March 28, 2024

Brazil Suspends Chevron’s Drilling Rights

The decision on Wednesday came as the head of Chevron’s Brazilian unit testified before Brazil’s Congress, where he apologized for the November 8 spill that leaked about 2,400 barrels of oil into the ocean off the coast of Rio de Janeiro.

Brazil’s National Petroleum Agency said it decided to halt Chevron’s drilling rights after determining there was evidence that the company had been “negligent” in its study of data needed to drill and in contingency planning for abandoning the well in the event of accident.

The agency, known as ANP, also rejected a request from Chevron made before the leak to drill wells in the deeper subsalt areas in the Frade field where the spill occurred. The field is located in the oil-rich Campos Basin and is the only block in Brazil where Chevron produces oil as the operator.

The Campos Basin is currently the source of more than 80 percent of Brazil’s oil output.

While Chevron said late on Wednesday it had not received formal notice of the drilling halt, the company announced an indefinite voluntary suspension of all current and future drilling off Brazil, apart from plug and abandonment work.

“Chevron acknowledges, however, that ANP has posted a notice of suspension to its website,” the company added.

The only rig working for Chevron off Brazil is Transocean Ltd’s Sedco 706, which drilled the well that leaked.

The spill is an ominous reminder of the risks involved in offshore drilling, cooling the euphoria over vast subsalt oil reserves that Brazil found in 2007 up to 7 km (4.4 miles) below the seabed. The country is banking on those reserves of up to 100 billion barrels to speed its development.

Chevron has previously drilled for subsalt depth targets in the field, which is also owned by Brazil’s state-controlled energy giant Petrobras and Frade Japao, a Japanese consortium. Chevron owns 52 percent of Frade, whereas Petrobras owns 30 percent and Frade Japao 18 percent.

Chevron, the second-largest U.S. oil company, has been fined $28 million by Brazil’s environmental agency for the spill, an amount that is sure to rise when ANP and Rio’s state government slap fines on the company, as they have pledged to do.

Chevron had already halted all of its local drilling operations after the leak occurred, before ANP’s announced suspension. ANP said the suspension will remain in place until Chevron fully restores safety conditions in the field.

Chevron’s CEO in Brazil, George Buck, told Brazilian lawmakers that the company “acted as rapidly and safely as possible” and “used all resources” to contain and stop the flow of oil from the well.

“We controlled the source in four days. We worked with transparency and cooperation with the authorities of Brazil,” Buck said.

INVESTIGATIONS, RECRIMINATIONS

Chevron initially attributed the “sheen” on the sea surface to naturally occurring seepage from the seabed. The company is being investigated by the Federal Police, which noted discrepancies between Chevron’s account of the spill and the government’s.

The Frade leak, while small, is likely to provide more ammunition for the growing worldwide opposition to offshore drilling in the wake of the estimated 4-million-barrel BP Deepwater Horizon spill in the Gulf of Mexico in 2010.

The Frade oil flow has been staunched except for residual droplets still bubbling up from a fissure in the sea floor, but this is expected to cease in a few days. Chevron said the oil “stain” on the sea surface now equated to about a barrel.

Most oil has been mechanically dispersed, while 350 cubic meters of oily water has been recovered and will undergo processing.

Addressing a crowded congressional commission through an interpreter, Buck said Chevron still did not understand how the crude rose 567 feet up to the seabed after rock “parted” while drilling in the 8.5 inch-wide column.

“We have an ongoing investigation. We will share the lessons learned with the people of Brazil to ensure that this never happens here or anywhere else in the world,” Buck said.

Lawmakers, some calling the spill a “crime,” also turned their ire on ANP in the four-hour hearing and which they said had proven ill-equipped and ill-prepared, even as Brazil pursues its ambitions to rapidly increase oil output.

Production is unaffected at Frade, which produces 79,000 barrels per day of oil, or 4 percent of the country’s output. Chevron, with a share of Frade production that amounts to just over 1 percent of its worldwide output, had originally targeted peak capacity of about 72,000 barrels per day from the field.

Petrobras has so far dodged the criticism Chevron has faced despite having approved the development plans for Frade field.

Chevron, based in San Ramon, California, is also a 30 percent partner in the nearby $5.2 billion Papa-Terra project, which is operated by Petrobras. Petrobras and Chevron expect to produce 140,000 bpd oil and equivalent gas from Papa-Terra in 2013.

(Additional reporting by Jeb Blount in Rio de Janeiro and Braden Reddall in San Francisco; Writing by Todd Benson and Reese Ewing; Editing by Bob Burgdorfer, Gary Hill and Matt Driskill)


Article source: http://feeds.nytimes.com/click.phdo?i=fda0171408c0c5308b4c6d114ec6b5dd

Iraq Criticizes Exxon Mobil Over Kurdistan

The statement from the official, Hussein al-Shahristani, said the central government had cautioned Exxon against pursuing oil deals in Kurdistan, which the government says will remain illegal until long-awaited rules can be worked out to split revenues among Iraq’s fractious regions.

Mr. Shahristani’s office issued the statement a day after The Financial Times reported that Exxon, based in Irving, Tex., and the United States’ largest petroleum company, had become the first major international oil operator to sign a contract in the Kurdistan region — a move the company has neither confirmed nor denied.

If Exxon did indeed sign a deal in Kurdistan, it is wading into a central controversy that has dogged Iraq since the American invasion.

Oil has long been the heart of Iraq’s wealth, and the invasion threw control of the rich reserves into question, exacerbating longstanding enmity between the Kurds and other Iraqis. Under President George W. Bush, the passage of an oil law to split revenues was considered a crucial benchmark to bring long-term peace to Iraq.

Many smaller oil companies, including American ones like Marathon and Hunt of Texas, have signed contracts with the Kurdistan Regional Government. But the larger companies had held back to ensure they retain deals for fields in the south.

Michael Klare, a professor at Hampshire College and an authority on the Iraqi oil industry, speculated that Exxon might be betting that Iraq would not make good on threats of punishment, recognizing that the company’s investment elsewhere in the country was crucial to its economic revival.

“Both Exxon and the Iraqis understand that Iraq has no hope of reaching its lofty goals of higher oil output without Exxon’s involvement,” Professor Klare said. “Threats to punish the company for investing in the Kurdish area are hollow.”

Critics of the oil companies that went to Kurdistan after the overthrow of Saddam Hussein’s government say they are pursuing development in a manner that, far from contributing to stability through economic growth, has heightened ethnic tensions between Arabs and Kurds.

Exxon’s spokesman, Alan T. Jeffers, said Saturday in an e-mail that the company would not comment on whether it had signed an oil deal in Kurdistan, or respond to the Iraqi deputy prime minister’s statement. The Kurdistan Regional Government also had no immediate statement, though its official Web site prominently posted, without clarification, the text of The Financial Times article.

For now at least, the Iraqi government appears to be taking a strong, but somewhat vague, stance. “The Iraqi government will deal with any company that violates the law the same way it dealt with similar companies before,” the deputy prime minister’s statement Saturday said.

In the past, the government has excluded oil companies active in Kurdistan from new auctions elsewhere in Iraq. It was unclear whether the statement implied any threat to revoke Exxon’s existing contracts, which would be significant. A spokesman for Mr. Shahristani declined to elaborate.

The actual legal argument against any deal remains a matter of controversy. Iraq’s Constitution allows regions to strike their own oil deals, but the central government says there is no current law spelling out how that can happen.

Beyond the ripples that oil deals send through Iraq’s fragile politics, they are important for bringing new oil to world markets — but only if the relations between companies and the government go smoothly enough to allow investment.

The State Department and the military have sought to tamp down antagonism between Kurdistan and the central government for years, and American troops have died trying to keep the peace along that internal border.

With the American withdrawal imminent, concerns are mounting that ethnic tensions could again threaten stability.

Under a 2009 contract, Exxon is leading a consortium developing one of Iraq’s largest oil fields, outside Basra near the Persian Gulf.

Exxon and its partners agreed to invest $50 billion over seven years to increase output by about two million barrels of oil per day there, at West Qurna Phase 1, bringing more new oil to market than the United States currently produces in the Gulf of Mexico. Margins, though, are low. Kurdistan offers more lucrative production-sharing agreements, allowing the company to earn a larger share of revenues and to count more of the crude on its books, which helps boost stock prices.

Article source: http://feeds.nytimes.com/click.phdo?i=d6354f3c81b19a1e2ee0fadd857df458

Forecasts Differ on Restoring Libyan Oil Output

Abdalla Salem el-Badri, secretary general of the Organization of the Petroleum Exporting Countries, said Libya could reach prewar levels by the end of next year. But Shokri Ghanem, the former chairman of Libya’s state-run oil company, said a return to full production could take until the end of 2013.

“The question is whether the war is ended or not,” Mr. Ghanem said, underlining the risks to oil supplies in the aftermath of revolutions that have swept North Africa and the Middle East. “The picture is still unclear,” he said, referring to the situation in Libya since the ousting from power of Col. Muammar el-Qaddafi.

The two representatives made their remarks at the Oil Money conference, which is jointly organized by The International Herald Tribune and Energy Intelligence, in London.

Mr. Ghanem, who was the top oil official in Libya until earlier this year, said the country could produce 550,000 barrels of oil a day by the end of this year and a million barrels a day by next June. But he said Libya still could require up to two years to reach prewar production levels of 1.6 million barrels a day — and only on the condition that oil fields were adequately secured.

Libya is a relatively small producer compared with other OPEC countries, but it is an important supplier of the light sweet crude that many refineries around the world depend on.

Total of France, Eni of Italy and Repsol of Spain are among the companies with significant stakes in Libya.

Mr. Ghanem said it would be difficult for the new authorities to offer more generous terms to foreign investors than the previous government, but he said renegotiations “could happen.”

He said Brega and Ras Lanouf were among the sites that had been badly damaged, partly because of widespread looting. He said that contractors’ quarters and metering instruments had been damaged, and that spare parts and fleets of four-wheel-drive vehicles were stolen.

He estimated that it would cost “a few” billion dollars to repair damaged sites and replace equipment.

Underlining the caution among executives about Libya, Andrew Gould, the chief executive of Schlumberger, a major oil services company, said he would need to deploy about 100 security personnel in Libya to resume activities there this year.

Mr. Gould said Schlumberger still employed a far larger number of security personnel — more than 400 — in Iraq.

Mr. Ghanem said, “Now we are in the same boat” as Iraq, adding that the security situation was being further complicated by upheavals in neighboring countries, including Algeria, Chad and Niger.

Mr. Badri, who was chairman of the Libyan National Oil Corporation from 2004 to 2006, appeared to take a more upbeat view of the situation there. He insisted that production facilities were not seriously damaged and that the country had technicians to revive the industry.

Mr. Badri also said he was optimistic about avoiding a rerun of a rare public split within OPEC in June, when Iran and five other countries rejected a proposal to raise output by 1.5 million barrels a day after turmoil in Libya shut down production.

“In December, we’ll come up with a positive ending,” said Mr. Badri, referring to the next meeting of OPEC oil ministers in Vienna.

Mr. Badri said members were making sufficient investments to replace wells that were becoming depleted and to keep up with demand in countries with fast-growing economies, like China.

He said OPEC member countries had plans to undertake 132 projects worth $300 billion to increase gross production capacity by 21 million barrels a day by 2015 or 2016.

Article source: http://www.nytimes.com/2011/10/12/business/global/security-issues-weigh-in-libyas-oil-production.html?partner=rss&emc=rss

Oil Hidden in Shale Sets Off a Boom in Texas

Now the region is in the hottest new oil play in the country, with giant oil terminals and sprawling RV parks replacing fields of mesquite. More than a dozen companies plan to drill up to 3,000 wells around here in the next 12 months.

The Texas field, known as the Eagle Ford, is just one of about 20 new onshore oil fields that advocates say could collectively increase the nation’s oil output by 25 percent within a decade — without the dangers of drilling in the deep waters of the Gulf of Mexico or the delicate coastal areas off Alaska.

There is only one catch: the oil from the Eagle Ford and similar fields of tightly packed rock can be extracted only by using hydraulic fracturing, a method that uses a high-pressure mix of water, sand and hazardous chemicals to blast through the rocks to release the oil inside.

The technique, also called fracking, has been widely used in the last decade to unlock vast new fields of natural gas, but drillers only recently figured out how to release large quantities of oil, which flows less easily through rock than gas. As evidence mounts that fracking poses risks to water supplies, the federal government and regulators in various states are considering tighter regulations on it.

The oil industry says any environmental concerns are far outweighed by the economic benefits of pumping previously inaccessible oil from fields that could collectively hold two or three times as much oil as Prudhoe Bay, the Alaskan field that was the last great onshore discovery. The companies estimate that the boom will create more than two million new jobs, directly or indirectly, and bring tens of billions of dollars to the states where the fields are located, which include traditional oil sites like Texas and Oklahoma, industrial stalwarts like Ohio and Michigan and even farm states like Kansas.

“It’s the one thing we have seen in our adult lives that could take us away from imported oil,” said Aubrey McClendon, chief executive of Chesapeake Energy, one of the most aggressive drillers. “What if we have found three of the world’s biggest oil fields in the last three years right here in the U.S.? How transformative could that be for the U.S. economy?”

The oil rush is already transforming this impoverished area of Texas near the Mexican border, doubling real estate values in the last year and filling restaurants and hotels.

“That’s oil money,” said Bert Bell, a truck company manager, pointing to the new pickup truck he bought for his wife after making $525,000 leasing mineral rights around his family’s mobile home. “Oil money just makes life easier.”

Based on the industry’s plans, shale and other “tight rock” fields that now produce about half a million barrels of oil a day will produce up to three million barrels daily by 2020, according to IHS CERA, an energy research firm. Oil companies are investing an estimated $25 billion this year to drill 5,000 new oil wells in tight rock fields, according to Raoul LeBlanc, a senior director at PFC Energy, a consulting firm.

“This is very big and it’s coming on very fast,” said Daniel Yergin, the chairman of IHS CERA. “This is like adding another Venezuela or Kuwait by 2020, except these tight oil fields are in the United States.”

In the most developed shale field, the Bakken field in North Dakota, production has leaped to 400,000 barrels a day today from a trickle four years ago. Experts say it could produce as much as a million barrels a day by the end of the decade.

The Eagle Ford, where the first well was drilled only three years ago, is already producing more than 100,000 barrels a day and could reach 420,000 by 2015, almost as much as Ecuador, according to Bentek Energy, a consultancy.

Article source: http://feeds.nytimes.com/click.phdo?i=9391068e36c2fcecf1a98a9b5a959632