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By Ben Sharples

Sept. 29 (Bloomberg) — Oil in New York headed for its biggest quarterly drop since 2008 as investors speculated that global economic growth will slow and curb fuel demand amid rising supplies.

West Texas Intermediate futures, down 15 percent since June 30, were little changed today. Crude stockpiles rose 1.92 million barrels last week, the U.S. Energy Department said. Morgan Stanley cut its Brent oil forecast to $100 from $130 on weaker demand and increasing OPEC production. A Bloomberg poll indicated Chinese growth is poised to ease.

“We’re trading from headline to headline and that’s all markets, not just the oil market,” said Michael McCarthy, a chief market strategist at CMC Markets Asia Pacific Pty Ltd. in Sydney. “The gap is closing between Brent and West Texas and that could be an indication that there is some easing in the supply-side concerns from the Middle East.”

Crude for November delivery was at $81.15 a barrel, down 6 cents, in electronic trading on the New York Mercantile Exchange at 2:16 p.m. Sydney time, after falling as much as 1.9 percent. The contract yesterday slid 3.8 percent to $81.21. Futures are down 9 percent this month and 11 percent this year. The quarterly decline is the biggest since the last three months of 2008.

Brent oil for November settlement was at $103.94 a barrel, up 13 cents, on the London-based ICE Futures Europe exchange. The European benchmark contract was at a premium of $22.79 to New York crude, compared with a record of $26.87 on Sept. 6.

Slower Growth

Economic growth in China, which consumes about a tenth of the world’s oil, will slow to less than 5 percent annually within five years, according to most investors in a Bloomberg Global Poll. Growth was 9.5 percent last quarter.

The European Union accounted for about 16 percent of global oil demand last year, according BP Plc’s annual Statistical Review of World Energy. German lawmakers vote today on an expansion of the euro area’s rescue fund as the region’s governments weigh further measures to support Greece.

Crude inventories climbed for for the first time in four weeks in the U.S., the world’s biggest user of the commodity, which accounts for about 21 percent of demand. Gasoline stockpiles rose 791,000 barrels in the week ended Sept. 23, the Energy Department report showed.

Libya Output

Production capacity in the Organization of Petroleum Exporting Countries will climb almost 800,000 barrels a day in 2012, led by the resumption of Libyan fields, Morgan Stanley analysts led by New York-based Hussein Allidina said in a report yesterday. Slowing global economic growth will curb demand, the analysts said.

Libyan crude production may reach as much as 400,000 barrels a day next month, Citigroup Inc. analysts including Edward Morse said in a note yesterday.

Fighting in Libya since February has reduced the availability of light, sweet crude, or oil with low density and sulfur content. The country’s output fell to 45,000 barrels a day last month, according to Bloomberg estimates, compared with the 1.6 million barrels a day the nation pumped in January.

–Editor: Paul Gordon

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Posted on September 29, 2011 at 6:00 am by Brett Clanton (FuelFix)

In another sign oil and gas activity in the deep-water Gulf of Mexico is returning to normal, the three biggest oil field services say most of their employees are back on the job in the offshore region, after being temporarily transferred to other assignments in the wake of the BP oil spill.

Schlumberger, Halliburton Co. and Baker Hughes relocated hundreds of employees from the Gulf after federal regulators imposed a six-month ban on most deep-water drilling following BP’s deadly Macondo well blowout in April 2010. Even after the moratorium was lifted, activity remained at a virtual standstill as oil companies struggled to obtain drilling permits that incorporated new safety and environmental rules.

But in recent months, more permits have been issued, which has put many drilling rigs and their specialized crews back to work.

About 80 percent of Schlumberger’s Gulf workforce has returned to the U.S. offshore region after working in other deep-water basins during the slowdown, said Stephen Harris, spokesman for the world’s biggest oil services provider, with principal offices in Paris, The Hague and Houston.

Halliburton, the second-largest services firm, said “many of our Gulf of Mexico employees who were transferred to other areas have returned to work” in the region. And Baker Hughes said all of its Gulf workers are back on the job.

Halliburton had not specified how many of its 2,200 workers in the deepwater Gulf would be transferred, nor did Schlumberger. But Baker Hughes said it reassigned its 2,000 employees to shallow-water operations in the Gulf, North American land drilling sites and Brazil.

Thirty-three deep-water drilling rigs were idled when the Deepwater Horizon drilling rig exploded, killing 11 workers and triggering a massive oil spill. Since then, nine have departed the Gulf for contracts elsewhere.

Today, the deepwater drilling rig count — that is, rigs that are actually drilling, rather than doing plug-and-abandonment work or other workover activity — is at 60 percent of levels seen before the accident.

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(Wall Street Journal)

The Department of Energy keeps shoveling out taxpayer money.

If you thought the $535 million Solyndra scandal had chastened the fearless venture capitalists of the Obama Administration, think again. The Department of Energy shovelled out $1.1 billion in new loan guarantees to solar projects in Nevada and Arizona Wednesday, and more deals are pending before the $18 billion program funded by the 2009 stimulus expires Friday.

We’ll go out on a limb and say the rush raises questions about how carefully these outlays are being vetted, especially in light of solar-panel-maker Solyndra’s August bankruptcy. The FBI, Treasury Department and Congress are all investigating who approved the politically connected California company’s loan guarantee and why. The case is an embarrassment for the White House, which touted Solyndra as a model for its green jobs agenda.

Yet the Department of Energy seems oddly removed from the uproar. In a statement yesterday, Secretary Steven Chu said: “If we want to be a player in the global clean energy race, we must continue to invest in innovative technologies that enable commercial-scale deployment of clean, renewable power like solar.” Translation: China is throwing taxpayer money into solar, so Americans should, too.

That comparison isn’t straightforward; without a free media, it’s impossible to know how many Solyndras Beijing is creating, much less how many are making any money. We doubt most Americans want its government to get in the business of competing dollar-for-subsidy-dollar with the politically directed credit decisions of the Chinese Communist Party. If solar energy collection technology has a chance to be a commercial winner, someone will invest in it. If no one does, there may be a very good reason.

One of those reasons may be this: The Energy Information Administration estimates that new natural gas-fired plants will create electricity at a cost of $63.10 per megawatt hour, compared to the Administration’s “green” favorites, offshore wind and solar thermal plants—like the one in Nevada funded yesterday—which cost $243.20 and $311.80.

Even if you believe in the “green job” mantra, here’s some more math: Yesterday’s $737 million loan guarantee to Tonopah Solar Energy will create “600 construction jobs and 45 permanent jobs,” according to the company. The $337 million loan guarantee to Sempra Energy “will fund up to 300 construction jobs.” That’s $1.1 billion for 45 permanent jobs.

By comparison, the proposed Keystone XL pipeline to carry crude oil from Western Canada to refineries on the U.S. Gulf Coast would create some 13,000 union jobs and around 118,000 “spin-off” jobs—if the U.S. State Department ever gets around to approving it. And taxpayers wouldn’t have to risk a dime.

It’s always possible that some of the Energy Department’s latest investments will turn out to be winners, but if they do then the profits will go to the private shareholders. If they fail like Solyndra, then taxpayers will get stuck with the bill. Come to think of it, that really isn’t all that different from China’s political business model, a free press and democratic Congress aside.

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By Juliet Eilperin, Published: September 28

The Environmental Protection Agency should have conducted a more detailed scientific review before determining two years ago that greenhouse-gas emissions pose a threat to public health and welfare, according to a report issued Wednesday by the agency’s Office of Inspector General.

“This review did not meet all [Office of Management and Budget] requirements for peer review of a highly influential scientific assessment primarily because the review results and EPA’s response were not publicly reported, and because 1 of the 12 reviewers was an EPA employee,” the study said.

Although the IG probe — requested by the top Republican on the Senate Environment and Public Works Committee, James M. Inhofe (Okla.) — will do little to affect federal climate regulation, it provides fodder to those who question the government’s role in addressing global warming.

The investigation did not examine the scientific evidence underpinning the EPA finding of a connection between human activity and global warming over the past half-century.

However, Inhofe said, the IG’s conclusions raised the question of whether the administration should have concluded that carbon dioxide and other greenhouse gases qualify as pollutants under the Clean Air Act.

“This report confirms that the endangerment finding, the very foundation of President Obama’s job-destroying regulatory agenda, was rushed, biased, and flawed,” Inhofe said in a statement. “It calls the scientific integrity of EPA’s decision-making process into question and undermines the credibility of the endangerment finding.”

EPA spokeswoman Betsaida Alcantara defended the agency’s approach.

“While we will consider the specific recommendations, we disagree strongly with the Inspector General’s findings and followed all the appropriate guidance in preparing this finding,” Alcantara wrote in an e-mail. “EPA undertook a thorough and deliberate process in the development of this finding, including a careful review of the wide range of peer-reviewed science.”

The IG report concluded, however, that the agency met the legal requirements for issuing its “endangerment finding,” which provides the basis for federal limits on carbon dioxide from power plants and big emitters. It focused largely on a technical question of whether the supporting material for the rule amounts to a “highly influential scientific assessment” as defined by the OMB.

Both the EPA and the OMB, which establishes peer-review guidance for such rules, said the Technical Support Document did not meet the threshold for a “highly influential scientific assessment, because it did not cover new science.

It is unclear whether the report will affect a legal challenge to the endangerment finding that several industries affected by the regulation have mounted in federal court.

Two lawyers representing greenhouse-gas emitters in Wash­ington who are not litigants in the federal court case said that the IG’s findings could damage the EPA. Joe Stanko, who heads government relations for the law firm Hunton and Williams, noted that the EPA described the Technical Support Document “as the underlying basis for its endangerment finding, so failure to follow peer review procedures could come back to haunt EPA in the [greenhouse gas] litigation.”

But Vermont Law School environmental law professor Patrick A. Parenteau said in an interview that he did not think this would bolster the plaintiffs’ case, because “the IG has concluded EPA has followed all the rulemaking procedures, and its decision is supported by the underlying science.”

Beyond the court case, House oversight committee Chairman Darrell Issa (R-Calif.) indicated that he might hold hearings. “This report raises serious questions that our committee and staff will further review,” he said in a statement.

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By Andrea Shaw, The Times-Picayune

The 54th state House District is the engine that produces 20 percent to 25 percent of the nation’s oil. It is also defined by its shrinking coastline, and it is home to families whose livelihoods are tied to the seafood industry. It is a place that state Rep. Jerry ‘Truck’ Gisclair said he knows all too well, making him a formidable candidate as he mounts a re-election bid in the Oct. 22 election against political upstart Micah Hebert. Hebert said he is running because the residents of the coastal communities deserve a stronger, louder voice.

The 54th District includes Grand Isle and Lafourche and Terrebonne parishes.

Gisclair, a Democrat from Larose, is seeking a second term. He said he has learned that a regional approach of building relationships with local legislators is the best way to take care of the district.

“A collective force is a lot more effective than one individual,” he said. “One of my main goals is to try to make sure our central and other state reps are familiar with our district and our district’s needs and the importance of our region to the state and the nation.”

One of those pressing needs is restoring the state’s rapidly shrinking coastline. Gisclair said the state has hundreds of projects in the planning and waiting stages because of a lack of money. “We are spending tens of millions of dollars when we need to be spending billions,” he said.

He called for bonding out some of the revenue from the Outer Continental Shelf leases the state is slated to begin receiving in 2017 to expedite some of the projects.

He also said some regulations affecting shrimpers need attention, including legislation on turtle exclusion devices and a redefinition of the state’s disappearing coastline.

“A lot of people are shrimping in areas that are questionable and are getting fined using the old shorelines of decades ago,” he said. “We need to redefine our shoreline and adjust law.”

Hebert, who lives in Cut Off, is making his first bid for political office. A sergeant in the Marine Reserve who has served in Afghanistan, Hebert said he decided to run for the Legislature because too many people go into politics for personal gain.

“I don’t want to see the integrity of my area compromised,” he said.

If elected, he said he would introduce a bill to reduce the base pay for legislators. A 2008 attempt by legislators to raise their salaries failed, and the base salary stands at $16,800 per year. But legislators also receive a per diem, mileage and $6,000 in unvouchered expenses.

“It’s very deceptive that when in fact they are making more than that,” he said of the $16,800. “We are in dire economic times. (Reducing base pay) would help weed out some of the people who are doing it for the wrong reasons.”

Although the district has been insulated from the poor economy because of the oil and gas industry, Hebert wants to bolster jobs by eliminating red tape and providing tax incentives to businesses. He called for creating a commission to study the issue of allowing more refineries in the state. By building new refineries, businesses and residents would save and no longer bear the expense of having to ship oil from south Louisiana to refineries in Illinois.

He said the state needs to protect public education and not use it to prop up its ailing finances.

“Education is under attack. That is a travesty. To get any high-paying, decent jobs, we are removing the ability for people to get the education they need” by cutting education spending, Hebert said. “…We are cheating our future.”

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(AP)  WASHINGTON — The only senator opposed to a bill to toughen federal safety regulation of oil and gas pipelines said Wednesday he’s willing to work with Senate leaders to schedule a debate on the measure, but he’s still blocking expedited passage.

Sen. Rand Paul, R-Ky., who is philosophically opposed to federal regulation, also blamed Democratic leaders for the Senate’s failure to act on the measure, saying they could have scheduled a debate and vote on the bill at any time.

But a spokesman for Senate Majority Leader Harry Reid, D-Nev., accused Paul of “a classic tea party stunt.”

“The simple fact is that if Sen. Paul stopped blocking this bill, it would sail through with overwhelming bipartisan support,” spokesman Adam Jentleson said.

The bill has wide, bipartisan support and is backed by industry and safety groups. It was approved without opposition by the Senate Commerce, Science and Transportation Committee in May. Paul is the only senator opposing an effort by the bill’s Democratic sponsors to pass it swiftly using “unanimous consent” procedures that eliminate the need for a time-consuming debate.

“I believe legislation should have open debate and votes. It need not take weeks. Certainly we could spend an afternoon for the people’s elected representatives to discuss whether they got massive new regulations,” Paul said in a statement.

Paul, a tea party ally, was a tax protestor and worked as an ophthalmologist before winning election to the Senate, his first public office, last year. He shares with his father, Rep. Ron Paul, R-Texas, a determination to reduce the size and power of the federal government. The elder Paul is running for the Republican presidential nomination.

Most Senate bills, except for top legislative priorities, are approved using “unanimous consent” procedures that forgo a debate and roll call vote. That’s because the Senate’s procedures typically require days or weeks to pass a single bill.

The pipeline bill is, in part, a response to a series of pipeline accidents over the past year and a half, including a gas explosion last year that killed eight people and heavily damaged a suburban subdivision in San Bruno, Calif., near San Francisco. The bill would authorize more federal safety inspectors, and pipeline companies would have to confirm that their records on how much pressure their pipelines can tolerate are accurate.

The bill would allow federal regulators to order that automatic shutoff valves be installed on new pipelines so leaks can be halted sooner, but it stops short of requiring the valves for existing pipelines. And it directs regulators to determine whether mandatory inspections of aging pipelines in densely populated areas should be expanded to include lines in rural areas. It would be paid for by industry fees.

The bill is supported by the industry’s major trade associations — the Interstate Natural Gas Association of America, the American Gas Association and the Association of Oil Pipelines — as well as the Pipeline Safety Trust, a safety advocacy group.

“The bill puts in place new mandates; it hires new bureaucrats,” Paul said. He also said the bill “grandfathers in the very pipelines that have had recent problems,” an apparent reference to automatic shutoff valves.

Rep. Jackie Speier, D-Calif., whose district includes San Bruno, said the bill is a “good start” but doesn’t go far enough to incorporate National Transportation Safety Board recommendations.

Paul’s actions show he is “blinded by ideology” and “indifferent to the overwhelming evidence that self-regulation of the gas industry is a prescription for further death and injury,” Speier said in a statement.

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By MIKE NIXON

The very elements that make the oil and gas industry a leading contributor to Louisiana’s economy are the same components that could keep the state reasonably comfortable in the coming months while other parts of the nation prepare for another financially cold winter.

On the other hand, increased federal regulations could set petroleum and natural gas activity on a slower pace as those who produce, manufacture and consume goods connected to oil and gas take a hard look at the costs and risks involved.

Varied Benefit

Diversity makes the difference, and it is difficult to find in abundance north of the Gulf Coast with the depth and breadth within one single industry that Louisiana has with petroleum and natural gas.

“All you have to do is look at Louisiana’s pipeline structure and realize that Louisiana is absolutely critical to the entire country,” Louisiana Oil and Gas Association President Don Briggs said.

As a leading voice for the business, Briggs explained that natural gas and petroleum should be described more as four industries than two parts of a whole.

Exploration and production might be the most apparent elements recognized by others looking at the Tri-parish region, but with 19 active Louisiana refineries employing more than 8,700 people and processing 15 percent of the nation’s entire raw product into usable fuel and chemical stock, manufacturing becomes an important part of the mix.

Marketing leads to outlets such as service stations to fill motor vehicles and utilities that run and maintain pipelines and carry gas for cooking, heating and manufacturing in homes and businesses. Many electrical processing plants across the nation would not function without natural gas.

Finally, Briggs noted the transportation sector, tankers delivering crude from recovery locations under the sea floor, to a network of pipelines that route a flow of product across the land, to on-land transport vehicles which both consume the product and deliver goods, that have one way or another been made, processed or packaged in part because of petroleum, definitely is part of the mix.

By the Numbers

During May, national gasoline prices at the pump averaged $3.97, but had dropped back to $3.57 per gallon by September, because of a market decline in crude prices. Those same pump price averages are expected to decline to $3.47 a gallon by the end of this month.

In August, the U.S. Energy Information Administration predicted that refinery costs for crude oil would increase to an average of $100 per barrel by the end of 2011, and reach $103 by 2012. During that same month, natural gas inventories were listed at 3 trillion cubic feet. This was below usage levels from the same time one year earlier. That market is expected to tighten by the end of the year.

Last week, the International Energy Agency forecast that global oil consumption will slow during the remainder of the year. The organization reduced its global demand rate estimate by 160,000 barrels a day to 1.04 million barrels and held back on 2012 demand growth estimate by 190,000 barrels per day to 1.42 million barrels per day.

In addition to Louisiana being the third leading producer of natural gas and fourth top petroleum producer in the nation, it is the gateway that receives U.S. delivery of both offshore domestic and imported crude.

Economist Loren Scott estimated that the total direct and indirect impact of oil and gas on Louisiana stands at approximately $65 billion. He explained during an August presentation in Houma that the direct impact of the industry is witnessed through outlets such as salaries, taxes and fees spent directly by the industry. Indirectly, some salaries and expenditures are utilized by oil and gas company employees and service providers to conduct business with other companies.

Louisiana refineries alone spend more than $17 billion a year on wages, taxes and vendor services, according to the Louisiana Mid-Continent Oil and Gas Association. Nearly 48 percent of refinery vendors make more than 25 percent of their income from the refinery business.

Industry Challenged

One of the hardest blows to the oil and gas industry since the April 2010 BP disaster was not that event in itself, but the subsequent drilling moratorium placed on offshore operations by the federal government, a host of new rules and regulations issued by the Bureau of Ocean Energy Management Regulation and Enforcement, and a delay in returning the issuing of permits to pre BP spill levels.

Last week, BOEMRE announced a new offshore safety rule identified as the Safety and Environmental Management Systems rule, identified by industry insiders as just another change to another way to manage safety operations at all oil and gas facilities.

“This proposed rule is the latest regulatory reform we have undertaken to enhance the safety of offshore energy operations,” BOEMRE Director Michael Bromwich said in a printed statement. “The protection of human life and the environment are top priorities for BOEMRE. Implementing a comprehensive program with these additional features will further our goal of avoiding accidents that may result in injuries, fatalities and serious environmental damage.”

The SEMS rule adds to existing requirements for conducting job safety analysis, implements a stop work authority, tells how to identify a work and safety decision maker on site, gives procedures in reporting unsafe work conditions and carries the requirement of third party safety audits. The details are still being sorted through by industry leaders.

“We still don’t know how everybody is going to be able to react to all that stuff that BOEMRE is putting on us,” Briggs said. “And we don’t know about insurance caps.”

Speculation Doubted

The challenge for oil and gas, according to those working in the field, is not the market, but the doubts that have been placed in the minds of many because of federal tightening of activity.

“If you had $100 million, would you want to invest it in the Gulf of Mexico right now?” Briggs asked. “I’d be scared to death to do it. That’s the problem.”

Briggs said that even with the supportive data and diversity that Louisiana has to offer, a cloud of uncertainty will require a change in how business is conducted.

“The permits are being held up,” he said. “We still have complications in shallow water. And those guys are still trying to recover from insurance costs because of hurricanes we had the past five years.”

Prospects Positive

As the leader of LOGA, Briggs said even in the face of uncertainty he remains positive about the future because Louisiana, as such, is an energy business. “I know that is a very simplistic answer, but it is the reality of it all,” he said.

Briggs stressed that oil and gas produced, refined and marketed from Louisiana are critical to the U.S. infrastructure of commerce in its many forms. “It’s not going to be replaced in any or our lifetimes,” he said. “Have we seen some ups and downs? Yes we have, but we’ve got more rigs working across the United States today than we have had in decades. Right now, we are actually going through an upswing.”

Many of the elements that have caused oil and gas to experience ups and downs during the past 17 months are expected to turn in its favor and become the very components that keep this diverse industry stable.

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By Jack Z. Smith

jzsmith@star-telegram.com

The Barnett Shale natural gas drilling boom has had an economic impact of $65.4 billion in North Texas since 2001 and now supports, directly and indirectly, 100,268 jobs in 24 counties, according to a report by economist Ray Perryman.

Employment in the region is about 8.7 percent higher, and personal income about 8.5 percent more, than it would be without the Barnett Shale, which has generated 38.5 percent of the area’s economic growth since 2001, Perryman said in presenting his report Tuesday to the Fort Worth City Council.

The huge economic impact of the Barnett Shale, accomplished in just a decade, has been “remarkable,” he said.

“It’s been a nice addition to the job base when a lot of businesses are struggling,” he said.

Perryman is a well-known Texas economist whose Waco firm, the Perryman Group, has done many economic impact studies for groups and industries. The new report, “A Decade of Drilling,” was commissioned by the Fort Worth Chamber of Commerce.

Perryman said jobs related to the Barnett Shale peaked at about 120,000 in 2008 because of high natural gas prices that led to more drilling. The rig count, now less than one-third of its peak, can be expected to rise again if gas prices rebound, he told the Star-Telegram after his presentation to the council.

“I think you’ll see some price increases two to three years out, which always drives the rig activity,” he said.

In terms of the number of jobs created directly and in related sectors, the Barnett Shale’s impact is now about 5 percent higher than that of aircraft manufacturing and 10 percent greater than air transportation, which includes Dallas/Fort Worth Airport, Dallas Love Field and Fort Worth Alliance Airport, Perryman said.

He estimated that the total regional impact of the Barnett Shale will be $11.1 billion in 2011. He said the economic benefits come from exploration, drilling and related activity; pipeline investments and related operations; royalties and lease bonuses; local and state tax revenue; and direct and indirect jobs and increased business activity in the private sector.

The impact “goes far beyond just the drilling of new wells,” he said. Economic benefits will last “as long as the wells produce, which can be 40 or 50 years or longer.”

The Barnett Shale will have generated $5.3 billion in taxes for local governments over the 2001-11 study period, including an estimated $730.6 million in 2011. The state will receive estimated benefits of $911.8 million, he said.

Bill Thornton, CEO of the Fort Worth chamber, said in a statement that the study was commissioned to see how or whether the economic downturn had affected past projections about the industry.

“What we found was that it’s a bulwark of our economy,” Thornton said. Barnett Shale gas drilling was “virtually nonexistent a decade ago and now — thanks to new technology developed here — is generating huge benefits in terms of tax revenues, payroll and personal income for our region and the state.”

Bud Weinstein, associate director of the Maguire Energy Institute at Southern Methodist University, said the Barnett Shale has been a strong backstop against effects of the recession and what he calls the “Great Stagnation.”

“What’s important is that we have an industry in North Texas that basically didn’t exist a decade ago,” he said. “While gas prices have fallen over the last couple of years and the rig count is way down, and the Barnett may no longer be the biggest shale-producing play in the U.S., the technology of horizontal drilling and hydraulic fracturing has clearly added a new dimension to our economy, added thousands of jobs, and helped cities, counties, school districts.”

Weinstein also criticized the Obama administration for its lack of focus on natural gas as a future energy source.

“One of these years, prices are going to go back up, because one of these years, the economy is going to recover, and one of these years, we may have a sensible national energy policy that recognizes the potential of natural gas,” he said.

Original Article