Monday, May 17, 2010

BP Sucking Oil from Tube Working in Gulf Spill

NEW ORLEANS — Oil company engineers on Sunday finally succeeded in keeping some of the oil gushing from a blown well out of the Gulf of Mexico, hooking up a mile-long tube to funnel the crude into a tanker ship after more than three weeks of failures.
Millions of gallons of crude are already in the water, however, and researchers said the black ooze may have entered a major current that could carry it through the Florida Keys and around to the East Coast.
BP PLC engineers remotely guiding robot submersibles had worked since Friday to place the tube into a 21-inch pipe nearly a mile below the sea. After several setbacks, the contraption was hooked up successfully and funneling oil to a tanker ship. The oil giant said it will take days to figure out how much oil its contraption is sucking up.
The blown well has been leaking for more than three weeks, threatening sea life, commercial fishing and the coastal tourist industry from Louisiana to Florida. BP failed in several previous attempts to stop the leak, trying in vain to activate emergency valves and lowering a 100-ton container that got clogged with icy crystals.
A researcher told The Associated Press on Sunday that computer models show the oil may have already seeped into a powerful water stream known as the loop current, which could propel it into the Atlantic Ocean. A boat is being sent next week to collect samples and learn more.
William Hogarth, dean of the University of South Florida's College of Marine Science, said one model shows oil has already entered the current, while a second shows the oil is 3 miles from it — still dangerously close. The models are based on weather, ocean current and spill data from the U.S. Navy and the National Oceanic and Atmospheric Administration, among other sources.
Hogarth said it's still too early to know what specific amounts of oil will make it to Florida, or what damage it might do to the sensitive Keys or beaches on Florida's Atlantic coast. He said claims by BP that the oil would be less damaging to the Keys after traveling over hundreds of miles from the spill site were not mollifying.
"This can't be passed off as 'it's not going to be a problem.'" Hogarth said. "This is a very sensitive area. We are concerned with what happens in the Florida Keys."
BP had previously said the tube, if successful, was expected to collect most of the oil gushing from the well. On Sunday, the company said it was too early to measure how much crude was being collected and acknowledged the tube was no panacea.
"It's a positive move, but let's keep in context," said Kent Wells, BP's senior vice president for exploration and production. "We're about shutting down the flow of oil from this well."
Crews will slowly ramp up how much oil the tube collects over the next few days. They need to move slowly because they don't want too much frigid seawater entering the pipe, which could combine with gases to form the same ice-like crystals that doomed the previous containment effort.
The first chance to choke off the flow for good should come in about a week. Engineers plan to shoot heavy mud into the crippled blowout preventer on top of the well, then permanently entomb the leak in concrete. If that doesn't work, crews also can shoot golf balls and knotted rope into the nooks and crannies of the device to plug it, Wells said.
The final choice to end the leak is a relief well, but it is more than two months from completion.
Still, scientists warned of the effects of the oil that has already leaked into the Gulf. Researchers said miles-long underwater plumes of oil discovered in recent days could poison and suffocate sea life across the food chain, with damage that could endure for a decade or more.
Researchers have found more underwater plumes of oil than they can count from the well, said Samantha Joye, a professor of marine sciences at the University of Georgia. She said careful measurements taken of one plume showed it stretching for 10 miles, with a 3-mile width.
The hazardous effects of the plume are twofold. Joye said the oil itself can prove toxic to fish swimming in the sea, while vast amounts of oxygen are also being sucked from the water by microbes that eat oil. Dispersants used to fight the oil are also food for the microbes, speeding up the oxygen depletion.
"So, first you have oily water that may be toxic to certain organisms and also the oxygen issue, so there are two problems here," said Joye, who's working with the scientists who discovered the plumes in a recent boat expedition. "This can interrupt the food chain at the lowest level, and will trickle up and certainly impact organisms higher. Whales, dolphins and tuna all depend on lower depths to survive."
Oil has been spewing since the rig Deepwater Horizon exploded April 20, killing 11 people and sinking two days later. The government shortly afterward estimated the spill at 210,000 gallons — or 5,000 barrels — a day, a figure that has since been questioned by some scientists who fear it could be far more. BP executives have stood by the estimate while acknowledging there's no way to know for sure.
BP has been casting about for ways to contain the leak since it was discovered several days after the blast. First robot submarines were unable to get valves to work on machinery at the well head called the blowout preventer. Then the company failed to capture the oil with a 100-ton box after icelike crystals formed in it.
Collins reported from Hammond.

Sunday, May 16, 2010

Natural Gas Storage Up Again Week Ending May 15, 2010

Natural gas prices continued a weeklong rally Thursday on a government report that showed gas in storage increased less than expected last week.
Natural gas prices rose 5.5 cents to settle at $4.339 per 1,000 cubic feet of gas on the New York Mercantile Exchange. Prices have jumped about 9 percent since May 5.
The Energy Information Administration said in its weekly report that natural gas inventories held in underground storage in the lower 48 states rose by 94 billion cubic feet last week to about 2.09 trillion cubic feet. Analysts expected an increase of between 100 billion and 104 billion cubic feet, according to a survey by Platts, the energy information arm of McGraw-Hill Cos.
Despite than lower-than-expected build, natural gas in storage remains well above normal levels for this time of year. And unlike oil prices, which have been rebounded sharply in the past year, natural gas prices have remained cheap.
The recession has hurt demand for gas as industries and consumers used less energy. Meanwhile producers are pulling more gas from the country's vast underground reserves, pushing supplies higher.
Oil prices continued to slide Thursday. Crude followed the stock market lower, with investors disappointed that jobless claims did not fall as much as expected in the weekly report from the Labor Department. Benchmark crude for June delivery dropped $1.25 to settle at $74.40 a barrel on the Nymex. Prices have fallen about 15 percent in the last 10 days.
The Dow Jones Industrial Average was off about 85 points in mid-afternoon trading.
Oil prices have yet to be affected by the giant spill in the Gulf of Mexico though there is worry that the spill may eventually interfere with tankers carrying imported oil to Gulf ports and vessels moving refined products to other parts of the country.
The well's owner, BP PLC, said Thursday that its costs for trying to stop the gusher, containing the spill and helping Gulf states foot the response tab totaled $450 million, up $100 million since its Monday update to securities regulators. The spill started after an oil rig exploded and sank on April 20.
Lower oil prices are slowly making their way to drivers filling up at the pump. Gasoline prices fell 0.6 cent overnight to a national average of $2.89 per gallon, according to AAA, Wright Express and Oil Price Information Service. Prices have fallen 3.9 cents in the past week, but remain 4.2 cents higher than a month ago and 62.3 cents above year-ago levels.
In other Nymex trading in June contracts, heating oil fell 2.72 cents to settle at $2.1319 a gallon, gasoline lost 1.53 cents to settle at $2.1951 a gallon.
In London, Brent crude was down $1.09 to settle at $80.51 on the ICE futures exchange.
Associated Press writers Pablo Gorondi in Budapest and Alex Kennedy in Singapore contributed to this report.

Saturday, May 15, 2010

Barclay Bank Advises Investors on Oil Spill

By Jeff Kearns
May 14 (Bloomberg) -- Investors should sell bearish Transocean Ltd. options and buy BP Plc’s to take advantage of a price anomaly after the gulf oil spill, Barclays Plc said.
Options strategist Maneesh Deshpande, who leads the top- ranked derivatives strategy team in Institutional Investor magazine’s 2009 survey, recommended selling Transocean’s January $45 puts and buying January $40 puts linked to American depositary receipts of BP, Europe’s largest oil company. Puts give the right to sell a stock.
“The options market seems to be pricing in a higher downside risk,” for Transocean because the premium for its puts is high compared with calls while BP’s put premium is “cheap,” New York-based Deshpande wrote. “We recommend this trade to investors looking to express a bearish view on the impact of the accident.”
Transocean, based in Vernier, Switzerland, is the owner and operator of the Deepwater Horizon drilling rig leased to BP that exploded and sank last month in the Gulf of Mexico, causing the largest spill in 40 years from an offshore U.S. rig or platform. Oil has been gushing from the underwater well at a rate of 5,000 barrels a day, according to a U.S. Coast Guard estimate.
Transocean has tumbled 28 percent to $66.32 from the April 20 disaster through today, while London-based BP’s U.S. shares have lost 23 percent to $46.87. Energy companies in the Standard & Poor’s 500 Index are down 7.3 percent during the same period.
Transocean has asked a U.S. federal court to limit its liability for the accident to $26.7 million. More than 100 lawsuits have been filed against it, the company said in a statement today.
To contact the reporter on this story: Jeff Kearns in New York atjkearns3@bloomberg.net.

Wednesday, May 12, 2010

U.S. Crude Oil Inventories Up Causing Slight Price Fall

By Mark Shenk
May 12 (Bloomberg) -- Crude oil declined in New York after a U.S. government report showed that inventories climbed for the 14th time in 15 weeks.
Supplies of crude oil gained 1.95 million barrels to 362.5 million, the Energy Department said. Stockpiles at Cushing, Oklahoma, where the New York-traded West Texas Intermediate oil grade is stored, rose to a record. The price of oil for prompt delivery dropped more than contracts in future months.
“The inventory build is pulling prices lower,” said Jason Schenker, president of Prestige Economics LLC, an Austin, Texas- based energy consultant. “The front-month contract is under more pressure than those further out because of the supply glut at Cushing.”
Crude oil for June delivery fell 79 cents, or 1 percent, to $75.58 a barrel at the 2:30 p.m. close of floor trading on the New York Mercantile Exchange. Oil is down 4.8 percent this year.
The price of oil on the Nymex for June delivery is $4.55 a barrel lower than for July, the widest divergence between front month contracts since Feb. 13, 2009. The spread between the June and December contracts is $10.32, a contango encouraging buyers to store barrels.
Brent crude oil for June settlement rose 47 cents, or 0.6 percent, to $80.96 on the London-based ICE Futures Europe exchange. Brent, usually cheaper than Nymex futures, is trading at a $5.38-a-barrel premium, the most since Feb. 17, 2009.
Crude supplies rose to the highest level since the week ended May 29, 2009. The increase left stockpiles 6.1 percent above than the five-year average for the period, up from 5.4 percent last week. It was the 14th gain in 15 weeks.
Inventory Forecast
Stockpiles of crude oil were forecast to climb 1.6 million barrels, according to the median of 17 analyst responses in a Bloomberg News survey.
Inventories at Cushing increased 784,000 barrels to 37 million, the second straight week supplies reached the highest level since the department began reporting on supplies at the hub in April 2004.
“There was another build at Cushing, which should put downward pressure on crude,” said Tom Bentz, a broker at BNP Paribas Commodity Futures Inc. in New York. “The gasoline number was a lot more supportive than expected.”
Gasoline inventories fell 2.81 million barrels to 222.1 million last week, the report showed. Supplies of gasoline were forecast to increase by 400,000 barrels, according to the median of analyst responses in the Bloomberg News survey.
Gasoline for June delivery climbed 1.52 cents, or 0.7 percent, to $2.2104 a gallon in New York. Futures touched $2.2345, the highest level since May 5.
Increasing Margin
The margin, or crack spread, for processing three barrels of oil into two of gasoline and one of heating oil surged 9.3 percent to $16.451 a barrel today, based on futures prices. It was the highest level since Feb. 12, 2009.
“The rise in gasoline prices is good for one group, refiners,” said Sean Brodrick, a natural resource analyst with Weiss Research in Jupiter, Florida. “They should see the crack spread widen.”
Refineries operated at 88.4 percent of capacity, down 1.2 percentage points from the prior week and the first decline since March, the report showed.
Oil prices also dropped after the dollar rose against the euro, reducing the appeal of the raw material to investors. The dollar traded at $1.2634 per euro, up 0.2 percent from $1.2662 yesterday.
Market Fundamentals
“The economy and the dollar have been the biggest movers of this market recently, not fundamentals,” said Chip Hodge, who oversees a $9 billion natural-resource bond portfolio as senior managing director at MFC Global Investment Management in Boston. “Eventually we will have to move on the fundamentals because there are plenty of barrels of both crude and products in storage.”
The International Energy Agency cut its estimate of world oil demand this year by 220,000 barrels to 86.4 million barrels a day in a monthly report.
The Organization of Petroleum Exporting Countries bolstered oil output by 40,000 barrels a day in April, according to the IEA. Supplies from the 11 members bound by quotas rose to 26.79 million barrels a day, 70,000 barrels a day more than in March. That means the group’s compliance with the record output cuts slipped to 54 percent last month. Iraq has no output target.
OPEC Barrels
OPEC members will need to pump 28.7 million barrels a day to balance global oil demand and supply this year, according to the IEA. That is 400,000 barrels fewer than the Paris-based agency estimated last month.
Iran, holder of the world’s second-largest oil reserves, may be storing as much as 38 million barrels of crude at sea as demand declines for the heavier, sour grades the Persian Gulf country sells, according to the IEA.
Oil volume on the Nymex was 873,674 contracts as of 2:36 p.m. in New York. Volume totaled 908,890 contracts yesterday, 28 percent greater than the average of the past three months. Open interest was 1.47 million contracts.
To contact the reporter on this story: Mark Shenk in New York atmshenk1@bloomberg.net.
Last Updated: May 12, 2010 14:49 EDT 

Chesapeake Light Trucks Run on Natural Gas


OKLAHOMA CITY, May 11, 2010 (BUSINESS WIRE) -- Chesapeake Energy Corporation(CHK 23.28, +0.18, +0.78%) was recognized by the NAFA Fleet Management Association (NAFA) for its environmental leadership when it was awarded the 2010 Sustainable Fleet Award. Presented by NAFA during its annual Institute & Expo held in Detroit, Michigan, the award recognized Chesapeake's program to convert its light-duty truck fleet to operate on clean-burning American natural gas.
An international competition, NAFA's Sustainable Fleet Award recognizes ground-breaking fleet programs for reducing energy consumption, lowering carbon emissions and reducing operating expenses. Chesapeake was recognized in the Sedan/Light-Duty -- Non-Mandated Clean Air Category, highlighting Sedans/light-duty fleets located in areas of the U.S. or Canada that are not covered by a government mandate to reduce carbon emissions.
The Sustainable Fleet Award was presented by NAFA's Treasurer, Bryan Flansburg, who directs the association's Fuels & Technology Advisory Council, and was accepted by Anthony Foster, Chesapeake's Fleet Operations Manager. "It is a privilege to accept this award on behalf of Chesapeake and our NGV Team. As Fleet Managers, we want to have a positive impact on the communities where we operate. Converting our company fleet to run on clean, American natural gas is one way we can have a positive impact because CNG is good for both the environment and economy," said Foster.
"Chesapeake Energy has been at the forefront of the growing CNG movement in America," said NAFA Executive Director Phillip E. Russo. "The company's robust CNG fleet conversion program is part of a bigger initiative to adopt sustainable practices within its company fleet operations. NAFA is proud to recognize Chesapeake Energy for its efforts."
Aubrey K. McClendon, Chesapeake's Chief Executive Officer, commented, "We appreciate this recognition by NAFA of our NGV program, which was implemented as we convert our entire fleet to run on CNG as part of our corporate 'Fueling America's Future Initiative'. Our country enjoys a significant competitive advantage when it comes to addressing economic, environmental and energy issues from the discovery and development of a once unimaginable supply of natural gas. Without question, natural gas will allow our country to transition our transportation system away from expensive and carbon-heavy gasoline and diesel towards carbon-light, affordable American produced natural gas. At Chesapeake, we always try to lead by example, encourage innovation and invest in the greater use of natural gas, which we know is a superior fuel for transportation, power generation and industrial usage."
CNG has 30% less carbon dioxide, 97% less carbon monoxide, 99% less Particulate Matter, and 100% less evaporative emissions than gasoline. CNG costs approximately 50% less per gallon than gasoline and diesel.
Chesapeake will convert 1,000 trucks within its corporate fleet in the next 12-18 months with plans to convert the entire fleet of 3,300 over the next 3-4 years. Through the fleet conversion, Chesapeake will enable local fuel retailers to add CNG pumps to existing facilities or build new CNG stations that will provide public fueling for the community as well as access for Chesapeake's fleet. As a result of the first phase of this program, nine public CNG stations will be built this year in Oklahoma and two in Arkansas. The company plans to expand the program to its other operating regions throughout the country over the next four years.
Chesapeake Energy Corporation is one of the largest producers of natural gas and the most active driller of new wells in the U.S. Headquartered in Oklahoma City, the company's operations are focused on discovering and developing unconventional natural gas and oil fields onshore in the U.S. Chesapeake owns leading positions in the Barnett, Fayetteville, Haynesville, Marcellus and Bossier natural gas shale plays and in the Eagle Ford, Granite Wash and various other unconventional oil plays. The company has also vertically integrated its operations and owns substantial midstream, compression, drilling and oilfield service assets. Further information is available atwww.chk.com.
NAFA is the world's premier non-profit association for professionals who manage fleets of sedans, public safety vehicles, trucks, and buses of all types and sizes, and a wide range of military and off-road equipment for organizations across the globe. NAFA is the association for the diverse vehicle fleet management profession regardless of organizational type, geographic location or fleet composition. NAFA's Full and Associate Members are responsible for the specification, acquisition, maintenance and repair, fueling, risk management, and remarketing of more than 3.5 million vehicles including in excess of 1.1 million trucks of which 350 thousand are medium- and heavy-duty trucks. For more information visit http://www.nafa.org
SOURCE: Chesapeake Energy Corporation

Tuesday, May 11, 2010

Chesapeake Raising Money for Hydrocarbon Liquids Products

OKLAHOMA CITY — Chesapeake Energy Corp. said Monday plans to raise about $5 billion over the next two years in an effort to expand its investment in oil and natural gas liquids and to reduce its debt.
Oklahoma City-based Chesapeake announced a "strategic and financial plan" that includes the sale of up to a 20 percent equity interest in its Chesapeake Appalachia LLC subsidiary to investors within the next three to 12 months. Chesapeake is a key driller in the Appalachian Basin, with 24 operating rigs in the Marcellus Shale natural gas play.
Chesapeake also announced a private placement of $600 million of a new series of convertible preferred stock to investors in Asia. The investors, Maju Investments (Mauritius) Pte Ltd. and Hampton Asset Holding Ltd., will have an option for up to $500 million more shares within the next 30 days.
Of the $5 billion to be raised, Chesapeake said it plans to use $3.5 billion to pay off its debt and $1.5 billion to focus on drilling for oil and natural gas liquids.
Chesapeake also is looking at negotiating various joint ventures as part of its plan, which the company said is ultimately designed to achieve an investment grade rating for its debt securities.
Chesapeake is one of the top independent natural gas producers in the U.S. but has gradually expanded its oil and natural gas liquids portfolio in recent months. Company spokesman Jim Gipson said natural gas accounted for about 90 percent of Chesapeake's production in the first quarter of 2010, down from 93 percent a year ago.
Chesapeake's CEO Aubrey McClendon has spoken in recent weeks about the company's interest in expanding its oil and natural gas liquids production, noting that oil prices are rising while the cost of natural gas is stagnant. Crude oil rose $1.69 to $76.80 per barrel Monday on the New York Mercantile Exchange while natural gas rose 15.5 cents to $4.170 per 1,000 cubic feet.
In a production update issued last week, Chesapeake said it is trying to identify more supplies of oil and natural gas liquids. It said it has strong positions in 12 "liquids-rich" plays — mostly in Oklahoma, Texas and Wyoming — and is using 21 operated rigs to develop about 1.9 million acres of leasehold.
The company wants to enter into joint ventures so that it can pay for accelerated drilling in those areas. Chesapeake said Monday that in the third quarter of this year, it plans a joint venture in the Eagle Ford Shale in south Texas. It did not name a partner.
The goal of the joint ventures, Chesapeake said, would be to have 50 operating rigs on the 12 plays within the next year.
Chesapeake shares rose $1.19, or 5.4 percent, to close at $23.10.

Monday, May 10, 2010

Gulf Oil Blow Out Continue to Spew Oil Unabated on Sunday, May 9, 2010

ON THE GULF OF MEXICO — A growing collection of crippled equipment littered the ocean floor Sunday near a ruptured oil well gushing crude into the Gulf of Mexico, the remnants of a massive rig that exploded weeks ago and the failed efforts since to cap the leak.
On the surface, nearly a mile up, a fleet of ships maneuvered to deploy the latest stopgap plans hatched by BP engineers desperate to keep the Deepwater Horizon disaster from becoming the nation's worst spill. An estimated 3.5 million gallons has risen from the depths since the April 20 explosion that killed 11, a pace that would surpass the total spilled in the Exxon Valdez disaster by Father's Day.
A day after icelike crystals clogged a four-story box that workers had lowered atop the main leak, crews using remote-controlled submarines hauled the specially built structure more than a quarter-mile away and prepared other long-shot methods of stopping the flow.
One technique would use a tube to shoot mud and concrete directly into the well's blowout preventer, a process that could take two to three weeks.
Chief operating officer Doug Suttles said BP was also thinking about putting a smaller containment dome over the massive leak, believing that it would be less vulnerable because it would contain less water. The smaller dome could be ready to deploy Tuesday or Wednesday.
The company was also now debating whether it should cut the riser pipe undersea and use larger piping to bring the gushing oil to a drill ship on the surface. Cutting the pipe would be tough, and was considered the less desirable option, said Suttles, who gave no indication of exactly what the next step would be.
As BP weighed its options on the mainland, waves of dark brown and black sludge crashed into a boat in the area above the leak. The fumes there were so intense that a crewmember of the support ship Joe Griffin and an AP photographer on board had to wear respirators while on deck.
A white cattle egret landed on the ship, brownish-colored stains of oil on its face and along its chest, wings and tail.
Meanwhile, thick blobs of tar washed up on Alabama's white sand beaches, yet another sign the spill was spreading.
It had taken about two weeks to build the box and three days to cart the containment box 50 miles out and slowly lower it to the well a mile below the surface, but the frozen depths were just too much. BP officials were not giving up hopes that a containment box — either the one brought there or another one being built — could cover the well. But they said it could be Monday or later before they decide whether to make another attempt to capture the oil and funnel it to a tanker at the surface.
Company and Coast Guard officials had cautioned that icelike hydrates, a slushy mixture of gas and water, would be one of the biggest challenges to the containment box plan. The crystals clogged the opening in the top of the peaked box, BP chief operating officer Doug Suttles said, like sand in a funnel, only upside-down.
The containment box plan, never before tried at such depths, had been designed to siphon up to 85 percent of the leaking oil.
The original blowout was triggered by a bubble of methane gas that escaped from the well and shot up the drill column, expanding quickly as it burst through several seals and barriers before exploding, according to interviews with rig workers conducted during BP PLC's internal investigation. Deep sea oil drillers often encounter pockets of methane crystals as they dig into the earth.
As the bubble rose, it intensified and grew, breaking through various safety barriers, said Robert Bea, a University of California Berkley engineering professor and oil pipeline expert who detailed the interviews exclusively to an AP reporter.
Associated Press writers Ray Henry and John Curran in Louisiana, Jay Reeves and Brent Kallestad in Florida and Sarah Larimer and video journalist Rich Matthews in Alabama contributed to this report.