Posted March 22, 2011
The Wall Street Journal: Obama Underwrites Offshore Drilling: You read that headline correctly. Unfortunately, the Obama Administration is financing oil exploration off Brazil. The U.S. is going to lend billions of dollars to Brazil's state-owned oil company, Petrobras, to finance exploration of the huge offshore discovery in Brazil's Tupi oil field in the Santos Basin near Rio de Janeiro. Brazil's planning minister confirmed that White House National Security Adviser James Jones met this month with Brazilian officials to talk about the loan. The U.S. Export-Import Bank tells us it has issued a "preliminary commitment" letter to Petrobras in the amount of $2 billion and has discussed with Brazil the possibility of increasing that amount. Ex-Im Bank says it has not decided whether the money will come in the form of a direct loan or loan guarantees. Either way, this corporate foreign aid may strike some readers as odd, given that the U.S. Treasury seems desperate for cash and Petrobras is one of the largest corporations in the Americas. But look on the bright side. If President Obama has embraced offshore drilling in Brazil, why not in the old U.S.A.? The land of the sorta free and the home of the heavily indebted has enormous offshore oil deposits, and last year ahead of the November elections, with gasoline at $4 a gallon, Congress let a ban on offshore drilling expire. The New Orleans Times-Picayune: Interior Department OKs first new deepwater oil and gas exploration plan since disaster: Secretary of the Interior Ken Salazar and Bureau of Ocean Energy Management, Regulation and Enforcement Director Michael Bromwich announced Monday that, for the first time since the Deepwater Horizon disaster, the bureau has approved a deepwater oil and gas exploration plan, submitted by Shell Offshore Inc., following the completion of a site-specific environmental assessment. As explained by Salazar and Bromwich, an exploration plan describes all exploration activities planned by the operator for a specific lease or leases, including the timing of these activities, information concerning drilling vessels, the location of each planned well, and other relevant information that needs to meet important safety standards. Once a plan is approved, additional new applications for permits to drill can be issued. According to BOEMRE, Shell's plan supplements its original exploration plan for the same lease in the company's Auger field, which was approved in 1985. This plan would allow for the Shell to seek permits to drill three exploratory wells in about 2,950 water depth, 130 miles off the coast of Louisiana.
The New Orleans Times-Picayune: Study warns against repealing Louisiana drilling incentive: As state lawmakers grapple with a $1.6 billion budget shortfall, a new study commissioned by the oil and gas industry warns against repealing severance tax exemptions for companies drilling horizontally for natural gas, contending that such incentives are key to balancing high costs of production at the Haynesville Shale formation in northwest Louisiana. The study, paid for by the Louisiana Oil and Gas Association, an industry group representing offshore drillers, and conducted by Loren Scott, a professor emeritus at Louisiana State University, is set to be released Tuesday. It asserts that the state made $2.94 in revenues for every $1 that it gave up as part of the exemption, which waives severance taxes that the state would receive for the first two years of production on a well or until costs are covered. Overall, in 2010, the cash-strapped state lost out about $125.3 million in gas severance taxes, but added roughly $368 million in revenue from Haynesville, according to the study. In a four-year period beginning in fiscal year 2008 and projected through 2011, the study reports that total severance taxes lost through the incentive were nearly $266 million.
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