energy policy, fossil fuels, offshore oil

OilPrice.com: Problems At Petrobras Mount As Brazil’s Oil Production Stagnates

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http://oilprice.com/Energy/Energy-General/Problems-At-Petrobras-Mount-As-Brazils-Oil-Production-Stagnates.html

By Nick Cunningham | Tue, 06 May 2014 22:06 | 0
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For the past 30 years or so, Brazil has increased its oil production every year. Brazil’s state-owned oil company, Petrobras, has become a world class producer of offshore drilling technology, which puts it in a good position for the future, as oil comes from increasingly difficult places to reach.

In the 1980s, Brazil’s oil production was negligible, but by 2010, it was pumping 2.7 million barrels of liquid fuels per day (bpd). By the mid-2000s, the trend line seemed to be inexorably rising upwards, and with the huge oil discoveries in 2007 in Brazil’s pre-salt basins – oil reserves that are trapped beneath a thick layer of salt – many observers believed Brazil was destined to become an oil superpower.

But then something happened. Since 2010, oil production has flattened out entirely. In 2013, Brazil averaged only 2.7 million bpd of oil production, which is where it was three years ago.

Petrobras’ performance over the last few years deserves some of the blame, and a steady stream of reports point to mismanagement within the company as why. A former executive was arrested in March for money laundering in connection with a gang. The company is conducting an internal investigation because of allegations that top company officials accepted bribes from a Dutch company in exchange for awarding contracts.

Local content rules are also hampering production. With Brazilian oil service companies booked up, there is a shortage of labor, leaving Petrobras and its partners struggling to find enough qualified contractors. Not only has this raised costs, but it has also delayed projects. Most recently, Brazil’s oil regulator ANP recommended a delay of further auctions for offshore blocks until 2015, so that local service companies could absorb all the demand.

Petrobras’ problems were perfectly summed up in an April mishap. According to Reuters, Saipem SpA, an Italian contractor working at a Petrobras-run oil field in the Atlantic Ocean, managed to drop a 2.3 kilometer steel pipe deep into the ocean. Saipem was trying to attach the pipe to a drilling rig, but it sank 1,800 meters (5,900 feet) to the ocean floor. Damaged and lost to sea, the $2 million pipe is not recoverable. That’s only the beginning – the lost pipe could set the project back by more than a month, costing Petrobras tens of millions more.

The incident fits a pattern – several other rigs in nearby oil fields are also behind schedule, including Parque da Baleias off the coast of the state of Espirito Santo, and Papa Terra near Rio de Janeiro.

But the problem is deeper than just bad management. The state-owned oil company is used as a tool to achieve policy goals by the government, such as subsidizing fuel prices for drivers, which has cost the company $37 billion since 2011.

All of these problems have caused Petrobras to claim the mantle of the world’s most indebted and least profitable major oil company. It has amassed $114.3 billion in debt, and according to Moody’s, Petrobras owes $11.50 for every barrel of oil it has yet to produce. Its share price has cratered, losing half of its value since 2010.

The stagnating oil industry is becoming a hotter political issue in Brazil. Whether true or not, it fits the narrative of how corruption at the highest levels is causing the economy to stagnate. And the angry protests in several major cities last year demonstrated voter frustration as Brazil heads into this fall’s presidential election.

Brazil’s political opposition is using Petrobras’ woes in an effort to unseat President Dilma Rousseff. But she continues to back the firm, which is a symbol of nation pride. “No one and nothing will destroy Petrobras,” she told a crowd of oil workers and supporters in April in the state of Pernambuco. “Petrobras is bigger than all of us. Petrobras is as big as Brazil.” Her fate, as well the country’s, hinges on the performance of Brazil’s largest company.

By Nick Cunningham of Oilprice.com Special thanks to Richard Charter

energy policy, fossil fuels, fracking

Tampa Bay Times: Oil drilling company ordered to shut down second Florida well pending tests

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http://www.tampabay.com/news/environment/water/oil-drilling-company-ordered-to-shut-down-second-florida-well-pending-tests/2178106

Craig Pittman, Times Staff Writer
Friday, May 2, 2014 6:40pm

State Department of Environmental Protection officials announced Friday they have ordered the Dan A. Hughes Co. to cease operations at a second South Florida well until experts can analyze whether the violation at the first well spread pollution in the aquifer.

DEP officials did not give details about why they were taking this step more than a week after shutting down operations at the well where the violation occurred. DEP spokeswoman Dee Ann Miller said the agency “has been in dialogue with the Dan A. Hughes Co. regarding their plans and permits … and this is part of that ongoing process.”

However, the announcement followed a call Thursday by U.S. Sen. Bill Nelson for the U.S. Environmental Protection Agency to open an investigation into what happened.

Hughes spokesman David Blackmon issued a terse statement that said the shutdown was something the company had agreed to after negotiations with DEP.

“Protection of human life and the environment are our company’s highest priorities,” he said in the statement. “We commend the DEP for its diligent efforts to … reach an approach to this matter that satisfies the needs of all stakeholders.”

Hughes’ drilling operations have sparked controversy among Collier County residents, who went so far as to stage a protest march on Gov. Rick Scott’s Naples home. The controversy began when a Hughes contractor contacted Golden Gate Estates residents about their plans for an evacuation should something go wrong with the well being drilled less than 1,000 feet from their homes. That was the first they’d heard of it.

That permit was approved by DEP but challenged in court. Meanwhile a new controversy has swirled around one of the company’s other wells in that region.

A 12-page consent order, dated April 8, says DEP officials became concerned about an operation that the Texas company launched without DEP permission in late December 2013. They told the company to shut it down, but it kept going for another day.

The company was injecting acid deep underground to fracture the limestone, then injecting a mix of sand and chemical gel under pressure, to prop open the new fractures and let the oil flow out. That’s called using a “proppant.”

Although the process is similar to fracking, Blackmon called it an “acid stimulation treatment,” which he said is common in Florida. However, Miller of the DEP said no one has ever used a proppant in Florida before. The DEP order requires Hughes to install monitoring wells to check on whether any pollution is spreading through the aquifer, although Blackmon said the chemicals were injected thousands of feet below the drinking water supply.

Until the well results are analyzed by independent experts, Hughes has to shut down all other “new operations,” DEP said Friday. Hughes has six other locations, but the only one fitting the DEP’s description is a well near Immokalee, Miller said.

Craig Pittman can be reached at craig@tampabay.com or follow him on Twitter via @craigtimes.

Oil drilling company ordered to shut down second Florida well pending tests 05/02/14 [Last modified: Friday, May 2, 2014 8:16pm]
© 2014 Tampa Bay Times

Special thanks to Richard Charter

fossil fuels, offshore oil

Platts: BP has record 11 deepwater rigs running in Gulf of Mexico: BP America CEO

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http://www.platts.com/latest-news/oil/houston/bp-has-record-11-deepwater-rigs-running-in-gulf-21576914

Houston (Platts)–5May2014/414 pm EDT/2014 GMT

Four years after the Macondo oil spill, BP has 11 operated rigs running in the US Gulf of Mexico, the most the company has ever had there at one time, BP America’s CEO said Monday.

BP will spend $10 billion over the next five years in the deepwater US Gulf, which amounts to about 10% of its worldwide exploration and production budget and makes the company the largest investor in that arena, said John Minge, who is also BP America’s chairman and CEO.

“Our business is back; it’s strong and it’s gaining momentum,” Minge said. “It wasn’t long ago when the common belief was that the region was played out, that deepwater wasn’t going to work and it was better to head off to other places. But we had [employees] who said there’s more there, and convinced the leadership to invest further.”

Minge was enthusiastic over energy reforms in Mexico that could lead to new opportunities for the company in that country, particularly in the upstream deepwater.

Mexico’s so-called “secondary legislation” on energy reform– the fine print and terms — was sent to the Mexican Congress last week for approval later this year. The first bid round is expected in mid-2015.

“We’re excited about developments in Mexico, particularly offshore,” he said at the opening of the Offshore Technology Conference in Houston. “We think the resource base will be similar to what we’re exploring on the US side of the border.”

Not only is BP the largest investor in the deepwater Gulf of Mexico, it also is the largest leaseholder there, with about 620 blocks, Minge said. The company has explored in waters of 1,200 feet deep or greater since the mid-1980s.

On April 20, 2010, the BP-operated Macondo deepwater well offshore Louisiana blew out, causing the US’ largest offshore oil spill. As a result, deepwater exploration came to a virtual standstill for about nine months while the federal government formulated and implemented stricter offshore regulation.

Moreover, in late 2012, the US Environmental Protection Agency imposed a Macondo-related ban on the award of federal contracts to BP, including US Gulf leases. As a result, BP sat out three subsequent federal lease sales, although it reached a settlement with the EPA just days before the most recent sale in March. As a result, the company participated in that sale where it was apparent high bidder on 24 of 31 blocks.

BP ‘READY TO GO’ IN MEXICO

BP has four major production hubs in the US Gulf: Thunder Horse, Atlantis, Mad Dog and Na Kika. It has also made three ultra-deep Paleogene discoveries in recent years, sited largely in the Keathley Canyon area of the US Gulf: Kaskida, Tiber and last December, Gila. The Paleogene is sited in the remote southwest US Gulf in waters that can be more than a mile and a half deep and at total depths more than six miles below the seabed.

Among BP’s 11 deepwater rigs are three Thunder Horse alone, according to federal offshore records. The company is also drilling a wildcat at Keathley Canyon block 57 in 4,065 feet of water. Government records show BP procured the lease in 2003 for a nominal $500,000; it now has a 62% stake, while Brazil’s Petrobras has 20% and ConocoPhillips has 18%.

Owing to what Minge called pioneering technologies BP has developed to allow better deepwater reservoir imaging, data collection and recoveries, the company expects operating cash flow from the US Gulf “to grow to 2020 and beyond,” he said.

BP also has a minority stake in the Shell-operated Perdido Hub, which produces some of the deepest and most remote offshore discoveries in the world. The hub, offshore Texas, is just a handful of miles from Mexican waters, where the ultra-deep Perdido Fold Belt reservoir also spans that country’s offshore. Mexican state oil and gas company Pemex has drilled some wells there and global oil companies may be able to bid on blocks in the area as early as next year. They will also be able to joint-venture with Pemex on the company’s tracts there.

Minge said he believes Mexico “will absolutely compete for capital” within BP.

“We’re ready to go if [Mexico is] ready to have us,” he said.

–Starr Spencer, starr.spencer@platts.com –Edited by Richard Rubin, richard.rubin@platts.com

Special thanks to Richard Charter

fossil fuels, offshore oil, oil pollution

Reuters: Bird reproduction collapsed after oil spill Study of shag colonies on Spanish coast shows lingering effect of 2002 Prestige disaster

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by Matt Kaplan

30 April 2014

volunteer workers
Jose Manuel Ribeiro/REUTERS
Volunteer workers drag fuel oil spilled by the Prestige tanker at Muxia beach, in northwestern Spain, in December 2002.

Oil spills kill a lot of wildlife quickly, but their long-term effects are hard to establish because to compare the situation before and after a disaster, a study would need to have been already up and running before the disaster occurred. Fortunately, this was precisely the case for a Spanish team of researchers.

Back in 1994, marine biologist Álvaro Barros and his colleagues at Spain’s University of Vigo started looking at the reproductive activity of 18 colonies of a diving bird known as the European shag (Phalacrocorax aristotelis). Then, on 13 November 2002, the hull of the Prestige oil tanker broke in half off the north-western coast of Spain, releasing 63,000 tonnes of oil. The oil heavily coated regions near seven of the colonies, and mostly missed the other 11, creating ‘oiled’ and ‘unoiled’ populations for the researchers to compare.

The team now reports in Biology Letters1 that reproductive success was 45% lower in oiled populations compared with unoiled colonies, whereas it had been much the same before the spill. The researchers measured reproductive success by counting how many fully grown young emerged from each nest. This number averaged 1.6 for both oiled and control colonies before the spill. Afterwards, while the control colonies maintained the 1.6 figure, the number for the birds in the oiled colonies dropped to 1.0.

“We just don’t have much information on long-term oil-spill effects. That this team was able to compare colonies like this over so many years makes the findings very valuable,” explains ecologist David Grémillet at the CNRS Centre for Functional and Evolutionary Ecology in Montpellier, France.

Barros and his team did not investigate why reproductive success was so much lower in the oiled colonies, but speculate from their knowledge of other studies that it resulted from wider ecological damage. “It looks like many of the shags’ preferred prey were wiped out, and that a lot of oil pollutants got incorporated into the ecosystem. This would certainly harm their ability to reproduce,” Barros explains.

Nature
doi:10.1038/nature.2014.15130

References

Barros, A., Álvarez, D. & Velando, A. Biol. Lett. http://dx.doi.org/10.1098/rsbl.2013.1041 (2014).

energy policy, fossil fuels, Methane Hydrates

The Guardian: Methane hydrate reserves under deep ocean bed are ‘enormous’ but challenging to mine, says British Geological Survey

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http://www.theguardian.com/environment/2014/apr/28/uk-ireland-fire-ice-gas-reserves

Press Association
Monday 28 April 2014
theguardian.com

A fuel buried under the deep ocean bed off Britain and Ireland could provide a plentiful supply of energy but will be difficult to exploit, an expert said. The gas – known as fire ice – is locked away in the form of ice crystals under the Atlantic where the floor changes from shallow waters to deep sea. But poor weather, the great distance from shore and technical challenges could make it hard to mine methane hydrate profitably.

Dr Chris Rochelle, a geo-chemist at the British Geological Survey, said: “It is exploitable, it is just going to be some way off-shore.”
Existing reserves of oil, coal and gas have become tougher to access. Test wells have been drilled for shale gas in north west England. In Northern Ireland environmental campaigners have railed against fracking exploration for the gas in Co Fermanagh.

Methane hydrate takes the form of crystals with natural methane gas locked inside. They are produced through a combination of low temperatures and high pressure and are found largely on the edge of continental shelves where the seabed drops sharply away into the deep ocean floor.

Rochelle said the deposits were enormous. “Estimates suggest that there is about the same amount of carbon in methane hydrates as there is in every other organic carbon store on the planet.” That means there is more energy in methane hydrates than in all the world’s oil, coal and gas put together.

By lowering the pressure or raising the temperature, the hydrate breaks down into water and methane. One cubic metre of the compound releases about 160 cubic metres of gas, making it an energy-intensive fuel.

However with potentially easier access to shale gas, at this stage no serious plans are in place to retrieve methane hydrates from relatively near the UK, unlike research carried out in the US and Canada. Last year Japan became the first country to successfully extract natural gas from methane hydrates.

Rochelle added: “We have to bring it back a long way, for other producers it is closer to shore. It is relatively deep water, it would be more challenging from the UK respect. That does not mean to say that companies from this part of the world could not take advantage of it by exploiting it in different parts of the world.”

Special thanks to Richard Charter

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