bloomberg

Drillers Under Pressure as Low Prices, Broad Uncertainties Put Oil & Gas Industry's Financial Prospects 'In Limbo'

At a climate change conference in Paris last week, Fatih Birol, chief economist at the International Energy Agency, had a blunt message for energy companies.

“We see some moves from energy companies in the direction of sustainable development. However, it is not at the level you would like to see,” Mr. Birol, who will be promoted to chief of the IEA in September, told those assembled. “If they think that their businesses are immune to the impacts of climate policy, they are making a strategic mistake.”

Other experts sound a similar note, calling for changes so fast and sweeping that they would be like an “induced implosion.”

Greenwash: Shell May Remove "Oil" From Name as it Moves to Tap Arctic, Gulf of Mexico

Shell Oil has announced it may take a page out of the BP “Beyond Petroleum” greenwashing book, rebranding itself as something other than an oil company for its United States-based unit.

Marvin Odum, director of Shell Oil's upstream subsidiary companies in the Americas, told Bloomberg the name Shell Oil “is a little old-fashioned, I’d say, and at one point we’ll probably do something about that” during a luncheon interview with Bloomberg News co-founder Matt Winkler (beginning at 8:22) at the recently-completed Shell-sponsored Toronto Global Forum.

“Oil,” said Odum, could at some point in the near future be removed from the name.

Are We Witnessing The Beginning Of The End For Fossil Fuels?

Bloomberg recently declared the era of fossil fuels irrevocably in decline: “The world is now adding more capacity for renewable power each year than coal, natural gas, and oil combined. And there's no going back.”

The sea change in how we power our economies officially occurred in 2013, Bloomberg’s Tom Randall writes in “Fossil Fuels Just Lost the Race Against Renewables.” That year, there were 143 gigawatts (GW) of renewable electricity capacity added globally, versus just 141 GW of new fossil-fueled capacity.

"I Hate That Oil's Dropping": Why Mississippi Governor Phil Bryant Wants High Oil Prices for Fracking

Outgoing Interstate Oil and Gas Compact Commission (IOGCC) chairman Phil Bryant — Mississippi's Republican Governor — started his farewell address with a college football joke at IOGCC's recent annual conference in Columbus, Ohio.

“As you know, I love SEC football. Number one in the nation Mississippi State, number three in the nation Ole Miss, got a lot of energy behind those two teams,” Bryant said in opening his October 21 speech. “I try to go to a lot of ball games. It's a tough job, but somebody's gotta do it and somebody's gotta be there.”

Seconds later, things got more serious, as Bryant spoke to an audience of oil and gas industry executives and lobbyists, as well as state-level regulators. 

At the industry-sponsored convening, which I attended on behalf of DeSmogBlog, it was hard to tell the difference between industry lobbyists and regulators. The more money pledged by corporations, the more lobbyists invited into IOGCC's meeting.

Perhaps this is why Bryant framed his presentation around “where we are headed as an industry,” even though officially a statesman and not an industrialist, before turning to his more stern remarks.

“I know it's a mixed blessing, but if you look at some of the pumps in Mississippi, gasoline is about $2.68 and people are amazed that it's below $3 per gallon,” he said.

“And it's a good thing for industry, it's a good thing for truckers, it's a good thing for those who move goods and services and products across the waters and across the lands and we're excited about where that's headed.”

Bryant then discussed the flip side of the “mixed blessing” coin.

“Of course the Tuscaloosa Marine Shale has a little problem with that, so as with most things in life, it's a give and take,” Bryant stated. “It's very good at one point and it's helping a lot of people, but on the other side there's a part of me that goes, 'Darn! I hate that oil's dropping, I hate that it's going down.' I don't say that out-loud, but just to those in this room.”

Tuscaloosa Marine Shale's “little problem” reflects a big problem the oil and gas industry faces — particularly smaller operators involved with hydraulic fracturing (“fracking”)  going forward.

That is, fracking is expensive and relies on a high global price of oil. A plummeting price of oil could portend the plummetting of many smaller oil and gas companies, particularly those of the sort operating in the Tuscaloosa Marine.

Federal Reserve Policy Keeps Fracking Bubble Afloat and That May Change Soon

In August 2005, the U.S. Congress and then-President George W. Bush blessed the oil and gas industry with a game-changer: the Energy Policy Act of 2005. The Act exempted the industry from federal regulatory enforcement of the Safe Drinking Water Act, the Clean Water Act and the National Environmental Policy Act.

While the piece of omnibus legislation is well-known to close observers of the hydraulic fracturing (“fracking”) issue — especially the “Halliburton Loophole” — lesser known is another blessing bestowed upon shale gas and tight oil drillers: near zero-percent interest rates for debt accrued during the capital-intensive oil and gas production process.

Or put more bluntly, near-free money from the U.S. Federal Reserve Bank. That trend may soon come to a close, as the Federal Reserve recently announced an end to its controversial $3 trillion bond-buying program.

In response to the economic crisis and near collapse of the global economy, the Federal Reserve dropped interest rates to between 0 percent and .25 percent on December 16, 2008, a record low percentage. It also began its bond-buying program, described in a recent Washington Post article as implemented to provide a “booster shot” to the economy.

“The Federal Reserve will employ all available tools to promote the resumption of sustainable economic growth and to preserve price stability,” the Fed stated in a press release announcing the maneuver. “In particular, the [Federal Reserve] anticipates that weak economic conditions are likely to warrant exceptionally low levels of the federal funds rate for some time.”

That free money, known by economics wonks as quantitative easing, helps drilling companies finance fracking an increasingly massive number of wells to keep production levels flat in shale fields nationwide.

But even with the generous cash flow facilitated by the Fed, annual productivity of many shale gas and tight oil fields have either peaked or are in terminal decline. This was revealed in Post Carbon Institute's recently-published report titled, “Drilling Deeper: A Reality Check on U.S. Government Forecasts for a Lasting Tight Oil & Shale Gas Boom.” 

Leaked Trade Deal Document Shows EU Pressuring U.S. to Lift Crude Oil Export Ban

Oil tanker

A secret document regarding the Transatlantic Trade and Investment Partnership (TTIP) negotiations leaked this week shows that oil companies have just as much influence over the governments of the European Union as they do over the government of the U.S. 

In the two-page document, the EU makes several arguments about why the TTIP should require the lifting of the U.S. ban on exporting crude oil, including pushing to add a “strong and comprehensive” chapter that would “combine our support for procompetitive regulation while also lifting bilateral restrictions on gas and crude oil, will show our common resolve to increase security and stability through open markets.”

In a revealing statement to the Washington Post, U.S. Chamber of Commerce’s vice president for Europe Peter Chase cut to the chase about what was really happening in these negotiations and who was calling the shots.

“Because U.S. and European companies, including energy companies, have invested heavily on both sides of the Atlantic, U.S. and EU negotiators are essentially representing the same company interests,” Chase said.

When both sides of a negotiation want the same thing, it is easy to see what the outcome will be.

TransCanada Begins Injecting Oil Into Keystone XL Southern Half; Exact Start Date A Mystery

Keystone XL's southern half is one step closer to opening for business. TransCanada announced that “on Saturday, December 7, 2013, the company began to inject oil into the Gulf Coast Project pipeline as it moves closer to the start of commercial service.”

The Sierra Club's legal challenge to stop the pipeline was recently denied by the U.S. Court of Appeals for the Tenth Circuit, so the southern half, battled over for years between the industry and environmentalists, will soon become a reality.

According to a statement provided to DeSmog by TransCanada, “Over the coming weeks, TransCanada will inject about three million of [sic] barrels of oil into the system, beginning in Cushing, Oklahoma and moving down to the company’s facilities in the Houston refining area.”

In mid-January, up to 700,000 barrels per day of Alberta's tar sands diluted bitumen (dilbit) could begin flowing through the 485-mile southern half of TransCanada's pipeline, known as the Gulf Coast Project. Running from Cushing, Oklahoma to Port Arthur, Texas, the southern half of the pipeline was approved by both a U.S. Army Corps of Engineers Nationwide Permit 12 and an Executive Order from President Barack Obama in March 2012.

BloombergThe Canadian Press and The Oklahoman each reported that the Gulf Coast Project pipeline is now being injected with oil. Line fill is the last key step before a pipeline can begin operations. 

“There are many moving parts to this process – completion of construction, testing, regulatory approvals, line fill and then the transition to operations,” TransCanada spokesman Shawn Howard told DeSmog. “Line fill has to take place first, then once final testing and certifications are completed, the line can then go into commercial service.”

Residents living along the length of the southern half will have no clue about the rest of the start-up process, as TransCanada says it won't provide any more information until the line is already running. “For commercial and contractual reasons, the next update we will provide will be after the line has gone into commercial service,” the company announced.

When DeSmog asked whether the company is currently injecting conventional oil or diluted bitumen sourced from the Canadian tar sands, TransCanada's Howard replied: 

“Many people like to try and categorize the blend, etc., however we are injecting oil into the pipeline. As you’ve likely seen me quoted before, oil is oil and this pipeline is designed to handle both light and heavy blends of oil, in accordance with all U.S. regulatory standards.

I am not able to provide you the specific blend or breakdown as we are not permitted (by our customers) from disclosing that information to the media. There are very strict confidentiality clauses in the commercial contracts we enter into with our customers, and that precludes us from providing that. The reason is that if we are providing information about a specific blend, when it is in our system, etc. – that has the potential to identify who our customers may be or allow others to take financial positions in the market and profit from that information when others do not have access to the same information. This has much farther reaching impacts for the financial markets (and ultimately all of us).”

Whether Approved Or Not, Keystone XL Has Been A Victory For Lobbyists

For the past six years, lobbyists in Washington have made a killing shilling either for or against the Keystone XL tar sands pipeline.  And with no clear end in sight, the folks on K Street will continue to see a flurry of cash headed in their direction.

During last year’s heated presidential race, groups spent close to $16 million directly related to the Keystone XL pipeline, with most of that money coming from industry and other proponents of the pipeline.  While opponents of the pipeline spent a few million last year – with at least one million pledged this year to fight against KXL – the lion’s share of the money spent on lobbying comes from the dirty energy industry.

Bloomberg reported the following on how intense the lobbying showdown has been in recent years:

Fracking Making Its Way Toward the UK

To date, opposition to hydraulic fracturing (“fracking”) for unconventional oil and gas in the United Kingdom (UK) has been fierce. The opposition, though, seems to be meeting deaf ears in England, according to recent news reports. 

Bloomberg reported on Dec. 4 that England's Energy Secretary, Ed Davey, wants to lift the country's currently exisiting moratorium on fracking. The halt was put in place after drilling sites owned by Cuadrilla Resources caused two minor earthquakes in northwestern England in November 2011.

England's Chancellor of the Exchequer (a position equivalent to the Secretary of the Treasury in the United States), George Osborne, is set to release Britain's new energy plan on Dec. 5 and told Bloomberg he wants to ensure “Britain is not left behind” in the unconventional oil and gas boom.  

“Cuadrilla estimates that the area it is exploring in Lancashire, in northwestern England, could contain 200 trillion cubic feet of gas—more gas than all of Iraq,” explained Bloomberg. John Browne, the scandal-ridden former CEO of BP, sits as the Chairman of the Board of Directors of Cuadrilla. 

Osborne, The Independent recently reported, will also offer tax breaks to oil and gas corporations hungry to profit from England's shale gas prize. 

“Mr. Osborne hopes that tax breaks for shale gas extraction will encourage investors and help economic growth,” The Indepedent wrote. “Oil and gas are currently taxed at between 62 per cent and 81 per cent. Shale gas would be taxed at lower rates.”

An astounding 64-percent of the English countryside could soon be subject to fracking, which is over 34,000 square miles, according to The Independent

ALEC, CSG, ExxonMobil Fracking Fluid "Disclosure" Model Bill Failing By Design

Last year, a hydraulic fracturing (“fracking”) chemical fluid disclosure “model bill” was passed by both the Council of State Governments (CSG) and the American Legislative Exchange Council (ALEC). It proceeded to pass in multiple states across the country soon thereafter, but as Bloomberg recently reported, the bill has been an abject failure with regards to “disclosure.”

That was by design, thanks to the bill's chief author, ExxonMobil

Originating as a Texas bill with disclosure standards drawn up under the auspices of the Obama Administration's Department of Energy Fracking Subcommittee rife with oil and gas industry insiders, the model is now codified as law in Colorado, Pennsylvania, and Illinois.

Bloomberg reported that the public is being kept “clueless” as to what chemicals are injected into the ground during the fracking process by the oil and gas industry.

Pages

Subscribe to bloomberg