Daily Archives: January 9, 2012
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
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.
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.”
- Gasoline May Rise Above $4 a Gallon as Northeast Plants Shut (businessweek.com)
- Gas could soar past $4 per gallon by summer, analyst says (nj.com)
- Refining Sector Woes Going From Challenging To Worse (TSO, VLO, MPC, WNR, CVI, XOM, CVX, COP, BP) (247wallst.com)
- Amid fears of price spikes, Dems press Chu to fill Northeast oil reserve (thehill.com)
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.
- AGR Signs Deal to Supply RMR to Woodside for Use on Australia’s North West Shelf
- UK: Aquaterra Wins Drilling Riser Contract
- Norway: Eni Norge Chooses AGR ‘s Technology for Multi-Well Projects in Barents and Norwegian Sea
- Norway: AGR’s Drilling Technology Break Through 500 Wells Milestone
- Norway: NPD Announces Oil Discovery East of Ula Field
- Milestone Achievement for AGR’s Drilling Technology in Chirag Field, Azerbaijan (mb50.wordpress.com)
- USA: Aker Solutions to Open Hi-Tech Drilling Equipment Simulator in – Houston (mb50.wordpress.com)
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.
- MPs to quiz oil giants BP, Shell and Cairn Energy on Arctic drilling safety (telegraph.co.uk)
- Guggenheim Partners announces Arctic investment fund (mb50.wordpress.com)
- Now Russia’s Joint Venture With BP Is Spending $10 Billion To Find Oil In The Arctic (mb50.wordpress.com)
- Is the Industry Ready to Drill in the Arctic? Stena Drillmax Ice Nears Delivery (mb50.wordpress.com)
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
- South Korea: Songa Offshore Orders Two Rigs from DSME (mb50.wordpress.com)
- Israel: DSME Signs Tamar Deal (mb50.wordpress.com)
- Norway: Island Offshore Charters Two Vessels to Schlumberger (mb50.wordpress.com)
- Norway: DOF Subsea to Provide Offshore Survey & Construction Services to Statoil (mb50.wordpress.com)
- Oceaneering Bags Angola Gig from BP (mb50.wordpress.com)
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.
- South Korea: Naming Ceremony for Odfjell Drilling’s New UDW Drillship (mb50.wordpress.com)
- South Korean Hyundai Heavy Delivers Deepsea Metro II Drillship (mb50.wordpress.com)
- USA: Busy December Ahead of Pacific Drilling’s Drillships (mb50.wordpress.com)
- Dolphin Drilling to Provide Two Drillships for Anadarko’s Mozambique Operations (mb50.wordpress.com)
- Ophir Begins with Drilling Operations Offshore Tanzania (mb50.wordpress.com)