Energy Companies Pull a Blackwater

Energy Companies Pull a Blackwater Norwegian energy company Statoil said last week it was forming a special operations division to handle emergency operations in response to a terrorist attack on a natural gas facility in Algeria. The company said it would double the amount of employees it had designated for existing security operations after reviewing the measures in place at the In Amenas gas facility. A January attack there left employees with Statoil and BP dead in what al-Qaida said was a response to French intervention in Mali. With the economy just as much a viable target as any, counter-terrorism may becoming more than just the military's game. A January attack by a division of al-Qaida in the Islamic Maghreb left several energy company employees and foreign fighters dead. The Algerian attack had the logistical support of Islamic fighters who traveled across the western border from Libya, still unsettled nearly two years after the revolution. Statoil said last week it was forming a special unit in response to the attack as part of a comprehensive response to the tragedy. Operations at In Amenas resumed at a limited capacity after the attack for owners Statoil, BP and Algeria's state energy company Sonatrach. French supermajor said it too was spending more on industry-wide security operations since the January attack. Natural gas production has declined more or less since 2005 for Algeria and lingering instability in the region suggests a turnaround isn't likely in the medium term. BP said it had its own concerns, noting it was holding back on natural gas projects in the country because of the security situation there. Algerian Energy Minister Youcef Yousfi told a Houston energy conference in March the country "remains a stable country" despite the terrorist attack. He said the country wasn't discouraged by the incident and remained committed to developing its natural gas sector. Algeria has enacted policies that would give foreign investors an incentive to take a closer look at unexplored fields in the country. Algeria in 2011 produced around 2.9 trillion cubic feet of gas and has since worked to return to its previous glory. Statoil said it would appoint an official to lead security operations by July. The security team is part of what Statoil said was a "broader response" to the tragedy in Algeria. British Foreign Secretary William Hague said Friday the attack in Algeria shows that al-Qaida may be weakened, but it's not yet out of the picture. He complained some members of the international community aren't willing to take on the responsibility to tackle the threat themselves, however. With the international economy depending on a reliable source of energy to keep churning, Statoil's actions suggest the energy sector may start to take on some of that burden itself. Source: http://oilprice.com/Energy/Energy-General/Energy-Companies-Entering-War-on-Terror.html By. Daniel J. Graeber of Oilprice.com

India's Energy Ties with Iran Unsettle Washington

India's Energy Ties with Iran Unsettle Washington India's relentless search for hydrocarbons to fuel its booming economy has managed the rather neat diplomatic trick of annoying Washington, delighting Tehran and intriguing Baghdad, all the while leaving the Indian Treasury fretting about how to pay for its oil imports, given tightening sanctions on fiscal dealings with Iran. On 7 June the US State Department reluctantly announced that it was renewing India's six-month waivers for implementing sanctions against Iran, along with seven other countries eligible for waivers from the sanctions owing to good faith efforts to substantially reduce their Iranian oil imports. In New Delhi's case, it is the U.S. and EU-led sanctions rather than any willingness on India's part that has seen a fall in its Iranian oil imports. India is the second largest buyer of Iranian oil, a nation with whom it has traditionally had close ties. U.S. Secretary of State John Kerry said that India, China, Malaysia, South Korea, Singapore, South Africa, Sri Lanka, Turkey, and Taiwan had all qualified for an exception to sanctions under America's Iran Sanctions Act, based on additional significant reductions in the volume of their crude oil purchases from Iran. Kerry told reporters, "Today's determination is another example of the international community's strong and steady commitment to convince Iran to meet its international obligations. This determination takes place against the backdrop of other recent actions the administration has taken to increase pressure on Iran, including the issuance of a new executive order on June 3. The message to the Iranian regime from the international community is clear: take concrete actions to satisfy the concerns of the international community, or face increasing isolation and pressure." But even with Washington's beneficence, New Delhi is struggling to find ways to pay for its Iranian oil imports. The U.S. and European sanctions have deeply affected Iran's international oil trade, reducing its exports by more than 50 percent and costing Iran billions of dollars in revenue since the beginning on last year. Tightening the screws, the Obama administration is now attempting to reduce Iran's oil exports even further, to less than 500,000 barrels per day through tighter sanctions. Nevertheless, despite plummeting sales overseas, Iran, OPEC's second largest oil exporter, remains one of the world's largest oil producers, with sales bringing in tens of billions of dollars in revenue annually. And Iran is anxious to keep India as a favored customer. Last month Iran offered India lucrative terms for developing its oilfields, routing a proposed natural gas pipeline through the sea to avoid Pakistan as well as insurance to Indian refiners provided New Delhi raised oil imports. Making its case, Iran sent a high-level delegation led by Oil Minister Rostam Ghasemi to India to urge New Delhi to raise its oil purchases, which slid to 13.3 million tons in 2012-13 from 18 million tons in 2011-12. Heightening Iran's concerns, later this year Indian imports are slated to fall further to around 11 million tons. After meeting Ghasemi Indian Oil Minister M. Veerappa Moily issued a statement noting, “The Iranian side encouraged the Indian side to increase its crude purchase. “The Indian side explained that it would encourage companies to maintain their engagement in terms of crude oil purchase, taking into account their requirements, based on commercial and international considerations.” While Iranian-Indian trade ties continue to deepen, with Indian-based Consul General of Iran Hassan Nourian predicting that bilateral trade between India and Iran will be worth $25 billion by 2017, India is hedging its bets about energy imports, and where to make up the shortfall from the increased sanctions regime. …and what better place to look than the Middle East's rising petro-state, Iraq? India's External Affairs Minister Salman Khurshid is heading for Baghdad for a two-day visit beginning 19 June. Top of the agenda? Oil - Iraq is now India's second largest supplier of oil after Saudi Arabia, having replaced Iran and become a “critical partner” of India. It is a potential marriage made in heaven. Iraq needs an assured market for its increasing crude production, having set itself a production target of 7 million bpd from its current 3 million bpd, while India is in search of a long-term partnership with a major oil producer. While such deepening ties will thrill Washington as much as they distress Iran, there is still a wild card in the Iraqi mix – China, now Iraq's biggest customer, already purchasing nearly half the oil that Iraq produces, almost 1.5 million barrels a day. Worse still for Indian aspirations, China is now trying for an even bigger share, bidding for a stake currently owned by Exxon Mobil in one of Iraq's largest oil fields, West Qurna. New Delhi's choices are stark – make Washington happy, alienate long-time partner Iran, and keep fingers crossed that Beijing doesn't stitch up any further Iraqi concessions. Tough call. Source: http://oilprice.com/Geopolitics/International/Indias-Energy-Ties-with-Iran-Unsettle-Washington.html By. John C.K. Daly of Oilprice.com

Will Saudi Arabia Allow the U.S. Oil Boom? Interview with Chris Faulkner

Will Saudi Arabia Allow the U.S. Oil Boom? Interview with Chris Faulkner Technology, technology, and more technology—this is what has driven the American oil and gas boom starting in the Bakken and now being played out in the Gulf of Mexico revival, and new advances are coming online constantly. It's enough to rival the Saudis, if the Kingdom allows it to happen. Along with this boom come both promise and fear and a fast-paced regulatory environment that still needs to find the proper balance. In an exclusive interview with Oilprice.com, Chris Faulkner, CEO of Breitling Energy Companies—a key player in Bakken with a penchant for leading the new technology charge—discusses: • How Bakken has turned the US into an economic powerhouse • What the next milestone is for Three Forks • What Wall Street thinks of the key Bakken companies • Where the next Bakken could be • What to expect from the next Gulf of Mexico lease auction • What the intriguing new 4D seismic possibilities will unleash • What the linchpin new technology is for explorers • How the US can compete with Saudi Arabia • Why fossil fuel subsidies aren't subsidies • How natural gas is the bridge to US energy independence • Why fossil fuels shouldn't foot the bill for renewable energy • Why Keystone XL is important • Why the US WILL become a net natural gas exporter James Stafford: How important are Bakken and Three Forks to US energy in the big picture? Chris Faulkner: The Bakken Shale has been the biggest driver in America's reversal of decades of decline in oil production. It has transformed North Dakota into an economic powerhouse with the nation's lowest unemployment rate and fastest-growing GDP—and an oil production level surpassing that of some OPEC nations. An added increment of almost 800,000 barrels per day of oil output, built in less than a decade, has helped the US reduce its dependency on oil imports from often hostile countries by 22% since peaking in the mid-2000s. US oil production is at its highest level since 1992, and in another 5 years, it is projected to reach its highest level since 1972. More importantly, the US oil production surge will help tamp down the possibility of chronically recurring oil supply shortages and help keep a lid on oil price spikes for the foreseeable future. Additionally, the Bakken surge is helping to narrow the spread between WTI and Brent, providing even more economic incentive to develop the costly unconventional resource plays. James Stafford: The US government recently more than doubled its estimates for Bakken and Three Forks to 7.4 billion barrels of undiscovered and technically recoverable oil and 6.7 trillion cubic feet of natural gas. How is the industry responding to this? How are investors responding? Chris Faulkner: Some operators had already been developing the Three Forks formation ahead of the USGS revised estimate for the Greater Bakken play. That drilling in fact provided much of the knowledge about the Three Forks that led to the USGS upgrade. We're already seeing stepped-up drilling in the Three Forks, and some of that will entail dual horizontal laterals, a real milestone that could yield spectacular IP rates. Accordingly, Wall Street analysts are upgrading their guidance on companies such as Continental Resources that are leading the Bakken charge. James Stafford: What's the next Bakken? Chris Faulkner: That's a tough one. In a sense, we've already seen it with the Three Forks reappraisal. But it would be exceedingly difficult to replicate the Bakken, with its vast areal extent and thick pays. Progress is being made with a modest level of drilling in the Tuscaloosa Marine Shale of southern Louisiana and Smackover Brown Dense Shale in southern Arkansas/northern Louisiana, but results have been somewhat spotty to date. Perhaps the best prospective candidate is the Cline Shale in the Texas Permian Basin. This shale covers a vast area, has very thick pay zones, and there is established infrastructure. Some estimates have put its technically recoverable resources at 30 billion barrels of oil. But it's very early days in that play. Devon Energy is moving aggressively there, and we should get some hints of its true potential before too long. James Stafford: How excited should investors be about the Monterrey Shale? Chris Faulkner: Some restraint is in order. While preliminary estimates put potential Monterey Shale technically recoverable resources at more than 15 billion barrels, it's hardly a slam dunk. There has been a flurry of leasing and some drilling to date, but as of yet no operator has “cracked the code” for the Monterey. Even apart from the substantial technical challenges and complicated geology and petrophysics, a bigger hurdle would be the widespread and entrenched anti-oil development attitudes industry faces in California, which already has the most stringent regulatory regime in the nation. Furthermore, that anti-oil stance will just gain momentum with the anti-frac campaign that the environmental pressure groups are pushing now. James Stafford: The US government's next auction of Gulf of Mexico acreage is expecting a bigger turnout than previous auctions. How is the bidding environment shaping up ahead of this sale? Chris Faulkner: Excellent. Even with the near tripling of minimum bid requirements in deepwater areas, I expect brisk bidding. Operators are fine-tuning their exploration strategies in the deepwater areas, and some recent significant discoveries, such as ConocoPhillips's huge Shenandoah find, will only stoke that enthusiasm. I think we're also seeing the beginnings of a revival in shallow Gulf waters, judging from the high number of bids there in the last sale. Expectations of a gas price rebound were underpinned by the latest approval of another LNG export terminal—both positive for shallow-water drilling. James Stafford: How important are Brazil's pre-salt finds to a revival in the US Gulf of Mexico? Chris Faulkner: The Gulf revival is proceeding quite nicely as it is with the string of big discoveries in the Inbound Lower Tertiary. However, the knowledge and best practices being accumulated in the pre-salt play off Brazil probably benefits the pre-salt plays emerging off West Africa more so than in the US Gulf, where success has been concentrated more in the subsalt. In fact, the advances gained in probing the Gulf subsalt—particular in seismic technology—laid much of the groundwork for decoding Brazil's pre-salt. I think you'll see the Gulf operators focus more on the Lower Tertiary as the flavor of the day. James Stafford: How are drilling advancements contributing to a re-evaluation of old data and the collection of new data? Chris Faulkner: There's no doubt that MWD and LWD [Measurements-while-Drilling/Logging-while-Drilling] have helped operators gain a better perspective on old well logs. As accumulation of drilling data in real time makes even more technical advances, progress will continue. This may be the biggest contributing factor for the dramatic reductions in spud-to-release times that we've seen in the major unconventional plays. James Stafford: What are the most recent major advancements in seismic imaging and data processing that are changing the way companies decide where to explore and where to drill next? Chris Faulkner: 3D seismic is firmly established as a valuable exploration tool, especially for delineating reservoirs that have already been identified, and there are intriguing new possibilities for 4D seismic (essentially 3D seismic phases over time), especially for enhanced oil recovery and carbon sequestration applications. But in terms of pure exploration, the linchpin technology has been reverse time migration, which really got the ball rolling for subsalt and pre-salt plays in the Gulf and off Brazil and West Africa. Then explorers started using pre-stack depth migration to ultimately arrive at a fully defined 3D salt geometry, which has fueled much of the success in the Gulf. James Stafford: What can we expect both from drilling technology and supercomputer data collection and processing over the next 5-10 years? Chris Faulkner: We'll probably see a growing convergence of microseismic data gathering and processing in real time and real-time drilling data gathering to enhance mapping of natural fractures in tight reservoirs that may help drillers better steer the well so as to optimize subsequent placement of frac stages. James Stafford: Can the US really compete with Saudi Arabia in terms of production? Chris Faulkner: Sure, just as long as the Saudis will allow it. Don't forget the Kingdom is still the world's swing supplier, a role it's held since the late 1970s. It's important to remember that the Saudis not only have the largest proved reserves of oil, it's also the largest repository—by far—of low-cost oil reserves. Much of Canada's oil sands and US tight oil requires $75 per barrel or more to be economically viable. Saudi Arabia also needs $75 per barrel, but that's to support its current domestic budget. The Kingdom's lifting costs are somewhere around $5 at last report. So Saudi Arabia could easily flood the market, as it did in the early ‘80s, if it lost too much market share, dropping oil prices to $50 or less, and US drilling and production would collapse. Ideally, growing demand from China and other Asian markets will help sustain Saudi production levels and oil prices even as the Americas become self-sufficient in oil. James Stafford: Can we expect to see a gradual end to fossil fuel subsidies in the near or medium-term? Chris Faulkner: Depends on what you mean by subsidy. Anti-oil factions erroneously claim that the standard tax incentives that the US oil and gas industry shares with most other American businesses are subsidies. But while these incentives are the target of some heated rhetoric, there are enough red-state Democrats in Congress to prevent them from being stripped away, especially for the independent oil companies that rely most heavily on them. A more likely development in the US would be incremental attempts to impose a “back door” carbon tax by proxy–essentially the Obama administration resorting to regulatory overreach to add to the costs of fossil fuel development, production, and consumption. This kind of disincentive essentially creates a subsidy-in-reverse. James Stafford: Who benefits most from these subsidies and how? Chris Faulkner: Again, if you mean standard industry tax breaks such as expensing of intangible drilling costs, expanded amortization for G&G costs, repealing the percentage depletion allowance benefit, pure-play E&P independents rely on them more heavily than integrated firms such as the majors or hybrid midstream/upstream firms. I've seen estimates that eliminating these incentives could slash as much as 15–20% of US drilling. But if you mean true subsidies such as those in Iran or Venezuela aimed at keeping gasoline and other fuel costs to consumers below their real costs, then the primary beneficiaries are the autocrats and dictators who might get ousted without them. James Stafford: Is natural gas a feasible bridge to the US' renewable energy future, and will the Obama administration's plan to fund clean energy projects with oil and gas revenues work? Chris Faulkner: Absolutely yes and absolutely no, respectively. The fact that US greenhouse emissions have fallen in recent years owing mainly to power plants switching from coal to low-cost natural gas illustrates the first point quite clearly. The fact that US LNG export projects are moving ahead underscores the point that there are abundant gas resources to support that bridge. As to the second point, one word: Solyndra. How do you think Americans will react to their energy bills spiking so that more of their tax dollars can be flung down that rat hole? How reticent do you think the Republicans will be about pointing that out? James Stafford: How important is Keystone XL to the US' energy future? Chris Faulkner: Keystone XL is important for several reasons. First, blocking the project will alienate our most important energy trading partner, Canada. Some folks talk about US energy self-sufficiency, but for oil that is a much taller hurdle; however, North American oil self-sufficiency could be achieved in less than a decade. Who knows how Canada will react to such a snub and an apparent violation of NAFTA? Retaliatory measures in energy trade are not out of the realm of possibility. The irony is that Canadian oil sands syncrude, bitumen, and heavy oil will continue to move south irrespective of Keystone XL's fate, so any purported environmental benefits from stopping the project are a wash. And Gulf Coast refiners are eager to replace declining supplies of heavy crude from Mexico and Venezuela (not to mention the reliability of the latter's supplies) with low-gravity feedstock from a friendly North American supplier whose supply will only increase. Perhaps the most important impact of blocking Keystone XL is symbolic. If the administration caves to the environmental pressure lobby, it sends an unmistakable message to both sides; the result will be a perception of significantly heightened investment risk in the US oil sector and an emboldened opposition that will use the momentum of this “victory” (certainly a pyrrhic one for America) to step up opposition to oil and gas development everywhere in North America. Don't forget: A hostile administration beset by a sluggish economy imposed the windfall profits tax that resulted in the migration of hundreds of billions of dollars of US oil and gas company E&P capex overseas; this was the single biggest factor in the US oil production decline of the past several decades. A regulatory stranglehold can have the same effect. James Stafford: What can we expect in the next 1-2 years in terms of advanced fracking technology that could help remove some of the opposition to the process? Chris Faulkner: The use of benign frac fluid constituents taken from food sources is certainly a significant advance and at least shows industry is trying to address the public's concerns. Breitling Oil and Gas' EnviroFrac™ program was founded in February 2010 to evaluate the types of additives typically used in the process of hydraulic fracturing to determine their environmental friendliness. After evaluations are completed, EnviroFrac™ calls for the elimination of any additive not critical to the successful completion of the well and determines if greener alternatives are available for all essential additives. EnviroFrac™ is a decisive move toward an even greener fluid system. By reviewing all of the ingredients used in each frac, the program identifies chemicals that can be removed and tests alternatives for remaining additives. To date, the company has eliminated 25% of the additives used in frac fluids in most of its shale plays. But the truth of the matter is that the science and data have always been on industry's side in this debate. So technology is less of a consideration in removing opposition than are efforts to educate the public about the science and data. James Stafford: How important is technology versus acreage to a company's success? How does this balance work out for Breitling? Chris Faulkner: Given our size, Breitling's focus on technology actually provides leverage for our investors against the huge scale of effort and capex that larger companies employ in amassing vast leaseholds in today's resource plays. We rely on advanced exploration technology to help us find prospects others might have overlooked and help us be more selective in high-grading the best opportunities. For example, 3D seismic surveys—and earlier 3D surveys in particular—often contain information that is beyond visual resolution and thus escapes the interpreter. Signal processing on the workstation using what might be termed “geologically based seismic deconvolution” has the potential to enhance the resolution to the point that this hidden information can be made visible and incorporated into the interpretation. Breitling's patent-pending Geo3D Seismic Filtering technology takes existing 3D seismic data and enhances it so that it is noise-free with a broad enough “zero phase” spectrum to represent fractional match points that could lead to oil and gas discovery. Within the limitations of the seismic data we can use this synthetic data to optimize our 3D data set and locate oil and gas reservoirs that were missing in previous low resolution interpretation. James Stafford: There have been a number of hints by the Obama administration that the US could become a net gas exporter, with potential exporters eyeing lucrative Asian markets. What will this mean for gas prices at home? What will it mean for the US economy? Chris Faulkner: I think this has gone beyond the “hints” stage with the administration recently approving a second LNG export terminal, although I expect more of that LNG will go to Europe than to Asian markets. The US would experience a net economic benefit occurring with unrestrained exports. Certainly US gas prices would increase but not nearly as much as EIA's earlier study concluded, because global competition among established LNG suppliers would put a cap on US LNG exports at a certain price point. The US trade balance will improve. All energy-intensive industries combined would see a loss of jobs or output no greater than 1% in any year. If anything, putting a cap on LNG export volumes would probably push gas prices higher because it lessens that competition emerging in an increasingly global LNG trade. James Stafford: Chris, thanks for taking the time to speak with us – hopefully we will get a chance to speak later in the year. For those of you looking to find out more about Chris and Breitlings operations please visit: http://www.breitlingenergy.com Source: http://oilprice.com/Interviews/Will-Saudi-Arabia-Allow-the-U.S.-Oil-Boom-Interview-with-Chris-Faulkner.html Interview by. James Stafford of Oilprice.com