US Proposes 1st Rules for Arctic Drilling
The Obama administration proposed standards on exploratory drilling for oil and gas in US Arctic waters that would add costs for energy companies but aim to protect against catastrophic spills.
The rules, proposed by the Department of Interior, require for the first time that energy companies have access to equipment to contain potential well blowouts, such as rigs that can drill so-called relief wells. The companies would also need to ensure quick access to capping stacks and containment domes, while drilling in the Chukchi and Beaufort seas off Alaska.
The costs of the rules would be about $1.2 billion over 10 years, the department estimated. The benefits of preventing or reducing the severity of an oil spill are difficult to quantify, it said.
The proposal comes in the wake of Royal Dutch Shell Plc's 2012 exploration season when the company lost control of the Kulluk drill rig, which drifted and ran aground in harsh, frigid waters. The rules, which could shorten drilling seasons, could also add costs to Statoil and ConocoPhillips which own leases in the Arctic. The companies are not currently drilling in the waters.
The rules are "designed to ensure safe energy exploration in unforgiving Arctic conditions," said Brian Salerno, head of the Bureau of Safety and Environmental Enforcement, an office of the Interior Department.
The Beaufort and Chukchi seas are a huge potential resource for the United States containing an estimated 21.5 billion barrels of oil and 93.4 trillion cubic feet of natural gas.
The public will have 60 days to comment on the rules which will not be finalized before this summer's drilling season.
A conservationist group applauded the plan. "It's a vast improvement to have Arctic-specific rules proposed so that companies will not be operating simply as they do in warmer, more developed Gulf of Mexico," said Marilyn Heiman, director of the Pew Charitable Trusts' US Arctic project.
Shell said it would review the rules, but added that the company takes "unprecedented steps" to ensure safe operations in the Arctic and that "often, that has meant going above and beyond" requirements.
Azerbaijan Sharply Devalues Currency
Azerbaijan’s central bank has sharply devalued the energy-rich country’s currency as falling oil prices and economic turmoil in Russia hit hard across the former Soviet Union.
The Azerbaijani manat lost 34 percent of its value against the dollar and 33.8 percent against the euro in the cut, with new exchange rates set at 1.05 manat and 1.195 manat respectively, the central bank said.
The move “aims at creating additional stimuli for economic diversification, boosting competitiveness and exports,” the regulator said in a statement.
With oil and gas accounting for 95 percent of the country’s exports and 70 percent of state revenues, the Azerbaijani economy has been under pressure from falling oil prices since June.
In December, the central bank spent some eight percent of its international reserves to defend the manat, and reportedly as much as $1 billion so far this year.
The central bank moved to abandon its currency peg to the dollar in favor of euro-dollar basket.
The central bank said that “the adjustment of the manat’s rate is also directed at neutralizing negative effects from the devaluation of national currencies of Azerbaijan’s trading partners.”
The plunging value of the Russian ruble and falling oil prices affected the national currencies of many ex-Soviet countries.
The Georgian lari fell to its lowest level since 2004.
It has lost 22.4 percent of its value against the greenback since November — a consequence of shrinking remittances from Russia and declining exports.
Chevron's 2014 Oil, Gas Reserves Slip
Chevron Corp, the second-largest US-based oil producer, said its oil and natural gas reserves fell one percent last year largely due to the sale of its stake in a Chad oil field.
The company had proved reserves of 11.1 billion barrels of oil equivalent on Dec. 31, about one percent lower than a year earlier.
Even as Chevron has five major projects coming online by the end of the decade, dwindling reserves have become a key concern for international energy companies, many of which have massive capital budgets to find and extract oil and natural gas.
San Ramon, California-based Chevron is also grappling with plunging crude oil prices , which Chief Executive John Watson said last month would lead to "significant cost reductions."
Other companies, too, such as Exxon Mobil, Royal Dutch Shell, have aggressively tried to balance cheap oil with the crucial need to find and develop new reserves that are increasingly found in remote places such as Papua New Guinea and the Arctic Circle.
At the end of 2014, about 20 percent of Chevron's reserves were in Kazakhstan and 19 percent in the United States, the largest single areas of holdings, Chevron said.
Last year, Chevron sold its stake in an oil concession and pipeline system in Chad's Doba Basin to the country's government for $1.3 billion.
The exit from the project, led by Exxon, was largely seen as a way to refocus cash toward Chevron's Permian shale holdings in Texas, considered one of the largest shale oil reserves in the world.
While Chevron has invested billions of dollars in global energy projects in recent years, investors have grown anxious as smaller independent rivals, including Whiting Petroleum and Continental Resources; have successfully developed US shale plays.
More than half of Chevron's 1.5 million Permian acres don't require royalty payouts to landowners, an advantage over rivals. Chevron is trying to lift Permian production to 250,000 barrels of oil equivalent per day by 2020.
"Proved reserves" refers to oil and natural gas reserves that can be successfully recovered using existing technology.
Oil May Briefly Drop to $20
Russia’s former finance minister, Aleksey Kudrin, does not rule out a brief drop in crude oil prices to 20 dollars per barrel.
In recent trading on the London Intercontinental Exchange, a barrel of Brent was trading at 60.41 dollars before the close. In January, Brent blend prices dropped as low as 48 dollar per barrel and even lower.
"I cannot rule out that at a certain point, for a very brief period, the price of oil may slump to 20 dollars," Kudrin told the media in Makhachkala. "I do not think most analysts agree this may last a while. At the moment the assumption is that oil prices will be somewhere between 60 and 80 dollars per barrel this year. That the price is now back to 60 dollars indicates nothing at all. It may turn either way."
Kudrin believes there are very many factors that keep putting downward pressures on oil prices.
"For two or three year we shall see the world getting used to new prices and businesses evaluating the new opportunities. The world will realize at last, what is the long-term price everybody will be prepared to agree to," Kudrin said.
The Russian government hopes that the oil price will stabilize at the current level, he recalled.
"Whenever I am asked for an opinion, I say that future prices are anyone’s guess. They may stay at 40 dollars per barrel for a long time, or they may be at 80 dollars," he concluded.
Earlier, Deputy Prime Minister Dmitry Medvedev said that in proposing adjustments to the budget the Cabinet of Ministers would proceed from a forecast price of 50 dollars per barrel. In that case the federal budget’s deficit will make up 3.8% of the GDP.