Daily Archives: February 24, 2012
Shell’s Arctic-class drill ship, the Kulluk, is shown as it is towed near Alaska. Shell is moving the Kulluk drilling unit from Dutch Harbor, Alaska, to a Seattle shipyard for ongoing maintenance and planned, technical upgrades. (Photo courtesy of Shell Oil Co.)
Alaska’s North Slope shales may hold as much as 80 trillion cubic feet of gas, or more than half the highest estimate for the Marcellus formation, and as much as 2 billion barrels of oil, the U.S. Geological Survey said.
President Barack Obama’s administration and the state of Alaska are offering more access to oil and natural gas resources on land and in the Arctic waters to help lower dependence on imported fuel and push more crude through a major oil pipeline crossing the state. Royal Dutch Shell Plc plans to start drilling this year in the Chukchi and Beaufort seas, which are off the coast of the North Slope.
“Alaska’s energy resources hold great promise and economic opportunity for the American people,” Interior Secretary Ken Salazar said today in an e-mailed statement.
The geological service, part of the Interior Department, said in a statement that North Slope shale hasn’t been developed because of economic and infrastructure considerations.
The assessment, the first made of North Slope shale resources, is based on success in extracting oil and gas from similar formations, such as the Marcellus Shale in the U.S. East. The agency last year estimated Marcellus may hold as much as 144 trillion cubic feet of gas.
Shale gas and shale oil, produced by horizontal drilling and hydraulic fracturing by injecting water and chemicals underground, led to record natural gas output in the U.S. last year and 33 percent decline in prices in the past 12 months.
- USA: EIA Expects Huge Rise in Natural Gas Production (mb50.wordpress.com)
- ExxonMobil, OMV Petrom Strike Gas Offshore Romania (mb50.wordpress.com)
- Shell ‘hits shale gas’ in China (mb50.wordpress.com)
Obama’s Forrest Gump analysis of rising gas prices.
‘The American people aren’t stupid,” thundered President Obama yesterday in Miami, ridiculing Republicans who are blaming him for rising gasoline prices. Let’s hope he’s right, because not even Forrest Gump could believe the logic of what Mr. Obama is trying to sell.
To wit, that a) gasoline prices are beyond his control, but b) to the extent oil and gas production is rising in America, his energy policies deserve all the credit, and c) higher prices are one more reason to raise taxes on oil and gas drillers while handing even more subsidies to his friends in green energy. Where to begin?
It’s true enough that oil prices can’t be commanded from the Oval Office, so in that sense Mr. Obama’s disavowal of blame is a rare show of humility in the face of market forces. Would that he showed similar modesty in trying to command the tides of home prices, car sales (“cash for clunkers”), or the production of electric batteries.
The oil price surge has several likely sources. One is the turmoil in the Middle East, especially new fears of a supply shock from a conflict with Iran. But it’s worth recalling that Mr. Obama also blamed the last oil-price surge, in spring 2011, on the Libyan uprising. Moammar Gadhafi is now gone and Libyan oil production is coming back on stream, yet oil prices dipped only briefly below $90 a barrel and have been rising since October. Something else must be going on.
Mr. Obama yesterday blamed rising demand from the likes of Brazil and China, and there is something to that as well. But this energy demand is also not new, and if anything Chinese and Brazilian economic growth has been slowing in recent months.
Another suspect—one Mr. Obama doesn’t like to mention—is U.S. monetary policy. Oil is traded in dollars, and its price therefore rises when the value of the dollar falls, all else being equal. The Federal Reserve throughout Mr. Obama’s term has pursued the easiest monetary policy in modern times, expressly to revive the housing market. It has done so with the private support and urging of the White House and through Mr. Obama’s appointees who are now a majority on the Fed’s Board of Governors.
Oil staged its last price surge along with other commodity prices when the Fed revved up its second burst of “quantitative easing” in 2010-2011. Prices stabilized when QE2 ended. But in recent months the Fed has again signaled its commitment to near-zero interest rates first through 2013, and recently through 2014. Commodity prices, including oil, have since begun another surge, and hedge funds have begun to bet on commodity plays again. John Paulson says he’s betting on gold, the ultimate hedge against a falling dollar.
Fed officials and Mr. Obama want to take credit for easy money if stock-market and housing prices rise, but then deny any responsibility if commodity prices rise too, causing food and energy prices to soar for consumers. They can’t have it both ways, as not-so-stupid Americans intuitively understand when they buy groceries or gas. This is the double-edged sword of an economic recovery “built to last” on easy money rather than on sound fiscal and regulatory policies.
As for domestic energy, Mr. Obama rightly points to the rising share of U.S. oil consumption now produced at home. But this trend began in the late Bush Administration, which opened up large new areas on and offshore for oil and gas drilling that are now coming on stream. Mr. Obama sneered at expanded drilling as a candidate in 2008 and for most of his term has done little to expand it.
In early 2010, he proposed to open some new areas to drilling but shut that down after the Gulf oil spill. According to the Greater New Orleans Gulf Permits Index for January 31, over the previous three months the feds issued an average of three deep-water drilling permits a month compared to the historical average of seven. Over the same three months, the feds approved an average of 4.7 shallow-water permits a month, compared to the historical average of 14.7.
Approval of an offshore drilling plan now takes 92 days, 31 more than the historical average. And so far in 2012, an average of 23% of all drilling plans have been approved, compared to the average of 73.4%.
Oh, and don’t forget the Keystone XL pipeline, which would have increased the delivery of oil from Canada and North Dakota’s Bakken Shale to Gulf Coast refineries, replacing oil from Venezuela.
The reality is that most of the increase in U.S. oil and gas production has come despite the Obama Administration. It is flowing from the shale boom, which is the result of private technological advances and investment. Mr. Obama has seen the energy sun rise and is crowing like a rooster that he made it happen.
Mr. Obama yesterday also repeated his proposal that now is the time to raise taxes on oil and gas companies, as if doing so will make them more likely to drill. He must not believe the economic truism that when you tax something you get less of it, including fewer of the new jobs they’ve created.
We’d almost feel sorry for Mr. Obama’s gas-price predicament if it weren’t a case of rough justice. The President has deliberately sought to raise the price of energy throughout the economy via his cap-and-trade agenda. He is now getting his wish, albeit a little too overtly for political comfort. Mr. Obama has also spent three years blaming George W. Bush for every economic ill. If Mr. Obama now feels frustrated by economic events beyond his control, perhaps he should call Mr. Bush for consolation.
- Well, At Least They Aren’t Blaming ‘Speculators’ For Skyrocketing Oil Prices This Time… (businessinsider.com)
The final NMS Girl Of The Week is Sarah Banks.
I’m sure that by now you’re not surprised by the quality of NMS hopefuls we’re providing you for NMS Girl Of The Day. Even if it is almost unbelievable!
February 24, 2012
- Venus Teams With Sports Illustrated Model Chrissy Teigen (blogs.smarter.com)
- Sports Illustrated Swimsuit Covers: Kate Upton and 19 Hottest SI Models of All Time [PHOTOS] (ibtimes.com)
- Kate Upton on cover of Sports Illustrated swimsuit edition (reuters.com)
- 2012 Sports Illustrated Swimsuit Edition (hypebeast.com)
French supermajor Total, operator of Block OML138, announces the start-up of production of the offshore Usan field in Nigeria, in line with the planned schedule. Usan is the second deep offshore development operated by Total in Nigeria, coming on stream less than three years after Akpo.
Discovered in 2002, the Usan field lies around 100 kilometers off the South East Nigerian coast in water depths ranging from 750 to 850 meters. The Usan development comprises a spread moored Floating Production, Storage and Offloading (FPSO) vessel designed to process 180 000 barrels per day and with a crude storage capacity of 2 million barrels. Its size of 320 meters long and 61 meters wide makes it one of the largest vessels of this type in the world. Development involves 42 wells that are connected to the FPSO by a 70 kilometers long subsea network.
Yves-Louis Darricarrère, President Exploration-Production at Total, stated on the occasion:
“I’m particularly proud to announce start-up of this major project together with the concession holder NNPC. This project demonstrates the ability of Total, a key operator of large-scale deep offshore developments in the Gulf of Guinea, to lead ambitious projects that will contribute to increase production for the Group and for the country. Total as operator has introduced a number of technological innovations, among which is a solution that drastically reduces gas flaring and thus minimizes the project’s environmental impact. The development of Usan has involved a record 60% of local content man-hours and thus has contributed to strengthening the know-how of the Nigerian industry in the area of hydrocarbon exploitation in the deep offshore.”
The Usan project has involved an unprecedented level of Nigerian local content, with over 500,000 engineering man-hours and 14 million construction and installation man-hours performed in Nigeria. FPSO construction included an offshore integration of 3,500 tons of locally fabricated structures. In addition, large-scale training and capacity building programs were put in place, raising the skills of the local workforce to the benefit of future projects.
Total’s wholly owned subsidiary Total E&P Nigeria Ltd. operates OML 138 with a 20% interest, while Nigerian National Petroleum Corporation (NNPC) is the concession holder. Total’s partners are Chevron Petroleum Nigeria Ltd. (30%), Esso E&P Nigeria (Offshore East) Ltd. (30%) and Nexen Petroleum Nigeria Ltd. (20%).
Offshore Energy Today Staff, February 24, 2012
- Total starts production at Usan field in Nigeria (marketwatch.com)
- Usan Production Will Mitigate Yemen Loss, Nexen Says (mb50.wordpress.com)
- Geopolitical stakes in Nigeria: Curious role of the IMF (mb50.wordpress.com)
The European Union plans to freeze the assets of the Syrian Central Bank starting next Monday, declared French Foreign Minister Alan Juppe, as quoted by Reuters.
The new sanction will hit Syria right on the next day after the referendum on the new constitution, set for February 26.
- EU likely to adopt further sanctions against Syria (vancouversun.com)
- Syria’s Assad unbowed as sanctions tighten (cbc.ca)
The order’s estimated value is approximately USD 1.1 billion and it comes from a “large-scale” American corporation. According to the contract details posted on the Korea Exchange (KRX), SHI will make the deliveries no later than August 31, 2014.
This has been a fruitful month for Samsung Heavy Industries. On February 13, the company announced it had received the order from INPEX for the construction of an offshore central processing facility (CPF) for the Ichthys LNG project in Australia.
- South Korea: Pacific Drilling Extends Option for its 7th Drillship (mb50.wordpress.com)
- Dolphin Drilling to Provide Two Drillships for Anadarko’s Mozambique Operations (mb50.wordpress.com)
- South Korean Hyundai Heavy Delivers Deepsea Metro II Drillship (mb50.wordpress.com)
- Is the Industry Ready to Drill in the Arctic? Stena Drillmax Ice Nears Delivery (mb50.wordpress.com)
- Deepsea Metro II Drillship Arrives in South Africa (mb50.wordpress.com)
- Israel: DSME Signs Tamar Deal (mb50.wordpress.com)
- China: COSCO Orders Ellis’ Cleats for New Drillship ‘Dalian Developer’ (mb50.wordpress.com)
- USA: Busy December Ahead of Pacific Drilling’s Drillships (mb50.wordpress.com)
Cheniere Energy Partners reported a net loss of $7.5 million and $31.0 million for the quarter and year ended December 31, 2011, compared to a net loss of $2.7 million and net income of $107.6 million for the same periods in 2010.
For the year ended December 31, 2011, affiliate revenues decreased $116.3 million primarily as a result of the assignment of the terminal use agreement (TUA) in June 2010 from Cheniere Marketing to Cheniere Energy Investments, the company’s wholly owned subsidiary, which required Cheniere to eliminate for consolidated reporting purposes the TUA revenues under this contract to Sabine Pass LNG.
Overview of Significant Events
- received an order from the U.S. Department of Energy (DOE) with authorization to export domestically produced natural gas from the Sabine Pass LNG terminal as LNG to any country that has, or in the future develops, the capacity to import LNG and with which trade is permissible;
- entered into a lump sum turnkey engineering, procurement and construction (EPC) agreement with Bechtel Oil, Gas and Chemicals for the first two LNG trains and related facilities at the Sabine Pass LNG terminal for a contract price of $3.9 billion, which is subject to adjustment by change order; and
- sold an aggregate of approximately 10.5 million mtpa of LNG per year under three long-term LNG sale and purchase agreements (SPAs) which commence upon the date of first commercial delivery for the applicable LNG train.
During 2011, Cheniere received approximately $69.0 million in net proceeds through equity issuances, including:
- approximately $9.0 million during the year from the sale of 0.5 million common units through an at-the-market (ATM) program; and
- approximately $60.0 million in September 2011 from the sale of 3.0 million common units in an underwritten public offering and the sale of approximately 1.1 million common units to Cheniere Common Units Holding.
As of February 2012, Sabine Liquefaction has contracted additional volumes under SPAs and has now sold approximately 16.0 mtpa of LNG, or approximately 89% of the expected nameplate liquefaction volumes that will be available upon the completion of the liquefaction facilities. The fixed fee component for the SPAs equates to a range between $2.25 per million British thermal units (MMBtu) and $3.00 per MMBtu and, in aggregate, the fixed fee component from all four SPAs totals approximately $2.3 billion annually.
Cheniere Partners reported income from operations of $37.0 million and $144.6 million for the quarter and year ended December 31, 2011, respectively, compared to income from operations of $40.7 million and $280.8 million for the comparable periods in 2010.
Total revenues for the quarter and year ended December 31, 2011, were $70.8 million and $283.8 million, compared to total revenues of $72.1 million and $399.3 million for the comparable periods in 2010. Total revenues primarily include capacity payments received from customers in accordance with Cheniere’s TUAs and incremental revenues from tug services and re-export fees. Revenues from affiliates for the year ended December 31, 2011, decreased by $116.3 million when compared to the comparable period in 2010 due to the assignment of Cheniere Marketing’s TUA to Investments, partially offset by revenues from the variable capacity rights agreement (VCRA) with Cheniere Marketing.
Total operating costs and expenses for the quarter and year ended December 31, 2011, were $33.8 million and $139.2 million, respectively, compared to $31.4 million and $118.5 million for the comparable periods in 2010. Development expense (including affiliate) increased $25.9 million for the year ended December 31, 2011, compared to 2010, primarily due to expenses related to the proposed Liquefaction Project. Operating and maintenance expenses (including affiliate) decreased $5.4 million for the year ended December 31, 2011, compared to 2010, primarily due to decreased fuel costs as a result of efficiencies in our LNG inventory management.
Liquefaction Project Update
Cheniere continues to make progress on its Liquefaction Project, which is being designed and permitted for up to four liquefaction trains, each with a nominal production capability of approximately 4.5 mtpa. Cheniere anticipates LNG exports from the Sabine Pass LNG terminal could commence as early as 2015, with each liquefaction train commencing operations approximately six to nine months after the previous train.
Cheniere is advancing towards making a final investment decision on the first two liquefaction trains, which is subject, but not limited to, obtaining regulatory approval from the Federal Energy Regulatory Commission (FERC) and obtaining financing. Cheniere estimates that the costs to construct the first two liquefaction trains will be approximately $4.5 billion to $5.0 billion, before financing costs. The company expects to finance the first two liquefaction trains with a combination of debt and equity. Construction is expected to commence in the first half of 2012.
Commencement of construction for liquefaction trains 3 and 4 is subject, but not limited to, regulatory approvals, entering into an EPC agreement, obtaining financing and making a final investment decision. Sabine Liquefaction has engaged Bechtel to complete front-end engineering and design work and to negotiate a lump sum turnkey contract. Construction for LNG trains 3 and 4 is targeted for early 2013.
- USA: Cheniere, KOGAS Ink Sabine Pass LNG Deal (mb50.wordpress.com)
- USA: Cheniere Enters into Contract with Bechtel (mb50.wordpress.com)
- USA: Societe Generale Says Cheniere Can Make Sabine Pass Export Decision After Fenosa Deal (mb50.wordpress.com)
- USA: Sabine Pass LNG Gets Cargo (mb50.wordpress.com)
- GAIL to buy 3.5 million tonnes of LNG from U.S. firm (mb50.wordpress.com)
- USA (Sabine Pass): BG Ups Sabine Pass LNG Volumes to 5.5 MTPA (mb50.wordpress.com)
- Gas Natural Fenosa Deals with Cheniere Energy to Buy US Shale Gas Sourced LNG (mb50.wordpress.com)
- Soc Gen Says China May Look for US LNG Deals in Future (mb50.wordpress.com)
ATP Oil & Gas Corporation today announced an increase in its estimated year-end 2011 proved and probable pre-tax PV-10 value to $7.3 billion based on SEC pricing, up 52% from $4.8 billion at year-end 2010.
ATP also provided an update on production for full-year 2011 which averaged an estimated 24.6 thousand barrels per day (MBoe/d), an increase of 17% over 2010.
Reserves – ATP estimates year-end 2011 proved reserves of 118.9 MMBoe compared to 126.1 MMBoe at year-end 2010. ATP estimates proved and probable reserves of 194.4 MMBoe at year-end 2011, compared to 211.3 MMBoe at year-end 2010. The changes were primarily a result of production of 9.0 MMBoe in 2011 and revisions to oil and gas reserves. On a Boe basis, ATP estimates that oil and natural gas liquids (NGLs) represent 66% of its year-end 2011 proved reserves and 65% of proved and probable reserves, compared to 60% and 59%, respectively, at year-end 2010.
ATP estimates a year-end 2011 SEC pre-tax PV-10 value of $4.2 billion for its proved reserves and $7.3 billion for its proved and probable reserves, compared to $2.6 billion and $4.8 billion, respectively, at year-end 2010. This increase is primarily a result of pricing, but other factors include timing and an increase in oil and NGL reserves.
Since independent reservoir engineers are finalizing estimates of ATP’s oil and natural gas reserves for year-end 2011, ATP will issue its final reserve amounts utilizing SEC pricing and reconciliation in conjunction with filing its Form 10-K, anticipated in March 2012.
Production – ATP’s production in the fourth quarter 2011 averaged 24.8 MBoe/d compared to 24.2 MBoe/d in the third quarter 2011. The fourth quarter average benefited from a 1.4 MBoe/d recognition of royalty relief related to 2010 production. Not including this benefit, average production in the fourth quarter was 23.4 MBoe/d, of which 70% was oil, compared to 69% in the third quarter 2011. ATP intends to conduct the previously announced sleeve shift at the Mississippi Canyon (MC) 941 A-1 well in the first quarter 2012 after production is established at the MC 942 #2 well. This sleeve shift had previously been scheduled in the fourth quarter of 2011. ATP estimates that opening the sleeve in the MC 941 A-1 well will increase production by 1.5 MBoe/d.
ATP anticipates an increase in production from the completion of the MC 942 #2 well during the first quarter 2012 and an increase later in the year with the installation of the pipeline for the two Clipper wells that were completed and tested in 2011. The installation of the Clipper pipeline is scheduled to begin in the third quarter 2012 with production expected in the late third quarter/early fourth quarter 2012.
ATP Oil & Gas is an international offshore oil and gas development and production company with operations in the Gulf of Mexico, Mediterranean Sea and the North Sea. The company trades publicly as ATPG on the NASDAQ Global Select Market.
Source: ATP Oil & Gas, February 24, 2012
- USA: ATP Successful with Second Clipper Well Testing (mb50.wordpress.com)
- USA: Helix’s Oil & Gas Revenues Rise on High Prices and Lift in Production (mb50.wordpress.com)
- USA: The Bedford Report Releases Equity Research on BP and ATP Oil & Gas (mb50.wordpress.com)