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By DAVID WINNING

SYDNEY—Crude-oil futures hit fresh 2½-year highs, as traders bet that an acceleration in China’s manufacturing sector will tighten the global oil market at a time when supply from Libya is disrupted.

Ahead of the New York day, light, sweet crude futures for delivery in May was up 51 cents, or 0.5%, at $107.23 on the New York Mercantile Exchange. The front-month contract earlier hit an intraday peak of $107.65, its highest price since late September 2008. May Brent crude on London’s ICE Futures exchange firmed 35 cents, or 0.3%, to $117.71 a barrel.

Rising Chinese oil demand played a major role in supporting oil prices since the financial crisis, but it has been overshadowed recently by unrest in the Middle East and North Africa, two regions that produce much of the world’s crude.

China’s official Purchasing Managers Index rose to 53.4 in March from 52.2 in February, according to the China Federation of Logistics & Purchasing, which issues the data with the National Bureau of Statistics.

The rise in the PMI indicates a rebound in manufacturing activity in March after three consecutive months of slowdowns, which could help ease concerns about a sharp economic deceleration in the country and provide room for more tightening measures in coming months to curb inflation.

A separate survey by HSBC Holdings showed the pace of manufacturing expansion in China has stabilised after slowing in February.

Economic news will continue to guide crude futures during the day. The U.S. is due to release its monthly jobs report at 8:30 a.m. ET. The median forecast of economists is for a gain of 195,000 jobs, broadly consistent with employment data issued earlier in the week.

Traders are increasingly concerned that a rosier-looking demand picture will stretch the oil market too far, given that 1.65 million barrels a day of Libyan oil production is offline.

Jim Ritterbusch, president of oil trading advisory firm Ritterbusch & Associates, said Saudi Arabia is helping to cover some of the lost Libyan barrels, but global stock draws have provided the balance of needs to European refiners.

Libyan rebel fighters Thursday gave more ground back to forces loyal to Col. Moammar Gadhafi, who laid siege to the city of Brega where key oil infrastructure is located with artillery and rockets.

The advance by pro-Gadhafi forces on Brega, after reclaiming the oil-refinery town of Ras Lanuf, has dashed hopes in the market for an early restart to Libyan oil exports.

“Even if some Libyan sales do resume through unconventional channels, the obstacles for a return to normalcy in industry involve political chasms with dimensions far beyond the supply of petroleum to a tight market,” said Lawrence Eagles, an analyst at J.P. Morgan.

Gordon Kwan, head of regional energy at Mirae Asset Securities, said the Libyan tensions have coincided with refinery maintenance in Europe, which has meant oil demand is more subdued than usual.

This will intensify demand for supplies of high-quality, low-sulfur crude oil that matches the lost Libyan barrels, as many refineries can’t process the lower-quality crude from Saudi Arabia that has been added to the market as cover. Already the premium on prices of some light, sweet crudes, such as those from Azerbaijan and Kazakhstan, has soared to an all-time high, Mr. Kwan said.

“Until now, the physical market has not realized the full extent of the missing Libyan barrels,” he said.

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By Joshua Schneyer and Edward McAllister

NEW YORK (Reuters) – This week when President Barack Obama touted an initiative to slash U.S. oil imports by a third by 2020, he gave a major nod to a billionaire financier who could be central to the plans.

T. Boone Pickens, 82, a Texas hedge fund manager and former corporate raider who made his billions in the U.S. oil patch, is now a leading evangelist for U.S. natural gas.

He claims the Pickens Plan, a lavishly marketed campaign launched in 2008, which earlier failed to gain support in Washington, would cut 2.5 million barrels a day from U.S. oil imports by converting the country’s heavy vehicle fleet from diesel to natural gas.

“We need to get off OPEC and use our own supplies, so I’m very, very encouraged by the president’s speech,” Pickens said in a phone interview. “Natural gas could be the way to do it.”

With a new bill encouraging the use of natural gas in U.S. vehicles about to make its way through Congress and U.S.-produced natural gas trading at record discounts to soaring crude oil prices, the time could be ripe for Pickens’ grand plans to prosper.

“Gas is domestically produced and currently one-fourth the price of oil: it’s a no brainer that people will look for ways to push out oil and use more gas,” said Nikos Tsafos, senior analyst at PFC Energy in Washington.

While Obama is not calling for U.S. natural gas to supplant the entire 3.6 million barrels of oil imports he aims to cut by 2020, the potential cost savings from switching to gas are becoming too big to ignore.

At $106 a barrel on Thursday, buying 3.6 million barrels of oil on futures markets would cost $382 million. At $4.40 per million BTU for U.S. natgas futures, buying the energy equivalent in gas — around 19.5 trillion British thermal units — would cost $86 million.

Based on current prices, the annual savings on energy could amount to $122 billion, equivalent to the gross domestic product of Israel.

U.S. oil futures are trading at a near-record 24 times the price of U.S. gas contracts. As unrest across the Arab world boosts oil prices to near 30-month highs, the natural gas price has slumped due to near record U.S. production, on track for a 40-year high this year.

Pickens peppers his frequent sermons on natural gas with equal measures of scaremongering and optimism. If the country fails to break its addiction to oil, he said, barrel prices could soar to $300 a barrel in the next decade.

A U.S. natural gas boom and widescale conversions of its vehicle fleet, on the other hand, would create hundreds of thousands of American jobs, he said.

The United States is sitting atop 100 years of natural gas supply, President Obama said on in a speech on Wednesday, thanks to hydraulic fracturing technology. The technology has allowed drillers to tap vast reserves of gas trapped in shale rock, bringing on large volumes of production that have helped push down gas prices.

The bounty of U.S. natural gas reserves has attracted a string of foreign investors over the past year, including Chinese offshore oil producer China National Offshore Oil Corp (CNOOC) which has bought $1.6 billion of acreage in the United States in two deals with U.S. gas producer Chesapeake Energy.

NATGAS CONVERSION

U.S. presidents since Richard Nixon have all talked up plans to cut the country’s reliance on foreign oil, and all have failed.

Since around 70 percent of U.S. oil goes into making transportation fuels, Obama said, any realistic plan to cut consumption must address Americans’ long-held penchant for oil-guzzling cars and trucks.

A new bi-partisan bill, heavily lobbied for by Pickens, offers potential solutions. The NAT GAS act as it is called, will be launched next week and would provide billions in subsidies and grants for converting heavy vehicles to natgas.

Past bills have failed, though bill sponsor congressman John Larson said that the more limited focus of this bill — concentrating only on natural gas vehicles and not climate change — could smooth its passage as early as this year.

“We have bi-partisan support and this is a narrower bill. Last year’s (energy) bill got caught up in wider issues,” Larson told Reuters.

Pickens, whose personal fortune was estimated at $1.4 billion by Forbes, could also profit handsomely from the shift. His fund BP Capital Management has major holdings in natural gas stocks, and he is the biggest stakeholder in Clean Energy Fuels and BAF Technologies, which respectively operate gas refueling stations and retrofit cars to run on the fuel.

The U.S. vehicle fleet mostly runs on gasoline and diesel, but converting vehicles to natural gas is not a new phenomenon. From Argentina to Thailand, Pakistan and even oil exporter Iran, the conversion kits have been popular for years.

Conversion offers the added incentive of cutting emissions, since natural gas burns cleaner. But critics have concerns, including huge up-front costs and a lack of fuel stations.

“I’m after the 18-wheelers. There are 8 million of them on our roads and they consume 2.5 million barrels a day. It would take a while to convert them, but this will create jobs,” Pickens told Reuters

Retrofitting 18-wheelers to run on natural gas costs about $40,000 per truck, according to Pike Research senior analyst Dave Hurst in Detroit. Based on Pickens’ estimate of 8 million tractor trailer trucks, the implied conversion cost could be up to $320 billion.

“Both the timeline and magnitude impacts are extremely difficult to predict,” Deutsche Bank analysts said in a report on Wednesday.

Concerns also remain about the affects of hydraulic fracturing, or fracking, on water supply. The technology is currently under review by the U.S. Environmental Protection Agency. It involves blasting water, chemicals and sand into shale rock to release trapped gas.

“I have personally fracked over 3,000 wells,” Pickens said. “I have seen nothing about fracking that concerns me — this issue will clear up on investigation.”

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WASHINGTON, DC, Mar. 31 — US offshore oil and gas safety has improved significantly since the Macondo well accident as the industry has responded aggressively to develop new spill containment technologies and comply with more stringent regulations, Bureau of Ocean Energy Management, Regulation, and Enforcement Director Michael R. Bromwich told a House committee.

But BOEMRE will need more funding if federal lawmakers expect it to keep pace as the search for oil and gas moves into deeper water and formations with higher pressures, Bromwich said. “We will be able to speed up the permitting process and keep up with drilling technology advances, but only with the necessary funding,” he said during a Mar. 30 Natural Resources Committee hearing on the US Department of the Interior agency’s fiscal 2012 budget request.

BOEMRE employees are particularly frustrated that since US President Barack Obama requested $100 million of new funding for the agency last summer, it has received only $10 million, he added.

The Apr. 20, 2010, blowout at the deepwater Macondo well, which led to the destruction of the semisubmersible Deepwater Horizon rig and the deaths of 11 people, and the subsequent massive oil spill into the Gulf of Mexico, jolted both the oil and gas industry and what was then the US Minerals Management Service out of years of complacency, Bromwich maintained.

“Companies now have to have very detailed plans on how they do casing and well structures, as well as blowout preventers,” he said. “We also require subsea containment capabilities which they haven’t had to demonstrate before. We’re much more confident than we were before that we’ve driven down the risks of a blowout to begin with and that, if one occurs, it can be contained.”

‘More we can do’

Bromwich said BOEMRE is pressing both the Marine Well Containment Co. and Helix Well Solutions Group to test their systems further and to make them able to work at greater depths and under higher pressure. “I have directed both groups to meet with me to discuss expanding their systems’ capabilities. There’s more we can do going forward, but [US Interior Secretary Ken Salazar] and I both felt that we’d seen enough to begin allowing deepwater permits to be approved,” he said.

He said he recognizes companies producing oil and gas offshore have to satisfy more rigorous requirements now, and that it can take more time. But Bromwich also said the seven deepwater permits BOEMRE has approved since Feb. 17, when the industry demonstrated its capacity to contain offshore spills to his and Salazar’s satisfaction, suggest that producers can meet this challenge.

“They have all complied not only with the requirements of NTL No. 6, which was issued last June weeks after the Macondo well blew out, but also with the new safety requirements,” he said. “That demonstrates to me that all of the industry can comply with them. I believe we’ll see a continued surge of permit applications.”

Bromwich said he is willing to consider delays related to the moratorium Salazar imposed soon after the accident and spill as reasons for possibly extending a lease, but added that he has received requests for more time from producers with leases expiring in 2020. “I think that’s outrageous,” he said. “If someone’s lease is expiring in the next year and it hasn’t been explored because of the moratorium, that’s another situation entirely.”

He suggested that the offshore oil and gas culture has changed since the accident and spill. “I think it was a chastening experience. A lot of companies took pride in their safety cultures and criticized other companies for not being as diligent,” he said. “But I believe there was complacency overall. Many acknowledged that they’d been complacent about the possibility of a catastrophic spill. They recognize that something like this can’t happen again.”

BOP questions

Responding to Ranking Minority Member Edward J. Markey’s (D-Mass.) question about blowout preventers’ effectiveness after Det Norske Veritas’s report last week said that the Deepwater Horizon’s BOP clearly failed, Bromwich said: “There certainly are more questions now about BOPs, but there were questions before. We knew the BOP at the Deepwater Horizon didn’t work as anticipated. Now we know how it didn’t work. The [BOEMRE-US Coast Guard] joint investigation team is conducting a hearing in New Orleans on Apr. 4 to get a lot more information about the analysis which the independent contractor conducted.”

He also disputed Republican committee members’ statements that a de facto offshore drilling moratorium is in place. Decisions removing the eastern gulf and mid-Atlantic portions of the US Outer Continental Shelf from the 2012-17 program were made “in the shadow of Deepwater Horizon and concerns about offshore drilling safety,” Bromwich told the committee. “As more time passes, we are all gaining confidence that offshore drilling can be safer. If that continues, the decisions could possibly be reconsidered.”

He also told committee member Doug Lamborn (R-Colo.) that it’s unlikely that BOEMRE would resume widespread use of categorical exclusions (CXs) as it considers offshore drilling permits. “We were widely criticized for using CXs by the CEQ, the president’s commission, and others,” he said. “We are moving forward with site-specific environmental assessments of the deepwater as we review our analytic process, and we could possibly resume use of CXs, although I doubt we will.”

Lamborn questioned whether a full EA is always necessary. “If you have a fully evaluated formation 20 miles away, you shouldn’t have to reinvent the wheel because the same conditions apply,” he observed.

“But they don’t,” Bromwich immediately responded. “You can’t take a cookie-cutter approach because conditions change. I would point out that the first site-specific EA we just completed was done in 30 days. Now that we have done the first one, I suspect that later ones will take less time. Again, here, as in many other areas, the answer is for us to have more resources. We have a limited number of people to do the work. We need more.”

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A first-of-its-kind public registry of chemicals used in hydraulic fracturing is expected to launch this month.

The website developed by the Ground Water Protection Council and Interstate Oil and Gas Compact Commission allows producers and oil field service companies to upload data about their hydraulic fracturing operations.

The long-used practice, which allows producers to unlock fossil fuels trapped in tight rock formations, has been criticized at a threat to drinking water — an assertion denied by industry officials, who note there are no documented cases of water contamination from hydraulic fracturing.

Ground Water Protection Council Director Mike Paque said the new website will launch April 14 with an array of educational materials about hydraulic fracturing and how ground water is protected when the process is used.

The site will list the chemicals used in hydraulic fracturing on individual wells, as submitted by operators.

The demonstration he showed the Oklahoma Corporation Commission on Thursday included details from a Chesapeake Energy Corp. well in Texas.

“Nowhere, on a public site, can that kind of information be found about the chemicals used in hydraulic fracturing,” Paque said.

Data not required

Lori Wrotenberry, director of the Corporation Commission’s oil and gas conservation division, said the agency can request chemical information when it is needed, but operators are not required to report such data on all wells.

Paque said about 20 companies have uploaded data to the website over the past couple of weeks, even though it is not mandatory.

He said he expects that number to rise dramatically, especially after officials develop a tutorial video to help operators input their information.

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Alternative to Obama plan pushes drilling

By Bruce Alpert

WASHINGTON — Sen. David Vitter, R-La., Thursday unveiled a GOP alternative to President Barack Obama’s energy plan, a proposal that, not surprisingly, offers more robust domestic drilling opportunities with limits on federal and judicial oversight.

The bill, which lists 28 Senate co-sponsors, all Republicans, is called the 3-D Act: Domestic Jobs, Domestic Energy and Deficit Reduction Act of 2011.

Vitter said his legislation would create more than 2 million jobs, $10 trillion in economic activity and $2 trillion in federal tax receipts over a 30-year period.

“Louisianians know how our domestic energy supplies can be a powerful job-creating force and dozens of energy producers are willing and able to begin work quickly and safely to develop those untapped resources,” Vitter said.

Like Obama’s energy proposal, Vitter’s bill faces partisan gridlock, with Democrats and some Republicans likely to oppose Vitter’s proposal to expand drilling in Alaska, and the eastern Gulf, just as Republicans oppose the administration’s plan for the oil and gas industry to finance the expanded regulatory approach it initiated after last year’s BP oil spill.

The Vitter plan borrows heavily from previous GOP energy bills, but does include some new provisions, including one designed to, in Vitter’s words, “properly limit” the time frame for environmental and judicial review of drilling permits.

It would require any party wanting to challenge a federal drilling permit to do so within 60 days, with no chance to later add another legal challenge. It would limit court review to six months, and force litigants appealing a District Court ruling to go directly to the U.S. Supreme Court, which rejects the vast majority of appeal filings.

At a news conference, Vitter said he’s willing to consider “reasonable amendments,” such as larger caps on spill liabilities as long as the new limit doesn’t force small independent producers “out of business.”

Asked if he saw any chance of Congress voting such a large expansion of drilling operations so soon after the BP disaster, including in portions of Alaska that environmentalists and the Obama administration want to protect, Vitter said higher gas prices might prompt the public to press their congressional members to support expanded oil exploration offshore and onshore.

But Aaron Viles, deputy director of the Gulf Restoration Network, said domestic exploration and production is not a factor in the price motorists pay at the pump, meaning the best way to save people money is to make cars go farther on a gallon of gas.

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By Jeremy Alford

BATON ROUGE — With only 13 days remaining in the ongoing special redistricting session, many lawmakers are beginning to look ahead to the upcoming regular session and are filing bills at a hurried rate.

The regular session starts April 25 and must end by 6 p.m. June 23.

Members of the Houma-Thibodaux delegation have filed half a dozen measures, including the proposed transfer of the Louisiana Universities Marine Consortium in Terrebonne Parish.

LUMCON has been a major driver of marine research and education along the Gulf Coast for more than three decades, providing coastal laboratory facilities to state universities and advocating marine sciences.

The campus leaves a significant local footprint, there’s a marine center in Cocodrie, labs at Fourchon, a fleet of vessels that includes a 116-footer, a dedicated library at Nicholls State University and six environmental monitoring stations across the central coastline.

LUMCON is guided by a board of directors, but House Bill 56 by Rep. Joe Harrison, R-Napoleonville, would transfer management and administration to Nicholls.

In many ways, it would regionalize LUMCON’s leadership structure, since the current board of directors consists of the presidents and one of the vice presidents from Louisiana State University and the University of Louisiana at Lafayette, as well as Nicholls.

Here’s a look at other local bills:

Police training: House Bill 72 by Rep. Truck Gisclair, D-Larose, would require that all non-municipal chiefs of police participate in training as prescribed by the Law Enforcement Executive Management Institute.

Under current law, only municipal chiefs have to undergo the training.

Gisclair’s bill defines a non-municipal chief of police as the lead law enforcement officer at a port or possibly a wildlife authority.

More specifically, according to the legislation, it would be “any chief of police of a board, authority, commission, department, office, division or agency of the state or any of its political subdivisions.”

Illegal aliens: Harrison is also sponsoring House Bill 59, which would create the Taxpayer and Citizen Protection Act of 2011.

It’s a complicated concept that Harrison has been working on for several sessions now and involves verifying the citizenship status of Louisiana residents as it relates to employment, educational benefits, public benefits, identification, arrest, criminal offenses and law enforcement.

The proposal would require that the agencies supporting these functions use the Systematic Alien Verification for Entitlement program, known as SAVE, for persons 14 or older.

Through this process, Harrison hopes to block access for illegal aliens to certain public services and employment in the state.

So far, members of the House and Senate have filed at least 84 bills for the approaching regular session.

The count, however, will surely grow substantially. In 2009, the last time lawmakers conducted a regular fiscal session, more than 1,200 bills were filed.

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Friday, April 01, 2011

President Obama will find no disagreement in our region with his stated goal to cut our nation’s oil imports by a third over the next decade and replace it with U.S. energy sources, including more domestic oil.

But thousands of people across the Gulf Coast whose livelihoods depend on domestic oil production want to see more decisive action from this administration to back up the president’s words. That means working with the industry to speed up the resumption of safe drilling in the Gulf, which the administration halted for almost a year with its blanket moratorium and slowness to issue new drilling permits.

The president rejected criticism that this disruption is responsible for the current spike in gas prices, noting that oil production levels have remained high. But the disruption in exploration and drilling could have serious consequences over the next few years, as currently producing wells run out and not enough new wells come on line. But the administration has yet to announce a sale of new leases in the Gulf. If no sale is held in 2011, it would be the first year without one since the mid-1960s. Administration officials have told industry representatives that the government may need more time to complete environmental assessments before a sale. But those evaluations should have continued over the past few months. In the end, it’s fantasy to talk about reducing oil imports and increasing domestic production without increasing exploration in the Gulf — and that’s something the White House must understand.

Oil is hardly the only controversial energy source. As the president said, Japan’s nuclear disaster has raised questions about that source of energy — as it should. Regulators and the domestic nuclear industry must make sure that they are prepared to respond to a disaster and that strict safety standards are enforced.

But our nation’s energy demands — and indeed, the world’s — are too large to write off nuclear power or to stop investing in new plants, as some critics have recently argued. Nuclear plants supply much of our nation’s electricity, including to many residents in metro New Orleans. The key is to continue finding ways to reduce the risk of nuclear power and other major energy sources.

President Obama acknowledged that every president in the past 40 years has made the same promise to wean us from foreign oil, “but that promise has so far gone unmet.” He’s uniquely positioned to do something about it, though, by more diligently moving his administration to resume safe oil exploration and drilling in the Gulf and to expand production in our region in the future.

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Federal regulators have granted a permit for a deepwater well in a new area of the Gulf of Mexico located about 137 miles off the Louisiana coast. Last week the government approved Shell Offshore’s exploration plan for the new area. On Wednesday, the first well in that new area was given the go-ahead.

The approved permit gives Shell the green light to drill a new well in Garden Banks Block No. 427, about 2,721 feet below the seabed, the Bureau of Ocean Energy Management, Regulation and Enforcement said in a statement.

BOEMRE said Shell has contracted with the Marine Well Containment Company to use its capping stack to stop the flow of oil if a well control event occurs. As part of its approval process, BOEMRE said it reviewed Shell’s containment capability available for the specific well proposed in the permit application and confirmed that the capabilities of the capping stack met the requirements specific to the proposed well’s characteristics.

“Today’s permit approval represents a culmination of a broad and comprehensive review process involving an exploration plan, a site-specific environmental assessment, and the application for the drilling permit – all of which complied with our rigorous safety and environmental standards,” BOEMRE Director Michael Bromwich said. “The completion of this process further demonstrates that we are proceeding as quickly as our resources allow to properly regulate offshore oil and gas operations in the most safe and environmentally-responsible manner.”

All offshore wells are identified in either an exploration or development plan, which must be approved before drilling permits can be issued. On March 21, Shell’s exploration plan, which seeks drilling permits for three new wells, became the first approved since last year’s Macondo blowout.

This marks the seventh deepwater drilling permit issued under the new regulatory system, put in place after last year’s oil spill.

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