Poll Shows Growing Support Among Californians for Offshore Drilling

- Poll Shows Growing Support Among Californians for Offshore Drilling

Monday, August 01, 2011
Knight Ridder/Tribune Business News
by Josh Richman, The Oakland Tribune, Calif.

Environmental disasters seem to have cooled Californians' support for nuclear power but not for offshore oil drilling, according to the latest survey by the Public Policy Institute of California.

The poll generally shows Californians remain green-minded, showing substantial support for forcing automakers to improve fuel efficiency; for federal funding for renewable energy sources; and for the goals of the state's landmark greenhouse-gas emissions law.

But Japan's Fukushima Daiichi nuclear meltdown disaster -- caused by March's cataclysmic earthquake and tsunami, and widely seen as the world's worst nuclear accident since 1986's Chernobyl blast -- apparently has sapped Californians' support for building new power plants.

The poll found 65 percent of Californians now oppose building more plants while 30 percent are in favor, the lowest level of support since PPIC began asking the question in 2001 and a 14-point drop since one year ago.

And the Deepwater Horizon disaster, an April 2010 explosion followed by three months of uncontrolled oil flow into the Gulf of Mexico, the nation's worst offshore spill, no longer curbs Californians' growing support for more offshore drilling, likely driven by concern over high gas prices.

The poll found 46 percent of Californians favor more drilling -- a 12-point increase since one year ago -- while 49 percent are opposed. Republicans, at 71 percent, are twice as likely as Democrats, at 35 percent, to support more drilling; 40 percent of independent voters support it. Residents of the Central Valley, Orange and San Diego counties, and the Inland Empire were much more likely to support offshore drilling than those in Los Angeles or the Bay Area.

Meanwhile, 76 percent of adults say high gas prices have caused financial hardship for their households.

Unlike Californians' consistently solid support over the long haul for renewable energy and improved fuel efficiency standards for the U.S. auto industry, support for nuclear power and oil drilling "are more volatile -- they move around with news events, and in the case of oil drilling, with gas prices," PPIC President and CEO Mark Baldassare said.

Indeed, as the Obama Administration rolled out new fuel-efficiency standards Friday, 84 percent of Californians favor significantly tighter standards, the poll found, including 90 percent of Democrats, 81 percent of independents and 76 percent of Republicans.

And 80 percent of Californians support having more federal funding to develop renewable energy sources such as wind, solar and hydrogen technology, while 77 percent support the state's policy requiring that a third of the state's electricity come from such sources by 2020 -- unless that leads to higher electricity bills, in which case only 46 percent favor it.

"Seventy-seven percent support for the renewable energy portfolio shows that this policy is a floor," Environment California legislative director Dan Jacobson responded. "California should look to moving the state to 100 percent clean energy by 2040."

AB 32, the state's landmark greenhouse-gas emissions reduction law, survived a rollback from the failed Proposition 23 in November, and the new poll shows 67 percent of Californians still support the law's goal of rolling emissions back to 1990 levels by 2020; 21 percent are opposed and 11 percent are undecided.

Most Californians see global warming as a serious threat to the state's future economy, with 47 percent saying it's very serious and 28 percent saying it's somewhat serious.

And 57 percent of Californians believe that the state should make its own policies, separate from the federal government's, to address global warming. Most -- 58 percent -- say California should act now to reduce emissions, while 38 percent prefer to wait until the economy and job situation improve. Nearly half say state action would result in more jobs and 23 percent say it would result in fewer, while 20 percent foresee no change in employment.

But while an overwhelming 79 percent of residents favor government regulation of greenhouse gas emissions, just over half -- 54 percent -- favor the kind of cap-and-trade system under development in California, with 36 percent opposed; 60 percent favor a carbon tax.

David Allgood, the California League of Conservation Voters' Southern California director, said the poll shows that "people when they're not emotional about these issues tend to agree with our point of view." Things like conservation, renewable energy and strict pollution controls are "very strongly supported by California voters -- we basically lead the nation because they've taken the longer view time after time."

Allgood said past experience shows voters will support reforms that cost them money if they've been well-educated on how the money will be spent and how their investment will create jobs and other economic benefits in the future.

Said Jacobson: "Californians see the path to getting out of our economic recession as one where we have clean cars, clean energy, and clean jobs."

Findings are based on a survey of 2,504 adult Californians reached by landline and cell phones from July 5 through 19, with a 3-point margin of error.

Copyright (c) 2011, The Oakland Tribune, Calif.

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Analysis: Iraq Faces Challenges in Growing Oil Production

- Analysis: Iraq Faces Challenges in Growing Oil Production

Friday, July 29, 2011
Rigzone Staff
by Karen Boman

Iraq's large oil-production potential could allow it to compete for leadership with Saudi Arabia in the coming decades, but a new energy study by Rice University's Baker Institute for Public Policy finds that in the near term, both Baghdad and Riyadh may have difficulty meeting rising demand for oil.

The study, "Iraqi Oil Potential and Implications for Global Oil Markets and OPEC Politics," argues that ambitious targets set by the government of Iraq may not be reachable in the short-to-intermediate term while international oil companies operating in southern Iraq continue to experience infrastructure development problems.

Iraq has the potential to increase production from 2.5 million b/d in 2010 to over 5 million b/d in the next five to 10 years. The country has expressed the ambition to reach 10 to 12 million b/d of production by 2017, but this lofty target will be difficult, given mounting political, bureaucratic and infrastructure related barriers.

"Political decentralization inside Iraq, social tensions and electricity shortages remain barriers to large-scale repair and construction of infrastructure that is needed before export levels can rise," said author Amy Myers Jaffe, the Wallace S. Wilson Fellow for Energy Studies at the Baker Institute. "Failure to progress quickly on water injection, pipeline, electricity and natural gas facilities will limit the ability of independent oil companies to translate upstream oil-field expansion successes into continued export increases."

The return of international oil companies to Iraq has raised the prospect that Baghdad's oil production will indeed be increasing in the coming years. Iraq is expected to see a 200,000 b/d increase in output in 2011, with output expansions already achieved at the Rumaila, Zubair, West Qurna-1 and Majnoon fields. As of spring 2011, Iraq's southern oil fields were producing a total of 1.986 million b/d and total production was pegged at around 2.7 million b/d. Iraq's June 2011 output was 2.56 million b/d, of which 2.27 million b/d were exported.

However, foreign oil company officials say that, while output gains are easily achievable based on field performance and geology, infrastructure bottlenecks might make future increases harder to accomplish. "The end result may be that ambitious targets set by the government of Iraq may not be reached in the short to intermediate term, delaying the time when OPEC will have to address rising Iraqi output," the study found.

While these operational and logistical factors will play a large role in whether Iraq reaches its energy potential, political factors will be equally important, the study concludes. The resolution or management of several political issues – including ongoing challenges to political stability, difficult power-sharing arrangements at the national level between political parties and growing pressures for provincial empowerment – is essential to the smooth development of Iraq's energy potential.

Iraq's logistical and political challenges come at the same time that the costs for Saudi Arabia to continue to expand and maintain sufficient spare capacity to influence global markets have increased dramatically, according to the study. Saudi Arabia has less spare capacity immediately available now than in the 1980s and 1990s, and it will be quite expensive for Saudi Arabia to bring on additional production capacity.

Saudi Arabia has spent $14 billion since 2005 to increase its oil production since 2005 to grow its oil production capacity from 10 million b/d to 12 million b/d. Future investment in a new tranche of Saudi production capacity is likely to be even more expensive because the kingdom will have to shift to areas that have more complex geology and require greater technological intervention.

But Saudi Arabia is also facing competing priorities with higher spending requirements on social services and defense in light of new regional and internal challenges, which calls into question whether sufficient spending on spare oil production capability will be maintained. King Abdullah ordered sweeping spending increases of $67 million in March 2011 for housing, job creation and the military, on top of a $36 billion hand-out to citizens in February, in an effort to respond to increased instability across the Middle East. "The pressures for higher defense and social spending will make it that much harder for the government to justify a massive campaign to expand its oil sector."

Possible increases in Iraqi oil production will likely be very important to the future stability of the global oil markets, and Iraq’s aspirations to become a major oil exporter create shared interested with the U.S. and other major oil consuming countries. The U.S. and other major powers should meet to discuss way to support Iraq's realization of the potential of its oil and gas deposits.

"As the U.S. government did successfully in the Caspian region and the Japanese government did successfully in Qatar and other LNG [liquefied natural gas] producing nations, the United States, EU, Japan and China should work together to ensure that IOC’s [international operating companies] operating in Iraq and the Iraqi government are able to attain attractive financing and loan packages to underwrite major export infrastructure development projects," the study noted. "Multinational assistance would also be appropriate as a means to support major investments as well as bilateral or trilaterial trade finance and development assistance."

Iraq's ability to reach its energy potential should be of broad regional and international concern. The nation could be poised for a dramatic transformation, one in which it finally escapes the political and technical constraints that have kept it producing less than four percent of the world's oil, despite having the third largest conventional oil reserves in the world.

"Should Iraq meet its ambitions to bring nearly 10 million more barrels of oil on line by 2017, it would constitute the largest ever capacity increase in the history of the oil industry," said Meghan O'Sullivan, the Jeane Kirkpatrick Professor of the Practice of International Affairs at Harvard University's Kennedy School. The health of Iraq's energy sector – currently the source of more than 90 percent of revenues accrued by the state – is a major determinant in setting Iraq's overall trajectory.

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Growing Population, Economies Fuel Asian LNG Demand

- Growing Population, Economies Fuel Asian LNG Demand

Tuesday, July 19, 2011
Rigzone Staff
by Karen Boman

Southeast Asian demand for liquefied natural gas (LNG) will play a significant role in the global LNG trade as forecasts call for growing populations and economies in the region and demand for cleaner-burning natural gas.

According to the U.S. Energy Information Administration, Asia is expected to account for 48 percent of the world's population growth, 52 percent of global gross domestic product growth, and 64 percent of growth in primary energy consumption. Demand for LNG is expected to grow in China, India, Malaysia and Indonesia in the coming years, and Japan, which was devastated by an earthquake and tsunami in March, has boosted its LNG imports as nuclear power plants in the country remain offline.

Southeast Asian gas markets are often overlooked, but Thailand, Singapore, Indonesia, Malaysia, Vietnam and Bangladesh are expected to become LNG importers by 2017, Flex LNG reported in June. Regasification terminals are under construction in Indonesia, Malaysia, Singapore and Thailand, which previously did not have regasification capacity.

Thailand's first LNG receiving terminal is expected to begin operations this year.

Flex LNG is developing a floating LNG project in Papua New Guinea (PNG) with a proposed operations start-up date in 2014, which the company said is "perfect timing" for the anticipated wave of Asian LNG demand. Northeast Asia remains the dominant LNG market and is still experiencing solid growth, and the Fukushima disaster is greatly enhancing this growth, Flex LNG noted. "China and India are the new 'growth engines' in Asian LNG demand and strong growth is expected going forward," Flex LNG said.

According to a report by the International Gas Union, 60 percent, or 135.1 million tones/annum, of the world's LNG was consumed by the Asia-Pacific region in 2010. Sixty percent of that LNG was sourced from within the region; the remaining 40 percent was imported from other regions.

At the end of 2010, China and traditional LNG importers Japan, Taiwan and Korea had 280 million tones/annum, or 51 percent, of the world's regasification capacity. East Asia had accounted for between 75 percent and 80 percent through of the 1990s and early 2000s of the world's regasification capacity, but that share has declined since the mid-2000s due to new capacity in North America, Europe, and the emergence of LNG importing markets in South Asia, South America, and the Middle East.

Asian LNG markets represent three distinct demand groups, said Peter Cleary, VP of Corporate Strategy and Development of Santos Ltd., at the Asian Oil and Gas Conference on June 7. The first group, comprised of established LNG markets of Japan, South Korea, and Taiwan, are countries seeking supply security and diversification by fuel type. These countries have effectively locked in LNG demand, growing at steady incremental rates of between one percent and three percent of year.

The second group represents the growing mega-markets of China and India, which started to develop less than a decade ago but is expected to grow at 10 percent per year, and could be as significant as established markets.

Last month, Black & Veatch and Chemtex unveiled plans to design and build two new LNG facilities in Shaanxi Province, China. The facilities, located in Jingbian City and Yulin City, will be used to liquefy gas for vehicle fuel in the region, offsetting the use of diesel and gasoline. The Black & Veatch-Chemtex team has won five LNG projects in China since the beginning of 2011, and 13 since 2006.

The third group represents the emerging markets of Southeast Asia, including Singapore, Thailand, Malaysia, Indonesia, Vietnam and the Philippines. This group of emerging buyers includes some of Asia's "bedrock" producers who are now becoming importers, as is the case with Petronas purchasing 3.5 mtpa from the Gladstone LNG project in which Santos, Petronas, Total and Kogas are partners.

While future U.S. LNG exports will impact trade flows, Cleary said he believes Asia's demand for securing supplies from neighboring sources will preserve oil-linked prices for the foreseeable future. "Oil-linked pricing of LNG has been the commercial driver required to build real scale and tackle challenging gas developments. Oil-linked pricing has worked in Asia because buyers are comfortable that oil is an established, well understood and globally traded commodity," Cleary said.

With limited conventional gas resource, industrialized Asia and the emerging economies in that region are almost totally dependent on imported LNG from Southeast Asia, Australia and the Middle East. "This dependence places a high premium on security of supply, which is reflected in the region's dependence on long-term relatively high-priced contracts indexed to oil," according to a study by the Massachusetts Institute of Technology, The Future of Natural Gas.

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Maersk Oil Takes Stake Offshore Norway

Maersk Oil Takes Stake Offshore Norway

Friday, April 15, 2011
Maersk Oil

Maersk Oil has been awarded a 30% non-operated share in License PL597 on the Halten Terrace offshore Norway in the 21st Licensing Round.

The operator of the license is VNG Norge A/S (40%) with Dana Petroleum Plc as partner (30%). Together with Maersk Oil, the partners are committed to carrying out seismic data reprocessing leading to a decision whether to drill an exploration well.

"This license award fits well with Maersk Oil's strategy of building up a strong exploration portfolio in our chosen focus areas in Norway. It adds to our current interests in four other licenses on the Halten Terrace," said Morten Jeppesen, Managing Director of Maersk Oil Norway.

"We are committed to growing our business in Norway through exploration and acquisitions to build a significant portfolio of exploration and producing assets in the coming years," Jeppesen said.