Archive  April 1999 Vol. 220 No. 4  Offshore

Robert E. Snyder,  Editor

Flawed emission trading policy, other offshore news

In this issue, on page 147, a case is made that the Kyoto Protocol, if put into practice, would lower U.S. productivity growth and cut the average standard of living. Overviewed here is another major report on negative aspects of the mis-guided project.

Efforts to stave off global climate change through emissions trading and carbon taxes are conceptually flawed and unlikely to achieve the goals of the Kyoto Protocol on Climate Change, according to a study released by Reason Public Policy Institute (RPPI), Los Angeles, California. Co-author Dr. Kenneth Green, director of RPPI’s environmental program, notes that the Kyoto Protocol is unlikely to make our children or ourselves safer. "Risk-reduction efforts are seldom pure, often having countervailing impacts that must be factored in. Unfortunately, climate change is rarely discussed in a framework that accounts for benefits and risks of implementing various strategies," he says.

Previous RPPI studies have estimated that implementing the Protocol could induce as many as 22,000 fatalities per year by lowering people’s disposable income, and thus depleting their ability to secure safety for themselves and their children.

In the 40-page report titled, Climate change policy options and impacts: Perspectives on risk reduction, emissions trading, and carbon taxes, RPPI argues that resilience and continued climate research, rather than speculative, preemptive action should be the default strategy. Leaders should avoid the temptation of emotion-driven, hoped-for quick fixes to confront a highly uncertain and complex problem like climate change.

Two other co-authors who are strong advocates for emissions trading programs for many air pollutants, argue that emissions trading would not work in the context of climate change. Under such a system, governments would set a fixed "allowable" level of greenhouse gas concentration and then distribute "ownership rights" to private parties, permitting market forces to allocate how they are dispersed — or so the idea goes. Unfortunately, uncertainty about global warming forecasts, policy outcomes, and the relative influence of specific greenhouse gases on the atmosphere fail the basic criteria necessary to establish an effective market for greenhouse gas emissions.

Furthermore, it is questionable whether a market for greenhouse gases can function, given high transaction and monitoring costs, and difficulties of enforcing the market, and the uncertainty of international emission trades.

Stifling fossil fuel consumption with so-called carbon taxes is equally problematic, according to economist Roy Cordato, who contributed to the report. He argues that carbon taxes cannot be justified on the basis of economic theory. Serious information problems, as well as the highly subjective nature of the purported benefits of a carbon tax, make the system arbitrary, at best, Cordato notes.

To address the serious scientific challenges confronted by climate change theory, Dr. Green argues for a strategy that seeks additional research expertise and leaves society more capable to respond when we have a better understanding of the scope and nature of the problem. In the long run, that is a superior strategy to squandering precious resources now and potentially achieving no return.

A division of the Reason Foundation, RPPI conducts academic, peer-reviewed research into the areas of environmental policy, transportation, land use and economic development, government reform and privatization, education and social services. Copies of the report are available by calling 310-391-2245, or at www.rppi.org/ps252central.html.

Chevron selling California offshore assets. In November 1998, Venoco, Inc. signed an agreement to purchase all of Chevron’s coastal California production assets. In February, Venoco announced it had closed on the acquisition of certain of Chevron’s offshore fields, including: Platforms Gail and Grace in the SE Santa Barbara channel; an oil / gas plant in Carpinteria and Chevron’s non-operated 25% interest in Dos Cuadros field. The acquisition of Chevron’s remaining offshore assets, principally ownership in Point Arguello field, remains in escrow.

Venoco presently produces fields in California (including offshore properties in state waters), Colorado, Texas and Mississippi. The acquisition will make it one of the largest U.S. independents in terms of reserves. With Venoco’s corporate base in Santa Barbara, company officials say they are sensitive to local communicty concerns.

Production from Platform Gail averages 4,300 bopd and 11 MMcfd gas. Production from Platform Grace was suspended in 1997. Venoco is working on plans to return Grace to production.

New technology lowers deepwater costs. Aker Maritime, Inc., (Riser Business Unit and Aker Marine Contractors), Cameron and Diamond Offshore Drilling, Inc. have announced an economical solution for what have become rather costly deepwater ventures. The program being presented to operating companies is a low-cost drilling concept called Installation In Advance (IIA). The concept enables lower-cost, shallow-water semisubmersible rigs to drill in ultra-deep waters, as opposed to using more-expensive deepwater rigs, thereby reducing overall well costs.

The key to being able to use the shallow-water rigs is a mooring system developed by Aker Marine Contractors. The system, which is pre-installed or pre-set before the rig arrives, enables a shallow-water drilling vessel to operate in water depths deeper than originally designed for without requiring modification to existing onboard equipment. It also enables the units to be moored safely in areas containing subsea obstructions.

The free-standing riser used with the system is a mature technology developed by Cameron, similar in concept to the free-standing production riser that has been in operation in the Gulf of Mexico for the last eight years. Aker Maritime’s Riser Business Unit is interfacing with Cameron on certain design facets as well as developing the commercialization of the program with Cameron and Diamond Offshore.

Copyright © 1999 World Oil
Copyright © 1999 Gulf Publishing Company