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Family firm still struggling, 18 months after Gulf oil spill

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Leslie Bertucci, co-owner of R&D Industries in Harvey, stands in front of the company’s compartmentalized storage tank, designed by her husband and co-owner Dan Ness.

Earlier this month, a flatbed truck lumbered slowly out of the gravel parking lot at R&D Enterprises in Harvey, bearing a huge red-and-yellow storage tank bound for an oil rig in the Gulf of Mexico.

Watching it leave, co-owner Leslie Bertucci raised her camera phone and snapped a couple of pictures of a cherished sight in the last few months: a paying customer.

For R&D, this was rain after a drought, a breath of oxygen flowing into a small oilfield supply company that has been gasping for air. The company, which rents modular storage containers and racks to offshore rigs, has managed to stay in business since the Deepwater Horizon exploded last year and radically reshaped deepwater drilling in the Gulf.

But it’s been grueling.

R&D survived a four-month deepwater drilling moratorium that ended in October. Since then, it has been struggling to navigate the re-made regulatory environment that has settled over the Gulf, leaving drilling activity far short of where it was when Deepwater Horizon blew, killing 11 workers.

Bertucci and her husband, Dan Ness, founded R&D 11 years ago in their house in Metairie to manufacture and rent specialized equipment to deepwater drillers. When the moratorium clanged down and the Gulf went quiet, Bertucci said revenue plunged 80 percent almost overnight.

The company survived, in part, by enforcing furious economies, Bertucci said.

The couple slashed their own salaries by 75 percent. Months later they eliminated them entirely, and then began shoveling personal savings into company operations.

Bertucci said they slashed every discretionary nickel, ended their practice of cookouts or gifts for customers, cut off all charitable contributions.

Remarkably, over the course of 18 months, R&D has held on to its small workforce of a dozen or so employees.

“We didn’t lay off anybody but ourselves,” she said.

‘Not a penny

Meanwhile, Bertucci learned that R&D didn’t qualify for compensation from a $20 billion fund that BP established shortly after the spill.

Although the company had contracts in hand, it received no compensation for lost revenue, or for the estimated $144,000 in equipment that went to the bottom of the Gulf with the Deepwater Horizon.

“We haven’t received a penny. Not a penny,” she said.

However, since the spring, business has inched back up, “but it’s excruciating how slow it is.”

“I didn’t think a year and a half ago I’d be excited to have the numbers I have today,” she said. “They’re not great. But they’re creeping back up slowly.”

Bertucci said she and Ness are back on the payroll, but business is still down more than a third of what it was before the oil spill. The day of the BP disaster, Bertucci said her company had equipment on 23 deepwater rigs; today they’re on 12.

If her projections work out, Bertucci expects that next summer the business will be where it was in June of 2010.

Depressed deepwater drilling

On the day BP’s rig blew, 33 deepwater rigs were operating in the Gulf.

Today there are about 34, but only about half are drilling, said Eric Smith, associate director of the Tulane University Energy Institute. The rest are awaiting permits.

Just last week, a joint report by the Coast Guard and the Bureau of Ocean Energy Management, Regulation and Enforcement found that BP, Halliburton, its drilling contractor and Transocean, owner of the Deepwater Horizon, took disastrous shortcuts that led to the blowout of the 18,000-foot Macondo well, killing 11 crew members and spilling nearly 5 million barrels of oil into the Gulf.

Since the relaxation of a moratorium after the spill, Gulf deepwater drillers have been operating in a new environment in which regulators have ordered increased oversight at every stage of oil and gas development, and invited more government agencies to consult and comment on drilling permit applications, Smith said.

The result is that permit applications are significantly backlogged and deepwater drilling remains depressed.

Pleading their cases

In the months since the spill, Bertucci has become a highly visible spokesperson for thousands of small secondary businesses that support — and are supported by — the multi-billion-dollar corporate behemoths in the oil and gas industry.

Bertucci has pleaded the case of small businesses in Washington and before the president’s National Oil Spill Commission in New Orleans. She is the subject of a short pro-business video by the Heritage Foundation and the Institute for Energy Research.

Her message is clear: although the blowout was a disaster, the moratorium was an overreaction, and the post-moratorium regulatory environment has tilted the balance of oversight versus production too far in favor of oversight.

During the slowdown, Bertucci and Ness began looking to other markets for business. In the last few months, they have sought an international technical certification for their tanks and racks so they can bid on deepwater jobs in other regions — especially Brazil, which appears to be the preeminent new deepwater market.

During the darkest days of the moratorium, Bertucci frequently said the company needed to keep a full workforce on hand for the day the moratorium was lifted, for on that day, she believed, R&D would be swept off its feet with customers stampeding back into the Gulf.

It hasn’t worked out that way at all.

“It turned out to be sort of a joke. A joke on us,” she said.

“It was a very cruel joke.”

Bruce Nolan can be reached at bnolan@timespicayune.com or 504.826.3344.

Original Article

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The Making of FPSO TGT 1

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Uploaded by MrAnagnorisis on Jun 11, 2011

Offshore Vessel Operators Suffer As Gulf Oil Output Sags

Susan Buchanan
Sunday, September 11, 2011

File Marine Management, LLC managing member Cliffe Laborde (left), with Peter Laborde

Marine Management, LLC managing member Cliffe Laborde (left), with Peter Laborde

As seen in the August edition of MarineNews, Susan Buchanan updates readers on the GOM oil production situation.

BP’s gushing well was capped more than a year ago but life is hardly back to normal in the U.S. Gulf–where rigs and vessels remain underutilized. At least ten rigs have moved overseas since last summer. Gulf oil production is below pre-spill levels and won’t recover anytime soon, analysts say. Issuance of drilling permits picked up this spring as operators agreed to use oil-containment systems but permitting lags earlier rates.

Paul Candies, president and CEO of Otto Candies, LLC, in Des Allemands, La., said offshore activity has increased recently, and “we expect to see a slow trend toward more drilling “ But the marine industry shouldn’t get lulled into a false sense of security. “We need to continue to push for more permitting of rigs and simplification of that process,” he said. Candies gave a positive report about his company, saying “all of our platform supply vessels are committed at present for extended periods. We have three inspection, maintenance and repair vessels on long-term commitments, and should have a fourth IMR vessel committed by year end.” Otto Candies is a marine transportation and offshore services company.

At Laborde Marine Management, LLC, in New Orleans, managing member Cliffe Laborde said “I think the worst is over, but we’re a long way from getting back to where we were shortly before the Macondo spill.” Laborde Marine, with operations in Morgan City, La., services the deep and shallow water drilling industry.

  • Gulf Assets Move Overseas

Laborde provided some recent history, and explained how promising times in the Gulf had turned sour. “In early 2010, as the economy emerged from a two-year recession, the Gulf energy industry was beginning to bloom,” he said. “Utilization rates for deepwater support vessels were high, and charter rates were rising again. The outlook was very good, but then came the spill and the market has languished since.”

Laborde continued, saying “many deepwater vessels and rigs have moved out of the GOM to foreign areas, and many vessels and rigs that stayed in the Gulf are idle now, waiting on BOEMRE to issue new permits.” The granting of new drill permits has been “alarmingly anemic,” he added.

Rigs are underutilized in the Gulf this summer. The fleet utilization rate for all 52, offshore Gulf platforms was 40.4% on July 22, less than half the worldwide usage rate for platforms, according to ODS-Petrodata, Inc. Utilization of mobile rigs in the Gulf stood at 53.7% on July 22.

Meanwhile, other drilling regions in the world are closer to full capacity. In Europe and the Mediterranean, 96.3% of all platform rigs and 87.7% of mobile rigs were in use in late July. Oil and marine companies can’t afford to keep assets in waters where they’re not needed. Since the start of the deepwater moratorium in May 2010, at least ten rigs have left the Gulf of Mexico, and headed to Angola, Egypt, Congo, Nigeria, French Guiana, Liberia, Brazil and Vietnam. One of those rigs returned to the Gulf in March, however, and another is slated to come back this fall.

  • Shallow Water Activity Could Slow Further At Late Year

In Morgan City, La., Dave Barousse, business development director at Fleet Operators, Inc., said “in the shelf market, or non-deep water at depths of 1,000 feet and less, we have not seen an increase in business because of the end of the moratorium. However, business has been steady as a result of the normal construction and maintenance work offshore that generally takes place during the summer months.” But, he said, activity is considerably slower than before the deepwater moratorium.” Fleet Operators owns and charters supply vessels for the offshore oil and gas industry. And Barousse said “we’re preparing for things to slow down tremendously once winter weather is upon us. The outlook is not very positive at the moment, and will be even worse by the end of the year.”

  • Gulf Oil Output Projected To Decline This Year and Next

Crude oil production from the federal Gulf of Mexico is expected to shrink from 1.64 million barrels per day in 2010 to 1.49 million bpd this year and 1.38 million bpd in 2012, according to the U.S. Energy Information Administration‘s short-term energy outlook, released in July. Gulf output should drop by 150,000 barrels a day this year and another 110,000 bpd in 2012.

The EIA said this year’s decline stems from lower production in existing fields, last year’s drilling moratorium and a subsequent delay in issuing new drilling permits. Even before the BP spill and the drilling ban, the EIA expected Gulf oil output to fall this year.

  • Issuance of Drilling Permits Lags Pre-Moratorium Pace

Jim Adams, president and chief executive of Offshore Marine Service Association, an industry group in Harahan, La., said the Administration’s approval rate for exploration and development plans is down 85% from pre-moratorium levels, and the number of drilling permits covered by exploration and development plans is off nearly 65%. He cited a study called “Restarting the Engine–Securing American Jobs, Investment and Energy Security,” released by IHS CERA and IHS Global Insight in late July.

Adams said “no industry can operate with that kind of shutdown.” He said the Obama Administration is sending rigs, boats and jobs overseas in an indefensible policy. OMSA represents more than 250 member companies, including about 100 firms that own and operate marine-service vessels. “The offshore marine industry remains in a state of crisis, almost as if the drilling moratorium was never lifted, and the only relief from excess capacity is overseas opportunities,” Adams said. “The Administration has strangled offshore drilling, and until that changes, we can’t look for better times in the marine industry.”

Adams said Washington has choked the Gulf shallow sector though it never had any significant spills. “There’s no reason that shallow water permits shouldn’t be 100% of what they were in the spring of last year, but we’re not even close,” he said. “The Administration isn’t interested in shallow-water or deepwater exploration.”
OMSA sent a letter to President Obama in February complaining about suspended offshore drilling and its impact on marine industry jobs. “We never heard back from the Administration and that’s because they know we’re right,” Adams said. According to OMSA, more than 50,000 wells have been safely drilled in the Gulf of Mexico over the past fifty years.

  • Problems with Rig Permit Numbers

Adams said “BOEMRE numbers on Gulf drilling permits are completely misleading. We need to know how many wells are brand new that will lead to exploration and how many wells are being re-permitted from last year.” Someone looking at BOEMRE’s website might think that new wells are keeping pace with pre-moratorium levels, but they aren’t, he said. He added that oil and marine industries need to be able to compare how many exploratory wells are permitted. “It takes an average seven permits for a well to start producing,” he noted. In March, Senator David Vitter (R-La.) also sent a letter to U.S/ Interior Dept. Secretary Ken Salazar and BOEMRE director Michael Bromwich, complaining about inaccurate, federal information on Gulf drilling permits.

In their July study, IHS CERA and IHS Global Insight said an analysis of BOEMRE data provided several findings. “The current pace of plan and permit approvals is significantly below historical norms and indicates that the process is not working smoothly,” researchers said. And “the growing backlog of plans awaiting approval indicates that the industry remains ready to invest as quickly as it is permitted to do so.”

  • Rigs and Vessels Adopt Oil Containment Systems

One way to get your vessel hired in the Gulf is to outfit it with spill-response equipment. After BP’s accident, BOEMRE issued new regulations requiring that rig operators be able to respond to subsea leaks and surface spills. In late July of this year, two Hornbeck Offshore Services vessels were added to the fleet of ships that can respond to a Gulf accident, the Marine Spill Response Corp. said. MSRC is a non-profit company that was established in 1990. Hornbeck’s HOS Centerline and HOS Strongline are vessels with oil-skimming systems, ocean boom, support boats and navigational systems that can support skimming at night and in stormy weather.

Hornbeck, based in Covington, La., in late May posted its first quarterly loss in over six years, but said it was diversifying by moving vessels into foreign markets. This summer, BOEMRE director Bromwich said his agency will issue more safety measures for Gulf rigs soon. At the fifth, annual World National Oil Companies Congress in the U.K. in late June, he said “offshore drilling in the U.S. and around the world will never be the same as it was a year ago. Changes that we have put in place will endure because they were urgent, necessary and appropriate.” More regulations will be issued, but not at the frantic pace of the past year, he said.

  • Report Delayed On Who’s To Blame for Spill

In late July, a U.S. team examining the causes of the BP spill delayed the release of a final report as it continued weighing evidence. BOEMRE and the U.S. Coast Guard were expected to issue results of a joint investigation on July 27 but said they needed more time. The Gulf marine industry wants additional rigs to start drilling soon. Laborde said “the oil companies, the rig operators and the energy-service companies are all anxious and ready to get back to work. This would create jobs, improve the economy, increase government revenues through royalty income and taxes, and enhance our national security by lessening dependence on foreign oil.” Where the Gulf oil and marine industries go from here is up to decision makers in Washington, he said.

Original Article

New Oil Finds Around the Globe: Will the U.S. Capitalize on Its Oil Resources?

Uploaded by AmericanSolutions on Mar 28, 2011

In a recent trip to Brazil, President Obama praised the Brazilians for their forward-thinking energy policy and said he wants America to be one of their “best customers.” Why, then, is he keeping American energy resources off limits?

By November 23, a team of 12 Congressmen and Senators will determine if they can agree on a way to cut at least $1.2 trillion dollars from the federal deficit. If they fail to agree, predetermined cuts will automatically occur, half of which will be to the Department of Defense budget.[i] One way to get revenues without taxation and spending is to allow the U.S. oil industry to do what countries around the globe are doing: drilling for oil, onshore, offshore, in the Arctic and elsewhere. A recent study by the American Petroleum Institute (API) finds that fewer restrictions on oil drilling could increase government revenues by $800 billion, increase U.S. liquids production by 50 percent, and generate 1.4 million new jobs by 2030.[ii] And, the United States can do that just by allowing the oil industry to develop oil resources here in the United States as other countries are doing in their countries: Canada, Norway, Cuba, Brazil, Russia, Israel, to name just a few.

Oil Finds and Development around the Globe

Brazil. Brazil has some 15 billion barrels of proved oil reserves in its sub-salt offshore fields. They lie in a 2 kilometer deep salt layer under the seabed that is estimated to hold up to 50 billion barrels of oil.[iii] These ultra-deep deposits are drilled at up to three times the normal pressure for offshore oil. By 2020, Petrobras, the country’s government-controlled oil company, is expected to produce 4 million barrels per day, double its volume today.[iv]  Other estimates have production as much as 5 million barrels a day and 6.42 million barrel a day by 2020.[v] The sub-salt’s share of total domestic oil production is expected to increase from 2 percent in 2011 to 40.5 percent in 2020.[vi]

While the United States has oil offshore in the Gulf of Mexico and in the Atlantic and Pacific Oceans, the Obama Administration either has that oil off limits to exploration or is slow at approving leases since it lifted the drilling moratorium it put in place after BP’s accident in the Gulf. In Alaska, which has over 50 percent of the entire coastline of the United States[vii], fewer than 100 exploratory wells[viii] have been drilled in federal waters, while over 35,000 wells have been drilled in the Gulf of Mexico[ix]. Alaska has tremendous unknown potential for energy discoveries, but currently, final permits have not been issued to allow exploratory wells. But, during President Obama’s visit to Brazil earlier this year, he pledged that the United States will be a major customer for Brazilian oil.

Canada. Canada is rich in oil sands with 170 billion barrels in reserves.  Environmentalists are against oil sands because their production emits more greenhouse gas emissions than the production of conventional oil. Studies have shown that the difference in emissions from well to wheel is only about 15 percent. Further, a new technology, developed by N-Solv, an Alberta Consortium, can extract twice the amount of oil as current methods and reduce greenhouse gas emissions from the process by up to 85 percent.[xi] But none the less, the dispute over the Keystone XL pipeline bringing Canadian oil into the United States is due mainly to the oil sands production issue.

Needless to say, whether the United States buys Canadian oil sands or not, someone will and that someone is most likely China, who has already bought into Canadian oil fields. In July, China’s largest offshore oil producer, Cnooc Ltd. agreed to buy OPTI Canada Inc. for about $2.1 billion a deal that has to be approved by both governments.[xii] Also, whether the United States allows Canada to build the Keystone XL pipeline or not, the United States will be importing Canadian oil sands, moving it by barge, rail, or truck, as we do now. An Ensys Energy & Systems Report, Inc. commissioned by the State Department estimated that rail alone could haul 1.25 million barrels of Canadian crude daily by 2030, nearly twice the amount of the proposed pipeline.[xiii]

Cuba. Cuba has 5 billion to 20 billion barrels of oil off its coast, just 70 miles off the Florida Keys. Soon, Cuban workers on a Chinese-built rig owned by Spain will be drilling in mile deep-waters. China has signed contracts with oil companies from Brazil, India, Italy, Russia and Spain and is in talks with China over lease deals. This oil find could make Cuba independent of Venezuelan crude, from which Cuba gets 60 percent of its oil. Due to our 49-year embargo with Cuba, U.S. oil companies cannot drill in Cuban waters, supply equipment there, or help in the event of an oil spill.[xiv]

Israel. Israel has an estimated 250 billion barrels of recoverable oil shale, second only to that of the United States, which has almost a trillion recoverable barrels. The 250 billion barrels compares favorably to the proven reserves of Saudi Arabia whose reserves total 260 billion barrels. It is estimated that the oil can be recovered at $35 to $40 a barrel using a new technique that does not use water. Israel Energy Initiatives indicates that the process is cleaner than that currently used to produce shale oil because the oil will be separated from the shale rock up to 300 meters beneath the ground, releasing water as a by-product. The extraction process involves heating the rock underground to approximately 325C, the level at which the carbon bonds in the rock start to “crack”. Production on a commercial basis is expected by the end of the decade with production levels beginning at 50,000 barrels per day, which will provide almost 20 percent of Israel’s oil consumption. [xv]

In contrast, the U.S. oil shale resources are mostly on federal lands in Colorado, Utah, and Wyoming, and the U.S. federal government is withholding those lease sales.

Norway. Norway had been seeing oil production declines since 2000 when its oil production peaked due to maturing oil wells. But that trend may be reversed due to two new finds in the North Sea.  Statoil ASA has made two offshore finds totaling between 500 million and 1.2 billion barrels, which is among Norway’s top ten discoveries. The new well is less than ten feet from a dry well drilled in 1971.[xvi]

“This shows Norway still has the capacity to deliver world-class discoveries,” Tim Dodson, Statoil’s exploration chief, said. “It’s probably the largest offshore oil discovery anywhere in the world this year. It has given the entire oil industry renewed optimism.”[xvii]

Russia. Russia has opened a portion of its offshore area in the Arctic Ocean to drilling and ExxonMobil has obtained the rights to drill there, but the deal may need to be reviewed by the U.S. government. The United States Geological Survey estimates that the Arctic holds one-fifth of the world’s undiscovered, recoverable oil and natural gas. Russia’s economy is dependent on petroleum for about 60 percent of its export revenue. While Russia currently produces more oil than Saudi Arabia, its Siberian onshore oil fields are in decline, so the country needs to develop new areas.

This contrasts with the U. S. stance regarding drilling offshore Alaska where environmental restrictions and lawsuits by conservation organizations have held off exploration.[xviii]

The API Study

What could the oil industry achieve if restrictions on oil drilling in the United States were lessened? The American Petroleum Industry commissioned a study that assumed oil drilling would be allowed off the currently prohibited areas of the East and West Coasts, in waters off Florida’s Gulf Coast, in Alaska’s Arctic National Wildlife Refuge, and on most federal public land that is not a national park. It also assumed that it would get approval to build pipelines to accommodate a doubling of Canadian oil sands production and the continuation of the tax policies currently in place for the oil industry.[xix]

The API commissioned the study from energy consultants Wood Mackenzie, who found that domestic production of petroleum liquids would increase from 7.8 million barrels per day in 2010 to 9 million barrels per day in 2030 under current policies due to increased production from shale oil and deepwater drilling. However, if the industry could meet the assumptions of the study, domestic liquids production could reach 15.4 million barrels per day close to the 19 million barrels a day that we currently consume. That would create 1 million new jobs over the next seven years and 1.4 million by 2030. The industry already supports more than 9 million jobs throughout the economy. The study indicates that the United States can come close to producing enough new oil and natural gas to displace all non-North American imports within 15 years. More than $800 billion in cumulative new government revenue could be generated by 2030 and $127 billion by 2020 – equal to about two and a half years’ worth of current federal spending on roads. Most importantly, no new taxes or increased government spending is needed to accomplish the results of the study.

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Conclusion

Around the globe, countries are drilling for oil onshore, offshore, and in oil shale deposits. But the United States is hampered by government rules and restrictions to developing its vast resources. Without increasing taxes and without increasing government spending, the oil industry in the United States could make us independent of non-North American oil imports. And in doing so, they could create jobs and add billions of dollars to government revenues. Why don’t we take the challenge?

Original Article

Don’t hold your breath on faster permitting

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It’s become a familiar refrain in the oil patch: the federal government could kick-start the country’s job machine by resuming offshore drilling permits to a pre-Macondo level.

A letter from American Petroleum Institute President Jack Gerard written last week implores President Obama to remember the Wood Mackenzie study API sponsored that says the oil and gas industry can create one million jobs in the next seven years and 1.4 million additional jobs by 2030.

And another a letter this week from a number of other industry groups points to another industry study that says 230,000 new or retained jobs, more than $44 billion in U.S. GDP and nearly $12 billion in tax and royalty revenues could be generated in 2012 if permitting returned to the same levels as before the Deepwater Horizon Accident.

Many in the industry (and many readers of this blog) assume the slowdown is part of a concerted effort of the White House to punish the oil and gas business. The arguments range from the administration punishing the largely Red State industry for failing to support it to kowtowing to unions and environmental groups.

Not all industry execs aren’t subscribing to the grudge-against-the-oil-industry answer on the permitting, however.

Chevron CEO John Watson also said earlier this week that he felt the Bureau of Ocean Energy Management, Regulation and Enforcement was “working very hard to process the permit applications they have,” but that the agency needs more staff to step up the pace, especially in light of new regulations imposed since the Gulf spill.

“Whether they have the resources to do it is another matter,” Watson said. “Whether there’s political overtones elsewhere, that’s for others to judge.”

But as far as the hope of getting back to pre-spill permitting levels, the industry shouldn’t hold its  breath.

“There are many more hoops and a lot more verification the government is requiring of itself and of us,” said Gary Luquette, president of Chevron North America Exploration and Production Co., said in an interview with the Chronicle earlier this week. ”This is a much more intensive process now, so we won’t go back to the time lines of the past.”

The biggest reason for the slower pace is that waivers on a number of environmental impact studies that allowed companies to skip them pre-Macondo have been reinstated.

The pace today is certainly better than it was right when the drilling moratorium was lifted, Luquette  said, and even better than it was just last month.

“There’s a need for continuous improvement and they seem to be committed to that,” he said.

BOEMRE chief Michael Bromwich said there’s no doubt the pace of permitting is way off from before Macondo.

“But that’s largely irrelevant because it misses the sea change that’s occurred over the last 15 months, with the more rigorous requirements,” Bromwich said during the same hearings where Watson spoke.

Bromwich also repeated his refrain that there’s no deliberate attempt to stifle the industry.

“There’s absolutely no evidence that anyone in the agency up through and including me has made any effort to slow things down,” Bromwich said. ” I do appreciate [Watson] saying that there is no deliberate slowdown. It’s actually fully consistent with what we’ve been hearing behind closed doors from top company executives for months. And it’s nice that one of the ceos has come out and said so publicly. I don’t think it would hurt the others to say the same thing because I think they realize there’s no agenda to slow things down.”

Original Article

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