http://www.trust.org/alertnet/news/breakingviews-drilling-alone-wont-fulfil-cheap-us-oil-dreams/

24 Feb 2012 18:17
Source: Reuters // Reuters

(The author is a Reuters Breakingviews columnist. The opinions expressed are his own.)
By Christopher Swann

NEW YORK, Feb 24 (Reuters Breakingviews) – Republican presidential hopefuls are presenting the American public with a familiar fantasy: by expanding offshore drilling they can bring gasoline prices back to earth. With the U.S. pumping only 9 percent of global crude, its leverage on supply is modest. But the world’s biggest consumer can affect demand, the other determinant of price. That, however, requires frank talk about conservation.

Americans get restive as pump prices rise toward $4 a gallon. Chastising President Barack Obama, and pledging to cut prices back to $2.50 a gallon, as Newt Gingrich has done, is standard political salesmanship. It’s also economic hubris. The United States pumps just 7.5 million barrels of the world’s 82 million barrels a day of crude, according to BP. One nation can’t control world prices with such a modest market share.

Even if the United States were to throw environmental caution to the winds and open up areas currently out of bounds to producers, the extra output could be offset by oil cartel OPEC. Swing producers, most notably Saudi Arabia, might swiftly reverse the effect of years of extra American drilling if they were unhappy with the resulting oil price.

It is also hard for Republicans to argue that America is failing to exploit its own oil. Oil output has been rising for the first time since the 1970s – thanks to enthusiastic deep-sea drilling and surging output from shale regions in North Dakota, Texas and elsewhere. The result is that reliance on foreign oil has fallen below 50 percent, back to levels last seen three decades ago. None of this, however, has stopped the price of Brent from rising 60 percent over the past two years.

America’s real clout on global energy markets comes as a consumer, where it accounts for a fifth of all oil burnt. There is plenty of low-hanging fruit, here. The average fuel efficiency of the U.S. vehicle fleet is about half that of European nations. And federal taxes on gasoline, which are the most effective means of curbing usage and fostering efficiency, are correspondingly lower.

A plea for conservation is unlikely to appeal to voters of any political persuasion. But the economic laws of supply and demand are pretty simple. And they make a strong case for focusing on the latter over the former. In an election year, however, don’t expect reason to triumph over populism.

CONTEXT NEWS
— Republican presidential candidate Newt Gingrich has unveiled an energy plan that he said would bring down the cost of gasoline to just $2.50 a gallon.
— “Americans have every right to demand $2.50 gas – we are an oil-rich country,” the former House speaker said.
— Gingrich has promised to authorize more drilling on federal lands and open up offshore areas currently unavailable to energy firms.
— The United States accounts for 8.7 percent of global oil production, according to BP’s statistical energy review, and 21 percent of consumption.
— Reuters: Obama hits back at Republican criticism of high fuel prices

— For previous columns by the author, Reuters customers can click on (Editing by Rob Cox and Martin Langfield)

Special thanks to Richard Charter

http://www.alaskadispatch.com/article/shells-alaska-bound-oil-drilling-ship-occupied-greenpeace-xena-actress

Alaska Dispatch: Shell’s Alaska-bound oil drilling ship occupied by Greenpeace, Xena actress
Alex DeMarban | Feb 23, 2012

Shell Oil Co. offshore Alaska drilling operations aren’t safe even from “Xena the Warrior Princess.”

Lucy Lawless, the actress who played the sexy, swashbuckling heroine of the cult classic named for her character, “Xena,” scaled the derrick of an Alaska-bound drillship Thursday with Greenpeace activists to protest exploratory oil drilling she believes could “devastate” the fragile Arctic environment and accelerate global warming, according to a statement from the pro-environment organization.

The Noble Discoverer ship, contracted by Shell to drill up to three exploratory wells this summer, was leaving Auckland, New Zealand, bound for Chukchi Sea waters off Alaska, according to the release.

“I’m blocking Shell’s Arctic drillship because I believe passionately that renewable energy is the way of the future,” Lucy said from the ship, according to the release.

Shell spokeswoman Kelly op de Weegh said the company respects freedom of speech, but isn’t pleased with Greenpeace’s tactics. The company is in contact with local authorities to keep the ship on path toward Alaska, she said.

“We are disappointed that Greenpeace has chosen this method to protest,” she said. “Actions such as this jeopardize the safety of everyone involved. While we respect the right of individuals to express their point of view, the priority should be the safety of Noble’s personnel and that of the protestors.

Six Greenpeace activists, as well as Lawless, a 43-year-old mother of three now co-starring in the TV show “Spartacus,” blocked the ship from the leaving the port of Taranaki for its 6,000-mile trip, the release said. The dill-rig invaders apparently expect to stay a while: the release notes they have several days of supplies.

Op de Weegh confirmed that the Noble Discoverer is currently at port in New Zealand, and said the port had been closed.

“Personnel from Noble have been in touch with local authorities,” she said, in response to an emailed question about how the company would respond to the boarding.
Greenpeace boarded and occupied another Arctic-bound drilling ship, the Leiv Ericksen, operating off Greenland’s coast last year.

Shell says it has safely drilled exploratory wells off Alaska’s coasts before, in the 1980s, and that it found oil and gas but never developed because global prices bottomed out and Arctic drilling became cost-prohibitive. Shell invested $2 billion to obtain leases in the Chukchi Sea in 2007.

With high prices in recent years, Shell is back and hopes to begin drilling exploratory wells in the Beaufort and Chukchi seas in U.S. waters this summer. The Hague-based oil conglomerate says it will exceed U.S. environmental safety requirements in its Arctic drilling efforts, and plans to employ sophisticated technology to reduce air emissions and a specially built capping and containment system to prevent an oil spill.

“Shell has taken unprecedented steps to pursue safe, environmentally responsible exploration in shallow water off the coast of Alaska,” op de Weegh said. “We recognize that industry’s license to operate in the offshore is predicated on being able to operate in a safe, environmentally sound manner.”

Greenpeace warns that a successful strike by Shell will launch a polar oil rush, threatening the relatively pristine Arctic. Environmentalists have warned that no technology exists to clean oil from the region’s thick sea ice.

“We don’t have to go to the ends of the Earth to suck out every last drop of oil. Instead we need to smarten up and begin the transition to a clean, green, sustainable energy future and right now that means keeping Shell out of the Arctic.”

Shell has recently been steaming ahead in its efforts to win regulatory approval to drill this summer in the Arctic seas, recently receiving an air permit for the Noble Discoverer and related ships. Environmental groups said Tuesday they’re challenging the permit in court.

Contact Alex DeMarban at alex(at)alaskadispatch.com

http://www.nzherald.co.nz/entertainment/news/article.cfm?c_id=1501119&objectid=10787694

New Zealand Herald: One arrest in Greenpeace drilling protest
By Matthew Theunissen
1:05 PM Friday Feb 24, 2012

Seven Greenpeace protesters, including Hollywood star Lucy Lawless, clambered onto an Arctic-bound oil drilling vessel and scaled its 53-metre tower at Port Taranaki this morning. Photo / Greenpeace

A man has been arrested after seven Greenpeace protesters, including Hollywood star Lucy Lawless, clambered onto an Arctic-bound oil drilling vessel and scaled its 53-metre tower at Port Taranaki this morning.

The group managed to evade the port’s tight security and, about 7am, board the Liberian-flagged Noble Discoverer, which was to depart on an 11,000km journey to drill three exploratory oil wells in the Chukchi Sea off the coast of Alaska.

They climbed to a platform atop its 53-metre drilling derrick and unravelled banners saying “Stop Shell” and “Save The Arctic”.

A police spokesman confirmed a man who was associated with the protest but not on the boat was arrested at the port gate this morning.

Five officers were on board and had made face-to-face contact with the protesters, he said.

“We’re trying to establish what their intentions are.”

Greenpeace spokesman Steve Abel said police were trying to climb the derrick to get to the protesters.

“We’d be pretty concerned about that because it requires specialist knowledge and capabilities to climb so you wouldn’t want your everyday police officer having to do that without proper equipment. It’s industrial climbing.”

The protest has captured international media attention with organisations including MSNBC, The Nation and the Associated Press trying to get interviews with Lawless, whose television series Spartacus is currently airing in the United States.

“Her involvement is very significant. There are very few people with her amount of profile and number of fans who have taken this level of non-violent direct action so, yeah, it’s a pretty exceptional, historical event,” Mr Abel said.

Police area commander for New Plymouth Inspector Blair Telford said their role in these situations was to ensure any protest was lawful and owners and crew of the ship were allowed to go about their lawful business.

“The protesters are clearly breaking the law by trespassing on the ship and we are currently liaising with the Port of Taranaki and the Harbour Master to decide the most appropriate course of action. Public safety is paramount.”

Lawless, the star of Xena: Warrior Princess, is a long-time Greenpeace supporter.
“I’m here today acting on behalf of the planet and my children,” she was quoted as saying in a Greenpeace statement.

“Deep sea oil drilling is bad enough, but venturing into the Arctic, one of the most magical places on the planet, is going too far.”

Mr Abel said Lawless had decided to take part in today’s activity of her own volition.

“She really was very keen to partake in a non-violent protest activity such as this one.”

She had considered that the police could be involved and people could be arrested, he said.

“She’s got a strong passion for ensuring the Arctic does not become the latest frontier for the oil industry.”

She has taken to Twitter from the platform.

“All safe up here but a squall coming in. Good spirits,” she tweeted.

“Today I’m taking direct action with GreenpeaceNZ in peaceful protest against Shell’s Arctic oil drilling.

“I’m on one of the oldest drill rigs on the planet and it’s heading to the Arctic. Tell Shell to stop.”

The ship was built in 1966.

Shell said in a statement it was “disappointed” that Greenpeace had chosen this method of protest.

“While we respect the right of individuals to express their point of view the priority should be the safety of Noble Discoverer’s personnel and that of the protesters.

“Shell has undertaken unprecedented steps to pursue safe, environmentally responsible exploration in shallow water off the coast of Alaska. We recognise the industry licence to operate offshore is predicated on being able to operate in a safe, environmentally responsible manner.”

Shell’s Alaska exploration plans were guided by extensive Arctic expertise and world-class capabilities, it said.

– APNZ
By Matthew Theunissen | Email Matthew

Special thanks to Richard Charter

http://online.wsj.com/article/SB10001424052970204131004577235501591753554.html

FEBRUARY 21, 2012
By TOM FOWLER
The U.S. and Mexico have reached an agreement that would allow oil and gas drilling on more than 1.5 million acres in the Gulf of Mexico, resolving a dispute that has left those areas in limbo for more than a decade.

The agreement signed Monday by U.S. Secretary of State Hillary Clinton and Mexican Foreign Minister Patricia Espinosa in Los Cabos, Mexico, establishes a legal framework for U.S. companies to develop offshore energy projects with Petroleos Mexicanos, the Mexican state oil company known as Pemex, in areas that straddle the two nations’ maritime border. The acreage runs due east from the U.S.-Mexico border to a point more than 200 miles south of the mouth of the Mississippi River, and includes areas where the water is almost 11,000 feet deep.

The agreement also allows U.S. and Mexican safety officials to work together to ensure the projects meet the safety standards of both nations and sets the groundwork for more cooperation to develop uniform safety guidelines for offshore energy development.
The safety agreement is particularly important as Pemex prepares to drill a site near the U.S. maritime border in 9,000 feet of water, nearly twice as deep as the well drilled by the doomed Deepwater Horizon rig in 2010. Officials on both sides of the border have expressed concerns about Pemex’s ability to safely handle such a complex project since it has done relatively few deep-water projects compared with operators in U.S. waters and none as deep as 9,000 feet.

“We’re moving forward with Mexico to make sure we have a common set of safety protocols,” U.S. Secretary of the Interior Ken Salazar said in a conference call.

Mexico, the U.S.’s No. 2 oil supplier behind Canada, has seen its offshore oil production drop for seven straight years and has only about 10 years of proven reserves of crude. The deep-water project is seen as an attempt to reverse that trend.
Houston-based Helix Energy Solutions Group Inc. has discussed providing a system to Pemex to contain a subsea oil leak like the one that occurred following the April 2010 Deepwater Horizon accident off Louisiana, but no firm agreement has yet been reached, according to a spokesman for Helix.

The areas that are part of the agreement may contain as much as 172 million barrels of oil and 304 billion cubic feet of natural gas, according to the U.S. Bureau of Ocean Energy Management.

The bureau included some of the acreage in a lease sale in December, with the understanding nothing would be finalized until the dispute was settled. The area is near successful projects such as Royal Dutch Shell PLC’s Perdido production platform, which is producing about 90,000 barrels of oil equivalent per day.

Special thanks to Richard Charter

9/3/10

http://www.chron.com/business/article/U-S-oil-gusher-blows-out-projections-3341919.php

More Information: Bouncing back
After declining to levels not seen since the 1940s, U. S. oil production began rising again in 2009:
More rigs: The number of rigs in U.S. oil fields has more than quadrupled in the past three years to 1,272.
Bright forecast: The U.S. Energy Information Administration hiked its forecast of crude production in 2025 to 6.4 million barrels per day. That’s 1 million barrels more than the U.S. produced in 2010.
Challenging the Saudis: By the EIA’s forecast, the U.S. will challenge Saudi Arabia as the world’s top oil producer, including crude and other forms of oil.

By Simone Sebastian
Updated 11:58 p.m., Sunday, February 19, 2012

The United States’ rapidly declining crude oil supply has made a stunning about-face, shredding federal oil projections and putting energy independence in sight of some analyst forecasts.

After declining to levels not seen since the 1940s, U.S. crude production began rising again in 2009. Drilling rigs have rushed into the nation’s oil fields, suggesting a surge in domestic crude is on the horizon.

The number of rigs in U.S. oil fields has more than quadrupled in the past three years to 1,272, according to the Baker Hughes rig count. Including those in natural gas fields, the United States now has more rigs at work than the entire rest of the world.

“It’s staggering,” said Marshall Adkins, who directs energy research for the financial services firm Raymond James. “If we continue growing anywhere near that pace and keep squeezing demand out of the system, that puts you in a world where we are not importing oil in 10 years.”

There are doubts that energy independence is that close. But many say the booming shale oil fields in Texas and North Dakota and the growth of deep-water drilling in the Gulf of Mexico will allow the nation to cut its reliance on oil imports significantly over the next couple of decades.

Last month, the U.S. Energy Information Administration upgraded its forecast of crude production in 2025 to 6.4 million barrels per day – 1 million barrels more than were pumped in 2010.

Previously, the EIA had projected the U.S. would peak at 6 million barrels in 2022.
“The growth that we’ve seen in shale, that’s one of the biggest changes that’s contributing to our outlook,” said Dana Van-Wagener, a research analyst for the agency. “It’s evolving so quickly. We weren’t anticipating enough growth.”

Crude prices stable

By the EIA’s forecast, the United States will challenge Saudi Arabia as the world’s top oil producer when crude and other forms of liquid petroleum are included. But the U.S. is also the world’s top oil consumer, demanding nearly 20 million barrels a day. So even with an oil boom, the nation still falls far short of its energy demands.

The technology that fueled the national shale gas rush is moving into oil fields. The pairing of fossil fuel production techniques called horizontal drilling and hydraulic fracturing allowed companies to access previously hard-to-reach natural gas trapped in dense shale rock.

The rush has unleashed a flood of natural gas onto the U.S. market, causing price to dive and making some gas wells uneconomical. Companies have started to close natural gas wells and pull rigs out of gas fields.

Meanwhile, crude oil prices have remained high, with the domestic benchmark West Texas Intermediate price rising 93 cents to $103.24 on Friday.

Pumping crude out of shale rock is more expensive and difficult than getting at natural gas, said Eric Potter, program director for energy research at the University of Texas at Austin’s Bureau of Economic Geology.

Oil molecules are larger and harder to squeeze through the cracks created by hydraulic fracturing. But the high price of crude makes it worthwhile for many companies.
“With natural gas prices being as low as they are, your company could go out of business if you don’t manage this carefully,” Potter said. “People are moving quickly to get into these oil plays. It’s a matter of their existence.”

The Eagle Ford Shale in South Texas, the Permian Basin in West Texas, and the Bakken Shale in North Dakota have been hubs of the domestic crude boom. They now make up about 40 percent of the nation’s land-based oil production, noted Adkins, the Raymond James analyst. He projects that proportion will grow to two-thirds by 2015.

Fields underestimated

Adkins says the Energy Information Administration is vastly underestimating the rapid growth of those oil fields. He believes that crude oil production in the United States will reach 9.1 million barrels by 2015, some 45 percent more than the EIA’s forecast.
The reason for the varying projections about the nation’s crude potential is uncertainty about how much oil is underground and whether technological advances will make it reachable.

That also causes debate about future crude oil prices.

Adkins, for example, says the rising production will help reverse the surging price of oil, pushing it down to $90 per barrel next year.

Forecast: $4.09/gallon

Others, however, believe oil prices will continue to rise despite the growing supply coming out of U.S. oil fields. Domestic crude prices are closely tied to the world market.
That makes domestic prices susceptible to the global Brent crude benchmark price, which is on the rise due to foreign conflicts and rapidly growing energy demands in developing countries.

The EIA projects the average world oil price will reach about $145 per barrel in 2035, in current dollars, compared to the 2011 average of $93 per barrel. Meanwhile, the agency forecasts gasoline in America will rise to $4.09 per gallon.

“As far as drilling and production, it’s going to be really good and robust,” said Michelle Michot Foss, chief energy economist for the University of Texas Bureau of Economic Geology. “But consumers will be upset because gasoline prices will continue to be high.”

simone.sebastian@ chron.com twitter.com/SimonesNews

Special thanks to Richard Charter