Daily Archives: January 9, 2012

Gulf Coast working to fill a fuel void in Northeast

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Sunoco‘s Philadelphia refinery is on the banks of the Schuylkill River. The company plans to pull out of the refining business altogether, which could help put the Northeast region in a precarious position. Photo: MIKE MERGEN / HC

by Simone Sebastian

Northeastern states are slated to lose half of their regional capacity for fuel production by midyear as financial woes push refineries there to idle, a trend likely to increase the region’s dependency on Gulf Coast supply.

A Houston-to-New York pipeline is making major expansions to accommodate growing demand to transport gasoline and other fuels up north from the Gulf Coast to fill the potential supply void.

The Gulf already supplies about half of the Northeast’s demand for petroleum products, said Mindi Farber-Deanda, head of the liquid fuels market team for the U.S. Energy Information Administration.

But the shutdown of production at two major Pennsylvania refineries last year and potential closure of a third could put the region in a precarious position and stress supplies of gasoline, jet fuel and heating oil, the agency concluded in a new report.

“It’s marginal, but it matters,” Farber-Deanda said of the drop in the Northeast’s local fuel production. “Before, you could get a certain percentage of supply from local refineries. Now you get it from Europe and the Gulf.”

The report noted that Northeastern states could experience “spot shortages with price hikes” for gasoline and other fuels as refineries discontinue operations.

Sunoco announced last month that it will idle operation of its 335,000 barrel-per-day refinery in Marcus Hook, Pa., part of the company’s plan to pull out of the refining business altogether. If Sunoco doesn’t find a buyer for its 178,000-barrel-per-day Philadelphia refinery by July, it will go off line, too, the company has said.

ConocoPhillips announced a similar move in September, taking its 185,000-barrel-per-day Trainer, Pa., refinery off line to prepare it for sale.

Pressure points

A combination of the sagging economy and improved fuel efficiency in vehicles and equipment has caused demand for some fuels to plateau. Meanwhile, competition from larger and more efficient refineries on the Gulf Coast and imports from Europe put pressure on local fuel producers, said Bill Day, a spokesman for San Antonio-based refiner Valero.

“They found it very difficult to compete,” he said. “If there was demand for product there, those refineries wouldn’t close down.”

Valero pulled out of the Northeast in 2010, when it sold its Delaware City, Del., and Paulsboro, N.J., refineries.

The struggling European economy has left refiners on the continent with plenty of gasoline to ship overseas.

Cleaner heating oil

A bigger concern for the Northeast is heating oil.

Demand for ultra-low-sulfur heating oil is expected to rise next fall, when regulations taking effect in New York will require use of the cleaner fuel in boilers that warm buildings. A limited number of refineries are equipped to produce it.

Heating oil concerns are probably the greatest,” said Terry Higgins, executive director of refining for consulting company Hart Energy. “A cold snap, with a strong surge on heating oil needs, could be a strain on the system.”

Room to grow

The Gulf Coast is replete with refineries that are expanding or have room to increase production, he said. Motiva Enterprises, a joint venture of Shell and Saudi Aramco, is nearing the end of a massive expansion of its Port Arthur refinery to increase production of ultra-low sulfur fuel and other petroleum products.

In 2010, Gulf Coast area refiners produced a net 3.4 million barrels per day of ultralow-sulfur distillate fuel oil, a category that includes the clean heating oil, according to Energy Information Administration data. That’s up from just 23,000 barrels per day in 2005.

Colonial Pipeline, a major thoroughfare for shipping fuels from Gulf Coast refineries to East Coast markets, has seen growing demand from refiners to ship larger amounts of its products north, spokesman Steve Baker said.

The 5,500-mile pipeline transports heating oil, as well as gasoline, diesel fuel and other petroleum products.

Last year, Colonial added 120,000 barrels per day of carrying capacity to its system. By mid-2012, it will have expanded the flow of distillates – including heating oil, jet fuel and diesel – by another 55,000 barrels per day. In December, the company announced it would expand its gasoline transport capacity by another 100,000 barrels per day.

In total, the expansions will increase the system’s capacity by about 8 percent, Baker said.

“We have seen a rising demand throughout the year” for fuel transport between the Gulf Coast and the Northeast, Baker said. “These are big capital investments. It’s a significant increase.”

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Australia: Woodside’s First CWD Well Breaks Record with AGR’s RMR

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An ambitious exploratory well project has entered the record books – with AGR’s Riserless Mud Recovery (RMR™) system from their Enhanced Drilling Solutions division helping to make it possible.

Woodside called a total section depth of 1,905m (6,250ft) on the Tidepole East-1 exploration well off Western Australia. It was the first time that Woodside had used the Casing While Drilling (CWD) method on one of its wells and the depth reached sets a new world record for the technique.

RMR™ enabled Woodside to use the type of drilling mud needed to maximize the wellbore smearing effect that CWD provides, which helps keep the wellbore stable.

The system allows top-holes to be drilled using weighted mud, with fluid and cuttings returned to the rig and no discharge. It is also able to supply the low pump rates and good hole-cleaning capability required to drill efficiently, despite the relatively narrow annulus that was a feature of this project.

Thanks to RMR™ and the casing being run during the drilling process, there were no losses to the formation during that stage – an all-too-common occurrence with conventional drilling method.

AGR’s ingenuity solves the challenge

Standard internal or external wellhead adapters could not be used on this project for the RMR’s™ Suction Module (SMO) without extensive modification to the Permanent Guide Base, or without causing difficulties when it came to landing the High Pressure Well Head (HPWH) on the Low Pressure Well Head (LPWH) later on in the operation.

AGR’s ingenuity provided the solution, with an internal adapter being devised that could be split. This meant that the casing could be drilled down with the SMO in place.

General Manager EDS Asia Pacific, Bernt Eikemo, said: “When it was time for the HPWH to be landed on the LPWH, the SMO could simply be lifted off the LPWH using two ‘tugger’ winches on the rig, with an ROV performing the split.

“This of course has never been done before but, with a simple design and good communication with the ROV Company, it proved to be a great solution and it took next to no time for the ROV to release the locking pins and split the adapter.”

The operation went smoothly, with an impressive Rate of Penetration (ROP) achieved of some 60m (197ft) per hour. Bernt added: “This would have been impressive even with conventional drilling. To be able to drill these kinds of wells and others in a quick, simple way like this can potentially create great savings for operators.

“Working within areas with challenging geotechnical conditions, a proper mud system and the ability to have full returns are vital for success. RMR™ is perfect for this application.”

AGR recently surpassed the 500-well landmark for its Cutting Transportation System (CTSTM) and RMR™. Next year will see the first deployment of the company’s EC-Drill™ Managed Pressure Drilling system.

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BP, Shell to partake in arctic drilling inquiry, Telegraph says

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The Noble Discoverer drill ship is shown near Alaska. Shell Oil Co., plans to use the ship for drilling in the Beaufort Sea. (Photo courtesy of Shell Oil Co.)

by Bloomberg

BP Plc, Royal Dutch Shell Plc and Cairn Energy Plc are among companies that may be asked to provide information on drilling in the Arctic to the U.K.’s Environmental Audit Committee later this year, the Sunday Telegraph reported, citing Committee Chairman Joan Walley.

The committee’s Protecting the Arctic inquiry will include both onshore and offshore drilling in the Arctic Circle, the newspaper said.

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Songa Eclipse Getting Ready for Contract with Total in Angola

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Songa Offshore​, Cyprus-based offshore drilling company, today provided a fleet update for October 2011.

Songa Venus remained on location for Petronas Carigali, Malaysia through-out the period. The rig was shut down during the majority of the period and completed earlier announced repairs and testing of re-worked BOP components on December 19. The unit achieved 100% operating efficiency for the remainder of the period after re-commencing operations.

Songa Mercur completed its de-mobilization and load off from Sakhalin, Russia to Labuan Malaysia end of October and the rig has undergone extensive contractual acceptance testing and installation of third party equipment through November and December. The rig is now fully accepted and scheduled to depart for commencement of its two well program in Malaysia with Petronas Carigali.

Songa Dee continued its program for Statoil at the Gulfaks field, and the rig achieved an average operating efficiency of 99% during the period.

Songa Delta completed its scheduled SPS and rig upgrade yard stay at CCB base outside Bergen, Norway during the period. The yard stay was extended from an original 40 days to 56 days mainly due to extended work scopes and additional work related to the BOP system. The rig was then further delayed by weather and remained in sheltered waters until 6th January and is currently in process of anchoring up at location in order to re-commence the contract with Wintershall / Det Norske Oljeselskap.

Songa Trym achieved an operating efficiency of 99% during the period. The rig continues to operate for Statoil in Norway.

Songa Eclipse completed its mobilization to Angola during the period, and the rig is currently undergoing final rig contractual acceptance testing which is expected to be completed during second half of January. The rig will thereafter commence its one well plus 18 month contract with Total E&P Angola

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Deepsea Metro II Drillship Arrives in South Africa

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Last week (4. January), Odfjell’s Deepsea Metro II drillship arrived at DCD-Dorbyl Marine shipyard in Cape Town, South Africa. The purpose of the yard stay is to carry out planned modifications for Petrobras in Brazil.

The contract with Petrobras has a firm duration of 3 years and the value, including part of potential bonus and mobilization fee, is approximately USD 531 million.

The modification project in Cape Town is managed by Odfjell Drilling, a privately-owned international drilling, well service and engineering company with nearly 40 years experience of international drilling operations.

“Working conditions at the shipyard here in Cape Town are impeccable, and the crew and project management team which will carry out the project activities are very motivated to complete the project with good quality and within time frame. We look forward to a successful stay in South Africa,” states EVP MODU in Odfjell Drilling Mr. Erik Askvik.

According to the data on Odfjell Drilling’s website the vessel, delivered by Hyundai Heavy Industries in November 2011,  is a highly efficient, state-of-the-art 6th generation ultra deepwater drillship equipped with the latest technology and with focus on zero discharge and other green rig features.

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USA: Keppel to Turn Ocean Voyager into Ocean Onyx

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Keppel AmFELS, a shipyard strategically located at the gateway of the Gulf of Mexico, Brownswille, Texas has secured a contract from Diamond Offshore to construct and upgrade a moored semisubmersible rig with delivery scheduled for 3Q 2013. The estimated shipyard contract price is approximately US$150 million.

The rig, to be named Ocean Onyx, will be constructed from an existing hull from a Diamond Offshore cold stacked unit, which previously operated as the Ocean Voyager.

Keppel AmFELS’ scope of work on the Ocean Onyx includes the reconstruction of the rig, installation of advanced equipment such as a modern drilling package, and installation of sponsons to the pontoons to enhance the stability of the rig in deepwater. The rig will be designed to operate in water depths of up to 6,000 feet and will have a variable deck load of 5,000 long tonnes, a five-ram blowout preventer, and quarters capacity for 140 personnel.

Mr Larry Dickerson, President and CEO of Diamond Offshore, said, “We have worked with Keppel for more than a decade, and our rigs have consistently been delivered on time and within budget, whether in the US or Singapore. With Keppel’s track record as a leading offshore yard, we are confident that this project will also be a success.”

Keppel O&M has previously built four similar semisubmersible rigs for Diamond Offshore: the Ocean Baroness, Ocean Rover, Ocean Endeavour and Ocean Monarch.

Mr Tan Geok Seng, President of Keppel AmFELS, said, “We are pleased to be able to embark on another major rig project for Diamond Offshore, who has worked with Keppel on more than 20 projects since 1996. Diamond’s rigs are sent regularly to our yards around the world for maintenance, repair and upgrade, and Keppel AmFELS has proven to be their choice yard in the US Gulf of Mexico. Having built a long-term partnership with Diamond, we understand the company’s needs and are confident of delivering another high quality rig to their satisfaction.”

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Obama’s Cordray Appointment Mocks the Constitution

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July 18, 2011: President Obama announces the nomination of former Ohio Attorney General Richard Cordray to serve as the first director of the Consumer Financial Protection Bureau.

By Phil Kerpen
Published January 04, 2012

In 2008 candidate Sen. Barack Obama famously said: “This is part of the whole theory of George Bush that he can make laws as he is going along. I disagree with that. I taught the Constitution for 10 years. I believe in the Constitution and I will obey the Constitution of the United States. We are not going to use signing statements as a way of doing and end run around Congress.”

Now, we find that not only was he kidding about signing statements – he recently used one to ignore about 20 provisions of the omnibus spending bill – but Obama also believes he can decide for himself that the Senate is in recess when it is not, overturn at least a hundred years of precedent, and bypass the Constitution’s

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Moreover, the president now considers it a political virtue that he is doing precisely what he criticized George Bush for doing: “make laws as he is going along.” Obama now says: “I refuse to take ‘No’ for an answer… when Congress refuses to act in a way that hurts our economy and puts people at risk, I have an obligation as president to do what I can without them.”

If he were acting within the confines of the law and the Constitution, the argument might make sense.But Obama has now adopted a theory of executive power so expansive that a reporter at a recent press conference understandably asked whether the president believes we have a virtual monarchy, a president of unlimited powers subject only to periodic elections but not to the rule of law.

According to a 1993 brief from the Clinton Justice Department, Congress must remain adjourned for at least three days before the adjournment constitutes a “recess” for the purposes the recess appointment power.

The origin of this three day period is Article I, Section 5 of the Constitution, which states: “Neither House, during the Session of Congress, shall, without the Consent of the other, adjourn for more than three days.”

In other words, the president can only recess appoint when the Senate has adjourned for more than three days, and the Senate cannot adjourn for more than three days without the consent of the House.

Speaker John Boehner has properly withheld that consent to prevent Obama from installing radical appointees into key positions.

There is recent precedent for this action and for its legitimacy.In fact, then-Obama Solicitor General Elena Kagan wrote to the Supreme Court on April 26, 2010:“Although a President may fill such vacancies through the use of his recess appointment power … the Senate may act to foreclose this option by declining to recess for more than two or three days at a time over a lengthy period. For example, the Senate did not recess intrasession for more than three days at a time for over a year beginning in late 2007.”

Obama’s attempt to “recess appoint” Richard Cordray while the Senate is in pro forma session is especially galling in light of the history of the new Consumer Financial Protection Bureau (CFPB) and the broad powers that Cordray – if Obama’s sleight of hand is permitted by the courts – will wield over the United States economy.

The CFPB has the power to interfere with every consumer financial transaction in the economy. It is housed in the Federal Reserve and funded out of Fed operations, not congressional appropriations, avoiding effective congressional oversight.

All power is vested in one individual – now, presumably Cordray – with no board or commission.None of this was part of Elizabeth Warren’s original design, which included a five-member commission that was funded and overseen by Congress.Senate Republicans have correctly called for reforms to make the new agency accountable before confirming a nominee and allowing it to begin writing rules that could have a major negative impact on the economy.

Obama doesn’t care.He’s making is up as he goes along.What a difference four years makes.

Phil Kerpenis vice president for policy at Americans for Prosperity and author of Democracy Denied: How Obama is Ignoring You and Bypassing Congress to Radically Transform America – and How to Stop Him.

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