W.Va. Official Signs Emergency Marcellus Rule

- W.Va. Official Signs Emergency Marcellus Rule

Tuesday, August 30, 2011
Knight Ridder/Tribune Business News
by Mannix Porterfield, The Register-Herald, Beckley, W.Va.

While legislators toil on something permanent and vastly more comprehensive, Secretary of State Natalie Tennant signed an emergency rule Monday regulating Marcellus shale natural gas.

Two specific meetings are planned during Sept. 12-14 interims by a select panel formed by the Joint Committee on Government and Finance, and a co-chairman says he expects to see the final amendments put to a vote.

Legislation bogged down in the final night of the regular session March 13, but acting Gov. Earl Ray Tomblin recently produced an emergency rule that Tennant said didn't reach her office until about a week ago.

"I am disappointed this matter took so long to resolve," the secretary said after signing the rule.

"This is a huge development opportunity that would diversify West Virginia's economy that has to be done promptly and responsibly."

If the Legislature fails to provide a permanent rule within 15 months, the emergency rules will expire under state law.

Tennant had 42 days to approve or deny the filing by the Department of Environmental Protection and said she signed it in the belief there should be no further delay for the industry. The DEP is scheduled to file a permanent rule Sept. 8, allowing a 30-day public comment period. All comments are to be posted on the secretary of state's Web site.

"I recognize there will be differing opinions about this rule, but I remind all those concerned that I can legally only approve the filing of the emergency rule or leave the process regulated in its current manner," she said.

Marcellus shale was put on the back burner this month in back-to-back special sessions, giving the Legislature an opportunity to smooth out legal obstacles in a controversial House of Delegates redistricting plan.

A co-chairman of the select panel, Sen. Doug Facemire, D-Braxton, expects at least 13 amendments to be debated when members convene Sept. 12 and again two days later during next month's interims session.

"I'm confident we can probably finish this up in our September interims and have it ready to go back to our respective bodies and see if we can sell it to them," Facemire said in a recent interview.

Facemire said the panel is focusing on three major goals in seeking a workable piece of legislation -- protecting the environment, safeguarding the rights of surface owners, and giving the fledgling industry room in which to operate.

(c)2011 The Register-Herald (Beckley, W.Va.). Distributed by MCT Information Services.

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UK O&G Industry Successfully Tests Emergency Spill Response Equipment

- UK O&G Industry Successfully Tests Emergency Spill Response Equipment

Thursday, August 11, 2011
O&G UK

The UK oil and gas industry has successfully tested its ability to deploy a well capping device in the waters west of Shetland. As part of the industry's commitment to further strengthen the UK's emergency response capabilities, the Oil Spill Prevention and Response Advisory Group (OSPRAG) has undertaken a number of initiatives to improve well engineering and oil spill response capability, including the development of a well capping device for use in UK waters to seal-off an uncontrolled subsea oil well in the unlikely event of a major well control incident.

The purpose of the recent Emergency Equipment Response Deployment (EERD) exercise was to simulate the logistical process of transporting a well capping device, loading it on to a vessel and lowering it over the side before fixing it to a specially-built simulated well on the sea floor.

The exercise was project-managed and executed by Total E&P UK on behalf of Oil & Gas UK and ran from July 16-26, 2011 at a site in block 206/4, around 75km north west of Shetland.

The various stages of the exercise included:

• Exercise site prepared by deploying a specially-built landing base to the seafloor at a depth of 300 meters to accurately simulate a subsea well.
• Remotely operated vehicles (ROVs) used to deploy subsea oil dispersant (in this instance, a non-toxic fluorescent dye).
• Heavy-duty cutting shears deployed to sever a subsea marine riser pipe. This would be done in a real-life scenario in order to clear the riser out of the way to make room for the cap to be landed.
• Capping device deployed over the side of a multi-service vessel using a crane.
• Device landed on to the well, locked on to the base and activated using ROVs.
• All equipment, including the landing base, recovered.

Oil & Gas UK's chief executive, Malcolm Webb, said, "The UK oil and gas industry has a very high level of confidence in its ability to prevent blowouts. We haven't experienced one here in over 20 years – in which time over 7,000 wells have been drilled.

"No matter how unlikely a blowout is, we recognize the importance of being prepared for low-probability, worst-case scenarios. This is why we regularly test our emergency response capabilities and why we wanted this particular exercise to be as realistic as possible.

"Its success proves we can not only quickly mobilize and deploy the capping device, but also incorporate the use of a wide variety of other related equipment, such as subsea dispersant and cutting shears, which in a real-life situation would be used as part of the same operation.

"The next stage will involve a full debrief involving all participants to identify any learning opportunities and Oil & Gas UK will share these findings throughout the industry."

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IEA Reports on State of Oil Markets since Emergency Stockpile Release

- IEA Reports on State of Oil Markets since Emergency Stockpile Release

Friday, July 15, 2011
Rigzone Staff
by Barbara Saunders

In an unusually strongly worded statement, the International Energy Agency (IEA) – the official energy watchdog for major consuming nations – said that its critics "can't have their cake and eat it too."

IEA made the statement in releasing its monthly oil market report on July 13, commenting on the status of oil markets since its call on June 23 for the release of 60 million barrels of oil and refined products from the emergency stockpiles of member nations, including the U.S. and Japan.

The move was made to help compensate for "a string of supply-side outage over and above" the loss of 1.5 million barrels per day (mbpd) of light sweet [i.e., easy to refine] Libyan crude oil, due to internal conflict in that nation, IEA said.

". . . [T]he market ledger this month looks slightly tighter than a month ago. Our balances for first-half 2011 [1H2011] show demand continuing to run ahead of supply, if a little less rapidly than in 2H10," IEA said.

"Major producers have recognized that demand for their oil is rising, with the seasonal uptick in 3Q11 refinery runs, and more generally as economic growth and short-term fuel substitution keep global and emerging market demand growth robust," IEA continued. “We welcome rising OPEC volumes seen in June (30.03 mbpd output), but the market needs still more oil for 3Q."

IEA continued, "This backdrop is simply a more vivid version of the one underpinning the IEA action, which commenced on 23 June. Member governments agreed to release 60 mb of strategic stocks for an initial 30 days, amid an ongoing disruption to light-sweet Libyan oil supplies, the anticipated rise in 3Q11 refiner and end-user demand and a likely hiatus before incremental OPEC barrels reach the market. Much ink has been spilt subsequently suggesting that the IEA action comes three months too late, depletes emergency stockpiles and has failed to reduce rampant crude and motor fuel prices. However, we feel compelled to point out that critics cannot have their cake and eat it too."

"Market intervention in late-February, when the Libyan crisis broke and prices surged by at least $10/bbl, would have been tempting, were price control really the prime motivation," IEA said. "But the presence of a supply disruption, and sharply higher prices is not, by itself, justification for a collective action. Market context is also important. Refiner crude demand was falling seasonally in March and April, but rising sharply in June and moving higher still in July and August, despite modest refining margins. Early-year industry stocks looked comfortable back in March, and there was a presumption then that other OPEC producers would immediately step in to boost supply to replace Libyan outages. In contrast, the absence up until June of major OPEC increases implied a real possibility that commercial stocks could fall to the bottom of their seasonal range, risking a renewed, damaging and sustained surge in international prices in 3Q11. The IEA therefore decided to act to address this supply-side issue, even though prices were then trending lower."

Marker crude prices fell by $5 per bbl immediately after the action was announced, IEA noted, adding, "Since then Brent futures have oscillated between $105-$119/bbl, and WTI between $91-$99/bbl. At writing, flat prices of $116/bbl (Brent) and $95/bbl (WTI) are close to those seen immediately prior to the action, but will doubtless fluctuate further in the weeks ahead. However, it is blinkered to focus on specific price levels, which were never the rationale for the action. Narrower sweet-sour spreads, modestly stronger refining margins and an easing of the steep backwardation evident before the release on the other hand all suggest a more benevolent market reaction. We acknowledge that the impact of the collective action will only be truly evident in hindsight. However, recognizing the flexibility and market liquidity it has already provided, we take a resolutely positive view so far."

IEA's move came in the wake of the last OPEC meeting on June 22, when three Middle Eastern nations – Saudi Arabia, Kuwait and the United Arab Emirates (UAE) – broke ranks from the other major producing member nations in wanting to increase production quotas to keep the world amply supplied. The three nations have since pledged to increase production in the absence of an all-OPEC accord, but there's a hiatus in the additional supply reaching the market.

Veteran OPEC-watcher Bhushan Bahree, senior director of global oil for IHS CERA, told Rigzone in a telephone interview: "Oil supplies are ramping up." Bahree added, "There was very little incentive for the other OPEC nations to agree to increase production. They have little or no spare capacity."

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IEA Emergency Oil Release Aims to Protect Economy

- IEA Emergency Oil Release Aims to Protect Economy

Thursday, June 23, 2011
Dow Jones Newswires
LONDON
by James Herron

Acting to protect a fragile global economic recovery against a backdrop of continually high oil prices, the International Energy Agency said Thursday it will release 60 million barrels of oil from emergency stocks to address the supply shortfall from Libya.

The move, announced by the agency's executive director at a hastily-organized press conference in Paris, helped send oil prices sharply lower Thursday, the latest drop in the commodity amid increased uneasiness about the economic outlook.

"The global economy is still emerging from recession and it is essential that this recovery not be endangered by an oil supply shortage," IEA Executive Director Nobuo Tanaka said. "The situation is getting tighter and tighter," he said, adding: "we have to act now and to fill the gap."

The IEA almost never diverts from a its public mantra on the need for OPEC and other producers to pump more oil to keep the economy humming. But Tanaka and other IEA officials have sounded an increasingly brittle note over the economy in recent weeks. Tanaka told a St. Petersburg, Russia economic forum last week that he feared a "very hard landing" due to high prices.

The IEA's surprise decision comes less than three weeks after a meeting of the Organization of Petroleum Exporting Countries disintegrated into chaos as members couldn't agree on a plan to boost output. The IEA has subsequently praised unilateral moves by Saudi Arabia and others to boost output without the OPEC agreement. On Thursday, Tanaka said the emergency release was taken to make up for a delay before Saudi supplies hit the market.

The IEA, which represents consuming countries and is responsible for coordinating emergency releases, said it will add an extra 2 million barrels a day of oil, equivalent to around 2% of global supply, into the market for the next 30 days from emergency stocks.

The IEA consulted OPEC members, as well as Chinese officials and representatives from other countries not officially part of the IEA, IEA officials said.

The IEA's move gave further downward pressure to oil prices on a day in which gloomy economic data had already sent crude lower.

Even before the IEA announcement, oil prices had been trading lower Thursday following surprisingly poor labor department figures in the U.S. But the IEA news sent prices lower still.

Light, sweet crude for August delivery tumbled $5.42, or 5.6%, to $89.99 a barrel on the New York Mercantile Exchange. Prices fell as low as $89.69 a barrel earlier in the session, their lowest since Feb. 22.

Brent crude on the ICE futures exchange fell even further, giving up $7.66 or 6.7%, to $106.55 a barrel, a day after the European contract rose sharply.

Crude prices have dropped around 10% since the June 8 OPEC meeting. Investors have fixated their attention on fears of weakening consumer demand and the ongoing debt crisis in Greece has dominated headlines.

The IEA elected not to release oil from stocks earlier this year, when 1.5 million barrels a day of Libyan oil supplies were shut down by the civil war. However, as the Libyan conflict has dragged on in stalemate, the effect of loss of those crude supplies has become more pronounced, the IEA said.

"The normal seasonal increase in refiner demand expected for this summer will exacerbate the shortfall further. Greater tightness in the oil market threatens to undermine the fragile global economic recovery," the IEA said in a statement.

Demand for oil typically rises in the summer season due to increased gasoline use in the U.S. Oil demand has also exceeded expectations in China as electricity supply problems have prompted higher use of diesel for power generation in China. Oil prices have retreated in recent days, but consumers remain concerned about a supply crunch later this summer.

Previous IEA stock releases followed the first Gulf War and hurricane Katrina.

Copyright (c) 2011 Dow Jones & Company, Inc.

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