PEMEX to Conduct Deepwater Drilling in Gulf of Mexico

The Mexican company has no experience in drilling for oil at the depths it intends to do it and Mexican regulators are warning everyone that the company is not prepared for a serious accident in the Gulf Region.

By TIM JOHNSON | McCLATCHY | APRIL 4, 2012

Two years after the worst offshore oil spill in U.S. history, Mexico’s state oil company is about to test its hand at drilling at extraordinary depths in the Gulf of Mexico.

If all goes as planned, Petroleos de Mexico, known as Pemex, will deploy two state-of-the-art drilling platforms in May to an area just south of the maritime boundary with the United States. One rig will sink a well in 9,514 feet of water, while another will drill in 8,316 feet of water, then deeper into the substrata.

Pemex has no experience drilling at such depths. Mexico’s oil regulator is sounding alarm bells, saying the huge state oil concern is unprepared for a serious deepwater accident or spill. Critics say the company has sharply cut corners on insurance, remiss over potential sky-high liability.

Mexico’s plans come two years after the Deepwater Horizon catastrophe, the worst oil spill in U.S. history. On April 20, 2010, a semi-submersible rig that the British oil firm BP had contracted to drill a well known as Macondo exploded off the Louisiana coast, killing 11 workers and spewing 4.9 million barrels of oil in the nearly three months it took engineers to stop the spill.

BP has said the tab for the spill — including government fines, cleanup costs and compensation — could climb to $42 billion for the company and its contractors.

Pemex’s plans to sink even deeper offshore wells underscore Mexico’s pressing need to maintain sagging oil production — exports pay for one-third of government operating expenses — along with oil companies’ desire to leverage technology and drill at ever more challenging depths.

Carlos A. Morales, the chief of the Pemex exploration and production arm, which employs 50,000 people, voiced confidence that his company has to the ability to sink wells in ultra-deep water.

“Pemex is ready to undertake the challenge and to do it safely,” Morales said in an interview in his 41st-floor office at Pemex headquarters in this capital city.

“You have to bear one thing in mind,” he said. “Pemex is the biggest operator in the Gulf — including everyone — both in production and in the number of rigs we operate. We are operating more than 80 rigs offshore.”

Sometime in May, Morales said, Pemex will move the Singapore-built West Pegasus semi-submersible oil platform, owned by the Norwegian company Seadrill, over a seabed formation known as the Perdido Fold Belt and drill a well named Supremus. At nearly the same time, a South Korea-built platform known as Bicentenario, owned by the Mexican company Grupo R, will drill the slightly shallower Trion well, a little to the west of Supremus.

The area where the two wells are to be sunk is some 30 miles south of the maritime boundary in the Gulf between Mexico and the United States.

Morales said the rigs are both “sixth generation, which means they are the most modern. They have all the safety devices that rigs should have.”

Still, the technological challenges of ultra-deepwater drilling — anything more than 5,000 feet of water — are significant because of the high pressures and complex seabed extraction systems, akin even to launching spaceships into orbit, experts said. The Deepwater Horizon was drilling in about 5,100 feet of water when it exploded.

Since Pemex decided in 2004 to expand from shallow offshore wells into deep water, it’s drilled 16 wells at increasing depths, with two in ultra-deep waters, Caxa and Kunah, the latter at 6,500 feet.

Mexico’s nationalist constitution bars Pemex from operating joint ventures with oil companies that already are experienced at very deep water. It can contract only with global oil service companies, ordering them to perform functions.

“This requires managerial expertise that Pemex lacks,” said Miriam Grunstein Dickter, an oil expert at the Center for Research and Teaching of Economics, a Mexico City institute in the social sciences. “When you contract a service company, they perform the work that you command them to perform. Here, Pemex does not know how to command the service company.”

“Like rocket science, you can find the people. They are out there to be hired,” added Kirk Sherr, the head of North American operations for Regester Larkin Energy, a global consulting company. “But who’s going to coordinate?”

It’s when disaster strikes that the resources — or lack of them — come into stark relief for an oil company or even a nation.

After the Deepwater Horizon disaster, BP, the U.S. Coast Guard, and state and federal officials mustered some 3,000 vessels to help set booms, clean marshes and gather spilled crude.

Mexico has nowhere near that fleet of vessels at its disposal. Its navy has 189 ships. Pemex itself contracts around 180 boats.

That’s one of the concerns of Juan Carlos Zepeda, the head of Mexico’s National Hydrocarbons Commission, a regulatory body created in 2009 that’s wrestled with Pemex over its practices, demanding that it adopt global standards on safety and preparation for worst-case scenarios.

The two sides have been in a power struggle. The 74-year-old state company is used to setting its own rules, not following the impositions of regulators.

“Pemex is just not accustomed to being bossed around,” Grunstein said.

A point of contention has been insurance. Zepeda wants Pemex to have insurance to pay for even catastrophic spills, like BP’s Macondo well. But Pemex balks.

“They are probably thinking, why are we going to give all this money to the insurance company?” said David Shields, an energy consultant in Mexico City.

Morales of Pemex said the company was insured for coverage of $2.5 billion.

“I feel comfortable with what Pemex is capable of doing. You can always argue that $2.5 billion is not enough. We can always argue that $10 billion is not enough,” he said.

But he said that Pemex had uniquely deep pockets.

“The owner of this company is the government of Mexico,” he said.

In the event of a deepwater disaster, whether claimants could ever get Pemex, or the Mexican treasury, to pay is an open question. Major damage claims haven’t been tried against a state oil company. Given that Pemex turns over most revenues to the treasury, Mexican taxpayers would have to pay much of the cleanup costs and legal claims.

“It’s going to be a really big hit on the Mexican economy if there is a catastrophic disaster, and it will be catastrophic for the relationship with the United States,” said Shields, the consultant.

Some industry experts said Pemex wasn’t taking greater risks than private oil companies sometimes took.

“It’s not inherently reckless,” said John Rogers Smith, an offshore drilling expert at Louisiana State University. “They can hire competent contractors. They can buy equipment from reputable vendors. The big question is . . . who have they hired to help them?”

Pemex signed a contract last week with Wild Well Control, a Houston company with blowout expertise. Morales said Pemex was negotiating a contract with a second Houston firm, Cameron International, that had sophisticated tools — such as huge underwater capping stacks — that helped BP control its Macondo well below the Deepwater Horizon.

In mid-February, the United States and Mexico signed a framework accord on developing trans-border oil fields in the Gulf. The accord includes terms for safety cooperation, including allowing joint inspection teams to ensure rigs’ compliance with safety and environmental regulations, key to preventing worst-case spills.

“I don’t think we should be any more concerned about what they are doing than some of the things we are doing on our side of the Gulf,” said Jeremy Martin, the energy program director at the Institute of the Americas, a La Jolla, Calif., nonprofit organization that promotes cooperation and economic development.

Still, the Deepwater Horizon disaster haunts like a lingering nightmare.

“Macondo was a watershed in deepwater drilling. There is before Macondo and there is after Macondo,” said Fabio Barbosa, an economist at the National Autonomous University of Mexico who specializes in the oil industry.

Barbosa said Pemex was deeply concerned about sustaining oil production and stemming a decline of proven oil reserves, 50 percent of which were in deep water. Pemex’s production has fallen from 3.4 million barrels per day in 2004 to about 2.55 million barrels a day now.

“They consider it their duty to elevate crude production. They are moving about, driving production in every way they can,” Barbosa said.

Shields, who edits a Spanish-language industry magazine, Energia a Debate, said it was one factor impelling Pemex but that Mexican leaders had observed rapid development of U.S. offshore wells in the Gulf and wanted to lay claim to nearby undersea areas of their own, even if it stretched their capabilities.

“They want to put the flag there,” said Shields, who’s a nationalized Mexican. “The oil industry is a lot like that. They want to go after bigger and bigger challenges. Once you go up a small mountain, you want to go up a bigger mountain.”

Shields added: “The risks are massive and the potential benefits are comparatively small.”

Morales, the Pemex executive, disagreed that his company can’t handle the risk: “We are going there because there are resources that belong to the nation. We have the mandate to explore and produce for the nation.”

He added: “We are capable of fulfilling all our obligations.”

Petrobras is Brazilian No More

The tentacles of the globalists who caused the current economic crisis are now reaching somehow stable countries and taking over their resources.

Bloomberg

One of the richest men in the world now owns $811 million in Petrobras shares..

Billionaire investor George Soros bought an $811 million stake in Petroleo Brasileiro SA in the second quarter, making the Brazilian state-controlled oil company his investment fund’s largest holding.

As of June 30, the stake in Petrobras, as the Rio de Janeiro-based oil producer is known, made up 22 percent of the $3.68 billion of stocks and American depositary receipts held by Soros Fund Management LLC, according to a filing with the U.S. Securities and Exchange Commission. Petrobras has since slumped 28 percent.

Soros has increased his mining and commodities holdings, a move that accelerated in the first quarter with purchases of such companies as Cia. Vale do Rio Doce, the world’s largest iron-ore producer, and Talisman Energy Inc., a Canadian oil and gas company. In November, Petrobras announced the discovery of Tupi, a field with as much as 8 billion barrels of reserves, making it the largest find in the Americas since 1976.

“Petrobras has something that other oil companies don’t have: oil — lots of it and they’re going to find more,” said Ricardo Kobayashi, equity fund manager with UBS Pactual SA in Rio de Janeiro, which manages about $5 billion of stocks, including shares in Petrobras. “If you can buy now and hang on, if you have the staying power, it’s great.”

Tupi is part of a new deepwater offshore region known as the pre-salt that may contain as much as 50 billion barrels, according to Peter Wells, oil analyst with the U.K.’s Neftex Petroleum Consultants Ltd.

Share Slump

The drop in Petrobras’ U.S.-traded common shares since June 30 would have reduced the value of Soros’s disclosed stake by $235 million.

Soros Fund Management didn’t report holding any Petrobras shares at the end of the first quarter. It did disclose much smaller stakes in the Brazilian oil company during 2007, including 150,000 depositary shares, with a market value of about $17.3 million, at Dec. 31. The hedge fund company also had calls on another 35,000 shares at Dec. 31.

Petrobras shares traded at an average closing price of $64.83 each during the second quarter, when Soros bought the stake. The shares today dropped 91 centavos, or 1.8 percent, to $50.68 in New York, valuing Petrobras at $204.8 billion, the world’s 11th-biggest company by market capitalization.

Soros funds also bought almost 9.5 million shares of Lehman Brothers Holdings Inc. during the second quarter, according to today’s filing. Soros funds held 10,000 Lehman shares at March 31, just before the second quarter began.

Lehman shares closed at $19.81 each on June 30, giving Soros’s stake in the New York-based brokerage a market value of about $187.7 million when the quarter ended. Lehman shares have since declined 18 percent, reducing the stake’s value to $153.5 million.

Michael Vachon, a Soros spokesman, didn’t immediately return a telephone call seeking comment.

BP’s Top Kill Procedure fails as Coast Guard Blocks Media Access

Natural News

BP officials have announced today that the “top kill” effort to stop the Gulf oil leak has failed. Unanticipated problems doomed the project, which involved trying to pump tens of thousands of gallons of mud, shredded rubber tires and other “junk” into the hole to try to halt the outflow of oil.

At 6pm Saturday evening, BP officials announced the “top kill” effort had failed and now they were moving on to another plan (more below).

I am on site at the Gulf Coast right now, and while I haven’t reached the areas where oil is washing up on the beaches, I’m learning some interesting information nonetheless. In particular, finding a hotel room anywhere near New Orleans has become virtually impossible, as BP has rented out virtually every available hotel room from St. Charles, Louisiana all the way to Pensacola, Florida. (I am currently staying in a fleabag hotel that miraculously has internet access…)

But it raises the question: Where are all these people? I haven’t seen a single BP person anywhere, and I was out on some beaches today filming editorial segments for NaturalNews. I did see some small watercraft laying out protective barriers, but I didn’t see any BP people anywhere.

I’ll keep you posted on what we find tomorrow as we approach the beaches to the East of New Orleans.

Expect more oil for the next 10 weeks

Now that the top kill effort has failed, it means oil will keep spewing into the Gulf of Mexico until at least August. That’s when two “pressure release” wells are expected to be completed. The purpose of these two wells is to siphon off the oil from underneath the ocean bed, thereby releasing the pressure that’s currently pushing crude oil out of the existing hole under the doomed Deepwater Horizon rig.

This “plan C” effort remains extremely risky, of course. There’s no guarantee it will work at all. And if it fails, this “volcano of oil” could continue to pollute the Earth’s oceans for years. This could, in fact, be the global killer event I warned about in an earlier story about this BP oil spill. (http://www.naturalnews.com/028805_G…)

We could be looking at a global-scale environmental catastrophe that destroys virtually all marine life in the Gulf of Mexico and takes a century to fully recover. It’s really that bad. If they can’t stop this volcano of oil in the next week, we could be looking at the single most destructive environmental catastrophe ever to strike our planet since the asteroid that wiped out the dinosaurs.

Get ready for more chemicals

In the mean time, now that the top kill effort has failed, BP has announced it is resuming the spraying of chemical dispersants into the massive oil plumes that remain deep under the surface of the Gulf of Mexico water. This means more chemicals that will kill more forms of marine life throughout the Gulf.

But it’s not just aquatic life that’s being threatened by these chemicals: BP workers are increasingly being sent to the hospital complaining of symptoms like vomiting, dizziness, difficult breathing and others. The obvious cause of such symptoms is the huge amount of crude oil bubbling up to the surface (some of which evaporates into the air) along with the massive injection of chemical dispersants into the waters (some of which also evaporates). CNN is reporting that BP claims it is monitoring air quality, but so far BP has not gone public with any air quality test results.

None of the cleanup workers have been outfitted with chemical masks that might protect them from the volatile chemicals now present in the Gulf waters. Yet CNN is reporting that the warning label on the chemical product made by NALCO states: “Avoid breathing vapor.”

The EPA, meanwhile, remains silent on this whole issue. Remember: It is the EPA that ordered BP to stop using its selected brand of chemical dispersant, but BP utterly ignored the EPA and continues to dump that very same chemical into the Gulf of Mexico right now.

A chemical attack on America

What we are watching here, folks, is very nearly a chemical attack on America by BP and the oil industry. It’s hard to say what’s worse: The oil or the chemical dispersants. In fact, no one knows the answer to that question, and it can’t even be studied by scientists because the disaster keeps growing by the day.

This is one environmental catastrophe that just keeps getting worse, and the cost to the marine ecosystem is incalculable. And that’s not to even mention the economic cost to the region and all the people who depend on life in the Gulf of Mexico for their own livelihoods. Their lives are now being destroyed by this oil drilling catastrophe.

If there’s one lesson that comes from all this, it is a reminder of the immense value Mother Nature provides us each and every day at no charge. The VALUE of a healthy ocean is incalculable. And the COST of killing it may be more than what human civilization can bear.

I suppose this resolves the whole question of what’s more important: The environment or the economy? As we’re rudely discovering today, the economy cannot exist without protecting the environment first.