Archive for '2011'

New consortium seeks to simplify biofuel certification standards

March 23, 2011 10:02 AM by Paula Dittrick, OGJ Senior Staff Writer

Boeing and a Swiss group on Mar. 22 launched the Sustainable Biomass Consortium, a research initiative seeking to help develop and simplify biofuel certification standards. The Swiss group, Ecole Polytechnique Federale de Lausanne (EPFL) recently created the Roundtable on Sustainable Biofuels.

The consortium plans to use the roundtable’s sustainability standard to set regional benchmarks based on aviation biofuel projects. Various airlines already have tested biofuels. The consortium plans to work with groups implementing voluntary standards or regulatory requirements for biomass used in jet fuel.

Research projects will commence in April, and the anticipated work during the next 2 years will include projects in China, Africa, the European Union, Latin America, North America, and the Asia-Pacific region.

Billy Glover, vice-president of environmental and aviation policy for Boeing Commercial Airplanes, said the aviation industry needs sustainable biofuel development.

“This consortium will help ensure we have a transparent way to collaborate among certification processes that guide us towards a more sustainable future,” Glover said.

Sustainable biofuel development is a key element of the aviation industry’s strategy to lower its carbon emissions, he added. Meanwhile, unrest in the Middle East has driven up jet fuel prices, emphasizing the importance of alternate fuel sources.



Exxon’s Tillerson disputes comment by BP’s Dudley

March 16, 2011 3:44 PM by Paula Dittrick, OGJ Senior Staff Writer

Tension continues to surface regarding the Macondo well blowout and Gulf of Mexico oil spill nearly 1 year ago. ExxonMobil Corp. Chief Executive Rex Tillerson criticized comments made by BP PLC’s Chief Executive Bob Dudly at the IHS-CERA energy conference.

On Mar. 8 in Houston, Dudley said industry can learn from safety issues identified since the Apr. 20, 2010, Macondo well control incident in 5,000 ft of water off Louisiana. The blowout caused an explosion that killed 11 people aboard Transocean Ltd.’s Deepwater Horizon semisubmersible drilling rig.

During a separate Mar. 9 news conference, Tillerson said the accident and spill primarily stemmed from management oversights by BP. Tillerson met with reporters following Exxon’s analyst meeting in New York.

“I think those comments are a great disservice to this industry,” Tillerson said of Dudley’s remarks. “This conclusion that this is a bigger problem for the industry is just wrong.”

Top executives of major oil companies rarely express negative comments about one another, but Tillerson openly disputed Dudley’s comments.

“I think the industry manages this risk well. When you do things the proper way, these things don’t happen,” Tillerson said. He believes Exxon manages risk well, relying on a system it developed after the Exxon Valdez tanker spill in Alaska’s Prince William Sound.

Tillerson’s unhappiness with his BP counterpart's industry remarks is an unusual demonstration of tension between oil companies.



FBR Capital: “No cookie-cutter process” for offshore drilling permits

March 7, 2011 4:02 PM by Paula Dittrick, OGJ Senior Staff Writer

Analysts are cautious about the pace that the US government might take in issuing deepwater drilling permits.

The Bureau of Ocean Energy Management, Regulation, and Enforcement approved the first Application for Permit to Drill (APD) for the deepwater Gulf of Mexico since the Macondo well blowout in April 2010 and the resulting oil spill.

“BOEMRE’s case-by-case evaluation of spill containment resources will not produce a cookie-cutter process for APD approvals, which are site specific and may require additional resources from operators,” FBR Capital Markets analyst Benjamin Salisbury said in a recent research note.

He believes the resumption of deepwater permitting “marks the beginning of a long period of slow approvals.” This is because BOEMRE significantly increased the volume of work involved in its review, verification, and approval of each permit application.

BOEMRE Director Michael Bromwich wrote an opinion article for the Houston Chronicle in which he said: “We need to ensure that our new drilling safety rules are fully complied with; we need to review certifications by professional engineers of every stage of the drilling process; and in many cases, we need to conduct more detailed environmental reviews. All of these steps are necessary and appropriate, but they extend the time needed to approve permits.”



RFF suggests putting deepwater risks in context

March 2, 2011 10:04 AM by Paula Dittrick, OGJ Senior Staff Writer

Resources for the Future, an independent economic research group, suggests that neither government or the oil and gas industry yet has adjusted to the high-risk context of deepwater operations. RAF recommends setting liability caps for individual wells at a level reflecting damages from worst-case spill scenarios.

Lynn Scarlett, RFF visiting scholar and former deputy secretary of the interior, made this comment during a Feb. 15 luncheon symposium hosted by ConocoPhillips at its Houston headquarters.

“One might argue it is rocket science,” Scarlett said of regulating drilling and production activities in the deepwater Gulf of Mexico. “No project is business as usual.”

RFF recommends that third-party insurance should be researched as a possible way to strengthen external monitoring of deepwater oil and gas operations. If insurance pools are used to assist smaller firms, fees should be related to risk, Scarlett said.

She said both government and the private sector lacked capacity and practices for performing adequate risk assessments.

‘You just don’t know what you don’t know,” Scarlett said, adding that risk assessment capacity and practices will be a key issue for both industry and regulators going forward after the April 2010 Macondo well blowout and resulting massive oil spill in the gulf.



EU advocates stronger carbon-market security

February 23, 2011 12:05 PM by Paula Dittrick, OGJ Senior Staff Writer

The European Commission is advocating that European governments strengthen security measures for the European carbon market. On Jan. 19, the commission suspended transactions because of repeated thefts that were reportedly worth millions of euros.

The commission on Feb. 23 outlined a list of security recommendations that it has submitted to the EU Climate Change Committee. Allowances to emit carbon dioxide are traded on the carbon market.

Connie Hedegaard, European Commissioner for Climate Action, said possible short-term actions include regularly reviewing security plans, reinforcing registry account policies and identity checks, and training registry users.

“For the medium- and long-term, we reinforce efforts to identify solutions in cooperation both with member states and through a regular dialogue with stakeholders,” Hedegaard said. A March meeting is planned for stakeholders to discuss addressing stolen allowances.

The commission soon plans to propose modifying the EU Registry regulation to provide a stronger legal protection to safeguard the integrity of the carbon market and to uphold the reputation of the EU Emissions Trading Scheme.



Industry keeping tabs on funding request for US BOEMRE

February 16, 2011 4:48 PM by Paula Dittrick, OGJ Senior Staff Writer

President Barack Obama requested $358.4 million to fund the Bureau of Ocean Energy Management, Regulation, and Enforcement (BOEMRE) in fiscal 2012. Oil companies operating in deepwater and offshore drilling contractors will be watching closely to see how Congress responds.

Following the April 2010 blowout of the Macondo well and the resulting oil spill in the Gulf of Mexico, government officials have acknowledged BOEMRE, formerly the Minerals Management Service, historically was underfunded. Lack of funding reportedly has hindered the agency's regulatory oversight of oil and gas activities.

Industry spokesmen have told OGJ that BOEMRE needs technically savvy inspectors and engineers who can keep up with deepwater drilling advances. BOEMRE also needs enough people to help streamline the approval process for deepwater drilling permits.

The requested BOEMRE budget marks a 50% increase above the 2010 funding level after adjusting for the reorganization of the MMS. Additional funding would be used to hire more inspectors, engineers, scientists, and others to oversee industry operations and to review offshore safety systems.

Industry agrees that BOEMRE needs more people. One issue that cannot be resolved by any budget request is the question of how to recruit and train additional BOEMRE inspectors so that they can be brought up to speed on the complex drilling equipment that they will be inspecting.



Real-time IT becoming more important to drilling contractors

February 9, 2011 10:26 AM by Paula Dittrick, OGJ Senior Staff Writer

Real-time drilling information is become more important to contractors and operators following the April 2010 deepwater Macondo well blowout and resulting explosion and fire on Transocean Ltd.’s Deepwater Horizon semisubmersible, speakers acknowledged at a recent energy forum in Houston.

Investigators looking into the cause of the accident have questioned who had access to what drilling information about the Macondo well and the timing of that information. The blast killed 11 crew members, and the semi later sank. Industry and government jointly responded to a massive oil spill in the Gulf of Mexico.

During a Feb. 2 panel discussion on consolidation within service companies, Amy Meyers Jaffe of Rice University’s Baker Institute suggested “the better players” among drilling contractors are going to offer top-notch information services.

“I see a real push post-Macondo for real-time information,” said Jaffe. She moderated the panel discussion during an Energy Mergers and Acquisitions Forum sponsored by Mergermarket.

William D. Marsh, Baker Hughes Inc. vice-president legal-Western Hemisphere, agreed that software and IT is becoming much more important to Baker Hughes and its competitors.

Lackland H. Bloom, a managing director with J.P. Morgan, said that IT remains the domain of major service companies. He described “isolated circumstances” for information-services companies outside the oil and gas industry to gain exposure within the energy industry.



Survey shows 58% of polled companies have no emissions-measuring plan

February 2, 2011 9:31 AM by Paula Dittrick, OGJ Senior Staff Writer

A recent survey of 143 energy and utility professionals indicates 58% have no system to record carbon emissions. That's a slight improvement from 61% who responded the same way during 2010, reports Enviance Inc., a software provider for management of environmental, health, and safety compliance activities.

Lawrence Goldenhersh, Enviance president and chief executive officer, said his company commissioned the survey for two consecutive years as a way to track changes about how companies handle their environmental and regulatory concerns.

When asked about monitoring the US Environmental Protection Agency, 84% of those polled said they monitor changing EPA rules “as they happen.” Goldenhersh said this demonstrates a clear corporate commitment to stay ahead of EPA changing regulations.

“It will be interesting to see whether the advent of cap and trade in California in 2012...will alter what companies consider necessary to meet the analysis and reporting requirements imposed by the SEC,” Goldenhersh said of the US Securities and Exchange Commission.

California’s AB32 legislation will implement a price on carbon starting in 2012 (OGJ Online, Nov. 3, 2010).

Enviance, a privately owned company n Carlsbad, Calif., reported its survey results during the EUEC conference in Phoenix. EUEC is an annual energy, utility, and environment conference involving environmental business leaders, energy executives, and government policymakers.



Rand: No direct benefit from US military development of alternate fuels

January 26, 2011 10:23 AM by Paula Dittrick, OGJ Senior Staff Writer

If the US military were to continue investing in alternate fuel development, researchers see no mission-specific, direct benefit to the nation’s armed forces, Rand Corp. concluded. The US Department of Defense asked the nonprofit research group to study the potential of alternate fuels for the Army, Navy, and Air Force.

Rand researchers recommend the DOD and Congress reconsider whether defense appropriations should support the development of advanced alternate fuel technologies.

“The Department of Defense consumes more fuel than any other federal agency, but military fuel demand is only a very small fraction of civilian demand, and civilian demand is what drives competition, innovation, and production,” said James Bartis, study author and Rand senior policy researcher.

The Rand study identified liquid fuel produced via the Fischer-Tropsch process as the most promising option for affordably and cleanly meeting military fuel specifications. With carbon dioxide capture, the study found Fischer-Tropsch fuels made from a mix of coal and biomass generate lifecycle greenhouse gas emissions that are less than half of petroleum-based fuels.

The military has invested in advanced technology to produce jet fuel from algae-derived oils. But Rand researchers said algae-derived fuel is more a research topic rather than an emerging option with which the military can run its operations.

Most of DOD’s efforts in alternate fuel development has been geared toward providing technical viability rather than establishing a process that yields affordable, environmentally sound fuel production, Rand said.

The US Department of Energy already knows about how hard it is demonstrate affordable, environmentally sound production. DOE has experienced this from its efforts in fuel cell and solar photovoltaic technology development, Rand researchers noted.



Texas agency skips EPA hearing

January 19, 2011 9:55 AM by Paula Dittrick, OGJ Senior Staff Writer

The most telling news coming out of a US Environmental Protection Agency hearing in Dallas was the absence of the Texas Commission on Environmental Quality (TCEQ). EPA’s Jan. 14 hearing concerned the federal takeover of permits for new or expanding Texas power plants, refineries and other industrial plants.

"The state's position on proposed greenhouse gas regulations has been clearly articulated to the EPA and well documented in several pending court cases,” TCEQ said in an email statement to OGJ.

“Our attempts to reason with EPA and efforts to have constructive discussions on our position and their authority under federal law have been ignored,” TCEQ said. “We look forward to pursuing our position in the court system, and we are confident that science and the law will prevail."

The EPA and Texas state officials disagree about whether EPA legally can regulate GHG emissions such as carbon dioxide, and whether EPA has a right to issue GHG-gas permits in Texas when the state refuses to do so.

Effective this year, permit applications for industrial plant expansions must outline plans to use “best available control technology” to reduce GHGs. That stems from a 2007 US Supreme Court decision saying that the Clean Air Act authorizes limits on GHG emissions.

State agencies in every state but Texas are issuing the permits or putting procedures in place to do so. But Texas refuses to take part, saying the EPA overstepped its authority by regulating GHG emissions.

Meanwhile, the battle continues in federal court. Separately, the EPA is taking written comments until Feb. 14.



Deloitte: Oil, gas industry faces well-organized cyber security threats

January 13, 2011 9:29 AM by Paula Dittrick, OGJ Senior Staff Writer

Oil and gas companies face cyber security threats, including well-organized efforts by criminal syndicates and terrorist groups. The cybercrime landscape has evolved into highly specialized criminals having sophisticated tools that can routinely evade many security controls, analysts said.

Rich Baich of Deloitte& Touche LLP said the changing threat environment means companies need to evaluate their security strategies, concentrating on espionage and critical infrastructure vulnerabilities.

“This isn’t an issue that is going to be solved by buying some technology,” Baich said.

Speaking during a Dec. 15, 2010, webcast, Baich urged senior executives to build an effective cyber security program. Executives should ask themselves if their company has enough skilled employees or contractors to mitigate advanced, persistent cyber security threats, he said.

Oil and gas companies are at high risk from web-based malware encounters and cyber attacks because they possess valuable, proprietary data on reserves and discoveries. High downtime cost and attack frequency rates necessitate strong cyber-security programs, Deloitte spokesmen said.

A Ponemon Institute last year released a study on annual costs of cyber crime. The study showed energy firms incurred the second-highest cyber-crime costs of surveyed industries. Ponemon polled 45 US firms. Only the defense industry reported cyber crime costs higher than the energy industry.

Both defense and energy reported cyber crime costs of more than $15 billion/year. The energy industry figure includes all types of energy rather than just oil and gas.



NOIA sees positive signs for tapping energy off Massachusetts

January 5, 2011 11:35 AM by Paula Dittrick, OGJ Senior Staff Writer

The National Ocean Industries Association applauds the US Department of the Interior’s recent Request for Interest concerning renewable leasing off Massachusetts and the availability of the commercial lease for the Cape Wind offshore wind project.

“I applaud Secretary [Ken] Salazar’s forward movement…on offshore renewable energy,” NOIA President Randall Luthi said in a news release. “It is gratifying to see the publication of the commercial lease for the Cape Wind project, which has undergone extensive studies, reviews, and litigation this past decade.”

Luthi sees the Request for Interest “as a positive indicator that there will indeed be more such leases to come. “

Acknowledging that offshore wind energy eventually will be helpful to the overall US energy supply, Luthi noted that analysts and others anticipate that it will be decades before offshore renewables “make a real dent in the domestic energy demand.”

Luithi encourages Salazar to commit himself “equally, if not more so, to the efficient and timely permitting for offshore oil and gas projects that will produce energy now and provide more jobs today.”

In November 2010, Cape Wind announced its first buyer. The Massachusetts Department of Public Utilities approved a contract in which Cape Wind plans to sell half of its power to National Grid, the state's largest electric utility.