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Deep-sea drilling and fracking are helping to unearth abundant supplies of oil and gas. The coming energy renaissance could be just the elixir the U.S. economy needs.

Thursday night in South Texas, and the parking lot at the Texas Roadhouse, on Highway 287 outside Port Arthur, is jammed. Big-shouldered Sierra trucks jostle with shiny Rams, F-150s, and Tundras, with a pearl-white, freshly polished Dodge Challenger sports sedan thrown in for contrast. Inside, manager David Gonzalez copes with an overflowing crowd and counts his blessings. “Every week this year we’ve been up 6% to 12% over the same week last year,” he tells an out-of-state visitor. “It’s a good time!”

Les bon temps are roulant, not just in Port Arthur but all up and down the Gulf Coast, from Beaumont to Biloxi. A renewed surge in deepwater production in the Gulf of Mexico has led to one of those periodic booms that have marked the oil-rich region ever since the first well, at Spindletop, just south of Beaumont, blew its top in January 1901. At the same time, a surge in domestic natural-gas supplies, which has come mostly from hard-to-reach shale formations tapped by the controversial fracking process, has pushed domestic oil and gas output to its highest level since 1988. Increased overseas demand for refined products like gasoline and diesel has made America a net exporter of finished petroleum products, something not seen since 1949. And to meet that demand, the oil giants are building and expanding Gulf Coast refineries, the first major investments in such facilities in four decades.

Many of the pickup-driving diners at the Texas Roadhouse are oil-patch contractors currently employed at one of two massive expansions going on just outside Port Arthur: the $3 billion addition to Valero’s (VLO) Port Arthur refinery and, literally across the road, the $7 billion project to double the size of the refinery owned by Motiva Enterprises, a joint venture between Royal Dutch Shell and Saudi Aramco.

Along the coast it’s easy to spot the effects of America’s oil and gas renaissance in new hotels built in the past five years (many of them now populated by itinerant oilfield workers), in the multiplying numbers of overnight “shale-ionaires,” in rising home values, expanding car and truck dealerships, and effectively full employment.

What really excites experts is that these signs of prosperity in the gulf point to a larger trend. “We call it the great revival of the North American oil industry,” declares Daniel Yergin, head of Cambridge Energy Research Associates. “This is a turnaround not just for North America’s oil supply, but one with global impact. It’s certainly the biggest development in the world oil market of this century.”

That means the oil and gas boom could make America a major player again in the world energy market and help spur the entire U.S. economy. Already, both Texas and Louisiana have unemployment rates significantly below the national average, and according to the Bureau of Labor Statistics, the West South Central region — which includes Arkansas, Louisiana, Oklahoma, and Texas — has the second-lowest overall unemployment rate in the country, at 7.1%. The lowest? West North Central, which includes North Dakota (with a 3% unemployment rate), where gas producers in the supergiant Bakken formation can’t find enough workers to fill their shifts.

7 electric cars for the future

On the East Coast, abundant natural gas flowing from the Marcellus Shale formation, which runs through New York, Pennsylvania, and Ohio, is enriching farmers who lease their lands to production companies and is estimated to have created 60,000 jobs in the region, with another 200,000 possible by 2015.

Cheap domestic energy is also good news for the manufacturing sector. “The discovery and development of North America’s shale resources has the potential to be the most remarkable source of economic growth and prosperity that any of us are likely to encounter in our lifetimes,” U.S. Steel CEO John Surma told the Congressional Steel Caucus in a late March hearing. It’s a virtuous cycle: More drilling requires more steel, and lower energy costs give U.S. steel producers a cost edge. This at a time when the Department of Energy reports that the energy intensity of U.S. steel companies is now among the lowest in the world.

In St. James Parish near Baton Rouge, ground was broken last year for a $3.4 billion steel plant being built by Nucor Steel (NUE), the first major facility built in the U.S. in decades. U.S. Steel is investing in a new facility in Lorain, Ohio, and V&M Star Steel (the North American subsidiary of the French pipemaker Vallourec) plans to spend $650 million on a small-diameter rolling mill in Youngstown, Ohio.

It’s not just Big Steel that will benefit. Feedstock made from cheap natural gas is a boon for the petrochemical industry. Citing “the improved outlook for U.S. natural-gas supply from shale,” Dow Chemical (DOW) says it will build an ethylene plant in Louisiana for startup in 2017. (Ethylene is used to make things like plastic bottles and toys.) Dow will also restart its ethylene plant near Hahnville, La. Shell, which is building a new petrochemical refinery in Pennsylvania, is also considering a $10 billion Louisiana plant to convert natural gas to diesel. “Low-cost natural gas is the elixir, the sweetness, the juice, the Viagra,” says Don Logan, president of the Louisiana Oil and Gas Association. “What it’s doing is changing the U.S. back into the industrial power of the day.”

Valero’s oil refinery in Port Arthur, Texas, is undergoing a $3 billion expansion.

It is ironic that only a few years ago the conventional wisdom was that America was running out of natural gas. Now becoming “the Saudi Arabia of natural gas,” as some industry promoters like to say, means that America will start exporting lots of the stuff. “We’re going from being a very large sinkhole for all hydrocarbon products,” says Charif Souki, CEO of Cheniere Energy (LNG), a natural-gas supplier, “to becoming the low-cost energy producer in the world.”

While the U.S. remains the world’s largest importer of crude oil (the nation still imports 45% of its oil) liquefied natural gas (LNG) may soon become a big export item, adding jobs and helping offset America’s trade deficit. Companies that built import terminals to bring in LNG in the early 2000s are now spending billions to remake them into export facilities. Cheniere Energy plans to break ground on the first new LNG processing unit at its Sabine Pass Terminal on the Louisiana coast this year and be exporting natural gas by 2015. Cheniere has signed contracts with four overseas customers including Spanish utility Gas Natural Fenosa. Besides Sabine Pass, at least three other LNG terminals, built as intake ports, have applied for export licenses. Essentially the infrastructure of the Gulf Coast oil and gas industry is being spun around to serve the new realities of the great petro-revival.

For all the ebullience in the industry these days, the boom times could change, and quickly. “Tight oil,” trapped in hard-to-exploit formations like oil sands and oil shale, is economical right now because of high crude prices, which could fall if Middle East tensions subside and new supplies flood the market. Some experts believe that world oil prices have to stay above $85 a barrel (current price: $105) for tight oil to remain profitable. A crackdown on environmentally risky fracking could stop the natural-gas boom in its tracks. Environmentalists cite concerns that fracking can despoil water supplies and contribute to air pollution. Another Deepwater Horizon accident could halt offshore production in the gulf for decades.

Even plans to export lots of cheap natural gas could hit market realities. American producers today, even with shipping costs, can sell gas into Asia, Europe, and South America for about 40% less than the price of gas in those markets. New supplies coming online over the next decade from Australia and China could drive prices down, crimping margins for U.S. exporters.

Could any or all of those factors stifle the Great Revival? That’s hard to say. As the regulars at the Texas Roadhouse can tell you, that’s the thing about booms. They eventually always turn to busts. In the meantime, let the good times roll.

original article

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The Louisiana Oil & Gas Association is proud to be supporting its members from South Louisiana in its sponsorship of the 33rd annual Lafayette Oilmen’s Invitational Golf Tournament, being held May 4th-5th, 2012 at the Wetlands Golf Course in Lafayette, LA. LOGA is supporting the Annual LOIGT as the logo sponsor for the tournament giveaway – Brand new K2 Coolers Beverage Boxes. See more here: k2-coolers.com…

As of March 28th, a limited number of spaces remain in this popular industry event.  Click here to register online or contact LOGA member Jacques Landry with Lafayette Steel Erector (LSE) at (337) 257-3453 with any questions.

Oil and gas rigs operating in the U.S. Gulf of Mexico fell to a two-month low as BP Plc halted two relief wells and no new drilling began to replace wells that were completed, according to data published by Baker Hughes Inc.

Gulf rigs dropped by six to 15, the lowest level since the week ended July 23. The decline was the largest in a single week since the period ended June 4. President Barack Obama suspended operations at 33 exploratory wells in the Gulf of Mexico on May 27 in the wake of the oil spill from BP’s Macondo well.

BP said Sept. 19 that it had completed well-kill operations involving the Macondo well, which was sealed with cement. Permitting by the government for new rigs has slowed in the wake of the oil spill because of new regulations and safety concerns.

Drilling rigs are rolling off contract and aren’t being signed for new work as frequently because producers need more time to get permits from the government, Randall Stilley, chief executive officer for Seahawk Drilling Inc., told investors at a conference Aug. 25.

“What we have today is people are afraid to actually sign a contract on a rig that commits them until they have a drilling permit in hand,” he said. “That has really changed the landscape. We’re likely over the next several months, until this situation improves, to see some gaps between contracts.”

The weekly decline in the Gulf rig count mostly came from oil drilling. Crude rigs in the Gulf plummeted to four from nine the previous week. Gas rigs dropped to 11 from 12.

New Activity

“We didn’t have any new activity start up on existing rigs,” said Gary Flaharty, head of investor relations at Baker Hughes. “Normally, you see about the same number of rigs moving into completion mode and drilling mode. The number’s so low now that it’s going to be really apparent when four rigs complete.”

Baker Hughes’s rig count, which began as a proxy for demand for drill bits, counts rigs as active only if they are “actually moving rock from the hole,” he said.

The Gulf losses helped cause the overall U.S. Baker Hughes rig count to drop from last week’s 20-month high. It fell by 11 to 1,650. The combined oil and gas rig count rose to a 22-year high in 2008, peaking at 2,031.

The U.S. oil rig count gained three to 673. Oil for November delivery rose $1.31, or 1.7 percent, to $76.49 a barrel on the New York Mercantile Exchange.

Gas rigs decreased by 15 to 967, down 40 percent from a peak of 1,606 in September 2008. Gas for October delivery lost 13.8 cents, or 3.4 percent, to $3.881 per million British thermal units on the Nymex.

Baker Hughes also reported that miscellaneous rigs, which primarily drill for geothermal energy, rose by one to 10.

Original Article

By TED GRIGGS

The deepwater drilling freeze imposed after the oil leak in the Gulf of Mexico could accelerate consolidation in the oilfield service industry, especially if the moratorium drags on for years as some industry experts predict.

“I’d be surprised if we didn’t see a lot of consolidation, particularly with everything that’s going on with the swings in the Gulf,” said Peter Ricchiuti, assistant dean in Tulane University’s A.B. Freeman School of Business.

The moratorium will leave a lot of publicly traded energy companies that budgeted money for deepwater projects looking for something to do with that cash, Ricchiuti said.

Those firms will be looking to buy back shares or to make a corporate acquisition.

There already has been some talk of mergers and acquisitions in the industry, said Kenny Jordan, executive director of the Association of Energy Services Companies.

“There’s still lot of stacked equipment and equipment not working,” Jordan said. “It kind of makes sense for companies to kind of consolidate some of their operations.”

Jordan said the companies that have a line of credit or other financing will survive.

Energy industry members say the pressure on service companies, and the damage to Louisiana’s economy, will increase the longer the moratorium continues.

President Barack Obama’s administration imposed the drilling ban after the Deepwater Horizon rig exploded April 20, killing 11 workers, and the well began spewing oil into the Gulf.

The ban will remain in place until an independent commission finishes its investigation of the disaster and makes recommendations to improve deepwater well safety.

Environmental groups have applauded the decision.

The Sierra Club has said the United States should end all new offshore drilling, regardless of the water depth, and end the country’s dependence on oil.

Last week, a Morgan Stanley analyst estimated there was only a 1-in-20 chance the moratorium would end in six months, said Don Briggs, president of the Louisiana Oil and Gas Association.

There was a 6-in-10 chance the ban would last 18 to 24 months and 35 percent chance it would last up to four years.

“Nobody’s got any reason to believe it won’t last 18 to 24 months,” Briggs said.

By that time, thousands of jobs and hundreds of millions in investments will be lost, he said.

A manager for Blue Sky Innovations LLC in Lafayette, Randy McCollum, said an 18- to 24-month drilling ban is “a scary prospect.”

Drilling is the engine that drives offshore oil and gas operations in the Gulf, he said.

If the moratorium lasts that long, the effects will be pronounced and devastating.

“Two months, three months is crippling. Eighteen to 24, these rigs will go other places and they just won’t come back,” McCollum said.

Blue Sky provides support services, such as refueling and cargo handling, for helicopter companies.

If the helicopter companies aren’t servicing offshore rigs, Blue Sky doesn’t have work, he said.

The Obama administration’s approach is wrong and lacking in foresight, McCollum said.

Banning offshore drilling is like telling airlines to ground all their planes because of a crash or closing all the mines because of the disaster in West Virginia, he said.

The accident in the Gulf was horrible and tragic, McCollum said, but it’s a mistake to cripple an entire industry, and the state’s economy, as a result.

Outstanding Investments Editor Byron King said he’s not optimistic the moratorium will end quickly because the federal government doesn’t get anything done in six months.

The bigger companies will be able to find work elsewhere, said King, whose newsletter is published by Agora Financial of Baltimore.

For example, drilling companies can move their rigs off the coasts of Brazil or west Africa.

The smaller firms, and the people whose skills can’t be easily transferred internationally — helicopter pilots, vessel masters and mates — will get hurt, King said.

“Those guys are screwed as long as this moratorium stays in place and probably afterward, too, because a lot of the business base is going to go away,” King said.

If the moratorium ends in 18 months, a company that services offshore won’t have anything to service in the Gulf, King said.

All the rigs will be off to Angola or Brazil or somewhere else.

Ricchiuti said there’s a saying in the energy industry: When the oil companies catch a cold, the oilfield service companies get pneumonia.

The oil companies may have gas stations, refineries and wells in production so they aren’t completely dependent on drilling activity, he said.

Contrast that with oil service firms, which aren’t making any money if their equipment is idle, he said.

King said the end result is strategic consolidations will take place.

“The companies who can afford to think 24 to 36 months out will be looking for the best assets and the best people they can pick up at a bargain price from anybody who’s distressed,” King said.

Original Article

Two major oil field services companies said Wednesday they will relocate workers and equipment in the Gulf of Mexico amid a government-ordered six-month moratorium on deep-water drilling that could soon drive other oil and gas companies to follow suit.

Halliburton Co. did not specify how many of its 2,200 workers in the region would be transferred or how much equipment would be removed, but rival Baker Hughes said it has started reassigning some of its 2,000 employees to shallow water operations in the Gulf, North American land drilling operations and Brazil.

Halliburton officials, in a conference call Wednesday with analysts, also raised the possibility the six-month, government-imposed drilling moratorium could last longer.

But Halliburton and Baker Hughes officials said their companies could keep busy with other work at least during a six-month hiatus.

“We shouldn’t consider the next six months to be a completely dead period,” said Tim Probert, Halliburton’s chief health, safety and environment officer. He noted a number of services the company provides, including well completion and workover activities, do not appear to be affected by the temporary ban on deep-water work.

Many firms affected

Announced May 27, President Barack Obama’s six-month moratorium affects all drilling in waters deeper than 500 feet in the Gulf. The Interior Department has also announced new safety regulations for rigs.

The action was in response to the April 20 blowout at BP’s Macondo well off the coast of Louisiana that destroyed the Deepwater Horizon drilling rig, killed 11 workers and triggered the biggest oil spill in U.S. history.

Halliburton and Baker Hughes are among the many firms that could be affected by the drilling suspension in the deep-water Gulf, an area that has grown rapidly in recent years and now accounts for about a quarter of U.S. oil and gas production.

Schlumberger, the world’s largest oil field services provider, is also looking at staffing in the Gulf and can move people and equipment quickly as required, company spokesman Stephen Harris said.

The six-month ban will idle 33 floating drilling rigs now under contract to energy super majors including Chevron and Shell, as well as independent producers like Anadarko Petroleum Corp., and losses could mount quickly.

Each rig is being leased for up to $500,000 a day and supports 800 to 1,400 jobs, including rig crews and other secondary employees, representing up to $330 million in monthly wages, according to the Louisiana Mid-Continent and Gas Association.

The ban could cut oil and natural gas production by as much as 11 percent next year in the deep-water Gulf as projects are put on hold, Barclays Capital analyst Paul Cheng said Wednesday.

Shell, for example, said it has suspended drilling on two deep-water fields known as Vito and Tobago and will delay drilling at its Appomattox discovery.

Halliburton, with dual headquarters in Houston and Dubai, United Arab Emirates, said its Gulf of Mexico region accounted for 12 to 16 percent of North American revenue in recent years, with deep-water work representing more than half of that.

Probert said if the moratorium is lifted as planned by Nov. 30, he would expect an immediate pickup in deep-water business from that point. But he said it could take 12 to 24 months to return to 50 percent of previous activity levels.

While the ban is in effect, Baker Hughes will go where the work is and could have people and equipment leave the U.S. offshore region for a long time if rigs move to international markets, company spokesman Gene Shiels said. But for now, the company views the moratorium as temporary, he said.

Faulty cement job denied

Wednesday, Halliburton officials also addressed the company’s involvement in the Deepwater Horizon disaster.

The company has come under scrutiny of investigators who say a faulty cement job, done by Halliburton, around pipe-like casing in the well may have contributed to the disaster by allowing volatile gas to escape the reservoir, reach the rig and trigger the explosion. Halliburton has denied any wrongdoing, saying it worked according to BP’s instructions.

Mark McCollum, Halliburton’s chief financial officer, said he believes the company is fully indemnified for all potential claims and expenses related to the accident, apart from any brought by Halliburton employees or that involve loss or damage to company equipment.

He said for that to change, BP or other parties would have to prove Halliburton acted with gross negligence in performing work on the well, noting that is a high legal bar to clear.

“You can’t develop a legal argument around gross negligence if you follow their instructions,” he said.

Original Article

Wojciech Moskwa

OSLO, June 1 (Reuters) – Norwegian seismic surveyor TGS-Nopec (TGS.OL) said demand for its seabed scans would probably rise as tougher drilling rules are implemented in the wake of BP’s (BP.L) oil spill in the Gulf of Mexico.

Seismic scans help oil producers have a better understanding of risks by mapping out the best locations to drill for oil and gas as well as monitoring reservoirs during production.

TGS said it was maintaining its guidance for 2010 despite the fallout from the Gulf of Mexico spill, which is slamming the brakes on the fast developing deep-water drilling industry.

U.S. President Barack Obama called a six-month moratorium on drilling in the Gulf of Mexico last week and some analysts expect that pause to remain in place even longer.

“Assuming that drilling activity will continue in deep-water Gulf of Mexico, it’s hard to imagine oil companies not needing that type of information even more going forward,” Chief Executive Robert Hobbs told investors and analysts on a conference call about the impact of the Gulf of Mexico spill on the company.

“Drilling, as it is now, is still a very expensive venture in waters that are this deep…and that’s why our products are so popular right now,” Hobbs said.

“It’s a type of product that really helps them understand risk and understand their likelihood of encountering hydrocarbons or drilling a dry hole.”

TGS shares closed down 3.0 percent at 85.5 crowns while peer Petroleum Geo-Services (PGS.OL) was off 4.1 percent on another poor day for a number of oil services stocks.

Hobbs said the drilling moratorium was “not positive” as it interfered with TGS’ customers exploration plans but it would not have material impact on its business if it remained intact for some six to nine months.

MEXICO GULF SALE KEY

The CEO said much hinged on whether U.S. authorities would go ahead with the planned sale of offshore acreage in the central part of the Gulf of Mexico — the region most affected by the spill — which was expected roughly around March 2011.

The licensing round for another part of the Gulf, which was set for August, has been cancelled, he said.

TGS said its Justice scanning project in the vicinity of the BP spill would be delayed only by about a month to late July or early August due the pollution and clean up efforts. He said a number of seismic groups also had limited downtime due to the accident.

“There has been a significant amount of vessel capacity that has been put … in the Gulf of Mexico, (but) some of the projects our competitors were doing were finishing up anyway, regardless of the accident,” he said.

Hobbs said seismic data purchased by customers was typically used for wells drilled some two to five years later — highlighting the long lead times that TGS bets will protect the seismic industry as long as deep-water drilling resumes sometime this year.

He said that even with mounting political pressure to keep offshore drilling to a minimum, the United States had too much to lose by cutting off exploration in the deep-water Gulf of Mexico.

“If the U.S. does not continue exploration in the Gulf of Mexico it will be shutting down a key oil contributor for their nation,” Hobbs said. “We still see interest in buying data from this area (by clients).” (Editing by Karen Foster)

Original Articles

VICKI SMITH & ALLEN G. BREED

Original Article

NEW ORLEANS (AP) — The best short-term solution to bottling up a disastrous oil spill threatening sealife and livelihoods along the Gulf Coast should be headed out to sea Wednesday in the form of a specially built giant concrete-and-steel box designed to siphon the oil away.

At about midday, a barge will haul the 100-ton contraption 50 miles offshore to a spot where a mile-deep gusher from a blown-out undersea well has been spewing at least 210,000 gallons of crude a day into the Gulf for two weeks. BP spokesman John Curry said it would be deployed on the seabed by Thursday.

It’s the latest idea engineers from oil giant BP PLC are trying after an oil rig the company was operating exploded April 20, killing 11 workers. It sank two days later.

BP is in charge of the cleanup and President Barack Obama and many others have said the company also is responsible for the costs.

BP capped one of three leaks at the well Tuesday night, a step that will not cut the flow of oil but that BP has said will make it easier to help with the gusher.

Meanwhile, the effort to protect Louisiana coastal wetlands was expected to pick up.

In Plaquemines Parish, officials loaded absorbent boom shortly after dawn to take out to the mouth of the Mississippi River. The barge will be used as a distribution point for local fishermen to lay the boom around sensitive marshes.

At a nearby marina, local shrimpers planned to use their boats to put down boom as part of a program BP is running.

In all, about 7,900 people are working to protect the shoreline and wildlife, and some 170 boats are also helping with the cleanup.

A rainbow sheen of oil has reached land in parts of Louisiana, but forecasts showed the oil wasn’t expected to come ashore for at least a couple more days.

“It’s a gift of a little bit of time. I’m not resting,” U.S. Coast Guard Rear Adm. Mary Landry said.

In their worst-case scenario, BP executives told members of a congressional committee that up to 2.5 million gallons a day could spill if the leaks worsened, though it would be more like 1.7 million gallons. In an exploration plan filed with the government in February 2009, BP said it could handle a “worst-case scenario” it described as a leak of 6.8 million gallons per day from an uncontrolled blowout.

Containment boxes have never been tried at this depth – about 5,000 feet – because of the extreme water pressure. If all goes well, the contraption could be fired up early next week to start funneling the oil into a tanker.

“We don’t know for sure” whether the equipment will work, Salvin said. “What we do know is that we have done extensive engineering and modeling and we believe this gives us the best chance to contain the oil, and that’s very important to us.”

The seas calmed Tuesday, allowing more conventional methods to contain the spill to get back on track as businesses and residents kept an eye on the ocean currents, wondering when the sheen washing ashore in places might turn into a heavier coating of oil. Crews put out more containment equipment and repaired some booms damaged in rough weather over the weekend. They also hoped to again try to burn some of the oil on the water’s surface, possibly Wednesday.

Chemical dispersants piped 5,000 feet to the main leak have significantly reduced the amount of oil coming to the surface, BP said.

From the air Tuesday, the site of the Deepwater Horizon explosion looked similar to a week ago except for the appearance of a massive rig brought in to drill a relief well to shut off the spewing oil. That will take months.

People along the Gulf Coast have spent weeks living with uncertainty, wondering where and when the huge slick might come ashore, ruining their beaches – and their livelihoods.

The anxiety is so acute that some are seeing and smelling oil where there is none. And even though the dead turtles and jellyfish washing ashore along the Gulf of Mexico are clean, and scientists have yet to determine what killed them, many are just sure the flow of crude unleashed by the explosion at BP’s Deepwater Horizon is the culprit.

The rig was owned by Transocean Ltd. Some of the 115 surviving workers who were aboard when it exploded are suing that company and BP PLC. In lawsuits filed Tuesday, three workers say they were kept floating at sea for more than 10 hours while the rig burned uncontrollably. They are seeking damages.

Guy Cantwell, a spokesman for rig owner Transocean Ltd., defended the company’s response, saying 115 workers did get off alive. Two wrongful death suits also have been filed.

While officials worked on cleanup, the long wait took its toll on nerves and incomes.

In Gulf Shores, Ala., the real estate firm Brett/Robinson Vacations sent a note to those renting vacation properties that they would not be penalized for any spill-related cancellations, but urged them not to jump the gun.

“There are many questions and many `what ifs’ regarding this event,” the message read. “Because changes come about hourly and 30 days is a long way away, we are asking you to wait before canceling your vacation, especially those of you who are scheduled to arrive more than 30 days from today.”

There are legitimate concerns, experts say. A second bird found in the slick, a brown pelican, is recovering at a bird rescue center in Louisiana. National Wildlife Federation president and CEO Larry Schweiger says there’s no way to know how many birds have been oiled because the slick is so big and so far offshore.

Perdido Key, a barrier island between Pensacola and the Alabama state line with sugar-white sand studded with condominiums, likely would be the first place in Florida affect by the oil spill. Perdido – Spanish for “Lost” – got a sniff Tuesday morning of what may be in store.

“You could smell the smell of it, real heavy petroleum base,” said Steve Owensby, 54, a maintenance man at the Flora-Bama Lounge abutting the state line on the Florida side.

The air cleared later, but Owensby’s 28-year-old daughter, Stephanie, who tends bar at the lounge, said some visitors have complained of feeling ill from the fumes.

“It’s very sad because I grew up out here,” she said. “I remember growing up seeing the white beaches my whole life. Every day I’ve been going to the beach … a lot of people are out watching and crying.”

Original Article

HOUMA — Port Fourchon isn’t alone in gearing up for a potential drilling expansion in the eastern Gulf of Mexico.

At least two other cities, Venice and Mobile, Ala., are positioning themselves to compete for a share of the business for potential deepwater oil-and-gas developments off the Florida coast, a push renewed when President Obama reopened the door to drilling in those areas last month.

Founded 50 years ago this year, Fourchon serves the majority of oil-and-gas activity in the Gulf and over 90 percent of that takes place in waters deeper than 1,000 feet.

Because these new projects take so long to build and are so advanced, they are less vulnerable than drilling in shallow water to the peaks and valleys of the oil-and-gas economy. It takes place on a massive scale: The port, which has a $77 million budget, supports about 15,000 jobs and hosts 250 companies. Nearly 270 vessels use the port daily.

Other ports see the tax dollars, investment and jobs that Fourchon has created as a tantalizing prospect, especially considering some are geographically closer to the new development areas than the Gulf’s largest supply point.

“It would be natural that with this further expansion of the development of the eastern Gulf, they would try to get some of that business,” said Joe Accardo, president of the Ports Association of Louisiana.

Drilling is still years away. Opening the area would require Congressional approval, extensive environmental monitoring and the proposal could still be derailed. But while Louisiana certainly has much to gain from the potential new business, facilities closer than Fourchon could have an edge in the long run.

Federal waters offshore of Louisiana and Texas have been open to oil-and-gas exploration for decades. But given its well-known white beaches and wildlife, Florida has strongly opposed drilling off its coast. Environmental advocates still take exception to the area where Obama has lifted the moratorium, which includes only waters 125 miles or more from shore.

The U.S. Minerals Management Service says the area could contain as much as 3 billion barrels of oil and 12 trillion cubic feet of natural gas, but says the numbers are uncertain and outdated. A lease sale in a small portion of the eastern Gulf was authorized by a 2006 energy bill, but so far it’s the only spot where drilling is permitted.

Since most of the areas in question would be in the deepwater areas in which Fourchon specializes, the port has a major stake in the potential business. The port is home to $1 billion in infrastructure and knee-deep in a 4,000-acre expansion that would accommodate future tenants, says its director, Chett Chiasson. The setup allows companies to refuel, repair and reload offshore-service vessels to keep supplies running smoothly, a process essential to keeping down costs in expensive offshore-drilling and production projects.

“We’re in the position to handle all the needs of the eastern Gulf of Mexico,” Chiasson said. “The efficiency of the types of facilities we have in port allow us to service a broader area of the Gulf. I feel confident as long as we keep providing the services that are necessary to service the oil-and-gas industry, we’re going to continue to be the choice of the oil-and-gas industry.”

Chiasson said he’s aware of other ports’ efforts to position themselves to take advantage of expanded drilling, but said the projects still have a ways to go.

“Competition is good: It keeps us on our toes, thinking about what we do to stay ahead of the curve,” he said.

Venice, the coastal port in Plaquemines Parish, has served the oil-and-gas industry since the 1940s. But in 2005 it was devastated by Hurricane Katrina, whose eye passed directly over it, said George Pivach II, an attorney for the port.

Now the Venice Port Complex, revamped with $75 million in new roads and other infrastructure, is leasing 38 acres on the site. To its credit, Pivach said, the facility only lost a single client after Katrina and wants to use the potential eastern Gulf expansion as a chance to move from serving inland and shallow offshore waters to the deepwater market.

“We don’t view ourselves in competition with any port,” Pivach said, but part of a group of state facilities working together for jobs and investment. “It’s an opportunity for us to capture a new emerging market. We believe with Venice capturing the market east of the Mississippi, it’s a Louisiana win.”

About 200 miles west, Mobile, Ala., has been working to position itself to take advantage of the eastern gulf’s resources for about two years. Its Chamber of Commerce has been promoting the city with program called “Offshore Alabama,” which on its website is billed “Tomorrow’s Great Energy Center for the Eastern Gulf.”

The campaign is mainly targeted at existing businesses, said Steve Russell, director of business retention and expansion for the chamber.

“Mobile’s role to play is the niche market,” Russell said. “Geographically, we have the capability of serving the eastern Gulf. I don’t really see us being another Port Fourchon in that sense. We just want to be a part of this.”

Mobile Bay was first leased for natural gas production in the 1980s, and the area’s oil-and-gas industry has grown since. The oil-and-gas companies include Aker Solutions, which makes the flexible pipes used in deepwater production, as well as a range of ship builders and two private shore bases.

Those facilities provide many of the same services as Fourchon, though with a fraction of the volume, said Chip Conklin, principal engineer for Construction Solutions, one of the private shore bases.

“I think it has a lot of potential,” said Conklin of the area. “It is currently the Siberia of the Gulf of Mexico: Most people need maps to figure out where we are.”

Mobile has one advantage that Fourchon lacks: Height. Its port facilities are 16 feet above sea level on a small bluff, while Fourchon is close to sea level and must constantly reinforce protection against storms and erosion.

While a newer competitor might lack all the amenities of Fourchon, simpler services closer to the site could provide a lower price tag, Conklin said.

Just an hour’s drive across the Florida state line in Pensacola, oil-and-gas interests are less likely to face competition in an area where the drilling proposals are still widely unpopular, says Evon Emerson, president and CEO of the Pensacola Chamber of Commerce. In a coastal city known for its tourism, military bases, research and technology, she knew of no local proposals to try to capture a share of the oil-and-gas business.

“We’ve had a long-standing position against this,” she said. “We look at tourism and the armed services and don’t want to do anything to cause consternation. Our white beaches are the most-beautiful beaches in the world. It’s a major part of our industry.”

Companies contacted for this story wouldn’t comment whether the eastern Gulf development would prompt a shift of their resources to closer supply points.

“Certainly I would assume some of the majors are going to take a look at that,” said Chris John, president of the Louisiana Mid-Continent Oil and Gas Association.

That said, many of the sites would be far enough out that their launch point from the coast might not be as significant. The overall picture — while still part of the distant future — would be a strong net benefit for the whole region, John said.

“This has an enormous potential for the energy coast,” he said. “They’ll be plenty of business for everyone, trust me.”

But given the grim hurricane risk, there’s also wisdom in distributing resources among multiple ports available, the experts said.