Transocean: Rig Off Ghana Remains Stable after Taking On Water

- Transocean: Rig Off Ghana Remains Stable after Taking On Water

Friday, July 08, 2011
Dow Jones Newswires
HOUSTON
by Ryan Dezember

Transocean said Thursday that the deep-water drilling rig off Ghana that was evacuated Wednesday after it took on water remains stable.

The company is working on unmooring the Transocean Marianas, which is anchored some 46 miles offshore, and plans to tow it to sheltered water to inspect damage, spokesman Guy Cantwell said.

It will likely be at least a week before a full damage assessment can be made, Cantwell said.

There have been no injuries and a skeleton crew remain aboard the vessel, Cantwell said. And because the rig was not drilling when it began taking on water, there is no risk of an oil spill.

Transocean owned the Deepwater Horizon, which exploded last year while drilling a well for BP in the Gulf of Mexico, killing 11 and touching off the worst offshore oil spill in U.S. history. Since then Transocean has faced scrutiny over its safety procedures and maintenance of the world's largest offshore drilling fleet.

More than 100 workers were evacuated from the Marianas on Wednesday when it was discovered to have taken on water. A semisubmersible rig, the Marianas floats on large ballast tanks, or pontoons, which are filled with water for stability during drilling and emptied to ease transport. It was built in 1976 and upgraded to drill in depths up to 7,000 feet in 1998.

The rig had been drilling for ENI and was in the process of being moved to drill an exploration well for Kosmos Energy and partners that include Anadarko, Tullow Oil and Ghana's national oil company.

The Marianas was expected to arrive on site next week and Kosmos on Thursday asked Ghana for more time to begin drilling the prospect while it searches for a new rig.

The loss of income from the Marianas, which earned $450,000 a day on its contract with ENI, will likely trim Transocean's earnings by 15 cents per share this year, analysts with Tudor, Pickering, Holt & Co. said in a client note.

"As of now we are assuming rig does not work for rest of 2011," the Houston-based analysts said.

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

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Long-Term Outlook for Gas Remains Bullish

- Long-Term Outlook for Gas Remains Bullish

Friday, June 24, 2011
Rigzone Staff
by Karen Boman

Despite the shift by producers towards oil-focused drilling away from natural gas, the long-term outlook for U.S. natural gas demand remains bullish as U.S. nuclear power and coal plants are retired and gas-fired electricity use rises over the next few years, said Pearce Hammond, director of institutional research at Simmons & Co. International, at Platts' sixth annual Oil & Gas Shale Developer conference in Houston this week.

The anticipated retirement of nuclear power plants could potentially add 1 Bcf/d of gas demand by 2020, and the expected retirement through 2020 of 50-60 gigawatts of U.S. coal generation assets could add 4 Bcf/d of additional U.S. gas demand. LNG exports from the U.S. could add an additional 2 Bcf/d of U.S. gas demand, Hammond said.
Increased future use of natural gas vehicles in the U.S. could also create additional 1 Bcf/d of demand for U.S. gas, and gradual growth in industrial demand could add another 2 Bcf/d.

While the U.S. has lost ground to Asia in terms of industrial base, the U.S. has the demographic advantage versus China, whose population is aging and growth limited by the nation's one child policy. Manufacturing costs also have begun rising in China, along with wage rates, and the availability of cheap energy resources at home has prompted some companies to bring manufacturing operations back to the U.S.

U.S. gas demand for 2011 is estimated at 67 Bcf/d, up from 66 Bcf/d in 2010, but less than U.S. supply estimate of 68.4 Bcf/d. Still, the supply overhang estimate is less than previous estimates, thanks in part to cold weather earlier this year which boosted gas demand for heat generation, Hammond said.

Given high oil prices, the Eagle Ford oil shale play in South Texas and the Permian Basin in West Texas and eastern New Mexico remain hot spots for drilling activity. However, activity in the Marcellus shale gas play continues to hold up despite the capital flow shift from gas into liquids.

Unconventional natural gas, particularly shale gas, will make an important contribution to future U.S. energy supply and carbon dioxide emission-reduction efforts, according to The Future of Natural Gas, the fourth in a series of MIT multidisciplinary reports examining various energy sources and their role in meeting future demand.

Demand for natural gas, which burns cleanly and efficiently with very few non-carbon emissions, will likely grow in the U.S. and worldwide for use in power generation, industrial, commercial and residential sectors due to its abundant availability, utility and low cost compared to other energy resources. Gas can play a major role in reducing greenhouse gas reduction, and "play a critical role as a bridge to a low-carbon future," according to the MIT report, which was released earlier this month.

The ample domestic supply of gas has stimulated interest in its use in transportation, driven by the oil-gas price spread and opportunity to lessen oil dependence in favor of domestically supplied fuel, including natural gas-derived liquid fuels with modest changes in vehicle and/or infrastructure requirements and reduce carbon dioxide emissions in direct of gas.

Compressed natural gas (CNG) offers a significant opportunity in U.S. heavy-duty vehicles used for short-range operation, such as buses and garbage trucks, where payback times are around three years or less and infrastructure issues do not impede development. However, for lighter passenger vehicles, even at 2010 oil-gas price differentials, high incremental costs of CNG vehicles lead to long pay back times for the average driver.

Payback periods could be reduced significantly if the cost of conversion from gas to CNG could be reduced to levels experienced in other parts of the world such as Europe.

The current supply outlook for gas will contribute to greater competitiveness of U.S. manufacturing, while the use of more efficient technologies could offset demand increases and provide cost-effective compliance with emerging environmental requirements.

The growing global interest in developing shale gas resources presents the U.S. energy industry with an opportunity to only build up a supply chain of exports for rigs and equipment, and an opportunity to support international allies, Melanie Kenderdine, executive director of the MIT Energy Initiative, told conference attendees. Providing aid in developing shale gas resources in southern South America can help counterbalance against the Chavez regime in Venezuela or help stabilize economies and governments in Africa and the Middle East.

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Global Deficit Between Oil Consumption and Production Remains the Norm

- Global Deficit Between Oil Consumption and Production Remains the Norm

Monday, June 13, 2011
Rigzone Staff
by Trey Cowan

The Economist Online recently posted a short article entitled "Running Dry" which offered another perspective that would support OPEC raising its quotas. Taking a page out of BP's recently released "Statistical Review of World Energy 2011", The Economist highlighted BP's global data showing that average daily crude oil consumption exceeded production by over five million barrels per day during 2010. This is the widest daily gap on record going back to 1965. As you can see from our graphic which subtracts annual consumption from production, you have to go back to 1981 to find the last year where production outpaced consumption. So to sound any alarms based on the most recent year of BP's data seems a bit short-sighted.

However, looking at the data over the long run still seems to verify the obvious facts. First, new discoveries coming on line at levels sufficient to offset reservoir declines and growing global energy demand is not the current reality. Second, the growing fundamental imbalance between supply and demand will favor increasing prices over an extended time period.

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But we did find something in the data that we thought readers would also find interesting. Whether coincidental or not - you be the judge. When the annual surpluses and shortages are added together, starting with 1965, the first year in BP's Statistical Review; the point where crude oil actually went into a deficit position (per BP's data) is around the same time oil prices really started to surge (i.e. 2004).

Our commentary is that current prices reflect the anticipated levels of supply and demand, whether an imbalance will or does exist, and whether it's growing or shrinking. Setting aside storage costs and the time value of money; out month futures for crude at higher prices than current suggest the world's level of supply is not sufficient. However, a persistent global economic slowing over the next six to twelve months (if it does occur) would likely prove OPEC's decision leave quotas as is, a good call. Considering the mixed agenda's behind OPEC's recent quota setting (instead of a unified view that there is plenty of oil available to meet world demand), then if they did get it right this time it will likely be for the wrong reasons.

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BP Remains Hopeful over Russian Arctic Deal

- BP Remains Hopeful over Russian Arctic Deal

Tuesday, May 17, 2011
Deutsche Presse-Agentur (dpa)

BP's plans for a major Arctic oil exploration deal with Russian state oil group Rosneft suffered a major setback Tuesday following the failure of a massive share swap transaction agreed in January, the oil company said in London.

Talks to broker a settlement with TNK-BP, the company's existing Russian partner, which had blocked the deal, ended without agreement, meaning that BP missed a midnight deadline set by Rosneft to get the deal back on track.

BP said in a statement that discussions would continue between all parties.

The announcement is the latest twist in a protracted saga that started in January when BP and Rosneft announced a share swap of 8 billion pounds (13 billion dollars) that included exploration rights for the Kara Sea in the Arctic.

The deal was subsequently scuppered after TNK-BP successfully claimed it breached an earlier agreement that TNK-BP had to be included in deals undertaken by BP in Russia.

The latest talks reportedly involved a 18.5 billion-pound buyout of TNK-BP, which is owned by a consortium of Russian billionaires called Alfa Access Renova (AAR).

BP said Tuesday it was still hopeful a deal could be struck, adding it would intensify its efforts to ensure TNK-BP's continued success.

"In recent months, BP has conducted detailed negotiations with AAR and Rosneft to seek a reasonable and businesslike solution that would allow the agreements to proceed to the satisfaction of all parties."

"Such a solution has not been found at this time, although talks will continue," it said in a statement.

Copyright 2011 dpa Deutsche Presse-Agentur GmbH

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Controversial 'Horizontal Fracking' Remains Legal in Idaho

Controversial 'Horizontal Fracking' Remains Legal in Idaho

Wednesday, April 20, 2011
Knight Ridder/Tribune Business News
by Rocky Barker, The Idaho Statesman, Boise

Though the only natural gas drilling company active in Idaho today has no plans to employ a method blamed around the country for polluting drinking water, industry officials say other companies could one day.

That was enough to keep Gov. Butch Otter and the other state elected officials who make up the Idaho Oil and Gas Conservation Commission from banning the practice Tuesday.

Bridge Resources, the Canadian-based exploratory company that has discovered natural gas in Payette County, said it only will use a "mini-fracking" procedure to stimulate flows of some of its wells.

But David Hawk, representing Snake River Oil and Gas, a subsidiary of Weiser-Brown, another exploration company, pointed to the Chainman Shale formation in Nevada, which has already gained interest from oil and gas explorers and may extend into Idaho.

"People are looking at southern Idaho," Hawk said. "I'd hate to forestall anything."

The commission approved temporary rules Tuesday that allow Bridge Resources to become the first natural gas driller in the state.

Idaho Conservation League Program Director Justin Hayes offered several amendments he said would protect groundwater. One would prohibit horizontal fracking, where fluids are pumped into shale formations at high pressure to allow natural gas to permeate through for recovery.

"Let's just keep those doors closed," Hayes said.

Bridge would inject only vertically, at high pressure, a mixture of gel and sand into the sandstone formation where the company has found gas to clean out the reservoir near the well bore. This process props open fractures and entices gas to flow more freely.

Hayes wanted drillers to ensure their liquids were not carcinogenic and were not a threat to children. Kim Parsons, Bridge Resources' explorations manager, said the rules as written and the company's own practices will ensure its very limited fracking poses no threat to groundwater.

An impermeable shale formation lies between the drill head area, where the fracking will take place thousands of feet below the surface, and the groundwater closer to the surface.

Parsons said other industries on the surface -- such as agriculture -- use far more dangerous compounds that have far more opportunities to leach into the groundwater.

"We invite the rest of industry to come up to our level of groundwater protection," Parsons said.

The commission, made up of Gov. Butch Otter, Secretary of State Ben Ysursa, Attorney General Lawrence Wasden, state schools chief Tom Luna and State Controller Donna Jones, voted unanimously for the temporary fracking rules. Over the summer, the Idaho Department of Lands will hold a series of meetings to develop permanent rules.

Bridge Resources and its partner, Paramax Resources Ltd., both of Canada, have drilled 11 wells in Payette County. Three of the 11 wells can produce at economic levels naturally. Four require stimulation through fracking, officials said. The other four were dry.

Bridge officials said they could go into production before the end of 2011. That could mean money for schools from state land royalties and for other programs from state severance taxes.