Oil Production and Obama

Under fire for surging gas prices in an election year, President Obama this week predictably trotted out his three year old energy speech and mocked republicans for their belief that increased domestic oil production would lead to decreased dependence on foreign oil.  


Pause for effect.  


There are so many ways we could go with this, but let's focus on one way.  In his remarks, the president stated:


Now, we absolutely need safe, responsible oil production here in America. That’s why under my Administration, America is producing more oil today than at any time in the last eight years.

It was painful to hear his stand-in press secretary try to explain later that President Obama wasn't really trying to take credit for the increased domestic production.  


Which is understandable in light of recent developments, such as:


1. Blocking the Keystone Pipeline.  Desperate to keep this loser issue off the table, congressional democrats have thrown all manner of disruptions and distractions into the effort to get Keystone up again, including, strangely, an effort to make sure that none of the Keystone oil goes outside the country.  Its not really clear why petroleum exports would be a bad thing... other than it involves US oil companies making money... never mind.  


2. My personal favorite... the Gulf of Mexico moratorium and slowdown following the Deepwater Horizon blowout, imposed on the industry across the board regardless of the facts.  I have blogged about this ad nauseum so I'll stop now.  


3. The real reason production is up... Obama and the EPA have been slow to throw up barriers to fracking, which is where all the increases in production are coming from. 


Now let me be clear.  All of this tripe sounds great rolling off the teleprompter, but the same plan rehashed over the course of three years is not a plan, it is a speech.  And time has borne that out.  


If only he were serious.    

Hope, change, deja vu, fertilizer.

In a move certain to distress those who believe that oil spills are caused by presidential proposals to drill offshore, last week the Obama administration announced a new offshore oil and gas lease sale.

Tied to this most generous offer of new leases is a plan to increase the minimum bid from $37.50 to $100 per acre, to "ensure that taxpayers receive fair market value for offshore resources".  This will certainly stick it to the big oil companies who, according to the narrative, curiously spend millions to acquire leases on which they have no intention of drilling.  The fact that oil and mineral leases represent one of the largest sources of nontax revenue to the treasury is apparently beyond the scope of the article.  

The more jaded of you may recall that the president blocked construction of the Keystone XL pipeline the week before, citing the need for further environmental studies, in addition to the three years of existing environmental studies.  In addition, the threat of US sanctions has Iran threatening to block the Strait of Hormuz, and with it much of the middle east's oil production. Other than that, there is really no reason to ramp up domestic production, after all, if we did that, it would be years before we produced any new oil from new drilling, right?

But don't you go thinking that the Obama administration is not in support of offshore drilling, far from it!  In fact, if we go back to April of 2010, mere weeks before the BP spill, Obama proposed opening the eastern Gulf of Mexico, the north slope of Alaska, and areas along the Atlantic coast to drilling for the first time, which was a bold plan.  It was, however, a stupid idea when GW Bush proposed additional drilling in 2008, and at the time a particular Illinois senator called it a capitulation to the oil industry, but no matter.  

For those who work in the industry and live and die by drilling contracts, empty promises to develop offshore resources mean nothing when they are accompanied by a consistent full-court press of government interference in offshore oil and gas production. It’s going to be a long election year.  

Why helicopters?

Helicopter lease rates in the Gulf of Mexico can easily run into the hundreds of thousands of dollars a MONTH, with added surcharges for fuel, extra hours, and night flights... how can anyone afford to pay such rates, and why does everybody seem to travel by helicopter in the gulf?  


1. Particularly in support of drilling operations, time is money. A deepwater drilling rig may lease for over $500K/day, and if the drilling project is held up for a day because the rig needs a part or a specialized contractor to move forward, the added expense for helicopter support is a mere rounding error in the drilling budget, which is in the multi millions for each well drilled.  


This brings up an interesting point.  If oil companies are making those obscene profits, do you imagine that any of those profits are rolled into further exploration, which is obscenely expensive?  And do you think that each time they drill a hole that they actually HIT something that gives them a big payoff?  Sometimes. And sometimes they're just out several million for a dry hole.  It happens.  


2. Drilling and production operations are quite geographically dispersed even in the Gulf of Mexico, and the tendency is to move toward deeper water, further and further out.  If you have twenty or thirty people spread out at various locations up to 150 miles offshore, a relatively fast crew boat (20 knots or so) can take 18 hours to do a crew change, while a couple of helicopters can pull the same crew change before lunch gets cold.  A large drilling operation can easily have 80-100 people on board one rig.  Figure in additional overtime costs for paying your outgoing crews for the delay, and the high rates for third party contractors waiting on transportation, and the helicopter again begins to look like a pretty good deal.  


3. Some deepwater exploration projects are served by increasingly larger and more expensive aircraft such as the Sikorsky S-92, which sells for around $20 million per copy.  There are reasons for this too, and reasons that companies are willing to pay a premium for such aircraft.  


One is that newer and more capable aircraft are safer, with additional power and up to date survivability equipment if the worst happens and the helicopter does go down.  Top tier companies are willing to pay a premium for the safety of their people, mindful of the costs of cutting corners and the price of liability and lawsuits.   


The second is a function of distance offshore.  The FAA limits a two-pilot crew to ten hours of flight time per day.  If a round trip to a location 250 miles offshore takes 4 flight hours, then you get two trips per day, per helicopter, period.  


So the ONLY way to increase your throughput of people in and out of your deepwater properties is to use faster aircraft (more flight time per day) or bigger aircraft (more seats on each flight).  


And now you know. 

Wisdom o' the Gulf

(Originally published in Autorotate Magazine)

ERRWOLF’S GENERALIZED GULF WISDOM

(or, “Mistakes I’ve Made Lately”)

A sleeping passenger is a happy passenger.

A quick walk around inspection is the cheapest insurance you can get. 

Get rushed, get complacent, get hurt. 

How would you explain what you are doing right now to an accident investigator?

Pay attention to the old farts.  Well, most of them. 

Jet A etiquette: When on the beach, take as much fuel as you can carry.  When offshore, take no more fuel than you need.

A swimming passenger is a most unhappy passenger. 

Work boats are in a unique position to notice changes in the weather sooner than anyone else.  Many of them have radar.  If they start calling YOU to tell you about the weather, I hope you’re tied down. 

Turning the blade by hand before starting is a good way to check for those annoying tiedowns you may have forgotten. 

Want to meet a crane operator?  Land and take off when he’s operating the crane and doesn’t know you’re there.  

A passenger who had to take the boat because of bad weather may be a crabby passenger, but he’ll live through the ride. 

Some great truths in the Gulf of Mexico:

1.   You will have a headwind when you are short on gas.

2.   You will have bad visibility if you’re not sure where the destination is.

3.   You will have more flight time than sleep time the day after you stay up too late. (Try it, it works)

Above all else, fly the aircraft. 

Wash your own dishes and sheets and you’ll live longer.

A passenger who is upside down in a helicopter full of water is the unhappiest passenger of all.  This is why you should brief your passengers, preferably before you leave and not halfway through an emergency procedure.

If you need help at the shore base to put 30 gallons in your Bell 206 at 7AM on a Thursday, you are part of the problem. 

There are two times when you especially need to do a walk around inspection of the aircraft:

1.   When you are unfamiliar with your aircraft, and:

2.   When you are all too familiar with your aircraft. 

The more you check the weather, the less you will be surprised when some weather shows up. 

Don’t feel so paranoid, they’re all trying to kill me too. 

Fly safe, EW