Daily Archives: April 18, 2011
By THOMPSON AYODELE
Turmoil in the Middle East is once again causing a spike in US energy prices, along with the usual hand- wringing over how the country can feed its oil addiction in the years ahead. With quick stops at alternative fuels (not a serious, large-scale option for decades to come) and nuclear (hello, Fukushima Daiichi), the debate quickly comes back to America’s own domestic oil production: To drill or not to drill?
And here some global perspective may help Americans find a way out of a blisteringly politicized discussion that generates, literally, more noise than light.
As a Nigerian who is proud of his country’s contributions to the world’s oil supply — we are the single largest producer of oil in Africa, and one of the top five exporters to your nation — I wonder how it is that Americans never seems to ask yourselves one fundamental question: What if all countries restricted access to their oil and gas reserves the way you do? Where would the world — let alone the United States — get its energy from?
America’s unwillingness to tap its oil reserves would be defensible if you were equally conservative with your consumption. But, sorry, you consume roughly a quarter of the world’s oil. Meanwhile, you severely restrict or outright forbid access to oil bounties along the Atlantic coastline, the eastern Gulf of Mexico and in the Alaskan tundra.
If countries in the Middle East, South America or Africa were to adopt a similar attitude, America would be left gasping for energy.
The arguments against tapping US oil reserves are familiar. Most popular is the refrain that there are barely enough “proved reserves” of oil beneath the US to last more than three years or so. But that statistic is based on a set of criteria set by the Society of Petroleum Engineers that is itself defined by the restrictions on exploration.
These “proved reserves” count only the oil that is “commercially recoverable” under “current economic conditions, operating methods and government regulations” (emphasis added). In other words, the term defines how much oil your government allows access to, not how much is actually there.
If you ease restrictions on drilling, the amount of US “proved reserves” will magically increase.
Meanwhile, tapping those reserves would mean significant economic growth, increased energy security and lower US energy prices. Developing the oil and natural-gas reserves now kept off-limits by Congress could mean another $1.7 trillion in government revenue, according to a study from the American Petroleum Institute. Not to mention millions of good-paying jobs in states that could use an influx of employment right now.
In Nigeria, oil and gas exploration now accounts for 40 percent of our GDP, as well as 98 percent of export earnings and about 83 percent of federal-government revenue. We are a developing nation, but we manage to access our reserves in a safe, environmentally sound way despite our challenges. Were America to enter full-scale production, it would force producers everywhere — including Nigeria — to be more competitive, thereby making energy cheaper for consumers worldwide.
In March, the Obama administration awarded its first permit for a new deep-water drilling project in the Gulf of Mexico (with beefed-up safety regulations) since the Deepwater Horizon disaster. This is a step in the right direction — but dozens of permits still await consideration, and the current snail-like pace of approval only exacerbates America’s energy anxiety.
President Obama has earned global good will for his efforts to make America a better international partner. Those efforts shouldn’t exclude his country’s obligation to kick in its share of the heating bill.
Thompson Ayodele is execu tive director of Initiative for Public Policy Analysis (www.ippanigeria.org), a policy think tank based in Lagos, Nigeria.
Victor Davis Hanson in his RCP post, Energy Fantasyland, asks if high priced energy and $4+ gasoline is good or bad. He immediately suggests that this would ordinarily be a stupid question except for the fact that President Obama has shut down or limited nearly all domestic oil expiration and production. The effect of course in the Gulf has been to see the exit of drilling rigs and jobs. But he argues that this is right in line with Obama’s desire to drive energy prices up: “Today’s soaring energy prices are exactly what candidate Obama once dreamed about: “Under my plan of a cap-and-trade system, electricity rates would necessarily skyrocket.” Obama, like Chu, made that dream even more explicit in the case of coal “So, if somebody wants to build a coal plant, they can — it’s just that it will bankrupt them, because they are going to be charged a huge sum for all that greenhouse gas that’s being emitted.”
Now let’s shift to Richard Weltz’s American Thinker post, Anyone Want to Connect the Petro-Dots? quote:
- George Soros and his various money-distribution organizations such as MoveOn.org spend heavily on behalf of Obama’s run for the presidency.
- Sorosinvests over $800 million for a large stake in Petrobras, the Brazilian oil company.
- The U.S. arranges for the Ex-Im Bank to guarantee loans of $2 billion to Brazil for exploration of offshore oil finds. end quote.
Victor Davis Hanson highlights President Obama victory lap in Brazil: “Last week, President Obama went to Brazil and declared of that country’s new offshore finds: “With the new oil finds off Brazil, President (Dilma) Rousseff has said that Brazil wants to be a major supplier of new stable sources of energy, and I’ve told her that the United States wants to be a major customer, which would be a win-win for both our countries.”
The administration has run record deficits, generated record unsustainable debt, and generated 9% unemployment in the process, so what does it do? Shuts down virtually all oil exploration and promoted bullet trains and the already failed Chevy Volt which runs on gas.
Who wins, the American workers? No. The American consumers? No. George Soros? Why yes! The value of George’s Petrobras investment has multiplied dramatically. The profits generated with the Brazilian offshore production will be tremendous. Oh, and those profits will be enhanced with the subsidized financing provided by Eximbank!
One more thing, who do you think Soros will support in the 2012 presidential race?
April 16, 2011 6:24 am by Joe Leahy
The obvious answer is because he wanted to get in early to build a more constructive relationship between the US and Brazil than existed under Rousseff’s predecessor, Luiz Inácio Lula da Silva. In spite of his great charisma, Lula’s overtures to Iran irritated Washington and made him seem like an unreliable partner on the foreign stage.
But why the rush? Why not allow Rousseff to settle in and get a better measure of her administration before pinning the diplomatic flag of the US to the Palacio do Planalto, the president’s palace in Brasília?
The true answer might lie in the following passage from Obama’s remarks during a joint press statement with Rousseff after their meeting in mid-March.
“We’re creating a new strategic energy dialogue to make sure that the highest levels of our governments are working together to seize new opportunities. In particular, with the new oil finds off Brazil, President Rousseff has said that Brazil wants to be a major supplier of new stable sources of energy, and I’ve told her that the United States wants to be a major customer, which would be a win-win for both our countries.”
So it was about oil. Brazil’s “pre-salt” deepwater finds, which are just starting to come on stream. And not just any oil but the biggest offshore discoveries in history and all of it located in a stable democracy in the western hemisphere, not the Middle East. No wonder Obama could not wait to fly Air Force One in a southerly direction.
Fast forward to this week and Rousseff is visiting China. Among the corporate deals on the sidelines of the trip, a proposal by Foxconn, Taiwanese-owned electronics group with large operations in China, to invest $12bn in Brazil caught the headlines.
But perhaps more important in the long-run was the courting during the visit of Petrobras, the Brazilian oil major, by Chinese peer Sinopec. Petrobras already has a deal to supply oil to Sinopec from the pre-salt fields. But Sinopec went further this week by finalizing a joint venture with Petrobras to explore more blocks off the coast of northern Brazil, away from the “pre-salt” areas.
The US is realizing that strategic competition with China for scarce resources is no longer something it does far from home. Latin America, once the backyard of the US, is shaping up to become the stage for the next tussle between these two giants.
Tanzania has ordered its army to escort ships searching for oil and gas off its coast to protect them from Somali pirates.
The East African country has licensed at least 17 international companies to look for offshore and onshore energy reserves.
“The first step has been to provide escorts to vessels that request security assistance when they enter our territorial waters and the second is for the government to provide protection to vessels exploring for gas and oil in our ocean.”
Companies exploring in Tanzania include Canada’s Artumas Group Inc (AGI) , France’s Maurel & Prom , Norway’s StatoilHydro ASA, Shell International and Ras al-Khaimah Gas Commission of United Arab Emirates.
Somalia’s lack of effective central government has allowed piracy to flourish offshore and deep into the Indian Ocean despite a flotilla of international warships.
Armed pirate gangs have made millions of dollars demanding ransoms for ships captured as far south as the Seychelles and eastwards towards India.
Pinda said Tanzanian authorities had so far arrested 11 Somali pirates in its waters and prosecuted all the suspects.
Tanzania this month postponed its fourth deep offshore bidding round to next year to allow it to offer new blocks discovered by a new seismic survey.
By Fumbuka Ng’wanakilala (Reuters)
Aban Offshore has received orders from ONGC for the deployment of jack-up rigs Aban III and Aban IV(image) for a period of 3 years each.
The total value of these firm orders is approximately USD 138 million (equivalent to Rs 6,200 million).
Wright’s Well Control Services (WWCS) announces the formation of a strategic alliance with IEV Group, a multi-national company headquartered in Malaysia (IEV), to introduce and promote WWCS’ plug and abandonment, decommissioning and removal, wireline and e-line, completion and recompletion, hydrate remediation, well pumping and other offshore services to the Asia Pacific market.
IEV will leverage its extensive presence in the region to provide sales, marketing, logistics, support, local third-party supplies and project management for WWCS’ operations in Malaysia, Thailand, Indonesia, Vietnam, Myanmar, India, Philippines, Papua & New Guinea, Australia, Taiwan, China, Singapore, East Timor, UAE, Saudi Arabia, Kuwait, Qatar and other Middle Eastern countries.
“Asia and Australia have the second highest concentration of offshore structures in the world only behind the Gulf of Mexico, so this strategic partnership to offer rigless well control services in the region is a perfect fit with our plans for international growth,” says WWCS president David Wright.
“With IEV’s help, we are excited to now offer clients substantial day-rate savings over conventional rig-based methods in this dynamic offshore market.”
“Our new alliance with Wright’s Well Control Services is a natural extension of our commitment to provide clients with best-in-class technologies for all their needs offshore,” says IEV founder and Group CEO, Christopher Do. “Oil and gas operators throughout Asia and Australia will be quick to embrace WWCS’ rigless services once we demonstrate the dramatic favorable impact to the bottom line these techniques offer.”
IEV Group provides a range of innovative and cost-effective engineering solutions to the petroleum and marine industries. The company excels in applying advanced technologies to replace conventional work methods thus helping clients to reduce costs and achieve desired results within schedule. IEV, along with its strategic alliance partners, has carved a niche as a leading integrated engineering solutions provider in the East Asian region.
Wright’s Well Control Services offers comprehensive surface, subsea and ultra-deepwater offshore and land-based services for clients in the Gulf of Mexico and Asia Pacific regions. Wright’s specializes in cost-effective rigless applications including patent-pending hydrate remediation and subsea blowout preventer technologies. WWCS was founded in 2006 by David Wright who has 25 years of offshore and onshore engineering experience including work at Halliburton, The Red Adair Company and ATP. Wright’s is a privately held company employing 60 people with corporate offices in Humble (Houston), Texas, USA and an operations facility is Lake Charles, Louisiana, USA.
Nathan Bell April 18, 2011 - 2:50PM
There’s an old joke among oil drillers: “We didn’t hit oil, but at least we didn’t hit gas”.
Just 10 years ago, gas was an irritating, near-worthless by-product of oil production. Now an oilman’s job depends on it.
Major oil producers like Chevron and ExxonMobil are chasing gas because they can’t get their hands on any more oil.
What’s more, it’s now much less expensive to transport, to the point here gas is now a real substitute for oil. The switch to LNG is on.
But what really accelerated the pace of change was the advent of Liquefied Natural Gas, or LNG.
Prior to this development, gas had to be transported through huge, and hugely expensive, pipelines. Only those projects close to customers or existing pipelines made economic sense. LNG did away with all that.
Through a process known as liquefaction, gas is chilled into LNG, occupying a volume just 1/600th of its gaseous state. This small fact changed the face of the industry.
Where once large and expensive pipeline networks were required to transport gas point-to-point, now ships deliver it anywhere in the world.
Nevertheless, it’s still a complex process. Once LNG reaches its destination, it has to be turned back into its gaseous state – a process somewhat unimaginatively known as regasification – and transported conventionally via pipelines to end users.
At both ends of the LNG chain, nature and technology collide. And the costs of that battle aren’t cheap.
The supply glut
LNG prices are traditionally linked to the oil price. In days when oil fetched $US20 a barrel this quirk was seen to benefit buyers of gas. Today, with oil prices at over $US100 a barrel, it’s a boon to gas producers.
Producers have responded by scrambling to increase output. There’s now every sign of a global glut of LNG.
Qatar is home to the world’s largest gas fields, where enough oil and condensate by-product lowers the effective cost of gas production to almost zero. Cost-free cargoes of Qatari LNG thus ply the world’s oceans, holding prices down.
In Australia, new capacity worth nearly 60 million tonnes per annum (mtpa), has already been committed. With coal seam gas reserves yet to come on stream, that figure is likely to grow.
The shale gas revolution in the US will also have an impact, turning what might have been an importer of LNG into a possible exporter.
And shale and coal seam gas discoveries that have transformed the North American gas market may also occur in new markets like China, India and Brazil. If that occurs, some of the world’s largest potential markets may not need to import LNG at all.
A glut of LNG over the next few years appears likely. Indeed, we’ve been warning of this possibility.
But over the longer term, demand for LNG should easily catch up and perhaps even exceed new capacity.
Growing demand for LNG
The world’s biggest and hungriest energy consumers have barely embarked on their conversion to gas.
In 2005 China had no re-gasification terminals at all. Today, there are six in various forms of development. Each will be able to process millions of tonnes of LNG each year. Currently, Chinese LNG imports are less than 6mtpa. In 15 years’ time, they’re forecast to increase 10-fold. India, Brazil, South Africa, Vietnam and others are constructing new terminals to import LNG.
Overall, demand is expected to grow 15mtpa for the foreseeable future. That’s the equivalent of a new North West Shelf every year.
With Qatar indicating it has reached its supply limit – volumes are not expected to exceed 77mpta for some years – Australian producers are well placed to fill that supply shortfall.
The switch to gas is already on. Developing countries are increasingly seeing LNG, not oil, coal or renewables, as the primary solution to their growing energy demands. Investors take note: this is a sector that will offer rich pickings for investors.