Industrialized economies rely on a consistent interworking of supply and demand. Successful economies are incrementally matched with rises in demand for goods and services, i.e. energy.

As of July, with record high oil prices, the term “green” became volatile. Green energy and green collar jobs became part of the vernacular, especially among politicos in the United States.

The City of San Jose, Calif., is now calling itself the “capital of America’s clean tech revolution.” Mayor Reed claims to have a “green vision,” and the city is now pursuing the country’s top green companies to locate within San Jose.

Tesla Motors, a manufacturer of high end electric sports cars, recently moved to San Jose bringing with it 1,000 new “green collar jobs.”

What exactly defines a “green collar” job? The most likely answer is any manufacturing position concentrated on so-called sustainable energy systems or components. Solar and wind energy are the big ones. For transportation purposes, biofuels, hydrogen, and electricity are most often proposed as alternatives to fossil fuels.

Wait a second…did someone say electricity? What generates electricity? Would it be coal? Or, even crazier, could it be natural gas? Aaah, so what comes first…the chicken or the egg?

The important point here is that alternative forms of energy are good. At some point in the future, fossil fuels will no longer be profitable to find or to produce. While experts disagree on exactly when this might take place, both sides of the energy industry must stay on course to determine a safe path to the future. The oil industry is the only bridge we have to the ideal world proposed as the “green revolution.”

Our modern scenario is much like the early 19^th century when wood provided most economies with a major source of energy. One would wonder if a “peak wood” theory was devised from this era? However, the introduction of coal supplanted wood as a much better source of energy. Later oil would do the same, and is now the highest net energy resource we know.

Technology and innovation will improve our means of reaping more benefit from all known sources of energy in the future. For now, we must concentrate our efforts on oil and natural gas. The problem with a “green revolution” is that many of its supporters are under a false impression that alternative forms of energy will supplant our current demand for fossil fuels. Many tout this change as if its possible right now. It’s not.

What are the current drivers of improved infrastructure and mass manufacturing in today’s industrial environment? The answer is fossil fuels.

Green energy will have a place in today’s market as long as the oil and gas industry is healthy. At $147/bbl, wind and solar are feasible endeavors, but at $58/bbl investors are wise to proceed with caution. The expectation of a wide availability for investments and job creation within the “clean tech” industry will be short lived if the price of oil remains low.

Could “green tech” be the next big bubble? Hopefully, it won’t suffer the same fate as many of the previous examples like the dot.com or the sub-prime real estate markets. It is possible that an extended slump in the oil and gas market could prevent many “clean tech” start ups from getting off the ground.

To provide sustainable energy sources for the future, industries should understand that it will take collaboration between those who wish to break away from the dependence on fossil fuels and the operators and service companies who currently produce these resources. It is very unlikely that the former will survive without the continued performance of the latter.

The event has been labeled as one of the world’s most significant natural disasters in recent years. New facts presented at the Geological Society of London is casting doubts on the premise that drilling provided a trigger for the catastrophe.

History
According www.mudvolcano.org, a Web site devoted to the event, Lapindo Brantas began drilling the Banjar Panji-1 well to target gas reserves in the Kunjung formation, which is a deep sedimentary basin located 1.9 miles (3 km) below the surface. The site is in Sidoarjo, East Java, Indonesia.

At 5:54 a.m., on May 27, 2006, an earthquake occurred, which measured 6.3 on the Richter scale. The tremor was felt on the drilling rig and approximately seven minutes later the well experienced a “loss” of 20 bbl of mud. The drilling team controlled the situation to industry standards before continuing operations.

On May 29, 2006, a sudden eruption of hot mud and steam began near the well. The initial event was reported as an intermittent hot water eruption with a maximum height of 25 ft (7.6 m) with an elapsed five minute period between the bursts in a distinct geyser-like cycle of active and passive periods.

Due to time of occurrence and its close proximity – 656 ft (200 m) – from the drillsite, general public opinion speculated that the mud flows were triggered by an underground blowout of the Banjar Panji-1 well.

New evidence
Presented in London’s Geological Society on October 23, a paper titled, “East Java Mud Volcano (LUSI): Drilling Facts and Analysis” (Control ID 472920), Bambang P. Istadi, Nurrochmant Sawolo, et al, examines the drilling data from the Banjar Panji-1. According to its authors the objective of the paper is to, “clearly and transparently set out the drilling engineering data and analysis to correct the technical record and to provide a platform for further analysis.” The analysis focuses on key drilling pressure measurements and drilling facts to investigate the early speculation that drilling was the trigger of LUSI.

Based on their analysis of the drilling evidence, the annular pressure was too low to fracture the wellbore. There was no sustained pressure to propagate fractures. Most importantly, the wellbore was open and totally dead while mud erupted at a rate of more than 300,000 b/d only 656 ft (200 m) from the well. The paper questions data and facts relied on for other papers citing drilling as the cause.

The paper also points the mud volcanoes are numerous in the area, namely the Porong collapse northeast of LUSI among others. The authors claim that LUSI is a special case that allows observation of the ongoing geological processes from the volcano’s controversial beginning. The paper also points other viable hypotheses including mud volcanism due to remobilization of over pressured shale through a reactivated fault as the conduit and geothermal activities where superheated hydrothermal fluids at high temperature and pressure are through fault zones or fracture networks as the conduit.

An open letter
Bambang Istadi and Nurrochmat ‘Rocky’ Sawolo have published an open letter describing their current effort to dispel the “drilling caused” scenario for LUSI. The letter emphasizes the earlier earthquake, which killed more than 6,000 people and rendered an estimated 1.5 million homeless after striking Yogakarta, Java, approximately 161 miles (260 km) from LUSI only two days before the mud volcano erupted.

The letter asserts that new facts make it clear that drilling could not have triggered LUSI. “We do not know where they got their original data, we only know that their findings are incorrect,” Istadi and Sawolo said in response to the vocal minority of scientists that continue to stand by the view that drilling caused the event.

In an effort to sustain their hypotheses, the authors took out an advert in the New Scientist to ask that facts and the official data should drive findings of the causes of LUSI. They also openly invited interested parties to scrutinize their data adding, “To find the real trigger of LUSI we need good science, not unsubstantiated hypotheses.”

They closed their letter with the hope that LUSI could serve as a watershed moment for the science and geology communities stating, “Either we base our conclusions on the facts and complete official data or we don’t.”

A full description of LUSI and the various research attempts it has inspired can be found at www.mudvolcano.org. For the full version of Istadi’s and Sowalo’s paper visit click here.

It was 1980, and I had just started the second grade. We were returning to school the day after Ronald Reagan had secured a landslide defeat of the incumbent Jimmy Carter. As a seven year old boy, I officially didn’t have a dog in that fight although, according to my father’s reaction to the election results the evening before, it was obvious that I shouldn’t be celebrating.

My father is a life long union democrat who espoused on many occasions that anyone claiming to be a “republican” while wearing a hardhat and carrying a lunch pail to work was undoubtedly a moron, point taken. Today, I understand the difference between facts and opinions, but as a young boy I assumed my parents were right about everything.

The next day at school we filed into the classroom just after the first bell. One of my classmates was a bit overzealous at Reagan’s success the night before. He was jumping up and down and attempted to high five me on the way to his seat. I wasn’t sure if my dad could beat up his dad, but I saw first hand that his dad’s president had given a good beating to ours.

I wasn’t much for debating in those days. Besides, how many talking points does a seven year old know? I used the only form of rebuttal I knew (thanks to three older brothers), and I punched him in the eye. He fired back with equal force and it was only minutes before Mrs. Fisher had us both by the ear marching us down the hall to the principal’s office.

If memory serves me correctly, one of us showed up with a shiner the next day. I’d like to say it was “the other guy” but quite honestly there have been too many scuffles in the last thirty years to recount the damage associated with each. Fortunately for me, that was the first and last time I ever came to blows over politics.

The point of this story is not to examine the validity of any specific political party. This week will present us with a new President – Barack Obama or John McCain. Regardless of how you vote, opportunities for change exist in either platform.

I’ll admit that the Reagan years were tough on my family. “Trickle down economics” was more aptly described as “trickle from.” Nevertheless, we survived and things improved over time. The lesson I’ve learned is that the US is best characterized as a diverse and robust endeavor.

Where the oil and gas industry is concerned, 2008 has been a very good year. Although things are now cooling due to a looming financial crisis and warnings of a coming recession, the industry will subside. July brought record high prices for crude. It was a time when every official in Washington could be found – soapbox in hand – proclaiming the need to “do something about these high prices!”

As Mark Twain said, “be careful what you wish for…you just might get it.” Today, the price of oil is less than half of its July peak. Gas prices in Houston are down to $2.20/gallon. Politicians have lost their grip on the debate; finger pointing is no longer a valid response to the nation’s major oil companies. This is a positive development. In spite of public perception, those of us who work in this industry understand the importance of independent oil companies. They are fighting a good fight when compared to the amount of available resource areas. More than three-fourths of the world’s hydrocarbons are controlled by national oil companies.

Offshore drilling is now gaining ground in parts of the US that have been closed off for nearly two decades. As a point of interest for political intervention, it should be noted that the first President Bush instituted the original ban on these areas – a Republican.

While it’s easy to assume that most candidates will toe the party line once in office, where energy is concerned we should keep an open mind. The basis of this industry is cyclical. High prices are good, too high prices become a problem. The object is to find a balance that sustains a profitable margin for operating companies while providing consumers with a market that doesn’t appear to be spiraling out of control.

The numbers show that $4/gallon kills demand for transportation fuel. Some of this demand will be lost forever. Now we have to be concerned about low prices. How will they affect industry projects and related job markets? What will become of the move toward alternative sources of energy? Time will tell.

Our new president could be democrat or republican. There’s no reason to assume that one is right and one is wrong for our industry. Energy is a big issue within our modern political discourse. Provided that a candidate is rational with some degree of common sense, the oil and gas industry will maintain its growth in the years to come. There should be no reason to come to blows over the election’s outcome.

How many times have you heard “we can’t drill our way to energy independence?” For many years now, legislators in the US have continually fought to prevent drilling operations from appearing in many of the country’s most prolific regions for natural resources like oil and gas – from onshore federal lands to offshore regions on the West, East, and Eastern Gulf Coasts.

The Energy Information Administration has published comprehensive US proved reserves data since 1977. The 2007 Annual Report of U.S. Crude Oil, Natural Gas, and Natural Gas Liquids Reserves (issued October 16, 2008) marks the thirty-first installment and shows record-high growth for dry natural gas and an addition to crude oil reserves for the first time in four years.

In 2007, the US recorded additions in proved reserves of dry natural gas – 46.1 Tcf, which is more than double than the amount of dry natural gas actually produced in 2007 (19.5 Tcf). The year-end total of proved reserves of dry natural gas in the US rose 13% above 2006 levels to 237.7 Tcf. This is the highest level in 31 years. Rapid development of unconventional resources such as coalbed methane and shale gas from tight, low permeability formations proved to add most of the additions.

The EIA estimates are based on a snapshot of what can be produced with reasonable certainty. Estimates can change as new discoveries and improving technologies increase. Changing prices can also alter estimates of proved reserves. If the reserves additions are greater than production, reserves increase, if they are less then estimates are reduced.

According to the report, 2007 was the ninth consecutive year that US natural gas proved reserves rose. The important point is that this year the rate of increase was more than twice as any year in the history of EIA data reporting. The proved reserves additions were developed through two broad categories: total discoveries (accounting for 63% or 29 Tcf of gas additions) and net revisions.

The report also noted additions to crude oil in the US for the first time in four years. Year end reserves for crude oil were 21.3 billion bbl, about 2% higher than at the end of 2006. Alaska saw the largest 2007 increase of 7% (284 million bbl) over 2006. This was followed closely by Texas with a 5% increase (251 million bbl) for the year. North Dakota, home to the Bakken formation, had the third largest increase of 70 million bbl of crude oil – up 17% from its 2006 reserves. Total discoveries of crude oil for 2007 in the US equaled 790 million bbl, which was 28% lower than the prior 10-year average (1.1 billion bbl) although it was 37% greater than in 2006 (577 million bbl). The majority of reserves additions to crude oil came form field extension operations however new field discoveries doubled in 2007 over 2006 (66 million bbl). Additionally, new reservoir discoveries in old fields were 70% higher in 2007 than in 2006.

This has been attributed to more aggressive drilling programs in many regions throughout the US. According to Baker Hughes, about 80% of the wells being drilled in the US have been for natural gas, which sheds light on the major increase in reserves.

Another hackneyed line you may be tired of hearing claims that the US contains 3% of the world’s reserves and consumes 25% of its resources. The EIA report shows the capacity for the US to up its reserves despite the fact that for 26 years approximately 85% of the country’s most vital lands have locked from exploration. With the offshore drilling ban now lifted it will be interesting to see how much increase will be shown in the EIA’s next Annual Report.

To see the full report visit http://www.eia.doe.gov/pub/oil_gas/natural_gas/data_publications/advanced_summary/current/adsum.pdf

The report points out the possibilities of a reduction in generating capacity due to the boom-and-bust cyclical nature of developments. It supports the need for large-scale existing generation capacity replacement, and claims that, despite progress in some areas, renewable forms of power generation continue to have a limited impact on the overall market.

The paper also points out that with the implementation of certain initiatives such as low-emission generation (mostly nuclear), clean coal, and offshore wind at a utility scale could prevent an over reliance on gas fired production in the medium term.

3i’s paper states that all of these offer a range of challenges for developers, investors, and policy makers, but believes that with strong efforts to develop these programs across Europe, increased development of gas-fired generation can be sustained.

For a full view of 3i’s White Paper visit http://www.3i.com/publicationsandevents/the-last-dash-for-gas.html.

To each his own; but, for the wildcatter, there is no thrill to compare with coring an oil sand.

The derrick stands tall and straight against the sky. The lights of the rig blink with the stars. The night air is cold and the wild goose calls at dawn. Mingled with the deep hoarse voice of the mud pump is the sharp rattle of rotary and chain; and the steady throb of the engine beating time for the turning, turning, turning.

The driller hunches over the brake, with weathered eyes on the indicator, as he feels the bit, a mile below, biting into the bowels of the earth.

And you stand there beside him, watching, listening, waiting for the screech of the draw works and sudden change in pitch and tempo all around – the sound of sand, oil sand, or water sand – who knows.

And then with the line of steel, down, down, you reach to pull from below, the sand of the sea buried fifty million years ago.

The core is up, the sand is there. One glance will give the clue. You smell, you taste. It’s oil! It’s oil! It’s true! It’s oil! It’s true!

Mark Edwin Andrews

April 19, 1952

(Reprinted from The Wildcatter’s Handbook)

Who said poetry never had a place in the oilfield?

As of September 8, the renewal of the ban is 22 days away. Pundits on both sides of the issue are calling for action. Those against the ban claim that opening more OCS in the U.S. for drilling and exploration is “no quick fix” for motorists at the pump while those in favor of the measure say that more offshore domestic drilling is crucial to alleviating U.S. dependence on imported resources. Most of us realize that the truth usually lies somewhere in the middle.

As far as the pundits are concerned – they’re both right. Lifting the ban against offshore exploration and development in the U.S. is not a quick fix, and it will decrease the nation’s dependency on foreign oil. Are their additional benefits?

The conversation so far talks mainly about “big oil” and the “environment,” but what are the social benefits of increasing oil and gas explorations? Increased exploration activity doesn’t result in only more oil.

Increased drilling and exploration projects mean more jobs. Ports and shipyards become integral hubs of activity. Shipping, manufacturing, and service related jobs are created to meet the need. There’s no room for short sided thinking, which is what politicians and activists bring to the table.

All things must be considered to make the best possible move forward. U.S. consumers are not just addicted to oil, their also addicted to healthcare, addicted to mortgages, addicted to a high standard of living. It takes jobs to feed the jones.

For or against

Visit the Institute for Energy Research’s online initiative to voice your opinion on the issue:

http://www.instituteforenergyresearch.org/2008/09/08/ier-solicits-public-comments-on-new-offshore-drilling-plan/

, or visit this site to support the renewal of the offshore ban:

http://oceana.democracyinaction.org/o/209/t/6207/campaign.jsp?campaign_KEY=25056&tag=ppc

Either choice is acceptable as long as you’ve considered the ramifications.

According to Clare Kendall, columnist for the Telegraph, an anonymous British donor is funding the project. Jess Work and Brian Page, both American biologists, and Ricardo Viteri, an Ecuadorian fungus expert, are heading up research to develop a mushroom that can eat toxic components in the soil thereby leeching the materials from land.

The process – known as mycoremediation – is being supported by an American charity – The Cloud Institute. It was pioneered by Paul Stamets, the US-based mushroom advocate, who believes that fungus could play a major role in restoring polluted land.

Jess Work claims, “Mushrooms are the world’s great recyclers,” adding, “They eat trash!” Typically, most fungus prefers to feed on wood, which is based on the material as oil – carbon. With this relationship in mind, the scientists have observed mushrooms feeding on petroleum in the laboratory, and now have set out to find contaminated environments for trial research.

Work said, “the question isn’t ‘does it work’ it’s about maximizing effects.” “The decontamination task here is huge.”

The technology has been used previously to clean up oil spills in San Francisco last November, but this will be the first time this experiment has been conducted in the tropics. The team is currently cultivating oyster mushrooms, which the scientists claim are particularly versatile and aggressive. The Ecuador-based experiment will be carried out under the many pipelines crossing the jungle.

Page said, the goal of the project is to find mushrooms that naturally like oil. “If we could develop a strain of mushroom whose particular ecological niche was oil pollution and nothing else; that would be our dream!”

Viteri explained, “The same enzyme mushrooms use to digest lignin, a main component of wood, is used to digest petroleum.” Although Viteri points out that this is not a cure and will most likely work on small scale.

Viteri said, there’s no miracle solution. The mushrooms can’t reclaim oil pits in their raw state, but it can make the soil reusable after the bulk has been removed allowing people to regenerate their own “patch.”

“This would be an amazing thing for the people here, to be able to remediate their own land,” said Viteri.

The International Energy Agency (IEA) released its Oil Market Report this week. The study showed crude prices falling by US $30/bbl from their mid-July high of $147/bbl. Despite the recent shut-down of the Baku-Tblisi-Ceyhan (BTC) pipeline, and the recent military clash in the Caucasus, oil price remains relatively unaffected.

Oil stocks fell by 15.3 million bbl in June among industrialized countries. Data for July shows that the United States, Japan, and the EU-16 have stocked 30 million bbl. Additionally, global oil supply increased by 890,000 b/d in July totaling 87.9 million b/d. Non-OPEC growth is also increasing with an average output of 665,000 b/d expected in 2009 compared to 425,000 b/d in 2007.

The study also showed an increase for OPEC supplies. In July, oil supplies rose by 145,000 b/d totaling 32.8 million b/d. OPEC has an effective spare capacity of 1.5 million b/d, but is expected to rise through 2009.

Global oil demand is expected to rise slightly in 2009 by an additional 70,000 b/d totaling 87.8 million b/d, compared to 86.9 million b/d for 2008. Regionally, demand is changing in some interesting ways.

The Financial Times reports that this fall represents a “dip rather than decline.” Even so, it is evident that high prices force consumers to find alternatives, many of which become permanent.

The Times attributes the drastic reduction in oil price to the “deepening gloom about the state of the U.S. economy.” A slower economy equals less demand. Is this inherently bad? Maybe, but there are benefits for those who survive the dip to arrive in an improved economy with an adjusted need to consume products and services related to petroleum.

In the U.S., motorists are driving less, airlines are trimming flight schedules, and the development of energy efficient vehicles and machinery has become a top priority for manufacturing companies.

The Times recalls the 1980s when, in 1985, U.S. oil consumption had fallen 19% from its 1980 peak. Additionally, Europe and the United States consumed almost three quarters of the world’s oil production in 1978. These same regions consumed less than half of total production in 2007.

Rapid growth in countries like India and China has waned slightly, but will continue to expand. “High prices are beginning to play a central role in determining demand, at least for the OECD countries,” the IEA said.

More importantly, the IEA noted that a portion of the demand in wealthy countries will be lost for good. “Even if retail prices ease, it seems unlikely that motorists (in the U.S.) who have purchased smaller cars will revert to gas-guzzling vehicles,” the IEA said.

It’s safe to say the global demand will continue to encourage further exploration to substantiate the world’s oil and gas reserves. The good news is that higher prices may represent a paradigm shift for you and your neighbors.

Well, it starts with an idea that may or not work. These ideas typically spring from solutions that didn’t work or that people in the field think could work better. New methods of finding, drilling, and producing the worlds reserves are at the forefront of many debates. The old ways work, but many operators and scientists believe that these methods could be made to work better.

The typical JIP can be carried out on a shared risk basis, which is paramount in an industry where most players always want to be the “second” to use a new technology. While many JIPs exist between several operators, others are done through cooperation with research-based non-profit corporations set up privately or through universities.

For instance, Chevron USA Inc. recently proposed an additional six wells for the northeastern portion of Alaminos Canyon Block 818 in 9,022 to 9,079 ft (2,752 to 2,769 m) of water. The company filed the plan as part of the Gulf of Mexico Methane Hydrate Joint Industry Project (JIP), in collaboration with the Department of Energy’s National Energy Technology Laboratory (NETL). The primary objective of the project is to develop technology and data to help in characterizing the naturally occurring gas hydrates in the deepwater Gulf of Mexico. Additionally, the study hopes to gain a better understanding of how natural gas hydrates can affect seafloor stability. The multi-phase project began in September 2001 and will continue through September 2010.

What can we learn from these types of ventures? Virtually everything. The problem with moving the industry along in the name of technology is the volatile nature of the oil price. No one wants to sink a major sum of capitol into newer technology that may or may not be necessary in the future. While many believe oil’s high price is here to stay, not everyone is convinced (including me). How do we know what will drive energy in the future? We don’t.

However, in the meantime it is important to understand the value of a barrel of oil based on its ability to drive technology, which is not merely a question of cash. Oil will remain the most volatile medium we have in driving new ideas into the real market. Conceptualizing is one thing, but putting new ideas into practice takes risk.

JIPs help operators and engineers avert extreme financial risks upfront for long-term benefits from an extended period of practical action in the field. Organizations like the Research Partnership to Secure Energy for America (RPSEA), the University of Pennsylvania’s Stripper Well Consortium, and Texas A & M’s Institute for Innovation and Design in Engineering all provide a venue to test new technology. While the aforementioned organizations are US-based, there are many like them throughout the world.

Joint Industry Projects have a proven value. However, the need exists for more advanced projects dealing with higher level technologies. According to C.A. “Buddy” Bollfrass, P.E., Texas A&M University, “With all the new technologies in our industry now, companies are unsure about what to give us,” adding that, “We want projects that benefit the common good.”

The common good is an important and unique feature that has attached itself to the oil and gas industry. When newer technology is developed through joint industry projects it accomplishes several goals. When carried out in an academic environment, the process helps to train tomorrow’s engineers. The end result is a more efficient oil business with less of an impact on the environment. Operating companies benefit through increased or enhanced production methods. Society benefits from an ample supply of mobility and energy to assist further advances in other industries.