To the typical American consumer, the recent collapse in the price of oil is viewed as a good thing on several levels: 1) it means more money is available from income to spend on other fixed or discretionary expenses and 2) it means the evil oil companies are hurting. The downsides are rarely considered or understood. For example: 1) some of the highest paying professions in the US are in the oil industry and employees are being laid off by the tens of thousands, 2) economies in cities like Houston, and entire states like North Dakota, that are highly dependent on the oil industry are in a tailspin, leading to foreclosures, business failures, and reduced public spending, 3) oil companies that took on too much debt during the oil boom are declaring bankruptcy and defaulting on their debts, which has contributed to the recent stock market slide, and 4) one of the goals of the Saudi Arabian orchestrated price collapse, that of destroying the US shale oil industry and maintaining Saudi market share has been successful. Continue reading The Human Side of the Oil Price Collapse
Category Archives: Oil & Gas
Cancellation of Keystone Pipeline – A win for climate change or misplaced symbolism?
On Friday President Obama announced that he had rejected the request from TransCanada to build the Keystone XL oil pipeline which ultimately would have transported 800,000 barrels a day of heavy oil from the Canadian oil sands to the US Gulf Coast refineries. This ended a seven-year review that had become a contentious political issue and symbol of the debate over his climate policies. Continue reading Cancellation of Keystone Pipeline – A win for climate change or misplaced symbolism?
Shell Abandons Arctic Exploration
The oil industry has taken a number of huge hits this year with the collapse of oil prices. The latest is the announcement from Royal Dutch Shell that they are abandoning their Arctic drilling program in the Chukchi Sea off the coast of northwest Alaska after years of effort, over $7 billion spent, numerous regulatory battles, and unrelenting challenges from environmental groups. Shell announced that they found indications of oil and gas, but that they weren’t sufficient to warrant further exploration in the so-called Burger prospect. The well will be plugged and abandoned in accordance with U.S. regulations. The problem is that geologists believe the Arctic holds a quarter of the world’s undiscovered conventional oil and gas reserves. Shell’s high profile failure likely means that other companies won’t make similar attempts, and this resource will be unavailable to meet both US and world demand for oil that is expected to grow by another 10% over the next several decades. Continue reading Shell Abandons Arctic Exploration
Eni Discovers Massive Gas Field in the Mediterranean
On August 30th, Eni SpA, the Italian oil company, reported discovery of a “super giant” natural gas field offshore Egypt that may be the largest find in the Mediterranean Sea and may hold hold 30 trillion cubic feet of gas. The field will go a long way toward addressing Egyptian domestic demand, which has swelled over the past years. The country is consuming most of its production and has cut gas sales abroad. Excess gas could be shipped to Italy or other destinations as liquefied natural gas (LNG) through a plant at Damietta on the Mediterranean coast that is currently not operating for lack of gas. Continue reading Eni Discovers Massive Gas Field in the Mediterranean
BP to Pay $18.7 Billion for Deepwater Horizon Oil Spill
As reported in the New York Times, an $18.7 billion settlement was announced last Thursday to address all federal, state and local claims against BP arising from the 2010 Gulf of Mexico deepwater drilling blowout and subsequent oil spill. If approved by the federal judge presiding over the litigation, it would be the largest environmental settlement and the largest civil settlement with a single entity in the nation’s history. BP had already agreed to pay $4 billion in criminal fines. Claims from shareholders or individuals are not affected.
The April 2010 explosion aboard the Deepwater Horizon oil rig killed 11 and injured 16 drilling crew members and resulted in a spill of millions of gallons of oil into the Gulf of Mexico.
Argentina orders asset seizure from Falkland oil firms
Over the weekend an Argentine judge ordered the seizure of $156 million and other assets from British and US oil companies exploring for oil in waters off the Falkland Islands. The Falkland Islands have been a disputed territory since colonization by Europeans, and the islands have had French, British, Spanish, and Argentine settlements. The UK has asserted control since 1883, and the islands were the scene of a fairly brief but deadly war between the UK and Argentina in 1982. Recently, the rhetoric from Argentina has heated up with the discovery of significant oil reserves. This judicial ruling is the most recent in a series by the government to stop exploration and potential development by other countries. Although there is little Argentina can do to enforce these orders, they do create uncertainty and cast a pall over any attempted development in this frontier region.
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Shell Drilling Rig Leaves Seattle for Alaska
The Royal Dutch Shell drilling rig Polar Pioneer that has been the focus of environmentalists while it was docked in Seattle left port on Monday for Alaska as the first step of a summer 2015 drilling campaign in the Arctic. Dozens of activists in kayaks dubbed “kayaktivists” tried to stop it, but the Coast Guard enforced the marine safety zone around the vessel and prevented any disruption. Around two dozen people were temporarily detained and fined $500 each for violations. Although final permits are still pending, Shell cleared major hurdles when a federal appeals court struck down a challenge to its oil spill response plans and after President Barack Obama upheld the 2008 Arctic lease sale. The U.S. Geological Survey estimates Arctic offshore reserves at 26 billion barrels of recoverable oil and 130 trillion cubic feet of natural gas. Shell says developing these reserves could increase domestic oil supplies by more than 1 million barrels a day.
Chevron Big Foot Project in Gulf of Mexico Delayed Due to Tendon Damage
Chevron Corporation has announced that the Big Foot tension-leg platform (TLP) will be moved to sheltered waters from its location in the deepwater U.S. Gulf of Mexico following damage to its tendons during attempted installation of the platform late in May. Tendons are the long, ultra-strong steel pipes that connect the platform to the seabed and are typically buoyant. The tendons were pre-installed to the seafloor with the top end floating below the water surface in preparation for connection to the TLP. It appears that nine of the 16 tendons lost buoyancy and fell to the seafloor. No injuries or environmental damage have been reported with the incident, and the TLP itself was not affected.
The problem is quite serious and Chevron will need to rebuild at least some of the tendons. This will result in a significant delay in start-up of the platform and will likely increase project cost beyond its current $5.1 billion estimate. Big Foot will ultimately be installed in approximately 5,200 ft of water, which is the deepwater depth for a TLP. It will also be the largest TLP in the Gulf of Mexico.
Santa Barbara Oil Pipeline Spill
On Tuesday an onshore pipeline ruptured along the scenic coast north of Santa Barbara, California, spilling an initial estimate of 21,000 gallons of oil into the ocean and onto beaches before the flow could be controlled. Later reports increased this estimate to 105,000 gallons. What caused the spill is still under investigation, and clean-up activities are ongoing. The incident brought back memories of the 1969 Santa Barbara Channel oil spill that effectively shut down oil development offshore California for almost 10 years.