Washington D.C. – 1/11/2012 - Gas drilling companies routinely warn their investors of a litany of possible disasters – such as leaks, spills, explosions, bodily injury and even death – but regularly fail to mention these risks when persuading landowners to sign leases for drilling rights, an Environmental Working Group investigation found.
EWG researchers compared federal Securities and Exchange Commission (SEC) filings and natural gas drilling leases used by major companies engaged in hydraulic fracturing (fracking) and horizontal drilling and found that, at best, the leases offered only vague mentions of risks that are explicitly listed in the legally required SEC reports. Twenty-three landowners in five states who had signed or been asked to sign drilling leases also told EWG that company representatives who offered the leases made no mention of possible risks.
“These landowners who were left in the dark about drilling risks are likely just the tip of the iceberg,” said EWG senior counsel Dusty Horwitt, J.D. “Industry documents, regulators and lawyers all indicate that there may be thousands of landowners who unknowingly put their water, homes and health at risk by signing natural gas leases. It’s time to level the playing field so that landowners know the facts about drilling before they sign a lease.”
Federal law designed to protect investors against fraud requires companies to disclose “the most significant factors that make the offering speculative or risky.” But in the midst of perhaps the largest natural gas rush in U.S. history, there has been little or no regulation of the transactions that give drilling companies access to private lands atop gas and oil reserves.
“We were never told about any kind of risks whatsoever,” Craig Sautner of Dimock, Penn., told an EWG researcher. Craig and his wife Julie leased about 3 1/2 acres to Houston-based Cabot Oil and Gas Corp. in 2008.
Water wells serving the Sautners and 18 other nearby families were contaminated and became unusable after Cabot began drilling in 2009, according to Pennsylvania officials. Cabot, which has publicly disputed the finding, did not respond to EWG’s request for comment. The state recently lifted an order requiring Cabot to provide replacement water to the families over the objection of the Sautners, who say their well water is still contaminated. Several affected residents in Dimock, including the Sautners, have sued Cabot for damages.
The company’s 2008 10-K form filed with the Securities and Exchange Commission contains explicit warnings that appear nowhere in the Sautners’ lease agreement and that the couple says never came up in their discussions with company representatives:
“Our business involves a variety of operating risks, including: well site blowouts, cratering and explosions; equipment failures; uncontrolled flows of natural gas, oil or well fluids; fires; formations with abnormal pressures; pollution and other environmental risks; and natural disasters.
“Any of these events could result in injury or loss of human life.”
The pollution in Dimock is not an isolated incident. State officials in Wyoming, Ohio and Colorado have documented recent cases of water contamination linked to natural gas drilling, and the U.S. Environmental Protection Agency has documented serious problems associated with drilling as far back as 1987. On Thursday, Dec. 8, the EPA also concluded that fracking could be responsible for a case of groundwater contamination in Wyoming.
EWG’s report calls on states to require that companies disclose drilling risks to landowners in the same way the SEC requires it for shareholders.
The report is available online at: http://static.ewg.org/pdf/Drilling_Doublespeak.pdf.
For more information on gas and oil drilling, visit: http://www.ewg.org/gas-drilling-and-fracking.
Source: Environmental Working Group release, 12/12/2011
Showing posts with label oil. Show all posts
Showing posts with label oil. Show all posts
Oil Company Pleads Guilty To Multiple Violations
WASHINGTON - 10/16/2011 - Pelican Refining Company LLC, pleaded guilty Oct. 12 to felony violations of the Clean Air Act and to obstruction of justice charges in federal court in Lafayette, La.
Charges were by announced Stephanie A. Finley, U.S. attorney for the Western District of Louisiana and Ignacia S. Moreno, assistant attorney General of the Environment and Natural Resources Division of the Department of Justice, and Cynthia Giles, assistant administrator for the U.S. Environmental Protection Agency’s Office of Enforcement and Compliance Assurance.
“Facilities that operate in our backyards have a responsibility to follow our nation's environmental laws, like the Clean Air Act, which is designed to protect the air we breathe and the local environment,” Giles said. “Today’s guilty plea shows that businesses that choose to ignore these critical safeguards and put their employees and the public at risk will face serious consequences.”
If the court sentences according to the terms in the plea agreement, Pelican will pay $12 million in criminal penalties, including $2 million in community service payments that will go toward various environmental projects in Louisiana, including air pollution monitoring. It would mark the largest ever criminal fine in Louisiana for violations of the Clean Air Act. Pelican would also be banned from future refinery operations unless and until it implements an environmental compliance plan, which includes external auditing by independent firms and oversight by a court appointed monitor.
In pleading guilty, officials of Pelican, headquartered in Houston and operating a refinery in Lake Charles, La., admitted that the company had violated numerous aspects of its permit to operate. The violations were discovered during a March 2006 inspection by the Louisiana Department of Environmental Quality (LDEQ) and the Environmental Protection Agency (EPA), which identified numerous unsafe operating conditions. Pelican also pleaded guilty to obstruction of justice for submitting materially false deviation reports to LDEQ, the agency that administers the federal Clean Air Act in Louisiana.
Pelican has admitted to the following:
• Pelican had no company budget, no environmental department and no environmental manager;
• In order to comply with a permit issued under the Clean Air Act, the refinery was required to use certain key pollution prevention equipment, but that equipment was either not functioning, poorly maintained, improperly installed, improperly placed into service and/or improperly calibrated;
• It was a routine practice for over a year to use an emergency flare gun to re-light the flare tower at the refinery which was designed to burn off toxic gasses and provide for the safe combustion of potentially explosive chemicals; because the pilot light was not functioning properly, employees would take turns trying to shoot the flare gun to relight the explosive gasses;
• Sour crude oil was stored in a tank that was not properly placed into service and remained in the tank after the roof sank;
• A caustic scrubber designed to remove hydrogen sulfide from emissions was bypassed; and
• A continuous emission monitoring system (CEMS) designed to measure the hydrogen sulfide levels in refinery emissions was not working properly.
Byron Hamilton, the Pelican vice-president who oversaw operations at the Lake Charles refinery since 2005 from an office in Houston pleaded guilty on July 6, 2011, to negligently placing persons in imminent danger of death and serious bodily injury as a result of negligent releases at the refinery. Hamilton faces up to one year in prison and a $200,000 fine for each of the two Clean Air Act counts.
The government’s investigation of the Pelican Refinery is continuing. Under the Crime Victims’ Rights Act, crime victims are afforded certain statutory rights, including the opportunity to attend all public hearings and provide input to the prosecution. Any person adversely impacted is encouraged to learn more about the case and the Crime Victims’ Rights Act or you may contact the Victim Witness Coordinator for the U.S. Attorney’s Office, Western District of Louisiana.
The criminal investigation is being conducted by the EPA Criminal Investigation Division in Baton Rouge and the Louisiana State Police, with assistance from the Louisiana Department of Environmental Quality. The case is being prosecuted by U.S. Attorney Stephanie Finley, Richard A. Udell, Senior Trial Attorney of the Environmental Crimes Section of the Environment and Natural Resources Division of the U.S. Department of Justice, Trial Attorney Christopher Hale with the Environmental Crimes Section.
Source: U.S. Environmental Protection Agency
Charges were by announced Stephanie A. Finley, U.S. attorney for the Western District of Louisiana and Ignacia S. Moreno, assistant attorney General of the Environment and Natural Resources Division of the Department of Justice, and Cynthia Giles, assistant administrator for the U.S. Environmental Protection Agency’s Office of Enforcement and Compliance Assurance.
“Facilities that operate in our backyards have a responsibility to follow our nation's environmental laws, like the Clean Air Act, which is designed to protect the air we breathe and the local environment,” Giles said. “Today’s guilty plea shows that businesses that choose to ignore these critical safeguards and put their employees and the public at risk will face serious consequences.”
If the court sentences according to the terms in the plea agreement, Pelican will pay $12 million in criminal penalties, including $2 million in community service payments that will go toward various environmental projects in Louisiana, including air pollution monitoring. It would mark the largest ever criminal fine in Louisiana for violations of the Clean Air Act. Pelican would also be banned from future refinery operations unless and until it implements an environmental compliance plan, which includes external auditing by independent firms and oversight by a court appointed monitor.
In pleading guilty, officials of Pelican, headquartered in Houston and operating a refinery in Lake Charles, La., admitted that the company had violated numerous aspects of its permit to operate. The violations were discovered during a March 2006 inspection by the Louisiana Department of Environmental Quality (LDEQ) and the Environmental Protection Agency (EPA), which identified numerous unsafe operating conditions. Pelican also pleaded guilty to obstruction of justice for submitting materially false deviation reports to LDEQ, the agency that administers the federal Clean Air Act in Louisiana.
Pelican has admitted to the following:
• Pelican had no company budget, no environmental department and no environmental manager;
• In order to comply with a permit issued under the Clean Air Act, the refinery was required to use certain key pollution prevention equipment, but that equipment was either not functioning, poorly maintained, improperly installed, improperly placed into service and/or improperly calibrated;
• It was a routine practice for over a year to use an emergency flare gun to re-light the flare tower at the refinery which was designed to burn off toxic gasses and provide for the safe combustion of potentially explosive chemicals; because the pilot light was not functioning properly, employees would take turns trying to shoot the flare gun to relight the explosive gasses;
• Sour crude oil was stored in a tank that was not properly placed into service and remained in the tank after the roof sank;
• A caustic scrubber designed to remove hydrogen sulfide from emissions was bypassed; and
• A continuous emission monitoring system (CEMS) designed to measure the hydrogen sulfide levels in refinery emissions was not working properly.
Byron Hamilton, the Pelican vice-president who oversaw operations at the Lake Charles refinery since 2005 from an office in Houston pleaded guilty on July 6, 2011, to negligently placing persons in imminent danger of death and serious bodily injury as a result of negligent releases at the refinery. Hamilton faces up to one year in prison and a $200,000 fine for each of the two Clean Air Act counts.
The government’s investigation of the Pelican Refinery is continuing. Under the Crime Victims’ Rights Act, crime victims are afforded certain statutory rights, including the opportunity to attend all public hearings and provide input to the prosecution. Any person adversely impacted is encouraged to learn more about the case and the Crime Victims’ Rights Act or you may contact the Victim Witness Coordinator for the U.S. Attorney’s Office, Western District of Louisiana.
The criminal investigation is being conducted by the EPA Criminal Investigation Division in Baton Rouge and the Louisiana State Police, with assistance from the Louisiana Department of Environmental Quality. The case is being prosecuted by U.S. Attorney Stephanie Finley, Richard A. Udell, Senior Trial Attorney of the Environmental Crimes Section of the Environment and Natural Resources Division of the U.S. Department of Justice, Trial Attorney Christopher Hale with the Environmental Crimes Section.
Source: U.S. Environmental Protection Agency
Refinery to Pay More Than $5.3 Million Penalty
WASHINGTON - 1/26/2011 - The U.S. Environmental Protection Agency (EPA) and the U.S. Department of Justice announced on Jan. 26 that Hovensa LLC, owner of the second largest petroleum refinery in the United States, has agreed to pay a civil penalty of more than $5.3 million and spend more than $700 million in new pollution controls that will help protect public health and resolve Clean Air Act violations at its St. Croix, U.S. Virgin Islands refinery.
The settlement requires new and upgraded pollution controls, more stringent emission limits, and aggressive monitoring, leak-detection and repair practices to reduce emissions from refinery equipment and process units.
“This settlement will produce significant benefits for the environment and for the people of the Virgin Islands,” said Cynthia Giles, assistant administrator of EPA’s Office of Enforcement and Compliance Assurance. “The commitments made by Hovensa to install state-of-the-art pollution controls will mean cleaner air for years to come.”
The government’s complaint, filed concurrently with today’s settlement, alleged that the company made modifications to its refinery that increased emissions without first obtaining pre-construction permits and installing required pollution control equipment. The Clean Air Act requires major sources of air pollution to obtain such permits before making changes that would result in a significant emissions increase of any pollutant.
Once fully implemented, the pollution controls required by the settlement are estimated to reduce emissions of nitrogen oxides (NOx) by more than 5,000 tons per year and sulfur dioxide (SO2) by nearly 3,500 tons per year. The settlement will also result in additional reductions of volatile organic compounds, particulate matter, carbon monoxide and other pollutants that affect air quality. Additional pollution-reducing projects at the refinery’s coking unit under the settlement will also reduce greenhouse gas emissions by over 6,100 tons per year.
High concentrations of SO2 and NOx, two key pollutants emitted from refineries, can have adverse impacts on human health, and are significant contributors to acid rain, smog, and haze.
“This important settlement with the second largest refinery in the United States will result in significant improvements to human health and the environment of the United States Virgin Islands,” said Ignacia S. Moreno, assistant attorney general for the Environment and Natural Resources Division of the Department of Justice. “Because of this settlement, Hovensa will install advanced pollution control and monitoring technology, will adopt more stringent emissions limits, and will also create a fund dedicated to local environmental projects. This is another major step in our efforts, alongside EPA, to bring the petroleum refining sector into compliance with our nation’s environmental laws.”
The government of the U.S. Virgin Islands has joined in the settlement and will receive a portion of the civil penalty. In addition, the company will set aside nearly $4.9 million for projects to benefit the environment of the U.S. Virgin Islands. The projects will be identified jointly by the U.S. Virgin Islands government and Hovensa, in consultation with EPA.
The settlement with Hovensa is the 28th under an EPA initiative to improve compliance among petroleum refiners and to reduce significant amounts of air pollution from refineries nationwide through comprehensive, company-wide enforcement settlements. The first of EPA’s settlements was reached in 2000, and with today’s settlement, 105 refineries operating in 32 states and territories – more than 90 percent of the total refining capacity in the United States – are under judicially enforceable agreements to significantly reduce emissions of pollutants. As a result of the settlement agreements, refiners have agreed to invest about $6 billion in new pollution controls designed to reduce emissions of sulfur dioxide, nitrogen dioxide and other pollutants by over 360,000 tons per year.
Hovensa is one of the 10 largest refineries in the world and has the capacity to refine more than 525,000 barrels of crude oil per day.
The consent decree, lodged in the District Court of the Virgin Islands, is subject to a 30-day public comment period and court approval.
Source: www.epa.gov.
The settlement requires new and upgraded pollution controls, more stringent emission limits, and aggressive monitoring, leak-detection and repair practices to reduce emissions from refinery equipment and process units.
“This settlement will produce significant benefits for the environment and for the people of the Virgin Islands,” said Cynthia Giles, assistant administrator of EPA’s Office of Enforcement and Compliance Assurance. “The commitments made by Hovensa to install state-of-the-art pollution controls will mean cleaner air for years to come.”
The government’s complaint, filed concurrently with today’s settlement, alleged that the company made modifications to its refinery that increased emissions without first obtaining pre-construction permits and installing required pollution control equipment. The Clean Air Act requires major sources of air pollution to obtain such permits before making changes that would result in a significant emissions increase of any pollutant.
Once fully implemented, the pollution controls required by the settlement are estimated to reduce emissions of nitrogen oxides (NOx) by more than 5,000 tons per year and sulfur dioxide (SO2) by nearly 3,500 tons per year. The settlement will also result in additional reductions of volatile organic compounds, particulate matter, carbon monoxide and other pollutants that affect air quality. Additional pollution-reducing projects at the refinery’s coking unit under the settlement will also reduce greenhouse gas emissions by over 6,100 tons per year.
High concentrations of SO2 and NOx, two key pollutants emitted from refineries, can have adverse impacts on human health, and are significant contributors to acid rain, smog, and haze.
“This important settlement with the second largest refinery in the United States will result in significant improvements to human health and the environment of the United States Virgin Islands,” said Ignacia S. Moreno, assistant attorney general for the Environment and Natural Resources Division of the Department of Justice. “Because of this settlement, Hovensa will install advanced pollution control and monitoring technology, will adopt more stringent emissions limits, and will also create a fund dedicated to local environmental projects. This is another major step in our efforts, alongside EPA, to bring the petroleum refining sector into compliance with our nation’s environmental laws.”
The government of the U.S. Virgin Islands has joined in the settlement and will receive a portion of the civil penalty. In addition, the company will set aside nearly $4.9 million for projects to benefit the environment of the U.S. Virgin Islands. The projects will be identified jointly by the U.S. Virgin Islands government and Hovensa, in consultation with EPA.
The settlement with Hovensa is the 28th under an EPA initiative to improve compliance among petroleum refiners and to reduce significant amounts of air pollution from refineries nationwide through comprehensive, company-wide enforcement settlements. The first of EPA’s settlements was reached in 2000, and with today’s settlement, 105 refineries operating in 32 states and territories – more than 90 percent of the total refining capacity in the United States – are under judicially enforceable agreements to significantly reduce emissions of pollutants. As a result of the settlement agreements, refiners have agreed to invest about $6 billion in new pollution controls designed to reduce emissions of sulfur dioxide, nitrogen dioxide and other pollutants by over 360,000 tons per year.
Hovensa is one of the 10 largest refineries in the world and has the capacity to refine more than 525,000 barrels of crude oil per day.
The consent decree, lodged in the District Court of the Virgin Islands, is subject to a 30-day public comment period and court approval.
Source: www.epa.gov.
2010 Called 'Wonderful Year' for Energy Investors
NORWALK, Conn.- (BUSINESS WIRE) - 1/13/2011 - Despite a poor start, 2010 finished as a “wonderful year” for energy investors, with more than 65 percent of oil and gas stocks delivering positive returns last year, according to the IHS Herold 2010 Energy Peer Group Stock Market Performance Report, which was just released by information and insight provider IHS.
Driven by economic growth, crude prices, which hit bottom in late May 2010 at around $65 per barrel, rose steadily and consistently through the second half of the year, and took oil company shares with them.
The median gain for the 503 stocks covered in the report was 21 percent, which, while it did not match the record-setting 59 percent gain posted in the 2009 IHS report, did outperform the market indices of nearly all Organization for Economic Cooperation and Development (OECD) countries. Total capitalization jumped by more than $300 billion, further reducing the severe losses the sector incurred in 2008 the report said, but did not extinguish them.
“Sometime in the first quarter of 2009, equity markets began to move upward in response to the economic growth that was becoming apparent in OECD countries,” said Robert Gillon, senior vice president and co-director of energy equity research at IHS. “It seemed as though every statistic that confirmed expansion was under way was reflected in a rise in the price of crude, which boded well for oil stocks. That pattern continued throughout the year, with oil prices and oil shares at a recovery high at the closing bell of 2010. In particular, North American oil stocks delivered the most returns to their investors.”
After finishing second-to-last as a peer group in 2009, U.S. Royalty Trusts earned redemption by taking top honors in 2010 as the best performing peer group reviewed, posting a gain of more than 44 percent. MV Oil Trust led the group by posting a return of 111 percent.
Companies in the E&P Limited Income Partnerships group followed closely with gains of nearly 43 percent. According to the IHS report, these survey-leading returns were in response to monetary stimuli by numerous central banks, where open-market interest rates fell to the lowest levels seen in decades, which forced yield-conscious investors to take on more risk in order to maintain their desired level of income.
“The vast amount of liquidity being injected into the economic system, particularly in the U.S. has resulted in a strong correlation between equity prices and oil prices,” Gillon noted. “By contrast, for many years prior to 2009, there was a reverse relationship, with higher crude prices perceived to cause a reduction in disposable income, lower consumer spending, and declining domestic product and stock prices. To our mind, this is the normal state of affairs, but to predict we will be back to normal in short order would be unwise.”
Mid-sized U.S. E&Ps, led by McMoRan Exploration Company, generated a segment return of nearly 42 percent, outperforming every other group of oil and gas producers globally. McMoRan delivered a total return in 2010 of nearly 114 percent.
As a group, Master Limited Partnerships — mostly pipeline and storage companies — enjoyed a hearty gain of nearly 35 percent, while the peer group of Integrated Oil Stocks with U.S. Downstream returned 22 percent, which was marginally above the survey average. Canadian Integrated Oil Stocks and Integrated Oil Stocks without U.S. Downstream Operations gained less than half that amount, at 10 percent and nine percent, respectively. Returns from the latter group, the report said, were dragged down by the generally poor performance of European markets. On the other hand, shares in the Refining and Marketing category offered a healthy median gain of 38 percent and did well globally as demand for distillates rose with increasing economic activity.
EnCore Oil plc of the U.K., whose shares rocketed by 773 percent following the discovery of the Catcher field in the U.K. sector of the North Sea, was the runaway leader of the Smaller E&P Companies Outside North America, but among companies starting at more than $0.50 per share, Xcite Energy Ltd. of the U.K. stole top survey honors for best total return of 552 percent due to its North Sea heavy oil project. Notably, Xcite Energy was also the top performer in last year’s survey.
Pacific Rubiales Energy enjoyed splendid results with its heavy oil development program in Colombia, and the sizzling gain of 131 percent placed the company at the top of the list of Largest Oil and Gas Producers for a second year in a row. CNOOC Ltd. maintained the title of largest capitalization amongst the Largest Oil and Gas Producers by a very wide margin. The Chinese producer, which had a steaming 56 percent total return, is the first in this sector to have its market valued exceed $100 billion.
Amongst the Largest Integrated and Diversified Oils, top-ranked Ecopetrol’s 84 percent gain reflected rapidly growing oil production, and it also got an updraft from the soaring Bogota market. Sunoco Inc. and Valero Energy, last year’s bottom two performers in the Largest Integrated and Diversified Oils group, moved into the top 10 due to a dramatic turnaround in refining margins. BHP Billiton is the only member of the 2009 crop to repeat in the top 10 this year.
In a stunning turnaround, nine of last year’s top 10 finishers fell to the bottom half of the table in 2010, with Petroleo Brasileiro and Rosneft Oil, numbers one and two in the previous ranking, being hit particularly hard.
Thanks in part to the Greek financial crisis, European markets were among the worst-performing financial exchanges and companies there had a tough 12 months, the report noted. Eni, Spa and Husky Energy repeated in the group’s bottom 10. BP p.l.c., as anticipated following the Deepwater Horizon incident, suffered through a horrendous year and now ranks eighth by capitalization, down from second in 2005.
While oil stocks carried the sector in 2010, continued weakness in the North American natural gas market did not prevent the large producers from generating solid shareholder returns, with the median performance of the group nearly matching that of the entire survey. However, a high concentration of North American natural gas in the production mix detracted from returns, since U.S. natural gas spot prices, which began the year at what now seems like the lofty price of $6/MMBtu, ended the year at a nine-year low for the date, which was about 30 percent below where they began. This led to the denouement of Southwestern Energy, which had been a stellar performer in the previous three years, the report said.
“Natural gas inventories were well above average and U.S. domestic production showed no signs of topping out,” Gillon added. “Fortunately for everyone but the Europeans, it has been ferociously cold in Europe, so gas is being shipped to the higher priced markets. The world is well supplied with gas, and the modest upward slope to the current futures curve is testimony to the glut in supply.”
Stocks in the Alternative Energy group held the basement position as worst in class, posting losses of more than 24 percent after gaining 26 percent in 2009. Said Gillon, “We’re not sure what to say about alternative energy, except perhaps a requiem. In the five years we have shown this segment in the survey, it has been the worst performing group twice, second worst twice, and soared to fourth from the bottom on one happy occasion. They suffer when natural gas prices go down, when government subsidies are cut, when the wind doesn’t blow, when it blows too much, and when the sun doesn’t shine. There may be other problems as well, which we will probably find out about in 2011.”
See: IHS Herold
Driven by economic growth, crude prices, which hit bottom in late May 2010 at around $65 per barrel, rose steadily and consistently through the second half of the year, and took oil company shares with them.
The median gain for the 503 stocks covered in the report was 21 percent, which, while it did not match the record-setting 59 percent gain posted in the 2009 IHS report, did outperform the market indices of nearly all Organization for Economic Cooperation and Development (OECD) countries. Total capitalization jumped by more than $300 billion, further reducing the severe losses the sector incurred in 2008 the report said, but did not extinguish them.
“Sometime in the first quarter of 2009, equity markets began to move upward in response to the economic growth that was becoming apparent in OECD countries,” said Robert Gillon, senior vice president and co-director of energy equity research at IHS. “It seemed as though every statistic that confirmed expansion was under way was reflected in a rise in the price of crude, which boded well for oil stocks. That pattern continued throughout the year, with oil prices and oil shares at a recovery high at the closing bell of 2010. In particular, North American oil stocks delivered the most returns to their investors.”
After finishing second-to-last as a peer group in 2009, U.S. Royalty Trusts earned redemption by taking top honors in 2010 as the best performing peer group reviewed, posting a gain of more than 44 percent. MV Oil Trust led the group by posting a return of 111 percent.
Companies in the E&P Limited Income Partnerships group followed closely with gains of nearly 43 percent. According to the IHS report, these survey-leading returns were in response to monetary stimuli by numerous central banks, where open-market interest rates fell to the lowest levels seen in decades, which forced yield-conscious investors to take on more risk in order to maintain their desired level of income.
“The vast amount of liquidity being injected into the economic system, particularly in the U.S. has resulted in a strong correlation between equity prices and oil prices,” Gillon noted. “By contrast, for many years prior to 2009, there was a reverse relationship, with higher crude prices perceived to cause a reduction in disposable income, lower consumer spending, and declining domestic product and stock prices. To our mind, this is the normal state of affairs, but to predict we will be back to normal in short order would be unwise.”
Mid-sized U.S. E&Ps, led by McMoRan Exploration Company, generated a segment return of nearly 42 percent, outperforming every other group of oil and gas producers globally. McMoRan delivered a total return in 2010 of nearly 114 percent.
As a group, Master Limited Partnerships — mostly pipeline and storage companies — enjoyed a hearty gain of nearly 35 percent, while the peer group of Integrated Oil Stocks with U.S. Downstream returned 22 percent, which was marginally above the survey average. Canadian Integrated Oil Stocks and Integrated Oil Stocks without U.S. Downstream Operations gained less than half that amount, at 10 percent and nine percent, respectively. Returns from the latter group, the report said, were dragged down by the generally poor performance of European markets. On the other hand, shares in the Refining and Marketing category offered a healthy median gain of 38 percent and did well globally as demand for distillates rose with increasing economic activity.
EnCore Oil plc of the U.K., whose shares rocketed by 773 percent following the discovery of the Catcher field in the U.K. sector of the North Sea, was the runaway leader of the Smaller E&P Companies Outside North America, but among companies starting at more than $0.50 per share, Xcite Energy Ltd. of the U.K. stole top survey honors for best total return of 552 percent due to its North Sea heavy oil project. Notably, Xcite Energy was also the top performer in last year’s survey.
Pacific Rubiales Energy enjoyed splendid results with its heavy oil development program in Colombia, and the sizzling gain of 131 percent placed the company at the top of the list of Largest Oil and Gas Producers for a second year in a row. CNOOC Ltd. maintained the title of largest capitalization amongst the Largest Oil and Gas Producers by a very wide margin. The Chinese producer, which had a steaming 56 percent total return, is the first in this sector to have its market valued exceed $100 billion.
Amongst the Largest Integrated and Diversified Oils, top-ranked Ecopetrol’s 84 percent gain reflected rapidly growing oil production, and it also got an updraft from the soaring Bogota market. Sunoco Inc. and Valero Energy, last year’s bottom two performers in the Largest Integrated and Diversified Oils group, moved into the top 10 due to a dramatic turnaround in refining margins. BHP Billiton is the only member of the 2009 crop to repeat in the top 10 this year.
In a stunning turnaround, nine of last year’s top 10 finishers fell to the bottom half of the table in 2010, with Petroleo Brasileiro and Rosneft Oil, numbers one and two in the previous ranking, being hit particularly hard.
Thanks in part to the Greek financial crisis, European markets were among the worst-performing financial exchanges and companies there had a tough 12 months, the report noted. Eni, Spa and Husky Energy repeated in the group’s bottom 10. BP p.l.c., as anticipated following the Deepwater Horizon incident, suffered through a horrendous year and now ranks eighth by capitalization, down from second in 2005.
While oil stocks carried the sector in 2010, continued weakness in the North American natural gas market did not prevent the large producers from generating solid shareholder returns, with the median performance of the group nearly matching that of the entire survey. However, a high concentration of North American natural gas in the production mix detracted from returns, since U.S. natural gas spot prices, which began the year at what now seems like the lofty price of $6/MMBtu, ended the year at a nine-year low for the date, which was about 30 percent below where they began. This led to the denouement of Southwestern Energy, which had been a stellar performer in the previous three years, the report said.
“Natural gas inventories were well above average and U.S. domestic production showed no signs of topping out,” Gillon added. “Fortunately for everyone but the Europeans, it has been ferociously cold in Europe, so gas is being shipped to the higher priced markets. The world is well supplied with gas, and the modest upward slope to the current futures curve is testimony to the glut in supply.”
Stocks in the Alternative Energy group held the basement position as worst in class, posting losses of more than 24 percent after gaining 26 percent in 2009. Said Gillon, “We’re not sure what to say about alternative energy, except perhaps a requiem. In the five years we have shown this segment in the survey, it has been the worst performing group twice, second worst twice, and soared to fourth from the bottom on one happy occasion. They suffer when natural gas prices go down, when government subsidies are cut, when the wind doesn’t blow, when it blows too much, and when the sun doesn’t shine. There may be other problems as well, which we will probably find out about in 2011.”
See: IHS Herold
Oil Industry's Center of Gravity Moves Eastward
NEW YORK--(BUSINESS WIRE) - 12/5/10 - The center of the oil universe is moving steadily eastward as oil companies throughout Asia add capacity to meet the region’s growing demand for oil and natural gas. This year’s ‘Energy Intelligence Top 100: Ranking the World’s Oil Companies,’ which incorporates the Petroleum Intelligence Weekly (PIW) Top 50, leaves little doubt they will continue to surge in size and influence.
‘Big oil,” meanwhile, appears to be cooling to mega mergers.
Asia’s government-controlled national oil companies (NOCs) are increasingly dominant. ‘Energy Intelligence Top 100’ is the only oil company ranking that measures Asian and other government-controlled national oil companies (NOCs) side by side with privately controlled international oil companies (IOCs). This year 41 NOCs and 59 IOCs made the list.
Malaysia’s Petronas (17), China’s CNOOC (38) and Thailand’s PTT (53) have been among the fastest rising companies in recent years. Korea’s National Oil Corp. (KNOC) made it back onto the list in this edition, landing at 77 following its acquisition of Canadian assets.
Yet even more dramatic was the ascent of India’s Reliance Industries, which jumped a remarkable 26 spots to land at 40. Its success is the result of significant increases in both gas production and distillation capacity --made even more remarkable considering this growth was organic.
The Top 100 control 87 percent of the world's oil reserves and 72percent of its gas reserves. Rankings are based on operating metrics rather than more traditional measurements such as market capitalization or revenues. A company’s rank is determined by the sum of ordinal ranks in each of six operational categories: Oil Production; Gas Production; Oil Reserves; Gas Reserves; Product Sales, and Refinery Distillation Capacity.
The Top 100 are also ranked in more than 100 other financial, upstream, refining and marketing categories.
While the names at the very top of the list barely shift, “look a little deeper and most of the companies in this group are in the midst of important changes,” says ‘Top 100’ Editor and Senior Research Analyst Ian Nathan. Some of these changes “could actually push them down, not up, in the next few years.”
BP, which faces huge costs associated with Deepwater Horizon disaster, may be the most prominent example of a shrinking giant. But the 2011 rankings suggest IOCs as a group may be rethinking size and mergers as a growth strategy.
An expected consolidation wave in 2009 didn’t materialize. And a look back to 1997 shows that today’s six largest IOC’s contribute a smaller share of global oil and gas operations than their aggregated predecessors.
While the consolidation may have made strategic sense for these companies at the time, the Top 100 research suggests that operational size is now being rethought as a driver of value creation.
That would be a significant break from the past. An astonishing 48 companies appearing in the 1997 Top 100 have disappeared from the rankings due almost entirely to M&A.
Research that produced the latest ‘Top 100’ also showed:
‘Big oil,” meanwhile, appears to be cooling to mega mergers.
Asia’s government-controlled national oil companies (NOCs) are increasingly dominant. ‘Energy Intelligence Top 100’ is the only oil company ranking that measures Asian and other government-controlled national oil companies (NOCs) side by side with privately controlled international oil companies (IOCs). This year 41 NOCs and 59 IOCs made the list.
Malaysia’s Petronas (17), China’s CNOOC (38) and Thailand’s PTT (53) have been among the fastest rising companies in recent years. Korea’s National Oil Corp. (KNOC) made it back onto the list in this edition, landing at 77 following its acquisition of Canadian assets.
Yet even more dramatic was the ascent of India’s Reliance Industries, which jumped a remarkable 26 spots to land at 40. Its success is the result of significant increases in both gas production and distillation capacity --made even more remarkable considering this growth was organic.
The Top 100 control 87 percent of the world's oil reserves and 72percent of its gas reserves. Rankings are based on operating metrics rather than more traditional measurements such as market capitalization or revenues. A company’s rank is determined by the sum of ordinal ranks in each of six operational categories: Oil Production; Gas Production; Oil Reserves; Gas Reserves; Product Sales, and Refinery Distillation Capacity.
The Top 100 are also ranked in more than 100 other financial, upstream, refining and marketing categories.
While the names at the very top of the list barely shift, “look a little deeper and most of the companies in this group are in the midst of important changes,” says ‘Top 100’ Editor and Senior Research Analyst Ian Nathan. Some of these changes “could actually push them down, not up, in the next few years.”
BP, which faces huge costs associated with Deepwater Horizon disaster, may be the most prominent example of a shrinking giant. But the 2011 rankings suggest IOCs as a group may be rethinking size and mergers as a growth strategy.
An expected consolidation wave in 2009 didn’t materialize. And a look back to 1997 shows that today’s six largest IOC’s contribute a smaller share of global oil and gas operations than their aggregated predecessors.
While the consolidation may have made strategic sense for these companies at the time, the Top 100 research suggests that operational size is now being rethought as a driver of value creation.
That would be a significant break from the past. An astonishing 48 companies appearing in the 1997 Top 100 have disappeared from the rankings due almost entirely to M&A.
Research that produced the latest ‘Top 100’ also showed:
- The 4 percent rise in Top 100 oil reserves was largely the result of a massive reserve upgrade by Petroleos de Venezuela (PDV); Top 100 gas reserves grew 2 percent.
- Top 100 oil output declined by approximately 1 percent, damped by Opec production restraint, and gas production fell nearly 2 percent, hindered by severely diminished production from both Gazprom and Turkmengas.
- Median revenue for the Top 100 was down 25 percent, while income dropped 42 percent.; median capital expenditures slid 35 percent.
- Four companies joined the Top 100 list: Cenovus Energy, Southwestern Energy, Ultra Petroleum and Korea National Oil Corp.
- North America is stirring again as a major upstream player, helped by unconventional (shale) gas success.
Report: Dioxin Level Low in Burn of BP Oil Spill
Dioxins are a category that describes a group of hundreds of potentially cancer-causing chemicals that can be formed during combustion or burning. The reports found that while small amounts of dioxins were created by the burns, the levels that workers and residents would have been exposed to were below EPA’s levels of concern.
Controlled burning of oil on the surface of the ocean (also called in situ burning) was one method used by the Unified Command during the Deepwater Horizon BP oil spill, to reduce the spread of oil and environmental impacts at the shoreline. A total of 411 controlled burn events occurred of which 410 could be quantified, resulting in the combustion of an estimated 222,000 to 313,000 barrels of oil (or 9.3 to 13.1 million gallons).
With support from the U.S. Coast Guard, EPA conducted sampling of emissions at the source of the controlled burns in the Gulf of Mexico to determine if dioxins were present. The sampling was conducted to identify potential dioxin exposures and determine the potential risks from inhalation to workers in the vicinity of the fires, risks from inhalation to the general population and risks to the general population from consuming fish caught in the area. The first report summarizing EPA’s sampling effort indicates that while dioxins were created from the burning of oil on ocean water, they were created at low levels – levels similar to the emissions from residential woodstoves and forest fires.
The second report, co-authored with scientists from the National Oceanic and Atmospheric Administration (NOAA), presents the results of a screening risk assessment for the dioxins emitted from the controlled oil burns. The results indicate that increased cancer risk due to exposure to the dioxins released from the controlled burning of oil was small - less than a 1 in 1,000,000 increased cancer risk. Additional cancer risks for inhalation by workers and onshore residents and fish consumption by residents were lower than risk levels that typically are of concern to the agency. Typically, the agency has a concern when the risk is greater than 1 in 1,000,000.
Had the spill of oil continued, the results of these measurements would have been used by the Unified Command to determine if burning should continue. However, the well was capped on July 15, 2010 and the last in situ burn occurred on July 19, 2010. Consequently, these results are most useful to inform and improve the agency’s ability to respond to future oil spills.
EPA and other federal agencies have developed a broad set of questions and answers to provide the public with general information on dioxins, including what they are, where they can be found, and major sources of dioxins. The questions and answers explain the review process for the dioxin reassessment and discuss possible effects of dioxin exposure in humans, including advice about consumption of food that might contain dioxins.
For further information see: http://www.epa.gov/research/dioxin/
