Chevron, the US energy company, will carry out oil exploration off the Liberian coast later this year, giving the west African country the possible chance to join its neighbours as an oil-producing nation.
Jim Mulva, chief executive of ConocoPhillips, has been in a hurry to establish his legacy. In the beginning, it was going to be as the head of one of the world’s biggest international oil and gas companies. And he got there, boosting Conoco into 5th place, in terms of production.
But then the economic downturn hit, and the weaknesses in his grow-through-acquisition strategy were exposed. It was no longer enough to be big, and Conoco was forced to slash capital spending, lay off staff and sell billions of dollars in assets.
The big question for months has been what would happen if there was a significant spill in the deepwater outside the Gulf of Mexico. Following BP’s Macondo disaster, the industry worked together to build two spill response systems for this area. But nobody said what would happen if a deepwater disaster unfolded in the waters offshore Ghana or Brazil.
Now the industry has gathered together to address that question. Nine of the world’s biggest oil and gas companies – BG Group, BP, Chevron, ConocoPhillips, ExxonMobil, Petrobras, Shell, Statoil and Total have launched the Subsea Well Response Project (SWRP), an initiative designed to enhance the industry’s capability to respond to subsea well control incidents.
There is no doubt it is hard to feel sorry for Big Oil. It pulls in billions of dollars in profits whenever oil prices go up, and yet higher oil prices result in higher petrol prices for the public.
So whenever these companies are doing well, the public is doing worse. And that, inevitably, leads to talk about punitive taxes (or at least a loss of tax breaks) for the oil industry.
That time has come once again. A few weeks ago, the world’s biggest oil companies reported massive profits just as petrol moved up and beyond, in some cases, $4 a gallon. That is a big deal in the US, where people often commute long distances to work, particularly in sprawling cities like Houston, Chicago, Los Angelos, and other highly populated areas. And it is particularly important now when the economy has not fully recovered, unemployment remains high and the public at large is still having economic difficulties.
The oil and gas industry has been afraid there might be repercussions from the recent investigation that found Macondo’s blowout preventer failed to close because a section of drill pipe had buckled during the accident and blocked efforts to seal it off.
Gary Luquette, Chevron’s president for North America exploration and production, said the industry would learn from the report. But he hopes it will not lead regulators to stop the permitting process just when companies have started to see progress. He explained:
The best way to deal with a blowout is never to have one. In this case, the pipe was blown up the hole because of a loss of control situation. If you have complete loss of control, you can’t imagine a BOP that can be designed for that.
It’s been a long dirty fight, and it’s not over yet.
A judge in the rough-and-ready Ecuadorean border town of Lago Agrio may have ruled that Chevron should pay up to $8.6bn in damages for soil and water pollution and the creation of a local health service, but the cash will not be flowing anytime soon.
When Michael Bromwich, head of permitting for the Gulf of Mexico (pictured), comes to Texas oil country on Friday, the message the industry hopes to deliver is that deepwater drilling will continue – with or without the US.
Last year Chevron, a lead investor in the Gulf, said it acquired acreage in nine major deepwater areas. This year it will drill in deepwater off China, Australia, West Africa, the UK, Brazil, and, if permitted, the Gulf. Bobby Ryan, Chevron’s vice president for Global Exploration, explains:
Deepwater is a major component of our exploration program. The only place we are not drilling is the Gulf of Mexico.
At Chevron’s last shareholder meeting, five people were arrested. The company has for years now been having a hard time with protestors – particularly about a lawsuit about environmental damage allegedly left in Ecuador by one of the companies it acquired. And certainly the arrests of those who the company says were troublemakers at the meeting must have been a welcome turn of events for Chevron.
Yet it really has not worked out as Chevron might have hoped. There will likely be continued protests at its upcoming shareholder meeting.
A group of US investors have filed shareholder resolutions with nine oil and gas companies, pressing them to disclose plans for managing risks associated with the technology being used to extract gas from shale rock.
With the US Environmental Protection Agency investigating the risks; a New York State moratorium on use of the technology; and cases like the one being built against Range Resources in Texas, the resolutions are no surprise.
The majors have a history of selling what they believe are their “cast offs” to the small, independent oil and gas producers because they see little value in them. When they all left the US for global markets, writing the US off as “mature” back in the 1970s, the independents picked up the pieces and carried on.
Not only did many continue to make a profit over the years, but they came up with new technology and expertise that cracked the code to making shale gas and now shale oil economic. The US is now a virtual boom town for energy resources.
So it is interesting to see that the majors, now back in the US and rushing to pick up shale assets from the independents, are selling their conventional assets in both the US and Canada.