Monthly Archives: June 2010

BP may lose U.S. oil leases, contracts

The Obama administration is considering penalties that will hamper BP’s ability to do business in the U.S., Bloomberg reported today. Citing analysts, Bloomberg said BP could be barred from doing business with the government as punishment for the spill in the Gulf of Mexico. David Pursell of Tudor Pickering Holt & Co told Bloomberg the […]  More »

KKR strikes $400 million deal with Hilcorp Energy

Kohlberg Kravis Roberts & Co. has agreed to invest up to $400 million in a partnership with Houston’s Hilcorp Energy Company to develop Hilcorp’s oil and gas properties in the Eagle Ford Shale in South Texas. The new partnership, Hilcorp Resources, LLC, will develop acreage in a 200-mile-long area southeast of San Antonio. Hilcorp is […]  More »

Rahall to Allen: Keep an eye on that blowout preventer

Rep. Nick Rahall (D-W.Va.) sent a letter Friday to Admiral Thad Allen, head of the federal response to the Deepwater Horizon accident, asking him to be sure to “secure the chain of custody” of the damaged blowout preventer once it is recovered from the sea floor. The letter, which was released Sunday, acknowledges that the […]  More »

Chron Energy Newslinks | 06.14.10 | Dividend may hold, perp walks for oil execs not likely.

• Criminal charges against individuals not a slam-dunk in spill case. • Coast Guard leans of BP to hurry up and stop. • BP ready to suspend dividend payouts. • Administration wants BP to create escrow fund for claims. • BP to install flow measurement sensors in the well. • Rig missed inspections leading up […]  More »

Creativity helps in Gulf cleanup

About 2 tons of tarball material in the Gulf of Mexico was recovered using a creative new method, the Deepwater Horizon Unified Command center said yesterday in a release. A BP contractor, Gerry Matherne, designed a simple collection system using a shrimp boat with outriggers attached on either side that drags mesh bags made of […]  More »

This week’s energy industry events

Tuesday, June 15 Society of Petroleum Engineers Projects, Facilities and Construction Study Group Lunch: 11:30 a.m.-1 p.m. Houston Racquet Club, 10709 Memorial Drive. “History of Key Safety Developments Over the Last 250 Years.“ Speaker: Iain Michael Light, Group Energy Director, Lloyd’s Register. Talk will cover key safety developments in a range of capital intensive high […]  More »

Atlantis investigation to take 3 more months

A federal investigation into engineering documents on BP’s massive Atlantis oil and gas production platform in the Gulf of Mexico will take another three months, during which time the facility will continue to produce, according to documents filed in federal court last week. The filings are part of a lawsuit brought by a former BP […]  More »

Map of spill, June 14

Spill, June 14  More »

Onshore accidents add to scrutiny for Houston industry

A string of accidents this month at natural gas operations on land could not have come at a worse time for Houston’s vast energy industry.

With BP’s massive oil spill already prompting questions about the safety of offshore drilling in deep waters, a key growth area for the sector in recent years, the natural gas accidents are bringing new scrutiny to a business that may be even more important to the local oil and gas economy.

The incidents include two well accidents in the Marcellus Shale play in the Northeast U.S. that have reinforced regional concerns about gas drilling. Last week, two fatal gas pipeline accidents in North Texas also focused public attention on dangers associated with infrastructure used to transport the fossil fuel.

It’s not clear whether those incidents will draw onshore gas operations into the push for tighter regulation that the offshore industry already is facing amid the unfolding disaster in the Gulf of Mexico.

But they do represent another setback for an industry desperate to repair its image and to reassure Americans that domestic oil and gas resources can be developed safely.

“Right now, the industry just can’t afford any more mistakes,” said Michelle Foss, chief energy economist and head of the Center for Energy Economics at the University of Texas’ Jackson School of Geosciences.

Greater scrutiny on land-based natural gas operations comes as offshore drilling practices are already under the microscope. In late May, federal regulators announced a six-month ban on deep-water drilling in the Gulf of Mexico.

That was in response to the April 20 blowout at BP’s Macondo well in mile-deep waters off the Louisiana coast that killed 11 workers aboard the Deepwater Horizon drilling rig and started the biggest oil spill in U.S. history.

Government action has idled 33 rigs currently permitted to drill in the deep-water Gulf, which could result in tens of thousands of job losses across the Gulf region, say industry groups.

In Houston, the impact of the ban, along with temporary delays in shallow-water drilling, could cost 25,000 to 80,000 jobs, said Lee Hunt, president of the International Association of Drilling Contractors.

Recent accidents

No one is predicting that kind of fallout from the recent slate of onshore accidents, but they haven’t gone unnoticed either.

In Texas last week, two people were killed and three injured after a natural gas pipeline owned by DCP Midstream Partners exploded near the town of Darrouzett when a bulldozer accidentally hit it.

The day before, one person died when a power line contractor inadvertently struck a pipeline near Cleburne that was partly owned by Houston’s Enterprise Products Partners LP.

Elsewhere, a fire raged for five days last week at a rig near Moundsville, W.Va., after workers hit a pocket of methane while drilling for natural gas in the Marcellus Shale. Seven were injured, and state officials cited the permit holder, AB Resources, for not following submitted well plans.

Also, Houston’s EOG Resources was ordered by Pennsylvania officials to halt all drilling in the state after a June 3 blowout spewed natural gas and chemicals out of a well for 16 hours before it was secured. The state has since allowed the firm to resume some drilling.

‘Accelerated’ concerns

Prior to that incident, concerns about offshore drilling safety were already starting to transfer to the onshore realm, but the EOG blowout “appears to have accelerated this trend,” wrote Kevin Book, industry analyst with Clearview Energy Partners, in a report last week.

Indeed, a handful of federal lawmakers are moving forward with bills to place greater restrictions on a drilling technique called hydraulic fracturing, and environmental groups are seeing an opening.

“It just demonstrates that we’re at a point where the extraction of fossil fuels is very risky, whether it’s deep-well drilling under the ocean or hydraulic fracturing, that our dependence on fossil fuels comes with some significant risks,” said Larisa Ruoff, with Green Century Capital Management, a Boston-based investment advisory firm. The firm is trying, through shareholder proposals, to push oil and gas companies to disclose more about risks associated with hydraulic fracturing.

While proponents say hydraulic fracturing has been key in unlocking dense shale rock formations that have greatly boosted U.S. natural gas supplies, critics have raised concerns about the millions of gallons of water required to fracture each shale gas well and about possible contamination of groundwater supplies by chemicals injected into the rock.

Effect in Houston

If new regulation arises, Houston undoubtedly will feel it.

The city’s energy industry is full of small and mid-sized exploration and production companies, as well as larger players, that have made big bets on shale gas. They, in turn, support hundreds of other service providers and equipment makers with headquarters here.

“Houston is the epicenter for shale gas technology development,” said David Pursell, managing director of Houston investment bank Tudor Pickering Holt & Co.

The fear in the natural gas industry is that the latest string of onshore accidents will erase momentum it had made in building support for natural gas as a clean, abundant alternative to crude oil.

“These kinds of events give environmentalists a mail-order funding cause,” said Porter Bennett, CEO of Bentek Energy, an energy market research firm in Evergreen, Colo. “That’s not a good thing from the gas industry’s standpoint.”

But Aubrey McClendon, CEO of Chesapeake Energy Corp., the nation’s second-largest natural gas producer, said while the recent accidents are regrettable, he doesn’t believe they will have a meaningful impact on the industry.

“You want to have no accidents ever, but as long as humans are involved and you’re dealing with great unknowns underneath the earth, you’re going to have some surprising things happen,” he said.

“The question is what do you do with it? If BP had been able to control that spill in a day, we wouldn’t be talking about the BP incident today.”

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Map of spill, June 14

Spill JUNE14 w  More »

Tesoro chief offers VP $400,000 to stay awhile

SAN ANTONIO — Just weeks into his job as Tesoro Corp.’s CEO, Greg Goff has taken steps to shore up the company’s top management team as he works to develop a plan to return the San Antonio-based refiner to profitability.

Goff offered Everett Lewis, 62, executive vice president and chief operating officer, a $400,000 cash retention bonus “as an incentive for his continued service to the company,” should he agree to stay through Jan. 31, according to a regulatory filing.

These are not the best of times for Tesoro, and the new CEO faces major financial and personnel challenges.

Thinning ranks

The ranks of Tesoro’s executive team have been thinned by a spate of recent retirements: Chairman and CEO Bruce Smith, 66, retired June 4; Chief Financial Officer Greg Wright, 60, retired May 5; William Finnerty, executive vice president of strategy and development, 61, resigned March 31 and now serves as a consultant to Goff.

Tesoro has struggled with weak margins as the recession has depressed demand for its fuels. The company posted a loss of $155 million in the first quarter of 2010 and a loss of $140 million for all of 2009.

Tesoro has struggled with weak margins as the recession has depressed demand for its fuels. The company posted a loss of $155 million in the first quarter of 2010 and a loss of $140 million for all of 2009.

Its stock has declined 23 percent since the first of the year. Its shares closed Friday at $11.37, down 10 cents.

Looking at refineries

Consequently, Goff has said he’s taking at hard look at each of the company’s seven refineries.

“We are going through each refinery and the marketing associated with that refinery and critically evaluating its position in the marketplace — its strengths, its weaknesses. We need to be able to improve the performance of each one of the assets,” he said.

He expects to present a plan for boosting the plants’ performance to the company’s board of directors in November or December.

Tesoro named Goff, a former senior vice president of ConocoPhillips Corp., CEO on May 1. In an interview, he said that he hasn’t moved full time to San Antonio, but he hopes complete a move within 60 days after he sells his house in Houston.

In a letter to Lewis, Goff told Lewis that the company “recognizes the leadership and industry experience you bring to Tesoro, and that you could choose to retire at any time. Your commitment and contribution to Tesoro’s success is not only appreciated but critical during this time of leadership transition.”

Lewis accepted the offer on June 9, according to a document filed with the Securities and Exchange Commission.

Lewis’ agreement calls for his bonus to be paid six months after the retention period ends on Jan. 31.

Looking forward, Goff hasn’t ruled out the possibility that Tesoro would consider buying another refinery at some point, but only if it’s judged a good strategic fit for company.

But first, he said, “we need to spend some time focusing on the direction of the company.”

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Map of spill, June 13

Spill, June 13  More »

Obama discusses spill with British prime minister

With tensions inflamed over the administration’s repeated reference to “British Petroleum,” President Barack Obama and British Prime Minister David Cameron today discussed the oil spill spreading across the Gulf of Mexico. But according to a White House “readout” of the call between the two leaders, the World Cup match between England and the U.S. was […]  More »

BP still better than Goldman Sachs

Reuters’ Felix Salmon posted this chart from BrandIndex showing responses to the question: “If you’ve heard anything about the brand in the last two weeks, was it positive or negative?” The brands shown in the chart are Goldman Sachs, Toyota and BP, arguably the companies getting some of the crummiest press as of late (though […]  More »

Map of spill, June 12

Spill, June 12  More »
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