LONDON | Thu Dec 27, 2012 10:47am EST

LONDON (Reuters) - An ambitious British plan to search for minute forms of life in an ancient lake beneath Antarctica's ice has been suspended because of technical problems, the scientist leading the project said on Thursday.

In a move that clears the way for U.S. and Russian teams to take the lead, Professor Martin Siegert said technical problems and a lack of fuel had forced the closure on Christmas Day of the 7-million-pound ($11 million) project, which was looking for life forms and climate change clues in the lake-bed sediment.

"This is of course, hugely frustrating for us, but we have learned a lot this year," said Siegert of the University of Bristol, principal investigator for the mission, which was headed by the British Antarctic Survey (BAS).

"By the end, the equipment was working well, and much of it has now been fully field-tested," he said on the BAS website.

Experts from Britain's Lake Ellsworth mission had expected to find minute forms of life in the lake three km (two miles) under Antarctica's ice, the most remote and extreme environment known on Earth.

They had also hoped that by dating bits of seashell found in the water they would have been able to ascertain when the ice sheet last broke up and to better understand the risks of it happening again.

INTERNATIONAL COMPETITION

Scientists from the United States and Russia are hot on Britain's heels when it comes to drilling through Antarctic ice to lakes that have been hidden for thousands of years.

The U.S. team is aiming to start drilling in Lake Whillans, one of 360 known sub-glacial lakes in Antarctica, in January or February 2013.

Russia was the first to pierce 3,769 meters (12,365 ft) of solid ice to reach Lake Vostok early in 2012. But some scientists believe their samples may have been contaminated by drilling fluids.

The British scientists decided to abandon the mission after trying for 20 hours to connect two holes in the ice that were needed for the hot-water drill to work, said a BAS spokeswoman.

Without a connection between the two holes, the hot water would seep into the porous surface layers of ice and be lost, reducing the pressure and rendering the drill ineffective.

The team tried to melt and dig more snow to compensate for the water loss, but without success.

As a result of the extra time taken to fix the problem, fuel stocks had been depleted to such a level as to make the operation unviable.

Asked how long the delay might be before the project could be resumed, Siegert told the BBC: "It will take a season or two to get all our equipment out of Antarctica and back to the UK, so at a minimum we're looking at three to four, maybe five years I would have thought."

However, he said he felt this year's mission had not been a complete loss.

The BAS spokeswoman said: "It's very possible that either the U.S. or Russia may take the lead but I think the one thing we've learned here is that anything can go wrong."

"We've never depicted this as a race. All sub-glacial lakes would give different information," she said.

(Editing by Andrew Osborn)

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LONDON | Fri Oct 12, 2012 8:58am EDT

LONDON (Reuters) - Frantic drilling activity across the United States has at last begun to moderate, as the industry responds to the plunge in prices for natural gas and now liquids such as butane and natural gasoline.

Production companies have switched towards oil-rich and liquids-rich plays since 2008, driven by the gas glut and falling gas prices. But now the number of rigs targeting oil and condensate plays also appears to have peaked.

Between July 2008 and July 2012, the number of rigs drilling for gas fell by almost two thirds, from 1,555 to just 522, while the number of rigs targeting oil rose four-fold, from 393 to 1,427, according to oilfield services company Baker Hughes, as the industry responded to a record oil/gas price ratio (Chart 1).

Rigs shifted from dry-gas plays such as the Barnett shale underneath Fort Worth in Texas to wet-gas plays such as Eagle Ford in south-west Texas, where methane is found in association with heavier molecules like ethane, and oil-rich plays like North Dakota's Bakken.

High prices for co-products helped support continued gas drilling and production even as prices sank below $3 per million British thermal units. They have also significantly improved the economics of oil wells drilled in comparatively expensive shale plays.

Bakken wells cost an average $8.5 million each to drill, making them some of the most expensive in the country. But the internal rate of return is almost 60 percent, among the highest, according to a recent study by Bentek, in part because of the high yield of natural gas liquids, which can be stripped from the associated gas production and sold separately ("The Williston Basin: Greasing the Gears for Growth in North Dakota" July 2012).

CONDENSATE GLUT

The massive expansion of liquids output is now causing its own problems, however, as the market becomes flooded with record stocks of ethane, propane, butane and natural gasoline, weighing down prices.

Combined stocks of natural gas liquids (NGLs) currently stand at 188 million barrels, up from 147 million at the same point last year, according to the Energy Information Administration (EIA). Butane prices have fallen to just $62 per barrel, down from $75 in 2011. Natural gasoline prices are down to $87, from almost $100 last year.

The total number of rigs drilling on land for some combination of oil, gas and condensates across the United States has fallen by 189 (9.6 percent) from 1,978 to 1,789 over the last 12 months.

Over the border, in Canada, the number of rigs drilling on land is down by 150 (29 percent) from 521 to 371 over the last year.

Rig counts alone provide a misleading indication of total drilling activity, since drillers have become adept at drilling faster, more accurately, minimizing downtime and generally becoming more efficient.

As the oil and gas boom has sent the costs of hiring rigs and crews soaring, the pressure to improve efficiency has become intense. Fewer drilling rigs can now drill more wells than before.

Nonetheless, there are signs the drilling market in North American is starting to cool slightly as poor prices for natural gas and now liquids have an impact.

In its second quarter earnings release, oilfield services company Schlumberger noted the hydraulic fracturing market on land in North America has weakened in recent quarters.

The downturn appears to be quite general across the United States, with rig counts down in most major petroleum-producing states (Charts 2-3).

DRILLING SHIFTS AGAIN

Outside North America, where prices are not so affected by freely available shale gas, drilling continues to rise.

In September, there were 1,254 rigs drilling for oil or gas outside the United States and Canada, according to Baker Hughes. It was more than double the number in 1999 and the highest number of operating rigs since 1986 (Chart 4).

The boom centers on the Middle East, where there were 381 rigs drilling last month, up from 292 in September 2011 and 276 in 2010. Latin America has also witnessed a sharp expansion in exploration and production activity, with a smaller uptick in Africa.

As surplus oil and gas production in North America depresses prices, more drilling assets and specialist crews will be redeployed overseas to take advantage of higher returns.

(Editing by Keiron Henderson)

(John Kemp is a Reuters market analyst. The views expressed are his own)

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Thu Sep 27, 2012 10:29pm EDT

n">(Reuters) - Transocean Ltd (RIG.N) said on Thursday it was served with a preliminary injunction by a federal court in Brazil that would require the drilling contractor's nine rigs operating in waters off the country to cease operations in 30 days.

The ban stems from an oil spill last November in an offshore field operated by Chevron Corp (CVX.N) at a well drilled with a Transocean rig. The eight other Transocean rigs in Brazil work for Petrobras (PETR4.SA), including seven contracted to the state-led oil company and another subcontracted from BP (BP.L).

If not overturned, the ban could seriously disrupt exploration and drilling in one of the world's most promising offshore oil frontiers by removing about 13 percent of Brazil's drilling fleet.

Petrobras Chairwoman Maria das Gracas Foster has said that a lack of drilling rigs, even with Transocean's rigs operating, is one of the reasons production growth at her company has stalled despite a $237 billion, five-year expansion plan, the world's largest corporate spending program.

The Transocean ban is related to civil lawsuits seeking about $20 billion in damages from Transocean and Chevron for the spill in the Frade field, which leaked 3,600 barrels of oil into the sea northeast of Rio de Janeiro.

Transocean said it was "vigorously pursuing" a reversal of the injunction, including an appeal to the Superior Court of Justice. "Absent relief from the courts, Transocean will be required to comply with the preliminary injunction," it added.

The world's largest offshore rig contractor warned two weeks ago, after the ban was upheld on appeal, that it could not be sure of overturning the decision in time to prevent its rigs going to zero revenue for some period of time.

Shares of Transocean, which earns 11 percent of its revenue in Brazil, declined by about 1 percent after the ruling, ending 1.7 percent lower at $45.37, on concerns that the average fourth-quarter earnings estimate of 90 cents per share might be at risk.

"The Brazilian issue will continue to overhang the stock until resolved," said UBS analyst Angie Sedita, estimating a drop in earnings of 5 cents per share for every week of Brazil downtime. "Rig has strong local support, but we believe the injunction is politically driven versus operationally driven."

Petrobras is working to help overturn the ruling, which would halt the exploration and development of some of its most promising deepwater fields.

Petrobras has a total of 31 offshore rigs, either self-owned or under contract, and it has struck a deal to build 28 more rigs in Brazilian shipyards by 2020.

The ANP, Brazil's oil regulator, has said there was no negligence in last November's Frade spill and that only Chevron had to pay fines and present a remedial plan before getting approval to drill again.

Chevron, the second-largest U.S. oil company, paid the ANP-levied fine on Thursday, and received a 30 percent discount on the 35.1 million-real ($17.3 million) charge because it paid promptly and did not challenge the 24 violations ANP found.

But prosecutors have won the injunction against Chevron and Transocean that will stand until the civil suit is resolved, which could take years. Chevron and Transocean say they have done nothing wrong.

When exactly that injunction takes effect is under dispute. The July 31 ruling by a Federal Court in Rio de Janeiro was supposed to go into effect 30 days after the judges' decision was published in a local legal gazette and the ruling physically served to company executives.

Separately on Thursday, Transocean announced the appointment of John Stobart as chief operating officer, effective Monday. Stobart had been worldwide drilling manager for BHP Billiton Petroleum (BHP.AX) since 1994 in Australia, the UK and Texas.

"I expect that he will be instrumental in taking the company to an even higher level of performance," said Steven Newman, Transocean's previous COO before he was promoted to chief executive more than two years ago.

The new COO comes just a few weeks after Transocean named a new chief financial officer after an eight-month search. Esa Ikäheimonen, the former CFO of rival Seadrill (SDRL.OL) who spent two decades working for Royal Dutch Shell Plc (RDSa.L), will succeed interim CFO Greg Cauthen on November 15.

(Reporting by Braden Reddall in San Francisco and Jeb Blount in Rio de Janeiro; Editing by Leslie Gevirtz and Jean Yoon)

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