Gulf of Mexico, Environment and Economy Confront Oil and Gas

July 1, 2010
A business-transforming trio of challenges confronts the oil-and-gas industry: continuing weak U.S. and European economies; the advent of more environmental and climate-connected operating restrictions through potential federal legislation; and the Deepwater Horizon offshore oil-rig spill disaster in the Gulf of Mexico.
“It was an unprecedented accident,” remarks Rayola Dougher, senior economic advisor with the Washington, D.C.-based American Petroleum Institute (API, “This came as a shock. The history of safety in the Gulf of Mexico has always been something to be proud of. It’s unacceptable to have this loss of life (11 oil-rig crew killed) and a spill like this.”After stopping the leak, cleaning up the spill and figuring out what happened, the industry must “go back and make sure that it absolutely does not happen again,” Dougher declares. API has already assembled two task forces to look at offshore technology and offshore safety procedures. “That information has been turned over, in late May, to the U.S. Interior Department for submittal to the [U.S.] president,” she notes.“This is a tough time for everybody to try to step up to this great challenge,” Dougher observes. But, she stresses that the Gulf spill mustn’t “result in our walking away from U.S. natural gas and oil resources. That would compound this tragedy even further.”It would be understatement to say that the timing of the leak and spill, accompanied by the tragic deaths of rig crew as well as existing or potential environmental and economic damage, was lousy. The domestic economy still founders. “[And] it’s a fragile recovery. We’re going to have to wait and see how this unfolds,” Dougher says. One positive, though: “We’re not importing as we used to do, because we’re meeting demands with domestic production.”However, there’s a renewed push in the U.S. Senate for manmade-climate-change-related legislation. “But moving away from the Waxman-Markey [American Clean Energy and Security Act, passed in June 2009] approach [of the U.S. House of Representatives] was absolutely necessary. It would penalize U.S. refineries and increase more overseas imports, so the world wouldn’t have any less carbon emissions,” Dougher comments.Economic penalties don’t translate well in oil-and-gas exploration and production (E&P). “The business, always faced with a declining resource, is always looking to invest,” explains Mike Strathman, head of Burlington, Mass.-headquartered vendor Aspen Technology Inc.’s ( E&P efforts. But the ups and downs of the economy never really change that, he adds.Unequal growthWhile Strathman believes the Western world, including the United States, is emerging from the recession, recovery doesn’t occur very rapidly. Citing information from Cambridge, Mass.-based Cambridge Energy Research Associates (, he says that world economic growth is approximately 3.8 percent; with U.S. growth at 3 percent; and Europe’s at 2 percent. But Asia is going to be the driver in the next two to three years, Strathman predicts. “China’s growth was almost 10 percent. And Asia, in general, excluding Japan and China, is about 5.5 percent.”How will companies compensate for sluggish growth? “Conserve where you can. We’re going to see people concerned more about energy management,” Strathman suggests. “E&P has a lot of secondary and tertiary recovery processes that are energy intensive. So, E&P is looking at them.”  For new facilities, companies look for better up-front energy management. “When you think about the energy consumption profile at a facility, in its design phase, you [can] minimize the amount of energy consumed [when the facility goes online],” he says. For existing facilities, owners/operators also analyze operations to reduce energy consumption.But the industry is very technologically complex, Strathman observes, and the public’s “oily” perception of it may be the most challenging issue it faces. “What’s happening in the Gulf of Mexico is just going to be another hurdle to overcome,” he adds. Yes, but very high, wide and constantly changing, it seems.C. Kenna Amos, [email protected], is an Automation World Contributing Editor.American Petroleum Institute, APIwww.api.orgAspen Technology Inc.www.aspentech.comCambridge Energy Research

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