President Barack Obama announced with a flourish Thursday that his administration is opening another 38 million acres of the central Gulf of Mexico for exploration and development with an oil and gas lease sale in New Orleans on June 20. But the administration’s critics in the industry and on the Hill, while welcoming the setting of a date, derided what the office of House Natural Resources Committee Chairman Doc Hastings, R-Wash., characterized as a “rather banal major announcement” of Obama’s plans for proceeding with “lease sales that were scheduled before he even took office.”

“We’re pleased to hear that the long-delayed central Gulf of Mexico sale will finally occur in June,” said Randall Luthi, president of the National Ocean Industries Association, a trade group. “However, this sale has been on the books since 2007 under the current five-year plan.”

“This sale is actually a melding of two previously scheduled sales: Central GOM Sale 216, originally scheduled for 2011, and Central GOM Sale 222, originally scheduled for 2012,” Luthi said. “In fact, seven sales scheduled in the 2007-2012 plan were flat out canceled — one off the coast of Virginia, one in the western GOM and five off the coast of Alaska. So, while we move one step forward today, we are already several steps behind.”

The president announced the lease sale in a speech in Las Vegas on his “all-of-the-above” energy strategy — a rhetorical coinage borrowed from House Republicans — that he talked about in his State of the Union address Tuesday.

The announcement was trumpeted in an administration news release Wednesday evening, embargoed until Thursday morning.

“When I saw this embargo deal last night I thought maybe it was something else and not just what was already going to happen,” Don Briggs, president of the Louisiana Oil and Gas Association, said Thursday. “At least he didn’t cancel it, and that is a good thing. They are going forward with a lease sale that was already planned and it wasn’t canceled.”

Briggs was preparing to speak before the Petroleum Club of Houston, a presentation that includes a slide showing in red all the stretches of the Outer Continental Shelf — including the Atlantic and Pacific coasts of the continental United States — that the administration has placed off-limits for drilling.

In his State of the Union address, the president said he had directed the Department of Interior to finalize the next five-year national offshore energy plan “to open more than 75 percent of our potential offshore oil and gas resources.”

But Sen. Mary Landrieu, D-La., said this was more rhetorical sleight-of-hand.

“Unfortunately, what the president proposed — making available 75 percent of the known recoverable resources — is already happening. His goal is the status quo because the known recoverable resources are in the western and central Gulf of Mexico — the two areas this country has always focused on to provide nearly 30 percent of our energy.”

“What we need is to expand our offshore efforts — by opening new areas, including Virginia, and developing more of our offshore energy resources here at home,” Landrieu said.

But leading environmental organizations see the move by the administration toward renewed exploration in the Gulf and perhaps beyond as wrongheaded.

“Coming only two years after the worst oil spill in U.S. history devastated the Gulf Coast — and without comprehensive reforms to government oversight and industry practices recommended by the National Oil Spill Commission and others — these moves could spell disaster for sensitive ocean areas and coastal communities,” Sarah Chasis, director of Natural Resources Defense Council, wrote in an online posting.

“Much of the oil is still in the Gulf, some fishermen still can’t catch enough to stay in business, and we still don’t know the full impact of the spill on marine life, including endangered species like sea turtles,” said Jacqueline Savitz, senior campaign director for the advocacy group Oceana. “Worse yet, the safety failures that led to the Gulf spill have not been addressed, and drilling remains as risky as it was before the spill.”

Original Article

In his State of the Union address Tuesday night, President Obama directed his Administration to open more offshore oil and gas resources for development and redirect tax incentives from the production of oil to the production of clean fuels, including natural gas.

“We have subsidized oil companies for a century. That’s long enough,” Obama said in his address. “It’s time to end the taxpayer giveaways to an industry that’s rarely been more profitable, and double-down on a clean energy industry that’s never been more promising. Pass clean energy tax credits and create these jobs.”

In Southwest Louisiana, where natural gas is abundant, Obama’s plans were viewed as campaign rhetoric.

“Missed opportunities,” said Harold Schoeffler of Lafayette, a leader in the Acadiana Chapter of the Sierra Club and a proponent/investor in offshore wind energy.

Schoeffler said as he watched the State of the Union speech he wondered why the Obama Administration hasn’t already done the things he proposed Tuesday.

Since World War II, the opportunities and technology have been available to turn abundant natural gas into gasoline and diesel for automobiles. The federal government knows about it but has done nothing to encourage it, he said.

A process called Fischer-Tropsch can change natural gas and methane – a renewable energy source — into a high-energy, clean-burning gasoline and diesel that can be used in automobiles without needing to modify them, Schoeffler said.

With natural gas prices under $3, now is a good time to move forward, he said. Within two or three years, Americans could be powering their cars with this high-octane, cheap, clean fuel.

“It’s more critical now because of the Iranian threat, all the turmoil in the oil-producing nations,” Schoeffler said. “That turmoil could deal our economy a death blow.”

The venture could be profitable since $30 worth of natural gas would produce about $140 worth of gasoline or diesel, he said. The process uses a lot less water than refineries. In fact, water it produced through the process.

Louisiana, with natural gas reserves larger than any other state, should be home to some of these Fischer-Tropsch natural gas plants and one should be located at the Henry Hub in Vermilion Parish, Schoeffler said.

The tax incentives Obama wants to take away from the oil companies would also affect wells in South Louisiana that are drilling for natural gas, Don Briggs, Louisiana Oil and Gas Association president, said Wednesday.

President Obama is again pushing cap and trade, and incentives for cleaner fuels like wind and solar power, not oil and gas, he said.

“I’m directing my Administration to open more than 75 percent of our potential offshore oil and gas resources,” Obama said in his State of the Union Address.
Briggs called it all “smoke and mirrors.”

“You can open all (the oil and gas territory) you want to,” Briggs said.

Federal permitting for offshore oil production remains at a snail’s pace since the 2010 BP blowout and oil spill, so it doesn’t matter how much territory you open, he said.

In his State of the Industry address Tuesday in Lafayette, Briggs said permitting took about 36 days before the BP disaster. Today, it takes about 131 days.

Original Article

Today, Senator David Vitter and 20 other senators sent a letter to President Obama urging him to lift restrictions on oil and gas development and alternative energy sources. 

”American energy, skills for American worker.” President Obama talked about relying more on American energy pushing to open more than 75-percent of the country’s potential offshore oil and gas resources.

Senator David Vitter agrees, but wants the President to first lift government restrictions on the Keystone XL pipeline project, which the Obama administration recently denied. “It’s important for domestic energy because it will have important on-ramps to get oil from the Dakotas and Oklahoma to our refineries in the Gulf Coast”

President of Louisiana Oil and Gas Association Don Briggs agrees the Keystone project will increase oil production and create jobs. “That pipeline would not have just been coming through the state, there would’ve been thousands and thousands of pipeline through this country that would have created over 20,000 jobs,” Briggs said.

“Producing the enegry we need, traditional and fossil fuels and clean energy sources can create a lot of jobs,” Senator Mary Landrieu said.

The Environmental Protection agency came out against the Keystone KL pipeline saying the consequences of greenhouse gas emissions are global and could potentially impact the United States.

Original Article

82 percent of rigs in the U.S. in 2008 drilled for natural gas.

12 percent of rigs in the U.S. today drill for natural gas.

4,500 rigs drilled for oil in the U.S. in the 1980s, the highest ever.

2,000 rigs are in use today.

36 days is the time it took to receive an offshore drilling permit

before the BP disaster.

131 days is how long it takes to receive a permit today.

(Source: Don Briggs, Louisiana Oil and Gas Association president)

Hydraulic fracturing of shale revolutionized the energy industry and may dramatically reduce the nation’s dependence on foreign oil, Don Briggs, president of the Louisiana Oil and Gas Association, said Tuesday.

But fracking has been so successful in producing natural gas in the U.S., the supply rose, prices fell and companies now are turning their attention back toward the more lucrative energy resource, oil, he said.

The oil and gas business today is being revolutionized like never before, Briggs told a near full-house Tuesday at the LOGA State of the Industry gathering at the Petroleum Club in

Lafayette.

The nation, in a few years, went from facing a decline in energy resources to seeing a future where it may no longer depend on foreign oil, he said.

By combining horizontal drilling with hydraulic fracturing — a process used in oil and gas exploration for decades — companies are accessing natural gas and in some cases oil that’s trapped in underground shale rock formations in new areas and those thought to be played-out.

Forty-nine percent of natural gas production today is from shale developments like the Haynesville Shale in DeSoto Parish.

Several years ago, the price of natural gas was high, making it a profitable undertaking. But recently, natural gas prices plunged while oil prices rose to or above $100 a barrel. Oil is a global market, with prices influenced by international events. Natural gas is a local market unaffected by global events.

“The well-head price of natural gas today is not adequate to support multi-million dollar projects,” Paul Hilliard of Badger Oil said following Tuesday’s event.

As a result, companies like Chesapeake Energy, one of the nation’s top producers of natural gas, are pulling out. Chesapeake on Monday announced that it’s cutting natural gas production by eight percent and investing those resources in oil and other liquid gases like propane.

Gas prices rose slightly after Chesapeake’s announcement.

The low natural gas prices may not be good news for those in the industry, but consumers’ pocketbooks are getting a break if they rely on natural gas to heat their homes in the winter months.

Lower natural gas prices also are good for manufacturers like an Ohio steel plant that’s re-opening because natural gas is affordable, Briggs said.

Speaking just hours before President Obama’s State of the Union address, Briggs reminded the heavily oil and gas industry audience of the president’s 2011 State of the Union speech where he touted the use of biofuels and asked Congress to eliminate billions in tax breaks to oil companies.

Briggs, a lobbyist, said he’s been defending the federal incentives as “the one thing that’s helping to make the industry grow.”

Original Article

Chesapeake Energy, the nation’s second biggest natural gas producer, announced Monday that it would cut production of gas in response to plummeting prices.

The announcement was not unexpected, and it followed a trend that has been under way for several months: oil and gas companies have been transferring drilling rigs to oil fields from natural gas fields. But given that Chesapeake has been the industry’s most public champion of natural gas, its announcement of an 8 percent cut in daily production led to a substantial rally in gas prices that had fallen last week to their lowest level in a decade.

Natural gas prices have been steadily falling over the last two years because of a glut stemming from mushrooming production in shale fields like the Haynesville in Louisiana, the Barnett in Texas and the Marcellus in Pennsylvania. Warm weather so far this winter has also cut normal seasonal demand significantly.

Aubrey K. McClendon, Chesapeake’s chief executive, said in a statement, “We have committed to cut our dry gas drilling to bare minimum levels.”

The company, based in Oklahoma City, said it would reallocate its investments from natural gas drilling to fields that are rich in oil and other hydrocarbon liquids like ethane, butane and propane, which are used as feedstocks for refining gasoline, diesel, heating and petrochemicals. Those fields are mainly in Ohio, Texas, Oklahoma and Wyoming.

Oil prices have remained strong the last two years because of instability in the Middle East and North Africa and growing demand in China and other developing countries. Since natural gas is not easily exported, prices in the United States are not tied to natural gas prices in Europe and Asia, which are still high.

Chesapeake, which has been responsible for almost a tenth of national gas output, said it would cut spending on drilling gas wells to $900 million in 2012 from $3.1 billion last year. The company said it would idle half of its drilling rigs in the next several months in fields that produce gas but no oil or hydrocarbon liquids.

The announcement showed that the oil industry does not know what to do with all the gas it is able to produce in shale fields, which were considered almost useless until a decade ago when new production techniques, including horizontal drilling and hydraulic fracturing, were first employed in a major way.

“This is a sign that the low price of gas has changed expectations for at least the next three to five years,” said Michael C. Lynch, president of Strategic Energy & Economic Research, a consultancy. “If they thought the price would recover in a year or so, they would keep drilling.”

The Energy Department released a report on Monday predicting that shale gas production would increase to 13.6 trillion cubic feet in 2035, or 49 percent of total domestic natural production, from 5 trillion cubic feet in 2010, or 23 percent.

Gas futures contracts on the New York Mercantile Exchange rallied by almost 8 percent on Monday. Chesapeake shares rose by $1.32 to close at $22.28.

Halliburton, a leading service provider to oil and gas producers, warned last week that the slump in natural gas drilling could cause disruptions in its first-quarter operations and earnings. But the company said it expected that the shift to oil drilling from gas would not hurt its earnings over the year.

“We are very optimistic about 2012 and fully expect that North American revenue and operating income will increase over 2011,” said Dave J. Lesar, Halliburton’s chief executive, in a conference call.

Original Article

As warmer-than-normal weather helped U.S. natural gas prices slide to

a 10-year low last week, a major producer of methanol announced that

it had secured land in Louisiana and was weighing moving an idle plant

in Chile to the site, a pending decision driven in large part by the

state’s record gas production and steady shale reserves.

Louisiana economic officials believe this is a sign of things to come.

The Haynesville Shale gas field in northwest Louisiana, which was

recognized last year as the highest-producing shale play in the

country, has driven down electricity costs for some commercial users,

particularly in the chemical industry. Stephen Moret, the state’s

economic development secretary, has predicted “tens of billions of

dollars” of investment in heavy industrial operations will spring up

in Louisiana in the coming years

Enter the Vancouver-based Methanex Corp., which announced Tuesday that

it has secured land in Geismar. The company will decide this year

whether to build a methanol plant on the site, an area that the

company’s chief described as “a large methanol-consuming region.” The

plant would not open until 2014.

“The outlook for low North American natural gas prices makes Louisiana

an attractive location in which to produce methanol,” Bruce Aitken,

president and CEO of Methanex, said in a statement.

Regulatory uncertainty

Meanwhile, energy analysts and others in the utility industry are

watching whether years of low prices and rising supply, coupled with

uncertainty over federal regulations to reduce power plant emissions

in dozens of states, will give way to a renewed appetite for natural

gas, which emits less pollutants than coal or oil when burned.

That talk gained traction last summer, when Entergy Louisiana

announced plans to build a $721 million natural gas unit at its

Ninemile Point power plant in Westwego. The 550-megawatt plant, slated

to begin construction this year, would replace two deactivated

1950s-era generators at the plant. Last year, Entergy Louisiana also

closed on a deal to acquire a 580-megawatt natural-gas power plant

near Eunice.

Earlier this month, the U.S. Energy Information Administration

reported that natural gas prices would likely remain low this year.

And while that may be good news for electricity users, the prediction

would likely have worse consequences for drillers who may be reeling

as prices continue to fall: The number of rigs drilling for natural

gas declined by 11, to 780, in the week ended Jan. 20, according to

Baker Hughes Inc. That’s down from 906 rigs a year ago.

‘Gas is so cheap’

The Energy Information Administration also released projections

Thursday showing that exporting natural gas could increase prices

domestically in the coming decades.

But while natural gas prices at the Henry Hub fell about 9 percent,

from $4.37 per million British thermal units in 2010 to $3.98 per

million Btu’s in 2011 — and registered at $2.32 per million Btu’s on

Thursday, the lowest since 2002 — the price of crude oil rose 10

percent.

“It’s never been this far out of whack,” said Peter Ricchiuti, an

assistant dean at the A.B. Freeman School of Business at Tulane

University. “Gas is so cheap, it’s just so plentiful.”

In Louisiana, the country’s leader in natural gas production, state

officials and representatives of the natural gas industry have been

scrambling for ways to put to use such an embarrassment of riches,

including evaluating the potential for developing a compressed natural

gas vehicle industry in the state.

Export deal signed

A separate alternative has been exporting it. Last fall, a Cheniere

Energy subsidiary that operates a liquefied natural gas terminal in

Cameron Parish signed a long-term agreement to begin exporting LNG to

the international gas markets, potentially as soon as 2015. A similar

effort to expand an existing LNG terminal to handle LNG exports could

follow suit in Lake Charles.

Harvey Gulf International Marine in New Orleans has also taken the

bait, contracting with Trinity Offshore to build two offshore supply

vessels that will operate exclusively on natural gas, with an option

for a third vessel.

The vessels, which will be built at Trinity’s shipyard in Gulfport,

Miss., are the first in the U.S. to be commissioned to operate

exclusively on natural gas, according to Harvey Gulf.

Original Article

Still, while a spike in demand could dwindle supplies and cause prices

to climb, David Dismukes, an associate director at Louisiana State

University’s Center for Energy Studies, said he expects the

uncertainty of the environmental regulations would likely trump those

concerns.

“I don’t think prices are going to get in the way” of a move toward

natural gas, Dismukes said.

In addition, leaders in the U.S. energy industry will likely begin

focusing on replacing aging infrastructure in the coming years with

newer, larger and more efficient facilities than many of the

coal-fired plants that the new regulations could force into

retirement, Dismukes said.

As observers of the nuclear power industry are still measuring whether

last year’s nuclear disaster in Japan could curb efforts for a

once-heralded nuclear renaissance in the U.S., natural gas could

emerge as the leading option.

“It’s getting time to start thinking about building again, and I think

the technology of choice is going to be gas,” he said.