or worse, America is sticking with gasoline.

Leave it to America’s only profitable carmaker to take a chance, and try to introduce a little complexity to the refueling landscape. At the 2010 Chicago Auto Show, Ford unveiled the Transit Connect Taxi, a new version of its North American Truck of the Year award-winning van that can be easily refitted to run on compressed natural gas (CNG) or liquefied petroleum gas (LPG). Just to be clear, Ford isn’t shipping any Transit Connects with a natural gas tank already installed. The company is offering an engine prep package that consists largely of hardened valve seats, to increase the vehicle’s long-term durability while running on either CNG or LPG. For the warranty to remain intact, whoever installs the fuel tank and internal plumbing must also follow calibration specifications provided by Ford—according to Jerry Koss, Ford fleet marketing manager, that amounts to reprogramming the fuel system since natural gas burns at a different mixture ratio than gasoline. The price of a CNG or LPG conversion depends on the installer, but can be a few thousand dollars per vehicle. And once the conversion is completed, it’s not a simple process to switch back to gasoline. Another downside is that the high-pressure tanks take up cargo space behind the rear seats. Pricing for the Transit Connect Taxi hasn’t been announced, but Ford expects the price of the engine prep to be comparable to the CNG/LPG package the company began offering for its E-Series vans last October, which cost $315.

Despite all of the fine print, and the fact that most buyers would still have to pay a third party to convert the new van, this could be a major turning point for the use of CNG in the United States, and the inevitable fracturing of the domestic fuel market into something closer to what’s seen in other parts of the world. In South America and Southeast Asia, millions of cars already run on CNG. Other countries, such as Turkey, Italy and Sweden, have tens of thousands of CNG-powered vehicles, with varying amounts of refueling stations. The benefits of CNG are pretty clear—it burns cleaner than gas, producing some 30 percent less in emissions, and it tends to be cheaper. Also, we get some 80 percent of our CNG domestically. The exact cost of CNG can vary from country to country, or even state to state, but according to the Department of Energy’s most recent estimate, in October of 2009 the national average for gasoline was $2.64 per gallon, and the range equivalent for CNG was $1.86.

For the average driver, logistics trump price, and the relative lack of CNG refueling stations in the United States has made the fuel a nonstarter. Honda has been producing the country’s only CNG vehicle, the Civic GX, since 1998, but only to customers in California, Utah and, more recently, New York. The result is a national fleet in the hundreds, and drivers and alt-fuel activists who have interpreted Honda’s rejection of would-be buyers, based on their access to fueling stations, as a full-blown conspiracy to limit CNG adoption. With its new Transit Connect engine-prep packages, Ford is avoiding any such accusations of Machiavellian handicapping, by skipping the awkward step of foisting an unfamiliar infrastructure on private consumers, and instead marketing the vehicle directly to taxi companies and state and local authorities.

“If there is a customer demand, we seek to fill it,” Koss says. “In the case of CNG or LPG, it was based on customers coming up to us and asking for a solution.” Last year’s release of engine-prep packages for the E-Series was the result of a specific contract to help a company (Koss wouldn’t name names) establish a CNG-powered service fleet. During that process, Koss traveled around the country, and in speaking to fleet operators in the private and public sector, found a strong demand for more CNG-ready vehicles. Many taxi and airport-shuttle companies, which can afford a central refueling station, have already converted some portion of their fleet to run on CNG or propane. But the tipping point for CNG—not as a successor to gas, but as a cost-effective niche fuel—could be new limits on vehicle emissions. As more taxi companies are forced to lower their average fleet emissions, CNG vehicles act as a kind of carbon offset. By making CNG more accessible, Ford could help fleet operators as well as municipal authorities who are trying to lower the overall emissions in a given city.

To be fair, a single engine-prep package isn’t exactly poised to revolutionize the auto industry—Koss points out that of the millions of taxis on the road in a given year, only 6000 or 7000 are replaced with new models. But if the likes of T. Boone Pickens and other CNG proponents hope to convert all light and heavy trucks to run on the cheaper, cleaner, and less import-reliant fuel, Ford’s move could be a crucial first step. “The Transit Connect Taxi with CNG is enabling the cities to move forward on their plans to change their policies and procedures, and cut emissions,” says Koss. “I can’t force them to change. I can only help.”

Mexico Sees Higher Electricity, Natural Gas Use In Next 15 Years –

MEXICO CITY (Dow Jones)–Mexico’s projected electricity consumption will increase by an average of 3.6% per year through 2024, requiring additional capacity of about 27,300 megawatts, the Energy Ministry said in a report Tuesday. In order to keep up with demand, the government-run electricity sector will require 37,615 megawatts of new installed capacity, at an estimated investment of $91.3 billion, according to the ministry’s 15-year outlook for the industry. The plan also foresees the retirement of 10,315 megawatts of existing capacity. Consumption of natural gas during the same period is expected to increase by 2.8% annually to reach 11.2 billion cubic feet per day, most of which will be used by the electricity and oil industries. Mexico’s production of natural gas is expected to increase at a slower rate, rising 2.3% a year on average to 8.7 billion cubic feet a day. The first production from deep-water deposits in the Gulf of Mexico is expected in 2013, according to the outlook.

Mexico will likely remain a net importer of natural gas throughout the 15-year period, with net imports rising to 2.5 billion cubic feet a day in 2024. Imports of liquefied natural gas, or LNG, are projected to grow at a rapid pace, overtaking imports of natural gas via pipeline across the U.S.-Mexico border. In 2010, Mexico expects LNG imports to rise to 586 million cubic feet a day from 367 million this year, and reach to 2.0 billion cubic feet a day by 2017. Mexico has two LNG regasification terminals in operation, one on the Gulf coast and another on the Pacific coast. A second Pacific coast terminal is expected to go into operation in 2011.

How the Economics of Natural Gas Vehicles Works – By Josie Garthwaite

Converting a gas-powered vehicle to run on natural gas can add upwards of $10,000 dollars to the cost of a vehicle — depending on tank size, production volume and other factors. “It’s not exactly cheap,” BAF Technologies President John Bacon told us today. So why are companies like AT&T — which just tapped BAF for what Bacon says is the company’s largest-ever single order of natural gas vehicle conversions — taking the plunge and investing in this technology?

In the short term it comes down to fuel savings (based on current natural gas vs. gasoline and diesel prices), low enough emissions to let drivers use the HOV lane in California, and desire to use fuels produced in the U.S., said Bacon. Longer term, Rich Kolodziej, President of the trade group Natural Gas Vehicles for America explained to us today, fleet operators will continue to eye natural gas conversions as a way to increase their options for lower-emission vehicles than they’d have relying on the models that roll off automakers’ assembly lines.

AT&T’s Natural Gas Vehicle Bet

AT&T ‘s plan to invest up to $565 million deploying more than 15,000 alternative fuel vehicles — including 8,000 vehicles converted to run on natural gas — by 2019 means selected car makers and conversion providers will be able to sink their teeth into some juicy contracts in coming years.

BAF, a Clean Energy Fuels Corp. subsidiary, has just taken its second prime cut of the $350 million natural gas vehicle portion of AT&T’s plan, announcing today that AT&T has awarded it the job of delivering 463 Ford E-250 vans converted to run on compressed natural gas, or CNG, in the first quarter of 2010 and another 463 converted vans the following quarter.

For the third quarter of next year, Bacon said BAF has gotten the go-ahead to purchase certain parts for an order of the same size. In all, Bacon said BAF will supply more than 1,800 converted vans to AT&T in 2010. This comes in addition to the 600 van conversions that AT&T ordered from the company earlier this year — a deal that BAF says remains on track for completion in 2009.

The Costs of Natural Gas Vehicle Conversions

Large fleet orders are a key to making natural gas vehicle conversions make economic sense not only for high mileage customers — which can reap savings on fuel — but also for the conversion provider. “Fleets generally operate a number of vehicles that are centrally maintained and fueled. They also travel more miles daily than the average personal use vehicle and therefore can take better advantage of the lower price per gallon of natural gas,” points out the NGVA.

Bacon said BAF’s retail price for converting a single van or pickup truck to run on natural gas is about $16,500, but the per-vehicle cost is less than that for a fleet order (he also said BAF would never really convert just one vehicle). According to Kolodziej, the biggest costs in the process lie in the environmental certification process and parts, in addition to labor and purchasing the vehicle itself. An aftermarket conversion provider like BAF has to get certification from the EPA and the California Air Resources Board for “every engine family, every year,” said Kolodziej — a process that he called “burdensome and much of it unnecessary” and can cost upwards of $100,000.

When it comes to parts, Kolodziej said fuel tanks represent one of the biggest costs. Bacon said AT&T’s vans will have four cylinders, and “when you put that much fuel on a vehicle, it drives up the cost.” While a regular gasoline tank “is really a rigid plastic bag,” said Kolodziej, natural gas fuel tanks are often made of metal, since the fuel has to be stored at a specific pressure. That means more cost, compared to a gas vehicle.

There’s a “big opportunity,” however, to bring the cost down as the market grows, he said: “You get the volume up, you get the economies of scale.” OEMs (original equipment manufacturers), of course, have capacity for high volume production. “If you make it on the assembly line, it’s a lot cheaper,” said Kolodziej. While he expects car companies to eventually introduce more natural gas models to the U.S. market (where the Honda Civic GX is currently the only natural gas vehicle from an OEM), Kolodziej expects aftermarket conversion companies to play a significant role for another several decades. OEMs will start out with 1-2 natural gas models out of their total lineup, he predicted.

Carbon Reduction Benefits

For corporations looking to cut fleet costs in a time when the prospect of Congress putting a price on carbon still looms — and for the companies competing for the job — there’s more to consider than direct costs: Potential emission savings could also factor into decisions about what types of vehicles to deploy. According to NGVA, nat gas vehicles emit only about 20 percent less carbon dioxide than a standard gas vehicle (BAF claims its fuel system reduces emissions by up to 25 percent).

Natural gas powered cars can qualify for a federal Alternative Fuel Vehicle tax credit of up to $4,000, but for some, the technology’s carbon-cutting potential falls short. Venture capitalist Vinod Khosla — a strong believer in supporting cleantech solutions that can scale quickly and cheaply enough to succeed in China and India’s markets – has called natural gas vehicles a “dead end.” AT&T holds a different view, citing estimates from the Center for Automotive Research that in total, AT&T’s 15,000 vehicle plan for the next decade will prevent as much as 211,000 metric tons of carbon emissions from the company’s fleet.

Executives say good times ahead for natural gas – By TOM FOWLER Copyright 2009 Houston Chronicle – Dec. 9, 2009, 7:41PM

The North American natural gas business has its best days ahead, according to a survey of the industry taken by consulting and accounting giant Deloitte, but many expect more layoffs in the coming year and more cost-cutting.

Despite low natural gas prices, 84 percent of the oil and gas executive surveyed are bullish on gas because of the surge in production from plentiful shale and coal bed methane formations, combined with an expectation that climate change legislation will increase the demand for natural gas-fired power generation, said Gary Adams, vice chairman and leader of Deloitte’s oil and gas practice.

The survey, released Wednesday at Deloitte’s annual oil and gas conference in The Woodlands, was based on interviews this fall with 200 oil and gas professionals with at least five years industry experience, college degrees and annual salaries of at least $100,000.

Some of the results seem to reflect conventional wisdom in the business community. For example, 85 percent believe domestic natural gas production will increase in the next five years, and 90 percent believe climate change legislation will lead to higher gasoline and natural gas prices. But respondents see further cost-cutting in the industry.

Forty-four percent expect industry job cuts will increase over the next year, 75 percent say their companies are reducing operating expenses, and 56 percent say they’re cutting capital expenditures. Respondents are more optimistic about revenue in the next year. Seventy-six percent expect revenue growth at national oil companies and international oil companies, 67 percent expect growth at independent exploration and production companies, and 61 percent expect growth at supply and service companies. Only 35 percent, however, expect revenues to grow at refining companies.

Lack of mergers? Contrary to some analysts’ predictions of a wave of mergers and acquisitions, 86 percent of the surveyed executives don’t see their companies going down that road.

“What we are seeing here is an underlying confidence in the sustainability of the oil and gas industry,” said Adams. “Oil and gas companies have survived severe volatility over the past decades, and despite the current recession, these companies have sophisticated, adaptable business models and believe they can post healthy revenues well into the future.”

The natural gas industry could also benefit if policymakers follow the advice of Deloitte senior consultant Joseph Stanislaw, who said in a white paper also released Wednesday that oil, natural gas and coal should be included in the country’s plans for a cleaner energy future. ‘Level playing field’

“The principal goal of policymakers should be to establish a level playing field that makes it easier to identify the cleanest fuels producible at the lowest cost, while also reducing energy use through efficiency and other technologies,” Stanislaw said. He calls for a “predictable price for carbon emissions” to help spur development of conservation and efficiency technology and practices, as well as efforts by the oil and gas industries to develop carbon-neutral technology.

An energy answer in the shale below? – New technology opens vast stores of natural gas, and the land rush is on – By Steven Mufson – Washington Post Staff Writer

Thursday, December 3, 2009

The first time Chesapeake Energy tried to buy mineral rights from Diana Whitmore, a 74-year-old retired real estate broker in southern New York, it offered her $125 for every acre of land plus a 12 percent royalty on whatever natural gas it extracts.

Nearly two years later, she’s still holding out. Along with hundreds of other landowners, she has joined a coalition that is negotiating with nine oil and gas companies. The latest offers in the area are running as high as $5,500 an acre with 20 percent royalties.

“It’s what’s really going to turn this whole place around,” said her son Daniel Fitzsimmons, who has since helped form the Binghamton Conklin Gas Lease Coalition.

This corner of the state is at the forefront of an old-fashioned land rush that has implications far beyond Conklin, N.Y. Oil and gas companies are vying to stake out territory where they can tap natural gas trapped in shale rock. Just a few years ago, the industry didn’t have the technology to unlock these reserves. But thanks to advances in horizontal drilling and methods of fracturing rock with high-pressure blasts of water, sand and chemicals, vast gas reserves in the United States are suddenly within reach.

As a result, said BP chief executive Tony Hayward, “the picture has changed dramatically.”

“The United States is sitting on over 100 years of gas supply at the current rates of consumption,” he said. Because natural gas emits half the greenhouse gases of coal, he added, that “provides the United States with a unique opportunity to address concerns about energy security and climate change.”

Recoverable U.S. gas reserves could now be bigger than the immense gas reserves of Russia, some experts say. The Marcellus shale formation, stretching across swaths of Pennsylvania, New York and West Virginia, has enough gas to meet the entire nation’s needs for at least 14 years, according to an estimate by two Pennsylvania State University experts. Just in Broome County, N.Y., where Fitzsimmons lives, shale gas development could create $15 billion in economic activity, according to consultants hired by the county.

The country is carpeted with shale gas plays, including the Barnett in Texas, Fayetteville in Arkansas and Haynesville in Louisiana. Since 2000, gas from shale has grown from less than 1 percent of the nation’s production to about 10 percent, according to the consulting firm PFC Energy, and it’s picking up fast.

That’s changing the energy and economic landscape from Broome County to the Gulf of Mexico. It could mean lower prices and reassurance to homeowners who heat with gas, or towns and companies with vehicle fleets running on the fuel. As winter begins, the price of natural gas is about a third of the level it was 14 months ago. Storage facilities are bursting.

With new supplies, the country will be less vulnerable to disruptions from Gulf Coast hurricanes and need to rely less on imports. Already, deliveries of liquefied natural gas from places such as Qatar, Nigeria and Trinidad are down 58 percent in 2008, idling costly U.S. terminals.

The prospect of new gas supplies at stable prices is also transforming debates over climate change. It deals another blow to proposals for new coal plants. And because gas plants can be switched on and off quickly, unlike coal and nuclear, natural gas could supplement wind and solar power facilities, whose output varies with the weather.

“Natural gas can serve as a bridge fuel to a low-carbon, sustainable energy future,” said former Colorado senator Timothy Wirth, now head of the U.N. Foundation. Indeed, this year, coal use is down about 13 percent, while electricity demand has fallen only 5 percent and natural gas use has remained about steady.

But the prospect of widespread shale gas drilling is also driving wedges in the environmental community. Many environmentalists have sounded alarms about the chemicals that drillers use to fracture the rock and the danger of natural gas or other substances contaminating water supplies. A video posted on the Web shows a man in Fort Lupton, Colo., lighting a fire with the tapwater in his kitchen sink — although it isn’t clear what caused that problem.

Residents of New York City, which draws drinking supplies from a large watershed that reaches up to the Catskill Mountains, have protested, and Chesapeake Energy has voluntarily announced that it would not drill in the watershed. Gov. David A. Paterson (D) has declared a moratorium on drilling until the state’s Department of Environmental Conservation issues rules, which are open for public comment. A raucous meeting in Manhattan last month ended before even a third of the people who wanted to comment got a chance to speak.

“This is probably the biggest thing to happen to the state of New York since the initial clearing by settlers,” said Wes Gillingham, executive director of the Catskill Mountainkeeper.

In north Texas, some people are also wondering whether drilling in the Barnett shale is to blame for a series of barely perceptible but highly unusual earthquakes now being investigated by geologists.

Yet other environmental groups favor developing gas to displace coal. “There are legitimate concerns that need to be addressed,” said Bruce Nilles, a lawyer at the Sierra Club. But, he added, new natural gas supplies could be a “game-changer” in the battle against coal plants.

Nilles said New York’s 20 coal plants largely burn Appalachian coal from areas with mountaintop removal. “The status quo means continuing to destroy the oldest mountain range in the country,” he said.

Credit for discovering that gas could be economically extracted from shale generally goes to George Mitchell, former head of Mitchell Energy. In the early 1980s, as the company’s production was declining, Mitchell and his geologists started experimenting with “hydraulic fracturing” — blasting underground layers of shale with a mixture of water, chemicals and sand to crack the rock and get gas flowing out of it.

“Mitchell had hired an investment banking firm in 1999 to see if anyone wanted to buy them,” recalled Larry Nichols, chief executive of Devon Energy. “Devon and everyone else looked and said, ‘No, that technology doesn’t work.’ We, like everyone else, turned up our noses.”

Three years later, Devon paid $3.1 billion to acquire Mitchell. It combined hydraulic fracturing with horizontal drilling, which enabled a single well to turn, follow a seam of shale for up to two miles and produce much more gas. Now a quarter of the natural gas produced by Devon, a $30 billion company, comes from shale.

Historically, most of the natural gas produced in the United States came from relatively small pockets in porous rock. The oil and gas industry has been “eternally searching for relatively small traps,” Nichols said. Shale, by contrast, is widespread and hard to miss. “Devon has drilled 4,000 wells in the Barnett and is planning 4,000 more, at least. And we have not drilled a dry hole,” Nichols said.

The stakes are high for companies and consumers, as well as the environment. Shale gas has already added billions of dollars to the value of companies like Devon, but it unsettles people living in scenic portions of Pennsylvania and New York, which were the first places oil was discovered but which have been relatively undisturbed for decades.

Some people are just happy about the money. Fitzsimmons, for example, suffers from arthritis and has a nonverbal autistic 18-year-old son. He and his family own 185 acres. “If you’re a property owner, it’s amazing,” he said. “Even some of the ones who are members of these organizations that are supposedly against it — when it comes time to get a check on their property, suddenly they’re all for getting the check.”

Oil & Water: Florida drilling could open up outer shelf – By Jim Ash – Gannett 

Editor’s note: This is part of a series on the debate over drilling off the coast of Florida.

TALLAHASSEE, Fla. — The immediate debate in the Florida Legislature is about drilling in waters controlled by the state in the narrow band up to 10.3 miles from the coast. The real prize may lie farther out, in the waters of the outer continental shelf controlled by the federal government, also subject to a ban put in place by Congress in 2006. That moratorium, already the subject of federal debate, would be in serious trouble if Florida opens up its own waters.

The oil industry contends — although critics seriously question it — that there are 3 billion barrels of oil waiting to be pumped, if and when the Florida Legislature lifts a two-decade ban on drilling in state waters, within 3 to 10 miles from shore. That’s just a drop in the bucket compared with the 14.4 billion barrels of oil that the Minerals Management Service estimate is available off the nation’s Atlantic and Pacific coasts where drilling has been banned by Congress since 1981. In the Eastern Gulf of Mexico, another federal ban puts another 3.7 billion barrels of oil out of reach. Just 25 miles off of the coast of Pensacola, a deposit that could produce 165 billion cubic feet of natural gas a year for the next 20 years has also been off-limits, according to the industry estimates. If the Florida Legislature lifts the ban in state waters, the industry, and offshore drilling proponents in Congress, will be watching closely.

“Certainly, the rationale for the moratoria goes away,” said Denise McCourt, industry relations director for the American Petroleum Institute. “Just by having the discussion, people are noticing. The poll numbers we’re seeing are enough to knock your socks off.”

Former President George W. Bush did not renew an annual drilling ban in the 2008 federal budget. In February, U.S. Interior Secretary Ken Salazar announced that he was taking a go-slow approach before approving new exploration. He scheduled a series of hearings that will last six months.

A compromise bill pushed by U.S. Sen. Bill Nelson, D-Orlando, bans drilling in a swath of the Eastern Gulf of Mexico about 125 miles from Florida Panhandle, and 235 miles from most of Florida’s west coast, including a military exclusion line that runs south from Destin. It expires in 2022, and can be changed at any time. Even though the original moratorium has lapsed, drilling can’t happen until Congress agrees to give the Minerals Management Service the money it needs to initiate a new leasing program.

“There are still many members in Congress who are entrenched,” acknowledged Aaron Saunders, a spokesman for U.S. Sen. Mary Landrieu, the Louisiana Democrat and drilling supporter who has pushed for Gulf states to take a greater share of federal royalties. “If Florida acts, it would send a signal to Congress that coastal states are ready.”

And if Florida lifts its drilling ban, Nelson warns that his holding action to “preserve national security” by keeping the military exclusion line would crumble.

He suspects that the industry is pushing drilling in state waters, not to tap a resource he is convinced isn’t there, but to bolster its push in Congress. He points to the history of Coastal Petroleum to bolster his case. The company drilled 19 test wells and came up dry before the state paid millions of dollars to buy out its leases in state waters.

“Of course there’s no oil,” Nelson said. “Look at how many dry holes they dug.”

Eric Draper, acting executive director of Audubon of Florida and a chief drilling opponent, doesn’t buy the theory that the industry push in the Florida Legislature is a feint. The drive is being led by Florida Energy Associates, a group that refuses to disclose all of its members but one that describes itself as a bunch of wildcat drillers.

“There’s probably not much oil out there, but there is still an economic interest in holding the leases,” Draper said.

Dave Mica, executive director of the Florida Petroleum Council, says the effort in the Florida Legislature is a sincere effort. Bill sponsors are focused on Florida resources, he said, not on sending a message to Congress.

“I’ve never talked to a single legislator who’s said that,” Mica said. “I tell them, ‘Pass this, and you’ll change the world.'”

Wednesday: Eglin Air Force Base operations would be affected by oil drilling off the Florida coast.

Official: Federal energy legislation could harm La. farmers – Jeremy Alford – Capitol Correspondent

BATON ROUGE — President Obama’s energy legislation will hurt an unlikely Louisiana industry: agriculture.

That’s what state Agriculture Commissioner Mike Strain is saying in a position paper issued last week.

Specifically, his concern centers on part of the plan that aims to reduce the pollution counts connected to global warming and increase the nation’s reliance on cleaner energies.

Gov. Bobby Jindal, for one, has said that the so-called cap-and-trade bill “punishes the American energy industry.”

The bill has already passed the U.S. House and is pending action in the Senate.

The American Clean Energy and Security Act would create a market-based cap-and-trade system under which industries and utilities would buy carbon “allowances” from the federal government.

Businesses and utilities that reduce their carbon pollution output below the cap would then be able to sell their extra allowances to businesses that exceed the cap.

The White House argues that the legislation would create millions of “green” jobs and move the nation toward developing more fuel-efficient vehicles and using renewable sources like wind, solar, ethanol, hydroelectricity, nuclear and others.

Inversely, that would also mean moving the nation away from Louisiana economic staples such as oil and gas, as well as other fossil fuels like coal.

Last week, Strain said cap and trade “is not favorable for Louisiana or the national agriculture economic sector.”

In the policy paper, he argues that cap and trade is, in essence, a tax on fossil fuels that will artificially increase the cost of energy and manufactured products.

In turn, he added that such a “tax” would change private and corporate behavior.

“Louisiana farmers will be subject to caps because of the nature of their crops and the limits set by the federal government,” Strain said. “Our dairy and cattle operations as well as rice production will all be affected.”

Of particular concern to state cattle operations is enteric fermentation, he said, which is included in the greenhouse gas-limit portion of the bill and accounts for 20 percent of the total limit on agricultural emissions.

“A proposed solution to reduce enteric fermentation is to alter the animals’ diets and receive credits for diet-induced reductions. That implies that some farmers would be able to sell credits to heavy greenhouse gas emitting industries for a profit,” said Strain. “In reality, this creates an environment where many entities, not just farmers, will be in competition to sell their credits but will ultimately lower the overall pool of funds available to farmers who may or may not have a chance to offset the added costs.”

He said that’s just one reason why “the legislation represents a net increased cost to the agricultural community and places Louisiana and U.S. agriculture at a disadvantage from a global-trading standpoint.”

Strain said he would support a voluntary approach that allows agricultural producers to reduce greenhouse gases through a variety of methods.

America’s Natural Gas Revolution – A ‘shale gale’ of unconventional and abundant U.S. gas is transforming the energy market.

 The biggest energy innovation of the decade is natural gas—more specifically what is called “unconventional” natural gas. Some call it a revolution.

Yet the natural gas revolution has unfolded with no great fanfare, no grand opening ceremony, no ribbon cutting. It just crept up. In 1990, unconventional gas—from shales, coal-bed methane and so-called “tight” formations—was about 10% of total U.S. production. Today it is around 40%, and growing fast, with shale gas by far the biggest part.

The potential of this “shale gale” only really became clear around 2007. In Washington, D.C., the discovery has come later—only in the last few months. Yet it is already changing the national energy dialogue and overall energy outlook in the U.S.—and could change the global natural gas balance.

From the time of the California energy crisis at the beginning of this decade, it appeared that the U.S. was headed for an extended period of tight supplies, even shortages, of natural gas.

While gas has many favorable attributes—as a clean, relatively low-carbon fuel—abundance did not appear to be one of them. Prices had gone up, but increased drilling failed to bring forth additional supplies. The U.S., it seemed, was destined to become much more integrated into the global gas market, with increasing imports of liquefied natural gas (LNG).

But a few companies were trying to solve a perennial problem: how to liberate shale gas—the plentiful natural gas supplies locked away in the impermeable shale. The experimental lab was a sprawling area called the Barnett Shale in the environs of Fort Worth, Texas.

The companies were experimenting with two technologies. One was horizontal drilling. Instead of merely drilling straight down into the resource, horizontal wells go sideways after a certain depth, opening up a much larger area of the resource-bearing formation.

The other technology is known as hydraulic fracturing, or “fraccing.” Here, the producer injects a mixture of water and sand at high pressure to create multiple fractures throughout the rock, liberating the trapped gas to flow into the well.

The critical but little-recognized breakthrough was early in this decade—finding a way to meld together these two increasingly complex technologies to finally crack the shale rock, and thus crack the code for a major new resource. It was not a single eureka moment, but rather the result of incremental experimentation and technical skill. The success freed the gas to flow in greater volumes and at a much lower unit cost than previously thought possible.

In the last few years, the revolution has spread into other shale plays, from Louisiana and Arkansas to Pennsylvania and New York State, and British Columbia as well.

The supply impact has been dramatic. In the lower 48, states thought to be in decline as a natural gas source, production surged an astonishing 15% from the beginning of 2007 to mid-2008. This increase is more than most other countries produce in total.

Equally dramatic is the effect on U.S. reserves. Proven reserves have risen to 245 trillion cubic feet (Tcf) in 2008 from 177 Tcf in 2000, despite having produced nearly 165 Tcf during those years. The recent increase in estimated U.S. gas reserves by the Potential Gas Committee, representing both academic and industry experts, is in itself equivalent to more than half of the total proved reserves of Qatar, the new LNG powerhouse. With more drilling experience, U.S. estimates are likely to rise dramatically in the next few years. At current levels of demand, the U.S. has about 90 years of proven and potential supply—a number that is bound to go up as more and more shale gas is found. To have the resource base suddenly expand by this much is a game changer. But what is getting changed?

It transforms the debate over generating electricity. The U.S. electric power industry faces very big questions about fuel choice and what kind of new generating capacity to build. In the face of new climate regulations, the increased availability of gas will likely lead to more natural gas consumption in electric power because of gas’s relatively lower CO2 emissions. Natural gas power plants can also be built more quickly than coal-fired plants.

Some areas like Pennsylvania and New York, traditionally importers of the bulk of their energy from elsewhere, will instead become energy producers. It could also mean that more buses and truck fleets will be converted to natural gas. Energy-intensive manufacturing companies, which have been moving overseas in search of cheaper energy in order to remain globally competitive, may now stay home.

But these industrial users and the utilities with their long investment horizons—both of which have been whipsawed by recurrent cycles of shortage and surplus in natural gas over several decades—are inherently skeptical and will require further confirmation of a sustained shale gale before committing.

More abundant gas will have another, not so well recognized effect—facilitating renewable development. Sources like wind and solar are “intermittent.” When the wind doesn’t blow and the sun doesn’t shine, something has to pick up the slack, and that something is likely to be natural-gas fired electric generation. This need will become more acute as the mandates for renewable electric power grow.

So far only one serious obstacle to development of shale resources across the U.S. has appeared—water. The most visible concern is the fear in some quarters that hydrocarbons or chemicals used in fraccing might flow into aquifers that supply drinking water. However, in most instances, the gas-bearing and water-bearing layers are widely separated by thousands of vertical feet, as well as by rock, with the gas being much deeper.

Therefore, the hydraulic fracturing of gas shales is unlikely to contaminate drinking water. The risks of contamination from surface handling of wastes, common to all industrial processes, requires continued care. While fraccing uses a good deal of water, it is actually less water-intensive than many other types of energy production.

Unconventional natural gas has already had a global impact. With the U.S. market now oversupplied, and storage filled to the brim, there’s been much less room for LNG. As a result more LNG is going into Europe, leading to lower spot prices and talk of modifying long-term contracts.

But is unconventional natural gas going to go global? Preliminary estimates suggest that shale gas resources around the world could be equivalent to or even greater than current proven natural gas reserves. Perhaps much greater. But here in the U.S., our independent oil and gas sector, open markets and private ownership of mineral rights facilitated development. Elsewhere development will require negotiations with governments, and potentially complex regulatory processes. Existing long-term contracts, common in much of the natural gas industry outside the U.S., could be another obstacle. Extensive new networks of pipelines and infrastructure will have to be built. And many parts of the world still have ample conventional gas to develop first.

Yet interest and activity are picking up smartly outside North America. A shale gas revolution in Europe and Asia would change the competitive dynamics of the globalized gas market, altering economic calculations and international politics.

This new innovation will take time to establish its global credentials. The U.S. is really only beginning to grapple with the significance. It may be half a decade before the strength of the unconventional gas revolution outside North America can be properly assessed. But what has begun as the shale gale in the U.S. could end up being an increasingly powerful wind that blows through the world economy.

E & M Specialty Makes Inventory Purchase of 1,533 jts Drill Pipe – October 16, 2009 –

Today E&M was awarded a bid to purchase 1,533 joints of used drill pipe from a major Gulf of Mexico offshore drilling contractor. The package will consist mainly of 5″ 19.50# drill pipe, grades G-105 and S-135. This was a surplus liquidation by the drilling contractor who was heavily overstocked on drill pipe due to the pullback in drilling activity in the Gulf of Mexico in the past year. A surplus liquidation usually results in the sale of high quality premium drill pipe to the secondary drilling market. The G-105 will most likely be sold to the overseas offshore drilling industry, and also domestically to the independant land based drilling industry. The S-135 will mostly be sold to the domestic HDD industry.

E&M Supply Group buys used drill pipe, used drill collars, and heavy-weight drill pipe. They buy mainly from offshore drilling contractors, both in the Gulf of Mexico and worldwide. E&M will buy drill pipe and bring it into their facility for processing and inspection by third party API liscensed drill pipe inspction company. After inspection E&M will segregate each class, perform all necesary cleaning and repairs, and stock the drill pipe in inventory for sale.


17 Million Natural Gas Vehicles Will Be on the Road by 2015, Forecasts Pike Research – Mon Oct 19, 2009 5:00am EDT 

BOULDER, Colo.–(Business Wire)– Natural gas vehicles (NGVs) have been in the marketplace for a long time, but despite technology advances and the ready availability of natural gas, it is still not widely accepted as a transportation fuel in many parts of the world. However, according to a new report from Pike Research, the NGV sector is poised for a new period of growth.The cleantech market intelligence firm forecasts that the number of NGVs on the road worldwide will grow to 17 million vehicles by 2015, up from 9.7 million in 2008.In 2015, NGV sales will surpass 3 million vehicles for the first time.

“Governments, fleet managers, and consumers are increasingly recognizing the environmental benefits of lower emissions from natural gas vehicles,” says industry analyst Dave Hurst.”However, lack of refueling station infrastructure has inhibited NGV demand in many countries.In regions where NGVs have strong market performance, adoption is largely due to a combination of inexpensive natural gas, a large number of existing refueling stations, and government subsidies of vehicles, fuel, and infrastructure.” Hurst adds that the top five markets for NGVs are currently Pakistan, Argentina, Brazil, Iran, and India.Over the next five years, he forecasts that Canada, India, and the United States will be the fastest growing markets.In the U.S., the growth will be driven by greater adoption of NGVs within government and corporate fleets.

Drill Gas Here, Drill Gas Now – Reihan Salam, 10.19.09, 12:00 AM EDT – Can natural gas save the climate and the economy?

While environmentalists are keen to fight climate change by reducing carbon emissions, rank-and-file voters seem more taken by the promise of energy independence. Last year, Republicans energized the conservative base by promising to “drill here, drill now,” a rallying cry that promised to exploit domestic energy reserves to reduce America’s reliance on foreign oil. Energy experts insisted, however, that because oil is a global commodity, exploiting offshore oil would have a trivial impact on our exposure to geopolitical instability in the biggest oil-producing regions. Chaos in the Persian Gulf and the strife-torn Nigerian delta would continue to impact prices at the pump. In a tightly integrated global economy, energy independence might be impossible to achieve. But by sharply increasing our use of natural gas and nuclear power, we might be able to come close while also reducing the carbon intensity of the American economy.

The last few months have seen a surge in interest in natural gas, the cleanest fossil fuel. American engineers and geologists have pioneered new, more effective ways of extracting natural gas from shale formations, and recoverable reserves in the United States have gone up by an extraordinary 40% in just the last four years.

What’s even more appealing is that many of the biggest natural gas discoveries have been in states that have been hard hit by industrial decline. The Marcellus shale, which could be the second-largest natural-gas field in the world after an offshore field in the Persian Gulf, stretches from the shores of Lake Erie through Pennsylvania, Ohio, Kentucky and West Virginia, and locals are hoping for an economic Cinderella story.

There are also new shale gas discoveries in western Europe, a development that will likely reduce dependence on Russian gas supplies–a major blow to Russia’s geopolitical ambitions. It is dangerously naive to believe that shale gas will make Appalachia boom or that it will defang Russia and Iran. The so-called resource course reminds us that gas discoveries could cause as many economic problems as they solve, and America’s Rust Belt should still focus on improving education and infrastructure. Moreover, it could turn out that far less shale gas is recoverable than industry analysts think. But a little optimism might be appropriate all the same.

Some environmentalists have hoped that these new discoveries would incline swing-state legislators to back cap-and-trade, as it would spur the replacement of coal electric plants with cleaner natural-gas-fired plants. Incredibly, coal electric plants provide 50% of U.S. electricity while accounting for 82% of carbon emissions from electricity generation. Natural gas generates half the carbon emissions of coal.

Big draw in gas supply sends energy prices jumping – By SANDY SHORE (AP) – 15 hours ago –

DENVER — Evidence that refiners severely curtailed their production of gasoline over the past week sent energy prices jumping across the board. The Energy Information Administration reported Thursday that gasoline in storage fell by more than 5 million barrels at a time when most energy experts expected supplies to grow yet again. Oil prices hit a new high for the year. Consumers may see a bump upward in pump prices but only a slight one, experts believe, because gas supplies greater than what they usually are at this time of the year and demand is still low due to the recession.

The average national price for retail gasoline has been drifting lower for two months. That price ticked up slightly overnight, according to auto club AAA, Wright Express and Oil Price Information Service. Pump prices rose less than a penny to $2.487 per gallon, which is 7.6 cents less than last month at this time and well below the summer peak of $2.69 reached in June. Last year at this time, a gallon of gas cost $3.12.

“This is probably enough to drift up a little bit but it should not be the first step on the march back to $3,” oil analyst Tom Kloza said. Refiners have been idling facilities because of a lack of demand at the same time that others have been shut down for routine maintenance. Besides the report on gasoline, the dollar hit a 52-week low on Thursday, which may have also contributed to the run-up in energy prices.

“The ignition switch for a rally got hit twice today,” Kloza said. Crude and gasoline prices have remained relatively stable for months with no clear signs of an economic rebound. But prices began to rise late last week when Alcoa, which kicks off the U.S. earning season, reported that it had returned to profitability after three straight quarterly losses.

One day after jumping above $75 per barrel for the first time this year, benchmark crude prices rose another $2.40 to settle at $77.58 on Thursday. At one point, prices were 3 cents shy of $78 per barrel. While the government reported that crude placed into storage grew again last week, it wasn’t as big of a build up as many experts had expected and that may have helped push prices higher as well.

Natural gas inventories also grew, the EIA reported Thursday, and levels now sit nearly 15 percent above the five-year average. Despite an uptick in prices, consumers should still be in for a relatively cheap winter as far as heating the home.

“The good news here is that heating oil distributors and natural gas distributors for that matter, too, were building stocks this past summer when prices were at their lowest,” said analyst Stephen Schork. “They’re sitting on cheap inventory so you’re not going to see a major spike in heating costs.” The EIA has forecast an 8 percent drop in heating bills this winter. The government reported that heating oil prices rose 3 cents last week to $2.53 per gallon. Last year at this time, a gallon of heating oil cost $3.39. Heating oil futures rose 7.53 cents to settle at $2.0181 a gallon while natural gas for November delivery rose 4.6 cents to settle at $4.482 per 1,000 cubic feet. Gasoline for November delivery gained 8.74 cents to settle at $1.9449 a gallon. In London, Brent crude rose $1.35 to settle at $74.45 on the ICE Futures exchange.

U.S. natural gas rig count climbs 14 to 726 – Fri Oct 9, 2009 1:20pm EDT –

NEW YORK, Oct 9 (Reuters) – The number of rigs drilling for natural gas in the United States climbed by 14 this week to 726, according to a report on Friday by oil services firm Baker Hughes in Houston. The U.S. natural gas drilling rig count has gained in 11 of the last 12 weeks but is still down sharply since peaking above 1,600 in September last year, standing at 822 rigs, or 53 percent, below the same week last year. During the week ended July 17, 2009, the natural gas rig count slipped to 665, its lowest level since May 3, 2002, when there were 640 gas rigs operating. Tighter access to credit and a 70 percent slide in natural gas prices over the past 15 months to below $4 per mmBtu forced many producers to scale back gas drilling operations. The steep declines in drilling this year have started to slow production and tighten supplies, but most traders agreed it has not been enough yet to offset record high inventories and steep recession-related cuts in demand, particularly from the industrial sector. (Reporting by Joe Silha; Editing by Walter Bagley)

Natural Gas Executives Put Faith In Industry’s Long-Term Outlook


BUENOS AIRES -(Dow Jones)- The global financial and economic crisis has taken its toll on the natural gas industry, with sharp declines in prices and consumption, but industry executives on Tuesday expressed their faith in the long-term outlook.

“Primary gas consumption’s share in the energy matrix is expected to be stable or rising in the next 25 years, at around 22%; historically that share in the matrix has never stopped increasing,” said Antonio Brufau, chairman and chief executive of Spain’s Repsol YPF (REP), in a speech to the World Gas Conference.

Emerging countries are going to be the main drivers of future natural gas demand, especially as incomes start to rise in places such as China or India, he said.

“If we believe in the economic health of these countries, then we must believe in the health of natural gas demand,” Brufau said. Brufau said he has doubts about the consensus forecast that points to an excess of natural gas supplies through 2013.

“In my opinion this view is subject to a high degree of uncertainty,” Brufau said. “Although I admit it is the most likely outcome, we must bear in mind that the market is now more complex.”

In Europe, a major center for demand, consumption will likely fall 7% in 2009 compared with 2008, according to Bernhard Reutersberg, chief executive of German gas company Ruhrgas, a subsidiary of E.ON AG (EOAN.XE). Demand should start to pick up again from next year, although its still too early to know the full impact of the crisis, he said.

“There will be a slight recovery in 2010, and present decreases will likely be overcome in two or three years,” Reutersberg said. Whether the slide represents a change in the long-term trend for growth in natural gas use is still unclear, the executive said.

Alexei Miller, chief executive of Russian gas giant Gazprom (GAZP.RS), also pointed to countries such as China and India which are undergoing an “impetuous process of industrialization, urbanization and other mobilization.” Energy demand will be growing but there will be limited contributions from oil and nuclear power, while alternative energies will be “insignificant,” he said in a speech.

The case of Gazprom highlights the fact that, just as with the oil industry, geopolitics also play a significant role in natural gas markets. A dispute between Russia and Ukraine has seen gas deliveries to a swath of European countries cut off intermittently over recent years.

Seeking to allay some of those fears, Miller said that Gazprom is committed to “fulfill its long term obligations,” and that it’s necessary to “dispel ideological and political prejudices.”

For now, the world won’t be able to live without fossil fuels, and natural gas is the most environmentally-friendly, he said, echoing calls by a number of the executives to brand natural gas as the cleanest of fossil fuels, and one which can help bridge the gap to a world of alternative fuels.

A study by the International Gas Union projects that global demand for natural gas will likely rise a third, to 4 trillion cubic meters by 2030, up from around 3 trillion cubic meters currently, as global economic growth and the desire for cleaner fuels pushes sales of natural gas to new limits. The study claimed that greater use of natural gas will necessarily underpin any push for stricter environmental standards and lower carbon dioxide emissions. The study finds that the share of natural gas in the global fuel mix could rise to 28% from 21% by 2030 if governments continue pushing for cleaner fuels. Colin Lyle, the study’s coordinator, said that increasing the world’s dependence on natural gas isn’t as risky as it may seem. “There is no ‘peak oil’ problem for gas,” he said.

In an interview on the sidelines of the conference, Lyle said new technologies are constantly providing gas producers with more efficient ways to extract gas. As a result, the world now has two to three times more natural gas than it did decades ago, when experts said the world was on the verge of running out of gas, he said.


Natural Gas Is The Solution – Medium-/Heavy-Duty NGVs

A comprehensive workshop for public and private fleet operators and clean air/clean transportation policymakers

Thursday, October 15, 2009 – Shreveport Convention Center -7:30 a.m. – 4:30 p.m.


Discover how natural gas vehicles can be beneficial and economical for your fleet operations. Topics will include:

When will I see a positive return on my investment (ROI) for our fleet and/or fueling station?

• Stimulus funding opportunities and available grants

• State and federal tax incentives

Which fleet/vehicle applications are the best candidates for successful NGV programs?

• Refuse, cement, dump, delivery, port delivery and service trucks

• School buses and mass transit and shuttle buses

How do I implement a successful NGV program and/or build a profitable fueling station?

• Engineers and consultants

• Clean Cities Coalition coordinators

How can fuel station design, development, ownership and operations provide options for fleets and interstate corridors?

• Location, gas transmission, design, components and CNG/LNG fuel

• Anchor fleets

Advance natural gas legislation to end our dependence on foreign oil – By Harry Teague and T. Boone Pickens

As two life-long oil-and-gas men, who have also taken leadership roles in promoting energy independence through a focus on alternative fuels, we have something to say: America is importing too much oil.

Dependency on foreign oil is expensive, and it is dangerous. In July alone, we spent $24 billion on 347 million barrels of imported oil. That’s about two-thirds of the oil we needed to power our economy, meaning we as a nation are negotiating with dictators for our economic strength and national security.

So what’s the solution? Well, we are developing our wind capacity in the Great Plains and our solar capacity in the Southwest. Those renewable sources can provide more than 20 percent of our electricity requirements, but 70 percent of the oil we use is as a transportation fuel. The oil is refined into gasoline to power our 250 million cars and light trucks, or diesel to power our 6.5 million over-the-road trucks. So unless we see major advances in battery technology, wind and solar are not helping you drive to work in the morning.

The only domestic resource available today to substitute for imported oil is domestic natural gas. The solution is clean, plentiful American natural gas. We have an abundance of natural gas in the continental United States. One recent study indicated we have 2,000 trillion cubic feet (Tcf) in natural gas reserves; enough for about118 years. Put another way, we have more energy in our natural gas reserves than all the energy stored in all the oil in Saudi Arabia.

Natural gas is a proven technology. Over 10 million cars and trucks around the world are natural gas vehicles (NGVs). Of those, unfortunately, only about 130,000 are in the United States. We must provide incentives to jump start the NGV industry in America. A bill currently moving through the U.S. House and Senate will do just that. H.R. 1835 – the NAT GAS Act – provides tax incentives for owners of trucks and other fleets to begin moving their vehicles from imported gasoline and diesel to domestic natural gas and to open NGV fueling stations.

Another target of the NAT GAS Act are municipal, county and state vehicles; utility and express delivery trucks; municipal buses, and refuse and recycling trucks. All of these go back to the “barn” every night so they can easily, cheaply, and efficiently be refueled at those central locations.

In addition to reducing our dependence on foreign oil, H.R. 1835 will also improve our environment. Natural gas burns much cleaner than either gasoline or diesel and produces virtually no particulate emissions. Anyone who has waited at the curb with their child for a diesel-burning school bus knows what we are talking about.

New Mexico in particular has an abundance of natural gas. It is an off-the-shelf technology which can, within a matter of months – not decades – begin to reduce our dependence on foreign oil. It is cleaner than gasoline or diesel. It is cheaper than imported oil. And it will keep precious American dollars in America rather than going to places like Venezuela, Saudi Arabia, or Angola – three major suppliers of oil.

H.R. 1835 has 84 bi-partisan co-sponsors. That is an indication of how important the Members of Congress think the problem of our dependence on imported is, and how vital this legislation is in helping to solve it. We hope the House Leadership will bring H.R. 1835 to the floor for a vote as soon as possible.

Congressman Harry Teague represents New Mexico’s 2nd Congressional District, he recently chaired the Re-Energize America Conference at New Mexico State University a two day conference that highlighted the benefits of natural gas for America’s energy independence his website is .

Natural gas, oil prices move up – By Mark Williams – Sept 16, 2009 Natural gas prices that have fallen steadily for a year are bouncing back sharply, up 16 percent since Monday, raising questions about whether prices fell too far. After jumping as much as 9 percent, natural gas settled 2.3 cents higher at $3.32 per 1,000 cubic feet yesterday on the New York Mercantile Exchange. Oil also moved higher in afternoon trading as the dollar fell to a new yearly low against the euro, stocks moved higher, and Federal Reserve chairman Ben Bernanke said the worst recession since the 1930s is probably over. Natural gas is still far from the $14 that it commanded last summer, before the recession destroyed demand for gas, gasoline, diesel, and jet fuel. Yet given the fact that storage facilities are brimming with natural gas, the $1 spike since the beginning of the month has many energy analysts skeptical.

“No doubt, gas is cheap,” analyst and trader Stephen Schork wrote yesterday. “But, if there is no value, then cheap, in and of itself, is not a reason to own something. Back in the 1980s the Yugo GV was cheap also. The car was cheap for a reason.” Natural gas in key storage facilities is nearing capacity, some exceeding 97 percent. How much more gas can be pumped into the massive caverns that are used for storage is key. The US Energy Information Administration said in its short-term energy outlook that it expects another 12 percent buildup through October. It is, however, the time of year when people begin to think about heating their homes, and that means more natural gas may be flowing out of storage. Prices hit $2.409 on Sept. 4, a seven-year low, on the eve of the heating season.

“The easy answer is that it was just too cheap,” PFGBest analyst Phil Flynn said. “Not the answer perhaps you were looking for but perhaps it is the most accurate one.”

The four-week average for gasoline consumption in the United States fell 3.2 percent for the week ended Friday, the ninth straight weekly decline, even though gasoline is one-third cheaper than a year ago, according to a SpendingPulse report by MasterCard yesterday. Still, investors seeking a hedge against inflation have continued to plow money into oil markets. Benchmark crude for October delivery rose $2.07, to settle at $70.93 a barrel. On Monday, the contract fell 43 cents to settle at $68.86.

Oil rises after decline in crude supplies – By MARK WILLIAMS (AP) – Sept 11, 2009

Oil prices moved higher for a third straight day Thursday after a report showed that U.S. crude inventories decreased more than expected last week. Oil also got support from a weaker U.S. dollar, OPEC’s decision to maintain production levels and a new report that says the slump in global oil demand will not be as bad as initially feared.

Benchmark crude for October delivery rose 63 cents to settle at $71.94 a barrel on the New York Mercantile Exchange. Earlier in the day, the contract rose as high as $72.44. On Wednesday, the contract rose 21 cents. The Energy Information Administration reported that crude inventories fell by 5.9 million barrels for the week ended Friday, more than three times estimates of analysts surveyed by Platt’s, the energy information arm of McGraw-Hill Cos. The government also said stocks of gasoline and distillates used for diesel fuel and heating oil rose for the week as supplies of crude products over the last four weeks increased by 2 percent from a year ago when Hurricane Gustav battered Louisiana. Supplies of crude products remain ample.

PFGBest analyst Phil Flynn said the decline in crude supplies shows that refiners were boosting production ahead of Labor Day, which marks the end of the summer driving season.

“The question is whether the demand is going to be enough to meet the supply,” he said. Natural gas prices jumped late in the session to settle 42.7 cents higher, or 15 percent, at $3.256 per 1,000 cubic feet. Gas prices, down about 80 percent in the past year, got a boost from an Energy Department report that showed natural gas stockpiles rose less than expected last week. But oil analyst and trader Stephen Schork credited the increase to speculators covering their bets that natural gas prices would continue to fall as opposed to an increase in demand. Crude has jumped from $68 a barrel in two days as the dollar weakened to its lowest level this year. Because crude is priced in the U.S. currency, it becomes cheaper when the dollar falls. Some investors also use commodities like oil and gold as a hedge against inflation and dollar weakness.

The Organization of Petroleum Exporting Countries, responsible for about 40 percent of the world’s oil production, confirmed Thursday at its meeting in Vienna that it will keep crude production levels the same. OPEC said in a statement that “market fundamentals have remained weak” and that “whilst there are signs that economic recovery is under way, there remains great concern about the magnitude and pace of this recovery,” especially in the West.

Meanwhile in Paris, the International Energy Agency said the slump in global oil demand in 2009 will be less severe than previously forecast and predicted consumption would rise in 2010 as the world economy stabilizes.

The IEA said Thursday that crude demand will reach 84.4 million barrels a day this year, down 2.2 percent from 2008 levels, but better than the 2.7 percent decline the agency forecast previously. The IEA also raised its forecast for oil demand in 2010 to 85.7 million barrels a day, or half a million barrels a day more than its previous forecast.

Prices at the pump remained mostly flat overnight, climbing 0.3 cents to $2.576 a gallon, according to auto club AAA, Wright Express and Oil Price Information Service. Prices are 6.7 cents below levels of a month ago and down $1.092 from a year ago. In other Nymex trading, gasoline for October delivery was down 2.45 cents to $1.8036 a gallon, and heating oil fell 0.55 cents to $1.7855 a gallon. In London, Brent crude settled 42 cents higher at $70.25 on the ICE Futures exchange.

Associated Press writers Pablo Gorondi in Budapest, Alex Kennedy in Singapore, Greg Keller in Paris and Tarek El-Tablawy in Vienna contributed to this report.

IEA Sees Global Oil Demand Rising – By JAMES HERRON – Sept 11, 2009 LONDON — The International Energy Agency Thursday revised up its forecast for world oil demand for the third consecutive month, citing stronger-than-expected economic growth in developing Asian economies and North America. Global oil demand in both 2009 and 2010 is now expected to be 500,000 barrels a day higher than the organization’s August estimate, at 84.4 million barrels a day and 85.7 million barrels a day respectively, the IEA said. Despite the increase, projected oil consumption this year will still be down 2.2%, or 1.9 million barrels, compared with last year, reflecting the still weak economy. “Economic prognoses from the OECD and IMF are being revised higher, while baseline oil demand in the U.S., China and other Asia appears to be running stronger than preliminary estimates suggested,” the Paris-based organization said in its monthly report.

Crude-oil prices rose almost $1 to more than $72 a barrel immediately after the release of the IEA figures, which came hours after the Organization of Petroleum Exporting Countries decided to keep its oil output unchanged at a meeting in Vienna. The price of October U.S. light sweet crude recently pared its gains to trade up 57 cents at $71.88 a barrel. OPEC ministers echoed the IEA’s increasing optimism, saying they see a brighter outlook for oil consumption in Asia. “I am more confident today than what I was back in May” about China’s economic recovery, Saudi Oil Minister Ali Naimi said. “We’re looking East more these days,” Kuwaiti Oil Minister Sheikh Ahmad Abdullah al-Sabah said. However, the IEA cautioned that rich country demand is set to remain weak for the remainder of the year and the true extent of the demand rebound in China is obscured by massive stock building there.

“It’s difficult to discern the true strength of Chinese demand at the final consumer level,” said the report’s editor, David Fyfe. Despite the increase, projected oil consumption this year will still be down 2.2%, or 1.9 million barrels a day, compared with last year, reflecting the still weak economy. In August OPEC was still pumping significantly above its output target as some members continue to exceed their quotas, the report said. Excluding Iraq, which isn’t subject to quotas, OPEC supply in August was 26.3 million barrels a day, 1.4 million barrels a day above the group’s target. OPEC acknowledged Thursday that compliance with its target of 24.9 million barrels a day is only 68% to 70% and behind the scenes in its Vienna meeting members pledged to improve their adherence to existing output quotas. The report also highlighted high stock levels in heating oil and diesel ahead of the winter. “Some 60 million barrels of products, mainly middle distillates, are being held in floating storage, largely off Europe,” it said. How the winter heating season plays out will be a key factor in future OPEC decisions, said the IEA’s Mr. Fyfe. “They would be looking for winter (demand) together with greater (quota) compliance to whittle into that stock overhang,” he said. Non-OPEC oil supply forecasts were unchanged from last month’s report, although Mr. Fyfe said there could be “revisions to non-OPEC supply numbers for the second half of the year if we get through the Hurricane season unscathed.”

BP makes massive oil find in deep Gulf – Discovery should mean big boost for south Louisiana economy Discovery should pump La. economy – Thursday, September 03, 2009

BP said Wednesday that it has drilled the world ‘s deepest oil well in the Gulf of Mexico and found a giant pool of crude, a discovery that promises to make an indelible mark on the south Louisiana economy. The Tiber Prospect is expected to rank among the largest petroleum discoveries in the United States, potentially producing half as much crude in a day as Alaska’s famous North Slope oil field. Louisiana energy circles were abuzz with news of the discovery Wednesday. “Any incremental business in the Gulf of Mexico is going to be a net positive for us one way or the other,” said Todd Hornbeck, chief executive of Hornbeck Offshore Services of Covington, which is the nation’s second-largest provider of deepwater offshore supply vessels. Hornbeck said the company received a big boost after BP made another major discovery in the late 1990s in the Thunder Horse oilfield. Located about 150 miles southeast of New Orleans, the Thunder Horse platform is the biggest producer in the Gulf, pumping 250,000 barrels of oil and 200 million cubic feet of natural gas per day.

— A big job producer — Developing Thunder Horse required billions of dollars and countless workers, many of them flown in or carried by boat from Louisiana to install equipment or provide other services, Hornbeck said. Shipyards, refiners and manufacturers and retailers of an array of industrial equipment also saw an uptick in business because of Thunder Horse, said Don Briggs, president of the Louisiana Oil and Gas Association. “The support industry for a project as big as this is huge,” Briggs said of Tiber, which could be even bigger than Thunder Horse.

Ted Falgout, director of the Greater Lafourche Port Commission, predicted that Port Fourchon would also get busier in the years ahead as BP works to bring Tiber into production. Port Fourchon, the massive energy hub at the tip of Lafourche Parish, has undergone a massive expansion since the mid-1990s, when the federal government offered financial incentives to increase offshore energy production. Falgout said that BP services most of its Gulf operations from Fourchon and estimated that the company already has about 100 employees stationed in Lafourche. “Some of the support for this development will come out of Fourchon,” Falgout said in an e-mail about Tiber. “Although it is in the Western Gulf, it will be good for the industry which is largely supported out of Louisiana.” BP’s chief of exploration Wednesday estimated that the Tiber deposit holds between 4 billion and 6 billion barrels of oil equivalent, which includes natural gas. That would be enough to satisfy U.S. demand for crude for nearly one year. But BP does not yet know how much it can extract. “The Gulf of Mexico is proving to be a growing oil province, and a profitable one if you can find the reserves,” said Tyler Priest, professor and director of Global Studies at the Bauer College of Business at the University of Houston.

— The last frontier — The Tiber well is southwest of New Orleans in U.S. waters. At 30,923 feet into the earth, it is as deep as Mount Everest is tall, not including more than 4,000 feet of water above it. Drilling at those depths shows how far major oil producers will go to find new supplies as global reserves dwindle, and how technology has advanced, allowing them to reach once-unimaginable depths. Deep-water operations are considered to be the last frontier for pristine oil deposits, and the entire petroleum industry is sweeping the ocean floor in search of more crude. BP needs to invest years of work and millions of dollars before it draws the first drop of oil from Tiber. Such long waits are not uncommon. Three years after announcing a discovery at a site in the Gulf called Kaskida, BP has yet to begin producing oil there. Projects like the Tiber well will not reduce U.S. dependency on foreign oil, which continues to grow. But new technology does permit access to major oil finds closer to U.S. shores. BP expects Tiber to be among the company’s richest finds in the Gulf, on par with its crown jewel, the Thunder Horse development. Thunder Horse produces about 300,000 barrels of oil equivalent per day, half as much crude as Alaska’s North Slope. Even if Tiber produces that much, it would still be a trickle compared with the largest oil producer in the world: the Ghawar field in Saudi Arabia, which produces 5 million barrels per day.

— Close to home — But because it’s close to home, Tiber would be especially attractive to refiners in America, where the government wants to cut down on oil imports from the Middle East. “Early indications are that it’s a significant positive discovery,” said Matt Snyder, lead analyst with Wood MacKinzie’s Gulf of Mexico research team. “They’re not swayed by daily price swings when it comes to planning deep-water exploration,” Priest said. BP’s discovery is the latest in what’s called the “lower tertiary” region, an ancient section of rock in the Gulf that is roughly 300 square miles and formed between 24 million and 65 million years ago. Chevron Corp. drilled one of the first wells in the region in 2001, followed by more than a dozen others from companies such as Royal Dutch Shell, Australian oil company BHP Billiton, BP and Total SA, according to the U.S. Department of Interior’s Minerals Management Service. In 2006, Chevron estimated that the lower tertiary holds between 3 billion and 15 billion barrels. But it has taken years to develop wells for commercial use. BP has a 62 percent working interest in the Tiber well. Petrobras owns 20 percent while ConocoPhillips owns 18 percent.

U.S. crude output on the rise – By BRETT CLANTON Copyright 2009 Houston Chronicle – Sept. 2, 2009, 12:27AM

Thunder Horse platform is helping offset U.S. oil production declines onshore and in shallower Gulf waters.

U.S. crude oil production is expected to rise this year for the first time in nearly two decades, buoyed mostly by new offshore projects in the Gulf of Mexico but also getting a boost from a so-far quiet Atlantic hurricane season.

Last year, hurricanes Ike and Gustav forced oil and gas companies to shut down wells and evacuate workers from offshore facilities, resulting in 63 million barrels of lost oil production. This year, the government predicts only 3.4 million barrels of outages due to Gulf storms, although hurricane season is still far from over.

U.S. oil output is benefiting from the addition of major deep-water fields, including BP’s Thunder Horse, that are helping offset production declines onshore and in shallower Gulf waters. In many cases, these deep-water fields were discovered years ago but are only now coming on line, given the massive costs and technical challenges associated with them.

The combination of favorable factors should lift U.S. crude oil production to an average of 5.22 million barrels per day in 2009, up from 4.95 million barrels per day last year and the first annual increase since 1991, according to the U.S. Energy Information Administration.

And the trend may continue beyond 2009, said Bob Fryklund, oil analyst with IHS-CERA in Houston, noting a queue of deep-water Gulf discoveries that will be coming onstream soon.

“For the next couple of years, oil production looks like it will be on an upward swing, which we haven’t seen — it’s been a long time,” he said.

The rise in domestic oil production highlights the growing contribution of deep-water fields in the Gulf, which until only recently were considered out of reach.

It also comes as U.S. natural gas production, which has been trending upward for several years, is slowing amid an unprecedented collapse in prices and demand, which has spurred producers to curtail output.

Since December, natural gas prices have plummeted from nearly $6 per million British thermal units, recently hitting a seven-year low around $2.80, while crude oil prices have more than doubled to near $70 a barrel.

Yet it may be too early to call it a turning point for U.S. oil. While deep-water fields, as well as emerging onshore fields like the Bakken oil shale play in North Dakota, are sure to become a bigger part of America’s oil diet, they may not be enough to offset declining production elsewhere in the U.S. Nor will they help the country wean itself from foreign oil any time soon.

Rather, the newly productive fields probably will keep domestic oil production “flat to mildly increasing the next few years,” said Rehan Rashid, industry analyst with FBR Capital Markets Corp. in Arlington, Va.

Bill Coates, president of North American oil field services at Schlumberger, suggested that would be progress. “After 30 years of decline, even a stabilization of oil production is a neat thing to see for the country.”

U.S. oil production has increased this year despite a global recession that has forced oil companies to slash spending on projects.

In the first seven months, the country has averaged 5.26??million barrels per day, the highest for the January-to-July period in four years, according to the American Petroleum Institute, an industry group.

During that time, production began or reached capacity in a number of new fields in the Gulf of Mexico, including Thunder Horse, Blind Faith, Thunder Hawk, Shenzi and Tahiti. They are now contributing roughly 500,000 barrels per day of additional oil production.

But Matthew Snyder, lead Gulf of Mexico analyst for Wood Mackenzie in Houston, noted that oil production was also on track to be up in 2008 before Gulf Coast hurricanes hit in September. He cautioned that the same thing could happen again. “We’re really right in that time frame right now,” he said.

Hurricane season, which begins June 1, enters its peak in August and September, according to the National Oceanic and Atmospheric Administration. Yet last month, the federal office lowered an earlier forecast. It now predicts a 50 percent chance of a “near-normal” season and a 40 percent chance of a below-normal season.

An average season comprises 11 named storms with winds of at least 39 mph, of which six become hurricanes, with winds of 74 mph or greater, and two become major hurricanes with winds of 111 mph or higher.

The Gulf accounts for about 25 percent of domestic oil production and 15 percent of natural gas output through about 3,800 offshore production platforms, according to the U.S. Minerals Management Service.

Foreign companies seeking natural gas eye U.S. supplies-API SmartBrief | 08/24/2009 Italy’s Eni, Norway’s StatoilHydro and other foreign oil companies interested in U.S. natural gas reserves are seeking investments in independent firms as American supplies climb. Independents have made progress in developing natural gas from shale, and if such advancements are taken overseas, they could significantly increase gas resources, according to PFC Energy, a consulting firm. The industry thinks natural gas could be a key to the energy future of the U.S. and the world, given the political issues tied to carbon. Financial Times (tiered subscription model) (08/23)

T. Boone Pickens, Dallas Mayor Tom Leppert hail green taxicab prototype – Aug 25, 2009

T. Boone Pickens (left) and Dallas Mayor Tom Leppert shared their thoughts on a prototype taxi that runs on natural gas Monday at City Hall. Pickens joined Mayor Tom Leppert and several members of the Dallas City Council in examining a prototype cab that is expected to run 250 miles on a single fill-up of natural gas. And Leppert used the occasion to sound support for a plan to set new rules allowing “green” cabs to jump to the front of the cab stand line at Dallas/Fort Worth International Airport and Dallas Love Field. Similar rules are already in place in San Francisco and Boston.

“Anytime we can use alternative fuels like natural gas, it’s a positive,” Leppert said, citing the city’s troubles with air quality. Pickens, a billionaire investor, said he stopped by as part of his larger effort to turn the country away from its dependence on foreign oil. “I want to get us off of foreign oil, and every time I can influence that, I do. Why would you buy gasoline from Saudi Arabia when you can buy natural gas from here?” he asked. Pickens’ vast investments have included a spectrum of energy sources from oil and natural gas to wind power. He said that although natural gas vehicles enjoy little market share in the U.S. today, that doesn’t have to be the case. Encouraging cab companies to move to natural gas could help bring in infrastructure for natural gas pump stations and spur wider interest among individuals, he said. He also noted that natural gas is significantly cheaper than gasoline.

Pickens and Leppert spent time checking out the prototype cab from Vehicle Production Group. The cab, which looks like a sport utility vehicle and is accessible to wheelchairs, goes into production in 2010 and lists at about $38,000, company officials said. They hope to interest large cab operators in buying the cabs with the help of federal and state incentives and assistance from City Hall, such as the plan to let green cabs hop the airport line.


Natural gas: The key U.S. energy source for the next decade? – Joseph LazzaroJoseph Lazzaro RSS Feed – Aug 24, 2009’ Natural gas is experiencing a perfect storm of new technology, a reluctance to cut production, and a pricing anomaly that together may make it a dominant energy source in the U.S. in the decades ahead. How has this happened?

First, there’s the commodity’s low price. Natural gas hit a seven-year low on Thursday, falling through the psychologically significant $3-per-million-BTUs threshold, on rising supplies and low demand from industry and power plants. Traders say prices could fall to $2.25 to $2.50 per MMBtus before rebounding with increasing demand — assuming the U.S. economy continues to recover.

Second, the price of natural gas will likely remain competitive with oil in the longterm, and possibly even cheaper on an energy-delivered-per-dollar basis. The main reason: Large storage capacity in the U.S. — and energy companies’ unwillingness to stop producing the stuff. New technology, including a process called hydraulic fracturing, enables the tapping of natural-gas sources in the previously cost-prohibitive regions of Appalachia, the mid-continent, the Gulf Coast, and the Rocky Mountains. Estimated U.S. natural gas reserves have increased 35 percent, mostly on the ability to access those new sources, with estimated reserves totaling 2,074 trillion cubic feet in 2008, up from 1,532 trillion cubic feet in 2006, according to the Potential Gas Committee, the New York Times reports.

Third, oil and natural gas compete for different customers and functions, and they orbit in different solar systems. Oil, trading at about $74, is now about 24 times the price of natural gas, about triple its historical average comparative expense over the past decade. And oil, for many reasons, shows little sign of trending lower. Whether it’s oil-as-an-asset-play, the threat of inflation, a weakening dollar, OPEC production cuts, or the prospect of rising demand in emerging markets, oil has found ways to defy gravity and remain at a lofty $60 to $75 a barrel despite high inventories and the worst global recession since the end of World War II. Each week, it seems, another oil sector analyst predicts a collapse for overpriced oil — and each week, it doesn’t happen. The price disparity creates a new opportunity for natural gas to displace both oil and coal. More vehicles, especially fleets of buses, vans, and trucks, could move toward natural gas engines. A bill to increase tax incentives now working its way through Congress would further encourage those conversions. If the price disparity continues, more homeowners may convert heating systems to natural gas.

Coal is considerably cheaper for generating electricity than natural gas, but new Congressional legislation to penalize carbon emissions will likely decrease that advantage. Even the cleanest coal is dirtier than natural gas, which has a lower impact on climate change. Still, after price, perhaps the most important selling point for natural gas is location: it’s a domestic energy source, a crucial factor in a global economy that’s likely to become more competitive in coming decades. The U.S. possesses ample conventional and unconventional natural gas, so nearly all the funds allocated to produce and use the energy source will remain in the domestic economy — serving as a capital source for investment and creating domestic jobs. Our consumption of foreign oil sends $250 billion to $450 billion to foreign governments and suppliers each year — an energy habit that has increased the U.S. trade deficit.

How significant is natural gas in the nation’s energy policy? Oil and energy analyst Daniel Yergin, co-founder of Cambridge Energy Research Associates, has called unconventional natural gas “the biggest innovation in the energy business in the past 25 to 30 years.” What’s Congress waiting for? The nation should pass legislation that increases tax credits to speed the conversion of vehicle, residential, and commercial energy systems to natural gas. Today, natural gas accounts for about 25 percent of the nation’s energy production and 22 percent of its electricity production.

Natural gas is not without environmental concerns: it has a low (but not zero) impact on climate change, and some environmental groups are concerned that hydraulic fracturing will pollute drinking water sources. But the advantages of energy independence, more flexible foreign policy, ample reserves, retained wealth and increased jobs, and a lower carbon footprint tip the scale well in favor of a much bigger role for natural gas.

Natural gas is the ‘alternative’ we need now – Commentary: It’s not pristine, but it’s best for immediate needs – By Thomas Kostigen, MarketWatch – Aug 21, 2009 SANTA MONICA, Calif. (MarketWatch) — For all the talk of alternative energy, a traditional energy source may be the future power of America — at least in the near term. Natural gas reserves are up tremendously — 39% higher than previous assessments — new estimates show. New drilling procedures to extract natural gas from shale are the primary reason estimates have been revised so sharply upward. But natural gas hasn’t been tapped much lately either. The depressed economy has kept prices low and they’ve yet to rebound. Natural gas prices have tracked oil’s general slide, sans the recent bounce. Low prices mean less exploration and drilling. The Potential Gas Committee, an independent nonprofit organization, recently released a report that indicates the U.S. possesses a total resource base of 1,836 trillion cubic feet of natural gas, the highest resource evaluation in the group’s 44-year history. “Most of the increase from the previous assessment arose from re-evaluation of shale-gas plays in the Appalachian basin and in the mid-Continent, Gulf Coast and Rocky Mountain areas,” the committee said. Total reserves are enough to power the country for decades.

Coal currently produces half the power for electricity in the U.S. Coal plants produce large amounts of carbon emissions that are under fire for their association with climate change and global warming.

Replacement: New legislation promises to crack down on carbon emissions from coal plants and to raise the price of carbon. Natural gas, which produces about half the carbon emissions of coal when burned to create energy, could step in as a replacement. Don’t think, however, that natural gas is squeaky clean. Carbon emissions are only reduced; they’re not eliminated entirely via natural gas production. Shale extraction is not without its downside either. It takes energy to extract the energy source, and it’s expensive.

Former Colo. Sen. Timothy Wirth, president of Ted Turner’s United Nations Foundation and a pro-environment Democrat, spoke last month to the natural gas industry. “The time has come for the natural gas industry to get organized, take the gloves off, and get thoroughly engaged in helping our country advance rapidly toward a low-carbon economy,” he said. “You will help yourselves, leave a legacy for your grandchildren and play a major role in saving the world. But you have to ask for the order.”

Next step: Wirth and other environmental advocates see natural gas as the next step in weaning the world off fossil fuel burning for power. They believe natural gas could be used in a mix with solar and wind power until technology allows the world to be fully reliant on clean and sustainable energy supplies. I agree. Until we see the day when the sun powers our needs, a natural step in the right direction may be natural gas, imperfect as it may be. Natural gas can be used to power homes, cars and industry, all without concern for the whether the sun is shining or wind is blowing to sustain resources. It’s waiting on something equally as frustrating and unpredictable as the weather, however — politics and business acceptance. Natural gas isn’t talked about much in the boardroom or the halls of Congress. It should be.

 Apache announces plans for two more CNG stations. From Staff ReportsPublished: August 18, 2009 Corp.
Plans to build two more compressed natural gas stations to cash in on state-offered tax incentives. House Speaker Chris Benge, R-Tulsa, filled up his natural gas-powered Chevrolet Impala on Monday at Apache’s district office to spotlight incentive programs for using CNG. Apache CEO G. Steven Farris said the company built its first refueling station in Oklahoma because the state’s incentives improved the economic return for the project. It will be used for more than 40 company vehicles that will run on CNG. Apache also is exploring ways to coordinate its refueling program with state agencies, local governments and other CNG fleet operators, he said. “The biggest obstacle to expanding the use of CNG right now is the lack of refueling infrastructure; that’s why we built our own station,” Farris said. “… Policymakers in Washington and other states need to follow Oklahoma’s lead and consider appropriate incentives to accelerate development.” Oklahoma legislators this year passed two bills meant to increase use of compressed natural gas.

‘Greener’ buses – Posted: Aug 17, 2009 110:21 PM Monday, August 17, 2009 11:21 PM EST

SHREVEPORT, LA (KSLA) – Public transportation in Shreveport-Bossier is about to change. The stimulus package will give the area five buses that will run on compressed natural gas as well as a natural gas filling station. Trade in diesel for compressed natural gas — SporTran is using some green from the stimulus package to go green in Shreveport-Bossier.

“It’s cleaner burning. It’s more efficient and the equipment that we find in the cities that we’ve seen will operate for a longer period of time,” said SporTran General Manager Gene Eddy. SporTran general manager Gene Eddy says if the fleet of buses ran on CNG, they would have saved more than $600,000 last year alone. “It’s going to cost more to change our infrastructure to cover the compressed natural gas, but I think over time, we’ll make our investment back,” said Eddy. The federal grant will give SporTran five buses that run on CNG, as well as a compressed natural gas filling station.

People around town are already talking. “I’d rather see it spent on public transportation than anything I know of. We have a lot of people in Shreveport that depend on it,” said Shreveport resident Floyd Johnson. “I think that’s too much. I really do. I think there are other things that need it a lot more,” said Shreveport resident Sue Kelly. Environmentalists like Murray Lloyd say never mind the doubters; the question for them is not how much a total transformation from diesel to CNG will cost. “I guess the real question is how much it costs if we don’t. What’s it going to if we don’t start moving in this direction?” said environmentalist Murray Lloyd. Lloyd says air and water quality, land development, and energy uses are major issues facing the region, especially since winds from Houston and Dallas have brought so much pollution that new restrictions on everyday life aren’t that far away. “We need to be taking care of our natural resources and it’s something that we haven’t done a really good job of in this community and we need to start addressing it in a more strategic way,” said Lloyd.

The transition from diesel to CNG buses will take at least 10 years — something that might mark that decade in local history. SporTran plans on exploring ways to open that natural gas filling station to the private sector. This will help promote natural gas vehicles in the area and help them generate extra revenue.

No Respect? Cheap Natural Gas Draws Crowd – By Ben Casselman Never mind being the Rodney Dangerfield of fuels—natural gas is starting to seem like the punch line to a bad joke: “Natural gas is so cheap…” Perhaps he saw his natural gas ETF statement? But seriously, folks, natural gas futures fell another 43.6 cents last week to $3.24 per million British thermal units. That’s the lowest gas has traded since Reese Witherspoon’s “Sweet Home Alabama” was in theaters (that was 2002, back when Enron was still falling, but not fallen.) Gas is down 11% in August, 42% on the year and 69% from this time a year ago. For comparison, oil is down just 41% from this time last year, and is up 51% in 2009. There’s no mystery as to what’s behind natural gas’s continued free-fall: surging supplies (think, Haynesville Shale) and anemic demand (the recession). Neither shows any signs of a quick fix. Most natural-gas producers are actually on track to beat production targets despite reduced drilling, and the Energy Information Administration expects U.S. gas demand to fall 2.6% this year. Many experts expect gas storage, already 20% above normal, to fill up by the fall. But there’s a glimmer of hope on the horizon: Democrats in Washington might finally be getting on the natural-gas bandwagon. On a trip to Colorado last week, Interior Secretary Ken Salazar last week told the Grand Junction Daily Sentinel that he wouldn’t seek to withdraw drilling leases in the Roan Plateau and that “the future of natural gas is very bright.” In short, he wants to use energy policy to increase demand for the stuff because it’s an abundant source of fuel that has less carbon than coal or oil. That might not quite be fodder for Boone Pickens, but it’s a start. Even better for gas bulls (if there are any left) was the National Clean Energy Summit in Las Vegas last week, where gas got talked up by Democratic bigshots like Senate Majority Leader Harry Reid. John Podesta, Bill Clinton’s former chief of staff and the co-chair of President Obama’s transition team, even put out a paper calling natural gas “a bridge fuel for the 21st century.” Washington isn’t likely to provide a quick fix, of course. Just about the only short-term hope for gas producers is the weather.


New Priorities For Our Energy Future – Our natural gas reserves contain more energy than Saudi Arabia’s oil. – By T. BOONE PICKENS AND TED TURNER – AUGUST 17, 2009 –

 Renewable energy and clean-burning natural gas are the basis of a new strategy the world needs to create a cleaner and more secure future. And the global transformation to a clean-energy economy may be the greatest economic opportunity of the 21st century. According to the authoritative Potential Gas Committee (administered by the Colorado School of Mines), the U.S. sits on top of massive reservoirs of natural gas—an estimated 2,000 trillion cubic feet—that contain more energy than all the oil in Saudi Arabia.

Harnessing this large supply—plus developing wind, solar and biofuel energy sources—is essential to achieve three strategic national priorities:

• Energy security: The internal combustion engine makes us dependent on oil that’s concentrated in a handful of countries in some of the world’s most volatile regions. In June, we imported 374 million barrels of oil, nearly two-thirds of what we used, at a cost of $24.7 billion. With 70% of imported oil going into cars and trucks, our transportation system is perilously at risk to shaky oil markets and even shakier regimes.

• Economic security: Last year more than $155 billion was invested in clean energy technologies such as wind and solar, and China and India plan to invest hundreds of billions in renewable energy sources. The annual market for clean energy may escalate in the next decade to between $1 trillion and $2 trillion. The race is on.

• Climate security: Likewise, the clock is ticking on potentially devastating climate changes. We already are witnessing the disintegration of polar ice, melting glaciers, rising sea levels and altered weather patterns. But if we act now, we can prevent catastrophic human and economic impacts.

Long-term economic and environmental interests compel us to put a priority on energy independence and a price on carbon pollution. Natural gas and renewable energy are obvious sources for cheap, clean and reliable electric power and transportation fuels.

In the electricity sector, natural gas is already cheap, available and ready to meet the nation’s power needs while improving climate security. It emits about half the carbon dioxide per British thermal unit of energy, and far fewer of the heavy metals than does coal.

Adopting a “cash-for-clunkers” program in the utility sector can save money and reduce emissions right away by retiring the oldest, least efficient and most polluting power plants in exchange for modern gas-powered plants. New coal plants should be required to combine natural gas with the coal they burn, resulting in cleaner emissions, and every power plant should meet strict carbon-emissions standards.

We should also adopt a strong national standard requiring that electrical generation include a growing percentage of renewable fuels to help bring down costs over time, and ensure America’s place in the burgeoning global competition for innovative renewable and efficiency technologies. Numerous state initiatives have already demonstrated the feasibility of these standards on a smaller scale.

In the transportation sector, renewable energy and natural gas can also be deployed immediately. For a quarter century, natural-gas vehicle technology has been available but stymied by lack of leadership. Of the 10 million natural gas vehicles in the world, fewer than 150,000 are in the U.S.

We can begin transitioning the nation’s fleet of 6.5 million 18-wheelers that run regular routes. It would take just 20 refueling stations along a single highway to get trucks from one coast to the other. Centrally fueled urban business and government fleets also can quickly move to natural gas. The Ports of Los Angeles and Long Beach are in the process of buying new natural gas vehicles for their fleets, and many municipalities are harnessing the economic and environmental benefits of natural gas-powered buses.

Renewable biofuels should also be part of a new energy strategy. Advanced biofuels produced from cellulosic material, such as forest residues, municipal waste or even algae, can play a key role in reducing the vulnerabilities, emissions and costs associated with imported oil, while also providing new economic opportunities for America’s farm communities.

The economic, environmental, and national security imperatives of America’s energy posture are clear, as is the proven potential of domestic natural resources like gas, wind and solar power. Coupled with energy efficiency, these resources have the potential to help jump-start the economy, drive prosperity and reduce emissions well into the 21st century. The keys are in our hands. All we have to do is unlock the door and start the engine.

U.S. natgas rig count climbs for a fourth week – Fri Aug 14, 2009 2:05pm EDT

NEW YORK, Aug 14 (Reuters) – The number of rigs drilling for natural gas in the United States rose 7 this week to 688, the fourth straight weekly gain after sinking last month to the lowest level in more than seven years, according to a report on Friday by oil services firm Baker Hughes in Houston.

U.S. natural gas drilling rigs are still down sharply since peaking above 1,600 in September, and now stand at 898 rigs, or 57 percent, below the same week last year.

During the week ended July 17, 2009, the natural gas rig count dipped to 665, its lowest level since May 3, 2002, when there were 640 gas rigs operating.

Tighter access to credit and a 70 percent slide in natural gas prices to about $3.50 per mmBtu over the last year have forced many producers to scale back gas drilling operations.

But while the steep decline in drilling this year has started to slow production and tighten supplies, most traders agreed it has not been enough yet to offset recession-related cuts in industrial demand and slight gains in imports of LNG.

The U.S. Energy Information Administration estimates that domestic gas production fell for a fifth straight month in July, with output in June dropping below the same year-ago month for the first time this year. (Reporting by Joe Silha, editing by John Picinich)


Interior Secretary Salazar aims to include natural gas in energy policy – By GARY HARMON/The Grand Junction Daily Sentinel – Aug 14, 2009

Natural gas will be a part of the nation’s energy policy even while the federal government looks to other fuel sources, Interior Secretary Ken Salazar said Wednesday. “The future of natural gas is very bright,” Salazar told The Daily Sentinel editorial board after he presided over the dedication of the Dominguez-Escalante National Conservation Area. Natural gas is one of the sources of fuel he’s recommending President Obama look to as the nation’s energy policy is being shaped, primarily because it’s considered to be less a source of greenhouse gases than other fossil fuels, he said. As a senator from Colorado, Salazar had been critical of the Bureau of Land Management’s leasing of lands on the Roan Plateau for natural-gas drilling. That plan is now the subject of a federal lawsuit and there are efforts to reach a settlement, Salazar said. He ruled out withdrawing the Roan Plateau leases, as he did with 77 contentious leases in neighboring Utah near national parks, because the Roan leases had been signed, giving the buyers a property right he was bound to protect, Salazar said. The process with the Utah leases was not so complete, he said. As a senator, Salazar was a critic of Bush administration policy on oil shale, and he said he remains supportive of research into shale, but doesn’t see it as an immediate part of the nation’s energy store. Still, he said he expects to open a second round of research-and-development leases for oil shale in the next month or so. Three companies are now working five, 160-acre leases in Rio Blanco County, and a sixth such lease is being operated in Utah.

Politicos give natural gas, efficiency top billing – by Martin LaMonica – August 11, 2009

Increasing domestic natural gas production and retrofitting buildings to be more efficient should form the basis of a low-carbon U.S. energy policy, according to a statement put out Monday during the Clean Energy Summit. The summit, held for the second year in Las Vegas, brought together some of the most recognized political figures shaping energy policy, including Sen. Harry Reid of Nevada, Energy Secretary Steven Chu, and businessman T. Boone Pickens. Other speakers included Bill Clinton, Labor Secretary Hilda Solis, Al Gore, and green jobs advocate Van Jones. The event was organized by the Center for American Progress and the Energy Future Coalition, which jointly put out a memo touting the benefits of natural gas and building efficiency. The memo says that there is now technology to tap natural gas in so-called nonconventional sources, namely trapped in shale deposits in the U.S. “This creates an unprecedented opportunity to use gas as a bridge fuel to a 21st-century energy economy that relies on efficiency, renewable sources, and low-carbon fossil fuels such as natural gas,” according to the memo. (Click for PDF of full text.) Natural gas can be used to make electricity and as a transportation fuel. The memo recommends investing in natural gas filling stations for large trucks and buses, which are much harder to run from electric batteries than passenger cars. In addition to reducing imports of oil, natural gas burns cleaner than coal, emitting half as much carbon Efficiency, considered the most cost-effective way to reduce fossil fuel use, was a consistent topic of discussion at the summit as well. The Center for American Progress and Energy Future Coalition estimated that retrofitting 40 percent of U.S. homes and buildings would save consumers $1,200 a month on energy bills and create 625,000 jobs. “Energy efficiency should be the first source we turn toward to meet energy demand and reduce consumers’ bills” said Reid, who is a key figure in the energy and climate bill being considered by Congress. “It creates more jobs than nearly every other energy investment and the cheapest, cleanest, safest energy is the energy we never have to use.” Read More 

The plan is…there is no plan – Louisiana Oil & Gas Association – Don Briggs, President – Aug 10th 2009

Nearly every day, there are 143 million cars and 110 million trucks on the highways of the United States. It is this immense transportation network that provides our over 300 million citizens with the American way of life. We have the luxury of commuting to work, traveling cross-country and the ease of delivering goods and services, all of which comes with a cost……..oil. Everyday the U.S. consumes 25% of the world’s daily crude oil production, providing the fuel to power 96% of the country’s transportation infrastructure. Our country consumes, in round numbers, 20 million barrels of oil per day, while producing only 5 million, making up the balance mostly by imports and refinery gains. By importing nearly 70% of our oil demand, hundreds of billions of dollars every year go into the coffers of countries that dislike the United States. Why is there not a plan to even contain our ever-growing dependence on these countries? President Obama said in his inaugural address, “We will harness the sun and the winds and the soil to fuel our cars and run our factories.” Washington needs to stop insulting the intelligence of the American people. The development and research into new sources of energy is important, however, when we are so vulnerable as to import 70% of the energy that powers 96% of our transportation, we should be incentivizing the exploration and development of our natural resources. The United States is the only country in the world that has more than 85% if its natural resources off limits for exploration and development. This past week Russia inked a contract with Cuba to drill off Florida’s coast, an area that is off limits for U.S. companies to drill. China and India have also leased concessions from Cuba. “This is the irony of ironies,” complained Charles Drevna, executive vice president of the National Petrochemical & Refiners Association. “We have chosen to lock up our resources and stand by to be spectators while these two come in and benefit from things right in our own backyard.” Opposition to drilling off Florida’s coast is weakening as Florida’s Legislature is looking for revenues to offset budget deficits. “Our national enemies, who have sworn to destroy the United States and everything we stand for, uses our reliance on foreign oil as a tool to arm themselves and to disarm us and to cripple us,” said Cannon, a Winter Park Republican slated to become speaker in 2010. The environmentalists argue drilling off Florida’s coast will spoil the beaches, however, the fact is more oil bubbles up naturally from the sea floor in the Gulf of Mexico than will ever come from drilling operations. The Obama administration has no plan that provides energy security to the transportation network so vital to our country; in fact it is quite the opposite. President Obama’s budget, if passed by Congress, will strip the independent oil and natural gas producers of their incentives to explore.

What would a good plan look like?

· Lift the moratoriums on areas off limits for exploration and development

· Incentivizes companies to explore and develop our natural resources

· Incentivize the development of a natural gas infrastructure to fuel our country’s transportation network

It’s called, free enterprise.

California Bus Co. Completes Transition to CNG – August 4, 2009 | | USA, San Bernardino CA

Omnitrans, the public transit agency serving the San Bernardino Valley, California, is completing its transition to a 100% alternative-fuelled fleet. Delivery and commissioning of 27 new 40-foot low-floor CNG buses manufactured by New Flyer Inc. of Canada will end the transition phase that commenced in 1997. “Omnitrans embraced CNG bus engine technology early on as part of our commitment to being environmentally friendly,” said CEO/General Manager Durand L. Rall. “With this purchase, we are replacing the last of our diesel buses as well as our first generation of CNG buses.” In a press release Omnitrans remarks upon the environmental benefits of using CNG. “Natural gas buses reduce smog-forming emissions by 87% compared to diesel buses. Using Omnitrans for one day instead of driving cuts carbon emissions by 20 pounds. Over a year, that translates to nearly 5,000 pounds of emissions.” Funding sources include the Federal Transportation Administration, Congestion Mitigation and Air Quality Funds, State Transit Assistance Funds and Local Transportation Funds. A grant from the South Coast Air Quality Management District contributed $30,000 per vehicle. Powered by a larger 8.9L Cummins natural gas engine that meets 2010 Environmental Protection Agency and California Air Resources Board emissions levels, the new buses bring the fleet total to 167.

Chesapeake CEO expects rig counts, natural gas prices to increase – By Murray Evans • The Associated Press • August 5, 2009

OKLAHOMA CITY — Chesapeake Energy Corp. CEO Aubrey McClendon expects natural gas rig counts and prices to rebound significantly within the next year. Natural gas prices will rise to $6 to $7 per 1,000 cubic feet and about 900 rigs will be drilling for the fossil fuel by August 2010, McClendon predicted Tuesday during a conference call with analysts. That would be an increase of more than 200 rigs from current levels. “There’s a lot to like about 2010,” McClendon said, although he predicted “a lot of wailing and gnashing of teeth in the next 60 days” within the industry concerning storage and pipeline issues. “But after that, you’ve got an improving economy. It’s all shaping up to be a pretty favorable summer of 2010.” Natural gas prices have plummeted from a high last summer of $13.69 per 1,000 cubic feet to $3 to $4 per 1,000 cubic feet. Natural gas for August delivery fell 5.4 cents, to $3.98 per 1,000 cubic feet, Tuesday on the New York Mercantile Exchange. While demand for natural gas has wilted, reserves have increased, with the government reporting Thursday that U.S. stockpiles are 18.8 percent above the five-year average of about 2.545 trillion cubic feet. Chesapeake Energy reduced its production for a time as prices fell, but the Oklahoma City-based independent energy company last week said it boosted daily production by 4 percent in the second quarter over the first quarter and by 5 percent over the second quarter of 2008. Chesapeake Energy believes the industry “will be full up on storage by the end of the year,” McClendon said, but company officials see no need now to curtail production. “Pipeline pressures” will result in others in the industry undergoing “involuntary curtailments,” he said. “There’s no reason for us to curtail since everyone is going to be involuntarily curtailing soon. We didn’t see any reason for us to take it on the chin for the team any more than we did.” On Monday, Chesapeake Energy reported it posted a profit a year after it recorded a $1.6 billion hedging-related loss. But stripping out one-time costs, Chesapeake Energy said its profit was down from last year with natural gas prices off 70 percent. Chesapeake Energy said it made $237 million, or 39 cents per share, for the quarter that ended June 30. Discounting one-time costs, the company reported $377 million in profits, or 62 cents per share, down from adjusted profit of $479 million, or 89 cents a share, in the year-ago quarter. Revenue was $1.7 billion compared with a revenue loss of $455 million a year ago. Analysts surveyed by Thomson Reuters expected Chesapeake Energy to make 52 cents per share on revenue of $1.9 billion for the most current quarter. Those estimates typically exclude one-time charges. Chesapeake Energy shares rose 89 cents, to $23.25, during trading Tuesday afternoon. The stock has traded between $9.84 and $51.10 during the past year.


Energy companies turning to natural gas vehicles, Denver Business Journal – by Cathy Proctor

Colorado’s big oil and gas companies have begun burning natural gas in some of their fleet cars and pickups to demonstrate its effectiveness as an alternative motor fuel. Natural gas has been used to generate electricity, or to heat homes and office buildings. But there’s a growing interest in it for cars and trucks — one of the components of oilman T. Boone Pickens’ plan to cut the nation’s reliance on imported oil.

In Colorado:

• Denver’s EnCana Oil & Gas (USA) Inc. recently converted four Ford F-250 pickups, which the company bought for the Denver-Julesburg basin north of Denver, to run on natural gas as well as gasoline. It also plans to convert the company’s 52 trucks in the area to dual-fuel capability by 2011. EnCana also has bought seven Honda Civic GXs — the only car manufactured to run on natural gas — for its employees in Colorado, Wyoming and Texas to use on the job.

• Pioneer Natural Resources Co. (NYSE: PXD), based in Irving, Texas, last winter converted 25 Ford F-250s it runs in southern Colorado’s Raton Basin to operate on natural gas as well as gasoline. In February, the company installed a refueling station for the vehicles.

• The Governor’s Energy Office has applied for a $10 million grant from the U.S. Department of Energy’s share of the federal stimulus package to help pay for a $27.6 million natural gas vehicle project. The money would be spent on 68 heavy-duty vehicles, such as trash trucks and buses capable of running on natural gas, and building five new natural gas refueling stations across Colorado, according to the office, which expects an answer in August. Colorado has 18 natural gas fueling stations — 12 in the Denver area — selling compressed natural gas for as low as 80 cents for the equivalent of one gallon of gasoline.

• On July 22, EnCana is sponsoring a “Natural Gas Expansion Forum” in Rifle for panelists from the state and natural-gas-vehicle businesses to talk about the costs and benefits of converting fleets to run on natural gas. As of mid-July, about 25 people representing local nonprofits, businesses and local governments had signed up for the free forum, said Natalia Swalnick, air quality and “Clean Cities” program manager for the Colorado chapter of the American Lung Association. “It’s something that is definitely generating more conversation and interest,” Swalnick said. “It’s not a decision that people can make overnight.” There are about 120,000 natural gas vehicles operating in the United States, according to the Natural Gas Vehicle Association. That compares to a total of 247.3 million of all registered cars, trucks and buses, according to the U.S. Department of Transportation.

Running a natural gas vehicle produces fewer emissions, and the gas is cheaper. But the upfront costs can run into thousands of dollars per vehicle. Natural gas-powered vehicles emit about 30 percent less carbon dioxide than gasoline-powered engines. Emissions of sulfur dioxide, nitrous oxide and volatile organic compounds that lead to harmful ozone emissions are nearly eliminated, according to the Governor’s Energy Office. The cost of natural gas is one-third less than that of gasoline, said EnCana spokeswoman Wendy Wiedenbeck, who’s overseeing the company’s “DRIVE Natural Gas Vehicles” (NGV) program. State tax credits also cut the cost of buying a natural-gas vehicle or converting a gasoline-powered engine to run on natural gas. But the upfront costs can be sizable. EnCana’s Drive program is approaching $1 million when adding up the costs of vehicles, conversions, employee training and small refueling stations, Wiedenbeck said. “It’s an expensive thing to do; a conversion on a pickup runs about $12,000,” said Wes Biggers, president of FuelTek Conversion Corp. in Commerce City, one of six companies in the nation approved by the U.S. Environmental Protection Agency to manufacture equipment to add natural gas capability to cars and trucks. FuelTek also installs conversion equipment in vehicles. But interest is up, particularly from the oil and gas industry, Biggers said. “The driving industry right now [for natural gas vehicles] is the oil and gas industry,” Biggers said. “I’m hearing from them that the No. 1 reason is that it can be cheaper for them to operate their vehicles, and it’s another use for the product that they make. “It’s a ‘practice what you preach’ kind of thing,” he said. “It’s hard for them to stand up and say ‘Drive natural gas vehicles’ if they themselves don’t drive natural gas vehicles.” Wiedenbeck said, “It’s a win-win. Raising awareness about the benefits of natural gas at home, at work and on the road is good business. And we can’t overlook the environmental benefits of natural gas in general — it’s the cleanest fossil fuel. It’s certainly the cleanest transportation fuel.”

Oil price rises as US supply falls By CHRIS KAHN – July 16, 2009 NEW YORK (AP) — Oil prices rose above $61 a barrel Wednesday, riding gains on Wall Street and a government report that said U.S. crude supplies dropped more than expected. Benchmark crude for August delivery was up $1.59 to $61.11 a barrel on the New York Mercantile Exchange. In London, Brent prices rose $1.49 to $62.35 a barrel on the ICE Futures exchange. During the past few weeks, crude fell from its peak and has loitered near $60 a barrel as America’s expanding population of unemployed workers left doubts about a quick economic recovery. A weaker dollar combined with a rally in equities markets has kept oil prices from falling further, however. The Dow Jones Industrial Average and The Nasdaq composite index rose more than 2 percent in midday trading. Crude barrels, which are traded in dollars, go up in price as the dollar falls and foreign investors find they have more buying power. Investors also see crude as a safe haven from inflation, and they’ve pumped money into oil futures on the expectation that oil will get more expensive as the economy improves. Meanwhile, the Energy Information Administration reported Wednesday that the country’s supply of crude oil dropped more than expected last week, falling by 2.8 million barrels. However, the U.S. is still swimming in surplus oil. It’s total inventory of 344.5 million barrels is 16.5 percent above last year’s levels. Inventories of gasoline and distillate fuels, such as diesel and heating oil, also rose last week. Rising world stock markets also propped up crude prices, with major exchanges logging gains in the wake of better-than-expected earnings reports from Intel and Goldman Sachs. Trader and analyst Stephen Schork said prices could swing either way in the next few days, setting a longer-term trend. In other Nymex trading, gasoline for August delivery jumped by 4.29 cents to $1.6895 a gallon and heating oil added 5.32 cents to $1.5651 a gallon. Natural gas for August delivery fell by 11.3 cents to $3.316 per 1,000 cubic feet.

Morning Bell: EPA Admits Cap-and-Trade Will Fail – July 9th, 2009 at 9.06am in Energy and Environment.

The Senate Environment and Public Works Committee began their hearings on the 1,500 page Waxman-Markey cap-and-trade legislation Tuesday, and ranking member Senator James Inhofe (R-OK) won a startling admission from Environmental Protection Agency administrator Lisa Jackson. Inhofe produced an EPA chart generated last year during the Senate’s debate of the Lieberman-Warner cap-and-trade legislation. The chart showed that the carbon reductions under that bill would not materially effect global carbon concentrations in the atmosphere. Inhofe then asked Jackson if she agreed with the chart’s conclusions. Jackson replied: “I believe that essential parts of the chart are that the U.S. action alone will not impact CO2 levels.” Also, at the hearing, Energy Secretary Steven Chu said he did not agree with chart. This is interesting ,since all the best science confirms Inhofe’s and Jackson’s conclusions. For example, a recent study of cap-and-trade by MIT concluded: “The different U.S. policies have relatively small effects on the CO2 concentration if other regions do not follow the U.S. lead…The Developed Only scenario cuts only about 0.5 °C of the warming from the reference, again illustrating the importance of developing country participation.” So how is that “developing country participation” going? The New York Times reports from the Group of 8 summit in L’Aquila, Italy: “The world’s biggest developing nations, led by China and India, refused Wednesday to commit to specific goals for slashing heat-trapping gases by 2050, undercutting the drive to build a global consensus by the end of this year to reverse the threat of climate change.” For anyone that has been following the issue, this development should come as no surprise. On June 30th of this year India’s Environment Minister Jairam Ramesh told Bloomberg: “India will not accept any emission-reduction target — period. This is a non-negotiable stand.” China has also made it explicitly clear that they view the carbon tariffs in the Waxman-Markey bill as a violation of World Trade Organization rules. So if other countries will not sacrifice their own economic growth to meet carbon cutting goals, then what is the economic hit Americans are taking? The left is touting a recent Congressional Budget Office study which they say shows Waxman-Markey would only cost Americans $175 a year. However, the left is seriously misrepresenting what the CBO study is. Footnote three on page four of the CBO study explicitly admits: “The resource cost does not indicate the potential decrease in gross domestic product (GDP) that could result from the cap. The reduction in GDP would also include indirect general equilibrium effects, such as changes in the labor supply resulting from reductions in real wages and potential reductions in the productivity of capital and labor.” In other words, the CBO study is not an economic analysis at all. Instead it is a simple accounting of how energy tax revenue that Waxman-Markey collects is distributed. When the economic costs of Waxman-Markey are included, the harm to American families skyrockets. According to Heritage’s Center for Data Analysis Waxman-Markey will decrease GDP in 2020 by $161 billion (2009 dollars). For a family of four, that is $1,870 that the CBO simply ignores. All economic pain, for no environmental gain. No wonder the Obama economy is failing.


U.S. lawmakers offer bill to spur natural gas vehicles – Wed Jul 8, 2009 2:33pm EDT By Ayesha Rascoe WASHINGTON (Reuters) – U.S. lawmakers on Wednesday unveiled legislation aimed at helping the nation wean itself off foreign oil by providing financial incentives for the use of vehicles fueled by natural gas. Sponsored by Democratic Senator Robert Menendez, the bill would extend for 10 years tax credits for purchasing vehicles that run on natural gas and installing natural gas refueling stations. “We saw last summer how the wild fluctuations in oil prices helped to wreck our economy, and we’ve seen how pollutants from dirty fuels are wrecking our planet,” Menendez said at a press conference. He added that the recent economic downturn also had “shined a spotlight on the urgent need for alternative, cleaner and cheaper sources of energy that we don’t have to import.” The legislation is backed by Senate Majority Leader Harry Reid and Republican Senator Orrin Hatch. Recent advances in technology have led to a natural gas production boom in the United States, after years of stagnant growth in the sector. “We have much more natural gas than we thought we did just a few years ago,” Hatch said at the press conference. He said there were enough reserves to “significantly increase” the use of natural gas as a transportation fuel. In addition to extending the tax breaks, the bill would also raise the tax credit caps for consumers who buy natural gas-fueled vehicles and provide tax breaks for manufacturers of those vehicles. The bill would also provide grants for the development of light- and heavy-duty natural gas engines. Menendez said he may be able to attach his bill to energy and climate change packages the Senate is set to consider some time this year.

Obama’s dangerous game with energy policy

President Barack Obama is playing Russian roulette with America’s quest for energy independence by rushing to replace fossil fuels with unreliable and expensive renewable energy. The global balance of power is already shifting away from the United States toward China and Russia in the critical area of strategic natural resources. Earlier this year, the cash-rich Chinese embarked on a veritable shopping spree, snatching up energy and mineral resources around the world at bargain-basement prices. In February alone, Beijing cut oil deals worth $41 billion with Russia, Brazil and Venezuela. Among the most lucrative is an agreement with Moscow in which China will lend $25 billion to Russian oil giant Rosneft and oil pipeline company Transneft. In return, China will receive 300,000 barrels of crude oil a day for the next 20 years at about $20 a barrel, or less than one-third the current price of about $71. Beijing’s growing appetite for energy has also taken it to the Middle East, where in March a Chinese consortium signed a $3.2 billion deal with Iran to develop an area beneath the Persian Gulf believed to hold 8 percent of the world’s known natural gas reserves. In addition to energy, precious metals, with both commercial and military applications, are uppermost on the minds of forward-looking Chinese. Data compiled by the Nevada Bureau of Mines and Geology show China is boosting production of its ample domestic mineral resources. Of 22 key metals commodities in 2008, China was a significant global producer (meaning it accounted for more than 10 percent) in 16 and was the global leader in the production of 10, including zinc, tungsten, gypsum, cement, iron ore, gold, phosphate rock, tin, barite and rare earths. Russia, too, is taking care of business when it comes to securing strategic natural resources. Faced with dwindling supplies of its traditional sources of natural gas, the Kremlin is moving aggressively to exploit vast gas fields in the Yamal Peninsula in northwestern Siberia. Moscow also has laid claims to an area on the Arctic continental shelf equal to the size of France, Germany and Italy combined. Geologists believe the Arctic seabed contains nearly 25 percent of the world’s hydrocarbon deposits. Furthermore, together with Iran and Qatar, Russia has recently formed what the Heritage Foundation’s Ariel Cohen calls a “gas OPEC,” a cartel that will meet quarterly to coordinate and exercise control over nearly two-thirds of the world’s natural gas reserves and a quarter of global gas production. By contrast, the U.S. is engaging in unilateral economic disarmament by shutting off access to the nation’s most abundant and reliable sources of energy. Congress and the Obama administration refuse to lift moratoriums on drilling for oil and natural gas on the outer continental shelf, or to open up a tiny speck of the Arctic National Wildlife Reserve for oil and gas exploration. Interior Secretary Ken Salazar has put on hold plans to develop huge oil shale reserves in Utah, Colorado and Wyoming. In April 2009, the U.S. Geological Survey estimated Colorado’s Piceance Basin alone contains 1.53 trillion barrels of oil. In the name of combating “global warming,” Washington is force-feeding Americans a low-energy diet of renewable fuels, including notoriously unreliable and inefficient wind and solar power. In doing so, it will create a severe energy shortage, to the detriment of our prosperity and national security. The United States is the only major world power that refuses to develop its own energy resources. In so doing, it is playing Russian roulette – solitaire-style. Sooner or later, it will prove fatal.

U.S. natgas rig count edges up 1 to 688 for week – Thu Jul 2, 2009 2:54pm EDT NEW YORK, July 2 (Reuters) – The number of rigs drilling for natural gas in the United States unexpectedly rose again, the second gain in seven months, according to a report on Thursday by oil services firm Baker Hughes in Houston. The report showed U.S. gas drilling rigs edged up 1 to 688 this week, still 851 rigs, or 55 percent, below the same week last year, when there were 1,539 gas rigs operating. U.S. natural gas drilling rigs have been in a mostly steady decline since peaking above 1,600 in September, but two weeks ago the count rose for the first time since November 2008. Sources said the gas rig count decline seemed to be slowing just below the 700 mark, despite still-weak natural gas prices, possibly because some prolific shale plays like Haynesville in Louisiana or Marcellus in Appalachia may still be economic. Tighter access to credit and a 70 percent slide in natural gas prices to about $3.50 per mmBtu, after peaking above $13 last July, have forced many producers to scale back drilling operations. But, with the natural gas drilling rig count below 700, most analysts expect to see year-on-year output declines soon, which should help tighten the overall supply-demand balance. (Reporting by Joe Silha; Editing by Walter Bagley)

Cap and tax’ scheme will hit us hard – By REP. PAUL RYAN – Thursday, July 2, 2009 The last thing Wisconsin families need is higher energy prices. But the House passed H.R. 2454, the American Clean Energy and Security Act, which would do just that. By requiring all energy producers to buy expensive government permits in order to produce energy from certain natural resources or to produce certain goods such as steel or cement, cold-weather states such as Wisconsin will take direct hits in higher energy costs. As a result, I voted against this measure. While this bill’s proponents promise new 223green224 jobs and less reliance on oil, they ignore what American taxpayers already pay to support cleaner energy production. Taxpayers already provide a nearly 40 percent subsidy rate for solar and wind producers; $15 billion per year for other renewable energy sources and conservation programs; $24 billion for the energy-related portion of the Department of Energy’s budget; and $39 billion to the so-called 223stimulus224 bill for other energy projects. But they claim we need to spend more. Their plan’s 223cap and tax224 scheme claims it can slow global warming by raising the cost of fossil fuels, which provide 86 percent of U.S. energy. The bill’s authors tried to reduce its impact on households through complicated allowances, tax credits and rebates; but the fact remains: this plan will raise the cost of energy by $1 trillion over the next 10 years-12 times our current energy spending. That cost will fall on American families through higher energy prices, higher taxes, more government debt or a combination of all three. It will cost taxpayers on average $3,000 per year and raise taxes by more than $840 billion. The impact on Wisconsin will be especially severe. Estimates from the Congressional Budget Office and the Energy Information Administration predict Wisconsin families alone will shoulder an extra $230 million in energy costs as a consequence of this bill. The 1st District of Wisconsin is predicted to lose roughly 3,000 jobs. We are already suffering the closures or pending closures of major car factories in Janesville, Kenosha and Oak Creek. Racine’s unemployment rate recently broke 10 percent. It is unacceptable for Congress to consider legislation that would drive out even more American jobs and force businesses to close down. Meanwhile, some studies show 223cap and tax224 might move global temperatures a fraction of a degree by the end of this century-a shift so small that it might be impossible to measure. But for every ton of carbon we avoid, China, India and Russia will produce many more, putting the U.S. economy at a clear competitive disadvantage. A better approach would be to make energy cheaper, not more expensive; to facilitate an economy operating at full potential, not below it; to encourage domestic production of oil and gas in an environmentally responsible manner, not demonize it; and to encourage all forms of clean energy, including emissions-free nuclear power. These are the common-sense principles for creating a cleaner environment and a stronger economy in the 21st century that I will continue to support.

US rig count up as oil prices lure back drillers

SAN FRANCISCO, June 26 (Reuters) – The number of U.S. rigs working rose for a second week as improved crude oil prices lured back drillers even as natural gas activity weakened, according to figures from Baker Hughes Inc (BHI.N) on Friday. The rise appeared to support predictions made a few months ago by oil services company executives for a bottoming of the closely watched rig count in the second or third quarter. In the week to Friday, the overall U.S. rig count rose by 18 rigs to 917, having touched a six-year low of 876 two weeks before. But the number of rigs drilling for natural gas fell again, down by five at 687, as gas prices remained subdued by massive production and weak demand. [ID:nN26341943] On the other hand, U.S. crude oil price futures CLc1 have doubled in the past four months, even if they are still only half their level of a year ago. Nabors Industries Ltd (NBR.N) Chief Executive Gene Isenberg, speaking to analysts in April after the contract driller reported first-quarter results, said he saw the rig count bottoming in the second quarter. Many others have predicted the bottom would be hit in the third quarter. Nonetheless, Pritchard analysts expect any recovery in drilling to be modest. “We expect a period of stabilization in which the rig count only modestly improves, with a material improvement unlikely until mid-2010,” the analysts wrote in a note this week. The U.S. rig count, which is far more volatile than international numbers, peaked above 2,000 last year

What’s Up With Crude Oil – Commodities / Crude Oil – Jun 24, 2009

Best Financial Markets Analysis ArticleThe price of oil has climbed despite the lack of demand and a glut of surplus crude. Benchmark crude closed near its highest level in eight months on Friday June 19, 2009 reaching $69.50 on the New York Mercantile Exchange. Gasoline has risen with the price of oil reaching a national average of $2.63 per gallon. Higher oil prices are another factor affecting the economy’s ability to recover. What is fueling this price increase and is it sustainable? Click link above to read more…

Backers Hope Drilling Pumps Interest in Florida – News Service of Florida – Jun 23, 2009

Supporters of allowing drilling off Florida’s Gulf Coast are hoping pushes to drill near the coast of two islands just beyond the state’s southern shores will make waves in the debate about oil production here. As Congress debates authorizing drilling as close as 10 miles off the Florida Gulf coastline and supporters push for a referendum on a drilling plan not approved this year by the Legislature, Florida Petroleum Council executive director David Mica said Cuba and the Bahamas are both moving quickly toward allowing drilling in their waters.

Oil and gas industry ‘in a good position,’ study finds – Houston Business Journal – June 19, 2009 The oil and gas industry is headed in the right direction for recovery, according to a study released Thursday by Ernst & Young LLP’s Houston-based oil and gas division. The study found that hits to the industry included some scaling back of upstream investment in 2009 and the postponement of some proposed developments. But from overall figures, Ernst & Young estimates that, as the recovery in oil and gas markets gathers steam in the second half of 2009, the U.S. oil and gas industry appears poised to resume its growth and be a key contributor to the U.S. and global economic recovery. Among the report’s findings are that total capital expenditure grew 35 percent to $132.1 billion in 2008 compared with 2007. Natural gas reserves also rose 4 percent to 145.2 trillion cubic feet in 2008 from 139.9 Tcf in 2007 — even though negative revisions of 6.7 trillion cubic feet were recorded for gas reserves in 2008.

Auction Feedback – June 11, 2009

Attendance at the Kruse Auction in Oklahoma City this week was surprisingly good. Of all the drill pipe in the auction, only very little was of any real quality and those particular lots were bought mostly by drilling contractors. Prices for drilling equipment seemed relatively stable as opposed to what one would guess considering the industry slowdown. For example, there were two used GD PZ9 1000HP triplex skidded pumps (no power) that sold for $85K each. Comparitively there were also two brand new Chinese versions (with power ) that sold for $200K each. The drill collar situation was suspect at best. There were some 3 1/2″ drill collars that looked brand new and perfectly normal. Upon futher inspection, however, the ID opened up severely about 8-10″ from the end. An unfortunate bidder paid $1750 each for these.