As the world’s appetite for oil and gas continues to increase while access to easily accessible reserves decreases, deep-sea oil and gas wells are being positioned in ever-deeper waters. The dangers and difficulties faced in such operations were highlighted in 2010 with the Deepwater Horizon oil spill. While placing a containment dome over a leak and piping the oil to a surface storage vessel had worked on leaks in shallower water, the attempt to do the same on the Deepwater Horizon’s largest leak failed when the formation of methane hydrate crystals blocked the opening at the top of the dome. Now researchers at MIT have developed surface coatings that can inhibit the buildup of these methane hydrates and keep the gas and oil flowing.

Methane hydrate is a solid cage-like compound – or clathrate – that forms under very high pressure in which a large amount of methane is trapped within a crystal structure of water to form an ice-like solid. Although it was originally thought to only occur in the outer reaches of the solar system, it is now estimated that total amount of methane contained in hydrates in the world’s seafloor is much greater than the total known reserves of all other fossil fuels combined.

Much like the buildup of cholesterol and fatty deposits on the inner walls of arteries inside the body, the buildup of methane hydrates – which can freeze upon contact with cold water in the depths of the ocean – inside a well casing or on the inner walls of pipes that carry oil or gas from the ocean depths can restrict or even block the flow of gas or oil. It was this kind of blocking that caused the failure of the containment dome technique attempt on the Deepwater Horizon leak.

Current techniques to prevent this happening include the heating or insulation of the pipes – which is expensive – or adding methanol into the flow of gas or oil – which can harm the environment if it escapes.

An MIT team led by associate professor of mechanical engineering Kripa Varanasi had been looking for a solution to this problem even before the Deepwater Horizon spill and now say they have found it. Having already studied the use of superhydrophobic surfaces to prevent the buildup of ordinary ice on things such as aircraft wings, the team decided to examine whether similar surfaces could be used to keep pipe walls clear of methane hydrates.

Using a simple “hydrate-phobic” coating, Varanasi and his colleagues were able to reduce the adhesion of hydrates in a pipe to one-quarter the amount compared to untreated surfaces.

“The oil and gas industries currently spend at least $200 million a year just on chemicals” to prevent methane hydrate buildups, Varanasi says. However, the total figure for prevention and lost production due to hydrates would be much, much higher. Using passive coatings on the insides of pipes would be much cheaper than current prevention techniques and allow the use of containment domes to capture flows from leaks in much deeper waters than is currently possible.

Additionally, the team says the test system they devised provides a simple and inexpensive way to search for even more effective inhibitors. They say their findings are also applicable to other adhesive solids, such as solder adhering to a circuit board, or calcite deposits inside plumbing lines. The testing methods developed by the researchers could also be used to evaluate coatings for a variety of commercial and industrial processes.

The team’s findings are detailed in a paper published in the journal Physical Chemistry Chemical Physics.

Source: MIT

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The East Coast basin is “literally leaking oil and gas” and provides potential for thousands of wells, an oil company with exploration permits in the area says.

New Zealand’s main oil and gas producing region is at Taranaki on the west coast of the North Island but Tag Oil says the East Coast basin on the other side of the North Island has “world class upside potential”.

A presentation by the small Canadian-based company on its website says it has identified widespread oil and gas seeps over a large area.

The presentation says the “East Coast basin is literally leaking oil and gas”.

The Sunday Star Times newspaper reported that the company regarded the East Coast as a “Texas of the south” and wanted to pursue an aggressive program there.

Last September the company said it was undertaking seismic testing in the region, with first exploration drilling planned after that. The region is seen as having potential for so-called shale oil extracted from rock.

The company has a farmout deal with Apache for the region, under which Apache may spend up to $US100 million ($A97 million) to earn up to half of Tag’s present 100 per cent share of exploration prospects.

“This is not where New Zealand’s economic future lies. We need to be investing instead in renewable solutions,” says Moana Mackey, Labour’s Energy representative.

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SAUDI ARABIA RAISES PRODUCTION WITH LITTLE VARIANCE IN PRICE EFFECT

Saudi Arabia is by far the world’s largest oil exporter. Thus, when it raises its production, oil prices usually fall. Yet, when Ali Naimi, Saudi oil minister, said last week Riyadh was pumping more than 10m barrels a day, prices barely moved a few cents.

Oil traders were in disbelief at the number. The International Energy Agency estimated that in October the kingdom pumped 9.45m barrels a day and Opec itself put Saudi production at 9.47 b/d in the same month. The level of production that Mr Naimi stated suggested a huge increase, in only a few weeks. Moreover, the 10m b/d is a psychological barrier – a level the kingdom has not reached since the aftermath of the second oil crisis in 1979.

The level of Saudi oil production has triggered a heated debate among oil traders, analysts and government officials.

The discussion is twofold: on the one hand, about the level itself; on the other, about why it has boosted its output at a time when many are betting that oil demand growth is slowing down, not accelerating.

The discussion is critical to understand the direction of oil prices in 2012.

The 10m b/d figure is controversial in the market.

Some oil traders do not believe the number at all. Two of the largest top-five independent oil trading houses have told me that their own numbers suggest a much lower production level. The traders largely dismiss the 10m b/d figure as a bargaining tactic ahead of the Opec meeting on Wednesday.

Yet, other sources suggest that Saudi Arabia has indeed boosted production sharply over the past few weeks, potentially towards the 10m b/d mark.

The Lloyd’s List Intelligence Apex database, which tracks tankers around the world, puts Saudi Arabia’s oil exports at nearly 7.4m b/d. Add local demand of about 2.7m b/d and you get to the 10m b/d. In addition, Lloyd’s List Intelligence estimates suggest that Riyadh boosted month-on-month exports sharply, from 6.7m b/d in October to 7.4m b/d in November. Other tanker trackers have yet to publish their numbers, but the talk in the market is that they also have witnessed a big increase in tankers sailing from Saudi oil export terminals.

So if the numbers are right – a big if for many traders – what do they say about the health of the global oil market?

The International Energy Agency puts global oil demand this quarter at 91.4m b/d, up from 90.9m b/d from the previous quarter due to the onset of the Northern hemisphere winter and the surge in heating demand. The seasonal increase in demand could well explain an output hike.

But I think there is more. China’s oil demand, which only a month ago appeared to be slowing down to a halt, could be accelerating in reality. Chinese refiners processed a record amount of crude oil in November to offset diesel shortages and oil imports surged last month to the second-highest monthly volume on record, hitting 5.52m b/d, just short of an all-time high of 5.67m b/d in September 2010, according to estimates by Thomson Reuters based on official Chinese data.

The bottom line is that Saudi Arabia could very well be telling a lot of naysayers and sceptics in the market that global crude oil demand is a lot healthier than many assume.

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Anadarko Petroleum, the US oil and gas independent, has more than doubled the estimated size of its biggest natural gas discovery, located off the coast of Mozambique.

“This could be one of the most important natural gasfields discovered in the last 10 years,’’ Jim Hackett, Anadarko’s chief executive, told the Financial Times.

Mr Hackett said the Barquentine-3 appraisal well encountered more than 662 net feet of natural gas pay. That expanded the estimated recoverable resource range to 15 to 30 plus trillion cubic feet (Tcf) of natural gas, with an estimated 30 to 50 plus Tcf of natural gas in place.

Anadarko has not released how much it plans to invest but the size of the find indicates it could easily surpass $10bn over the life of the field. “There is no question this will be a commercial project,’’ Mr Hackett said.

The well is in the same offshore Mozambique deepwater in which Eni, the Italian oil group, said in late October it had made an extensive gas discovery. Eni estimated the size of its find at 15,000bn-20,000bn cubic feet. The well was then deepened, and Eni put the size at 22,500bn cubic feet.

Anadarko, which has drilled six successful wells in the area, has a working interest of 36.6 per cent in 2.6m-acre field known as Offshore Area 1. It has five junior partners with Mitsui E&P Mozambique holding 20 per cent.

Anadarko said it will be accelerating its drilling programme with two dedicated rigs. “We will be advancing this very aggressively,’’ Mr Hackett said.

The exploration and appraisal will determine the ultimate size of recoverable resources but Mr Hackett said the target was to begin construction in 2013 with a goal to bring the resources to market in 2018.

Anadarko is planning a large liquefied natural gas (LNG) development to support the field. It is being designed to consist of at least two trains – facilities to liquefy the gas – with the flexibility to expand to six.

The announcement follows Anadarko’s agreement last month to pay $4bn to BP to settle claims related to the Macondo oil spill in the Gulf of Mexico, an attempt to draw a line under the disaster. The spill had weighed on the company, which was a junior partner in that well.

While Anadarko had compartmentalised the risk and continued a strong exploration programme that has yielded significant finds in recent years, ranging from west Africa to Brazil to the US, the uncertainty over how much it would be forced to commit to Macondo claims had kept investors from fully valuing its pipeline of development projects.

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Ethiopia, Ghana and Mauritania

Capital Drilling, the emerging and developing drilling company, has recently been awarded another three new contracts. They are for BHP Billiton in Ethiopia, and two for Kinrtoss Gold, one in Ghana and the other in Mauritania. Commenting, Jamie Boyton, Executive Chairman, said: “I am very pleased to announce [these] contract wins, which follow closely on the heels of contracts recently awarded in Chile with BHP and the Solomon Islands with Allied Gold. The contracts represent the expansion of existing relationships with blue chip and major mining companies and further strengthens the long term visibility of our revenue profile. Having concluded successfully our first energy contract with Oil Search in Papua New Guinea we are looking forward to working in Ethiopia and continuing to grow the energy division. The contract with Kinross continues our drive in the significant market of West Africa.”Capital Drilling Energy has been awarded a contract with BHP Billiton, the second contract with the mining major this year, which will initially involve the deployment of one rig to carry out exploration drilling for potash in the Danakil Depression of the Afar National Regional State in northeast Ethiopia. The contract is expected to run until late 2011 and represents the group’s second energy contract. The rig required for the contract is currently in mobilisation and represents an addition to the group’s fleet.Capital Drilling Africa has been awarded a contract with Kinross Gold in Ghana where it recently acquired the Chirano gold mine through the takeover of Redback Mining. Capital Drilling Africa has been contracted to supply two diamond rigs for development drilling, with the contract expected to commence in early Q3 2011 for a minimum 12 month contract. The rigs required will be sourced from the existing fleet.

Capital Drilling Africa has been awarded a further contract with Kinross Gold in Mauritania which represents an expansion of activity at the Tasiat gold mine, where the group currently has five diamond rigs operating. The new contract is for an additional air core rig to be utilised in exploration drilling, which has been sourced from within the existing fleet.

Capital Drilling, which has a Premium Listing on the Main Market of the London Stock Exchange, provides specialised drilling services to mineral exploration and mining companies in emerging and developing markets, for exploration, development and production stage projects. ThecCompany currently owns and operates a fleet of 78 drilling rigs with established operations in Tanzania, Zambia, Egypt, Mauritania, Mozambique, PNG, Eritrea and Chile. The group’s corporate headquarters is in Singapore and it has its administrative offices for South America in Santiago, Chile.

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OLI GIExxon earned nearly $US11 billion ($A10.15 billion) in the first quarter, a performance likely to land it in the centre of the national debate over high gasoline prices.

The world’s largest publicly traded company on Thursday reported net income of $US10.65 billion ($A9.83 billion), or $US2.14 per share, in the first three months of the year. That compares with $US6.3 billion ($A5.81 billion), or $US1.33 per share a year ago. Revenue increased 26 per cent to $US114 billion ($A105.2 billion).

The results surpassed Wall Street estimates of $US2.04 per share on sales of $US112.6 billion ($A103.91 billion), according to FactSet.

The quarter was Exxon’s best since it earned a record $US14.83 billion ($A13.69 billion) in 2008′s third quarter. It comes at a time when some drivers are paying $US4 or more for gas and President Obama is threatening the oil industry’s multibillion-dollar tax subsidies.

Earnings grew across the company’s business segments. Income from its exploration and production business gained 49 per cent to $US8.7 billion ($A8.03 billion) while the company’s downstream business, which includes refineries, posted a huge 30-fold jump to more than $US1.1 billion ($A1.02 billion).

Anticipating a strong reaction to the results from drivers and politicians, Exxon said on a company blog on Wednesday that it has little control over the price of oil, which has risen to near $US113 per barrel. The company also noted that less than 3 cents of every dollar it earns comes from the sale of gasoline and diesel fuel.

That may not appease many motorists, however. The national average for a gallon of gas is $US3.89, about $US1.02 more than a year ago. It’s above $US4 in 8 states and the District of Columbia. And on Thursday, the Commerce Department said economic growth slowed sharply in the first quarter, partly because of high gas prices.

On the blog, Ken Cohen, Exxon’s vice president of public and government affairs, said the company was anticipating “the inevitable headlines and sound bites about high gasoline prices and what to do about them” after the earnings were reported.

Exxon’s huge profit followed similar results by other oil companies.

Europe’s largest oil company, Royal Dutch Shell PLC, reported $US8.78 billion ($A8.1 billion) in first-quarter profits, up 60 per cent from a year ago. BP PLC’s quarterly earnings rose 16 per cent to $US7.2 billion ($A6.64 billion). ConocoPhillips said net income grew 43 per cent to $US3 billion ($A2.77 billion) and Occidental Petroleum Corp said earnings climbed 46 per cent to $US1.55 billion ($A1.43 billion).

Exxon Mobil Corp increased earnings even though it produced less oil and natural gas liquids. Benchmark crude prices rose 20 per cent from a year ago.

The company has increasingly focused on producing natural gas. Exxon expects natural gas to displace coal as the second most important fuel source within the next decade, and last year it acquired XTO Energy to become the largest US natural gas producer.

Natural gas production increased 24 per cent in the quarter for Exxon, but prices declined as other companies followed Exxon’s lead and rushed to develop underground shale gas deposits in North America. Natural gas prices fell nearly 16 per cent from a year ago.

AP   Sourced & published by Henry Sapiecha

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Liquid salt could help clean up tar sands

A tar sand sample treated with the ionic liquid process
(Photo: Penn State University)

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February 4, 2011 – 10:17AM

The  market has opened higher after receiving mixed leads from offshore trading overnight, with Wall Street flat to slightly higher, European markets mixed, Asian markets mostly closed and precious metals higher. Oil was down a touch.

In early trade, the benchmark S&P/ASX200 index rose 15.2 points, or 0.3 per cent, to 4835.8 and the All Ordinaries gained 13.2 points, or 0.3 per cent, to 4932.5.

• For market data by sector, click here
• For share price information, click here
• For the latest currency movements, click here

What’s out today

In economics news, the Reserve Bank of Australia releases its quarterly Statement on Monetary Policy.

The Australian Office of Financial Management conducts a tender process to issue $700 million of the November 2012 bond line.

In equities news, Aristocrat Leisure manager for Australia and NZ, Trevor Croker, appears before a public hearing in Sydney of the Joint Select Committee on Gambling Reform.

In the news this morning

Qantas chief Alan Joyce has questioned the viability of its full-service international operations without a change of direction.

Murdoch’s latest project is a US-only, iPad-only “newspaper of the 21st century” that takes the tablet bar to a new high.

The wealth contained within Lang Hancock’s discovery in Western Australia’s Pilbara has propelled his daughter to the top of Australia’s rich list.

And world food prices have hit a new high, the United Nations has said.

Plus, Malcolm Maiden asks whether wireless is the hair in the NBN soup, Ian Porter on industry policy and Harold Mitchelllooks ahead to a great year.

Offshore overnight

US stocks kicked up in late trading, after dipping as concerns over violent protests in Egypt weighed against better-than-expected economic news in the US, including retail sales data that gave Wall Street a late boost.

Clashes continued in Egypt between pro- and anti-government demonstrators, leaving some analysts worried about their impact on oil-rich countries throughout the Middle East like Saudi Arabia and the stability of the region.

But better-than-expected December sales figures sent retail companies higher. Consumer discretionary companies in the Standard and Poor’s 500-stock index gained 1 per cent after national chains reported that sales were nearly double what analysts had forecast despite heavy snowstorms in much of the nation. Costco Wholesale Corp, Limited Brands, Nordstrom and Gap all gained more than 4 per cent.

During afternoon trading, too, US Federal Reserve chairman Ben Bernanke, opened the door for more stimulus to the US economy if the bank judged it necessary.

The S&P 500 – the benchmark for most US mutual funds – rose 3.07 points, or 0.24 per cent, to 1307.1. The Dow Jones industrial average closed up 20.29 points higher, up 0.17 per cent, at 12,062.26. The Nasdaq composite rose 4.32 points, or 0.16 per cent, to 2753.88.

European stock markets retreated and the euro dropped lower against the US dollar on Thursday as the ECB kept interest rates on hold, better-than-expected US data and ongoing unrest in Egypt.

London’s FTSE 100 index of leading shares dipped 0.28 per cent to 5983.34 points, and in Paris the CAC 40 dropped 0.74 per cent to 4036.59 points.

In Frankfurt, the DAX bucked the trend to close up 0.14 per cent at 7193.68 points.

Elsewhere in Europe, Swiss stocks ended off 0.13 per cent, Brussels slipped 0.14 per cent, Lisbon dipped 0.41 per cent, Amsterdam shed 0.68 per cent, Milan dropped 0.93 per cent, and Madrid fell 1.36 per cent.

In foreign exchange trade, the euro ran into profit-taking ahead of an interest rate call from the European Central Bank, and fell further thereafter, suggesting markets had curbed expectations of a rate hike early this year.

The shared euro zone unit retreated to 1.3648 dollars, compared with 1.3808 dollars late in New York.

How we fared yesterday

The Australian stock market closed in the black following gains in the mining sector on the back of record copper prices overnight.

Insurance stocks rebounded amid relief that the impact of Cyclone Yasi was less devastating than expected.

The benchmark S&P/ASX200 index was up 24.1 points, or 0.5 per cent, at 4820.6 points, while the broader All Ordinaries index added 21.4 points, or 0.44 per cent, to 4919.3 points.

Commodities

At one point, Brent North Sea crude for delivery in March climbed to $US103.37 a barrel — the highest level since September 26, 2008.

It later stood at $US102.27 in London trade, down seven cents compared with Wednesday’s close.

New York’s main futures contract, light sweet crude for March, dipped 33 US cents to $US90.53 per barrel in late afternoon trade.

The oil market is jittery due to fears the crisis in Egypt could spill over to other countries in the crude-rich but politically volatile Middle East. Although Egypt is not a major crude producer, it controls the Suez Canal, which carries about 2.4 million barrels daily, roughly equal to Iraq’s output.

Hasegawa added that the spread in the price between Brent crude and the benchmark New York contract, also known as West Texas Intermediate (WTI), was likely to widen further because of oversupply in the US port of Cushing, Oklahoma.

The latest weekly stockpiles report from the US Department of Energy showed reserves had increased sharply for a third week in a row.

Crude oil stocks rose 2.6 million barrels to 343.2 million in the week ending January 28, in line with expectations, official data showed on Wednesday.

At the almost-full depot at Cushing, reserves rose 600,000 barrels to a record high of 38.3 million.

Gold rose over 1 per cent in volatile trade as strong buying by exchange traded funds and safe-haven demand driven by ongoing unrest in Egypt triggered large buy orders.

After trading lower in most of the morning session, gold rallied at midday in New York, just ahead of a speech by Federal Reserve Chairman Ben Bernanke and with financial markets already worried about escalating political tensions in Egypt and the Middle East.

Sizeable volume of buy-orders from ETFs — which were sellers earlier — hit the market once gold prices rose to $US1345 an ounce, Perez-Santalla said.

Gold also benefited from the latest remarks by Bernanke, who said that the US economic recovery still needs help from the Fed despite signs of improvement.

Bullion investors are paying close attention to Friday’s US January nonfarm payroll data. Traders said that gold prices could retreat sharply if the data promotes an optimistic view of the economy.

Spot gold rose 1.3 per cent to $US1353.55 an ounce after trading as low as $US1324.79.

US gold futures for April delivery settled up $US20.90, or 1.6 per cent, at $US1353. Volume was in line with its 30-day moving average after notching lower than usual turnover in the past three sessions.

Silver climbed 1.5 per cent to $US28.77 an ounce.

What you need to know

• The $A was up at 101.58 US cents
• In the US, the S&P500 was up 3.07 points to 1307.1
  
• In Europe, the FTSE 100 fell 16.73 points to 5983.34
• Gold was up $US20.90 an ounce to $US1353.00
• Oil fell 8 US cents a barrel to $US90.78
• The Reuters Jefferies CRB Indexfell 0.81%

AAP, with BusinessDay

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Hibernia GBS

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