Daily Archives: June 13, 2012
Israel’s Delek Group has been informed by the operator, Noble Energy Mediterranean Ltd., that on June 12, 2012, development of Pinnacles #1 was completed and gas began to flow from it.
Pinnacles offshore well was recently linked by a subsea pipeline to the nearby Mari B production platform. Helix ESG’s reeled pipelay vessel, Express, which in April arrived at the port city of Haifa, Israel, completed the SURF (Subsea Umbilicals, Risers and Flowlines) work.
According to the Israel-based financial newspaper The Globes, Pinnacles well will produce 150 million cubic feet of gas per day.
Noble Energy Mediterranean Vice President Lawson Freeman told The Globes that the company was excited to bring the Pinnacles well on stream. He also added that the company was pushing hard to accelerate the Noa development in the same way.
- Noble Energy Linking Noa and Pinnacles to Mari B Platform (mb50.wordpress.com)
Obama’s emphasis on saving government workers hurts American business
By now, just about everyone has had an opportunity to pick apart President Obama’s fatuous remarks about how the private sector is “doing fine,” while public employees are suffering. The president’s comments, of course, were not even within viewing distance of reality. After all, despite some recent hiring, the private sector is still 4.5 million jobs below its 2008 employment peak. And while public employment is also down from 2008, that ignores a boom in state and local government hiring from 2006 to 2008. The current decline still leaves state and local employment about where it was in 2006. Meanwhile, federal employment is up 88,000 jobs.
But a much bigger question is: Why is the private sector doing so poorly? Perhaps because most businessmen are not that dumb.
If one includes the unfunded liabilities of Social Security and Medicare, this country’s real total indebtedness could run as high as $129 trillion (in current present value). Even under the most optimistic scenarios, our real debt exceeds $92 trillion. Measured as a percentage of GDP, our total debt exceeds the total debt of Greece or Spain. By comparison, the total book value of all U.S. companies is roughly $23 trillion. It’s not a perfect comparison (future taxes will be paid out of future wealth), but it does put things in perspective. Any business owner looking down the road, and seeing debt four to five times the size of his or her company, is likely to decide that this is not a great time to expand or hire new workers.
That is why the president’s preferred solution of offsetting private-sector losses with increased public-sector hiring is so mistaken. Those new public-sector jobs must be paid for with more debt and taxes borne by the private sector. As Frédéric Bastiat wrote in 1848, public employment “gives jobs to certain workers. That is what is seen. But it deprives certain other laborers of employment. That is what is not seen.” Bastiat concluded that trying to increase employment through government was “a ruinous hoax, an impossibility, a contradiction.”
For example, a study done for the European Commission by economists at the University of Paris looked at public employment in 17 countries between 1960 and 2000. It found that for every public-sector job created, 1.5 private-sector jobs were destroyed. Thus, hiring more government workers actually increases the level of unemployment.
And, perhaps more directly relevant, a study of President Obama’s stimulus bill by Timothy Conley of the University of Western Ontario and Bill Dupor of Ohio State concluded that, while the stimulus created or saved some 450,000 government jobs, it destroyed or prevented the creation of more than twice as many private-sector jobs.
Of course, in general, we know that an increase in the size of government slows economic growth. As Harvard’s Robert Barro points out, there is a “significantly negative relation between the growth of real GDP and the growth of the government share of GDP.” Under President Obama the federal government consumes 24 percent of GDP, a one-third increase over the historic post–World War II average of 19.8 percent. Throw in state and local government spending, and government spending now amounts to 36 percent of GDP.
President Obama is correct that much of this spending binge began under President Bush, but Obama’s policies have taken the Bush spending (including one-time spending hikes such as TARP) and turned them into the new baseline for future spending. And the president would have spent even more if he could have gotten away with. The purpose of last week’s press conference, after all, was to renew his call for more spending.
The president says “more spending,” and businesses correctly hear “more debt” and “higher taxes.”
This long-term burden on American business comes on top of short-term uncertainty. In January 2013, the Bush tax cuts will expire, leading to the largest tax hike in U.S. history unless Congress can reach an agreement. If reelected, President Obama seems determined to use this potential “fiscal cliff” to push for higher taxes on the wealthy, businesses, and investors. The president’s insistence, in particular, on raising capital-gains taxes will discourage business investment and expansion, while the hike in federal income taxes will fall especially hard on small businesses and Subchapter S corporations, which often file taxes as individuals.
Also ahead, pending a decision from the Supreme Court, is the potential implementation of Obamacare. Most of the law’s tax hikes, $569 billion over the first ten years, fall on businesses. Next year, for example, there would be new taxes on medical devices and investment income, among others.
And in 2014, the law will impose a mandate on employers with 50 or more workers to provide their workers with health insurance, at a cost of $4,450 on average, or else pay a $2,000-per-employee fine. As former Labor Department economist Diana Furchtgott-Roth explains:
The $2,000 per worker penalty raises significantly the cost of employing full-time workers, especially low-skill workers, because the penalty is a higher proportion of their compensation than for high-skill workers, and employers cannot take the penalty out of employee compensation packages. Suppose that a firm with 49 employees does not provide health benefits. Hiring one more worker will trigger a penalty of $2,000 per worker multiplied by the entire workforce, after subtracting the statutory exemption for the first 30 workers. In this case the tax would be $40,000, or $2,000 times 20 (50 minus 30).
If you were that small-business owner with 49 employees, how fast would you run out to hire that 50th worker? In fact, a Gallup survey of small businesses found that nearly half (48 percent) cited Obamacare as a reason why they are not hiring. It’s worth noting that in France, another country where numerous government regulations kick in at 50 workers, there are 1,500 companies with 48 employees and 1,600 with 49 employees, but just 660 with 50 and only 500 with 51.
And, if Obamacare is not enough of a burden on business, 2013 will also see the onset of many of the new Dodd-Frank regulations on banking, lending, and finance.
President Obama seems wedded to an old-fashioned Keynesian philosophy of trying to revive the economy by using government hiring and spending to increase consumer demand. By now we should have learned that no amount of pump-priming is going to help, as long as businesses are worried about the crushing burden of debt, taxes, and regulation in their future.
That’s the real truth behind President Obama’s gaffe: He’s not just out of touch; he’s wrong.
— Michael Tanner is a senior fellow at the Cato Institute and the author of Leviathan on the Right: How Big-Government Conservatism Brought Down the Republican Revolution.
- Has President Obama’s Stimulus Made the Private Sector Lazy and Hurt Job Growth? (txwclp.org)
- The Private Sector is Not ‘Doing Fine’ (hawaiireporter.com)
- David Axelrod Got It All Wrong: How He, The President, And All Progressives Need To Address Obama’s Economic Record (crooksandliars.com)
- Morning Bell: The Private Sector is Not “Doing Fine” (heritage.org)
Yesterday BP announced that on June 3, 2012 it began the initial start-up of the Galapagos development in the deepwater U.S. Gulf of Mexico, one of a series of new major upstream projects that the company expects to bring into production this year.
“The start-up of this project in the Gulf of Mexico is one of BP’s key operational milestones for 2012, one of six high-margin projects we expect to come on stream this year,” said Bob Dudley, BP group chief executive. “I expect that the operational progress we are now making will deliver increasing financial momentum for BP as we move into 2013 and 2014.”
The Galapagos development includes three deepwater fields and increases the capability of a key offshore production hub for BP. The fields – Isabela, Santiago and Santa Cruz – are being produced using subsea equipment on the floor of the Gulf. A new production flowline loop has been added to carry output to the nearby Na Kika host facility, a BP-operated platform located roughly 140 miles southeast of New Orleans in 6,500 feet of water.
The Na Kika facility, with a production capacity of 130,000 barrels of oil equivalent per day, has been modified to handle output from the three fields. Full ramp-up of the project is expected around the end of June.
“The Galapagos development marks another significant step forward for BP in the Gulf of Mexico, and reflects the potential we continue to see in this world-class basin, now and in the future,” said James Dupree, Regional President of BP’s U.S. Gulf of Mexico business.
BP’s overall interest in the three-block area that includes the fields comprising the Galapagos project is about 56 per cent. Noble Energy, Inc., Red Willow Offshore, LLC, and Houston Energy, L.P., are co-owners. BP is the operator of the Isabela field, while Noble Energy operates the Santiago and Santa Cruz fields.
The Galapagos development required the installation of new subsea infrastructure, production risers, topsides as well as other modifications.
BP expects to invest at least $4 billion a year on oil and gas development in the Gulf of Mexico over the next 10 years, following its strategy of focusing investment and future growth around the company’s strengths, including deepwater exploration and development.
“BP’s continuing investment in the Gulf of Mexico is yet another example of our commitment to the U.S. economy and energy security,” Dudley added. “This investment, along with our ongoing commitment to the Gulf Coast region, demonstrates the importance of the U.S. to BP’s long term strategy.”