Daily Archives: April 8, 2011
No deal yet for Gulf drilling near Cuba’s coast
U.S. officials have talked with Repsol over the Spanish oil company’s plans to begin drilling off the coast of Cuba later this year, but there is no deal yet to ensure that work meets the same standards it would if it happened in U.S. waters.
“We have talked with Repsol, and we anticipate talking to them again,” said Michael Bromwich, the director of the Bureau of Ocean Energy Management, Regulation and Enforcement. “But there are no agreements.”
U.S. drilling regulators have been meeting with their counterparts in Mexico in hopes of hammering out a single uniform standard for offshore drilling in the Gulf of Mexico. But Cuba — the third country with territorial waters in the Gulf — has not been part of those discussions.
Repsol has said it plans to begin drilling a well as soon as this summer in Cuban waters. Other international oil companies have lined up drilling in the region after Repsol’s first well, including Malaysia’s Petronas and India’s ONGC Videsh. Cuban officials have said five wells could be drilled in the country’s Gulf of Mexico territory this summer.
“Everyone has an interest in there being the highest standards possible that are observed in all of the drilling offshore, in all three countries that co-own the Gulf of Mexico,” Bromwich told reporters on a conference call. “That would certainly be desirable, but finding the mechanism to do that is tricky and needs to be explored further.”
The presidential commission that investigated last year’s Gulf oil spill stressed the importance of harmonizing international drilling standards — since oceans and floating oil don’t respect sovereign boundaries. Companies “ought to have the same standards wherever they are operating,” William Reilly, a commission co-chairman, said earlier this week.
Drilling regulators and energy officials from more than a dozen countries are set to address the issue during an international offshore drilling summit on April 14.
( Original Article )
U.S. is Trying to Mend Relationship With the Saudis
Posted by Angela Khan on April 8, 2011
Robert Gates, the U.S. Defense Secretary, had a private meeting with King Abdullah on Wednesday, in Riyadh, for an hour and a half, trying to repair the increasingly damaged relations between the two countries.
Gates described the discussion as “extremely cordial”. He said that he refused to address one of the most controversial topics: Abdullah’s decision to send troops in an effort to ending the uprising in Bahrain, disregarding the call of the President Barack Obama, who asked him not to do so.
The relations between U.S. and its main ally in the Middle East, Saudi Arabia, were especially deteriorated because of the support that Obama has provided to the protesters in Egypt.
Abdullah, angry at Obama
After the resignation of the former Egyptian president, Hosni Mubarak, the Saudis have canceled the Riyadh visit that Gates and the Secretary of State Hillary Clinton planned to pay, saying that the king does not feel well. But Pentagon officials and State Department had every reason to wonder whether Abdullah was more angry than sick.
As per the later declaration of an Arab official, the willingness of the King Abdullah to listen to the Obama administration has “evaporated” after the ouster of Mubarak. A correspondent of NBC conveyed yesterday that Saudi Arabia is “so angry” at Obama, that it has sent senior officials in China and Russia to seek business opportunities in both countries.
( Original Article )
Raising oil spill liability limits is hot topic at House hearing
By Jonathan Tilove, The Times-Picayune
The thorny issue of raising oil spill liability limits rose at two congressional hearings Wednesday, with Rep. Jeff Landry, R-New Iberia, predicting that higher caps would “destroy the shallow-water drilling industry,” and an economist who studied the issue for the Oil Spill Commission testifying that the lower limit encouraged the industry to “underinvest in safety.”
Rusty Costanza, The Times-Picayune The Helix Producer 1 was photographed in February in the Gulf of Mexico 112 miles south of Houma.
Helix Energy Solutions is part of an effort by 20 companies to have a system ready to deal with a crisis such as the BP oil spill in the Gulf of Mexico.
The Oil Pollution Act caps liability for damages from an offshore spill at $75 million per incident, a limit that BP waived in the aftermath of its Deepwater Horizon disaster last year. It’s not yet clear how much the deep-pocketed oil giant will end up paying for the massive spill.
The National Oil Spill Commission recommended that Congress significantly raise the liability cap, and Rep. Edward Markey, D-Mass., the top Democrat on the House Natural Resources Committee, who has authored legislation to implement many of the commission’s recommendations, goes even further in his bill, which would remove the cap altogether.
Otherwise, he said, the taxpayers are on the hook to make up the difference.
At a committee hearing on Republican bills to speed the pace of permitting and open new offshore areas to drilling, Markey pressed the liability issue in his questioning of Hank Danos, president of Danos and Curole Marine Contractors, an oilfield service company based in Larose, who had been called to testify about how the slowdown in drilling had led him to lay off 200 workers.
“Do you believe that a $75 million penalty for the kind of spill we saw is high enough, or should it be higher?” asked Markey, demanding an answer as Danos struggled to say that anything that increased costs wasn’t helpful.
When it came his turn to ask questions, Landry revisited the liability issue with Danos.
“Mr. Danos, you do a lot of work for shallow-water drilling contractors. Could you tell me if they remove the liability cap on the (Outer Continental) Shelf, the impact for those oil and gas contractors?” asked Landry, noting that most of those shallow-water companies are relatively small.
“My understanding is that if the liability cap was removed, that there would be more wells shut in and shut down, and less production in the Gulf of Mexico,” Danos said.
“So it would destroy the shallow water drilling industry,” Landry said. “Is that what it would do?”
“It could,” Danos said.
But at an afternoon hearing of the House Science Committee’s subcommittee on Energy and the Environment, Molly Macauley, research director for Resources for the Future, an independent research center, suggested that “limited liability and sometimes-ineffective regulatory oversight can lead people to naturally under invest in safety.”
Macauley studied that issue as part of her research for the Spill Commission into the industry’s development, or lack of development, of spill containment technology.
In the aftermath of the disaster, two groups — the Helix Well Containment Group and the Marine Well Containment Co. — have just completed development of new deepwater containment response systems that could respond in the event of loss of well control, and that have enabled the federal government to begin approving permits for new deepwater drilling.
Owen Kratz, president and CEO of Helix Energy Solutions Group, who also testified before the Science subcommittee, said he doesn’t agree with Macauley’s conclusion that the liability cap worked to discourage investment in the kind of expensive system his group had created.
He said the oil industry’s self-interest in avoiding a disaster like the Deepwater Horizon is so deep and plain, that “these companies don’t even think about the liability cap in keeping a spill from happening.”
On the contrary, Kratz said, “I can definitely see a high cap being a disincentive to innovation,” by simply driving business out of the Gulf of Mexico.
( Original Article )
Eagle Ford boom means new wealth, new problems
By JOHN MACCORMACK
STAFF WRITER
April 7, 2011, 8:02PM
KARNES CITY — It was almost a half-century ago that John Braudaway had his first encounter with the hydrocarbon-soaked, deep shale formation that is turning a large swath of South Texas into one crazy boomtown.
“In 1962, I was roughnecking on a crew north of town. And when we drilled through the Eagle Ford shale, it kicked back on us with a lot of pressure. It took us three days to choke it off,” he recalled.
“I told the geologist, ‘You’ve got a good well here. Let’s run ‘er out.’ But he said, ‘Naw, it’s that old Eagle Ford shale. It will produce for four or five days and then seal off,’ ” said Braudaway, 71, who’s still in the oil business.
But about a year ago, an extraction technology called hydraulic fracturing began unlocking the mineral riches held in the deep shale vault that runs from the Mexican border northeast for hundreds of miles.
These days, the Eagle Ford is the hottest play in the country, with some South Texas oil wells producing several thousand barrels a day as well as abundant flows of natural gas.
The play is creating jobs and sudden wealth in a chronically depressed region that long survived on cattle and agriculture, between periodic oil and gas booms.
In some areas, mineral leases that a few years ago went for a few hundred dollars an acre now are commanding $10,000 and up. For a fortunate few, monthly royalty checks can run to six figures and lease bonus checks are even larger.
“This place went from desolate to booming. There are quite a few millionaires now in Karnes County. They are being made every day,” Braudaway said during a recent tour of the county.
Trip Ruckman, 66, president of the Karnes County National Bank, said deposits rose by $2 million a month last year, and now may be double what they were five years ago.
“What’s good is that a lot of mineral interest around here is owned by small landowners and farmers,” he said. “The wealth is getting spread around pretty well.”
Ruckman said that after decades of lean times, no one is throwing the money around.
Fun to be flush
“It’s fun. We’re enjoying it, but a lot of people are not used to being flush. It’s kind of unbelievable for most of them, and they are sitting on it to a large extent,” he said.
Drilling figures at the Texas Railroad Commission tell the production story.
In 2008, the state issued 33 drilling permits for the Eagle Ford shale. In 2009, it jumped to 94, and last year it exploded, to 1,229 permits.
Correspondingly, sales tax collections are climbing by double digits in areas most affected by the play.
According to a recently published economic impact study by the University of Texas at San Antonio, the long-term regional implications of the boom are staggering.
“Under modest assumptions, by 2020 the Eagle Ford shale is expected to account for close to $11.6 billion in gross state product, $21.6 billion in total economic output impact and support close to 67,971 full-time jobs in the area,” according to the executive summary.
‘No Vacancy’
At ground level, the first fruits of the boom are everywhere.
In Kenedy, the State Motel has been booked solid for two years to oil company workers, and it likely will keep the “No Vacancy” sign up awhile longer. “We’re gonna be full for the next five years,” said manager Maria Munoz.
Just down the road is the Pecan Grove RV Park, one of many cropping up around the play.
Owner David Brodsky, 48, of Kenedy, one of the new Eagle Ford millionaires, financed it with oil and gas leases and bonuses. “The bonus money built this park. I’ve got a little over 100 acres leased, and they have nine months left to drill,” he said.
With the Pecan Grove already full, Brodsky is building two more RV parks.
In Cuero, officials are planning a new 300-home subdivision to house oil field workers.
Lee’s Steakhouse in Carrizo Springs – like most restaurants in the play – is regularly jammed with free-spending newcomers.
“These people work 16 to 18 hours a day in the field, and they are hungry. They’ve got money and they pretty much order whatever they want. We’re packed every night,” said owner Lee Vallejo, who has expanded his menu and business hours.
Because hydraulic fracturing requires tremendous amounts of water, cities including Carrizo Springs are trying to figure out how to turn treatment plant effluent into cash.
“The oil industry is paying about 50 cents a barrel right now for gray water, and we generate about a half-million gallons a day,” City Manager Mario Martinez said.
The competition for mineral rights among the “lease hounds” who now are swarming over land records in county courthouses across South Texas has driven lease prices sky-high and caused some to take unusual risks.
“We’re getting a lot of ‘top-leasing,’ where one company leases on top of another, betting that the first one won’t be able to perform before the lease expires,” said David Phillip, 61, a veteran Karnes County oil and land man.
Strain on the system
And because most leases lapse if drilling doesn’t occur within three years, the landowners are hoping to cash in twice by signing a second lease with a company that’s willing to gamble.
But the sudden influx of thousands of new workers and fleets of heavy oil field equipment also is taking a toll in lightly populated rural South Texas, causing traffic jams and ruined roads.
“We have constant traffic, day and night, big trucks and oil tankers. At the H-E-B and Wal-Mart, it’s hard to find parking, and by 4 p.m., practically everything is gone from the shelves,” said Carrizo Springs Mayor Ralph Salinas, who quickly noted that he isn’t complaining.
Other problems are more serious and expensive.
“We have a lot of road damage, and while some of these oil companies are very good about working with us, others are not,” said La Salle County Judge Joel Rodriguez. “We have a lawsuit with some of these oil companies over damage for $5 (million) to $7 million.”
In Karnes County, traffic problems caused by 18-wheelers prompted county officials to call in a state police task force this year. “We weren’t prepared for this,” said County Judge Barbara Shaw, adding that the increased tax revenues needed to hire more deputies are a year or two away.
Alfred Pawelek, 81, a former Karnes County judge and businessman, said the Eagle Ford play is lifting a region that seemed on a relentless slide.
“When I went into the drive-in movie business here in 1950, we had 25,000 people in the county. When I got out in 1975, we were down to 12,000,” he said. About 16,000 now live in Karnes County.
Good times always end
Many were just getting by before the boom, and as anyone who has spent a lifetime in South Texas knows, the good times always end.
“They keep talking about this being a 20-year shot for us, but the economy could crater or we could run into environmental problems,” said Fowler, the DeWitt County judge. “Right now we’re in the glory days, and as long as we watch our budget, we’ll be safe.”
( Original Article )
Will Brazil Face the Energy Curse?
by Shannon K. O’Neil
Brazil’s President Luiz Inacio Lula da Silva holds up his oil-covered hands at the Cidade Angra dos Reis offshore platform (Ho New/Courtesy Reuters).
Each day it seems Brazil finds more and more oil in the Santos Basin. Its estimated reserves almost doubled this year, totaling over 30 billion barrels (some expect them to rise as high as 50 billion barrels). This launches Brazil’s reserves to 9th in the world, just behind Russia’s.
In the last months of the Lula administration, the government passed legislation that would make Petrobras, the state-controlled oil giant, the operator of these new finds. It grants Petrobras at least a 30% stake in all future joint ventures, with contracts to be awarded to companies offering the largest share of output to the government. These changes, and the increasing role of the state, have led many to question whether the new found oil may prove a curse rather than a blessing.
Brazil has a better chance than most to achieve the vaunted Norwegian model of oil exploitation, and avoid the pitfalls of the Middle East (or closer to home in Venezuela). In large part this is due to timing. Countries such as Venezuela, Saudi Arabia, or Nigeria found oil at the start of their process of state formation. Oil let them avoid hard choices – in particular the need for a broad based economy to tax (as well as subsequent demands for representation). Brazil already has a vibrant and diversified economy, which won’t easily fade, even with the oil influx.
Second, Brazil has had significant experience in implementing national energy policies. During the 1970s, Brazil faced a situation somewhat similar to that the United States faces today – over reliance on foreign oil during years of volatile pricing. In an effort to limit its dependence, Brazil’s military government boosted hydroelectric power, and created Pro-Alcool, the National Alcohol Program. It created a now world class ethanol industry by offering low-cost loans and credit guarantees, mandating percentages in gasoline, setting government purchase prices, and guaranteeing monopolistic distribution by the state-owned energy company, Petrobras. Forty years later, Brazil is second only to the United States in terms of ethanol production, which powers 20% of its transportation matrix. Now largely self-sufficient, its overall energy portfolio is one of the cleanest in the world. While the pre-salt finds will test this last achievement, Brazil’s history of energy management shows that it can conduct a successful long-term energy policy.
Third, the pre-salt oil is hard to get at. Buried almost four miles below the ocean surface and a mile-thick layer of salt (the reason for the name), it is relatively expensive to extract. Unlike Mexico’s Cantarell fields, which were discovered by a fisherman as the oil seeping to the surface tangled his nets, extraction will require significant technology, expertise, and management. The time and effort needed to extract may work in Brazil’s favor, boosting local human capital and technology companies rather than the reverse. It may also mean that revenues enter the domestic economy more slowly, limiting the inflationary effects on domestic prices and other areas of the economy (avoiding the so-called Dutch disease.). Brazil already faces inflationary pressure—from both industrial expansion and natural resources like timber, iron ore, and beef—but prudent use of oil revenue could help not hinder their already impressive long-term growth prospects.
Finally, and perhaps counter intuitively, Brazil’s vibrant (if messy) democracy may rescue it from a less attractive fate. Hardly immune from patronage, corruption, and the like, Brazil’s democratic politics provide a platform for a multitude of interests and a system of checks and balances between branches and levels of government. This true political back-and-forth and compromise has never fully operated in the Middle East (much to the region’s detriment), and arguably was never firmly established next door in Venezuela. This isn’t to suggest that everyone gets heard in Brazil or that special interests don’t have a louder say than others. But it does give a broader array of political and economic players a voice, something that doesn’t occur under non-democratic regimes.
Taken together this suggests that the pre-salt oil can be what the Brazilians dream about— a means to tackle the big issues of poverty and structural inequality by boosting the social safety net, improving education, investing in infrastructure, and continuing to build foreign reserves to protect against inflation. The technological investment could also spill over into the broader economy, attracting engineers, scientists, and oilfield specialists. There are some positive examples from emerging economies— most notably Chile. Under its democratic leadership, it has managed its copper reserves (making up sixteen percent of GDP and nearly half of all exports—more than enough to curse instead of bless the nation) quite admirably. Let’s hope that Brazil follows a similar path.
( Original Article )
Port Moresby wired for dramatic social, political transition
10:01 March 28, 2011
Analysis – By Rowan Callick in Port Moresby
Papua New Guinea’s founding father and Prime Minister Sir Michael Somare, aged 75 next month, was found guilty last Monday of 13 charges of misconduct and on Thursday was suspended from office for 14 days.
Until recently, this would have caused a sensation that would have virtually stopped the nation.
That it hasn’t demonstrates how rapidly PNG has changed. It is awash with cash, and corruption. It is wired everywhere, mobiles hanging off every ear, in a way unthinkable under the old government telecommunications corporation.
And its population is already larger than New Zealand’s and heading to overtake Australia this century.
The Leadership Tribunal, chaired by Australian judge Roger Gyles, found Somare guilty of filing incomplete or late returns on his assets and business dealings to the Ombudsman Commission annually as required.
It is Somare’s skills as a leader and a player for 42 years in the PNG political game, which is at once ornate and brutal, that have held together his ruling coalition for almost 10 years.
But this long-anticipated court case has become more a coda to the passing of the old independence era than a decisive central movement of a fresh symphony.
On the cusp
For regardless of Somare’s personal fate, PNG is on the cusp of an extraordinary economic, social and political transition – one the country has not seen since gaining independence from Australia in 1975.
Where this change will take it remains utterly uncertain. But that it is undergoing a convulsion is clear.
A new generation is on the move, born since independence and unburdened by sentiment towards the past.
The election due mid next year, for which the maneuvering is well under way, will indicate who is likely to win or lose from this transition. Usually, more than half the MPs lose their seats, and this time Somare has said he may decide to stand down at last, clearing the way for generational change.
Within 30 years, PNG’s population may start to overtake that of Australia as it stands today. Its capital Port Moresby is already approaching one million and appears set to be bigger than Auckland and Brisbane before long.
Its economy is likely to grow faster than China’s this year, more than 8 percent. Almost every leading resource company in the world is scrabbling over prospects there.
Rio Tinto is back after the Bougainville civil war. BHP Billiton is back after the debacle of its withdrawal from Ok Tedi. The first liquefied natural gas project, costing $16.5 billion, is just beginning four frenetic years of construction in the Southern Highlands and along a pipeline route down to the liquefaction plant in Port Moresby.
Massive mines
Massive mines are being developed elsewhere.
Port Moresby’s burgeoning backstreet lodges are bursting with landowners from gas fields and mine sites desperately seeking their fortunes from government and corporations, from anyone who may be persuaded to compensate them amply for their lost lands.
And life is being transformed especially rapidly by the wild rush into the mobile phone era.
Irish-based company Digicel, which specializes in telecommunications for developing countries, has launched a remarkably cheap service and backed it up by building towers all over PNG, giving its signals a nationwide reach despite its mountainous interior and myriad islands.
Street side betel nut sellers and people offering single cigarettes for 25c now also sell SIM cards.
In bustling Tabari Place in Boroko in the capital, traders have set up booths where they sell mobiles and all the associated paraphernalia, the deals usually being conducted entirely in Tok Pisin, while in the background young preachers try to attract the attention of the milling crowds.
Downtown outside the US embassy, where security guards hold dogs on leashes and parking is restricted to diplomatic staff, people wander the pavements selling China-pirated DVDs of American movies for $4 a time, as well as memory cards and flash drives.
Village phone talk
Papua New Guineans are able to contact relatives back in their villages by phone for the first time. The arrival of 3G has enabled people to go online throughout the country, accelerating the attractions of Facebook, which has already attracted 35,000 users.
Groups of young social and environmental activists — such as Act Now, Patriots, and The Voice, are building their numbers rapidly via such new technology, and also propelled by a growing rejection of the old politics of PNG: the parliamentary numbers game and the domination of money politics.
A “consultancy” firm run by one lobbyist from Enga province in the Highlands, the populous, high-energy but sometimes unruly region that is coming to dominate much of the country’s business and politics, is named, with breathtaking frankness, Money Talks Ltd.
A massive hoarding at the start of the road to the parliament carries the unadorned biblical text of Proverbs 29:2: “When the righteous are in authority the people rejoice. But when the wicked rule, the people suffer.”
Chief Ombudsman Chronox Manek … survived a 2009 assassination attempt. Photo: David Robie/PMC
Chronox Manek is among those sufferers. By rapid evasive action with his car, he only narrowly escaped an assassination attempt 15 months ago by gunmen outside his home but still requires treatment for his left arm where one of the bullets hit home.
He is the Chief Ombudsman, whose most contentious role is to police the Leadership Code that is the prime tool for combating corruption in PNG.
The foyer to the Ombudsman Commission’s office displays posters with cartoons. One shows a sleek politician urging a group of peers: “All those in favor of the construction of this hotel, say aye.” A thought bubble is emerging from his head at the same time: “On my block of land!”
Illegal ‘pay back’ bribes
Another has an Asian figure saying to an official: “I know you can’t accept a bribe. It’s illegal. But this is just a loan. Pay me back whenever you can.”
The stakes have never been higher in PNG, and thus the institutions established at independence by Australia have never been under such siege, especially the legal system.
Manek, who for many years was the top public prosecutor and has been the leading public defender, and has a master’s in law from the University of Melbourne, only pursues a limited number of targets at a time.
It is thus all the more extraordinary that the police have failed to make any charges over this assassination attempt on one of the country’s top constitutional office holders.
Manek says: “I’m left without information about what’s going on” over the case. “But it’s happened, and I’m moving on.”
He believes corruption began its insidious undermining of the country’s governance in the early 1980s, when PNG opened up to the logging industry.
“Our world was no longer an Australian-focused one but a much bigger world”, in this case, that of Asian timber corporations.
‘No sweat, no get’
Manek’s favourite motto is “no sweat, no get”.
He believes that has been undermined by a growing culture of taking short cuts to getting rich. And he is keen to educate the public that it is its right to insist that governments deliver citizens the services they are paying for.
“I want to educate the leadership that the public is right,” Manek says.
Another figure who is urging on this shift to a new form of leadership in PNG is Powes Parkop, a young former journalist, academic and human rights lawyer who is the Governor of Port Moresby.
He has gained a reputation for cleaning up the city and beautifying it, for new fountains, for Christmas lights, for his organizing of family events in the evenings to “reclaim the night” from the rascal gangs, with some positive indications: young hoodlums being chased away from evening big-screen relaying of rugby league games.
“We need to change the political culture and quickly,” Parkop says. “It has gone bad in PNG and we must alter that so that many other changes can happen, too. Too many people have effectively been disenfranchised, socially and economically.
“People have migrated here to Moresby looking for the land of milk and honey, and have found instead a place that is not so rosy.”
Facebook businessmen
Sam Basil is another new-generation MP, a young businessman from Bulolo in Morobe province, scene of an early gold rush 80 years ago and where top global mining houses are building or planning to build world-sized mines.
Basil uses Facebook extensively in communicating his views, with his supporters and others.
He says he is concentrating much of his efforts on helping give the public accounts committee of the parliament the teeth it needs.
Paul Barker, executive director of the private-sector-funded Institute of National Affairs, says it’s crucial that the government ensures that benefits flow broadly from the new resource projects, especially from the ExxonMobil led gas deal.
“If the government doesn’t get its act together and leaders cream off the profits, then PNG will get only the downside, not the upside, from such projects,” he says. “As in the Arab world today, the people in their 30s are the talking generation. But the younger generation below them have no special respect for what’s happened before.”
Australia’s role as PNG enters this difficult transition remains substantially shaped by its aid program, which comprises about 14 per cent of the national budget. It is becoming more focused and more practical, advice giving way to implementation.
Last year AusAID built 400 classrooms, provided 500,000 textbooks and trained 9000 teachers. The aim is to raise this to 800,000 textbooks next year. They will be delivered via an international procurement agency, which is also being deployed for the health project that is following these education successes, aiming to distribute much-needed basic medicines to every aid post and clinic, however remote.
Alternative paths
Alternative paths towards PNG’s development are reflected in the Port Moresby landscape.
Structures new at independence in 1975, such as the “pineapple building” where prime ministers once had their offices and the former main government building nearby, have been abandoned for sheer want of maintenance, today decaying skeletons.
Nearby, Malaysian logging giant Rimbunan Hijau — “forever green” — has built a massive mall, the Vision Centre. It is still largely untenanted but is likely to fill steadily, including with a new cinema complex that will be Port Moresby’s first since its old cinemas were shut as crime soared.
There is an intensity in the humid air, a gathering pace of change, as individuals and the nation as a whole dices for the prosperous future that has so far evaded them.
( Original Article )
Continents of the World
Mb50's "Liquid Mud" Rant 
