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(09/06/06 4:25am)
WASHINGTON -- A trio of oil companies led by Chevron Corp. has tapped a petroleum pool deep beneath the Gulf of Mexico that could boost the nation's reserves by more than 50 percent.\nA test well indicates it could be the biggest new domestic oil discovery since Alaska's Prudhoe Bay a generation ago. But the vast oil deposit roughly four miles beneath the ocean floor won't significantly reduce the country's dependence on foreign oil, and it won't help lower prices at the pump anytime soon, analysts said.\n"It's a nice positive, but the U.S. still has a big difference between its consumption and indigenous production," said Art Smith, chief executive of energy consultant John S. Herold Inc. "We'll still be importing more than 50 percent of our oil needs."\nChevron on Tuesday estimated the 300-square-mile region where its test well sits could hold between 3 billion and 15 billion barrels of oil and natural gas liquids. The U.S. consumes roughly 5.7 billion barrels of crude oil in a year.\nIt will take many years and tens of billions of dollars to bring the newly tapped oil to market, but the discovery carries particular importance for the industry at a time when Western oil and gas companies are finding fewer opportunities in politically unstable parts of the world, including the Middle East, Africa and Russia.\nThe proximity of the Gulf of Mexico to the world's largest oil-consuming nation makes it especially attractive. And it could bring pressure on Florida and other states to relax limits they have placed on drilling in their offshore waters for environmental and tourism reasons.\nThe country's reserves currently are more than 29 billion barrels of oil equivalent, according to the U.S. Energy Department. But the U.S. imports most of its oil from abroad, and its overall supply is tiny when compared with a country like Saudi Arabia, whose reserves exceed 250 billion barrels.\nChevron's well, called "Jack 2," was drilled about 5.3 miles below sea level. Chevron has a 50 percent stake in the field, while partners Statoil ASA of Norway and Devon Energy Corp. of Oklahoma City own 25 percent each.\nDuring the test, Jack 2 sustained a flow rate of more than 6,000 barrels of oil per day, but analysts and executives believe the payoff could be much larger.\nThe financial implications of the prospect are most significant for independent oil and gas producer Devon, which is the smallest of the three partners. Devon's shares soared 12 percent on the New York Stock Exchange.\n"This could not have happened in a better place," Devon CEO Larry Nichols said in a conference call with analysts.\nThe successful test well does not mean a huge supply of cheap oil will hit the market anytime soon.\nOppenheimer & Co. analyst Fadel Gheit estimated that the first production for the Chevron-led partnership might not come on line until after 2010, depending on how many more test wells the companies drill. That said, many companies, including BP Amoco PLC, Exxon Mobil Corp. and Anadarko Petroleum Corp., stand to benefit from their own projects in the so-called lower tertiary, a rock formation that is 24 million to 65 million years old.
(08/30/05 4:45am)
WASHINGTON - Hurricane Katrina disrupted Gulf Coast petroleum output and rattled energy markets Monday, sending oil and natural gas prices soaring and setting the stage for a spike in the retail cost of gasoline.\nBy the end of the day, more than 700 offshore platforms and rigs had been evacuated, two rigs had drifted away and authorities in Alabama were forced to close a bridge over the Mobile River after it was struck by a runaway platform. Oil futures briefly climbed above $70 a barrel for the first time.\nThe powerful hurricane roiled the industry at a time when producers worldwide were already struggling to keep up with strong demand, and it threatened to constrain the supply of home heating fuels this winter. The rise in energy prices has already slowed the U.S. economy's growth rate, though domestic fuel consumption is still rising.\nThe Bush administration said it would consider lending oil from the nation's emergency stockpile to refiners that request it -- Citgo Petroleum Corp. asked for 250,000 to 500,000 barrels to ensure its Lake Charles, La., refinery does not run out -- and the president of OPEC said he will propose a production increase of 500,000 barrels a day at the cartel's meeting next month. Analysts nervously awaited details on the extent of the damage to the region's platforms, pipelines, refineries and electric grid.\n"We're losing a lot of crude oil and also a lot of natural gas," said Lawrence J. Goldstein, president of the New York-based nonprofit Petroleum Industry Research Foundation. Goldstein estimated that total refinery production of gasoline, heating oil, diesel and other fuels could fall by as much as 20 million barrels over the next 60 days.\nAlso Monday, several refiners said damage at their plants appeared to be minimal and oil prices eased from the day's high of $70.80 a barrel. But if a bleaker picture emerges in the days ahead -- it may take more time to assess damage, depending on how rough the seas area -- prices could run-up once again, analysts said.\nBased on conversations with oil and gas companies operating in the Gulf, Goldstein said it appeared that Katrina would not curb output for as long as last year's Hurricane Ivan, even though the short-term impact was significant.\nThe federal Minerals Management Service said Monday that 92 percent of the region's oil output was shut-in, or shut down, with more than 3 million barrels of production lost since Friday. The agency said 83 percent of natural gas output was shut-in, resulting in a loss of 15.5 billion cubic feet of lost production since Friday.\nThe Gulf of Mexico normally produces 2 million barrels of crude oil a day, or about 35 percent of the United States' domestic output, according to government and industry data. About 10 billion cubic feet a day of natural gas is produced in the region.\nWholesale gasoline prices in the New York and Gulf Coast markets soared by 25 to 35 cents a gallon Monday following reports that more than 8 percent of U.S. refining capacity had been shut down as a precaution ahead of the storm. One analyst said pump prices nationwide would likely average more than $2.75 a gallon by week's end _ up from $2.61 a gallon last week, according to Energy Department data released Monday.\n"Unfortunately, I don't think $3 a gallon is a hyperbolic number in some markets anymore," said analyst Tom Kloza of Wall, N.J.-based Oil Price Information Service. He emphasized that the market reaction is a reflection of supply tightness, not shortages.\nNatural gas futures briefly surged more than 20 percent after the temporary closure of a critical distribution hub and on concerns that power outages and flooding could prevent processors from running their plants for days, if not weeks. Even before Katrina arrived, the Energy Department had warned consumers who rely on natural gas to heat their homes to expect sharply higher bills this winter.\nThe Louisiana Offshore Oil Port, the largest oil import terminal in the United States, evacuated all workers and stopped unloading ships on Saturday. Any significant damage to the port would have a devastating impact, analysts said.\nWith top winds of 145 mph, Katrina passed just to the east of New Orleans as it moved inland and later dropped to a 105-mph Category 2 storm, sparing this vulnerable city its full fury.\n"The damage to the electric power grid is the most important source of damage to consider in evaluation of the impact of Hurricane Katrina," said energy analyst Dan Lippe of Petral Worldwide in Houston.\nLippe said the operations of oil refiners, natural gas processors and chemical manufacturers could be disrupted for as little as a few days or as long as a few weeks.\nLight sweet crude for October delivery settled at $67.20 a barrel, an increase of $1.07. Crude futures settled at $67.49 last Thursday, the highest closing price since oil began trading on Nymex in 1983.\nOil prices would need to rise to about $90 a barrel to match the highs of 25 years ago, when adjusted for inflation.\nBrent crude was not trading Monday, with London's International Petroleum Exchange closed for a bank holiday.\nHurricane Ivan damaged seven platforms, 100 underwater pipelines and resulted in the loss of nearly 44 million barrels of oil production between September 2004 and February 2005. Natural gas output declined by 172 billion cubic feet over the same period.
(01/13/04 6:15am)
The Commodities Futures Trading Commission and the New York Mercantile Exchange said Friday they have stepped up their surveillance of natural gas trading in the past week and industry sources said traders' telephone records have been subpoenaed as part of that effort.\nCFTC officials visited the trading pit this week, an employee of one New York-based trading firm that was subpoenaed said Friday.\n"They didn't give any specific indication that they're targeting a specific trade, a specific trader or a specific (trading) house," said the employee, speaking on condition of anonymity.\nR. David Gary, a spokesman for the CFTC in Washington, said the agency has increased surveillance because of recent volatility and high prices of natural gas trading activity on Nymex since the start of the month. But, as a matter of policy, he said the agency would neither confirm nor deny the existence of any formal investigation.\nNymex spokeswoman Nachamah Jacobovits said the focus of the scrutiny is to "make sure that futures prices are reflective of what's happening on cash markets and that there's no manipulation."\nUtah Sen. Orrin Hatch, chairman of the U.S. Senate Judiciary Committee, said last month that he would hold hearings to determine if the recent increases in natural gas prices were caused by market manipulation.\nOil and natural gas prices climbed to their highest levels in more than nine months Friday as traders responded to colder weather in the Northeast, tight supplies and rising demand.\nThe weak dollar also was pushing energy prices higher, analysts said.\n"It gives OPEC countries less buying power and literally no incentive to make any increases in output," of crude, which is denominated in dollars, said Tom Bentz, an analyst at BNP Paribas Commodity Futures in New York.\nCrude oil for February delivery closed up 33 cents to $34.31 on the New York Mercantile Exchange -- the first time the front-month contract has closed above $34 since March 17, just a few days before the invasion of Iraq.\n"The weather made people realize just how tight supplies are," said Phil Flynn, an analyst at Alaron Trading Corp. in Chicago.\nThe nation's commercially available inventory of crude is 3 percent below last year's levels. For the week ending Jan. 2, commercial supplies stood at 269.0 million barrels, down from 277.5 million barrels a year earlier.\nCommercial inventories of natural gas, meanwhile, stood at 2.6 trillion cubic feet for the week ending Jan. 2, or 8 percent above the five-year average for this time of year.\nFlynn said the five-year average was a misleading metric, since demand for natural gas has been rising.\nBut Bentz said supplies of natural gas are adequate.\nIndeed, many analysts said they were surprised when prices first began to rise quickly in late November, and that they remain hard-pressed to substantiate these levels.\nNatural gas for February delivery rose 19.3 cents to $7.287 per 1,000 cubic feet on Friday.\n"I personally don't believe we should be up at these levels," Bentz said, noting that traders have ignored recent fuel-inventory reports that were bearish and focused instead on bullish factors such as the cold weather and the weak dollar.\n"When it's cold, the market does tend to have an upward bias," he said.\nBecause some users of natural gas can switch to fuels derived from oil when prices are high, price trends for one can affect the other.\nIn other Nymex trading, heating oil futures finished up 2.55 cents at $1.01 per gallon and unleaded gasoline closed at $1.02 per gallon, up 2.69 cents.\nIn London, Brent crude from the North Sea rose 29 cents to $31.37 per barrel.
(09/12/01 5:08am)
NEW YORK--Anxious consumers in various parts of the country lined up for an hour or more to fuel up on gasoline costing as much as $5 a gallon amid fears supplies would be disrupted following Tuesday\'s terrorist attacks.\nAs gasoline wholesalers and retailers quickly raised prices, the nation\'s largest oil companies immediately tried to allay consumers' worries by freezing their prices and pledging to keep distribution steady.\nPanic caused by rumors of a pending gasoline shortage sent prices skyrocketing in Oklahoma, Mississippi, Michigan and other states.\nThe R and L Texaco in Oklahoma City increased the price of unleaded gasoline to $5 a gallon after a supplier told owner Lewis Pfenninger it was unclear when the next shipment would be available and at what price.\nAt the Sunshine Conoco in Springfield, Mo., gas prices were raised after the attacks by 40 cents a gallon to $1.99 a gallon.\nIn California, gasoline wholesalers raised prices by as much as 20 cents a gallon on supply fears, although traders said there was no evidence of a shortage.\nExxon Mobil and BP sought to calm energy markets. The companies said supplies would not be hampered--except around New York City. The companies tried to reassure consumers that there was no need to stockpile gasoline.\n\"We are asking all of our customers to maintain their normal buying habits,\" Exxon Mobil spokesman Tom Cirigliano said late Tuesday. \"We have ample supplies. We\'re trying to avoid an artificial shortage.\"\nBut as distribution terminals closed down around the country for security reasons and motorists worried there wouldn\'t be enough fuel, gasoline prices rose almost immediately in parts of the Midwest.\nPrices had already been soaring in the Midwest because of distribution bottlenecks that were in effect long before Tuesday\'s catastrophe.\n\"It\'s supply and demand,\" said Pfenninger, owner of the Texaco station in Oklahoma City where gas sold for $5 a gallon. \"My lines were so long.\"\nPfenninger said he could have sold out his supply at that price but decided to close early. He said he would reconsider the price hike on Wednesday.\nIn Tulsa, Brandon Disney waited in his car at the pumps at a QuickTrip store.\n\"I\'m just filling up, so I don\'t have to fight anybody to get gas if there is a shortage,\" he said\nAdded Tulsa Police Sgt. Wayne Allen: \"We\'re having to assign officers to convenience stores to direct traffic and break up fights.\"\nAuthorities in various states were investigating instances of price-gouging, while Mississippi Gov. Ronnie Musgrove declared a state of emergency, which will allow prosecutors to pursue price-gougers there.\nMississippi authorities said they had received reports of gas prices doubling to as much as $3.60 a gallon within hours.\nRumors of spiraling prices spread rapidly.\n\"We got an e-mail from Oklahoma City saying gas was over $6 a gallon,\" Ronda Hunter said while waiting for gas at a Phillips 66 in Topeka, Kan. \"The news said it was jumping to $4 a gallon. Is this madness or what?\"\nGreg Seiter, a spokesman at the AAA Hoosier Motor Club in Indiana, said his office has received reports of prices rising to $3 and $4 a gallon in parts of Indiana--including Anderson, Bloomington and Indianapolis--in the wake of the attacks.\n\"Obviously that\'s a reaction to the events of this morning. What happened immediately after (the attacks) was the price of crude oil in overseas trading climbed suddenly,\" Seiter said.\nThe AAA\'s national office is urging retailers not to impose large price increases.\nNationwide, the retail price of unleaded gasoline is $1.54 a gallon.\nTom Kloza, director of Oil Price Information Service, a Lakewood, N.J., publisher of oil industry data, said he expects petroleum companies to act with restraint in the face of intense marketplace jitters.\n\"To be raising prices frenetically in this atmosphere makes the entire situation more difficult,\" he said. \"The last thing the American public needs to think about right now is that they need to be racing out to load up on fuel."