Daily Archives: October 28, 2013

The Point of No Return

libertyshame4

President Obama is about to play defense, for three years.

Nov 4, 2013, Vol. 19, No. 08
BY FRED BARNES

President Obama is facing the abyss. It’s that moment when a president’s plans are overwhelmed by his problems, and he’s relegated to playing defense for the rest of his White House term. Obama’s agenda already lingers near death. His poll numbers have slipped to new lows. His speeches are full of alibis and accusations.

Obama hasn’t reached the point of no return, but he’s close. His biggest problem is the collapse of Obamacare on its launching pad as the entire country watched. And there’s worse trouble ahead. More likely than not, Obamacare will be the dominant issue in the final three-plus years of his presidency. From that, there’s no recovery.

Years on defense—impotent years—have beset even the strongest of presidents. After the Iran-contra scandal broke in November 1986, the Reagan presidency was essentially over. He served two more years and made a triumphant trip to the Soviet Union, but his power was gone. The low point was the overturning of his veto of a highway bill.

Jimmy Carter’s presidency was hardly a powerhouse. Still, it had one shining moment, when the Camp David peace accord between Israel and Egypt was signed in September 1978. What clout Carter had vanished after the “malaise” speech in July 1979. It made him a target of ridicule.

Impeachment in 1998 forced President Clinton into retreat. His popularity remained high, but he abandoned an agenda that included entitlement reform. Even an unexpected Democratic victory in the midterm elections in his second term couldn’t revive his presidency.

In George W. Bush’s case, problems in his second term quickly engulfed his administration. The Iraq war became a bloodbath, his plan for overhauling Social Security had few takers, and he was blamed, unfairly, for the incompetent response to Hurricane Katrina. A troop buildup and adoption of a counterinsurgency strategy saved Iraq from disaster, but otherwise Bush’s second term was marked by futility.

Now, with his presidency in peril, Obama seems unprepared to avert paralysis. The failed startup of Obamacare, its website a “joke” in the view of 60 percent of America in a Fox News poll, caught the president by surprise. He refused to acknowledge the magnitude of the problem, conceding only that healthcare.gov wasn’t working as “smoothly as it was supposed to.” Neither is his presidency.

From all appearances, Obama sees the Obamacare mess as partly a political headache. A headline in Politico last week captured this: “White House works to flip Obamacare narrative.” It’s as if Obama and his advisers think they’re dealing with a faux pas to be smoothed over with political spin. Commentary’s Peter Wehner calls this attitude “detachment from reality.”

True, Obamacare will be a campaign issue in the 2014 midterm elections and no doubt a significant factor in the presidential election two years later. But that’s not because Obamacare is merely a matter of politics. It’s because Obamacare is now the official health care system for 310 million people and represents one-sixth of the American economy.

And it’s a national embarrassment whose troubles are only beginning. Unpleasant shocks loom for a majority of Americans who tap into Obamacare exchanges. Those 40 years of age and younger will discover next year their insurance premiums are “a lot higher than they would pay in today’s market,” says health care expert James Capretta. That will create a furor.

So, too, some lower-middle-income and middle-class Americans will find their access to doctors is limited. Why? Because many of the country’s biggest and best hospitals and some doctors have not agreed to take on this category of patients. Also, patients will be forced to endure longer waits as a result of a doctor shortage. In 2015 and 2016, the popular Medicare Advantage program will shrink.

Low-income folks and those with preexisting conditions will prosper under Obamacare. But how will middle-income Americans feel when they learn they’re paying considerably more for the same insurance? Not happy, I suspect. Or those under 30 who chose a “catastrophic-only” policy with high deductibles? They won’t be thrilled when told they are ineligible for a subsidy, whatever their income.

The point is that as Obamacare is rolled out over the final years of this presidency, there will be numerous occasions when Obama’s promises about the new health insurance scheme are exposed as untrue. If these incidents don’t provoke a crisis, they’ll at least keep Obamacare from fading as a prominent and fiercely debated issue.

And the president will pay a price. He’ll be stuck on defense, unable to change the subject. His agenda won’t help. A $9 minimum wage, universal preschool, immigration reform, global warming legislation, more infrastructure spending, higher taxes—there’s nothing close to a national consensus in support of these liberal leftovers.

Despite all this, Obama could escape a lost presidency. He has a loyal base that’s kept his approval rating in the low 40s. (Carter and Bush dipped into the 20s.) Democrats may be dreaming when they envision a 2014 election in which Republicans suffer badly from the shutdown. But it’s not inconceivable Republicans could lose the House, and their prospects of capturing the Senate are no better than 50-50. Then and only then, Obama’s presidency could be spared an early death and the nation’s attention shifted from a dreadful health plan named after him. That’s a nice scenario, but I’m not buying it. The humiliation of presiding over Obamacare’s debut won’t be soon forgotten.

But ponder this: Had Obamacare been created as a private enterprise with Obama as CEO, it wouldn’t have lasted a week. Not only would the stumbling company have been put out of business, so would its incompetent CEO. And we’d all—well, most of us—be better off.

Fred Barnes is an executive editor at The Weekly Standard.

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Corpus Christi, TX – Analysis: From Big Foot to Bluto, Gulf of Mexico set for record oil supply surge

CORPUS CHRISTI, Texas
Sun Oct 27, 2013 9:10pm EDT
By Kristen Hays and Terry Wade

(Reuters) – The Gulf of Mexico, stung by the worst offshore oil spill in U.S. history in 2010 and then overshadowed by the onshore fracking boom, is on the verge of its biggest supply surge ever, adding to the American oil renaissance.

Over the next three years, the Gulf is poised to deliver a slug of more than 700,000 barrels per day of new crude, reversing a decline in production and potentially rivaling shale hot spots like Texas’s Eagle Ford formation in terms of growth.

The revival began this summer, when Royal Dutch Shell‘s (RDSa.L) 100,000 barrels per day Olympus platform was towed out to sea 130 miles south of New Orleans – the first of seven new ultra-modern systems starting up through 2016. It weighs 120,000 tons, more than 200 Boeing 777 jumbo jets.

The Gulf Of Mexico’s growth will bolster the United States’ emerging role as the world’s top oil and gas producer, a trend led by advances in hydraulic fracturing and horizontal drilling that unlock hydrocarbons from tight rock reservoirs in places like North Dakota’s Bakken and the Permian of West Texas.

Rising domestic production and the start of natural gas exports may transform the economy and realign geopolitics as U.S. reliance on foreign oil declines.

The resurgence in the Gulf is occurring even though the U.S. government imposed stringent safety and environmental rules after BP Plc‘s (BP.L) Macondo spill. Foreign countries from Brazil to Angola have also aggressively courted Big Oil to invest in developing their offshore fields. And the shale boom has diverted billions of dollars in capital onshore.

The deepwater Gulf, considered the most technically challenging offshore oil patch, remains alluring even as other areas struggle. Brazil attracted only a single bid this month for its once-touted Libra field, yet global companies still compete fiercely for the right to drill in the Gulf.

“A barrel of discovered oil in the Gulf of Mexico is difficult to beat for value anywhere else, even with the increased costs of doing business,” said Jez Averty, senior vice president of North American exploration at Norway’s Statoil (STL.OL).

Huge finds over the last decade – in what engineers call “elephant fields” that can produce for 25 years or more – are lifting growth in a basin some companies once abandoned, fearing it was drying up or its resources were beyond reach.

“This is still one of the premier oil and gas regions in the world and that’s why we’ve never left,” said Steve Thurston, vice president of Chevron Corp‘s (CVX.N) North American exploration and production division.

Even after decades of production in the Gulf, government estimates have shown that 48 billion barrels could still be recovered.

LOWER TERTIARY

The area of the Gulf of Mexico where most of the new infrastructure will start up is in an ancient geological trend in its deepest waters 200 miles or more from shore known as the Lower Tertiary, estimated to hold 15 billion barrels of crude.

Appraisals in the Gulf’s Lower Tertiary have shown fields that could have half a billion barrels or more of oil, like Exxon Mobil Corp’s (XOM.N) Hadrian, estimated to hold up to 700 million barrels, or Anadarko Petroleum Corp‘s (APC.N) Shenandoah, which tests this year showed could hold up to three times more than initial estimates of 300 million barrels.

The potential bounty of massive deposits that can produce for a quarter century or more is what keeps players coming even though a single well that bores tens of thousands of feet through thick salt and rock to strike oil – or a dry hole – can cost $130 million or more.

By contrast, an onshore well costs about $8 million to drill – but may only produce a trickle of oil for a few years.

Chevron’s Jack/St. Malo project, which will tie a platform to the ocean floor 7,000 feet below the surface and tap a reservoir 26,000 feet deep, costs $7.5 billion.

It may become the biggest such platform in the world after shipping out later this year, with the ability to double its initial 170,000 bpd capacity. It will be followed next year by Chevron’s second new platform, Big Foot, to be secured to the sea floor by 16 miles of interlocking metal strands, or tendons.

In addition to projects by Anadarko Petroleum Corp (APC.N) and Williams Cos (WMB.N), private equity firm Blackstone Energy Partners will join the game. In 2015, Blackstone’s partner LLOG Exploration aims to start up Delta House – named for the boisterous fraternity in the film “Animal House” – less than 10 miles from BP’s plugged Macondo well.

Delta House will pump oil from the Marmalard and Bluto fields, namesakes of characters in the movie.

CLEAR AND STABLE RULES

Three years ago, some analysts thought the post-Macondo Gulf would have fewer players as stricter regulations and higher operating chilled activity, particularly for smaller companies.

Producers must now provide more detailed plans for offshore operations, submit to more frequent inspections and prove they have access to a rapid-response system to cap a gushing well. More than 4 million barrels of oil poured into the sea for 87 days after the Macondo well blowout killed 11 men.

High costs have given some companies pause. Even as BP began appraisal drilling at its self-described “giant” Tiber field this August, a month later it canceled contracts to build a second platform at its Mad Dog field. BP says it wants to move forward on Mad Dog 2 “with the right plan.”

Many others are pressing ahead full steam.

“It hasn’t scared us away,” John Hollowell, Shell’s top deepwater executive for Shell Upstream Americas said, noting deepwater is one-third of Shell’s growth platform, alongside natural gas and unconventional areas like onshore shales.

Hess Corp (HES.N) Chief Executive John Hess has told analysts the company, which operates one oil and gas platform in the Gulf with another on the way next year, also aims to increase its exploration in the deep waters.

“It’s a core area for us and now that Macondo is behind the industry, it is an area where we intend to start investing more, assuming we get the returns that we expect,” he said.

Companies say the Gulf is still the best deepwater basin to set up shop – with high profit margins, reasonable per-barrel costs and a predictable legal and regulatory system.

Operators can bring in their own workers rather than employ a certain number from the host country, as they do in Brazil – where just finding enough qualified workers is a hurdle.

Gulf operators also do not have to brace themselves for sudden changes in royalty requirements or possibly be blocked from bidding on drilling rights, as has happened in Angola.

To get in the Gulf of Mexico’s door, they put in the highest bid when the government leases drilling rights.

“All you have to do is show up at the lease sale,” Statoil’s Averty said.

(Editing by Eric Walsh)

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