Owensby & Kritikos, Inc. (O&K)

Mass. firm pushes $3.5 billion synthetic gas plant

2008-11-20T12:11:00.001-06:00

A Massachusetts-based investment firm said Friday it’s partnering with an unnamed major utility to build a $3.5 billion refinery in Louisiana that will be capable of producing 300 billion cubic feet a year of synthetic natural gas.

That would be equal to 7 percent of the natural gas piped into the U.S. from Canada each year.

C Change Investments LLC of Cambridge, Mass., is investing in the joint venture, dubbed NC12 Inc. C Change and its investors would split ownership with the utility, who won’t be named until the project announcement comes in the first quarter of 2009.

When the announcement does come, it will name a Louisiana community as the project site, said Stephen Allen, a C Change spokesman.
The project is under the radar. Louisiana Economic Development officials had no immediate comment when asked about the project Friday.

Chett Chiasson, director of economic development at the Greater Lafourche Port Commission in Galliano, said he hasn’t heard any news about such a project.

Chiasson works with Port Fourchon, the energy hub that serves about 90 percent of all deepwater rigs and platforms in the Gulf of Mexico and is a major connection between offshore oil and gas and mainland pipelines.

In addition to producing synthetic natural gas — a cleaner form of gas created from coal and petroleum coke at extremely higher temperatures — the project would capture carbon dioxide and pipe it to offshore wells in the Gulf to improve extraction of oil and gas.

To the west, George Swift of the Southwest Louisiana Partnership for Economic Development said Lake Charles Cogeneration LLC, owned by New York-based Leucadia National Corp., will break ground in mid-2009 on a previously announced synthetic natural gas project.

The $1.6 billion facility at the Port of Lake Charles will produce an estimated 35 billion cubic feet a year, about 12 percent of the amount proposed by NC12 Inc.

“I’m not aware of anything else over here (planned in the gasification sector),” said Swift.

Both projects say they will gain customers because they can sell synthetic natural gas at comparable prices to natural gas, but they can do so without the volatility of commodity markets. A utility, for instance, could buy 10 years worth of gas at consistent prices without fearing unexpected price spikes.

Another major gasification project announced in June 2006 by Gov. Kathleen Blanco — a $5 billion coal gasification plant by LIG Fuel Inc., formerly Synfuel Inc. — never materialized in Ascension Parish.

The NC12 venture claims to have a game-changing catalytic technology that will convert coal along with petroleum coke from Louisiana refineries into synthetic natural gas at half the cost of other gasification technologies.

Among the company’s principals is John Preston, a senior lecturer at MIT’s Entrepreneurship Center. Preston and other investors bought patents for high-temperature liquid metal catalysts and the assets of Molten Metal Technologies in Fall River, Mass., according to NC12 materials.

It’s that technology that NC12 would employ in Louisiana. Allen said about 1.5 billion cubic feet of synthetic natural gas has been produced in Fall River and transported via pipeline, proving the company’s concept at that scale, he said.

At 2,700 degrees F, 32-foot high reactors with a 10-foot diameter house the gasification process. About 10 would be installed in a first phase in Louisiana and produce 50 billion cubic feet of synthetic natural gas per year, Allen said.

The full plant would take about four years to build, with the first phase opening in late 2010, he said.

During construction, temporary building jobs would average 200 but could peak much higher, with permanent employment at the gasification plant expected to be 100, Allen said. Salary levels haven’t been established yet.

Despite the current credit climate, Allen said NC12 can produce the project. The company said it has contracts in place with customers who would buy half of the output.

“We think even in today’s tight credit market that this project can be financed, because one of the keys is it’s modular,” Allen said. “The other key is … the (carbon dioxide) can be kept out of the environment and sold.”

Texas Syngas, now NC12, and Quantum Catalytics are waging a legal battle in Massachusetts, according to a September story in The Patriot Ledger newspaper of Quincy, Mass.

The paper reported that Texas Syngas and Quantum Catalytics sued Ze-gen Inc. in Boston federal court in August, claiming Ze-gen misappropriated trade secrets and patents from Quantum. The patents deal with the same kind of technology NC12 would employ in Louisiana.

Conoco to restart Alliance units after upset

2008-11-20T12:09:00.000-06:00

NEW YORK, Nov 20 (Reuters) - ConocoPhillips (COP.N: Quote, Profile, Research, Stock Buzz) said it will restart on Thursday unnamed units at its 247,000 barrels-per-day Alliance refinery in Belle Chasse, Louisiana, after an "upset" a day earlier.

"We had a minor upset at our Alliance refinery yesterday, impacted units will be restarted today," Terry Hunt, a company spokeswoman, wrote in an email, without specifying the units that were affected. (Reporting by Haitham Haddadin)

Valero says plans significant '09 turnarounds

2008-11-10T09:02:00.001-06:00

HOUSTON, Oct 28 (Reuters) - Top U.S. refiner Valero Energy Corp (VLO.N: Quote, Profile, Research, Stock Buzz) on Tuesday said it planned significant turnarounds in 2009, with projects planned at two of its Texas refineries.

The company also said it had scaled back capital spending in 2008 and 2009 by deferring projects until 2010 and 2011.

Valero said it would carry out a heavy oil cracker overhaul at its 340,000 barrel per day (bpd) Corpus Christi, Texas, refining complex in January. The company also plans a crude unit and coker turnaround at its 245,000 bpd Texas City, Texas, refinery in February.

"As it turns out, 2009 should be a more significant year for turnaround activity," said Chief Operating Officer Rich Marcogliese.

The company also plans coker drum replacement in June at its 250,000 bpd St. Charles, Louisiana refinery, he said.

Valero also plans an overhaul of its gasoline-producing catalytic cracking unit at the 210,000 bpd Delaware City refinery.

Valero has cancelled a delayed coker project at its 245,000 bpd Port Arthur, Texas, refinery, but the company may revive it at a later time, Marcogliese said.

The company is pushing planned cat cracker work at its 195,000 bpd Memphis, Tennessee, refinery from 2009 to 2011 and reseting a hydrocracker project at Port Arthur from 2010 to 2011.

About deferring the Port Arthur hydrocracker project, Chairman and Chief Executive Bill Klesse said a major expanison at the nearby Motiva Enterprises LLC 285,000 bpd refinery was tying down many of the local craft workers and the delay would help the company manage its cash flow.

"We also have an extremely large turnaround at Port Arthur next year," Klesse said.

The Port Arthur overhaul is scheduled for the end of 2009 and early 2010.

Oil company profits rise, but outlook is cautious

2008-11-10T08:56:00.000-06:00

HOUSTON (AP) — Record crude prices this summer are translating into huge profits, as BP and Occidental Petroleum showed Tuesday, but some energy companies are bracing for tougher times, keeping a closer tab on cash and cutting spending.

Oil producers are coming off a quarter during which crude prices reached an all-time high of $147.27. But prices have since tumbled more than 50 percent, and the global economic malaise has raised questions about energy demand at least into 2009.

Despite a 71 percent jump in third-quarter profit, Occidental Petroleum said Tuesday it likely would not increase capital spending next year from its current $4.7 billion level. Refiner Valero Energy Corp., which also reported July-September results Tuesday, said it was scaling back spending by 33 percent this year and cutting its 2009 budget.

"You can expect us to maintain our balanced approach by investing in growth projects, paying off debt, buying back stock and increasing dividends, but clearly we intend to hold much more cash than in the past," said Valero chairman and chief executive Bill Klesse.

ConocoPhillips, the third-largest U.S. oil company, also has said it likely will keep capital spending at $15 billion next year.

It's vital that oil companies spend money on new exploration and production if they want to grow.

"The bigger you are, the less chance you're going to cut your capital spending," said Brian Youngberg, an analyst with financial services firm Edward Jones. "You generally have a stronger balance sheet and you tend to look through the ups and downs of commodity markets."

But demand for fuel is falling away amid a broad economic downturn.

The U.S. Department of Transportation last week reported the largest monthly decline in miles driven since World War II.

In the month after gas prices peaked at $4.11 per gallon, Americans drove 15 billion fewer miles in August 2008 than they did in August 2007 — the biggest single monthly decline since the data was first collected regularly in 1942.

Youngberg noted some smaller exploration and production companies are eliminating or delaying projects because they rely on credit markets for funding. That credit isn't available right now, he said.

That's not likely a worry for oil giant BP PLC, Europe's second-biggest oil producer behind Royal Dutch Shell PLC, which said Tuesday its third-quarter earnings rose to $8.05 billion from $4.41 billion a year earlier.

Revenue jumped 45 percent to $103.2 billion from $71.3 billion the previous year.

"The high oil price of the third quarter obviously helped our absolute result," said chief executive Tony Hayward.

Hayward said he was confident the company would continue to do well even though oil prices could dip further.

"I believe BP is well-positioned to cope with such volatility," Hayward said, noting the company had not committed as much money as its rivals to some higher-cost means of producing oil, such as mining tar sands.

"We think the current turmoil may in fact create opportunities for us," he added.

BP's U.S. shares rose $6.37, or 15.9 percent, to close at $46.52.

Los Angeles-based Occidental Petroleum said net income for the three months ended Sept. 30 rose to $2.27 billion, or $2.78 a share, versus $1.32 billion, or $1.58 per share, during the same period a year earlier.

Analysts polled by Thomson Reuters had been expecting earnings, on average, of $2.71 per share.

Revenue for the quarter rose to $7.06 billion from $4.84 billion in the year-earlier period.

Occidental said earnings from its oil and gas segment were $3.61 billion in the most-recent quarter, compared with $1.95 billion a year ago. Markedly higher commodity prices were partially offset by higher operating expenses.

Occidental shares rose $7.62, or 18.1 percent, to $49.70.

San Antonio-based Valero, the nation's largest independent oil refiner, said its third-quarter profit fell 9 percent from a year ago, but results were better than Wall Street expected.

Valero said net income was $1.15 billion, or 2.18 a share, compared with $1.27 billion, or 2.09 a share, a year ago. Valero had fewer outstanding shares in the most-recent quarter.

Excluding a gain from the July sale of a Louisiana refinery, income from continuing operations was $982 million, or $1.86 a share. Third-quarter revenue grew nearly 52 percent to $35.9 billion.

Analysts surveyed by Thomson Reuters expected earnings on average of $1.54 per share on revenue of $35.79 billion.

Margins — the difference between the cost of crude and other feedstocks and what the company makes on refined products — were extremely volatile in the quarter.

Gasoline margins were low in July, when crude prices hit record highs, but began to improve in August as oil prices began their downward spiral. Margins for distillate products, such as diesel and jet fuels, were robust throughout the quarter, Valero said.

Given the current economic downturn, Valero said it now expects capital spending to be around $3 billion this year, well below the $4.5 billion it had initially planned. For 2009, it expects capital spending to be about $3.5 billion, down $500 million from its previous guidance.

In a call with investors, company officials said the refiner planned to scrap plans for a new coker at its refinery in Port Arthur, Texas, and delay improvement projects at other sites.

"What we've got is a combination of a couple of deletions from our capital budget," said Rich Marcogliese, Valero's chief operating officer. "But primarily it represents a number of deferrals on discretionary investments."

Valero shares rose $1.70, or 11.3 percent, to $16.81.

Earnings season is in full swing for energy companies. Also reporting this week are Exxon Mobil on Thursday and Chevron Corp. on Friday.

Valero Energy Q3 income up

2008-11-02T20:00:00.000-06:00

Valero Energy has reported that its income from continuing operations was $1.2 billion or $2.18 per share in the third quarter of 2008, compared to $848 million or $1.34 per share in the third quarter of 2007.

The income for the third quarter of 2008 includes the company's pre-tax gain of $305 million on the sale of its Krotz Springs refinery in Louisiana to a subsidiary of Alon USA Energy.

Excluding the pre-tax gain, the income for the third quarter of 2008 from continuing operations was $982 million or $1.86 per share. The operating income for the third quarter of 2008 was $1.8 billion, compared to $1.2 billion in the third quarter of 2007.

The income from continuing operations for the nine months ended September 30, 2008, was $2.1 billion or $4.02 per share, compared to $4 billion or $6.66 per share for the nine months ended September 30, 2007.

Bill Klesse, chairman of the board and CEO of Valero, said: "As a result of our good earnings, our financial position has continued to improve. At the end of the third quarter, our net debt-to-capitalization ratio was 15.8%, one of the lowest in company history."

RMS Revises Hurricane Ike Industry Loss Estimate To $13-21 Billion

2008-10-24T10:30:00.000-05:00

Risk Management Solutions (RMS) today announced that it has updated its estimate for U.S. onshore and offshore insured losses from Hurricane Ike to $13-21 billion, of which $10-15 billion is estimated for wind and storm surge in Texas and Louisiana. The estimate also includes $2-3 billion from inland wind and flood losses and $1-3 billion in offshore losses, but does not include losses covered by the National Flood Insurance Program.

RMS published a preliminary loss estimate of $7–12 billion on September 17 shortly after Hurricane Ike made landfall over Galveston Island, Texas. The revised loss estimate is based on a new post-event modeling methodology that captures the uncertainty in Ike’s wind and storm surge footprint, due to the lack of observations, using an ensemble of 300 varying simulations of this footprint.

The updated industry loss estimate also includes an additional $2-3 billion of inland wind and flood losses that were not included in the previous RMS estimate. Most of these losses in the Midwestern U.S. resulted from wind damage caused by an unusual combination of the remnants of Ike with another meteorological system.

While the new modeling methodology better represents the losses expected from Hurricane Ike, the range of $13-21 billion reflects the significant uncertainty that still remains in assessing insured losses. One of the greatest sources of uncertainty in the range is the amount of storm surge losses that will be insured across the broad coastal areas of Texas and Louisiana impacted by Ike. In addition to the customary challenges of differentiating wind and storm surge damage after a hurricane and uncertainties in the percentage of properties with flood insurance, the final insured losses for Ike are also expected to be affected by the extended evacuations of Galveston and other coastal areas. Offshore platform losses are another source of uncertainty, due to a wide range of practices within the offshore energy industry on insuring both physical platform damage as well as business interruption caused by loss of production.

The updated range of insured losses makes Ike the third most costly U.S. hurricane after Katrina and Andrew. RMS will continue to monitor the impacts of Ike and may provide further estimates if significant new information arises.

Exxon brings hydrogen pipeline to gulf coast

2008-10-24T08:29:00.001-05:00

Exxon Mobil has entered in to a long-term contract with Air Products for constructing a new Steam Methane Reforming (SMR) Hydrogen production facility in Louisiana. The facility will be connected to Air Products’ Louisiana Hydrogen Pipeline Network and will service Exxon Mobil’s Baton Rouge, Louisiana refinery. It will also provide services to other customers in the region and is expected to be online by March 2010.

Air Products has collaborated with Exxon Mobil in other hydrogen based facilities in both Baytown, Texas and Joliet, Illinois.

“We are very pleased to expand our global business relationship with ExxonMobil. Air Products takes great pride in its production facilities and hydrogen supply reliability, and this project will enable us to demonstrate the added value of our expanded Louisiana Hydrogen Pipeline Network,” said Alex Masetti, vice president, North America Tonnage Gases for Air Products.

Supplying refineries with hydrogen for cleaner burning fuels is one of Air Products’ main areas of growth. In fact, Air Products has the largest hydrogen pipeline in the US Gulf Coast, which supplies more than fifty refineries.

Dow Chemical pens case study on contractor safety

2008-10-16T08:40:00.003-05:00

According to ReliablePlant, a case study developed by the Occupational Safety and Health Administration (OSHA) and The Dow Chemical Company Alliance shows how Dow's contractors reduced their recordable injury rate by more than 90 percent at Dow's Freeport, Texas, facility.

The case study, titled "Contractor Safety Case Study: Texas Operations Contractor Alliance for Safety at Dow Facility in Freeport, Texas," describes how Dow and 15 contractor companies formed the Texas Operations Contractor Alliance for Safety (TOCAS). The organization consisted of senior managers from Dow's Texas Operations and from its on-site contractors who could authorize implementing safety and health management systems within their own companies.

"Through the Alliance Program and its other cooperative programs, OSHA has developed a growing collection of success stories and case studies that demonstrate the value of safety and health management systems,” said Assistant Secretary of Labor for OSHA Edwin G. Foulke Jr. “This case study effectively demonstrates how safety and health management systems can be successful if organizations take proactive steps to implement and encourage their use.”

In 1994, TOCAS had an annual recordable injury rate goal of 3.43. By 2007, the rate dropped to 0.20. Dow's recordable injury rate for contractors at Freeport improved by 95 percent from 1995 to 2007.

There also was an increase in the number of contractor companies involved in TOCAS from 15 in 1995 to 85 in 2008. Because of the success of the TOCAS contractor safety and health organization at the Freeport, Texas, location, it is now in place at three other Dow facilities in Texas and at two in Louisiana.

Oil Drilling Supplier Expanding in Louisiana

2008-10-15T13:30:00.000-05:00

Gulf Island Fabrication Inc., a manufacturer of offshore drilling and production platforms and other specialized structures, will invest approximately $27 million to expand its operations in Houma, Louisiana, according to the Louisiana governor’s office. The company will create 200 new jobs with an average annual salary of $53,000 per year and retain 1,300 existing positions with the project. Plans call for a new corporate headquarters and warehouse, updates to equipment, a new fabrication shop, road improvements, new sewage lines and drainage systems, and a new dry dock. “In 1985, the company chose to locate to Houma for several reasons — two reasons were the Houma Navigation Canal, which allowed the company to be competitive in the oil and gas industry, and the work ethic of the people in south Louisiana,” says Kerry Chauvin, Gulf Island Fabrication’s CEO. “Because of the positive changes we see in Louisiana, our board of directors is committed to staying and expanding in Houma.” The state has awarded the company $2.3 million in performance-based financial assistance.

BP announces oil find in Gulf of Mexico

2008-10-14T13:14:00.000-05:00

Oil-and-gas company BP America Inc. said Tuesday it has discovered oil in the deep waters of the Gulf of Mexico, its third discovery in this area.

The discovery at BP's Freedom Prospect is about 70 miles southeast of the Louisiana coast in about 6,100 feet of water. The well was drilled to a total depth of 29,280 feet.

BP said an appraisal will be necessary to determine the size and commerciality of the discovery.

The announcement follows discoveries by BP at its Tubular Bells and Kodiak wells.

BP Exploration & Production Inc., a subsidiary of BP America, operates the well with a 25 percent working interest. Both are owned by London-based BP PLC.

Noble Energy Inc. has a 37.5 percent working interest in the site, Samson Offshore Co. a 25 percent working interest and Marathon Oil Co. a 12.5 percent working interest.

Noble Energy and Samson Offshore acquired the lease for the site in March 2006.

BP shares fell 64 cents to $45.86 in late morning trading, while Marathon Oil declined $1.74, or 6 percent, to $29.79. Nobel Energy shares gained $4.84, or 12 percent, to $45.96.

Energy industry poised to add jobs in South Louisiana

2008-10-10T08:26:00.001-05:00

HOUMA — As the rest of the country girds for recession, a study released Wednesday shows Houma-Thibodaux is on tap to gain 4,200 new jobs next year, buoyed by the strength of the local oil-and-gas industry.

The chaos across the country caused by the subprime mortgage crisis and the resulting “credit crunch” for borrowers both big and small should bypass south Louisiana, said Loren Scott, professor emeritus of economics at Louisiana State University and head of a group of economists in charge of the study.

“Right now we think that you’re going to blow right through this one,” Scott said of the recession.

With a local industry concentrated heavily in offshore drilling and shipbuilding, Scott said the Houma-Thibodaux area should be insulated from the financial fallout of the mortgage mess by oil prices that remain profitable, despite taking a dive in recent months.

“Typically your economy relies much more heavily on what’s going on with oil-and-gas prices,” Scott said.

Overall, Louisiana banks are not experiencing the problems of their counterparts in states like California and Arizona, which were among the hardest hit by the subprime-mortgage crisis.

“Most of our banks did not get involved in subprime loans,” Scott said. “Our banks are not suffering with a whole set of assets on their books that they don’t know how much they’re worth.”

Though the price of oil reached historic highs this year, hitting a record of $147.21 in July, most people forget that just a year ago the average price of oil was $65 a barrel, Scott said.

As of today, oil was trading at just under $89 a barrel, and even if the prices fall as low as $45 or $50 a barrel, oil companies will still turn a substantial profit, the economist added.

“That’s still a very profitable price,” Scott said.

However, across the state, job growth overall will virtually stop in 2009 as the nation goes into recession but should pick up in 2010, the report says.

Billions of dollars in construction involving industrial expansions, levee and highway projects, rebuilding from hurricanes and less exposure to the nation’s credit crisis will shield Louisiana somewhat.

But Scott cautioned the crisis that triggered Congress’ $700 billion financial-industry bailout made the forecast tenuous.

“This is a new animal,” he said.

Scott said the country is in a recession now, defined roughly as two straight quarters where real gross domestic product falls.

The recession, however, is expected to be short-lived, he said.

“We’re going to get the financial markets worked out,” he said, adding that other parts of the economy, including oil-and-gas production, remain strong. “It’s just this credit crunch.”

Though he added he would have preferred the government insure, rather than purchase, the bundled subprime mortgages responsible for the financial mess, he said the bailout approved last week will benefit “Main Street” as well as Wall Street.

“As anyone who opens their 401K will discover, it wasn’t just a bailout for Wall Street,” Scott said. “I think something had to be done because the fear level is so high.”

Events on Wall Street since August, when the report was completed, resulted in a major — and downward — forecast for Louisiana, Scott said.

Over the next two years, the state will add 29,700 jobs — only 1,300 in 2009. The original projection had the growth tally for 2009 and 2010 at 53,800, including 27,000 in 2009.

Historically, economic slumps in Louisiana have been buffeted because only 4.6 percent of jobs are tied to production of durable goods, compared with 6.4 percent nationwide, Scott said.

Marathon estimates Q3 refining margins up 40%

2008-10-09T13:13:00.000-05:00

HOUSTON, Oct 8 (Reuters) - Marathon Oil Corp on Wednesday estimated that its third-quarter oil and natural gas production rose and its refining margins soared about 40 percent from year-earlier levels.

Sales in the quarter were 384,000 barrels of oil equivalent per day, up from 371,000 a year earlier and 350,000 in the prior quarter.

The Houston company said the volume of oil and natural gas available for sale in the period is expected to be 388,000 barrels of oil equivalent per day, above Marathon's initial forecast of 360,000 to 385,000.

"The production was better than I expected, so that's a positive," Phil Weiss, energy analyst with Argus Research, said. "But the downstream news is slightly negative. The volumes are a little bit negative, obviously the hurricanes had an impact."

At the height of disruption, hurricanes Ike and Gustav shuttered nearly all of the oil production from the Gulf of Mexico and disrupted supplies to refineries including Marathon's Midwest plants.

Marathon said its expects its refined products sales volume will average about 1.37 million barrels per day (bpd) in the third quarter compared to 1.44 million a year ago.

The company said its refineries are expected to process 1.15 million bpd compared to 1.24 million in the prior year.

The oil and gas company's refining and wholesale marketing gross margin climbed, helped by a $40-per-barrel drop in the price of crude oil and a gain related to hedging.

Marathon said said it expects its net share of bitumen production before royalties from the Athabasca Oil Sands Project will be about 27,000 bpd in the third quarter, in line with company projections.

Energy XXI cuts 2009 budget after platforms are damaged by hurricanes

2008-10-09T07:44:00.000-05:00

Posted by The Times-Picayune October 09, 2008 7:00AM

Energy XXI, the Bermuda company that is drilling a high-profile Gulf of Mexico well with McMoRan Exploration Co., is cutting its 2009 budget by 17 percent after Hurricane Ike destroyed some of its production platforms.

But the spending cut won't impact the South Timbalier Block 168 No. 1 well it is partnering with McMoRan on. The energy industry has been closely watching progress at the well, formerly known as Blackbeard, because it could potentially set a record for the depth it reaches beneath the ocean floor.

McMoRan, a New Orleans energy company, said this week that the well has currently reached more than 32,850 feet beneath the sea floor. The well is permitted to go as deep as 35,000 feet.

Gulf of Mexico energy production slowly coming back online

2008-10-09T07:43:00.000-05:00

Posted by The Times-Picayune October 08, 2008 1:13PM

Nearly 44 percent of all Gulf of Mexico production remains shut down in the aftermath of hurricanes Ike and Gustav, the Minerals Management Service reported this afternoon. More than 38 percent of the Gulf's gas production also remains shuttered.

Over 12 percent of the platforms in the Gulf remain evacuated because of the storms, but all of the drilling rigs have been fully restaffed. Platforms are the offshore structures from which oil and natural gas are produced. Rigs are offshore drilling facilities.

Oil services executive forecasts fast exploration growth

2008-10-07T15:48:00.000-05:00

HOUSTON, Oct. 7 -- Exploration services are likely to grow much faster than the overall oil field services market worldwide for years, Schlumberger Ltd. Chairman and Chief Executive Officer Andrew Gould said. Absent a global recession, he is optimistic about the long-term outlook for oil and gas.

"We are now in the fifth year of an up cycle in E&P investment," Gould said in a recent speech, noting that supply remains flat because of a declining mature production base, cost inflation, the time for exploration to translate to production, and increasing numbers of complex, capital-intensive projects in deep water or targeting unconventional resources.

"It is unrealistic to think that 5 years of increased spending in an inflationary environment can compensate for 20 years of underinvestment," he said. He foresees continuing increased spending on exploration worldwide.

"The number of exploration blocks awarded has also been increasing substantially. This part of the business is most influenced by geopolitics and access to reserves," he said. More than 12,000 exploration licenses were awarded during 2003-07 worldwide.
Meanwhile, the offshore drilling fleet is growing. Current construction plans will increase the existing fleet by 29% by 2012, he said, noting that a significant share of the newbuilds are designed for high-specification deepwater operations.

"Among these newbuild rigs are 44 new drillships, which will almost exclusively be involved in exploration and delineation work," Gould said. "In addition, there are 81 new semisubmersibles capable of drilling in ultradeepwater—defined as being deeper than 5,000 ft. These will probably double the number of deepwater rigs involved in exploration activity."

McMoRan Exploration Co. Updates Gulf of Mexico Operations and Impacts of Hurricanes Gustav and Ike

2008-10-07T14:23:00.003-05:00

NEW ORLEANS, Oct 07, 2008 (BUSINESS WIRE) -- McMoRan Exploration Co. today reported on the status of its operations following Hurricanes Gustav and Ike, which impacted Gulf of Mexico operations prior to making landfall on the coasts of Louisiana and Texas on September 1, 2008 and September 13, 2008, respectively. Following these events, McMoRan completed initial assessments of the McMoRan-operated structures and received reports from third-party operators on certain properties, including Flatrock at South Marsh Island Block 212.

There was no significant damage to McMoRan's properties resulting from Hurricane Gustav. Assessments following Hurricane Ike identified several platforms, comprising approximately 3 percent of production and 2 percent of reserves, with significant structural damage. Substantially all of McMoRan's remaining production facilities are capable of resuming production pending restoration of downstream pipelines and facilities operated by third parties.

McMoRan has re-established production at a current rate of approximately 140 million cubic feet of natural gas equivalents per day (MMcfe/d), approximately 50 percent of average production rates in July and August of 2008. Based on reports from third party operators of downstream facilities and pipelines, McMoRan expects significant additional production to be restored in the fourth quarter of 2008.

The operator of the Tiger Shoal facility, which processes production from the OCS 310/Louisiana State Lease 340 area including Flatrock, indicated no material damage to the structures and production at Flatrock was re-established on September 22, 2008. The three wells are currently producing at a gross rate of approximately 175 MMcfe/d, 32.5 MMcfe/d net to McMoRan. Exploration and development activities in this important area are continuing as previously scheduled.

McMoRan is engaged in development activities at Flatrock (completion of the No. 4 well and drilling of the No. 5 well) and in exploratory activities on the following prospects, South Timbalier Block 168, Tom Sauk on Louisiana State Lease 340, and Northeast Belle Isle in St. Mary Parish, Louisiana. These rigs sustained no significant damage in the storms and operations have resumed.

Following is a status report on McMoRan's in-progress exploration and development wells:

In-progress wells Working Interest Current Depth Status Flatrock No. 4 -- "C" 25.0% 18,500' Completing in the Rob-L section location Development Well Flatrock No. 5 -- "E" 25.0% 15,300' Spud July 1, 2008: targeting Rob-L and Operc sands, location drilling to proposed total depth of 18,400' Development Well South Timbalier Block 168 32.3% 32,850' Drilling ahead: permitted to 35,000' Tom Sauk 18.3% 11,700' Spud August 14, 2008: drilling towards a proposed total depth of Louisiana State Lease 340 19,000' Northeast Belle Isle 35.7% 9,400' Spud August 24, 2008: drilling towards a proposed total depth of St. Mary Parish, LA 18,500'

The Flatrock No. 4 ("C" location) infill development well was drilled to a total depth of 18,500 feet in August 2008 and is being completed in the same Rob-L sand which is currently producing at an approximate rate of 100 MMcfe/d in the Flatrock No. 2 well ("B" location). The No. 4 well should be capable of flowing at similar high rates.

The Flatrock No. 5 ("E" location), which commenced drilling on July 1, 2008, is located between the Flatrock No. 1 discovery and the Flatrock No. 2 wells. The No. 5 well is drilling below 15,300 feet and log-while-drilling tools have indicated hydrocarbon bearing sands in the Rob-L section approximating 115 net feet over a total approximate 205 foot gross interval. The primary Rob-L sand should be capable of flowing at similar high rates seen in the Flatrock No. 2 well mentioned above. The well will be deepened to a proposed total depth of 18,400 feet to evaluate additional targets in the Rob-L and Operc sections.

Following completion activities at Flatrock No. 4, the rig will be moved to the Flatrock "F" location to drill the No. 6 delineation well on South Marsh Island Block 217. The Flatrock No. 6 well is located approximately 3,000 feet southeast of the Flatrock No. 3 well currently producing in the Operc and approximately 8,000 feet north northwest of the Hurricane Deep well that was productive in the Gyro. Flatrock No. 6 will target the deeper Operc, which could add significant new reserves to the Flatrock field, already a major discovery, and possibly penetrate the upper Gyro section of the Flatrock/Hurricane Deep structure.

McMoRan controls approximately 150,000 gross acres in the Tiger Shoal/Mound Point area (OCS 310/Louisiana State Lease 340) and has multiple additional exploration opportunities with significant potential on this large acreage position. McMoRan has a 25.0 percent working interest and an 18.8 percent net revenue interest in Flatrock. Plains Exploration & Production Company (NYSE: PXP) holds a 30.0 percent working interest.

The South Timbalier Block 168 No. 1 ultra-deep exploratory well (formerly known as Blackbeard West No. 1) is drilling below 32,850 feet to evaluate potentially significant targets. Previous logs had indicated three potential hydrocarbon bearing zones that would require further evaluation. Recent logs in October 2008 indicated that the well has encountered a fourth potential hydrocarbon bearing zone. The South Timbalier Block 168 well, which is permitted to 35,000 feet, is located on the top of the identified structure. Seismic data on the prospect indicated the potential for significantly thicker sands on the flanks of the structure as confirmed in recent major deepwater discoveries. Based on information obtained to date in the South Timbalier Block 168 well, McMoRan believes additional drilling on the flanks could result in significant reserve potential. McMoRan operates the well and owns a 32.3 percent working interest. McMoRan's partners, PXP and Energy XXI (NASDAQ: EXXI), hold a 35 percent working interest and 20 percent working interest, respectively.

In September 2008, McMoRan entered into a drilling contract with Rowan Companies, Inc. for the new 240C class jack-up, Rowan-Mississippi. This rig will allow McMoRan to continue to execute its deep and ultra deep exploration program on the Shelf of the Gulf of Mexico. McMoRan's partners in the ultra deep trend include PXP and Energy XXI. McMoRan expects drilling operations to commence with this rig at the Ammazzo exploration prospect located on South Marsh Island Block 251 in 25 feet of water in November 2008. The Ammazzo prospect has a proposed total depth of 24,500 feet.

Based on geologic and seismic data, the Ammazzo prospect is targeting one of the largest undrilled deep structures below 15,000 feet on the Shelf of the Gulf of Mexico. It is positioned on the southern portion of the structural ridge extending from the Flatrock and JB Mountain discoveries (located approximately 16 and 11 miles north-northwest, respectively), where McMoRan has successfully proven the existence of Rob-L, Operc and Gryo sands in the Middle Miocene. There are multiple targets at the Ammazzo prospect in these sections representing significant exploration potential (500 billion cubic feet of natural gas equivalents to greater than 1 trillion cubic feet), similar to Flatrock and potentially larger. McMoRan will operate the well and holds a 25.9 percent working interest and 21.1 percent net revenue interest. McMoRan's partners, PXP and Energy XXI, hold a 28.1 percent working interest and 16.0 percent working interest, respectively.

A charge to third quarter results will be required to reduce the net book value of certain property damaged in the storm and for related adjustments to estimated future abandonment costs associated with damaged structures and well abandonment. Preliminary estimates indicate a charge of approximately $150 million. McMoRan intends to pursue recovery of costs under its insurance program, which is subject to a $50 million deductible.

McMoRan ended the third quarter of 2008 in a strong liquidity position with $160 million in cash and no borrowings under its $450 million bank credit facility.

Lower Prices,Refining Margins To Hit Conoco 3Q Results

2008-10-03T08:09:00.000-05:00

HOUSTON -(Dow Jones)- ConocoPhillips' (COP) third-quarter earnings will be hit by lower oil and natural gas prices, smaller refining profits and less production compared with the previous quarter, the company said Thursday.

The third-largest U.S. oil company by market value said in its interim update that quarterly output and refining margins, the difference between the crude oil refiners buy and the products they sell, will be slightly below the second quarter in part due to hurricane disruptions.

ConocoPhillips said its refining results will be reduced by about $200 million during the third quarter due to Hurricanes Gustav and Ike, which hit the coast of Louisiana and Texas on Sept. 1 and Sept. 13, respectively. The storms forced offshore producers to evacuate personnel and halt output, while refiners had to shut down coastal operations.

Conoco's 247,000-barrel-a-day refinery in Belle Chasse, La., for example, shut down for more than two weeks until Sept. 17 due to both storms. It is now producing at normal rates, according to the Department of Energy.

The Houston company also said Ike and Gustav translated into a 20,000 barrels of oil equivalent per day not produced.

Some analysts see Conoco's preliminary quarterly report as the bellwether for other major oil companies as all of them have experienced lower oil prices, tighter refining margins and disruptions in Gulf of Mexico output during the third quarter. However, analysts said ConocoPhillips might be the hardest hit as it has less international leverage than other majors such Exxon Mobil Corp. ( XOM), Chevron Corp. (CVX), Royal Dutch Shell (RDSA) or BP PLC (BP), which have a larger global presence.

Shares of Conoco recently were off 4.6% at $67.42.

"We are going to see all oil companies with exposure to the Gulf of Mexico reporting unusual costs," said Sal Ilacqua, analyst at Monness Crespi Hardt & Co. "The third-quarter results are going to be very confusing, while the real impacts could come in the fourth quarter."

During the first month of the quarter that ended Sept. 30, oil prices reached an all-time high of $147.27 a barrel, but prices ended the period with a drastic drop to below $95.

Although oil prices are still much higher than a year ago, analysts expect prices to keep below its all-time high for the rest of the year, which is expected to shrink companies' fourth-quarter earnings. These results are also expected to keep reflecting the effects of Ike and Gustav as almost 50% of oil and gas production was still off line in early October and it could take weeks until output returns to pre-storm levels.

Conoco will report third-quarter results on Oct. 22.

- By Isabel Ordonez, Dow Jones Newswires; 713-314-6090; isabel.ordonez@ dowjones.com

Shell says U.S. Gulf refineries ramping up after Ike

2008-09-29T09:40:00.000-05:00

NEW YORK, Sept 29 (Reuters) - Shell said Saturday its U.S. Gulf refining throughput was about 1 million barrels per day out of a total of 1.2 million bpd.

Shell said the 285,000 bpd refinery in Deer Park, Texas which it jointly owns with Mexico's state oil company Pemex, was running nearly at planned rates and making gasoline and other products.

Motiva's 285,000 bpd refinery in Port Arthur, Texas was running at 70 percent of capacity, with planned rates expected within the next few days.

Motiva, a joint venture between Shell and Saudi Aramco, also operates two other refineries on the Gulf Coast -- a 235,000 bpd refinery in Convent, Louisiana and a 220,000 bpd refinery in Norco, Louisiana. Both refineries remained at planned rates.

(Reporting by Janet McGurty; Editing by John Picinich)

Enterprise Updates Operating Status Following Hurricane Ike

2008-09-26T11:02:00.000-05:00

Enterprise Products Partners L.P. (NYSE:EPD) today announced that the partnership continues to move forward in returning its facilities to normal operations and assessing the full impact of Hurricane Ike to its onshore and offshore assets. At the Mont Belvieu, Texas complex, natural gas liquids (NGLs) and propylene fractionation activity continue to increase. The NGL fractionation rate has returned to pre-storm levels of approximately 220,000 barrels per day and the propylene fractionation rates are near pre-storm levels. Throughput on the major pipelines connected to the Mont Belvieu complex is also increasing as operations resume at customer facilities. The partnership’s import/export system, which includes a terminal facility along the Houston Ship Channel and pipeline network connected to Mont Belvieu, has also resumed normal operations. Enterprise’s butane isomerization and isooctane units at Mont Belvieu have resumed normal operations following the restoration of hydrogen supplies necessary to operate the equipment.

With the exception of the North Terrebonne plant in Louisiana, Enterprise-operated natural gas processing and fractionation facilities located in the impacted areas are operational and either processing or waiting for natural gas flows to resume to the facilities. Crews have begun the repair process and are developing a plan to resume service at North Terrebonne as quickly as possible. In the meantime, some of the natural gas can be diverted to another Enterprise plant for processing.

Detailed inspections of Enterprise-operated offshore assets have revealed more damage in some cases than initial observations indicated. Assessments of the platforms and pipelines continue, utilizing subsea remote operated vehicles as well as operations and engineering personnel stationed aboard the facilities where appropriate. The platforms impacted by Hurricane Ike include Garden Banks 72, High Island A264 and South Marsh Island 205.

In addition, Enterprise has discovered that a 42-inch diameter segment of pipe that is part of the High Island Offshore System (HIOS), which transports natural gas from various producing fields in the western Gulf of Mexico, has been severed. As a result, natural gas volumes into the system are limited to certain receipt points upstream of the break and require third party pipeline systems for delivery to onshore facilities. Enterprise is investigating damage to the pipeline, which is located in about 130 feet of water, and is developing a plan to repair and return the affected portion to service as quickly and safely as possible.

Pressure tests that have been completed on the Poseidon and Cameron Highway Offshore Pipeline crude oil systems indicate no operational issues. Poseidon is currently transporting crude oil and plans are being finalized to resume service on Cameron Highway later today.

On the natural gas side, the Independence Trail pipeline and Hub system is operating normally and presently delivering more than 900 million cubic feet per day of natural gas. The Viosca Knoll Gathering System (VKGS) and the Falcon pipeline are currently operating; however, throughput on the western portion of VKGS is restricted due to pipeline damage sustained during Hurricane Gustav. Deliveries of natural gas through the partnership’s Anaconda pipeline have been suspended following the loss of a third party platform at Eugene Island 371. Enterprise is pursuing options that would connect Anaconda directly to the export pipelines previously served by the platform.

Enterprise Products Partners L.P. is one of the largest publicly traded partnerships with an enterprise value of approximately $20 billion, and is a leading North American provider of midstream energy services to producers and consumers of natural gas, NGLs, crude oil and petrochemicals. Enterprise transports natural gas, NGLs, crude oil and petrochemicals through more than 35,000 miles of onshore and offshore pipelines. Services include natural gas transportation, gathering, processing and storage; NGL fractionation (or separation), transportation, storage, and import and export terminaling; crude oil transportation and offshore production platform services.

Refineries 'a few weeks' from normal

2008-09-26T08:38:00.000-05:00

Gulf Coast refineries may still be "a few weeks" away from normal production rates after two hurricanes forced closures and sent inventories to a 41-year low, an Energy Department official said.

At least 46 million barrels of motor fuel was lost between Aug. 30 and Sept. 19 as Hurricanes Gustav and Ike shut 20 percent of U.S. capacity. Retail gasoline prices remained stable, based on national averages, as demand fell, while distributors and marketers in the Southeast and Midwest said customers ran out of fuel.

"We're now at about 85 percent of refinery operations in Louisiana and Mississippi and 43 percent in Texas," Kevin Kolevar, assistant secretary for electricity delivery and energy reliability, said in an interview. "If we don't have any nasty surprises as these refineries come back online, we should see near normal rates in about a few weeks' time."

Gustav struck on Sept. 1 and Ike on Sept. 13, shutting refineries along the Gulf Coast and causing flooding, power outages and wind damage. As of Thursday, four refineries were still shut, five were restarting and nine were running at reduced rates.

Recovery may be hampered after a fire shut a regional fuel terminal in Pasadena, Texas, on Sept. 23. The owner, Kinder Morgan Energy Partners LP, said Thursday that it has resumed "limited operations," The terminal connects at least six refineries to about 35 pipeline systems, which send fuel to terminals in the eastern U.S. and Midwest.

As of Thursday, pipelines that would normally carry 4.9 million barrels a day of gasoline and distillate fuels were shut or running at reduced capacity.

Congress to let offshore drilling ban expire

2008-09-25T09:34:00.002-05:00

WASHINGTON (Reuters) - The offshore drilling ban that became a flash point in the U.S. presidential election will expire next week after Democrats decided to drop the prohibition from a temporary spending bill that keeps the government running.

The end of the ban will not lead to a rush of new drilling any time soon, but it would be a big win for Republican Presidential nominee John McCain who has made opening most U.S. offshore areas to drilling a key part of his campaign. His Democratic rival, Barack Obama, supports limited offshore drilling as part of a bigger overhaul of U.S. energy policy.

The mammoth spending bill to keep the U.S. government operating through next March includes a $25 billion loan guarantee package for the auto industry but makes no mention of offshore oil drilling, pushing the politically hot topic to the next president and new Congress.

"The next election will decide what our drilling policy is going to be," said House Appropriations Committee Chairman Rep. David Obey.

Obey said the drilling ban will expire because Democrats could not reach an agreement with Republicans on how much offshore areas should be opened to energy exploration.

"The White House made it clear any new drilling provision was a nonstarter. The future resolution of offshore drilling will have to be addressed with a new President," said a spokesman for House Speaker Nancy Pelosi.

The spending measure that allows the drilling ban to lapse carries a price tag of more than $600 billion and was approved by the House of Representatives floor on Wednesday. The House had to pass the stop-gap spending bill by September 30, the end of the current budget year. C has not approved any of the 12 annual spending bills needed to keep the lights on in Washington.

"We think that lifting the ban on drilling is in the best interest of the American consumer as it gives them access to the billions of barrels of domestic oil and vast quantities of natural gas resources that had been off-limits to drilling," said Karen Matusic, spokeswoman for the American Petroleum Institute.

"If Congress does nothing to limit development by placing arbitrary limits, it is a great step for our nation's energy security," she said.

The Interior Department's current five-year leasing plan calls for possible drilling off the Virginia coast in 2011.

"It would take a substantial period for the administration to change this leasing plan or to develop new leasing plan," Jeff Bingaman, chairman of the Senate's energy committee.

"I think everybody has been working on assumption that on first of October something dramatically different occurs (with offshore drilling. That's not reality," he said.

Congress must pass the stop-gap spending bill by September 30, the end of the current budget year. It has not approved any of the 12 annual spending bills needed to keep the lights on in Washington.

Republicans, led by Presidential hopeful John McCain with his "drill here, drill now" campaign cry, have been pushing for an end to the 25-year-old ban as a way of relieving pressure on high gasoline prices.

House Democrats, saying the increased drilling would not be a quick fix for high gasoline prices, had moved to allow limited drilling 50 miles offshore in a bill that passed the chamber last week. But the bill was strongly opposed by Republicans and the White House as too limited in scope.

Give it the gas

2008-09-24T09:33:00.001-05:00

By Anna Thibodeaux, Baton Rouge Business Report

Monday, September 22, 2008

Energy supply fears over Hurricane Gustav quickly eased as refineries reported mostly minor damage and came back online within days of the Labor Day storm.

Only hours after Gustav’s arrival, Placid Refining Co. in Port Allen supplied Broussard-based Macro Oil Co., which was designated by the state to supply gasoline and diesel for emergency needs like hospital generators or emergency vehicles. Placid also provided fuel to emergency responders like fire departments, police and parish vehicles at a temporary fueling station.

Joey Hagmann, Placid’s refinery manager, says the facility sustained minor damage. The refinery, which was coming out of a maintenance turnaround in August, had stored additional volume and arranged to get additional oil by pipeline. When Gustav knocked out electricity, generator power allowed the company to operate its truck rack to load emergency fuel.

ExxonMobil also experienced a power outage and minor damage from the hurricane; repairs were ongoing as of Sept. 12. Spokesman George Pietrogallo Jr. says they are still producing gasoline and chemical products, although full operation isn’t anticipated for as much as 10 days. Since the storm hit, ExxonMobil Corp. has delivered 2.8 million gallons of fuel to Exxon, Mobil and other area stations.

“Louisiana refineries are doing quite well,” says Larry Wall, director of public relations with the Louisiana Mid-Continent Oil and Gas Association. Many of them, like Placid Refining, avoided shortages by building up fuel supplies or arranging for additional supplies in anticipation of the storm.

Eleven of the state’s 17 refineries shut down, while the rest reduced operations in anticipation of Gustav, Wall says. Collectively, they represent 17% of the nation’s refining capacity and refine 2.9 million barrels of oil a day. With mostly minor damages reported from Gustav, all but one had resumed operations by Sept. 12, easing worries about supply and price increases.

The storm did pose two issues for refineries with regaining electricity and access, he says. Most of them got power back shortly after the storm and quickly resolved access issues such as clearing channels to resume operations, easing market worries about supply and price increases.

Less than two weeks after Gustav, Hurricane Ike threatened much of the same area. Energy companies mostly chose not to resume operations and jeopardize crews in anticipation of the storm, which made landfall on Sept. 13 near Galveston, Texas. Texas represents 45% [4.8 million barrels a day] of the nation’s refining capacity and Louisiana 25% [2.9 million].

Supply and price fears again arose, but Wall says the supply was supplemented by other sources including the Strategic Petroleum Reserve, Louisiana Offshore Oil Port foreign imports and other pipelines and barges. A run on local gas stations took place Thursday, Sept. 11 after reports suggested gas prices could hit $5 a gallon because of Ike; a large increase did not materialize.

Citing supply disruptions, the U.S. Department of Energy approved Garyville-based Marathon Oil Corp.’s request for 250,000 barrels from the reserve, which loans oil in emergencies. On Sept. 11, the DOE also announced approval of another 250,000 barrels to Marathon and 130,000 barrels to Placid Oil. In making the requests, the companies cited disruptions in supply caused by Gustav.

IN HARM’S WAY

U.S. refineries located in the path of hurricanes Gustav and Ike and their ranking by barrels per calendar day:

Rank--Company--Site--Barrels per day

1--ExxonMobil--Baytown, Texas--567,000

2--ExxonMobil--Baton Rouge--503,000

3--BP--Texas City, Texas--467,720

4--Citgo--Lake Charles--429,500

6--ExxonMobil--Beaumont, Texas--348,500

8--Chevron USA--Pascagoula, Miss.--330,000

9--Deer Park--Deer Park, Texas--329,800

11--Premcor--Port Arthur, Texas--289,000

13--Flint Hills--Corpus Christi, Texas--288,126

14--Motiva--Port Arthur, Texas--285,000

15--Houston--Houston--270,600

18--Marathon--Garyville--256,000

19--ConocoPhillips--Belle Chasse--247,000

20--ConocoPhillips--Sweeny, Texas--247,000

22--ConocoPhillips--Westlake--239,400

25--Motiva--Norco--236,400

26--Motiva--Convent--235,000

27--Total--Port Arthur, Texas--232,000

32--Valero--Texas City, Texas--199,500

34--Chalmette--Chalmette--192,760

35--Valero--Norco--185,003

45--Citgo--Corpus Christi, Texas--156,000

53--Valero--Corpus Christi, Texas--142,000

57--Murphy Oil--Meraux--120,000

63--Pasadena--Pasadena, Texas--100,000

66--Valero--Three Rivers, Texas--93,000

71--Valero--Houston--83,000

75--Valero--Krotz Springs--80,000

76--Calcasieu--Lake Charles--78,000

79--Marathon--Texas City, Texas--76,000

94--Delek--Tyler, Texas--58,000

97--Placid--Port Allen--56,000

98--Shell--St. Rose--55,000

Oil, gas in fine shape

2008-09-24T07:49:00.001-05:00

NEW ORLEANS — “The future is very, very bright for the oil and gas industry in Louisiana,” former U.S. Rep. Chris John, president of the Louisiana Mid-Continent Oil and Gas Association, told 400 representatives from the energy sector Tuesday.

During a luncheon address hosted by the Louisiana Department of Natural Resources, John hop-scotched over an array of topics, including: the “re-emergence” of oil fields in the Gulf of Mexico, the effects of two recent hurricanes; exploration off the coast; presidential politics — and the football fortunes of LSU.

John said, for at least the next decade, there will be “an incredible opportunity for the re-emergence” of Louisiana’s offshore oil and gas industry — thanks to recent, record lease awards in the Gulf.

Since Oct. 7, the oil and gas industry has spent $7 billion “leasing water” (an industry term) for mineral rights in the Gulf’s Outer Continental Shelf, from 3-to-200 miles offshore.

“That’s just the leasing dollars,” John said. “The real dollars to state and the federal government are going to (come) in the production stage.”

Currently, the offshore oil industry provides Louisiana with $6.23 billion in direct benefits, a $1.5 billion payroll and 17,000 direct jobs, he said. Future benefits to the state from OCS leases will be — “off the charts.”

Eric Smith, a finance professor at Tulane University and director of the Tulane Energy Institute, is less sanguine.

“I don’t think it’s going to be an amazing renaissance but it’s going to be a healthy development,” Smith said.

Deepwater drilling programs should be productive in areas, 150 to 200 miles offshore of Louisiana, he said. However, the professor cautioned, “the oil is not good quality.”

Turning to weather woes, The Associated Press last week reported that hurricanes Gustav and Ike hammered small oil and gas producers in the Gulf, with insured losses for Ike alone expected to rise near $2 billion. During a two-week period, John said Tuesday, the back-to-back storms shuttered 28 refineries, from New Orleans to Corpus Christi, Texas.

“That means 45 percent of the refinery capacity of this country was shut down for two weeks,” he said.

Most of the energy industry on the Gulf Coast is “back on line,” John said, adding: “There have been no major spills in the OCS that we know of, as of yet. … I’m very proud of that.”

But environmentalist Darryl Malek-Wiley, a New Orleans-based organizer for the Louisiana chapter of the Sierra Club, says it’s too early for the oil and gas industry to celebrate.

“While we haven’t heard of any major spills, the fact that some oil rigs are still missing is of concern,” Malek-Wiley said, adding: “I always find it disingenuous of the oil industry to talk about oil spills when some scientists found that 60 percent of Louisiana coastal wetland loss can be attributed to oil and gas exploration and operations, which places Louisiana more at risk for storm surge.”

To reduce national dependence on foreign oil, John said that the nation needs to lift drilling bans in other areas, such as the coastal waters off the Florida coast — a proposal hotly resisted by environmentalists.

But John says Cuba has offered offshore oil leases to other foreign countries some 50 miles away from Key West, Fla. “Who has purchased (the leases)? We really don’t know yet.” John said. Officials of the island communist government are contemplating enlarging coastal areas for oil exploration, John said.

“That should make us — as Americans — very nervous in a lot of ways,” he said. “The Floridians don’t want us to drill off of their coast, but yet they are going to have drilling whether they like it or not because of this initiative by Cuba.”

Smith of Tulane says the Cubans are already drilling and the concessions are held by Canadian or Spanish companies. “We don’t know the quality of the Cuban crude because they haven’t found any yet.”

Storm Recovery Update

2008-09-23T12:52:00.000-05:00

The US Minerals Management Service reported 225 of the 717 manned platforms and 7 of the 121 mobile rigs operating in the US sector of the Gulf of Mexico were still without crews as of midday Sept. 22. Officials said 76.6% of the oil and 65.5% of the gas usually produced from offshore federal leases have been shut in.

The Department of Energy said 9 refineries (total capacity of 2.27 million b/d) remain shut down as a result of Hurricane Ike, while another 12 refineries (total capacity of 2.95 million b/d) are running at reduced rates. Officials said 8 natural gas processing plants (total capacity of 5.08 bcfd) in Texas and Louisiana were shut down; another 14 plants (6.28 bcfd total capacity) were restarting or operating at reduced runs. Also, 7% of Texas remained without electrical power as of Sept. 22.

Shell Oil Co. now has returned 1,210 employees offshore and increased production over the weekend to 32,000 b/d of oil equivalent (total gross) from a few Shell-operated facilities. The company expects to ramp up production, "depending on repairs and downstream oil and gas infrastructure readiness."

Shell Pipeline said most of the Delta pipeline system is delivering crude. In its Central Gulf pipeline corridor, the Amberjack pipeline north of the South Timbalier 301 platform is back in service and flowing oil from limited production platforms. Work continues to restore other connecting pipelines. Mars and Ursa pipelines are standing by for prestart testing when associated production facilities are ready.

Company officials are developing plans to reroute the Auger pipeline system around the damaged Eugene Island 331 platform. As a temporary measure to bring production on quickly, Shell is looking at redirecting flow from the Auger pipeline to another system in the area.

The Eugene Island pipeline remains down pending repairs at a third-party pump station and attempts to isolate subsea connections to damaged producer platforms. The Boxer pipeline is down pending start-up of the Eugene Island pipeline and the closure of a sub-sea valve to isolate a damaged producer platform.

In the western pipeline corridor, Cougar pipeline is down pending repairs at a producer platform. Work is progressing to restart the Central Gulf gathering system.

Onshore, the Shell-operated Capline Crude Oil Pipeline System is operating generally at scheduled rates. Deliveries continue at limited rates into Port Arthur and Houston areas on the eastern end of the Houma-to-Houston Crude Oil System. Finished products systems in Houston have power and are making deliveries to connecting truck terminals and pipelines. In Port Arthur, finished product systems are using portable generators to make limited deliveries from inventory.

Shell's Deer Park, Tex., refinery and chemical plant are progressing toward restart with units being brought online in a planned and sequential manner. Production and distribution of motor fuels is expected to begin Sept. 23, with normal operating rates expected by this weekend.

Motiva Enterprises LLC (a Shell-Saudi Aramco joint venture) reported power has been restored at its Port Arthur refinery. Production of gasoline and other products is expected to begin this week. Meanwhile, workers continue to blend gasoline and diesel from existing inventories for shipments into the pipeline distribution system.

Motiva's Norco, La., refinery is operating at planned rates, and its Convent, La., refinery is making gasoline and other products at 90% of capacity. The company plans to return production to normal rates over the next couple of days.

Shell's chemical plant at Norco is operating at planned rates, as is its chemical facility in Mobile. The chemical plat at Geismar, La., is still in start up sequence and is supplying limited product to customers from existing inventory.

More Gulf oil, gas production restored after Ike

2008-09-22T15:56:00.000-05:00

NEW ORLEANS — More than three fourths of oil production and more than half of natural gas production remained halted in the Gulf of Mexico nine days after Hurricane Ike slammed into Texas.

About 76.6 percent of oil production and 65.5 percent of natural gas production in the Gulf is on pause, the U.S. Minerals Management Service said today.

About 1.3 million barrels of oil and 7.4 billion cubic feet of gas are produced every day in the Gulf, according to MMS estimates.

The oil and gas industry is still sending personnel back to rigs and platforms that were evacuated for Ike.

As of 11:30 a.m. today, personnel were still evacuated from a 225 production platforms, or 31.4 percent of the 717 manned platforms in the Gulf, and seven rigs, or 5.8 percent of the 121 rigs operating in the Gulf.