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WASHINGTON, D.C. – The Department of the Interior today announced two new rules that will help improve drilling safety by strengthening requirements for safety equipment, well control systems, and blowout prevention practices on offshore oil and gas operations, and improve workplace safety by reducing the risk of human error.

“These new rules and the aggressive reform agenda we have undertaken are raising the bar for the oil and gas industry’s safety and environmental practices on the Outer Continental Shelf,” said Secretary of the Interior Ken Salazar, who announced the rules today in a speech at the Woodrow Wilson International Center.  “Under these new rules, operators will need to comply with tougher requirements for everything from well design and cementing practices to blowout preventers and employee training.  They will also need to develop comprehensive plans to manage risks and hazards at every step of the drilling process, so as to reduce the risk of human error.”

The Drilling Safety Rule and the Workplace Safety Rule join a host of reforms that the Department of the Interior has undertaken in the five months since the Deepwater Horizon oil spill that touch every stage of the offshore planning, review, permitting, drilling, and development processes.

“These two rules are part of a broader series of reforms we are undertaking to reduce the risks of offshore energy operations,” said Michael R. Bromwich, director of the Bureau of Ocean Energy Management, Regulation and Enforcement (BOEM).  “We are substantially raising the standards for all offshore operators, and are doing it in an orderly and responsible way.  We will continue to move forward with other changes and reforms in what will remain a dynamic regulatory environment.  We owe the public nothing less.”

The Drilling Safety Rule, effective immediately upon publication, makes mandatory several requirements for the drilling process that were laid out in Secretary Salazar’s May 27th Safety Report to President Obama. The regulation prescribes proper cementing and casing practices and the appropriate use of drilling fluids in order to maintain well bore integrity, the first line of defense against a blowout.   The regulation also strengthens oversight of mechanisms designed to shut off the flow of oil and gas, primarily the Blowout Preventer (BOP) and its components, including Remotely Operated Vehicles (ROVs), shear rams and pipe rams.   Operators must also secure independent and expert reviews of their well design, construction and flow intervention mechanisms.

The Drilling Safety Rule is being issued under an emergency rule-making process.  Director Bromwich said that BOEM will soon move forward with a standard rulemaking process that includes greater opportunity for public comment and that considers implementing additional recommendations of the Secretary’s May 27th Safety Report, such as the requirement that BOP’s have two sets of blind shear rams.

The second regulation, known as the Workplace Safety Rule, requires offshore operators to have clear programs in place to identify potential hazards when they drill, clear protocol for addressing those hazards, and strong procedures and risk-reduction strategies for all phases of activity, from well design and construction to operation, maintenance, and decommissioning.

The Workplace Safety Rule requires operators to have a Safety and Environmental Management System (SEMS), which is a comprehensive safety and environmental impact program designed to reduce human and organizational errors as the root cause of work-related accidents and offshore oil spills.  The Workplace Safety Rule makes mandatory American Petroleum Institute (API) Recommended Practice 75, which was previously a voluntary program to identify, address and manage safety hazards and environmental impacts in their operations.

BOEM will undertake additional workplace safety reforms, such as requirements for independent third-party verification of operators’ SEMS programs, through an additional rulemaking process that BOEM will be launching soon.

For a fact sheet on the Drilling Safety Rule, click here.

For a fact sheet on the Workplace Safety Rule, click here.

A fact sheet on recent offshore oil and gas reforms can be found here.

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September 29, 2010

Lafayette, La. – Mike Huckabee, former Arkansas governor and host of the critically acclaimed show “Huckabee” on Fox News Channel, will be the keynote speaker at the 2010 Gulf Coast Prospect & Shale Expo on Tuesday, October 19, 2010, at the Cajundome Convention Center in Lafayette, La.

“We are thrilled to have Gov. Huckabee as our keynote speaker for the Expo,” said Don Briggs, Louisiana Oil and Gas Association president. “He understands the importance the Gulf Coast market serves in powering America. We look forward to his speech and continued support for the domestic production of energy.”

Presented by the Louisiana Oil and Gas Association, the Gulf Coast Prospect & Shale Expo (GCPSE) was formed to link Gulf Coast oil and gas prospect sellers to Gulf Coast oil and gas prospect buyers. GCPSE attendees include one-man generator companies, as well as some of the largest companies in the oil and gas industry. Representatives from the majority of the Gulf Coast market is expected to attend the Expo.

Admission to the Expo and luncheon is open to the public. The luncheon is included with registration to the Gulf Coast Prospect & Shale Expo. A limited number of luncheon-only tickets are being made available through the Louisiana Oil & Gas Association website at www.loga.la.

For more information about the Gulf Coast Prospect & Shale Expo, please visit www.gcpeonline.com.

Original Article

By ERIC BESSON

Oil and gas industry executives predict “confusing and subjective” permit regulations will delay deepwater drilling even further in the Gulf of Mexico once the ban is lifted, though regulators say the excessive elapse in time is necessary to ensure safety.

The merits of the moratorium are being debated in the courtroom, but even if the ban on deepwater offshore drilling is lifted prior to the scheduled date of Nov. 30, the oil and gas industry does not expect to resume drilling because of what they have seen in the enhanced shallow-water drilling permit process, which is conducted by the Bureau of Ocean Energy Management, Regulation and Enforcement (BOEM).

“I’m confident the moratorium is going to be lifted but I’m very doubtful that we’ll go back to work any time in the near future,” Louisiana Oil and Gas Association President Don Briggs said.

Typically, the industry is granted approximately 60 shallow-water drilling permits in a four-month span, Briggs said, but only five have been granted for new wells since May.

Eight new well permits are pending for waters less than 500 feet deep, according to the BOEM website. Of the pending shallow-water permits, five were applied for before June 8.

“The shallow-water permits that we are getting are trickling out,” Briggs said. “If we can’t get permits in shallow water, how the hell are we going to get them in deep water?”

The delays are in place in order to ensure safety and proper compliance in the permit process, according to BOEM Director Michael R. Bromwich.

“I understand the frustration that people feel because we are not able to review and approve applications as expeditiously as we have in the past,” Bromwich said at a public forum on offshore drilling in Lafayette. “But the central fact is that it has taken time to submit and verify the additional required information.

“We will not approve applications until and unless they fully comply with the new requirements. That will not make everyone happy, but it is the right way to proceed.”

All well permits must satisfy the requirements laid out in Notice to Lessees and Operators (NTL) 2010-05, and new wells must comply with NTL 2010-06. Both notices included heightened safety regulations.

Jon Jepperson, executive vice president of the Apache Corporation, said NTL-06 is causing delays in the permit approval process because applicants still aren’t sure what information is needed.

“It is a very slow process,” Jepperson said. “They are requesting a very large amount of information. It takes weeks to gather the information in a lot of cases, and once we supply it, we are not getting anything back.”

NTL-06 requires hypothetical worst-case discharge calculations for a blowout scenario, including a flow-rate estimate, total volume and maximum duration of a blowout, and the plan to nullify and avoid the blowout.

Louisiana Mid-Continent Oil and Gas Association President Chris John said the request for companies to determine a worst-case scenario is subjective and confusing.

“That’s been a real contentious part of the legislation because many of our companies that have filed and answered those questions, but they have not been to the satisfaction to the bureaucrats who are not approving these,” John said.

Because new safety compliance regulations have not yet been published for deepwater drilling, oil companies cannot apply for permits in advance of the moratorium possibly being lifted. And until the safety regulations are announced, they are not even sure what information they should be gathering and sending to BOEM.

“As for deepwater, the Director has held eight public forums to collect information and views about deepwater drilling safety reforms, well containment, and oil spill response,” BOEM spokeswoman Caryl Fagot said in an e-mail. “Director Bromwich will consider this information and comments received from the public in evaluating whether to recommend any modifications to the scope or duration of the deepwater drilling suspensions announced by Interior Secretary Ken Salazar on July 12, 2010.”

The industry executives are in agreement on the short-term problems post-moratorium, but John said he is optimistic about the long-term future for drilling in the Gulf of Mexico. He said there have been three lease sales worth at least $1 billion in the last two-and-a-half years.

“I think the long term, the future looks bright in the Gulf because the need for energy in this country and around the world will continue to grow, and because of investments from lease sales,” John said.

Original Article

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Vitter: Moratorium may end in October

WASHINGTON — With Congress heading toward the exits for the election recess, Sen. Mary Landrieu, D-La., maintained her hold Tuesday on the appointment of a key administration official until the Obama administration lifts its drilling moratorium, which Sen. David Vitter, R-La., predicted could happen next month.

Vitter’s forecast — tempered by his concern that even without the moratorium, new regulations will stall a quick return to drilling — followed an afternoon meeting he and Landrieu had with Secretary of the Interior Ken Salazar and Michael Bromwich, the head of the Bureau of Ocean Energy Management, Regulation and Enforcement.

“I pushed Secretary Salazar and Director Bromwich in the meeting today to end the moratorium and establish realistic workable rules for producers to move forward, and it appears that the moratorium could be lifted next month,” Vitter said.

Earlier in the day, after testifying before a hearing of the National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling, Landrieu acknowledged she was getting considerable “pushback” from the Senate leadership to release her hold on the appointment of Jacob Lew to head the Office of Management and Budget.

But Landrieu, who had already had one meeting with Bromwich on Tuesday morning, said that despite some “slight progress” on the moratorium, she was not ready to relent. Bromwich delivers his recommendations to Salazar this week on the moratorium and whether to lift it before it is set to expire at the end of November.

The Senate is due to adjourn as soon as today, so any deal to release the hold and confirm Lew quickly would have to happen before the Senate leaves town until after the midterm elections.

Panel denied subpoena power

The waning hours of legislating before the break might also prove fateful ones for the commission, which was denied subpoena power because of the Senate’s failure to join the House and grant them that authority.

Back in June, the House voted 420-1, with only Rep. Ron Paul, R-Texas, voting “no,” to give the commission subpoena power. But the Senate never followed suit. It does not appear that the Senate leadership intends to include that power in the Continuing Resolution, the last legislative action before they head home to campaign.

The co-chairmen of the commission made clear during a break in Tuesday’s hearing that they considered the lack of subpoena powers an outrage, hampering their ability to command testimony amid some resistance from people working for BP or the other companies implicated in the disaster: Transocean, the drilling contractor, and Halliburton, which did the cement job on the well.

Lacking subpoena power, former Florida Sen. Bob Graham, the committee’s Democratic co-chairman, said their report will “not be as good as the American people deserve.”

“It really strikes me as unjustifiable for the Congress not to give us full authority,” said former EPA Administrator William Reilly, the Republican co-chairman.

At a two-day commission hearing in October, the commission’s general counsel, Fred Bartlit Jr., will present the findings of their investigation of what went wrong leading up to the blowout of the Deepwater Horizon well in April, and Reilly said that while he expected the report to be complete and telling, it might not be as legally ironclad in its sourcing as it might have been had they had the power to compel testimony.

On why the Senate failed to act, Jim Manley, the spokesman for Majority Leader Harry Reid, D-Nev., blamed Republicans and their desire to “protect Big Oil.”

“We have tried it as a stand-alone and as part of an energy bill that Republicans have made clear is not going anywhere anytime soon,” Manley said.

Don Stewart, spokesman for Republican Leader Mitch McConnell, R-Ky., said Republicans had backed bills that would have given subpoena powers to an alternative congressional commission to look into the disaster, and “I know of no effort by Sen. Reid to call those up for a vote before we leave.”

A Vitter spokesman said he supported giving the commission subpoena power.

Coastal restoration money

The second of two days of hearings this week of the Oil Spill Commission focused on coastal restoration efforts, amid the unveiling by Navy Secretary Ray Mabus of a report on restoring the Gulf Coast in the wake of the BP disaster. Mabus recommended that a significant portion of fines assessed against BP under the Clean Water Act be dedicated to the task.

While Mabus, who was charged by President Barack Obama with developing a plan, did not get specific about how much of the BP fines, which could amount to $20 billion or more, should go to the restoration efforts, Landrieu is determined to get Congress to mandate that at least 80 percent of those penalties be put to that use.

“We’ve been dreaming of this coastal restoration plan,” Landrieu told the commission. “No less than 80 percent of the civil and criminal penalties should be directed our way.”

Landrieu and other stressed that the degradation of the Gulf of Mexico and Mississippi Delta preceded the BP disaster and was a consequence of decisions and actions that served the national interest, but at great local cost.

“This is a national emergency,” said James Tripp, senior counsel of the Environmental Defense Fund, who told the commission that the massive and complicated repair job must not be left to a business-as-usual Army Corps of Engineers approach that could drag on for the next “20, 30, 50, 100 years.”

“This is a man-on-the-moon mission,” he said, necessary to avert “an inexcusable national tragedy.”

Original Article

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Development of shale gas has changed the dynamics of gas markets in the US, and shales may also become a major source of gas in other parts of the world.

Only a few years ago various forecasts said the US would need to import considerable amounts of gas as LNG, but with the development of shale gas, the US now is becoming self-sufficient in gas and may even become a gas exporter.

Enabling technologies

Several technologies have accounted for the explosive growth in shale gas in the last few years although production of gas from shales has occurred for many years with the first production in the 1820s, according to George E. King, Apache Corp. in the paper “Thirty Years of Gas Shale Fracturing What Have We Learned” presented on Sept. 20 at the Society of Petroleum Engineers Annual Technical Conference and Exhibition in Florence, Italy.

King attributed this production growth to such technologies as slickwater fracturing with few additives, horizontal wells that have largely replaced vertical wells, 10-20 or more fracturing stages that have increased fracture contact with the formation, and simultaneous or sequential fracturing that uses real-time stress changes created by fracs in an offset well to divert fractures in an adjacent well into nonstimulated zones.

These technologies have allowed recovery of gas from shale to increase in some cases to about 50% of the gas in place from the 2% believed recoverable a decade ago, although current typical ultimate recovers are in the 15-35% range, according to King.

Development of these technologies such as horizontal wells, multistage fracturing, and slickwater fracturing dates back to work in the 1970s through the 1990s by a loose alliance of the US Department of Energy, the Gas Research Institute, and numerous operators in the Devonian shales of eastern US, King said. But he added that the technologies did not catch on with shale gas operators until the technologies were refined, enlarged in scope, and applied in the Barnett shale of north-central Texas.

King notes that operators usually drill the new horizontals transverse to the fracture direction with toe lengths of about 2,500 ft to more than 5,000 ft. These horizontals are then either cased and cemented or isolated with packers to enable multistage fracturing.

In addition to these technologies, King lists six other technologies that are beginning to improve or if further developed may improve gas recovery from shales and make the operations more environmentally friendly.

First is the use of a host of technologies that allow operators to obtain more critical information. These technologies include 3D seismic, geologic mapping, cores, petrophysical studies, openhole logs, diagnostic fracture injection tests, fluid efficiency tests, microseismic, tracers, stimulation behavior analysis, flowback information, and production response analysis.

Second is the use of more than 20 fracture stages to increase fracture-to-shale contact area.

Third is to enhance and stabilize production by improving the development, placement, and longevity of small fractures such as fissures, microcracks, or opened laminations.

Fourth is the use of a hybrid fluid in cases where slickwater does not provide sufficient flow capacity. The hybrid fluid job entails opening the fissures with slickwater and then placing a more viscous fluid with proppants in the fissures.

Fifth are the evolving shale gas production techniques for keeping wells from loading up with produced or condensed water.

Last on his list are methods for treating and reusing flowback water as well as using higher salinity water for fracturing. This would reduce freshwater use and water disposal costs.

Transferring the technology

The technology developed for producing gas from shales in the US has started to be transferred to various parts of the world that have potential for shale gas production such as China, India, Poland, Sweden, Germany, France, North Africa, and many others. Canada already has sizable shale gas production.

Although these technologies may allow gas from shales to be produced, there remain issues such as government policies, land access, and environmental considerations that need to be addressed before many of these countries will realize substantial gas production from shales.

Original Article

By Richard Thompson

Business writer

Financial analysts are predicting that New Orleans-based Superior Energy Services stands to benefit the most after the Interior Department ordered oil and gas companies operating in the Gulf of Mexico to permanently plug nearly 3,500 temporarily abandoned wells and dismantle about 650 production platforms that are no longer used.

“As part of our sustained effort to improve the safety of energy production on the Outer Continental Shelf and strengthen environmental protections,” Interior Secretary Ken Salazar said Sept. 15, “we are notifying offshore operators of their legal responsibility to decommission and dismantle their facilities when production is completed.”

Federal regulations have required plugging such wells and dismantling and removing platform structures and pipelines within a year after a lease has expired, but oil and gas producers have been reluctant to take those final measures on wells that might be in the same lease area as active wells.

Companies will have 120 days to submit a company-wide plan for decommissioning these facilities and wells.

“We have placed the industry on notice that they will be held to the highest standards of planning and operations in developing leases and today’s notice reiterates that mandate,” Salazar said.

That’s likely good news for the shares of plug and abandonment service providers like Superior Energy. Since the announcement, Superior’s shares have risen 10 percent, closing at $26.69 on Thursday.

Just how much of an economic windfall depends on how much of this work is already in progress.

“The characteristics of the wells is mainly going to accelerate a lot of this work that’s out there, but it’s really just hard to quantify at this point what that means,” said Greg Rosenstein, vice president for investor relations at Superior.

Dismantling the oil and gas production platforms will be the bread-and-butter of the notice, pulling in about $2 million a piece, compared to about $250,000 for plugging a well, said Joseph Gibney, an energy analyst at Capital One Southcoast Inc.

Over all, the notice is expected to be a boon for the plug and abandonment industry, generating about $2 billion in total economic impact over a three-to-five year period.

“It’s significant,” said Gibney, who cautioned that questions remained about the limited time-frame. “I just think it’s going to take some time to materialize, given some inherent skepticism that’s already out there.”

The excitement has cooled somewhat since that started settling in, observers say.

Peter Ricchiuti, assistant dean at Tulane University’s A.B. Freeman School of Business, anticipates that the announcement could bring Superior Energy consistent work over the next couple of years.

“I think what the news has done is highlight the end-of-life (well) services, which I think investors are evaluating,” Ricchiuti said. “They see this as a more viable, consistent stream of business going forward, and I think that’s what the reaction was based on.”

Original Article