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Shale gas ‘revolution’ impacts to vary across globe: OTC panelists

The impacts that the international liquefied natural gas market will see from shale gas production growth in North America and across the globe will vary widely according to local market conditions, members of a panel at the Offshore Technology Conference in Houston said Wednesday.

In the US, where the “shale gas revolution” first started and already is well under way, domestic gas supplies have severely cut into the demand for imported LNG, Emma Cochrane, manager of gas power and marketing for ExxonMobil, said.

With ample gas supplies to meet US gas demands most of the time, LNG imports will largely serve to meet seasonal balancing needs, she said.

“Imports will mostly come in the summer, where there is nowhere else for the gas to go,” Cochrane said. As a result of the inflow of gas supplies from shale plays across the nation, “the US becomes almost self-sufficient” in meeting its gas demand in the future.

In other regions of the world, however, the growth of shale gas production will be less of a factor in supply-and-demand dynamics than more localized factors, Rafael McDonald, associate director of global gas research, IHS CERA, said.

“We see an acceleration of the tightening of the global gas market,” he said. However, the resurgence of gas demand in the wake of the global recession will result in “a multi-speed recovery,” with some regions outpacing others.

“In terms of GDP and gas demand, some places never dipped, like Brazil and China. Some dipped but came roaring back, like South Korea, and some continue to languish,” he said.

Australia, which has ambitious plans to dramatically increase its liquefaction and LNG export capacity, could someday surpass Qatar as the world’s largest LNG exporter, McDonald said. “There are some questions still. There 28 million tons of capacity already, with over an additional 100 million tons of capacity planned,” he said.

He added that “all of that can’t come on line,” as Australia does not have the resources to increase its LNG capacity to the extent that LNG developers envision.

Davis Thames, president of Cheniere Marketing, described how the changing dynamics of the international gas market has led his company to announce plans to convert its Sabine Pass LNG receiving terminal in Cameron Parish, Louisiana into bi-directional terminal capable of exporting as well as importing LNG.

“In the US, we have a natural gas market that doesn’t exist anywhere else in the world,” he said. Technological innovations in gas production techniques have resulted in “a tremendous amount of gas,” coming onto US markets, driving down the domestic costs of gas and destroying the economic rationale behind building LNG import-only terminals.

As a result, Cheniere is reinventing its business model from the traditional LNG import terminal, Thames said.

“We’re providing a midstream service,” he said. Cheniere’s proposed bi-directional LNG facility “looks more like a pipeline,” than a traditional LNG import terminal, he said.

Houston-based Cheniere, which owns the 4 Bcf/d Sabine Pass LNG import terminal, in August 2010 applied to US authorities for permission to export gas produced in the Lower-48 states.

–Jim Magill, jim_magill@platts.com

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Drilling: U.S. Embargo May Hinder Oil-Spill Response in Cuban Waters

Platts – A long-standing embargo imposed by the United States on Cuba could make it more difficult to clean up potential oil spills as the Caribbean nation prepares to drill in deep water 50 miles from the shores of Florida, according to the head of an international drilling trade group. Lee Hunt, the president of the International Association of Drilling Contractors (IADC), made his comments to Platts Energy Week (http://www.plattsenergyweektv.com/), the independent, all-energy television news and talk program airing Sundays in the United States.

Hunt said that the U.S. embargo on Havana has required drillers there to use second-hand equipment to avoid buying it from U.S. companies. “The impact of the embargo has to do if something goes wrong, and what kind of resources can be mobilized to cap or stem the flow of a runaway well or to contain a spill.”

Cuba has been a target of a U.S. embargo since 1962. A subsequent U.S. law allows foreign companies working with Cuba to use only 10% U.S.-made equipment, or face sanctions on their operations in the United States.

Spanish-owned Repsol plans deepwater drilling off the Cuban coast later this year using a drilling rig built in China specifically to avoid the embargo.

“What the contractor has had to do is shop around its used inventory to locate a piece of equipment that falls outside the restrictions of the embargo, so the embargo, in effect has forced the drilling contractors working in Cuba to go to second-level equipment,” Hunt said.

Hunt’s comments come a little more than one year after the anniversary of the 2010 Macondo well blowout in the Gulf of Mexico resulted in the worst oil spill in U.S. history.  A report from the Interior Department found that human failure was the primary cause of the disaster, but that a malfunctioning blowout preventer was a major contributing factor to the magnitude of the spill.

“It is unnerving that as we work here in the Gulf of Mexico with the Department of Interior and the [Bureau of Ocean Energy Management, Regulation and Enforcement] that as we seek the gold-plated standard for the United States, the impact of the embargo is to force our neighbor, drilling very, very close to our shores, to go into a secondary market for parts, service and supply.”

Cuban officials have been very supportive of drilling safety, Hunt said. “What we are hearing from Cuban officials is a great deal of respect for the various regulatory schemes in the world, and in particular the new ones emerging in the U.S.,” Hunt said. ‘They are attempting to follow what can be communicated as best practices.”

The interview with Hunt was shortly before the U.S. announced it would allow the Cuban officials to attend a conference in Trinidad next month sponsored by the U.S.-based IADC to discuss Cuba’s deepwater drilling plans. Permission from the United Sates was required because IADC is a U.S. group and the embargo prohibits U.S. citizens from meeting with Cuban officials. The full interview may be accessed here.

As plans for deepwater drilling ramp up off the Cuban coast, the presence of a delegation from Havana including the country’s top drilling regulator would mark the first time they have discussed that drilling in an international forum. The IADC hopes to use the forum to discuss international best practices with Cuban officials.

In a segment entitled Iraq Plays Catch-up on Oil, Platts Baghdad-based correspondent Ben Lando reported on Iraq’s race to rebuild its oil infrastructure and play a bigger role in oil and natural as markets.

In this week’s Energy Watch segment, Platts Energy Week featured Devon Energy’s William Whitsitt, executive vice president for public affairs, on the topic of a new national database on fluids used in shale gas drilling. Whitsitt spoke about his company’s participation in a new voluntary database. Platts Gas Daily Associate Editor Bill Holland offered an update on the latest developments in the Marcellus Formation, the rich shale gas region that stretches from New York to West Virginia.

Original Article

High-pressure deepwater well capping stack unveiled at offshore conference

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Helix Well Containment GroupThe Helix Well Containment Group’s new deepwater well capping stack, unveiled Tuesday at the Offshore Technology Conference in Houston. The new capping stack can handle pressures of up to 15,000 pounds per square inch, an improvement over the 10,000 psi model Helix completed in February.

By David Hammer
The Times-Picayune

The Helix Well Containment Group is a cooperative effort of 24 Gulf oil companies. They have banded together and invested in spill-response technology to convince the federal government that they could return to drilling in the deep sea and stop a leak like last year’s BP disaster, in which the massive device known as a blowout preventer failed to close in the well.

Helix Well Containment Group’s participating companies succeeded in getting several new wells approved in recent months, mostly because they had access to the consortium’s capping stack, something like a mini-blowout preventer that could attach to the top of a failed blowout preventer and block hydrocarbons flowing through it at pressures of up to 10,000 pounds per square inch.

At the annual Offshore Technology Conference in Houston today, Helix Well Containment Group unveiled a second capping stack model, which promises to safely shut in flows of up to 15,000 psi. That’s a significant increase in capabilities that the industry hopes can pave the way to deeper drilling.

Like the 10,000 psi model that was unveiled in late February — and led to the first new deepwater well permit approval a day later — the new capping stack will be housed in North Houston and can be at the site of a blowout offshore in less than 48 hours, according to Helix Well Containment Group.

The consortium’s well containment plan states that if there’s no debris blocking the well bore, the stack can be attached and shut off flow in three to four days. But other complications could delay final closure. If the capping stack is not enough to stop all flow and containment vessels and systems are necessary to carry oil to the surface, it could take as long as 17 days, consortium spokeswoman Danielle Allen said.

Michael Bromwich, the government’s top offshore regulator, said the 10 deepwater wells approved since Feb. 28 can all be shut in using only the capping stack.

The consortium’s second capping stack, which weighs 156,000 pounds, boasts a larger opening than others, something that should allow scientists to keep working on the insides of a busted blowout preventer even while shutting off the flow.

It’s one of the new components developed since last summer when a cap built on the fly by one of the consortium’s contractors, Helix Energy Solutions, finally shut in BP’s Macondo well, 87 days after its blowout preventer failed.

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A diagram of Helix Well Containment Group’s full capping stack and oil collection system.

In addition, the capping stack has ports for tubes to connect to ships on the surface, in case it needs to collect excessive oil flowing out. That containment system works in up to 8,000 feet of water and is being expanded to 10,000 feet this summer, Allen said.

Asked why Helix Well Containment Group is keeping its equipment in Houston when the vast majority of deepwater oil and gas prospects are off the Louisiana coast, Allen said the threat of hurricanes played a major role in the company’s decision.

“The Louisiana coast has some vulnerability in the event of a hurricane surge,” she said. “Houston is close enough to the port, but would not put it in the path of a hurricane surge and would allow for access to other ports via land.”

She also contended that most deepwater wells are about 200 miles from each deepwater Gulf port, but Macondo and some of the wells approved recently are about 100 miles from Port Fourchon.

Original Article

Brazil is open for US business at OTC, but Petrobras eyes local suppliers

By Katharine Frase
May 2, 2011 4:58 PM

With Petrobras planning to invest $224 billion between 2010-2014 in Brazil’s upstream and downstream oil and gas sector, plenty of US companies want to get a handle on how to get a piece of that. And US officials on hand at the Offshore Technology Conference in Houston want to lend a hand, including two who are visiting the meeting from the US consulate in Rio de Janeiro.

The key for foreign companies in Brazil may be raising your Brazilian profile, according to a panel of Petrobras and US officials at OTC. While Petrobras will buy goods originating elsewhere, it does place a preference on local sources and foreign companies are encouraged to build equipment in Brazil (this is known as the local content policy).

That is not to say Petrobras will not buy foreign-built equipment. Joao Henrique Rittershaussen, general manager of strategic market development in Petrobras’ procurement department, gave a slide show that included an extensive list of equipment that it is in the market for, including pumps, cranes, compressors, structure steel, flares, power generators, tanks, processing towers, reactors, wet Christmas trees, offshore wellheads, manifolds, umbilicals, tubing, flexible pipes, risers and turbines. He also went over the types of representatives that companies can retain in Brazil; the criteria for being selected, such as meeting certain industry standards; and did a quick walk-through of where to find more about the company’s procurement on its website.

Not all of it is for pre-salt oil exploration and production, and a lot is for refineries, the Petrobras official noted, saying that the boost in downstream is “huge.” As for sourcing, Petrobras’ objective is to see more companies hiring and building out in Brazil because the “idea here is to maximize local content,” but it will still buy foreign goods, Rittershaussen said.

After his presentation, he told a reporter that there are “more opportunities for companies” that set up shop in Brazil. Also, companies with a local presence usually provide “faster and friendlier” after-sales service and response than a foreign company; at least that’s what a slide in one of the presentations said. In essence, there is a sliding scale upon which “if the product can be made in Brazil,” the proportion of local content used will be higher, he told the OTC audience.

“We recommend that you find a Brazilian partner,” Alan Long, principal commercial officer with the US Commercial Service at the US Consulate in Rio, said. “We can help you find potential partners,” he added, noting “we can do customized market research and then move forward with company to company introductions.”

Just as Petrobras, a publicly traded company controlled by the Brazilian government, would like to see more Brazilian companies land its investments, the US wants to maximize the amount of Petrobras spending that could flow to American companies, according to Joseph Ringer, the senior export finance manager for the Export-Import Bank of the United States‘ southwest region. The Ex-Im Bank has “open account terms” with Petrobras to speed loan guarantees for US companies wanting to do business with it, he added.

Houston-based Ringer gave an overview of the types of credit programs accessible through his agency and offered to sit down with would-be US exporters to Brazil. “We make house calls. We actually come out to visit you.”

Original Article

Bromwich at OTC 2011: Feds will regulate offshore contractors

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Posted on May 2, 2011 at 1:28 pm
by Jennifer Dlouhy

The federal government will expand its oversight of coastal drilling to include new regulation of oil field service firms, rig suppliers and other offshore contractors, a top Obama administration official said today.

Michael Bromwich, the head of the Bureau of Ocean Energy Management, Regulation and Enforcement, said a broad internal review of current laws concluded that the agency has “broad legal authority over all activities relating to offshore leases, whether it is engaged in by lessees, operators or contractors.”

“We can exercise such authority as we deem appropriate,” Bromwich told the Offshore Technology Conference in Houston.

Bromwich has floated the idea of expanding the ocean energy bureau’s reach beyond oil and gas companies before — but he had been unsure whether the move would require Congress to go along with the plan. According to the administration’s internal legal review, congressional action isn’t necessary; the agency already has the authority.

Historically, the federal offshore energy agency — previously known as the Minerals Management Service — has focused on leaseholders and operators. Other federal agencies, such as the Coast Guard, separately regulate entities such as drilling rigs and their owners. The benefit of the traditional system, Bromwich acknowledged, is that “it served to preserve clarity and the singular responsibility of the operator.”

But the drilling chief said that he was “convinced that we can fully preserve the principle of holding operators fully responsible — and in most cases solely responsible — without sacrificing the ability to pursue regulatory actions against contractors for serious violations of agency rules and regulations.”

Bromwich insisted the Obama administration would be “careful and measured in extending our regulatory authority to contractors.”

The presidential commission that investigated last year’s oil spill concluded that poor communication among contractors on the Deepwater Horizon rig contributed to the disaster.

Sean Grimsley, the panel’s deputy chief counsel, said that there was an absence of a sense of real responsibility at the Macondo well.

“One of the problems is that there are upwards of 20 plus contractors out here on one of these rigs,” Grimsley said. “What we saw here was that different contractors were making critical decisions, often times without communicating what they had learned to other decision makers.”

Visit FuelFix this week for the latest news from OTC. You can also like our page on Facebook or follow @FuelFixBlog on Twitter. Look for updates from reporters @houstonfowler and @jendlouhyhc under the #OTCHouston hashtag.

Original Article

OTC 2011: Coastal governors form coalition to lobby for offshore drilling

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Posted on May 2, 2011 at 11:33 am
by jenniferdlouhy

Governors from Alaska and states bordering the Gulf of Mexico are reaching out to their counterparts along the West and East Coast today in a bid to get them more involved in decisions about energy production offshore.

The push for a new Outer Continental Shelf Governors Coalition is led by four governors who know a little something about oil and gas production offshore: Rick Perry of Texas, Bobby Jindal of Louisiana, Haley Barbour of Mississippi and Sean Parnell of Alaska.

In an invitation to other coastal state governors, the foursome said they hoped the coalition would “foster an appropriate dialogue between the coastal states and the administration” about offshore drilling. The group would give the governors a vehicle to lobby for expanded drilling offshore.

“All federal decisions regarding exploration and production must be made in consultation with affected states,” the four governors said. “In recent months, however, the federal government has taken sweeping actions regarding offshore oil and gas activities with little consultation with the states.”

And too often, they say, those decisions have conflicted with the states’ best interests.

For instance, Gulf Coast governors who signed the letter have protested the administration’s decision to halt deep-water drilling after last year’s oil spill and to postpone some sales of offshore drilling leases. And Virginia state leaders were upset by the Obama administration’s move to cancel a lease sale off their coastline.

Representatives from Louisiana, Texas and other states are set to announce the new group during a session this afternoon at the Offshore Technology Conference in Houston.

David Holt, president of the Consumer Energy Alliance and a FuelFix guest blogger, said the move would allow the governors to better communicate “the need to produce American energy offshore, not only for their individual states, but for the entire nation.”

Visit FuelFix this week for the latest news from OTC. You can also like our page on Facebook or follow @FuelFixBlog on Twitter. Look for updates from reporters @houstonfowler and @jendlouhyhc under the #OTCHouston hashtag.

Original Article

OTC 2011: Yes, roughnecks do tweet

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Phil McNabb of Oceaneering International shows off the WASP Atmospheric Diving System during the Offshore Technology Conference at Reliant Center in 2002. (Melissa Phillip/Chronicle)

April 29, 2011 at 7:18 am
by Tom Fowler

The Offshore Technology Conference is a showcase for all the brute force and technical finesse the energy industry has to offer, a place to highlight how mind meets muscle 20,000 feet beneath the surface of the ocean.

It’s also a place find folks up to their elbows in social media. Facebook and Twitter didn’t use to be part of the massive trade show, but that’s changed.

OTC has had a Twitter account at least since 2009 , shortly after what may have been an Exxon Mobil employee decided to single-handedly pull the oil giant into the Twitter-sphere.

Today, the energy industry using social media is old news, with companies like Chesapeake Energy, Chevron and Shell leading the way  (yes, Exxon is in the house too).

Since early this week the #OTCHouston hashtag on Twitter has become steadily more busy as vendors set up their booths at the Reliant Center. OTCHouston’s Facebook page has also been seeing steady traffic, answering questions from potential job applicants and students.

Three of us from the Houston Chronicle/FuelFix.com team will be at OTC all four days next week, posting stories throughout the day and tweeting using the #OTCHouston hashtag – so please follow our coverage and share any feedback/suggestions you may have along the way.

As with CERAWeek, we may even try a little contest for any dedicated followers of our work (no promises yet) so stay tuned and stay in touch.

Visit FuelFix this week for the latest news from OTC. You can also like our page on Facebook or follow @FuelFixBlog on Twitter. Look for updates from reporters @houstonfowler and @jendlouhyhc under the #OTCHouston hashtag.

Original Article

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