NewsWatch: Energy

February 19, 2010

Google gets to be an electric utility (sort of)

Just when you thought Google couldn't get more entrenched in daily life, the online search giant decides it wants to be an electric company, reports ITWorld:

Google has received federal approval to buy and sell energy on the open market, giving it more options for the way it powers its data centers and opening the door to a potential move into the energy-trading business.

Google applied for the authorization last December through a wholly owned subsidiary called Google Energy. The U.S. Federal Energy Regulatory Commission (FERC) approved its application Thursday, granting Google "market-based rate authorization," or the authority to buy and sell energy on a wholesale basis.

"We made this filing so we can have more flexibility in procuring power for Google's own operations, including our data centers," Google spokeswoman Niki Fenwick said via e-mail.

This doesn't mean Google Energy will become another option on the Power To Choose Web site here in Texas. It's really all about letting Google better hedge the costs of providing power for its massive server farms.

Posted by Tom Fowler at 10:15 AM in Electricity | Comments (0)
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Matagorda power plant could mess with Houston air

A proposed coal-fired power plant 90 miles from Houston in rural Matagorda County could threaten the city's efforts to comply with federal clean air rules, reports the Chronicle's Matt Tresaugue:

Some federal regulators, Houston lawmakers, and environmentalists say the proposed White Stallion Energy Center would only exacerbate the city's stubborn smog problem as tougher nationwide limits for the widespread pollutant come into play.

The U.S. Environmental Protection Agency, for one, wants Texas regulators to prove that pollution from the coal plant would not make Houston's smog worse before issuing permits. Critics also want the state to require the power company to consider new technology that might slash emissions of smog-forming pollution.

The push comes amid a review of the proposal by the State Office of Administrative Hearings, which will soon recommend whether the Texas Commission on Environmental Quality should grant the plant's air permit.

The plant is about 20 miles from the boundary of the eight-county Houston region that has long been in violation of federal limits for smog or ozone. It will use pet coke -- a byproduct of refining -- as a fuel, as well as coal, and use a number of technologies to reduce emissions, but apparently it will still have a worse emissions profile than other coal plants in the state.

The plant owners didn't call Tresaugue back. Sometimes companies choose not to comment on an issue thinking there's nothing to be gained by talking. Sometimes they're right, but often they're wrong.

Posted by Tom Fowler at 09:30 AM in Electricity, Legal/Enforcement, Pollution/Emissions | Comments (0)
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Haynesville: Another Houston screening

The natural gas shale documentary Haynesville will have another screening in Houston, this time on Thursday, March 4 at 7 p.m. at the Angelika Theater downtown.

To reserve tickets (which are free) sign up here.

Sponsors of this screening include Akin Gump Strauss Hauer & Feld LLP, Citi Energy Group and George Alcorn.

I will be moderating a panel discussion after the film, which will include the director Gregory Kallenberg, Jim Rice of Akin Gump and others to follow.

There are only around 250 tickets so be sure to sign up quickly. The showing the Chronicle put together at Rice University in January sold out.

Undecided? Take a look at the trailer:

Posted by Tom Fowler at 09:00 AM in Industry's image, Natural Gas | Comments (0)
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Chron Energy Newslinks | 02.19.10 | Schlumberger/Smith merger? Gore skewers Exxon.

• Schlumberger in talks to acquire Smith Intl.

• Indian firm to hike bid for LyondellBasell.

• Anadarko discovers east African nat gas bounty

• Halliburton to move 150 jobs from Ok. to Houston.

• Mayor of Dish,Tx. visits New York Marcellus Shale region.

• Russia looks to take gas field back from BP.

• KBR wins contract for India ammonia plant.

• Petrobras imports gasoline for the first time in 40 years.

• Argentine tightens shipping rules over Falklands oil dispute.

• BP, Statoil eye Greenland.

• Small reactors generate big hopes.

• Gore calls Exxon liars on climate funding.

Posted by Tom Fowler at 07:00 AM in Links | Comments (1)
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More on the Nissan LEAF

A few weeks ago I got to take a test drive of the Nissan LEAF, the all-electric compact sedan the company will be rolling out in select cities (including Houston) late this year.

As I wrote then I had mixed feelings about the driving experience, namely that it didn't include actual highway driving. I go into it a bit more in an podcast I did with Joel Greenberg over at Tech2Energy.com.

Coincidentally (really, I didn't know this was being done) Tim Spell, the Chronicle's car guy, has an entry on the LEAF this morning but it doesn't sound like he did the test drive.

Joel's site features a series of podcasts where to talks to people about a variety of energy and technology topics, like nanotech and energy and the basics of the electric power grid.

Posted by Tom Fowler at 06:45 AM in Automobiles, Electricity | Comments (0)
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Devon Energy to divest Brazilian assets in 2010

First the Gulf of Mexico, now Brazil.

Devon Energy Corp. will continue its plans to become a purely North American onshore company by divesting its Brazilian and other international assets in 2010.

The exploration and production company announced its plans to sell off its international business back in November. It plans to use money from the sales toward North American projects and to retire debt

And Devon's been pretty lucky on the oil front. A test in the Kaskida field in the Gulf found oil right before the company made its November announcement. And in December and January, Devon and partner Anadarko found oil off the coast of Brazil.

This week Devon reported that its oil and gas production for 2009 reached an all-time high.

"2009 was a pivotal year for Devon as we began repositioning the company to focus entirely on our high-return, North American onshore natural gas and oil portfolio," commented J. Larry Nichols, chairman and chief executive officer.

"We grew North American onshore production by more than six percent in 2009 and replaced more than twice our production with the drill bit at very attractive costs. We expect to receive after-tax proceeds of $4.5 billion to $7.5 billion as we divest our offshore and international properties this year."

Posted by Sharon Hong at 06:00 AM in E&P, Oil, South America | Comments (0)
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February 18, 2010

Texas' big bill for carbon

Sharon Hong/Chronicle Sen. John Cornyn speaks at press conference to release TPPF study findings at Mach Industrial Group

As we reported this morning, a new study being released today tries to quantify the negative impacts of proposed U.S. climate change laws on the U.S. economy. The complete study is at the bottom of this post.

The possible outcomes from a climate change law (the paper takes the Waxman-Markey bill as the standard) sound pretty scary for Texas.

But as critics of the study (and others that have preceded it) point out, it doesn't even try to identify positives that might come out of the effort.

My colleague Sharon Hong was at the press conference today where the findings were released. At the news conference, Margo Thorning, co-author of the study, said the report does take into account a potential rise in "green" jobs in the state.

Page 18 of the study notes:

"Even though Waxman-Markey will create new 'green' jobs due to the shift toward less carbon-intensive fuels, more renewable energy, and increased expenditures for energy efficiency across all sectors of the economy, the overall result will be fewer jobs than under the baseline forecast. Since electricity produced by wind and solar power has to be backed up with conventional generating capacity, the impact of the Waxman-Markey bill is to force the substitution of more expensive energy for cheaper fossil fuel energy. As a result, growth in productivity, GDP and employment is slowed."

Continue reading "Texas' big bill for carbon"

Posted by Tom Fowler at 05:40 PM in Climate Change | Comments (1)
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House asks for hydraulic fracturing data *update*

The House Energy and Commerce Committee is launching an investigation of hydraulic fracturing, the practice used by natural gas drillers to unlock prolific shale formations.

The committee sent letters to eight oil and gas companies that use the technique, asking for information on the chemicals used in the process and the potential impact of the practice on the environment and human health.

"Hydraulic fracturing could help us unlock vast domestic natural gas reserves once thought unattainable, strengthening America's energy independence and reducing carbon emissions," said [Committee Chairman Henry] Waxman. "As we use this technology in more parts of the country on a much larger scale, we must ensure that we are not creating new environmental and public health problems. This investigation will help us better understand the potential risks this technology poses to drinking water supplies and the environment, and whether Congress needs to act to minimize those risks."

Last year Waxman requested and received information from Halliburton, BJ Services and Schlumberger about the chemicals used in fracturing fluids. Waxman said the data showed that Halliburton and BJ Services used diesel fuel in their fracturing fluids between 2005 and 2007, potentially violating a voluntary agreement with the EPA to stop using diesel.

+++++++++++++++++++++++++
*updates*

Jeff Smith, CFO of BJ Services, said the the company does have an agreement with the EPA to stop using diesel in coal bed methane frac jobs, which was communicated to all of its operations in the field. Despite that effort some of the business units "inadvertently performed a few jobs" Smith said, with the last one occuring in 2007.

The company self-reported the incidents to the EPA and took measures to stop it from happening in the future. The company's technology center in Tomball also figured out a way to replace diesel in frac jobs with mineral oil-based products instead, to improve the ecological footprint of the fracking fluids.

Halliburton takes a different view of the allegation. According to a spokeswoman:

"The Company's use of diesel-based fluids since signing the MOA has been in compliance with that agreement. The terms of the MOA specifically cover coalbed methane gas development activities occurring in association with Underground Sources of Drinking Water, and not HF projects in other unconventional gas development activities or conventional formations. Halliburton is firmly committed to full compliance with the MOA and has, in fact, voluntarily gone further to cease the use of diesel in its liquid gel concentrates regardless of the type of HF job in which they are used.

++++++++++++++++++++++

The new data request went to the three companies as well as smaller firms, including Frac Tech Services, Superior Well Services, Universal Well Services, Sanjel Corporation, and Calfrac Well Services.

The American Petroleum Institute put out a statement saying fracking is a long-used, safe technology that has been used "in more than one million U.S. wells without a single confirmed instance of groundwater contamination."

"The director of EPA's Drinking Water Protection Division recently stated that he hadn't seen any documented cases of contamination as a result of hydraulic fracturing. States have regulated the technology for decades with every incentive to ensure it is employed safely."

Environmental Defense Fund Senior Policy Advisor Scott Anderson praised the planned study:

"Because the problem of global warming is so severe and the time for action so short, all low and lower carbon energy options, including natural gas, should be considered as part of the nation's energy mix, but only if such options can be accomplished without significant adverse health or environmental impacts."

Below the jump is a copy of the letter the committee sent to Halliburton Chairman and CEO Dave Lesar (addressed to the Houston office, although Lesar is actually based in Dubai):

Continue reading "House asks for hydraulic fracturing data *update*"

Posted by Tom Fowler at 01:04 PM in Natural Gas, Oil Field Services, Politics and Policy, Pollution/Emissions | Comments (0)
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Another Anadarko strike off Africa

Anadarko's having a nice bit of success off the African coast of late. The latest comes with the successful Windjammer well off Mozambique, which struck more than 480 net feet of natural gas pay over a gross column of more than 1,200 feet, according to Upstream Online:

The well is now at a casing point at a depth of 14,000 feet, Anadarko said. It said the well would be sunk a further 4100 feet to test underlying objectives.

The well is being sunk in about 4800 feet of water about 30 miles (50 kilometres) off the Mozambique coast by the drillship Belford Dolphin.

"This is true rank wildcat exploration, and to have our first deep-water exploration well result in a discovery with more than 480 net feet of pay, thus far, is a strong indication of the potential of this basin," Anadarko senior vice president for worldwide exploration Bob Daniels said in a company statement.

The discovery also "de-risks" some of the other prospects Anadarko has in the area, where it holds 2.6 million acres of leases. The question is at what level the market decides to price in all that potential with this new wildcat success.

Posted by Tom Fowler at 10:03 AM in Africa, E&P | Comments (0)
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Does the Helix helmet help?

Fowler photo Chron energy reporter Brett Clanton goes Roman.

When I covered technology for a business weekly in Austin in the late 1990s it wasn't unusual to get flashy press kits and knick-knacks from companies in the mail.

There was a huge wheel of parmesan cheese (Central Market), a kitchen apron (applianceOrder.com), a Razor scooter (some dot.com-flavor-of-the-month) and countless musical, inflatable, squeezable items.

Needless to say, these are more austere times, and the energy industry isn't quite so flamboyant. But a little something unusual showed up in the mail this week for Chronicle energy reporter Brett Clanton.

While our first thoughts were of Marvin the Martian the helmet came from Helix ESG, specialists in laying underwater pipelines for the oil and gas industry. Helix will be showing off its newest vessel, the 480-foot long, 9,000 ton Caesar (get it, Roman helmet, Caesar?). They are giving tours of the vessel out of Helix's Ingleside facility near Corpus Christi next week.

Mary Flood/Chronicle "Hail Helix!"

So, do such gimmicks work in getting coverage? It certainly got the attention of the newsroom (although there are probably just three of us who remember the company name). And it spawned this blog entry (which is really just an excuse to embarrass Brett). But technically Brett doesn't cover service firms like Helix anymore, so....

The ship looks pretty cool, though, as it's a shorter version of the vessel in this film below (you have to watch for a minute to see the ship). I think a lot of energy writers would gladly visit the ship at sea if it were in the middle of a pipe laying job -- with or without a funny helmet.

Posted by Tom Fowler at 09:00 AM in Industry's image, Oil Field Services, Pipelines | Comments (0)
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Share your Energy Deals on Chron.com

As part of our efforts to expand our online offerings for energy news, we've added an online database of Energy Deals and transactions.

These are items that might also make it into The Well, our listing of transactions in the print version of the paper on Sunday, or end up as stories on their own. Recent entries include an announcement by MicroSeismic saying it won contracts for work with Marathon Oil in the Haynesville and Marcellus shales, and Apache's notice of oil production being underway at an offshore field in Western Australia.

Companies can enter the items themselves, including photos or other images, but they are still reviewed by the Chronicle before posting. Be sure to leave your contact information on the form should we have questions.

New hires, promotions and other personnel announcements should be submitted for our People in Energy section.

Submissions to the Energy Deals database and People in Energy won't necessarily make it into the print version of the paper, however. You can also contact katherine.feser@chron.com for submissions.

Posted by Tom Fowler at 08:00 AM in Finance and accounting, M&A | Comments (0)
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Chron Energy Newslinks | 02.18/10 | Climate law's Texas price tag, drillers welcomed in NY

• Climate law could cost Texas jobs, says study.

• New York landowners layout the welcome mat for gas drillers.

• Devon tops profit expectations.

• XTO's earnings jump 50 percent.

• Anadarko adds responsibilities to COO's plate.

• Graham floats clean energy standard to replace renewables mandate.

• Effect of oil tax increase center of debate in Juneau.

• Oilpatch sees little demand growth from developed nations.

• The Gulf oil field that could save Pemex.

• RBS' new trading palace in Conn. mighit irk U.K. tax payers.

• Discussing uncomfortable topics with ethanol producers.

• Weather, avalanche risk delay search for body of Conoco Alaska worker.

• Permafrost line recedes 130km in 50 years.

• Saudis arrest Al Qaeda-linked militant in oil center.

Posted by Tom Fowler at 07:00 AM in Links | Comments (0)
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South Texas nuke dispute settled

San Antonio utility CPS Energy and the NRG Energy/Toshiba partnership trying to build two new nuclear reactors near Bay City have settled their dispute over the project, reports the San Antonio Express-News:

CPS Energy will keep a small share of the South Texas Project nuclear expansion and get $80 million from its corporate partner as part of a settlement of its lawsuit over the proposed reactors.

The negotiated agreement, which CPS said is valued at roughly $1 billion, means that CPS won't have to spend any more money on the expansion, but will retain 7.625 percent of the project to build two more reactors near Bay City.

Nuclear Innovation North America, which is owned by NRG Energy and Toshiba Inc., agreed to make two $40 million payments to CPS and contribute $10 million over the next four years to the Residential Energy Assistance Partnership, a nonprofit that helps low-income residents in San Antonio and Bexar County pay their power bills. The $80 million is contingent on the federal government granting the project loan guarantees.

This now means the expansion project can continue to move forward and may retake it's place in line for federal loan guarentees like the one announced by the Obama administration earlier this week.

In an e-mail statement one of the groups opposing the expansion said they hope the settlement "will tell the U.S. Department of Energy that this plant is a poor candidate for federal loan guarantees."

"This debacle should show the federal government that nuclear loan guarantees are a fundamentally flawed and wasteful use of taxpayer money," said the statement from Public Citizen's Texas Office.

"At $18.2 billion, the cost of STP has already tripled in just a year. When STP 1 and 2 were built, they ended up being six times over-budget and eight years behind schedule, and STP 3 and 4 look like they are on track to beat out that poor performance record."

Here's a link to NRG's statement on the settlement and a list of some of the terms:

Continue reading "South Texas nuke dispute settled"

Posted by Tom Fowler at 06:00 AM in Electricity, Nuclear | Comments (1)
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February 17, 2010

Companies stay mum on major oil discovery in Colorado

A gusher in Colorado's Niobrara Formation in northern Weld County has people buzzing today, but the major players in the region, including Houston's EOG Resources, Anadarko and Noble Energy are not commenting on the discovery.

According to the Greeley Tribune, a spokeswoman for EOG, which drilled the well, said she could not comment on areas "where the company is still negotiating leases." The Tribune says that EOG currently has about 15 drilling permits pending in the area.

Noble Energy also has quite a few drilling permits pending, in the Niobrara and Codell formations.

Anadarko has no permits pending, but company officials are feeling good about the Niobrara.

The well that sparked the attention produced 1,770 barrels of oil with 367,875 cubic feet of gas in just 24 hours. That amount is well above the 100-150 barrels a day typical wells in that area produce, the Tribune reported.

In early February OilandGasInvestor.com's Peggy Williams reported that companies were staking claims in Niobrara after a horizontal well owned by EOG in the Niobrara produced 1,750 barrels of oil and 360,000 cubic feet of gas per day for its first eight days of production in October.

Williams added:

There are plenty of places to prospect for Niobrara, as the shale occurs across a vast, tectonically active area. It can be anywhere from 150 to 1,500 feet thick, and its TOC ranges up to around 5%. It contains Type II kerogen. Additionally, the Niobrara contains a high proportion of carbonates, including brittle, calcareous chalk benches. These appear to enhance its porosity and its ability to be fractured, by both natural and mechanical processes. And the tremendous tectonic legacy of the central Rockies region means that natural fracturing can be extensive.

[snip]

We're sure to hear much more about the Niobrara in months to come, as results are posted from a number of significant tests across several play types and basins.

Posted by Sharon Hong at 03:20 PM in Natural Gas, Oil | Comments (1)
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Alabama, Virginia join Texas in challenging EPA's global warming findings

On Tuesday, Gov. Perry and other officials launched Texas into the legal battle over federal climate policies by becoming the first state to challenge the EPA on its finding that global warming endangers public health. That finding opens the door for federal regulation of emissions.

But Texas wasn't the only state to challenge the EPA:

Alabama and Virginia also filed petitions on Tuesday, Greenwire reported, and in January a group of 16 states and the city of New York asked to intervene in a lawsuit filed by several industry groups against the EPA.

The states, Arizona, California, Connecticut, Deleware, Iowa, Illinois, Maine, Maryland, New Hampshire, New Mexico, New York Oregon, Rhode Island, Vermont, Washington and Massachusetts, said they had the right to intervene in the suit because any action taken by the EPA as a result of the endangerment finding would have a direct impact on their states.

Additionally, the Greenwire report compiled a list of other industry groups/think tanks that filed petitions on Tuesday:

Continue reading "Alabama, Virginia join Texas in challenging EPA's global warming findings"

Posted by Sharon Hong at 12:06 PM in Politics and Policy, Pollution/Emissions | Comments (13)
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Obama's loans for nuclear power may not be enough

The Obama administration's loan guarantees for a new nuclear power plant is a welcome move, but it may not be enough, says Allen Brooks in his blog, Oil Patch Online.

In commenting about Saudi Arabia's concerns over peak oil, Brooks writes that some of these worries have changed because of the recession.

Before the global economic downturn, we were concerned that oil producing countries wouldn't have enough capacity to meet demand. But in the last two years global oil consumption has dropped by about 1.75 million barrels per day, Brooks says, and that has consequences for the U.S.:

With much of the world's attractive oil bearing acreage controlled by national oil companies and off-limits to western oil companies, the competition for available resources has intensified. Over the past few years, China has been aggressively seeking to lock up as much of the available oil resources around the globe as possible. At the same time, the U.S. government has elected to restrict and tax our oil industry in an attempt to push the companies into less economically viable alternative energy developments.

The Obama administration's decision to back the first new nuclear plan built in the United States in 30 years will help, Brooks says, but he cautions that "it may be too little, too late."

Posted by Jill Cohan at 11:59 AM in Nuclear, Peak Oil | Comments (0)
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The guys behind the Iraqi contracts

The Chronicle's Monica Hatcher reports today on the visit by Iraqi oil ministers to Houston to meet with some of the many companies likely to provide equipment and services to the country as it ramps up its oil production in the coming years.

During a meeting at Bracewell & Guiliani, the deputy director of Iraq's directorate for petroleum contracts and licensing, Sabah Abdulkadhum Shibeeb Al-Saidi gave a shout-out to one of the consultants he said was behind a "very successful" second round of bidding:

"I see our consultant, Mr. Bill Cline. I would like to thank him," he said.

Cline is a principal with Houston-based Gaffney Cline, a consultancy that specializes in all manner of oil and gas services. The firm has been the sole consultant to the Iraqi's on their licensing auctions since 2008 and is credited with putting in tough performance language that the producers will have to meet.

This would hardly be the first time Gaffney Cline has been an a sort of ace in the hole for a government. The company worked for the State of Alaska when it redid it's lease and royalty payment system for oil production, where the company was credited with protecting the state's interests admirably.

One story I've heard had attorneys for a major oil producer trying to downplay the potential upside from the payment system they supported. The Gaffney Cline consultant in the back of the room with laptop computer and spreadsheet plugged in the assumptions the opposing attorneys were making on the fly. With a few key strokes he pretty much shutdown that line of discussion.

Posted by Tom Fowler at 09:00 AM in Alaska, E&P, Economics, Finance and accounting, International | Comments (0)
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Fracking oversight OK says EPA water chief

Hydraulic fracturing has been the source of much anxiety and anger as drilling in the Marcellus Shales in New York and Pennsylvania picked up in recent years. A lack of direct federal involvement in oversight of the process and incidents of residential water supplies near drill sites becoming contaminated have been the main rallying points for opponents.

But one official at the Environmental Protection Agency says he's confident state regulators are doing a good job watching over fracking and that it has not yet been linked to any water contamination, reports Dow Jones:

"I have no information that states aren't doing a good job already," Steve Heare, director of EPA's Drinking Water Protection Division said on the sidelines of a state regulators conference here [Washington]. He also said despite claims by environmental organizations, he hadn't seen any documented cases that the hydro-fracking process was contaminating water supplies.

In its 2011 budget, the EPA is seeking to spend $4 million to study the environmental impacts of the process.

Bill Kappel, a U.S. Geological Survey official, said contamination of water supplies is more likely to happen as companies process the waste water from hydrofracking. In some instances, municipal water systems that treat the water have reported higher levels of heavy metals and radioactivity.

"Treatment of the [waste] water hasn't caught up with the hydro-fracking technology," Kappel said.

But both re-injection of that waste water and water treatment at the surface is already regulated by the federal government under the Safe Drinking Water and Clean Water Acts.

It seems poor well completion work is also to blame in some of the instances where there has been contamination as well. That's a pretty important distinction to make because it narrows the possible areas where errors/accidents can occur and should focus people on what part of the process has the greater risks.

Posted by Tom Fowler at 08:20 AM in E&P, Industry's image, Natural Gas, Pollution/Emissions | Comments (3)
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Chron Energy Newslinks | 02.17.10 | Iraq's sale, Houston's gain. Buffett sells Exxon.

• Iraqi oil could be a gusher for Houston firms.

• BP and Conoco pullout of climate alliance.

• U.S. climate data accurate, says study.

• Why did Exxon suddenly find religion with shale? Diminishing reserves.

• Chesapeake sees 19 percent production increase.

• $2.4 billion price for not expanding U.S. drilling.

• Buffett sells Exxon, buys Iron Mountain.

• Venezuela lands $80 billion in oil investments.

• China's lead on green energy not all it's cracked up to be.

• BP, Shell challenge Cali's low-carbon fuel rule.

• Energy efficient lightbulbs without the mercury.

• U.K. regulators concerned over nuke reactor design.

Posted by Tom Fowler at 07:20 AM in Links | Comments (0)
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Conoco's big lift at Woodriver

ConocoPhillips posted some video of its work upgrading the Wood River Refinery in Roxana, Ill. It's a pretty cool piece on using a massive Mammoet crane (the third largest in the world) to take down an old 870,000 lbs., 170-foot-tall crude distillation unit and replacing it with a new 860,00 lbs. one. The expansion is part of a $1.9 billion project, which will increase the amount of Canadian crude the refinery can process.

The background music is a bit unnecessary, but it's neat in a Modern Marvels sort of way.

Posted by Tom Fowler at 06:55 AM in Refining | Comments (0)
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Emissions rules could hamper cement industry, economic recovery

Cement is more than just that stuff under our feet (or car tires) throughout the day. It's also big business, accounting for some 17,000 direct U.S. jobs in 2008 and $27 billion in economic activity that supports some 153,000 jobs nationwide. Texas is home to some 22 cement kilns, more than any other state.

Cement manufacturing also accounts for up to 5 percent of global greenhouse gas emissions (despite efforts to improve its performance), making it the target of proposed tightening of federal pollution standards.

But the planned rules could decimate the cement industry as kilns would close rather than face the cost of upgrading equipment, according to a study being released today. Written by Bernard L. Weinstein, Associate Director of the Maguire Energy Institute at Southern Methodist University, the study says the new rules would likely lead to greater imports of cement from overseas which not only could bring added costs to projects but also likely increase global emissions as overseas plants don't need to meet the same air quality standards.

Adoption of the proposed rule would make it difficult to raise the capital or maintain sufficient business confidence to modernize existing kilns.The construction of new plants could also be stymied. Even EPA estimates that adoption of the rule will result in $340 million of new costs to the industry and an almost 10 percent drop in U.S. cement production. And the EPA estimates probably understates the true compliance costs, because there is no experience on which such estimates can be based--i.e., no cement manufacturing plant has ever attempted to meet these four distinct emission standards simultaneously.

The study goes on to use the example of a cement plant in Harleyville, South Carolina that had announced a $291 million expansion beginning in 2006. But when the so-called NESHAP rules (National Emission Standards for Hazardous Air Pollutants) related to Portland cement were unveiled in early 2009 the expansion was shelved:

After looking at the incremental capital and operational expenditures that would be required to meet the proposed NESHAP standards, the company determined that a more cost-effective strategy would be to import cement through the nearby Port of Charleston to meet future incremental customer demand in the southeastern United States. With a median household income in Harleyville 15 percent below the statewide median, and 25 percent below the national median, the relatively high-paying jobs that would have come from the Lafarge project will be sorely missed.

But environmental groups say the industry is just trying to dodge responsibility for meeting long-standing standards and installing existing technology, according to the Dallas Morning News:

"This whole idea there is an open debate about whether costs are too high or just about right is over," said James Pew, staff attorney at environmental advocacy group Earthjustice. "That debate was in Congress 20 years ago."

[snip]

Environmental groups say the benefits of regulation outweigh the costs, citing EPA figures that an estimated 620 to 1,900 premature deaths would be avoided.

"This is not a case where you look at the ledger and there is only one column for costs," Pew said. "It is always difficult to put a monetary value on people's lives, but when you do, it is vastly greater than the cost to industry."

The study is set to be discussed during a press conference in Washington, D.C. on Wednesday.

Posted by Tom Fowler at 06:00 AM in Climate Change, Pollution/Emissions | Comments (2)
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February 16, 2010

ConocoPhillips, BP back out of climate change alliance

ConocoPhillips and BP today announced they were pulling out of the U.S. Climate Action Partnership, a powerful alliance of businesses and environmental groups that has backed anti-global warming legislation on Capitol Hill.

USCAP was instrumental in shaping the climate change bill that passed the House last year and lobbying for a government giveaway of valuable carbon dioxide emissions allowances designed to soften the business costs of complying with a new nationwide cap on greenhouse gases.

But oil industry leaders have complained that the House-passed bill would only donate 2 percent of those emissions allowances to refiners -- an amount that would only cover about half of the annual emissions from the refining process, much less the emissions produced when consumers burn their fuels in cars, trucks and planes. All told, refiners would ultimately be responsible for 44 percent of U.S. greenhouse gas emissions, according to the American Petroleum Institute.

That was a major factor in ConocoPhillips' pullout, according to Jim Mulva, CEO of the Houston-based company.

"House climate legislation and Senate proposals to date have disadvantaged the transportation sector and its consumers, left domestic refineries unfairly penalized versus international competition, and ignored the critical role that natural gas can play in reducing (greenhouse gas) emissions," Mulva said.

A BP spokesman said that while the company still backed USCAP's initial blueprint for capping greenhouse gas emissions, the legislation on Capitol Hill falls short. BP is better positioned to shape climate change legislation independently, spokesman Ronnie Chappell said.

"We think we can be more effective if we show up in the discussion as BP," Chappell said.

Continue reading "ConocoPhillips, BP back out of climate change alliance"

Posted by Jennifer Dlouhy at 10:43 AM in Climate Change | Comments (13)
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Anadarko in $1.4 billion Marcellus joint venture

Anadarko Petroleum has entered into $1.4 billion joint-venture with Mitsui E&P USA where the Japanese firm will take a 32.5 percent stake in The Woodlands-based firm's Marcellus Shale assets.

Mitsui will earn approximately 100,000 net acres in exchange for funding 100 percent of Anadarko's share of development costs in 2010, and 90 percent of the costs thereafter, with an estimated completion of all obligations by 2013, the companies said in a press release. Mitsui will also have the opportunity to
purchase a 32.5-percent share of Anadarko's existing wells and additional acreage.

"This transaction reflects the significant value of Anadarko's fairway position in the Marcellus Shale, which has a gross unrisked resource potential of more than 30 Tcf (trillion cubic feet) of natural gas and spans more than 715,000 gross acres," said Anadarko Chairman and CEO Jim Hackett. "We continue to ramp up our activities in the Marcellus and anticipate drilling more than 4,500 wells over the coming years. We have successfully partnered with Mitsui in other parts of the world and look forward to working with them and our other partners in the Marcellus, as we continue to develop and deliver these domestically produced, clean-burning natural gas resources to American consumers."

A number of companies have entered into joint ventures to develop shale resources in the past year, most notably Chesapeake Energy which haspartnered with Total in the Barnett, and several other firms in other formations.

Posted by Tom Fowler at 09:15 AM in E&P, M&A, Natural Gas | Comments (0)
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Oil sands boycott only half-right

Last week high-end grocery chain Whole Foods and retailer Bed Bath & Beyond made a bit of a splash by saying they would work to remove fuel derived from Canada's oil sands from their supply chain. It was looked at by some as another blow against the costly and environmentally challenged oil sands of Canada.

Now it turns out the environmental group behind the announcements, ForestEthics, may have gotten a little ahead of themselves regarding Bed Bath & Beyond, reports TheGreeningOfOil.com:

But the sense of elation in ForestEthics was short-lived. Within 24 hours, it (Bed Bath & Beyond) issued a release, saying it had "incorrectly communicated a desire to limit or avoid fuels from the Canadian tar sands."

However, Whole Foods showed no signs of backing down. "Fuel that comes from the tar sands refineries does not fit our values," it declared.

"We lead on issues ... that's what we do and it's what's expected of us," said company vice-president Michael Besancon.

Whole Foods estimates its switch to conventional fuels will affect about 10 percent of its trucking mileage, but insists it has to start somewhere. Initially, BB&B vowed to give preferential treatment to fuel suppliers who avoided the use of "alternative energy with higher greenhouse gas discharges."

"Our current and particular concern ... is fuels produced by refineries taking feedstocks from the Canadian tar sands," BB&B said.

The article goes on to note that Canadian officials are getting a bit wary of how the oil sands industry seems to be taking a "head-in-the-sand attitude" toward environmental challenges.

[Canada's Environmental Minister Jim Prentice] said it's time for the industry to step up its communications campaign and dispel misconceptions surrounding oil sands operations.

"The oil sands, at the end of the day, are an essential part of the overall supply-demand balance in North America," he said. "But they do have to be developed in an environmentally responsible way. Industry in particular is going to have to tell its story and explain the real facts."

It could be said the natural gas business has in the past year or so taken similar approaches to environmental challenges by either ignoring them or aggressively denying and attacking them to their own detriment. My colleague Brett Clanton and I recently talked to a communications official with a natural gas firm about the industry's difficulties defending itself about the issue of hydraulic fracturing without simply sounding defensive.

And Gregory Kallenberg, the director of Haynesville said after the screening of the film at Rice University last month much the same thing -- that the industry wasn't getting it's message out there very well.

Posted by Tom Fowler at 09:00 AM in Industry's image, North America, Oil, Pollution/Emissions | Comments (0)
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An oil trader's best friend

In the high-stakes world of oil traders one might think it's sophisticated analytical software, live news feeds and spreadsheets that are key to success. Try something a bit more basic, like a phone line and Yahoo Instant Messenger, says the BBC:

"Trading oil is about getting information and knowing where the market is," says Eivind Lie who runs the trading desk at the Norwegian oil company StatoilHydro's offices in London.

"So being a trader your life is pretty much either on Yahoo or on the telephone trying to get an overview of the market."

While people trading shares or currencies can get a lot of their information from analysts' notes and computerised trading systems, the oil trader still relies on chatting to a wide range of people, ranging from other traders to specialist oil trading journalists, to try to find out what is going on in the world.

Everything from war or natural disasters to more mundane events such as seasonal changes to temperatures or elections can affect oil prices, so for the traders it pays to be informed.

An energy risk management expert told me recently he regularly talks to students who think they'd be great energy traders because "they can just get a good sense of which way prices are going" from watching the markets. It's a ridiculous notion, he says, because the only way to really know is to study all the parts that drive suppy and demand of a commodity, to know the producers, the pipelines, the storage facilities and the end customers. That deep knowledge of the physical side of the business helped make Enron such a formidable trading force years ago and it's likely the reason one of the most successful energy trading shops, Houston-based Centaurus Energy, made a big move into natural gas storage several years ago.

"When they find out what's really involved in energy trading they tend to lose interest," he said.

Posted by Tom Fowler at 08:00 AM in Commodity Trading, Technology | Comments (0)
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Chron Energy Newslinks | 02.16.10 | Get ready to rebound, faith and the tailpipe.

• Oncor accused of restoring power in affluent neighborhoods first.

• Shell to spin-off North Sea assets, make changes to executive pay.

• Oil demand rebound on the way.

• Saudis say peak oil concern is cause for alarm.

• Saudis plan to inject CO2 in oil fields a year early.

• Many natural gas companies "enjoying" profitless prosperity.

• JPMorgan buys non-U.S. Sempra assets.

• Does shift in Senate make carbon tax more likely than cap-and-trade?

• Calif. solar project to move forward after tree removal.

• POET, ethanol, independence and the flag

• In the U.K. the start of low-carbon churches.

Posted by Tom Fowler at 07:00 AM in Links | Comments (0)
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Is South Texas out of the running for nuclear loan?

The Obama administration is expected today to name Southern Co.'s Vogtle nuclear power project the recipient of a federal loan guarantee aimed at building two new reactors (a likelihood we noted back in December).

Up until late last year, however, it was the two-reactor expansion of the South Texas Project near Bay City that was considered most likely to receive the first loan guarentee. It was one of the first new projects announced following the Bush administration's creation of $18 billion in loan guarantees in 2005 and the first to file a combined construction/operating license.

But trouble hit last year when one of the plant's partners, San Antonio utility CPS Energy, failed to tell city leaders about higher cost estimates for the project. That has since led to CPS saying it will pull out. NRG and CPS are working out their differences in mediation, so it seems at some point soon the CPS question will be resolved, but the timing of the dispute effectively pushed the Vogtle project ahead of South Texas.

Does that mean South Texas is out of the running for loan guarantees altogether? That seems unlikely, largely because of the design for the project.

Vogtle and the two other projects on the short-list for the loans -- Unistar/Constellation Energy's Calvert Cliffs 3 project in Maryland and SCANA/Santee Cooper's Summer station in South Carolina -- are using a reactor design known as the AP1000, which is in the process of being preapproved for construction by the Nuclear Regulatory Commission. STP 3 and 4 are using the Advanced Boiling Water Reactor design, which is undergoing a similar process.

It's likely NRC officials would want their first round of loans to go to more than just one reactor design, however, so that the industry gets a broader range of designs underway. The construction of two ABWR units would help pave the way for other projects in the future if they wanted to use that design.

Posted by Tom Fowler at 06:00 AM in Electricity, Nuclear, Politics and Policy | Comments (0)
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February 15, 2010

Will China democratize? Eventually.

Economic prosperity and open government may seem to go hand-in-hand, but that's hardly been the case in China. Over the past 30 years the country transformed into an economic powerhouse and prime-mover in energy markets while the Communist Party maintained a closed political system. But according to Minxin Pei, a professor at Claremont McKenna College, that dynamic can't last forever.

During a talk in Houston last week sponsored by The Asia Society and BP, Pei noted that the secret to the success of the Chinese Communist Party in the two decades since Tiananmen Square is that it really became a capitalist party. It made economic growth its primary goal because the growth gives the party its main source of legitimacy, he said.

But that wasn't the only trick.

"Revolutions happen when college grads can't find jobs or be incorporated into the political system," Pei said, not when peasants revolt. So the party expanded its base to include intellectuals and others groups who would be more likely to agitate for change from the outside. The results: In 1979 the party was 70 percent made up of workers. By 2010, it's nearly 70 percent professionals, a broad coalition of the nation's elites.

Other tools China uses to maintain the balance: Greater personal freedom (one can get a passport to travel internationally in China more quickly than most Americans can, Pei said) and a well organized police force to keep the estimated 100,000 riots per year from spreading.

But Pei believes China will eventually have to open up its political system to make it democratic. As the nation becomes more urban (it's roughly a 50/50 rural/urban split now) it will become harder to maintain a one-party system. He thinks it likely the change could come sometime in the next 30 years, but how is too hard to say.

I asked Pei if China's data on its economic growth could really be trusted. As we've written before, some believe the Chinese economy is a huge bubble and there's lots of incentive for the government to falsely inflate its growth data.

Pei said there's no doubt the data isn't reliable, but he only put the overstatement in the 10 to 20 percent range.

Posted by Tom Fowler at 12:00 PM in China | Comments (1)
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Has the Haynesville shale peaked?

James Nielsen/Chronicle A drilling rig south of Shreveport, La.

Of all the natural gas shale plays around the country the Haynesville in NW Louisiana has been seen by many as the big one.

It doesn't have the lengthy track record of the Barnett around Fort Worth, and has a much smaller footprint than the Marcellus in Pennsylvania, New York and other states.

"However, the Haynesville has stood head and shoulders above the other emergy prospects due to the perceived production potential," notes Scott Gruber at Bernstein Research in a recent research report. "In fact, after limited drilling in the play through mid 2008, some postulated that the field could overtake the Barnett, which was producing almost 5 Bcfd at the time ..."

But Gruber says his team has been having doubts about the Haynesville for some time. New Haynesville wells do show huge initial production compared to other shales, but much of the good results come from other operators copying the successful techniques of Houston-based PetroHawk and Chesapeake:

Those two companies, however, have seen average IP fall since the fourth quarter of 2008 despite drilling more frac stages. It seems Petrohawk has settled on 12 frac stages per well and Chesapeake has settled on 10, but neither company's data shows an improvement in IP when the frac count increases further.

We believe the core of the Haynesville will end up being smaller than is widely anticipated. We identified a tentative core area consisting of 20 townships, or 720 square-mile sections, where the best wells were drilled. In 2009, wells drilled outside this core had had average IP rates of just 6.9 mmcfd, 29% below the 9.7 mmcfd average in the core sections. Tellingly, wells both inside and outside the core were drilled with an average of 11 fracs, which means that the economics outside the core are far worse.

Petrohawk is currently drilling the best wells in the Haynesville, Gruber continues, but the Bernstein team believes that over time costs will continue to rise and that "operating results have likely peaked in the play."

Indeed, Petrohawk's PDP F&D of $2.80/mcfe in 2009, which was higher than anticipated, means that its breakeven price in Haynesville is likely $7/mcf+, already making its Haynesville play far less profitable than Southwestern's Fayetteville play or Range's Marcellus play. Furthermore, 2009 will likely mark the lowest cost environment that the company sees for years, given the weak service pricing environment that prevailed.

Maybe there's some consolation in the overlay of the Bossier on top of the Haynesville?

This isn't exactly an Art Berman-like warning, but when combined with the kind of concerns he raised, what does this mean for shale plays?

Posted by Tom Fowler at 11:20 AM in E&P, Natural Gas | Comments (2)
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Another LNG re-export from the U.S.

Cheniere Energy's Sabine Pass liquefied natural gas terminal finalized its first export of LNG to another country -- or rather re-export of what was originally an import -- according to Houston-based Waterbourne Energy:

Just a few months after Citigroup made history as the first company to re-export LNG from the United States (from the Freeport LNG terminal), the firm is now laying claim to its second cargo. The Q-flex tanker "Al Sadd" loaded in Qatar on the 4th of January and discharged only days ago at Sabine Pass for Total's account, but has extended her stay at the berth to re-load volumes sourced from Cheniere.

The tanker has a capacity of 4.5 bcf but will light load just 3.1 bcf which is tentatively earmarked for discharge in Sagunto, Spain. It has been suggested that these volumes will act as backfill for LNG contracted through Oman for Spain but are being redirected to Asia. Waterborne LNG data has revealed that monthly deliveries into Spain from Oman have been nonexistent since last October.

Posted by Tom Fowler at 11:00 AM in LNG | Comments (2)
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Petroleum engineer ranks grew in 2009

The Society of Petroleum Engineers reached record membership last year with 92,100 members in 117 countries, a 4 percent increase over 2008.

Perhaps most significant for the aging work force, the number of professional members age 35 and under also increased.

Canada saw the greatest growth last year, up 20 percent due to a merger with the Petroleum Society of Canada. The Russian and Caspian Region was up 19 percent while and the Northern Asia Pacific region (including China) was up 11 percent.

In 2005, just 18 percent of SPE's members were age 35 and younger, compared with 25 percent of SPE members in 2009. For 2009, the average age of SPE members was 46, the same as in 2008.

SPE membership includes engineers, scientists, technicians, managers, operators, educators and other professionals who work in the global upstream oil and gas industry, as well as student members. SPE membership has grown 33 percent since 2005.

Continue reading "Petroleum engineer ranks grew in 2009"

Posted by Tom Fowler at 09:30 AM in Workforce | Comments (0)
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Upstream M&A should continue to recover

The 2009 recovery of M&A activity in the oil and gas exploration market should continue in 2010, according to a new Wood Mackenzie report.

From record low activity during the first quarter of 2009 to near-record highs by year-end, the global M&A spend for 2009 topped $150 billion, up by more than 35 percent year-on-year and only 15 percent below the record investment levels of 2006.

"The rebound in deal activity gained strong momentum through the second quarter," said Wood Mackenzie's M&A Service Manager Luke Parker. "Once the wider economy began to show signs of stabilising, the key to the recovery in Upstream M&A was a re-alignment in the price expectations of buyers and sellers."

The Implied Long-term Oil Price -- Wood Mackenzie's estimate of the long-term Brent price that a buying company would require in order to generate a 10 percent return on its investment -- averaged $66 per barrel for the year.

"Once the oil price hit the US$70 per barrel mark, it was back in alignment with market valuations and industry consensus planning assumptions for the first time since late 2007. It was this convergence that served to ease the disconnect between the price expectations of buyers and sellers, and to facilitate the rebound in deal activity witnessed during the second half of the year."

If the global economic recovery continues and commodity prices stay relatively stable, 2010 should see an even stronger M&A market. But Parker warns not to expect large-scale corporate consolidation in the upstream spacel

"For the Majors at least, the drivers for such moves are not nearly as strong as they were in the late 1990s. We would, however, expect to see a pick-up in the level of smaller scale, strategic Acquisition and Divestment (A&D) activity amongst this peer group over the next few years. We also maintain the view that the expansive National Oil Companies (NOCs) have the financial muscle and strategic imperative to significantly increase the scope and intensity of their M&A activity."

A few trends from 2009, according to Wood Mackenzie:

• Overseas investment by the NOCs doubled year-on-year to reach over US$26 billion (making up 17 percent of global M&A spend and 44 percent of M&A spend outside of North America)

• The Asian NOCs were particularly active, abandoning the cautious strategy that had characterised the previous two years in favour of a renewed interest in deal-making.

• Unconventional resources remained an important theme in M&A, with the largest Upstream deal in nearly a decade -- ExxonMobil's $41 billion acquisition of XTO -- pushing total investment in the sector to a record 45 percent of global M&A spend.

• The market for individual assets was at its lowest level since 2005, in terms of both deal count and total spend.
Total resource traded during 2009 was over 77 billion barrels of oil equivalent -- 49 percent liquids and 51 percent gas.

Posted by Tom Fowler at 08:00 AM in E&P, M&A | Comments (0)
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Chron Energy Newslinks | 02.15.10 | Laying pipe in Houston, hip-hop and E&P

• Drill pipe maker to expand into Houston.

• The mayor of Dish, Texas spars with energy biz flaks.

• Marcellus drillers object to Pa. tax plan, drilling rules.

• Southern Co. will get the nod for first new nuclear loan.

• Hip-hop record label founders start their own E&P company.

• Judge will look at subjective parts around Amaranth trading case.

• Jobs bill will likely do more for "cleantech" than climate/energy bill.

• Boulder, Colo. finds green isn't so easy.

• Chamber of Commerce to challenge EPA CO2 rule-making.

• A historian looks back at climate fight.

• China's claims about Canada and climate change "ludicrous."

• Smart meters have their work cut out for them on changing consumer habits.

Posted by Tom Fowler at 07:00 AM in Links | Comments (0)
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Conoco exec Jim Bowles dies in Alaskan accident

ConocoPhillips The late Jim Bowles of ConocoPhillips.

Jim Bowles, president of ConocoPhillips Alaska, died after being buried in an avalanche during a snowmobiling trip on that state's Kenai Peninsula. A second Conoco employee on the trip, Alan Gage, is missing:

An avalanche around noon Saturday near Seward buried Bowles and Alan Gage, an employee in the company's capital projects team in Anchorage.

They were among a party of 12 snowmobilers in the Grandview wilderness area.

Bowles was buried for about 45 minutes before companions using avalanche beacons dug him out. He was pronounced dead at the scene.

Gage apparently was not wearing an avalanche beacon, troopers said. Emergency officials said a search for Gage, who is presumed dead, was called off Sunday and would resume when weather improved and avalanche danger subsided.

The accident appears to have been in a relatively remote area as rescuers had to ride snowmobiles 15 miles to reach the scene while other got close to the area via railroad and helicopter.

Bowles, 57, started his career at Phillips Petroleum Co., the predecessor to Houston-based ConocoPhillips, said Natalie Lowman, a company spokeswoman. He moved to Anchorage in November 2004, when he assumed the job of president, and oversaw 900 employees.

"Jim brought so much to our state: his love of the great outdoors, his leadership of ConocoPhillips Alaska, and his dedication to making Alaska a better place," wrote Alaska Gov. Sean Parnell in a statement on his Web site.

Helene Harding, vice president of North Slope operations and development, will assume Bowles' duties in the interim, Lowman said.

The Anchorage Daily News notes notes Bowles was a driving force in the state's oil and gas business as well as active in the community. He was also an avid outdoorsman, as a friend recounted a story of a difficult sheep hunt last year that "overstretched both of our physical capabilities."

"I wanted to take some of Jim's load (from his pack)," said Lacher. "He was a little older and definitely smaller. ... There's times when he was on his hands and knees. ... I wanted to help him but he wouldn't let me."

"He was tough and never complained."

In a statement ConocoPhillips chairman and chief executive officer Jim Mulva said the enitre company was "deeply saddened and will greatly miss" Bowles:

"Jim Bowles has led our Alaska organization and its some 900 employees since late 2004 and presided over a number of developments that ensured our company's place and standing in Alaska and will serve as a legacy to his leadership as we go forward."

"Alan Gage is a respected member of our capital projects organization and has been a ConocoPhillips employee since 2006. We are hopeful the search for him can resume soon."

"On behalf of everyone at ConocoPhillips, including those who had the privilege to know and work with these two gentlemen and those who did not, I want to extend our sincere condolences to the Bowles family and our heartfelt best wishes to the Gage family and make sure they know the high regard in which we hold Jim and Alan, both as co-workers and as friends."

Continue reading "Conoco exec Jim Bowles dies in Alaskan accident"

Posted by Tom Fowler at 06:00 AM in People | Comments (0)
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