Monday, December 31, 2007

Natural Gas Vehicles

Cars, trucks, and buses are the greatest contributors to air pollution in the United States. Emissions from these vehicles contribute to smog around metropolitan areas, low visibility, and various greenhouse gas emissions. According to the Department of Energy (DOE), about half of all air pollution and more than 80 percent of air pollution in cities are produced by cars, trucks, and buses in the United States.

The oil and natural gas industry has transformed into one of the most technologically advanced industries in the United States over the past thirty years. New innovations have reshaped the industry into a technology leader. Select innovations have had a profound effect on the potential for natural gas. Because of the air pollution problem coming from gasoline and diesel powered cars, trucks, and buses, vehicles operating on compressed natural gas are being considered as a wise alternative fuel solution.

Using natural gas to fuel our vehicles will cut down on the high levels of pollution caused from gasoline and diesel engines. In fact, according to the EPA, compared to traditional vehicles, vehicles operating on compressed natural gas have reductions in carbon monoxide emissions of 90 to 97 percent, and reductions in carbon dioxide emissions of up to 25 percent. Nitrogen oxide emissions can be reduced by 35 to 60 percent, and other non-methane hydrocarbon emissions could be reduced by as much as 50 to 75 percent. These numbers would clean up the air tremendously. Because of the relatively simple makeup of natural gas in comparison to traditional vehicle fuels, there are fewer toxic and carcinogenic emissions from natural gas vehicles, and virtually no particulate emissions. There will be no soot or dirt flying in the air. The environmentally friendly attributes of natural gas are over-whelming. More natural gas vehicles will definitely contribute to reducing air pollution. New, stringent federal and state emissions laws require an improvement in vehicle emissions over the foreseeable future.

Fuel intensive vehicle fleets, such as taxicabs and public buses are the main vehicles fueled by natural gas today. However, virtually all types of natural gas vehicles are either in production today for sale to the public or in development, from passenger cars, trucks, buses, vans, and even heavy-duty utility vehicles. Despite the advances, a number of disadvantages of natural gas vehicles (NGVs) prevent their mass-production. Higher initial cost, limited driving range, trunk space, and lack of refueling infrastructure pose impediments to the future spread of natural gas vehicles.

However, it is expected that with improved technology, research, and fueling infrastructure, the use of NGVs in non-fleet settings will increase in the future. Natural gas vehicles present an exciting opportunity to reduce the damage of one of our most polluting sectors. Companies like
Triple Diamond Energy Corporation,
interested in changing the future for the better are keeping knowledgeable of the advancements being made.

The Henry Hub in Louisiana

Accounting for almost a quarter of United States energy consumption, natural gas futures contract determined at the NYMEX Division is widely used as a national benchmark price. The price is based on delivery at the Henry Hub in Louisiana which the nexus of 16 intra- and interstate natural gas pipeline systems that draw supplies from the region's prolific gas deposits. The Henry Hub is where pipelines meet that are carrying the natural gas to supply the United States. These pipelines serve markets throughout the U.S. East Coast, the Gulf Coast, the Midwest, and also up to the Canadian border. The natural gas futures contract trades in units of 10,000 million British thermal units (mmBtu). An options contract and calendar spread options contracts provide additional risk management opportunities.

Also available are two financially-settled natural gas contracts for trading on the CME Globex® system – Henry Hub (HH) and Henry Power (HP). The HH contract settles on the same date as the physically-delivered natural gas contract and HP is a penultimate contract. Both contracts are listed for 72 months. The spread between natural gas futures and electricity futures known as the spark spread, can be used to manage price risk in the power markets.

Because of the volatility of natural gas prices, a vigorous basis market has developed in the pricing relationships between Henry Hub and other important natural gas market centers in the continental United States and Canada. The New York Mercantile Exchange makes available for trading a series of basis swap futures contracts that are quoted as price differentials between approximately 30 natural gas pricing points and Henry Hub. The basis contracts trade in units of 2,500 mmBtu on the NYMEX ClearPort® trading platform. Typically, transactions can also be consummated off-Exchange and then submitted to the Exchange for clearing via the NYMEX ClearPort® clearing website. This can be as an exchange of futures for physicals or an exchange of futures for swaps transaction.

The NYMEX miNY™ natural gas futures contract, designed for investment portfolios, is the equivalent of 2,500 mmBtu of natural gas, 25% of the size of a standard futures contract. The contract is available for trading on the CME Globex® electronic trading platform and clears through the New York Mercantile Exchange clearinghouse.

Investments can also be considered through the companies among which produce, refine, and distribute the nation’s energy products like Triple Diamond Energy Corporation which specializes in acquiring the highest quality prime oil and gas properties.

Sunday, December 30, 2007

Half of the National Oil Consumption is Gasoline

Accounting for almost half of national oil consumption, gasoline is the largest single volume refined product sold in the United States. It is a highly diverse market, with hundreds of wholesale distributors and thousands of retail outlets. Because of this, it is subject to intense competition and price volatility. 

The NYMEX Division New York harbor unleaded gasoline futures contract and reformulated gasoline blend stock for oxygen blending (RBOB) futures contract trade in units of 42,000 gallons or 1,000 barrels. They are based on delivery at petroleum products terminals in New York harbor, the major east coast trading center for imports and domestic shipments from refineries in the New York harbor area or from the Gulf Coast refining centers. 

The industry is shifting towards ethanol with the ongoing phase out of the oxygenate methyl tertiary butyl ether (MTBE). Now required in many areas for controlling emissions that can adversely affect air quality, the unleaded gasoline contract specifications conform to those for oxygenated gasoline. RBOB conforms to industry standards for reformulated regular gasoline blend stock. As listed by the Colonial Pipeline for fungible F grade for sales in New York and New Jersey, RBOB is blended with 10% denatured fuel ethanol (92% purity). Ready for the addition of 10% ethanol at the truck rack, RBOB is a wholesale non-oxygentated blend stock traded in the New York Harbor barge market. 

The New York Mercantile Exchange maintains close contact with federal and state officials and continues to evaluate changes in the regulations to ensure that the terms and conditions of the gasoline futures contract continue to mirror the cash market. Contracts provide a slate of flexible, liquid financial instruments including futures contracts, options contracts, calendar spread options contracts, crack spread options contracts, and average price options. Exotic options contracts are offered as well.

The No. 2 fuel oil is heating oil, and accounts for about 25% of the yield of a barrel of crude, the second largest "cut" after gasoline. The heating oil futures contract also trades in units of 42,000 gallons or 1,000 barrels. and is based on delivery in New York harbor, the principal cash market trading center. Options on futures, calendar spread options contracts, crack spread options contracts, and average price options contracts give market participants even greater flexibility in managing price risk.

The heating oil futures contract is also used to hedge diesel fuel and jet fuel, both of which trade in the cash market at an often stable premium to NYMEX Division New York harbor heating oil futures.
The Exchange also lists for trading on the NYMEX ClearPort® trading platform a series of both gasoline and heating oil swap futures contracts based on crack spreads and location differentials, including European and average price options. Transactions in these contracts can also be consummated off-exchange and submitted to the Exchange for clearing through the NYMEX ClearPort® clearing website.

Investing in oil and energy products can be done through the oil and energy producers. Triple Diamond Energy Corporation specializes in acquiring the highest quality prime oil and natural gas properties.

Saturday, December 29, 2007

Smog and Acid Rain

Particularly for large metropolitan cities, smog and poor air quality is a pressing environmental problem. Smog primarily consists of carbon monoxide, nitrogen oxides, volatile organic compounds chemically interacting with heat from sunlight forming ground level ozone. Smog is that familiar haze most commonly found surrounding large cities, particularly in the summer time. Smog and ground level ozone contribute to all kinds of respiratory problems ranging from temporary discomfort, asthma, to long-lasting, permanent lung damage. The pollutants in smog come from vehicle emissions, smokestack emissions, paints, and solvents – most of which started out as crude oil.

Much of the eastern United States is affected by another environmental problem known as acid rain. Acid rain can damage crops, forests, wildlife populations, and cause respiratory and other illnesses in humans. When sulfur dioxide and nitrogen oxides react with water vapor and other chemicals in the presence of sunlight, various acidic compounds form in the air and come to the earth as acid rain. The pollutants of acid rain are derived from coal fired power plants. Natural gas emits virtually no sulfur dioxide and up to 80 percent less nitrogen oxides than the combustion of coal. So the increased use of natural gas would provide for fewer acid rain causing emissions.

The source of energy to use for reducing pollution and maintaining a clean and healthy environment is natural gas. Natural gas is also domestically abundant making it a secure source of energy. The environmental benefits of using natural gas over other sources of energy, particularly other fossil fuels are numerous.

Since the use of natural gas emits only low levels of nitrogen oxides and virtually no particulate matter, it can be used to help combat smog formation in those areas where ground level air quality is poor. Electric utilities, motor vehicles, and industrial plants make up the main sources of nitrogen oxides. To combat smog production, especially in urban centers where it is needed the most, increased natural gas use in the electric generation sector, a shift to cleaner natural gas vehicles, and increased industrial natural gas use could all serve to improving the air quality. Summertime, when natural gas demand is at its lowest and smog problems are the greatest, would be a good time for industrial plants and electric generators to use natural gas to fuel their operations instead of using the more polluting fossil fuels. This would effectively reduce smog emissions resulting in clearer, healthier air around the urban centers.

A study conducted in 1995 by the Coalition for Gas-Based Environmental Solutions found that in the Northeast, smog and ozone-causing emissions could be reduced by 50 to 70 percent through the seasonal switching to natural gas.

Particulate emissions such as soot, ash, metals, and other airborne particles also cause the degradation of air quality in the United States. Natural gas emits virtually no particulates into the atmosphere. Emissions of particulates from natural gas combustion are 90 percent lower than from the combustion of oil, and 99 percent lower than burning coal. Increased natural gas use in place of other dirtier hydrocarbons can help to reduce particulate emissions in the United States.

Companies like Triple Diamond Energy Corporation are concerned about the levels of smog and acid rain. They look at increasing their supply of the more environmentally beneficial natural gas and to make it more accessible to the northeastern part of the United States.

Friday, December 28, 2007

Oil Production on Floating Vessel Offshore Brazil

Designed to produce 180,000 b/d of oil at peak production, the Floating Production, Storage and Offloading vessel (FPSO P-54) went online December 11th on the Roncador field in the Campos Basin offshore Brazil. It will increase the field's installed capacity to 460,000 b/d. Petrobras built the new platform vessel to be added to the fleet.

Capable of compressing 211.9 MMcf/d of natural gas and storing up to 2 million barrels of oil, the P-54 is built from the conversion of tanker Barão de Mauá, which belonged to Petrobras' fleet. The new platform is an addition in the Roncador field to the P-52, which kicked off production in November and is also capable of lifting 180,000 b/d.

The new platform is expected to reach peak production in the second half of 2008. P-54 is anchored in 4,593 feet (1,400 m) of water, and will be connected to 17 wells, 11 of which oil and gas producers. The other six wells are water injectors. Oil production outflow will be performed by relief vessels. The natural gas collected will be transported via sub-sea pipelines to Brazil’s mainland.

As was the case with the P-52, Petrobras built the new platform in compliance with the new nationalization parameters. Totaling 63 percent national content, constructing the FPSO P-54 generated 2,600 direct jobs and 10,000 indirect jobs. The P-54 was built in a modular fashion over 41 months after three agreements were signed in June 2004. The Dresser Rand/Mauá Jurong consortium built the gas compression modules, and Nuovo Pignone made the power generation ones. Jurong Shipyard was in charge of converting the hull, manufacturing the remaining process and utility modules, and unit integration. The process, utility and compression modules were built at the Mauá-Jurong construction site in Niterói, Rio de Janeiro. The power generator was built at Nuovo Pignone's Porto Novo Rio construction site in Caju, Rio de Janeiro.

Another FPSO unit named Cidade de Vitória, capable of producing 100,000 b/d from the Golfinho field in the Espírito Santo Basin was put into production in November in addition to the P-54 and the P-52. Petrobras concludes in the last quarter of the year, with the inauguration cycle of three new production units in southeastern Brazil. These additional floating platforms will increase Petrobras capabilities considerably. The construction will generate thousands of jobs and once completed, new production jobs will open up to carry on the process.

Oil companies in the United States like Triple Diamond Energy Corporation keep aware of other countries producing oil for many reasons; one being to learn how other countries extract oil from their locations and another being possible trade negotiations as far as importing and exporting.

Mexico’s Oil Output

Oil was not discovered in Mexico until after the turn of the twentieth century. Commercial production of crude oil started in 1901 and by 1911 Mexico began to export oil.

In 1923 Bucarelli Agreements committed the United States and Mexico to regard titles held by foreign oil companies as concessions by the Mexican government rather than as outright ownership claims. And in 1925 President Plutarco Elías Calles decreed that foreign oil companies must register their titles in Mexico and limited their concessions.

Largely as a result of increased international demand generated by World War I, Mexico's oil production peaked in 1921 at 193 million barrels (25 percent of world production). Mexico was second only to the United States in petroleum output and led the world in oil exports during much of the 1920s.

Giving the Mexican government a monopoly in the exploration, production, refining, and distribution of oil and natural gas, and in the manufacture and sale of basic petrochemicals, President Lázaro Cárdenas nationalized the petroleum industry in 1938. This left the oil companies uncomfortable. The United States government soon pressured the oil companies to come to terms with Mexico as a result of President Franklin D. Roosevelt's Good Neighbor Policy. In 1943 Mexico and the oil companies reached a final settlement under which the companies received US$24 million (a fraction of the book value) as compensation.

Mexico's oil output expanded at an average annual rate of 6 percent between 1938 and 1971. And production increased from 44 million barrels in 1938 to 78 million barrels in 1951 alone. Domestic demand progressively exceeded output, and in 1957 Mexico became a net importer of petroleum products. Production then rose to 177 million barrels by 1971 with the exploitation of new oil fields.

Extensive oil discoveries in the 1970s increased Mexico's domestic output and export revenues. Almost every drilling operation conducted after 1972 struck oil. In 1973 oil production surpassed the peak of 190 million barrels achieved in the early 1920s.

However, by early 1993, both crude oil production and exports had begun to decline. Down from almost 80 percent in 1982, in 1995 the oil sector generated slightly more than 10 percent of Mexico's export income. In 1995 Mexico was the world's sixth-largest producer of crude oil. In the Western Hemisphere, only the United States produced more oil than Mexico. Directly behind Mexico was Venezuela.

The Mexican government invested heavily to increase the capacity of existing refineries and construct new ones so that, by the early 1990s, some 40 percent of Mexico's crude petroleum output was refined domestically. In 1993 Mexico had the world's eighth largest crude petroleum reserves, amounting to some 5 percent of the world's total. Mexico's reserves are sufficient to guarantee the current production levels for fifty years.

Since the nationalization of the oil industry in 1938, the state-owned Pemex has monopolized the production and marketing of hydrocarbons. In August 1993, it became known that the government was considering proposals to allow private companies to buy, sell, and distribute imported gasoline, natural gas, and petrochemicals, and to invest in new pipelines.

In early 1996, the government unveiled its Program for the Development and Restructuring of the Energy Sector. The plan is intended to increase Mexico's petroleum exports, improve its competitiveness in the international energy market, and contribute to more balanced regional development, which it has.

Companies in the United States’ oil sector, like Triple Diamond Energy Corporation continue to look at Mexico’s oil output and assess any potential business dealings.

Oil Spill in the North Sea

Oil spills happen. The most likely reason an oil spill occurs is when an oil tanker’s equipment has failed causing oil to leak into the ocean. If the equipment breaks down, the tanker may get stuck on shallow land. When they start to drive the tanker again, they can put a hole in the tanker causing it to leak oil.

Other oil spills may occur when countries are at war; one country may decide to dump gallons of oil into the other country’s oceans. Terrorists may cause an oil spill because they will dump oil into a country’s ocean. Many terrorists will do this because they are trying to get the country’s attention. Illegal dumps also can happen when people decide they do not want to spend money on decomposing their waste oil. Natural disasters (like hurricanes) may cause an oil spill, too. The winds from a hurricane can cause an oil tanker to flip over, pouring oil out.

The affect oil spills have on animals is tremendous. Birds die from oil spills if their feathers are covered in oil. Animals may die because they get hypothermia, causing their body temperature to be really low. Oil may also cause the death of an animal by entering the animal’s lungs or liver. Oil also can kill an animal by blinding it causing it to not be aware of predators. Oil spills sometimes are the reason for animals becoming endangered and instinct.

There are many ways to stop the spread of oil in the ocean. Workers can place a boom around the tanker that is spilling oil. Booms collect the oil off the water. A boom may be placed somewhere before an oil spill. They can be placed around an entrance to the ocean, like a stream. These booms will absorb any oil that flows around it. The workers can also use skimmers, boats that can remove the oil off the water. Sorbents are also used which are sponges that can collect the oil. An airplane can fly over the water dropping chemicals into the ocean. The chemicals can break down the oil into the ocean. They also can burn freshly spilled oil with fireproof booms to contain the oil.

Recently in the North Sea off of Norway, an oil spill happened while the tanker Navion Britannica was loading oil from a storage buoy. The tanker is owned by a Vancouver-based corporation. About 25,000 barrels of oil were discharged into the Statfjord field, 125 miles (201 km) off Bergen on the afternoon of December 12th. Reported on December 14, 2007 ships carrying two oil collection systems were active in the area where the oil slick was believed to be the thickest. StatoilHydro, involved in the clean-up, called off the deployment of booms to help collect the oil because the oil slick was too thin to recover. StatoilHydro will continue to monitor the situation and maintain its emergency response team. Vessels still present in the area, watch over the slick, which is also being monitored by satellite. The Norwegian National Coastal Administration's LN-SFT surveillance aircraft flew over the affected area later that week to make any new observations.

Oil spills happen. Companies like Triple Diamond Energy Corp. are kept abreast of these incidents for many reasons. This precious energy source should not be wasted. And the world has to learn that the damage caused by such oil spills has to be avoided.

There are many things being done to prevent more spills. In 1990, US Congress passed OPA (Ocean Pollution Act). The OPA 90’s major laws are: Emergency Response Plans—This law says that the owners of the tanker must have a detailed plan on what they will do if there was a spill. They must have this plan written before any spill. Double Hulls—The law says that all ships in the U.S are required to have a double hull. Liability—The law says that the owners of a boat that spills oil will have to pay $1,200 for every ton they spill. Spill Fund—The law says that the government has money from companies that transport the oil so when a spill occurs, the government can pay for the clean up. Navigation—The law says that the Coast Guard must know where the oil tankers can drive without an oil spill occurring.

Iraqi Unions Fight the New Oil Law

One of the Bush administration’s top political priorities is Iraq’s proposed oil law, which would open up control of the country’s oilfields to multinational corporations. On July 3, Bush called Iraqi Prime Minister Nuri al-Maliki to encourage him and other leaders to move forward on it. The latest draft of this new oil law headed to the Iraqi Parliament for debate. With strong opposition from Iraqi oil workers, enacting the law will be very difficult, even if does pass through the Parliament.

“It doesn’t serve the interests of the Iraqi people,” says Faleh Abood Umara, general secretary of the Basra-based Southern Oil Company Union and the Iraqi Federation of Oil Workers’ Unions. Umara recently toured the United States, advocating national control of Iraqi oil assets and the immediate withdrawal of US troops from Iraq.

Umara emphasizes the fact that the new law was written in the United States and would permit joint ownership of many Iraqi oil fields by foreign companies. Under the new law, Iraq could export much of the oil and profits from these fields for up to 35 years under what are called “production sharing agreements.”

“We want the national Iraqi oil company to make service contracts with the companies, not partnerships,” Umara said in an interview. Basically, the Iraqi oil workers’ unions are opposed to sharing joint ownership of the oil assets. “We want new technology for the production of oil but to have foreign companies work with Iraqi workers and professionals for a limited time only,” he says. “We are not opposed to being developed with advanced and imported technology, but we would like to be sole owner of our wealth and use it to develop our country and cities.” The oil workers’ opposition to the law could prove a serious obstacle to the already much-delayed legislation.

Umara says the oil workers’ unions want the distribution of revenue directed to a national redevelopment fund. But the Bush administration has long wanted to give foreign oil companies as much control as possible over Iraqi oil fields. The proposed oil law partly would govern the distribution of revenue. Antonia Juhasz, an analyst for the Oil Change International, says that the law gives foreign oil companies great flexibility, with no requirement to hire or invest profits locally, and opens the door to the long-term production-sharing agreements. Other Middle East oil-producing nations have rejected these agreements. The average oil worker is concerned about the future of Iraq’s oil.

US oil companies like Triple Diamond Energy Corporation see this objection to the new oil law proposal as a delay in foreign oil imports. They realize it is, more than ever before, necessary to find ways for the United States to be energy independent.

FloaTEC TLP Model Testing Underway

At Texas A&M University, model testing of FloaTEC's Extended Tension Leg Platform (ETLP) is underway at the Offshore Technology Research Center (OTRC). The American Petroleum Institute (API) established new guidelines after Hurricane Katrina. The testing at OTRC has been in accordance to these revised environmental regulations which require existing and future installations to withstand hurricane force winds similar to those of Hurricane Katrina.

To prove this, OTRC's testing tank simulates the wave and wind environments found in the Central Gulf of Mexico. Significant changes were made to the design basis requirements so that all new structures (Tension Leg Platforms, Spars and Semi-submersibles) will be designed to meet the requirements for use in the Central Gulf of Mexico. FloaTEC says API's new regulations have enabled new testing procedures to be established and will continue to test all of its future designs in this manner.

FloaTEC’s initial model test was confirmed a success and is considering a second optional test. With the scale model receiving no green water damage, FloaTEC feels its ETLP design is suitable to post-Hurricane Katrina requirements and now looks to secure an order to construct the design to work in the Central Gulf of Mexico. Designed with drilling and production capabilities, the ETLP will be able to be moored in water depths up to 5,500 feet (1,676 m) and drill ultra-deep wells up to 35,000 feet (10,668 m). The production capabilities will be able to yield 120,000 b/d of oil and contain up to 18 slots for drilling and dry tree production.

Since the rig market continues to be tight, FloaTEC President Eric Namtvedt explains the ETLP's dry tree application presents an attractive development alternative. Though tested for the Central Gulf of Mexico, FloaTEC's ETLP design can be used elsewhere and is not designed exclusively for use in the Gulf.

Compared to other floating production solutions, FloaTEC's design is expected to have the ability to fast-track a field's development, as construction time is significantly reduced being that FloaTEC's parent companies, J. Ray McDermott and Keppel Fels, ensure timely, full assembly, with both fabrication and shipyards at its disposal.

Altogether, FloaTEC anticipates its engineering and construction resources can reduce field development cycle time by as much as two years. The platform's drilling unit, topsides and nodes would likely be fabricated at Keppel's facilities, while hull construction, as well as integration work would be undertaken at McDermott's shipyard in Mexico and McDermott's derrick barge DB 50 could be utilized for integration of hull and topsides.

FloaTEC hopes to secure an order within the next 18 to 24 months. Representatives from Chevron, Petrobras and ConocoPhillips attended the model testing. As the news gets extended, independent companies like Triple Diamond Energy Corporation will be looking into this also as possible investment potential.

Canada is the Largest Supplier of Oil to US

United States oil imports from Canada are now greater than imports from the entire Persian Gulf. In 2001, 23.3% of US oil came from the Persian Gulf, 15.4% came from Canada, 12.1% was imported from Mexico, 14.0% from Saudi Arabia, and 13.1% from Venezuela. In 2006, US oil imports from the Persian Gulf was at 16.2% and the imports from Canada were at 16.9%, 12.4% from Mexico, 10.7% from Saudi Arabia, and 10.3% from Venezuela. The source of US imports for both petroleum and related products has shifted during the years 2001 and 2006.

The trend is very interesting, in that oil imports from Canada now exceed imports from the entire Persian Gulf, and oil imports from Mexico now exceed imports from Saudi Arabia.

Canadian oil companies recently announced $38 billion of new construction in Alberta's oil patch. And new projects in Canada which have been announced over the past year total something close to $200 billion worth.

At the moment, Canada's oil reserves are the second largest in the world, behind Saudi Arabia. This change has happened rather quickly and it is predicted that within a decade, Canada will have a higher daily oil production than any other country in the world, including Saudi Arabia.

Ahead of Saudi Arabia in 2004, Canada took first place, as the largest foreign supplier of crude oil to the US, according to data released by the Energy Information Agency of the US Department of Energy. That year Canada supplied to the United States 2.1 mm bpd of oil, crude and refined combined. From 1999 to 2004, consecutively, Canada was the number one foreign supplier of oil to the United States. Canadian oil production continues to increase each year, with production expansion of Alberta's oil sands, and of the Atlantic offshore.

With planned investments, oil sands production is projected to double by the end of the decade. In 2004, over a million bpd of crude oil were produced from the oil sands, about a third of total Canadian production. At roughly 180 bn barrels (5 bn conventional and 175 bn established oil sands), Canada has the second largest reserves in the world.

Since the signing of the NAFTA in 1994, the two-way trade between Canada and the United States has more than doubled in value. With $1.2 bn in trade now crossing the Canada-US border every single day, they are each other's largest trading partner.

An important part of this bilateral trade is energy. Canada is the largest supplier of not only oil, but natural gas and electricity also, to the United States. Oil Companies within the United States, like Triple Diamond Energy Corporation watch the amount of imports the US needs to help gauge their production.

Saturday, December 15, 2007

Opposition to the Energy Bill Passed

The American Gas Association (AGA) today announced its opposition to the Energy Bill (H.R.6) which passed the House. The bill includes several provisions that are detrimental to the nation’s natural gas customers by causing higher prices.

This recent Energy Bill H.R.6 discourages the expansion of natural gas distribution systems by increasing the depreciation period for natural gas distribution pipelines. In the Energy Policy Act of 2005 the depreciation period for these systems was reduced from 20 to 15 years. This policy encouraged the expansion of new systems and to replace aging equipment. After only three years, the current legislation proposes to reverse this policy. Without an effective delivery system, investments in natural gas infrastructure are very important because consumers will not have access to this clean domestic fuel. The new legislation will drive production down and prices up. Because of this likely outcome, the AGA opposes the bill.

“Responsible energy legislation should not only encourage increased use of natural gas but also ensure adequate supply. This legislation moves in the opposite direction,” said AGA President and CEO David Parker. “Higher taxes will reduce supply and result in higher prices for American consumers. Now is not the time to drive up energy costs.”

Building facilities and expanding production would benefit some regions of the country by boosting local economies. There are still many regions in the nation where pipelines do not even reach. These regions are subject to choose other energy sources that are more costly. Increased natural gas supplies would benefit the nation’s economic and energy outlook. This new bill also increases the tax on domestic natural gas production by repealing parts of Section 199. Higher taxes will reduce supply and result in higher consumer prices. Both outcomes are certainly not desired.

Natural gas is the cleanest domestic reliable fuel and with expansion, has the ability to meet the nation’s energy needs. Being sensitive to the environment of the future, natural gas reduces greenhouse gas emissions and is considered a viable resource to use because of this. Natural gas is the most efficient of the energy resources. Increased production and use of natural gas is a solution for improving the nation’s future energy outlook and reducing greenhouse gas emissions. Natural gas eliminates the threat of oil spills, oil contamination and environmental clean up. Because natural gas burns so cleanly, no unpleasant odors, soot, or ashes are left behind. Natural gas is non-toxic, not poisonous or harmful to humans. The new bill puts all this in jeopardy. Energy supply companies like Triple Diamond Energy Corporation agree that the passing of this bill is a step in the opposite direction for the natural gas industry. At a time when oil is becoming cost prohibitive, natural gas, with the passage of this bill, has potential to do the same.

Energy Coalition Recommends Improvements to Recent Compliance Program

The energy trade coalition represents both the electric and gas industries and is comprised of the American Gas Association (AGA), Edison Electric Institute (EEI), Electric Power Supply Association (EPSA), Independent Petroleum Association of America (IPAA), Interstate Natural Gas Association of America (INGAA), Natural Gas Supply Association (NGSA), and the Process Gas Consumers Group (PGC). All of the above coalition members understand the goal Federal Energy Regulatory Commission (FERC) wants to achieve, but expressed the need for a better ‘road map’ for compliance. There has to be more clarity and definition of the compliances in the policies, rules, regulations and specific processes.

A diverse coalition of energy trade associations released a White Paper on “Implementation of the Federal Energy Regulatory Commission’s Enforcement Authority”, which expresses support for the spirit of FERC’s enforcement actions, but calls on FERC to be more explicit. The white paper offers a constructive analysis to support the Commission’s use of its enforcement authority to foster a culture of compliance by market participants.

“Energy market participants want to comply with the law and the Commission’s regulations for a good reason—it is the right way to operate,” said former FERC Commissioner Bill Massey, who is representing the energy coalition. Massey said, “In addition, they value their commercial reputations, want to maintain competitive market environments, seek to provide innovative and market responsive services, strongly support industry reliability and understand the costs of noncompliance.”

While the energy coalition expressed its support for compliance in energy markets, the coalition also requested greater clarity. As noted in the white paper, certain FERC regulations and aspects of its enforcement policies and actions need to be clearer.

Massey said, “Market participants who desire to take the steps necessary to achieve full compliance need assistance from the Commission to develop a better compliance ‘road map.’” He said, “FERC and market participants have the same goals—to support the development of necessary energy infrastructure, ensure a reliable energy supply, promote competitive markets, and protect consumers—and market participants urge FERC to take further steps to promote and facilitate compliance with the energy laws and regulations it administers.”

To promote compliance by market participants, the coalition provided a number of recommended steps discussed in the white paper Highlights of the recommendations that FERC can take immediately include: clarifying, simplifying, and codifying certain Commission policies and rules to reduce regulatory uncertainty; measuring the success of the Commission’s enforcement program not by the number and amount of penalties, but by the degree to which the clarity of its rules and transparency of its policies facilitate compliance; and providing timely responses to informal and formal requests for assistance in interpreting the rules and regulations.

The coalition asked Bill Massey and Bob Fleishman of Covington & Burling LLP to prepare this white paper on behalf of the seven electricity and natural gas industry trade associations. Energy corporations like Triple Diamond Energy Corp. will want to hear how this unfolds to better serve their customers and meet the competitive market demands.

Friday, December 14, 2007

Energy Efficient Residential Gas Furnaces

Natural gas meets almost one-fourth of the United States' energy needs. With the price of energy on the rise, the American Gas Association (AGA) has recognized a growing concern and need for residential homes to be kept warm and safe in the future.

The American Gas Association, founded in 1918, represents 200 local energy utility companies that deliver natural gas to more than 64 million homes, businesses and industries throughout the United States. A total of 69 million residential, commercial and industrial customers receive natural gas in the US, and AGA's members’ deliver 92 percent of all natural gas provided by the nation's natural gas utilities. AGA is an advocate for natural gas utility companies and their customers and provides a broad range of programs and services for member natural gas pipelines, marketers, gatherers, international natural gas companies and industry associates.

The American Gas Association overwhelmingly approved of the final rule issued by the Department of Energy (DOE) for residential furnaces and boilers. The rule is the result of a long process that will ultimately give the end consumer the choice of energy-efficient, cost-effective, natural gas central furnaces and boilers.

“This rule underscores DOE’s understanding that consumers who live in warmer climates should not have to pay the additional costs for central heating equipment that, in the long run, will not pay for itself through energy-efficient savings,” said Charles Fritts, AGA Vice President, Government Relations. “In fact, an unreasonably high efficiency requirement could cause the unwanted and unsafe consequence of consumers attempting to repair equipment rather than replace it with a cost-prohibitive newer system.”

The Department of Energy has been researching and compiling an in-depth analysis for technical feasibility and economic justification of the new minimum efficiency requirements designated by Annual Fuel Utilization Efficiency (AFUE) ratings that will go into effect in 2015. It has been concluded the new requirements will raise the minimum requirements from two to five AFUE percentage points, so typical natural gas furnaces must meet a minimum of 80 AFUE and natural gas boilers will be at 82 AFUE. These new requirements may not seem to be a drastic change; however, they represent a balanced and sensible approach to safety and efficiency concerns with regard to central heating equipment, natural gas furnaces and boilers.

“This new rule balances consumers’ pocketbooks with safety and increased energy efficiency—a win-win situation for everyone,” Charles Fritts concluded at the end of the announcement.

Of course, energy companies like Triple Diamond Energy Corporation keep informed of any new rules the American Gas Association approves issued by the Department of Energy. The result of the study and rule will give consumers a more cost-effective and efficient way of receiving natural gas. And in the end the energy companies will continue to supply their customers with what is needed.

Thursday, December 13, 2007

Pipeline Spills Reduced

In 1999 a voluntary environmental pipeline performance tracking system was started. The petroleum pipeline industry has reduced both the number and volume of crude, refined product, and highly volatile liquid (HVL) spills. An increased emphasis on managing pipeline risk have led to these reductions.

The Petroleum Pipeline Tracking System (PPTS) records detailed data and information about spills and releases, their causes and consequences. The pipeline members of the American Petroleum Institute and the Association of Oil Pipe Lines believe that tracking and learning from spills will further improve performance. In recent years that has proven to be true. The times where spills have been increased have been noted during natural catastrophes (hurricanes Ivan, Katrina and Rita).

In 2004, pipeline operators participating in PPTS accounted for about 85% of the total interstate oil pipeline mileage and volume throughput. Data verification efforts are extensive and usually include an incident-by-incident comparison to releases reported with the DOT’s Pipeline and Hazardous Materials Safety Administration, checking for completeness and accuracy. While specific incident information recorded in PPTS remains confidential, the data mining team (DMT) checks the data from all of the reported spills. The DMT publishes results of the analyses in advisories so the pipeline industry can better manage any possible pipeline risk.

Spills caused by equipment failures which include non-pipe components such as valves, fittings, and pumps and operator error showed their first significant declines in 2004. The increased emphasis on facilities integrity and risk management contributed to these declines.

Spills caused by corrosion can be controlled by the in-line inspection tools that identify potential corrosion locations. The pipeline repairs are identified and repaired before failure. So corrosion spills also continued to decline, led by the reduction in spills from crude oil systems. Crude oil spills were about one-third more numerous than refined product spills but declined rapidly due to improvements in corrosion spill prevention in onshore pipelines.

Between 2003 and 2004 the volumes released rose very slightly, due in part to releases related to Hurricane Ivan. The data for 2005 will also show a significant spill volume related to hurricanes Katrina and Rita, which affected both onshore and offshore oil pipelines and associated shore-based facilities in the Gulf Coast.

Oil companies like Triple Diamond Energy Corporation join PPTS in their commitment to improving safety and environmental protection by the analysis of results of the pipeline spills.

Tuesday, December 11, 2007

Peak Oil Situation

Oil is a finite, non-renewable resource, one that has powered enormous economic and population growth over the last century and a half. The world has become addicted to oil. In just 8 years, it's projected the world will be consuming nearly 50,000 gallons of oil every second. It has been said that for every nine barrels of oil we consume, we are recovering only one. We're using up oil at breakneck speed. It has been challenging to keep up with the rate of demand. Peak oil is the label for this problem of energy resource depletion or the peak in global oil production. Exploration and discovery is becoming more expensive as we go further out into unknown and untouched areas.

Oil reserves to tap in the state of emergency have been opened up for use. OPEC member governments supplied only approximate amounts. The International Energy Agency (IEA) even admitted to knowing about some of OPEC's members not revealing accurate amounts of oil stored in reserve. The global impact on oil prices is staggering. The world economy and the strength of the dollar are directly related to oil supplies and cost.

How can the output be increased to meet the demand? OPEC claims they will (to 20million barrels per day), but it's been found that OPEC Middle East oil nations, even Saudi Arabia, are pumping oil from fields known to be post-production. OPEC is relying on what is called "Peak Oil" when they claim this increased production of 20 million barrels of crude oil per day. While most of the world idly stand by, investors are beginning to catch on to what's happening in the oil and gas industry on the global scale. While the energy crisis is beginning to make its way into the news media limelight, just a few are aware of the true scope and magnitude of this crisis. Other alternatives are being studied while exploration is still being done accompanied with economical ways to recover the new discoveries.

The rate of oil production (extraction and refining) currently is about 84 million barrels per day. Once we have used up about half of the original reserves, oil production stops growing and begins a terminal decline, hence 'peak'. The peak in oil production does not signify running out of oil, but it does mean the end of cheap oil. For economies leveraged on an ever increasing quantity of cheap oil, the consequences seem inevitable.

Oil companies like Triple Diamond Energy Corporation have, of course, extracted the easier-to-reach, cheaper oil first. The oil pumped first, near the surface, is light and 'sweet' with a low sulfur content and therefore easy to refine. Naturally these fields are worked on before the rest until final depletion determined when it takes the energy of a barrel of oil to extract a barrel of oil.

Sunday, December 9, 2007

Clean Diesel Engines and Fuel

The United States Environmental Protection Agency (EPA) has successfully compiled a group of regulatory and non-regulatory standards for reducing emissions from diesel engines. Now it extends this success by creating the National Clean Diesel Campaign (NCDC). Through the implementation of varied control strategies and the aggressive involvement of national, state, and local partners, this Campaign has been set up to reduce the pollution emitted from diesel engines across the country. The challenge the NCDC has in reducing diesel emissions is developing new emissions standards for locomotive and marine diesel engines while promoting the reduction of emissions for existing diesel engines. The strategies, of course, have to be cost-effective also. NCDC participants are committed to finding innovative ways to protect human health and the environment. This means using cleaner fuels, having existing fleets retrofitted and repaired, and reducing the need of idling, among others.

Over the last five years, the EPA has brought forward a number of very successful programs all designed to reduce emissions from the existing diesel fleet. By 2014, in conjunction with state and local governments, public interest groups, and industry partners, EPA has established a goal of reducing emissions from the over 11 million diesel engines in the existing fleet. School buses were also sited as an area where diesel emission control can greatly help a susceptible population, our children. Other sectors identified where diesel engines need repair or retrofitting are seaports, construction, freight, and agriculture. Each program provides technical and financial assistance to stakeholders interested in reducing their fleets’ diesel fuel emissions effectively and efficiently.

The Agency is devoting significant efforts to ensuring the successful implementation of stringent new standards for diesel fuel and new diesel engines with proposing regulation standards which will act as the foundation of the EPA’s diesel control program.

As of June 1, 2006, refiners began producing clean ultra-low sulfur diesel fuel (ULSD) with a sulfur level that is at or below 15 parts per million (ppm) for use in highway diesel engines. Low sulfur (500 ppm) diesel fuel (LSD) for any non-road diesel engines are currently required and will be all replaced by 2010 with ultra-low sulfur diesel fuel for these machines including locomotives and marine engines.

Besides reducing emissions from the existing diesel fleet, these clean fuels will enable the use of advanced technologies on new engines. Technologies like particulate traps, capable of emission reductions of 90% and more, that are required under the new standards already, are being phased into the highway sector. These technologies plan to be phased into the non-road sector by 2011. Through the use of cleaner fuels and engines, the EPA is also working to reduce emissions from large commercial marine diesel vessels like cruise and large container ships.

Together these programs will yield enormous long-term benefits for public health and the environment. Of course, oil companies like Triple Diamond Energy Corporation will be producing the ultra-low sulfur diesel fuel besides continuing to produce the low-sulfur diesel fuel until the complete switch is made to using ULSD entirely.

Oil Shale in the Green River Formation

Inside more than 16,000 square miles of rock and sand, an area called the Green River Formation, sits a gargantuan supply of oil. This land covers portions of Colorado, Utah, and Wyoming. What lies in this region is what geologists call oil shale.

Oil shale is a black rock feeling grainy to the touch and greasy. When heated, oil shale oozes bubbling crude. This precious resource is rare and found only in a few select countries like China, Brazil, Estonia, Morocco, and Australia. But all these countries’ oil shale resources pale in comparison to the supply here. The United States dominates the oil shale market with possessing over 72% of the world’s oil shale resources. World-renowned geologist Walter Youngquist calls the oil beneath the Green River Formation, “a national treasure.”

This region holds the largest known oil reserve on the planet. Congress calls this area, “the next Saudi Arabia.” In 1930, the federal government placed protective legislation on this land forbidding anyone to use it. The government owns 80% of the reserved area. Wisely, knowing its potential value, they kept it for a “rainy day”.

Restricted for 76 years, it is now open for drilling. Extracting the oil from shale has always been cost prohibitive. But now it has become way too expensive to keep buying foreign oil. Coupled with the price of gasoline constantly rising, the “rainy day” has arrived. There will be certain challenges that will surface, as they do with using any unfamiliar resource. Oil shale processing can be made energy efficient. It is necessary to work out any problems so we can take advantage of this huge resource. We now have more proven discoveries and have developed more technological advances than we knew about in 1930. Companies are coming up with economical ways to get oil from the Green River Formation. Scientists and engineers continue working on ways to recover oil shale for a reasonable cost. Dozens have stepped forward with claims that they can extract the oil for as little as $10 a barrel. With oil prices approaching $70 a barrel, these pretty significant breakthroughs have convinced the government that it is time to start extracting the oil from the shale in the Green River Formation.

The protective legislation on the Green River Formation was lifted on August 8, 2005 by President Bush and signed into law. This mandate is called The Energy Policy Act of 2005. It calls for the opening phases of oil extraction in the Green River Formation, the world’s most concentrated energy source. We’re are now ready to tap the largest oil reserve on the planet located right here in America.

Oil companies like Triple Diamond Energy Corporation are watching the development of the opening of this reserve and how it affects the nation’s energy supply and economy. According to the RAND Corporation (a public-policy think tank for the government), this small region has the potential to produce three million barrels of oil per day which translates into more than $20 billion a year.

Oil Drilling in Alaska

The Arctic National Wildlife Range (ANWR) was established in 1960 to protect the "unique wildlife, wilderness and recreational values" of the area. This area has grown since 1960 and today, the ANWR encompasses nearly 20 million acres, which is about the size of South Carolina.

In March 2006, the U.S. Senate passed its 2007 Budget Resolution, which included a provision for lease sales of the right to drill for oil in region of the Arctic National Wildlife (ANWR) in Alaska. The Congressional Budget Office estimates that the income generated from lease sales could top $4.2 billion in the next five years. The same act authorized the study of the oil and gas potential of the northern part of the Refuge, called the 1002 Area. This region is now being looked at as a possible oil-development site, but environmental groups say that any oil production would upset the natural ecosystem within the ANWR. A 1998 analysis conducted by the United States Geological Survey (USGS) estimates that there are about 7 billion barrels of profitable oil in the 1002 Area alone, but the price of crude-oil determines how profitable that oil is.

By releasing a draft Supplemental Environmental Impact Statement (SEIS) in August 2007, the federal Bureau of Land Management (BLM) has renewed its attempt to drill for oil in the Arctic. No alternative was presented in the draft. Despite overwhelming opposition from scientists, local communities, the Wildlife Society, and the general public, this sensitive and important wildlife habitat is being put in jeopardy. The government claims that the drilling will not harm healthy populations of waterfowl and caribou. But many believe this is not supported by sound science.

Right now, much of the land in the Northeast Reserve that has oil potential is already available for leasing. In fact, 3.8 million acres have already been leased for oil and gas drilling and are actively being explored. For now, the Teshekpuk Lake area is the only part of the northeast Reserve that remains closed to drilling. This lake area is one of the most important wetlands to Alaska and BLM’s complicated leasing plan will degrade critical wildlife habitats. However, the analysis released presently attempts to satisfy the court and allow leasing and drilling to move ahead. The environmentalists continue to fight the oil drilling plan for this area saying there is no new science justifying the decision. It has been an on-going battle.

The government has been trying to lease the Teshekpuk Lake area to the oil industry for years. The oil companies like Triple Diamond Energy Corporation know that they have to keep providing the nation with energy resources so that we can claim independence from foreign supplies.

The New Ultra Low Sulfur Diesel Fuel

To meet the U.S. Environmental Protection Agency (EPA) standards, the petroleum industry is now producing a new Ultra Low Sulfur Diesel (ULSD) fuel. A major reduction in the sulfur content of diesel fuel was indeed necessary. The emission levels from diesel engines and vehicles had to be reduced to keep the air quality safe. This new fuel is a cleaner-burning diesel fuel containing a maximum of 15 parts-per-million (ppm) sulfur.

By December 1, 2010, all highway diesel fuel offered for sale must be ULSD fuel. At the present, at least 80 percent of the highway diesel produced or imported is now ULSD fuel. It will be replacing most Low Sulfur Diesel (LSD) fuel, which contains a maximum of 500 ppm sulfur (quite a difference). Used in combination with cleaner-burning diesel engines and vehicles, ULSD fuel is improving air quality by significantly reducing emissions. Both ULSD fuel and LSD fuel will be available through 2010.

Environmentally speaking, this was extremely necessary. Reducing emissions from diesel engines is one of the most important air quality challenges facing the United States. As more and more people are driving and transportation demands increase, the air quality has to be improved. The ULSD fuel along with new engine and emission control system technology advances on vehicles have an important role in improving air quality and providing human health benefits.

The current heavy-duty vehicle fleet is expected to be completely replaced in 2030. Emission reductions will be equivalent to removing the pollution from more than 90 percent of today’s trucks and buses annually. Engine manufacturers show that the use of advanced emissions control devices reduces emissions of both hydrocarbons and oxides of nitrogen (precursors of ozone) to near-zero levels.
With children and the elderly among those most at risk, EPA studies have concluded that ozone and particulate matter cause a range of health problems, including those related to breathing, such as asthma attacks and premature mortality. Certainly with this program engaged, there will be significant health benefits.

Since diesel-powered vehicles tend to be more fuel efficient than gasoline-powered vehicles, an additional benefit for some will be economical when at the pump with the new ULSD fuel.

New EPA fuel standards for diesel fuel also apply to non-road ULSD fuel used in locomotive, marine and non-road engines and equipment, such as farm or construction equipment.

Oil Companies like Triple Diamond Energy Corporation have been producing at their refineries this new ULSD fuel along with the LSD fuel until the total switch is transferred.

Why the Price of Heating Oil Fluctuates

The main heating fuel used in approximately 8 million U.S. households is heating oil. The primary use for heating oil is for residential space. The demand is highly seasonal with the Northeast as the biggest user using most of the heating oil during the months of October through March. In order to beat rising winter prices, some customers fill their storage tanks in the summer or early fall when the prices are likely to be lower. Most homeowners do not have large enough storage tanks to store the full amount needed for the entire winter. They may have to refill their tanks as often as 4 or 5 times during the heating season, and possible rising or spiking prices are a concern.

The United States has two sources of heating oil: domestic refineries and imports from foreign countries. Refineries produce heating oil as a part of the “distillate fuel oil” product family, which includes heating oils and diesel fuel. Pipelines, barges, tankers, trucks and rail cars ship the heating oil throughout the United States. Most imports of distillate come from Canada, the Virgin Islands, and Venezuela. If consumer demand is high for gasoline during its peak season, refiners may delay producing heating oil for the winter, which may lower inventories at the start of the heating season. The supply and demand principal comes into play.

Heating oil is brought into oil storage terminals by the refiners and other suppliers. Heating oil may be delivered to a central distribution area, such as New York Harbor, where it is then redistributed by barge to other consuming areas, such as New England. Once heating oil is in the designated area, it is redistributed by truck to smaller storage tanks closer to a retail dealer’s customers, or even directly to residential customers depending on the consumer area.

The cost of crude oil, the cost to produce the product, the cost to market and distribute the product, as well as the profits (sometimes losses) of refiners, wholesalers and dealers all play an intregral part in determining heating oil prices paid by the end consumers. Prices can vary over time and by where a consumer lives. Prices can change for a variety of reasons. These include seasonality in the demand for heating oil,
changes in the cost of crude oil, and
regional operating costs. Prices also are impacted by higher costs of transporting the product to remote locations.

When crude oil prices are stable, home heating oil prices tend to gradually rise in the winter months when the demand is highest.
Since crude oil is a major price component of heating oil, changes in the price of crude oil will generally affect the price of heating oil. Crude oil prices are determined by worldwide supply and demand. The supply is influenced by the Organization of Petroleum Exporting Countries (OPEC) and other factors. The demand can vary worldwide with the economy and with weather. The cost of doing business by dealers can vary substantially depending on the area of the country in which the dealer is located. These are the main variables to make the prices of home heating oil fluctuate constantly.

Oil companies like Triple Diamond Energy Corporation do their part in supplying the homeowner with the heating oil they need to keep everybody warm and comfortable throughout the winter.

What Causes a Surge in Heating Oil Prices?

High on the list of variables that affect the pricing of home heating oil is the supply-and-demand factor. For many reasons home heating oil prices can change dramatically in just a short period of time. Assuming crude oil prices are staying pretty much stable, if refiners, wholesalers, dealers and consumers have enough heating oil in storage and temperatures do not drop rapidly, prices can hold fairly steady throughout the winter.
A rapid change to colder weather can impact both supply and demand. People want more fuel when the harbors and rivers may be frozen and delivery systems are interrupted. The available heating oil in storage is used much faster than it can be replenished during this time. During these cold periods, the refineries normally cannot keep up with demand. Concerned that supplies are not adequate, the wholesaler buyers will bid up prices to cover short-term customer demand for heating oil at this time. In the Northeast in particular, additional supplies may have to come from some distance away, such as the Gulf Coast or Europe costing more to transport. It also can take up to two weeks to arrive. While waiting, the supply of heating oil that sellers in the region have in storage drops further, buyers’ anxiety about finding heating oil in the short term rises, and so do prices until new supply arrives.
Refiners can increase heating oil production in the winter to a modest degree. There comes a point when more of other petroleum products which could not be sold in sufficient quantities during the winter months, have to be produced. If consumer demand is high for a seasonal product, such as gasoline, refiners may delay producing heating oil for the winter, which may lower inventories at the start of the heating season.

Prices of other heating fuels (such as natural gas or kerosene) may increase too, even more than heating oil prices during very cold periods. Because of this, some consumers may switch from using their normal heating fuel to using heating oil, which only increases the demand for heating oil.

Roughly 78 percent of all the households which heat their homes with oil are located in the Northeast region of the United States. The Northeast region (which includes the New England and Central Atlantic States) remains the area with an appreciable share of oil-heated single family homes. In 2005, over 5 billion gallons of heating oil were sold to residential consumers in the Northeast. In other regions, the older homes have been converted to gas heat from oil. So oil heat no longer has a noticeable share of the new home construction market. The seasonal increase in inventories and demand (sales of heating oil) is largely confined to the Northeast.

Triple Diamond Energy Corporation, along with other oil manufacturers, keep watch over their supply of heating oil and make sure there is adequate production for the demand the winter months bring.

Today’s Crude Oil Market

The increasing demand for petroleum products has affected the refining sector, and this has affected the global crude oil market. Even as the capacity to refine crude continued to expand, utilization rates exceeded 90 percent in the United States over the period of 2000-2004. As the demand increased, so too did the demand for conversion capacity.

The reduction in spare refining capacity has affected the international crude oil market. There are many different types of crude oil. To name a few here: West Texas Intermediate, West Texas Sour, Arab Heavy, Bonny Light. There are many characteristics to any given crude, the two most common distinctions relate to its viscosity or how “light” or “heavy” a crude is, and the amount of impurities contained within the oil, sulfur being the most common. These characteristics indicate the amount of processing required to convert the crude oil into saleable petroleum products. Generally speaking, lighter crudes, which are also known as “sweet”, require less processing to produce a relatively more valuable group of petroleum products, such as gasoline, diesel, and jet fuel. Heavier crudes, also known as “sour” contain more sulfur and require more processing before the resulting petroleum products can be sold into the marketplace.

The market for refined petroleum products is very similar to the crude oil market in that there is widespread buying, selling, and trading of products in both the physical market (or spot market) and the futures market. And just as with crude oil, there are significant international flows of refined products. Trade in petroleum products reflects the international market’s efforts to match what is produced (the supply) with what consumers prefer (the demand). In the United States the majority of exports tend to involve products for which there is little or no domestic demand. Crude oil is the single largest input cost associated with the manufacturing of petroleum products. The rest of the other costs involved make up the other 50%.

Consequently, changes in crude oil prices have a significant effect on petroleum product prices. If crude oil prices rise, most likely gasoline prices will also rise. Changes in expectations about future crude oil prices can lead to changes in both current and future prices of gasoline and other petroleum products. Inventory of the products will either have to build up or be drawn down. However, prices for petroleum products can also change due to supply-and-demand factors unrelated to the crude oil market.

There exists a dynamic relationship between current prices and prices for petroleum products to be delivered in the future. Future markets can give valuable information to oil companies like Triple Diamond Energy Corporation about the market’s expectations about future supply and demand conditions in the physical market—conditions that will ultimately determine the price for oil.

The Complexity of Oil Refineries

The black as tar substance that is extracted from the ground known as crude oil needs to be refined before it is delivered to the end consumer. Meeting the consumer demand is complicated. Refining a barrel of crude oil involves a series of complex processes. In order to produce the gasoline or any of the many other different products demanded by consumers, the crude oil has to go to the designated refineries.

Once the barrels of oil are at the refinery, the first step is the distillation where the oil is heated and then broken down according to different boiling points. When the vapor turns into liquid form, it is separated into its varied component parts. Subsequent processes, often referred to as conversion, focus on transforming lower-valued products into higher-valued products. One example of conversion is removing impurities, such as sulfur, to make higher quality diesel fuel. Another example of transforming a lower-valued product into a higher-valued product is changing bunker fuel suited for ships into different grades of gasoline used in automobiles. It is the size and scope of these various conversion processes that distinguish the differences in refineries.

The United States refining capacity stands at approximately 17 million barrels produced per day. Different refineries will prefer different types of crude oil. At the beginning of 2005, this capacity was spread across 55 refinery companies operating 144 refineries. Vertically integrated operations involving the production of crude oil and independent refiners with little or no crude oil production involved are among the 55 companies. Operations, both large and small, range in scale from millions of barrels produced per day down to thousands of barrels per day. No one refinery can own more than 13 percent of the total U.S. refining capacity.

The refinery segment of the oil industry has been on the decline due to the negative economic returns. The trend in profitability has, until the past few years, been consistently moving downward. As a consequence, the market has seen a decline in the ownership of refining capacity on the part of major oil companies in the United States. During the 1990s, the major U.S. oil companies reduced their ownership of refinery capacity from 72 percent to 60 percent of total U.S. capacity. The fast-growing independent refiners increased their refinery capacity from 8 percent to 23 percent of the total U.S. capacity. The largest independent refiners are now in competition with the major oil companies in their capabilities to meet the nation’s growing concerns and demands for cleaner transportation diesel fuels. Competition from imports is also increasing, as more than 10 percent of the daily U.S. petroleum products consumption now comes from outside the United States. In their efforts to meet the increasing demands for petroleum products, oil companies like Triple Diamond Energy Corporation face these changes and purchase or lease the necessary amount of refineries.

Protecting Our Reliable Supply of Fuel

After September 11th, 2001, the U.S. oil and natural gas industry partnered with federal and local authorities to reevaluate and strengthen our domestic security.

Nationwide, oil and gas companies made major investments in construction, training and communications. All the way from the wellheads to the offshore platforms changes were made. The oil tankers, ports, pipelines, refineries, and storage tanks were all reevaluated and all necessary construction was done. And most importantly, employees and their communities were informed of the important security policy changes and/or trained.

Now in place are early warning systems to make sure that all security officials in the oil and natural gas industry are alerted to intelligence that might signal a threat. The industry partnering with the government at all levels is now working to protect hundreds of facilities across the country from the potential of terrorist attacks.

The American Petroleum Industry and related associations produced an industry-wide method for managers to identify security vulnerabilities in their operations. These protocols were endorsed by the Department of Homeland Security (DHS). In October of 2004, additional protocols were established to expand the coverage to pipeline, truck, rail and liquefied natural gas (LNG) operations.

The oil sector uses an API compiled document “Security Guidelines for the Petroleum Industry,” to help managers protect their facilities and respond to changes in the threat level. Available free to all eligible operators in North America, an internet-based, secure, early warning system is in place for making sure that threats and suspicious behavior are relayed between oil and gas operators and homeland security agencies.

Government inspectors have examined refineries and other key energy production assets and conducted cyber-attack vulnerability tests on critical oil and gas facilities. In the summer of 2004, nineteen oil and gas associations created the Oil and Natural Gas Homeland Security Coordination Council to give the government a single point of reference for the industry when it is needed.

As a result of the public-private partnerships and numerous new federal security requirements, oil and natural gas operations are now safer and more secure. These partnerships and new security laws have strengthened the reliable flow of energy to consumers.

The oil and gas companies like Triple Diamond Energy Corporation are committed to protecting the reliable supply network of fuels and products to safely keep our economy growing. The goal is to continue coordinated efforts in the industry working with government officials to enhance the homeland infrastructure security.

Changes in the Market Structure

No longer is there a market structure in the oil industry based on rigid long-term, commercial arrangements. It has been replaced by a more efficient one. Now the buyers and sellers have greater flexibility in establishing commercial relationships that better meet their respective needs. The market structures are transforming. The global oil industry has seen a transformation in the contractual structures used to purchase and sell crude oil over the last 25 years.

Transactions which involve the near-term purchase and sale of a commodity, such as crude oil and refined products are called “spot markets”. Spot contracts typically involve delivery of crude over the coming month. Since they entail the buying and selling of physical volumes, spot markets are also referred to as the “physical market”. Refiners, traders, producers, and transporters all buy and sell these markets. The benefit of allowing buyers and sellers to more easily adjust their crude supplies is achieved depending on the near-term supply and the demand conditions in both the product markets and the crude oil markets.

In contrast to a spot transaction, a futures contract concerns the future purchase or sale of crude oil or petroleum products.
Specifically, it is a contract that carries the obligation for delivery of a given quantity of crude in the future. The contract specifies the volume, type or grade of crude oil, the price, the future time in which the crude is bought or sold, and the particular location to which it is to be delivered. The buying and selling of futures contracts occurs on organized exchanges.

The futures market is often referred to as the “financial market.” The crudes underlying futures contracts are often called “marker” or “benchmark” crudes. Thousands of independent traders, including both commercial as well as financial institutions get involved in competitive organized exchanges. The prices in the spot market transactions are often tied to prices for crude oil on organized exchanges. Price adjustments account for differences in the quality of the crude oil being traded; plus the location of the spot market transaction is considered. The oil industry uses various types of contractual structures and financial instruments. The trade press most commonly reports the prices of futures contracts which are watched by the public.

Futures markets bring a number of benefits to the global oil market. Crude oil futures markets provide information about future expectations regarding supply and demand conditions. To manage risk facilitated, crude oil producers, marketers, and refiners are able to use the financial contracts on the exchanges. This trading process becomes beneficial to those who can respond to this information. It provides the economic incentive to build inventories if the higher futures prices will cover the cost of storage.

Future markets bring together valuable information about the market’s expectations about future supply and demand conditions in the physical market – conditions that will ultimately determine the price for oil. Oil companies like Triple Diamond Energy Corporation use the future markets to gauge their supply capacity and to make business transactions.

Monday, December 3, 2007

What Will Happen When We Run Out of Oil?

The dwindling supplies of crude oil will cause massive changes in our economy. Because of the rampant increase of people driving, the rising demands for gasoline alone is a monumental concern. Gas prices are influenced by many factors including the world supply of oil. The truth is that there is probably more oil to be discovered somewhere, but the costs of drilling it in far off remote areas or deep under the ocean floor will get too costly to pursue. It will be too expensive to find; we won’t be able to afford it. Most likely, the rising costs will force us to develop other energy sources.

Oil companies start out exploring for oil in the easiest places, costing the least to drill and bring to the surface. They go to the areas closest to their refineries to cut costs in transportation. This enables the costs to the end consumer to be kept in line. Once the nearby places are tapped out, the oil companies go elsewhere to find oil which might be harder to harvest. If the oil supply continues to get harder and harder to find, unfortunately, it will continue to get more and more expensive.

However, there is always a possibility for surprising good news to surface too. Recently, scientists from Cornell University discovered an enormous amount of oil off the coast of Louisiana. The find is some 60 billion barrels or three times more than the current US recoverable oil of 20 billion barrels. This discovery should bring the United States total oil reserves to 80 billion barrels which is on par with Venezuela. In comparison to other finds around the world, this is twice the size of all oil ever found in the North Sea and six times larger than the estimates of the Alaskan Artic National Wildlife Refuge oil deposits.

A new method of oil discovery known as “gas washing” was used to find this area of about 10,000 square miles. It was found under layers of salt domes. With this method, geologist are able to track the movement of oil deposits by the way they interact with the flow of natural gas. It helps scientists to make extremely accurate 3D-seismic maps of deep underground oil deposits and mitigate the risk involved in drilling such deep under water wells.

A team lead by a chemical geologist from Cornell and funded by a grant from Chevron discovered the oil with information gathered from source rocks deep below the sea. Because of the devastation left by the hurricanes Katrina and Rita there is a critical shortage of equipment and manpower to do the kind of recovery work needed to bring the oil to the surface. At the present, crews are working hard to get the necessary equipment to the area to conduct more tests. It is estimated that it won’t be until 2010 before oil will be pumped from the found area.

Oil companies like Triple Diamond Energy Corporation are always pleased when the new oil discoveries are made within the United States. Of course, it is discoveries like this which make the United States self sufficient and contribute to being less dependent on foreign oil. So, what will happen when we run out of oil? Maybe we won’t.

What is the Strategic Petroleum Reserve?

Oil supplies were cut off during the oil embargo (1973-1974), so in 1975 the United States started the petroleum reserve. The government decided that the country should never again be caught short which put the economy in shock. The Strategic Petroleum Reserve can be tapped when oil prices rise to help make sure that people who use oil to heat their homes will have plenty and that the price will not be too high. It was President Clinton who authorized the Department of Energy, which manages the reserve, to release up to 30 million barrels of oil in a swap with oil companies. The companies took the oil in fall 2000 with a promise to return the oil by fall 2001. The government hoped that the companies would use the oil to keep supplies adequate during winter.

Stored in underground salt caverns at four sites along the Gulf of Mexico, the Strategic Petroleum Reserve is the United States' emergency oil stockpile, and it is the largest emergency petroleum supply in the world. The reserve stores about 570 million barrels of crude oil. A barrel contains 42 gallons (59 liters) of oil. To create the caverns, workers drill into a salt dome and then proceed to put water into the hole to dissolve the salt. Holding about 10 million barrels of oil, each cavern is about 2,000 feet deep. The United States Energy Department has chosen using salt caverns to store the oil reserve because it is much more economical than storing it in tanks above ground. Another reason for this choice is because the pressure from the earth will seal up any leaks that might develop. Plus the temperature difference in the caverns, which are 2,000 feet below the surface of the earth, keeps the oil circulating so that the petroleum maintains its quality.

The government put the oil near the Gulf of Mexico because there are many oil refineries nearby and therefore shipping is readily available. The sites are Bryan Mound near Freeport, Texas; Big Hill near Winnie, Texas; West Hackberry near Lake Charles, Louisiana; and Bayou Choctaw near Baton Rouge, Louisiana. The reserve could store up to 700 million barrels. Most of the oil in the reserve comes from Mexico and the North Sea.

It costs the federal government $21 million every year to maintain the oil reserve. The oil reserve employs about 1,150 people, of which about 125 are government employees, and the rest are contracted workers. The Energy Department will get about $157 million to buy oil for the reserve in the coming budget year. Oil companies like Triple Diamond Energy Corporation may become involved in supplying the oil so that the reserve never gets low or tapped out.

The United States uses almost 19 million barrels of petroleum every day, and more than half of that oil comes from imports. A reserve of 60 days' worth of petroleum could help keep the oil flowing in case there ever is a cut-off or embargo again. The last time that the United States used oil from the reserve was during the Persian Gulf War in 1991 to keep oil plentiful and the prices stable. That drawdown is different from the exchange authorized recently because the companies who bid for it will return the oil this time.

Friday, November 30, 2007

Tracking Gasoline Prices in America

Gasoline prices are down one month, after they were up the previous month, and then will shoot up the next. Many variables affect the price of gasoline. Tracking them is difficult making it practically impossible to predict. Plus, they're different depending on where you are. Other states and cities, and other countries can have very different gas prices from your local gas station.

Gasoline continues to be the nation’s bloodline. It is what keeps America on the go. Last year 140 billion gallons of gasoline and diesel fuel were pumped into just our personal cars alone, up 3.2 percent from the previous year.

Many forces impact the price of gas at the pump. The biggest portion of the cost of gas is crude oil, presently that is about 50 percent. This is determined by the world's oil-exporting nations, particularly the Organization of the Petroleum Exporting Countries (OPEC). The price of a barrel of oil is determined by how much these countries are producing. Price increases generally occur when the world crude-oil market tightens and lowers inventories. Another portion of the price covers the cost of the refining process. The cost of distribution and marketing also has to be included in the price. Federal and state excise taxes are in the price, too. All these factors vary and fluctuate. Natural disasters, weather, war and world events can step in to change the price of gasoline also.

According to a Motor and Equipment Manufacturers Association (MEMA) report, Americans drive more than 2.5 trillion miles per year in automobiles, light trucks and sport-utility vehicles (SUVs). With SUVs continually growing in popularity we are only getting more dependent on gasoline. A severe gas shortage would practically cripple the country. This high demand usually translates into higher gasoline prices. According to the Department of Energy, the United States consumes an average of 20 million barrels of oil daily, Of that, about 45 percent is used for motor gasoline or something like 178 million gallons is consumed every day.

The time of year can drive gasoline prices to go up. Typically, when lots of people go on vacation during the summer, the demand for gas spikes. In some years (like in 2004), prices continued to rise past the end of the summer travel season for a variety of reasons, including several hurricanes and an increase in the price of crude oil. Also, growing demand can sometimes outpace refinery capacity. In the spring, refineries perform maintenance, which slows or stops production. Oil refineries are usually back to full capacity by the end of May. So again, the time of year affects the price of gasoline. Oil companies like Triple Diamond Energy Corporation follow a production schedule that adheres to industry standards.

The Price of Gasoline at the Pump

There are actually many factors that determine what you end up paying at the pump. You might think it is dependent on the price of crude oil. The money you pay at the pump gets broken down into little pieces that get distributed among several entities. Just like any other consumer product, gasoline’s supply chain determines what the price will be. Several groups have to get paid for their contribution.

The biggest portion of the cost of gas is crude oil, presently that is about 50 percent. This is determined by the world's oil-exporting nations, particularly the Organization of the Petroleum Exporting Countries (OPEC). The price of a barrel of oil is determined by how much these countries are producing.

Prices of crude oil fluctuate upwards in a time of emergency or after a disaster when they have been known to double. Even when there is plenty of crude oil on the market, sometimes gas prices can go up. Because it depends on what kind is plentiful: the light or sometimes labeled “sweet” oil or the heavy (“sour”) type. Light crude is easier and cheaper to refine. There is a lot of heavy crude available in the world, but refineries have to undergo costly retooling to handle it.

The next portion (28%) of the cost of gasoline has to do with the refining of crude oil. This cost is determined by how much is distilled from the crude oil batch and the refining process costs involved.

Crude oil is transported to refineries and gasoline is shipped from the refineries to distribution points and then to gas stations. The price of this transportation is included in the gasoline price at the pump. The advertising costs of the certain brand is also passed along to the consumer. The distribution and marketing together account for 8% of the price of gasoline.

In the United States, 14% of the total price of gas is for taxes (federal and local). Federal excise taxes are 18.4 cents per gallon, and state excise taxes average 18.2 cents per gallon. There may also be some additional taxes such as applicable state sales taxes, gross receipts taxes, underground storage tank fees, and environmental fees. Taxes vary from state to state making the price of gas vary too.

Some of the actual money you spend at the pump does go to the service station which usually adds a couple of cents per gallon. There's no set standard; so shopping around may be a worthwhile option. Some states have markup laws designed to protect small, individually-owned gas stations from being driven out of business by large chains.

Other variables can affect the price of gasoline. Competition between local gas stations can drive prices down. Distance from the oil refineries due to transportation costs involved can change the price. Anything that affects any part of the process, from when the oil is drilled, through refining and distribution will result in a price change. World events, wars and weather disasters can also raise prices. And, as in just recently, legislation in Washington DC can also affect the price. All of these factors must be studied and watched by the oil companies like Triple Diamond Energy Corporation to help them predict the future of their products in the constantly changing marketplace.

Monday, November 26, 2007

Finding Oil

The United States, in 2005 alone, consumed per day an estimate of 9 million barrels of crude oil and 13.21 million barrels of imported oil. This oil is refined into gasoline, kerosene, heating oil and other essential products. To keep up with this demand, oil companies must constantly look for new sources of petroleum, as well as improve the production of existing wells.

The fossil fuel oil can be found in countries all over the world. It was formed from the remains of tiny plants and animals (plankton) that died in ancient seas millions of years ago. After the organisms died, they sank into the sand at the sea’s bottom. Over the years, the organisms decayed in the sedimentary layers. Because there was little oxygen there, the organisms broke down into carbon-rich compounds. This material mixed with the sediments, forming fine-grained shale which known as the source rock. As new sedimentary layers were deposited, they put intense pressure and heat on the source rock which distilled the organic material into crude oil and natural gas. The oil flowed from the source rock and accumulated in thicker, more porous limestone or sandstone, called reservoir rock.

Movements and shifts in the Earth’s surface trapped oil and natural gas in the reservoir rocks between layers of impermeable rock, or cap rock, such as granite and marble. These movements of the earth included folding when the rock moved horizontally inward creating a fold or anticline; faulting where the layers of rock cracked with one side shifting upward and the other downward, and pinching out when a layer of impermeable rock squeezed upward into the reservoir rock.

Oil companies like Triple Diamond Energy Corporation employ directly or under contract from a private firm, geologists who actually find the oil. Their task is to find the right conditions for an oil trap—the right source rock, reservoir rock and entrapment. They interprete surface features, surface rock, soil types, and small core samples obtained by shallow drilling and, nowadays, with the additional help of satellite images. They also can use sensitive gravity meters to measure tiny changes in the Earth's gravitational field that indicate flowing oil, as well as sensitive magnetometers to measure tiny changes in the Earth's magnetic field caused by flowing oil. They can detect the smell of hydrocarbons using sensitive electronic noses called sniffers. And they also most commonly use seismology, creating shock waves passing through hidden rock layers. In seismic surveys, a shock wave is created by a compressed-air gun which shoots pulses of air into the water for exploration over water, a thumper truck which slams heavy plates into the ground for exploration over land, and explosives drilled into the ground for exploration over both land and water.

Although modern oil exploration methods have made it easier for finding oil, geologists still only have a 10-percent success rate for finding new oil fields. Once a prospective oil strike is found, the location is marked.

Chris Jent is the Chief Marketing Officer of Triple Diamond Energy Corp. Triple Diamond Energy specializes in acquiring the highest quality prime oil and gas properties. For more information, visit htttp://

Fractional Distillation of Crude Oil

The make-up of crude oil consists mostly of carbon and hydrogen. Hydrocarbons come in different molecular forms. Longer chains with 5 or more carbons are liquids. Very long chains are solids like wax or tar. By chemically cross-linking hydrocarbon chains you can get a variety of different products like synthetic rubber, nylon, and even plastic. Hydrocarbons are very versatile depending on their cross-linking.

At the oil drilling site, after the rig is removed, a pump is placed on the well head. The pump system extracts the crude oil; then it is brought for refining and the process of distillation. The first step is to separate the oil components by size, weight, and boiling temperature. The process called fractional distillation separates the components by heat. Different substances have different boiling temperatures. Fractional distillation is useful for separating a mixture of substances with narrow (fractional) differences in boiling points, and is the most important step in the refining process.

The steps in this process are as follows: the mixture of two or more substances (liquids) with different boiling points are heated to a high temperature. A vapor (gases) form as the mixture boils. This vapor goes into the fractional distillation column that has trays or plates at different levels. These trays collect the liquids that form at various heights in the column. The temperature gauge runs from hot at the bottom of the column to cool at the top.

As the vapor rises through the column with trays, it cools. When a substance in the vapor reaches a level in the column where the temperature is equal to that substance's boiling point, it will condense into the form of a liquid. This liquid fraction is collected in the tray at the appropriate height. As the liquid cools even more, it passes from the tray to storage tanks or to other areas for further chemical processing.

Most of the components that go through fractional distillation have to be chemically processed further before becoming marketable. For example, one of the major products coming from crude oil, gasoline is only 40% distilled crude oil. Distillated and chemically processed fractions are treated to remove impurities, such as organic compounds containing sulfur, nitrogen, oxygen, water, dissolved metals and inorganic salts. Treatment usually involves passing through a column of sulfuric acid, an absorption column filled with drying agents, and/or a hydrogen-sulfide scrub.

After treatment and more cooling, the fractions are blended together to make various products, such as gasoline, lubricating oils, and kerosene (all of various weights and grades), jet fuel, diesel fuel, and heating oil. Further chemical processing will turn the crude oil into plastics and other polymers. Oil companies like Triple Diamond Energy Corporation have production crews at the refineries to make sure that the fractional distillation process at the refineries produce enough of every product.

Chris Jent is the Chief Marketing Officer of Triple Diamond Energy Corp. Triple Diamond Energy specializes in acquiring the highest quality prime oil and gas properties. For more information, visit

Land Oil Rig Systems

The modern oil exploration methods today include using sensitive gravity meters, magnetometers, electronic noses called sniffers, and seismology. These all help the geologists determine where there is oil to be drilled. Once the site is selected, the land is prepared for drilling. The rig equipment may be transported to the site by truck or helicopter depending on the remoteness of the area. When the equipment is at the site, the rig is set up. The major systems or anatomy of a land oil rig are the power system, the mechanical system, the rotating equipment, and the circulation system.

Large diesel engines burn diesel-fuel oil to provide the main source of power. Electrical generators are powered by the diesel engines to provide electrical power. This is the power system of the land oil rig.

The mechanical system is driven by electric motors. A mechanical winch called drawworks is used for hoisting heavy loads. The drawworks has a large steel cable spool, a block-and-tackle pulley, and a receiving storage reel for the cable. The mechanics also include a turntable, part of the drilling apparatus.

Rotary drilling requires the rotating equipment of a swivel, kelly, turntable or rotary table, drill string, and drill bits. The large handle or swivel is used to hold the weight of the drill string allowing the string to rotate and make a pressure-tight seal on the hole. The kelly is a four-or-six-sided pipe that transfers rotary motion to the turntable and drill string. The turntable or rotary table drives the rotating motion using power from electric motors. The drill string consists of drill pipe (connected sections of about 30 feet or 10 meters) and drill collars, larger in diameter and heavier, this pipe fits around the drill pipe and places weight on the drill bit. The drill bit(s) are at the end of the drill which actually cut the rock. They comes in many shapes and materials (tungsten carbide steel, diamond) that are specialized for various drilling tasks and rock formations.

The large-diameter concrete pipe that lines the drill hole is called casing. It prevents the hole from collapsing, and allows drilling mud to circulate which brings us to the circulation system.

The circulation system is made up of pumps, drilling mud, pipes and hoses, a mud-return line, a shale shaker, a shale slide, the reserve pit, mud pits, and a mud-mixing hopper. The drilling mud is a mixture of water, clay, weighting material and chemicals used to lift rock cuttings from the drill bit to the surface. The pump sucks mud from the mud pits and pumps it to the drilling apparatus. Pipes and hoses connect everything to the drilling apparatus. There is a line that returns mud from hole. The shale shaker is a sleeve that separates rock cuttings from the mud which are conveyed to the reserve pit by the shale slide. The reserve pit collects rock cuttings separated from the mud. Mud pits collect the drilling mud mixed by the mud-mixing hopper and recycle it.

A derrick is the support structure that holds the drilling apparatus, It is tall enough to allow new sections of drill pipe to be added to the drilling apparatus as drilling progresses.

The final system is the blowout preventer which consists of high-pressure valves located under the land rig or on the sea floor that seal the high-pressure drill lines and relieve pressure when necessary to prevent a blowout.

These major systems all work together in bringing the oil to the surface. Oil companies like Triple Diamond Energy Corporation have production crews working these rigs to accommodate today’s demand for this energy.

Chris Jent is the Chief Marketing Officer of Triple Diamond Energy Corp. Triple Diamond Energy specializes in acquiring the highest quality prime oil and gas properties. For more information, visit htttp://