US House Republicans Move to Expand Oil Drilling

WASHINGTON - House Republicans are pushing a plan to allow oil drilling in the Arctic National Wildlife Refuge and several other areas currently considered off-limits to energy production, stapling the measures to a massive transportation bill expected to move through the House.

The House Natural Resources Committee Wednesday passed a trio of bills directing the government to allow drilling in the Atlantic and Pacific oceans--where leases aren't currently offered--and open up a chunk of the Arctic refuge to drilling. The bills also pave the way for oil-shale development in western states.

The bills will be attached to a measure endorsed by House Speaker John Boehner (R., Ohio) that authorizes $260 billion over five years to fund federal highway and transit programs. Republicans say the revenue from expanded oil production will help pay for the transportation projects.

The House is likely to approve the package in the near future, marking a win for the oil-and-gas industry that urges greater access to U.S. lands and waters. The fate of the legislation in the Senate is less clear, however, given the Democrats' control of that chamber.

The bills mark the latest attempt by Republicans to draw an election-year distinction from the Obama administration over energy policies. They have said the administration stifles domestic oil production and blocks off federal waters and land known to have oil resources.

Democrats have countered that Republicans are catering to the whims of big oil companies and that their policies pose a threat to areas that have been shielded from energy production for several years.

Among the most-controversial bills approved by the committee Wednesday is a measure that allows drilling on a 3% chunk of the Arctic National Wildlife Refuge. The measure passed by a vote of 29-13.

Rep. Don Young (R), the sole representative from Alaska, long has pushed for oil production in the refuge and said it would be a "foolish mistake" to ignore the oil resources under the refuge.

Democrats have tried unsuccessfully to fight the measure, saying the refuge should be protected from the noise, pollution and environmental impacts that accompany energy production. "If we allow drilling in the Arctic refuge, it would set a precedent that would allow the oil and gas industry to set a bulls eye" on refuges around the country," Rep. Rush Holt (D, N.J.) said.

The committee also passed a bill by a vote of 25-19 compelling the Obama administration to allow drilling in the Atlantic and Pacific oceans. A formal moratorium on drilling in the areas was lifted in 2008, however, many state governments continue to oppose oil production off their coasts. The Obama administration maintained a years-long ban on the Atlantic and Pacific when it proposed a five-year plan for offshore-oil drilling late last year.

Republicans have passed multiple pieces of legislation to expedite or expand U.S. oil production, asserting the energy industry is a source of jobs in a weak economy. But the legislation fizzles once it hits the Senate.

Copyright (c) 2011 Dow Jones & Company, Inc.

Need work? Roustabouts in Demand

Even though employment grew in December 2011 and the jobless rate dropped to a near three-year low of 8.5 percent -- its lowest since February 2009 -- gaining employment is tough in all sectors worldwide, especially for those with no college degree. Yet, drilling contractors are scrambling to fill jobs as Baby Boomers retire.

"The oil field had attitude if things got tough with boomers and the industry started seeing labor shortages, it could go to other areas of the world to pick up roughnecks," Reg MacDonald, CEO and President of Maritime Drilling Schools said, "but it is a world-wide problem. We need more people trained and working in the field or the industry is going to be limited as far as drilling because there's not going to be people to do it."

According to the Petroleum Human Resources Council of Canada, 100,000 new workers will be needed over the next decade. Trades people will be in high demand over the next 10 years, the release stated, but oil and gas drilling and services field workers are at the top of the list and are needed immediately.

As demand for oil and gas rises, demand for more oil field workers rises too. Hard workers, regardless of background, are needed to fill these positions, especially offshore, but they need proper training. Entrepreneurs have capitalized on this void and have opened roughneck training schools. Instead of four years at a university, short training courses can prepare inexperienced laborers for a good-paying entry level drilling rig job.

One such school is the Maritime Drilling Schools based in North Sydney, Nova Scotia, which provides a 20-day training course. The entry-level training course provides individuals with skills and safety training needed to function safely and efficiently in the field.
Maritime Drilling's 20-day training course breaks down each part of the drilling process and explains what it does and why it is necessary. The school has a drilling rig on site where students get hands-on training in rig operations as well as safety.

As most roughneck jobs today are found on offshore drilling rigs and platforms, training schools also teach offshore skills as well as land. Roughnecks can expect to align, tighten, unscrew and add pipe, along with position casing, tubing and pump rods. Other duties include cleaning, maintaining and repairing drilling equipment.

Maritime Drilling Schools also teaches the following:

• Rotary Drilling
• Drilling Contracts
• Oil and gas reservoirs
• Moving equipment to the drill site
• Rigging up
• Rig components
• Normal drilling operations
• Formation evaluation and completing the well
• Coring operations
• Reverse circulation
• Extraction and cleaning of core samples
• Cataloguing and crating core samples for geologist
• Working safely around track mounted drilling machines
• HAZMAT Materials
• OSHA Regulations

When students complete the 4-week program, they typically have no trouble finding work.

"Right now, as fast as guys are being trained, they are going right to work," MacDonald said. "We have drilling contractors who come to us regularly looking for hands. As an institution, we don't guarantee work to students, but we do assist them."

Recently trained students are finding work as roustabouts all over the globe, but specifically in Alberta, British Columbia, North Dakota (Bakken), Texas, Oklahoma, Louisiana and offshore worldwide.

Drillers start off as roustabouts until they gain enough hands-on experience to move up to a roughneck or floorhand position, then to driller and rig supervisor. Of course, pay increases as well.

"While it certainly assists an individual to have a solid educational background coming into our program, all drillers start at the bottom. A driller is not going to walk in off the street. Drillers have to build their knowledge and experience and know how things operate and what's going on around the rig."

According to MacDonald, his students start as roustabouts with a salary between $80,000 to $100,000 in Canada, and $75,000 to $95,000 in the US, depending on where and for who they are working. Some even get a living allowance.

The pay is very generous; however the labor is physically demanding, the work schedule is taxing and the work environment is potentially dangerous to those not properly trained.

Although schedules vary from one company to another, as well as one rig to the next, a common shift is 12 hours on and 12 hours off for two or three weeks at a time and then off the rig for two weeks.

This is a tough schedule for individuals with families at home, but it pays well. MacDonald noted that most of his students have been male; however, with the labor shortage, unemployment rate and advancements in drilling rig technology, he is surprised that more women aren't taking his training course.

"It is certainly a male dominated field, but the industry has changed," MacDonald said. "A lot of drilling equipment -- land and offshore -- is changing to auto robotics. We have cyber drillers, pipe racking systems, pipe handling systems and auto roughnecks, which allows opportunities for women to get into industry. Drilling is not as labor intensive as it used to be and women can make good money at it."

Jaime Kammerzell is an experienced upstream and downstream O&G journalist who has worked for many of the top petroleum publications. Email Jaime at eandpsessions@gmail.com.

Oil majors launch spill response program

1/26/2012
Members of the international oil industry have launched a collaborative effort to enhance Arctic oil spill response.

The International Association of Oil & Gas Producers (OGP) announced the formation of the Oil Spill Response Technology Joint Industry Program (JIP) at the Arctic Frontiers Conference in Tromsø, Norway.

This collaborative research endeavor will expand industry knowledge of, and capabilities in, Arctic oil spill prevention and response. Nine major oil companies are sponsoring the program: BP, Chevron, ConocoPhillips, Eni, ExxonMobil, North Caspian Oil Company, Shell, Statoil, and Total.

"Prevention of oil spills is a priority for industry, as is the response to any spill that may occur. Spill response research is an aspect of the oil business for which collaboration is imperative. Working together in this four-year JIP increases knowledge and opportunities to test equipment, conduct field experiments and develop oil spill response technology," said program Manager Joseph Mullin.

This is a continuation of the industry's decades-long research and development for response in Arctic and cold weather conditions. The largest effort of its kind, the JIP has identified research projects to enhance industry capabilities and co-ordination in the area of Arctic oil spill response.

The JIP is realistic about the unique challenges needing to be addressed when considering Arctic operations. These include prolonged periods of darkness, extreme cold, distant infrastructure, presence of sea ice offshore and a higher cost of doing business. By working together, the JIP companies are ensuring the most efficient use of resources, funding and expertise to improve the technologies and methodologies for Arctic spill response.

"In the last few decades, the oil and gas industry has made significant advances in Arctic spill prevention and response technology," Mullin said. "We continue to further advance spill response knowledge and test new technology through joint industry projects such as this JIP that bring experts together. That is why we have made this major research commitment to support responsible Arctic exploration and development."

Warren Buffett's Renewable Energy Investment

Source: Jeff Siegel, Energy & Capital  (1/30/12)

"With concerns over the likelihood of higher gas prices this summer, the bill and its sponsors propose the creation of a 'Reasonable Profits Board' that would control the profits of oil and gas companies."

Until recently, he's kept it pretty quiet.

In fact, when he ponied up his first billion for a piece of this action, he barely made a peep.

The only reason I found out about it is because I know some of the players behind the scenes. . .

These are the money guys that tend to keep a low profile, yet are typically the most important guys involved in these types of deals. And that's the way they like it.

Regardless, for the past 12 years, Warren Buffett has been meticulously building his position in some very select modern energy markets. And in typical Buffett fashion, he's going make billions.

Fortunately, you can get a piece of this action, too.

You just need to do two things:

First, tune out all the hype and BS spewing from Washington and the mainstream media about modern energy technologies. They know nothing, and are nothing more than parasites. As investors, they are of zero value to us.

Second, the next time you look at a solar panel, wind farm or state-of-the-art, superefficient cogeneration plant, remember one thing: These were not built for tree-huggers; these were built for very wealthy investors.

Modern energy technologies don't exist to appease environmentalists. They exist to make very rich individuals even richer.

Buffett Loves Renewable Energy. . . and Natural Gas. . . and Nuclear. . . and. . .

Warren Buffett isn't hanging out in drum circles talking about clean air. But he is making billion-dollar clean energy deals—and he's actually been doing so for more than a decade.

And last week, Buffett upped the ante on clean energy once again by announcing that his MidAmerican Energy Company is officially forming a branch dedicated solely to the development of modern renewable energy.

The new branch will be broken down into four units:

• Solar
• Wind
• Geothermal
• Hydro

MidAmerican's already got more than $9B in wind and solar alone, and more is expected this year.

The energy giant—which is the largest electricity provider in Iowa, Wyoming and Utah—is clearly bullish on renewable energy. And management isn't shy about making this new growth strategy known.

In fact, MidAmerican vice president Jonathan Weisgall pulled no punches last week when he told reporters this move was simply a vote for renewable energy and not some random bet.

Of course, Buffett's no fool either, and he isn't putting all his eggs in that "clean energy" basket. . .

While the Oracle of Omaha clearly understands that the long-term outlook on energy will not be dictated solely by fossil fuels, MidAmerican's conventional energy investments will continue to butter most of its bread for years to come.

Natural Gas, Oil and Nuclear: Buy What Buffett Buys

MidAmerican already transports 8% of the country's natural gas through its own pipelines, and Burlington Northern Santa Fe (which Buffett owns) moves oil from the Bakken region in North Dakota to refineries.

Interestingly, with the Keystone Pipeline construction delayed (I say "delayed" because only a fool believes this pipeline won't be built), oil producers will now have to rely even more on Burlington.

This is a very bullish case for freight rail this year—and, of course, for continued production in the Bakken, particularly in the Three Forks region, where we've been telling you to load up for months.

Buffett's also big on nuclear—but not in the way you might think.

You see, back in 2008, MidAmerican tried to do a deal in Idaho, but that fell through before Buffett ponied up any real money. He then looked to get a piece of Constellation's Calvert Cliffs nuclear reactor, but French state-owned utility EDF beat him to the punch.

Then Fukushima happened, which resulted in Buffett losing interest in conventional nuclear power generation, saying: "[conventional nuclear] isn't going to happen because the psychology has changed."

But here's what a lot of media reports missed: Even after Fukushima, MidAmerican's nuclear energy unit had been sniffing around a different kind of nuclear technology—small modular reactors.

Buffett may be in tune with the kinds of risks folks are willing to take when it comes to power generation, particularly after one of the worst nuclear meltdowns in history, but he also embraces and doesn't run from disruptive technology.

Could these small modular reactors prove to be a disruptive technology that could make Buffett even richer?

Perhaps. But that's not the only disruptive technology in the nuclear space right now.

And I would argue that small modular reactors are nothing compared to a recent breakthrough in nuclear fuel technology that allows for both increased safety and lower operational costs, the latter being a big deal as conventional nuclear simply could not exist today without massive government subsidies.

Of course, thanks to a new development in nuclear fuel technology from our neighbors to the north, these huge nuclear subsidies could be a thing of the past.

And the company behind this development?

Well, let's just say that between its truly disruptive technology and the fact that the president of this company was recently appointed as the head of the World Nuclear Association's Fuel Technology Group, it's probably going to be one of the easiest triple-baggers we'll see in 2012.

My colleague Nick Hodge actually has some video of this company's technology in action. Interestingly, he's the only analyst on the planet who was allowed the necessary access to obtain this footage. Not even the big dogs over at Goldman could get their hands on it.

But that's how it goes when you're willing to get your hands dirty instead of sitting behind an antique desk in some overpriced Wall Street office.

Of course, it won't be much longer before every Wall Street hack is jumping into this stock. . .

To a new way of life and a new generation of wealth. . .

Jeff Siegel, Energy & Capital

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Jeff is the co-founder and managing editor of Green Chip Stocks, an independent investment research service focusing primarily on alternative energy and organic & natural food markets. He has been a featured guest on Fox, CNBC, and Bloomberg Asia, and is the author of the best-selling book, Investing in Renewable Energy: Making Money on Green Chip Stocks. For more on Jeff, go to his editor's page.

Preventing Failures by Selecting the Right Flange Isolation Kit

By John T. Keldsen

Flange isolation kits are used to seal and electrically insulate flanges, thereby maintaining the integrity of piping systems. By preventing metal-to-metal contact, they mitigate corrosion caused by galvanic action or when used in conjunction with a cathodic protection system.

Gasket for water project failed hydrotest.

Flange isolation kits consist of gaskets to separate flanges in metallic piping systems, plus non-conductive sleeves and washers to prevent the flow of electric current across the connection. However, these kits can fail if they are not properly specified, manufactured and installed. Following are a few such examples, the first two of which involve isolating gaskets that failed.

Gasket from treater water dump.

 The retainer material for the gasket in Figure 1 was not cut from a sheet as large as the flange on which it was installed. The material had to be spliced together. The overlapping seam which is subject to separation under pressure indicates the splice was poorly made. As a result, the gasket failed during hydrostatic pressure testing.

The gasket in Figure 2 split at the sealing location due to improper sizing and/or the durometer of the rubber sealing element.

To avoid these types of failures, the following factors should be considered when specifying flange isolation kits. Gainsaying the conventional wisdom that gaskets with overlapping seams should be avoided is the fact that a number of these have been in service for many years without failures. The issue with this type of gasket is generally not the seams, but controlling tolerances and adhering to exacting design, quality and raw material standards. 

 

Bolt sleeve failure due to shear stresses.

As an example, both of the failed gaskets above were replaced with PSI LineBacker® gaskets from Pipeline Seal & Insulator, which worked as designed.

The globalization of sourcing has brought with it inexpensive materials that ostensibly meet the requirements for flange isolation gaskets, but may not be functional or effective for their intended use. For example, there are numerous phenolic formulations that have not been properly evaluated for suitability as a gasket material. Some are more porous than others, absorbing water and making them less effective as flange isolation gaskets.

Flange kits also include isolation sleeves to electrically separate the bolts from the flange, as well as non-conductive washers to electrically isolate the nuts securing the bolts. Specifications for isolation sleeves often call for them to be "full length", an indeterminate measure for which there is no known industry standard. In practice the sleeves should extend at least halfway into the steel backup washers behind the isolation washers.

Over-compressed white isolation washer.

Figure 3 shows a sleeve that failed in shear mode. The contractor ordered glass-reinforced epoxy isolation washers and sleeves from one supplier and steel washers from another. Normally the isolation and steel washers are supplied as part of a kit. Because the I.D. of the steel washers was slightly smaller than the isolating washers, there was no clearance between the steel washers and the sleeve. As the nuts were tightened, they grabbed the sleeves and twisted them causing the failure. Both the I.D.s and O.D.s of the steel and isolation washers should have been precisely matched for more uniform loading and to allow the sleeve to fit within the I.D. of the steel washer.

In Figure 4 the compressive load of the blue steel washer (second from the bottom) has squeezed out the white isolation washer, the result of exceeding the compressive strength of the washer material and the dimensional variance between the two washers.

Flange isolation kit failures can largely be avoided by taking into account the factors that contributed to them in the above examples, notably gasket quality. The isolating gaskets are critical to the performance of these kits and the piping systems they are designed to protect. As such, they should be specified with the same care as other system components.

About the author: John T. Keldsen is Director of Sales and Marketing at PSI/Pikotek, Houston, TX.