Niobrara's Slow Start Not Cause for Worry

- Niobrara's Slow Start Not Cause for Worry

Tuesday, July 19, 2011
Knight Ridder/Tribune Business News
by Trevor Brown, Wyoming Tribune-Eagle, Cheyenne

The Niobrara oil play is off to a slow start, but state and industry officials say that is not unexpected or a reason for concern.

No oil rigs were operating in southeast Wyoming as of last Wednesday. This is down from about six in the area two months ago.

Wyoming Oil and Gas Conservation Commission Supervisor Tom Doll said many oil companies are waiting for updated seismic maps that show the underground Niobrara formation before they commit to expensive drilling operations.

"You want to get as much data as possible so you don't drill a $3 million to $4 million dry hole," he said. "My expectation is (the companies) want to have another tool of using that additional science to have a better opportunity to drill a productive well."

Texas-based Global Geophysical Services spent much of the spring using trucks and other seismic equipment to map areas beneath the surface of 831 square miles of land in Laramie County.

John Robitaille, vice president of the Petroleum Association of Wyoming, said it can take some time before the 3-D seismic maps are analyzed and sold to the oil companies.

"I can tell you it is some pretty technical data that they receive back," he said. "It then needs to be plotted and made into a format that is readable for the various geologists so they can get their plans made and know where they want to drill.

"And, of course, getting everything in place and lining up a rig takes all sorts of time as well."

Robitaille said he expects the activity to pick up in the fourth quarter of this year. In addition, up to three rigs are expected to return to Laramie County later this month.

According to the Oil and Gas Conservation Commission, 21 wells have been drilled to date in southeast Wyoming for the oil play -- 18 in Laramie County, two in Goshen County and one in Platte County.

Doll said although the companies are currently hesitant to drill, they are moving forward with other preparations, including obtaining drilling permits.

The Oil and Gas Conservation Commission issued 73 permits for drilling in Laramie County for the first quarter of 2011 and 60 in the second quarter.

In the second, third and fourth quarters of 2010, a combined 64 permits were issued here. Data from the first quarter of 2010 are not available.

Laramie County planner Gary Kranse said he estimates 1,500 drilling permits will be issued during the next five years here.

Both Doll and Robitaille said the relatively low number of wells that have been drilled so far is not a sign the oil play is a bust -- at least not yet.

"I wouldn't be too concerned because this is a slow-moving play," Robitaille said. "It is still very much in the exploratory phase of knowing where to drill."

A representative for Chesapeake Energy, which has announced a large stake in the oil play, would not comment on the specifics of why there has not been more drilling.

But John Dill, director of corporate development and government affairs for the company, agreed this exploratory phase can take some time before increased activity begins.

"It is also a very complex geology, and Chesapeake is only just beginning the process of exploring this vast, complicated play," Dill said in an email. "What may appear to be slow development of this extraordinary resource is primarily due to its size, complexity and the early stages of this effort."

Doll said there is too little information yet to determine how successful the play will be in the end.

This is because of the low number of commercial wells and rules that allow companies to keep their results confidential for up to six months.

"We just haven't seen enough drilling rigs and enough activity to really know if there is a play yet," he said.

Another reason for the oil play's slowdown could be because of increased activity in North Dakota, Doll said.

He said the Bakken oil play is gearing up to have 170 active drilling rigs and up to 290 by the end of the year. That could leave a shortage of equipment and workers for activity here.

"They claim that they are using many new rigs, so that may not be a problem," Doll said. "But my concern is: Where are you going to get the drillers, roughnecks and (fracking) crews who are trained to do the sophisticated work?"

Kranse added that companies could be taking time to develop the right formula for fracking the Niobrara shale.

Hydraulic fracturing, known as fracking, involves injecting a mixture chemicals and water into the earth to extract oil.

Copyright (c) 2011, Wyoming Tribune-Eagle, Cheyenne

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Could Energy Resources Cause Russia to Spark a Naval War in the Caspian?

- Could Energy Resources Cause Russia to Spark a Naval War in the Caspian?

Monday, July 11, 201
OilPrice.com
by John Daly

In the past three decades the Islamic Republic of Iran has developed a well-earned sense of paranoia. First, in September 1980 Saddam Hussein invaded Iran in what he thought would be a quick military victory, but which quickly turned into an eight-year bloody slugfest, leaving an estimated 500,000-1,000,000 dead before the guns fell silent.

More recently Iran has been subjected to increasingly militant rhetoric from both Tel Aviv and Washington over its civilian nuclear energy program, with thinly veiled threats of possible military action if Tehran does not abandon its efforts, even though they are completely complaint under the terms of the Nuclear Non-Proliferation Treaty (NPT), which Iran has signed.

Now however, potential is brewing for Iran from an unexpected direction - the north.

Russia is sharply increasing its military presence in the Caspian. Russian Federation Navy Commander in Chief Admiral Vladimir Vysotskii has stated that Russia's Caspian Sea Flotilla will receive up to 16 new ships over the next decade, while some aviation units will be transferred to the Navy from the Russian military's southern operational-strategic command. What has really got to have the mullahs in Tehran fingering their worry beads however is Vysotskii's promise to provide the Caspian Sea Flotilla with Bastion shore-based missile systems armed with Yakhont hypersonic missiles, which are designed to destroy surface targets at distances of up to 200 miles.

Russia's Caspian Sea Flotilla flagship, the Tatarstan frigate, is already the most powerful vessel on the Caspian, armed with Uran missiles with a range of 100 miles. Later this year the Tatarstan will be joined by a sister ship, the Dagestan.

The Caspian Sea Flotilla is also taking delivery of the first in a series of new Project 21631 Buyan-M-class rocket-artillery ships, along with three amphibious assault ships.

The Iranian Navy has a total of approximately one hundred, mostly small combat and supports ships on the Caspian. They include three Iranian-made midget submarines (of a North Korean type that can transport a group of combat divers and have a range of 1,200 miles), an outdated Salman-class minesweeper (American-made), and patrol cutters.

Russian analysts believe that Iran however has the ability to increase its Caspian naval forces by 50 percent in short order by relocating craft from the Persian Gulf.

As for the other Caspian littoral states - Azerbaijan, Turkmenistan and Kazakhstan, their naval forces are negligible, to be polite.

So, why is Russia beefing up its naval presence?

The most likely reason is the one that has bedeviled the region for the last two decades - a final treaty delineating the ownership of the Caspian's offshore waters and seabed has yet to be signed. While Moscow and Tehran might agree about keeping the U.S. locked out of exploiting the Caspian's energy resources, worth an eye-watering $3 trillion, they remain at loggerheads over the issue of dividing the Caspian, with Russia insisting that each nation receive offshore waters in proportion to its coastline, while Iran insists that all five nations receive an equitable twenty percent apiece. Under the Russian definition Iran's share would be 11-13 percent.

Complicating the issue is that international law has yet to definitively designate whether the Caspian is an inland "sea" or a lake, an adjudication which has enormous implications for both the applicability of the 1982 U.N. Convention on the Law of the Sea and negotiation of the boundary demarcation regime affecting the littoral states' rights to significant undersea oil deposits.

Ironically, Iran has itself played the "gunboat diplomacy" card in the past. On 23 July 2001, an Iranian warship and two jets forced two Azeri research vessels, the Geofyzik -3 and the Alif Hajiyev, operating in what Azerbaijan calls the Alov oilfield on behalf of BP-Amoco, to leave the field where they were conducting surveys, which lies 60 miles north of Iranian waters. BP-Amoco immediately announced it would cease exploration activities and withdrew the research vessels. Azerbaijan denounced the move as a violation of its sovereignty and on 31 July charged that an Iranian reconnaissance aircraft had violated Azeri airspace and come within 90 miles of Baku. Ramping up the pressure, Iranian former Pasdaran Commander Mohsen Reza'i pointedly reminded Azerbaijan that the whole country had once been Iranian territory and that Iran might decide to take it back, even as the Iranian press speculated that the whole thing was a provocation cooked up by Azerbaijan who was scheming to bring about American intervention in the Caspian.

In the unlikely event that hawks in Washington ever considered, then or now, to fly the Stars and Stripes on the Caspian while taking a few potshots at the evil Russkies or the even more perfidious Axis of Evil mullahs, then geography seems to have thrown a spanner in the works, as the Caspian's sole exit point, the Volga-Don canal, is controlled by... Moscow.

What seems to be happening is that Russia has decided that gunboat diplomacy has its uses, and an upping of its naval presence in the Caspian might finally persuade Iran's obstinate mullahcracy that it's time to divvy up the Caspian pie according to Moscow's formula.

And, after all, 11-13 percent of $3 trillion is no small chunk of change, even to an OPEC member.

(John Daly is an energy and geopolitical specialist with OilPrice.com. The full article is available here.)

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Little Lizard Could Cause Big Disruptions for Texas Drillers

- Little Lizard Could Cause Big Disruptions for Texas Drillers

Monday, June 20, 2011
Fort Worth Star-Telegram, Texas
by Anna M. Tinsley

Deep in the West Texas sand dunes is something that some say could threaten the state's oil and gas production: A tiny lizard.

But it's not just any lizard: It's a dunes sagebrush lizard, also known as the sand dune lizard.

This little brown reptile is a concern for state officials, who hope that federal officials don't designate it an endangered species. That, they say, could disrupt oil and gas exploration in the heart of Texas' oil country, leading to higher gas prices and shrinking dollars for schools.

"It's reptile dysfunction," said Texas Land Commissioner Jerry Patterson, who oversees the permanent school and university funds, which get money from royalties and leases on some of the potentially affected land. "It has the potential to bring oil exploration and production to a halt."

The U.S. Fish and Wildlife Service, which has had the issue before it for about a decade, is considering protections because oil and gas exploration and ranching are shrinking the lizard's habitat. A decision could come by year's end.

The lizard

The blunt-nosed lizard at the heart of the issue has bright yellow eyes but is barely as long as a person's hand. The lizard is important prey for a number of other species, including some birds and mammals.

It can be found in the West Texas counties of Andrews, Crane, Gaines, Ward and Winkler -- part of the Permian Basin, known to petroleum officials as the most "prolific oil-producing region in onshore America" -- as well as in southeast New Mexico.

There it lives, in the shade of shinnery oak trees, which look like bushes and are found mainly in the sand dunes. The lizard lives only in dunes that have medium-size sand grains.

Environmentalists say the spiny lizard is in danger of extinction because its habitat has been disturbed or removed by oil and gas development. Shinnery oaks, for instance, have been destroyed by drillers, who clear space and move equipment. They have also been killed by ranchers, who say the plant can be poisonous to cattle.

The lizard has been a candidate for endangered status since 2001, when the Center for Biological Diversity asked the federal government to list it. But this proposal was moved forward at least in part because of a federal lawsuit by the environmental advocacy group WildEarth Guardians.

"I think the current federal proposal is based on a number of years of examining the status of the lizard," said Ken Kramer, director of the Lone Star Chapter of the Sierra Club. "It's not a last-minute sort of proposal."

State opposition

Patterson, who has compared the sand dune lizard to Godzilla for its ability to potentially freeze gas and oil work, said this fight is about more than just a reptile.

It's about what he said is a new strategy to gain endangered status for many animals and essentially block industries from doing their work.

"You overwhelm Fish and Wildlife with requests ... and rather than do science on several hundred species, they just settle the lawsuit," he said.Patterson, who has held a sand dune lizard and said it actually is "a cute little bugger," is calling on federal officials to reject the proposed designation.

"The science is not complete, it's out of date, and there's no decent information that has been sufficient to warrant the designation," he said. "If the designation comes, and it isn't based on sound science, we will file a lawsuit."

Texas Agriculture Commissioner Todd Staples, University of Texas System officials and Texas Association of Business President Bill Hammond also oppose the designation.

UT System officials manage more than 2.1 million acres for the benefit of the system, including acreage that could be a habitat for the lizard. They sent a letter to federal officials saying that listing the lizard as endangered is "at best premature" because that decision would be based on "faulty science, inadequate data and seriously erroneous assumptions."

Patterson said that a herpetologist from Texas A&M University has been hired and that studies of the lizard have been commissioned.

The Texas Endangered Species Task Force, primarily made up of property and business owners who could be affected, is developing conservation plans, said R.J. DeSilva, a spokesman for the Texas comptroller's office.

"The goal is to have a plan by November," he said. "There's a need to balance the development of the industry, and economic development in the industry, and take actions to mitigate and preserve the habitat."

Political move?

This year, the Obama administration said a decade's worth of petitions to add wildlife to the endangered species act would be addressed over the next six years.

About 1,400 plant and animal species are designated endangered. Officials work to protect their habitats and review what can be done. Several Texas Republicans in Congress, including Reps. Michael Conaway of Midland, Randy Neugebauer of Lubbock and Francisco Canseco of San Antonio, have asked colleagues to keep the lizard from being designated as endangered. Sen. John Cornyn filed an amendment to prevent federal officials from offering protections to the lizard.

"If the Obama administration has its way, this scaly political pawn will land on the Endangered Species List, without sufficient supporting research to back up the move, and effectively bring new and existing oil and gas production in parts of Texas and New Mexico to a screeching halt," he said in a statement.

Federal officials say they used the best science available and are working with companies to minimize problems or interruptions. Some petroleum companies have signed on to voluntary conservation agreements, agreeing to pay for habitat restoration and use techniques to lessen the impact on the lizards.

Kramer, of the Sierra Club, said he believes that state and industry officials are exaggerating the crisis.

"Practically every time there is a proposal, we get these people saying ... 'The sky is falling. This is going to be the end of civilization as we know it,'" Kramer said. "There is almost always an overreaction based upon their lack of understanding in which the species can be protected."

Copyright (c) 2011, Fort Worth Star-Telegram, Texas

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BOEMRE Deems Heater-Treater Cause of Vermilion Fire

- BOEMRE Deems Heater-Treater Cause of Vermilion Fire

Wednesday, May 25, 2011
BOEMRE

The Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE) released the findings of its investigation into a fire that occurred Sept. 2, 2010, on Mariner Energy Inc.'s, Vermilion 380 A oil and natural gas production platform located approximately 102 miles off the coast of Louisiana.

A BOEMRE Accident Investigation Panel concluded that the fire was caused by the collapse of a fire tube located inside of the platform's Heater-Treater. The Heater-Treater, a nearly 30-year-old piece of equipment, used heat from a fire tube as well as chemicals and electricity to separate oily water emulsions into oil and water. The fire tube had been weakened over time due to a variety of factors, including heat, corrosion and pitting. Investigators also found that after the platform lost primary power because of the fire, the emergency generator failed to start and supply power to the firewater pump, leaving the 13-member crew without a firewater system to aid them in trying to fight the fire. Ultimately, the crew was forced to evacuate the platform, and all were later transported to safety.

"This report reflects a careful and comprehensive investigation by the BOEMRE Accident Investigation Panel, led by the Investigations and Review Unit," said BOEMRE Director Michael R. Bromwich. "The report underscores the need for offshore operators to maintain their equipment consistent with existing standards, to protect the safety of personnel working onboard and to protect the environment."

The investigation included interviews of the Vermilion 380 A crew, review of documentary and physical evidence, examination of equipment onboard the platform, and consultation with an expert in oil production platforms and Heater-Treaters.

In addition to its investigative findings, the BOEMRE panel recommended several Incidents of Non-Compliance be issued to Mariner Energy, Inc., which may be used as the basis for future civil penalties. BOEMRE will now consider the panel's recommendations before taking further action in this case. Production from the platform remains shut-in until BOEMRE personnel approve all safety and structural corrections.

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