Daily Archives: April 27, 2012
Biofuel mandates could close more refineries, officials warn
OGJ Washington Editor
Philadelphia area refinery closures will be only the beginning of shutdowns nationwide if the federal government does not change several key regulations, two oil industry officials warned on Apr. 26. Ethanol mandates in the 2007 Energy Independence and Security Act pose a particular threat, they told the US Senate-House Joint Economic Committee.
“The recent refinery closures that have occurred or are currently pending are the tip of an iceberg,” said Thomas D. O’Malley, chairman of PBF Energy Co. LLC, which operates refineries in Delaware City, Del. (190,000 b/d), Paulsboro, NJ (180,000 b/d), and Toledo, Ohio (170,000 b/d).
“If the fuel substitutions from 2012 to 2022 mandated under [EISA] are maintained, we will lose over that time period an additional 10% minimum of US capacity and the thousands of jobs this important industry provides,” O’Malley said.
Bob Greco, the American Petroleum Institute’s downstream and group director, said refiners face an impending “blend wall” where mandates to blend ethanol into gasoline will soon exceed motorists’ ability to safely use the fuels in existing vehicles.
“Moreover, refiners are also required to blend into the gasoline supply advanced biofuels that do not yet exist, or pay a fee when they cannot meet the mandates,” he noted. “This policy is regulatory absurdity, and effectively amounts to a hidden tax on gasoline manufacturers.”
Tier 3 as well
O’Malley said the US Environmental Protection Agency’s Tier 3 gasoline proposal also will close more US refineries. Refiners, including independents that control 60% of US capacity, will need to spend billions of dollars to lower sulfur content from 30 ppm to 10 ppm, he said.
“Under this plan, the total sulfur removed from PBF’s gasoline production of about 4.5 billion gal/year would less than one eighth of what one 300-Mw coal-fired power plant emits in a year,” O’Malley said.
Greco said EPA has yet to demonstrate any air-quality benefits from adopting Tier 3 limits. He cited an analysis by the Baker & O’Brien consulting firm, which API commissioned, that found that implementing the new requirements could increase refinery greenhouse gas emissions because of the use of energy-intensive hydrotreating equipment to remove sulfur from the gasoline.
“Existing refinery regulations and fuel requirements clearly contribute to a cleaner environment and safer workplace,” Greco said. “Unnecessary, inefficient, and excessively costly requirements hamper our ability to provide and distribute fuels to America, while also employing hundreds of thousands of people and enhancing our national security. We have already seen some refineries close, at least in part due to the cumulative impact of government controls.”
O’Malley said, “Refineries in Pennsylvania closed because they didn’t make money. The federal government took away some of their market and gave it to the agriculture industry. The insanity of cellulosic ethanol will take away another 10-15% and make refiners pay $120 million in indirect taxes. This whole system is a house of cards that’s collapsing. Unfortunately, it’s collapsing on the men and women who work in refineries.”
Market concentration
A third witness, Diana L. Moss, vice-president and director of the American Antitrust Institute, said more refinery closures in the US Northeast could result in a market where three refiners accounted for 93% of capacity changing to one where two refiners represent 86%. More products coming by pipeline from the Gulf Coast could replace much of what is lost from closed plants, but proposals to convert some installations to terminals could raise new ownership concentration questions, she said.
The fourth witness, Michael Greenstone, an environmental economics professor at the Massachusetts Institute of Technology, said the federal government should encourage policies that recognize the health, environmental, and security costs associated with each form of energy. If this isn’t feasible, he said, research suggests that natural gas should be put on the same footing as renewable fuels under any federal standard and subsidies equal to those for electric vehicles should be offered to those using compressed natural gas.
Others submitted written statements. US Rep. Donna M. Christensen (D-VI) noted that Hovensa LLC’s chief executive, when he testified before the Virgin Islands legislature, said low demand and competitive disadvantages, such as having to fire its units with oil instead of gas, led to the decision to close the 500,000-b/d facility. “Our neighbors in Puerto Rico remain concerned about where they will be able to secure jet fuel that was supplied by Hovensa,” Christensen said.
Industry witnesses kept returning to regulatory problems refiners face. “The ethanol and biofuel mandates need to be adjusted to reflect what the vehicle fleet can use,” API’s Greco said. “As it is, even if E15 became widely used, it would extend the blend wall by only 1-2 years.”
EISA and its mandates were a bad idea in 2007, and a worse one now, American Fuel & Petrochemical Manufacturers Pres. Charles T. Drevna said following the hearing. “We’re seeing unintended consequence of rushing something through Congress without considering the impacts,” he told OGJ. “Keep corn on people’s tables, and gasoline in their vehicles’ tanks.”
Contact Nick Snow at nicks@pennwell.com.
Related articles
- EPA’s E-15 Ethanol Plan: Bad for Pocketbooks, Environment, Energy Policy (papundits.wordpress.com)
- Closing Refineries: EPA’s Heavy Hand Seen In Gas Crisis (tarpon.wordpress.com)
Swiber Incorporates New Subsidiary in Mexico
The Board of Directors of Swiber Holdings Limited and together with its subsidiaries announces that Swiber Offshore Construction Pte Ltd and Kreuz Engineering Ltd, direct and indirect subsidiaries of the Company, have incorporated a new wholly owned subsidiary in Mexico, known as Swiber Offshore Mexico SA DE CV. The initial issued share capital of SOM is 50,000.00 Pesos.
The principle activity of SOM is to engage in engineering, procurement, construction and installation of subsea pipeline.
The above transaction is funded through internal resources and is not expected to have any material financial impact on the consolidated net tangible assets per share and consolidated earnings per share of the Company and its Group for the current financial year ending 31 December 2012.
Related articles
- Swiber Lands Offshore Construction Job in Gulf of Mexico (mb50.wordpress.com)
- Texas (Brownsville): Keppel Gets Jack-up Rig Order from Mexican Company (mb50.wordpress.com)
- USA: Deep Down, Bornemann Team up in Gulf of Mexico Subsea (mb50.wordpress.com)
USA: Sumitomo, Tokyo Gas in Cove Point LNG Talks with Dominion
Following the signing by Sumitomo Corporation of a precedent agreement with respect to the bi-directional liquefied natural gas processing services with Dominion Cove Point LNG, LP, the body implementing the Cove Point LNG Project in the State of Maryland, the United States, Sumitomo Corporation has started negotiation with Dominion to conclude a final terminal service agreement. In this context, Sumitomo Corporation and Tokyo Gas Co., Ltd. have agreed to jointly work as a team to negotiate with Dominion.
The Project is envisaged to build a new LNG liquefaction plant in the existing Cove Point LNG import terminal owned and operated by Dominion (in Maryland, the United States), enabling Dominion to provide natural gas liquefaction service for export in the form of LNG. This means tolling customers concluding TSA with Dominion will be able to liquefy natural gas procured by themselves in the United States through the relevant LNG liquefaction plant. Upon obtaining the approval from the U.S. Department of Energy to export LNG to Japan or other nations that have not yet ratified a free-trade agreement (FTA) and also the approval for plant construction from the authorities, in addition to other processes required including but not limited to the final investment decision on the Project, Dominion plans to commence construction of a new LNG liquefaction plant to start-up the Project operation by sometime in 2017.
Sumitomo Corporation and Tokyo Gas have so far conducted a comprehensive deliberation on potential cooperation regarding the natural gas business in the United States and the import of LNG to Japan. Following the conclusion of the PA between Sumitomo Corporation and Dominion, Sumitomo Corporation and Tokyo Gas have decided to work together as a team to negotiate the TSA with Dominion.
In addition, Sumitomo Corporation and Tokyo Gas contemplate that the natural gas liquefied for import to Japan should be procured from the Marcellus shale gas field, etc. where located adjacent to the Project and in which Sumitomo Corporation has an interest. If the Project is realized, it would be a LNG of its kind in the US derived from shale gas destine to Japan.
Sumitomo Corporation is the first Japanese company to participate in the development of a shale gas field in the United States and currently holds two interests, including one in the Marcellus shale gas field. In addition, Pacific Summit Energy LLC, a fully owned subsidiary, is engaged in the gas trading business in the United States. Therefore, if the Project is finally agreed, Sumitomo Corporation will be able to establish a natural gas and LNG value chain in the United States across natural gas upstream development, through distribution and liquefaction, to LNG export.
Tokyo Gas is seeking to increase its procurement of LNG from un-conventional natural gas resources across the globe in order to diversify its portfolio, and to expand its global LNG value chain with the aim of reducing the costs of raw materials pursuant to its “Challenge 2020 Vision.” If the Project is finally agreed, these goals will be realized.
Related articles
- USA: Mitsubishi Inks Development Deal with Cameron LNG (mb50.wordpress.com)
- USA: Sierra Club Opposes Cameron LNG Export Plans (mb50.wordpress.com)
- USA: Sierra Club Opposes Cove Point LNG Export Plans (mb50.wordpress.com)
- Sierra Club Denies Permission to Build Liquefied Natural Gas Export Terminal (sierraclub.typepad.com)
- Sierra Club to fight Dominion hub using 1972 deal (reuters.com)
- USA: Jordan Cove Submits Non-FTA LNG Export Application (mb50.wordpress.com)
- Japan: Osaka Gas Eyes U.S. LNG (mb50.wordpress.com)
Sierra Club Challenges Md. Natural Gas Terminal
WASHINGTON (AP) — The Sierra Club said Thursday it will try to block an energy company’s plan to export liquefied natural gas from the booming Marcellus Shale formation.
Virginia-based Dominion Resources Inc. is seeking to export 1 billion cubic feet per day through a terminal it owns in Maryland.
A previous legal settlement dating to the 1970s gives the Sierra Club the ability to reject any significant changes to the purpose or footprint of the existing natural gas terminal in Cove Point,
Md.
The environmental group says the export project could result in major damage to the Chesapeake Bay and nearby Calvert Cliffs State Park in Maryland.
Dominion says the Cove Point terminal is well-situated to export gas from the prolific Marcellus Shale region, which lies beneath Pennsylvania, New York, West Virginia, Ohio and other states.
“The damage that this project would bring to the Maryland coast as well as the disastrous effects of the fracking boom on communities in states like Pennsylvania make it clear that exporting liquefied natural gas is bad news for Americans’ air, water and health,” said Michael Brune, executive director of the
Sierra Club.
Exporting liquefied natural gas, or LNG, would drive up the cost of domestic natural gas, Brune said, reversing the effects of a natural gas boom that has driven U.S. prices to 10-year lows.
Thomas F. Farrell II, president and CEO of Dominion Resources, said the company intends to go forward with the project.
“We have reviewed the various regulations, agreements and rulings from various regulatory bodies governing the site and are confident that we will be able to locate, construct and operate a liquefaction facility at Cove Point,” Farrell told reporters.
Dominion will design the plant to minimize damage to the environment, Farrell said.
The dispute over the Maryland plant comes as federal regulators have approved the first large-scale natural gas export facility in the United States.
The Federal Energy Regulatory Commission cleared construction of the Sabine Pass LNG terminal in Cameron Parish, La., last week. The facility, owned by Houston-based Cheniere Energy Inc., will chill natural gas into a liquid that can be shipped on tankers, allowing U.S. producers to export natural gas overseas for potentially huge profits. An existing LNG import facility at the Louisiana site will be converted also to handle imports.
The push for exports represents a turnaround from just a few years ago, when U.S. companies were seeking to build LNG terminals that would receive natural gas from other countries.
Those plans changed as improved drilling techniques, such as hydraulic fracturing and horizontal drilling, allowed drillers to gain access to natural gas wells that were hard to reach in the past.
Hydraulic fracturing, also called fracking, involves blasting mixtures of water, sand and chemicals deep underground to stimulate the release of gas. It is often combined with horizontal drilling, which can increase production far beyond a vertically drilled well.
Brune, of the Sierra Club, called on the Energy Department to review potential dangers of fracking. No federal agency has fully analyzed or disclosed such dangers to the public, he said.
Gas companies say fracking has been used safely for decades.
(Copyright 2012 by The Associated Press. All Rights Reserved.)Source
Related articles
- USA: Sierra Club Opposes Cameron LNG Export Plans (mb50.wordpress.com)
- USA: Sierra Club Opposes Cove Point LNG Export Plans (mb50.wordpress.com)
Dominion: Sierra Club Will Not Block Cove Point Liquefaction Project (USA)
Dominion said yesterday it is confident that its existing agreement with the Sierra Club and the Maryland Conservation Council permits the company to build a natural gas liquefaction plant proposed for its Cove Point facility in Lusby, Md.
Thomas F. Farrell II, Dominion chairman, president and CEO, said:
“As with any project of this magnitude, we would expect some opposition from various special interest groups. The Sierra Club, which is a party to an agreement restricting activities on portions of the Cove Point property, has previously expressed its opposition to all LNG export facilities. We have reviewed the regulations and agreements governing the site and are confident we can locate, construct and operate a liquefaction plant at Cove Point. The project can be built within the footprint of the existing facility without amending the agreement involving the Sierra Club and the Maryland Conservation Council. Dominion plans to design, build and operate the facility with minimal environmental impacts.”
Farrell said that by adding on to an existing facility, the Cove Point project would have less environmental impact than other liquefaction projects proposed for greenfield sites. He also noted that the Cove Point facility has been cited many times for its environmental stewardship, such as for the restoration of the 190-acre Cove Point freshwater marsh, a Maryland Natural Heritage Area along Chesapeake Bay.
Dominion announced earlier today it is moving forward with its natural gas liquefaction project at Cove Point. At the end of March, Dominion signed binding precedent agreements with two companies, one of which is Sumitomo Corp., a major Japanese corporation with significant global energy operations. Between the two shippers, the planned project capacity of about 750 million cubic feet per day on the inlet and about 4.5 million to 5 million metric tons per annum on the outlet, is fully subscribed. Construction is expected to begin in 2014, with an in-service date in 2017, pending receipt of necessary approvals, negotiating binding terminal service agreements with the shippers and successful completion of engineering studies.
Economic studies filed with Dominion’s federal approval applications anticipate a number of significant benefits from the project, including:
- An average of 750 construction workers would be employed during three-plus years of construction. There will be between 2,700 and 3,400 jobs associated with the project in Calvert County alone at the peak of construction activity. Benefits to the natural gas and other industries would support another 14,600 jobs once the shippers begin natural gas exports.
- About $1 billion annually of additional federal, state and local government revenues would be generated directly and indirectly.
- Owners of the natural gas rights would receive an estimated $9.8 billion in royalties from production of natural gas over the life of the project.
- The natural gas exports would lower the U.S. trade deficit by $2.8 billion to $7.1 billion annually.
Related articles
- USA: Sierra Club Opposes Cove Point LNG Export Plans (mb50.wordpress.com)
- USA: Sierra Club Opposes Cameron LNG Export Plans (mb50.wordpress.com)
Continents of the World
Mb50's "Liquid Mud" Rant 