Chevron wins U.S. ruling calling Ecuador judgment as fraudulent

Chevron has won a U.S. judge’s ruling that a multibillion-dollar pollution judgment issued in Ecuador was procured by fraud, making it less likely that plaintiffs will collect the $9.5 billion award.

U.S. District Judge Lewis Kaplan in Manhattan said today that the second-largest U.S. oil company provided enough evidence that a 2011 judgment on behalf of rain forest dwellers in the country’s Lago Agrio area was secured by bribing a judge and ghostwriting court documents. Kaplan oversaw a seven-week nonjury trial over Chevron’s allegations.

“The decision in the Lago Agrio case was obtained by corrupt means,” Kaplan said in the opinion. “The defendants here may not be allowed to benefit from that in any way.”

Chevron, based in San Ramon, California, was ordered to pay $19 billion to a group of farmers and fishermen by the Ecuadorean court. The award was reduced to $9.5 billion on Nov. 12 by the Ecuadorean National Court of Justice, the nation’s highest tribunal.

The Ecuadorean villagers, and activists working on their behalf, argued the oil producer should be held financially responsible for pollution of the Amazon rainforest by Texaco Inc. from the 1960s through the early 1990s. Chevron, which bought Texaco in 2001, claims the company already paid $40 million to clean up its share of the drilling contamination.

Cases Pending

The Ecuadoreans have sued Chevron in Brazil, Argentina and Canada, where the company has assets that can be seized. The Court of Appeal for Ontario ruled in December that the 47 villagers have the right to pursue Chevron’s Canada assets. The other cases are pending.

The ruling bars the plaintiffs from trying to enforce the ruling within the U.S. but not elsewhere, Kaplan said, noting that Chevron had dropped a request for a worldwide injunction.

“This ruling will be very helpful if the plaintiffs continue to try to seek enforcement of a corrupt verdict that was obtained in Ecuador,” John Watson, Chevron’s chairman and chief executive officer, told reporters at the IHS CERAWeek energy conference in Houston today. “Having a judgment like this from a reputable court in the United States will certainly be helpful in preventing enforcement actions elsewhere. We will continue to defend ourselves in any enforcement actions around the world.”

Bribed Judge

In its racketeering case before Kaplan, Chevron alleged that a U.S. lawyer leading the Ecuadoreans, Steven Donziger, and members of his team engaged in “repeated acts of fraud, bribery, money laundering” and obstruction of justice in pursuit of a multibillion-dollar payout.

The company said that Donziger’s team bribed a judge who issued the decision with a promise of $500,000 from the proceeds, ghostwrote the ruling and arranged to have their own damages estimate submitted as independent findings to the court.

“This trial record proved what Chevron has been saying all along -- that Donziger, who professes merely to be a lawyer representing clients, is, in reality, a liar, con man, and criminal who has headed a racketeering enterprise targeting Chevron as its deep-pocketed victim,” Chevron lawyers said in a memorandum filed Dec. 23.

‘Flawed Proceeding’

Morgan Crinklaw, a Chevron spokesman, said in a statement today that Kaplan’s ruling is “a resounding victory for Chevron and our stockholders.”

“It confirms that the Ecuadorean judgment against Chevron is a fraud and the product of a criminal enterprise,” Crinklaw said. “Any court that respects the rule of law will find the Lago Agrio judgment to be illegitimate and unenforceable.”

Chevron shares were up .85 percent to $115.69 at noon in New York.

“This is an appalling decision resulting from a deeply flawed proceeding that overturns a unanimous ruling” by Ecuador’s high court, Donziger said today in a statement. “We believe Judge Kaplan is wrong on the law and wrong on the facts and that he repeatedly let his implacable hostility toward me, my Ecuadorean clients, and their country infect his view of the case.”

Donziger said he will pursue an “immediate and expedited appeal.”

Donziger has argued that he did nothing wrong in Ecuador and that any aggressive tactics he may have used were no worse than Chevron’s actions. Han Shan, a spokesman for the plaintiffs, described them as being “out-gunned on a profound level” against the oil company.

Corrupt Means

“The court assumes there is pollution in the Oriente,” Kaplan wrote, referring to the region of Ecuador where drilling occurred. “The issue here is not what happened in the Oriente more than twenty years ago and who, if anyone, now is responsible for any wrongs then done. It instead is whether a court decision was procured by corrupt means, regardless of whether the cause was just.”

During the trial, Chevron was represented in the courtroom by 10 lawyers, including seven partners, from Gibson Dunn & Crutcher LLP. Donziger’s team included a group of volunteers and trial lawyers Zoe Littlepage and Richard Friedman, who told Kaplan they were working for discounted fees.

Appellate lawyer Deepak Gupta joined Donziger’s team after the trial concluded. The decision “should be extremely troubling for anybody who cares about the rule of law,” Gupta said in a statement today.

“This court has taken the extraordinary and unprecedented step of appointing itself a worldwide fact-finding commission,” issuing “what is in effect a global anti-collection injunction,” Gupta said.

Financing Firms

Chevron sought to show that its adversaries weren’t lacking in resources, eliciting testimony that they received more than $30 million from sources such as a Pennsylvania trial lawyer, an Internet gambling entrepreneur who was friends with Donziger, and specialty financing firms.

One of the investment firms, Burford Capital Ltd., backed out of a commitment to fund the litigation after learning about fraudulent activities by Donziger, Chevron alleged.

Some celebrities supported the campaign against Chevron, including Trudie Styler, who founded the Rainforest Foundation with her husband, musician Sting, and helped to start a project to make clean water available to forest inhabitants in Ecuador. Styler attended some of the New York court proceedings, bringing her husband to watch Donziger testify.

Public Support

Actress Mia Farrow and actor Danny Glover also voiced support for the campaign, and the case was featured in a documentary, “Crude,” by filmmaker Joe Berlinger. Chevron won access to hundreds of hours of outtakes from the film, which it contended showed Donziger acting inappropriately.

The company said in a Jan. 21 brief filed with the Manhattan court that it spent more than $10 million gathering evidence to build the racketeering case against Donziger.

Donziger, a Harvard Law School graduate, joined the case in a junior role in the late 1990s and gradually rose to a position as a strategist and fundraiser. He contends that Ecuador-based lawyers are now in charge of the case.

Kaplan called the case’s background “extraordinary” and said tactics used by the Ecuadorean plaintiffs “include things that normally come only out of Hollywood -- coded e-mails among Donziger and his colleagues describing their private interactions with and machinations directed at judges and a court-appointed expert.”

Secret Account

The defendants made surreptitious payments to an expert from a secret bank account, a judge who was so inexperienced he used an 18-year old typist to do legal research for his ruling on the Internet in three languages he didn’t speak and a lawyer who invited a film crew to their private strategy meetings, Kaplan said in his ruling.

Kaplan credited Donziger’s initial motives for getting involved in the case, saying he sought “to do well for himself while doing good for others.” However the tactics resulted in a “corrupted” Lago Agrio case,’’ he said.

Providing useful resources, articles and writings on crude oil, other petroleum products, energy and gas. By O'Niel Petroserve Nigeria Ltd, online.

Pioneer Natural Resources to triple shale drilling, double output

Pioneer Natural Resources is tripling drilling in shale fields as international energy explorers five times its size recoil from losses on the U.S. oil renaissance.

Pioneer is expanding its fleet of drilling rigs in the northern part of Texas’ Spraberry field to 16 from five this quarter after striking reservoirs so rich that some wells are expected to pump as much as 1 MMbbl of crude during their lifespans. Pioneer’s wildcatting bucks the trend among bigger explorers including Royal Dutch Shell Plc that are writing down U.S. shale assets and shrinking their footprints after drilling money-losing wells.

Pioneer plans to double crude and natural gas output by the end of 2018 by exploiting deep layers of shale beneath a Texas oilfield that has been in production for more than six decades. Pioneer amassed those assets in the 1990s from international companies that didn’t foresee the shale-drilling revolution and were fleeing what they regarded as a withering oil province in favor of the Gulf of Mexico and Africa.

“The technology changed,” Timothy Dove, Pioneer’s president and COO, said in a telephone interview on March 7. “What we’re doing is going back into a large, already-discovered oilfield.”

Pioneer has risen 6.5% this year after surging 73% in 2013 as production climbed to an eight-year high and Texas crude prices averaged above $90 a barrel.

International explorers who were late to the land rush for U.S. shale fields during the past decade haven’t been able to mimic Pioneer’s success.

For Shell, the world’s second-largest oil producer by market value, the dwindling value of its U.S. shale prospects contributed to a $2.7 billion writedown of its oil and gas portfolio announced in January.

The Hague-based company said it would scale back drilling in those fields because of disappointing results. Shell’s global output dropped 1.9% last year to the lowest since 2009, according to data compiled by Bloomberg.

BP Plc announced a restructuring of its onshore U.S. business last week to improve results. That was after the London-based company’s global, full-year 2013 production tumbled 32% to the smallest in at least 15 years.

Energy companies also are contending with soaring costs for everything from rig crews to the sand used in mixtures that fracture oil-soaked rocks deep underground, industry executives including Chevron Corp. Chairman and CEO John Watson said during the IHS CERAWeek conference in Houston last week.

Escalating costs are creating a “squeeze” on the biggest oil producers that is eroding profitability, Watson said.

Pioneer’s lack of exposure to the costliest and riskiest international projects, such as LNG complexes and ultra-deepwater oil platforms, shields it from some of the pressures impacting larger peers. Pioneer’s cost to extract the equivalent of a barrel of crude declined 4.8% during the final three months of 2013 to $13.36.

Pioneer is spending about $8 million a well to drill sideways through the Spraberry field, Dove said. Some of those wells probably will gush 1 MMbbl or more before they peter out decades from now, according to a presentation published on the Irving, Texas-based company’s website on March 7.

Those wells cost four times as much as traditional, $2 million vertical wells that typically yield 140,000 to 170,000 bbl over their lifetimes, Dove said. The higher costs and risks of drilling horizontally are justified because the return on each dollar invested is so much greater, he said.

At an oil price of $95 a barrel, an $8 million, million-barrel well would yield an average of $11.88 for each $1 of initial investment, based on Bloomberg calculations. That’s 61% above the $7.36 earned per dollar spent at the midpoint production estimate for the $2 million vertical well.

Pioneer plans to drill 250 horizontal wells in the Spraberry and other nearby fields in the Permian basin that straddles the Texas-New Mexico border, Dove said. That’s in addition to 200 vertical wells planned for the area in 2013.

Pioneer is selling fields in Alaska and the Barnett shale in north Texas after quitting African exploration in 2011 and 2012 to focus on its most-promising domestic prospects.

In its 2013 annual report, Pioneer identified the Spraberry field and the Eagle Ford shale in the southern part of the state as its main growth areas. The company also produces oil, gas and byproducts such as propane in Kansas, Colorado and the Texas panhandle.

Providing useful resources, articles and writings on crude oil, other petroleum products, energy and gas. By O'Niel Petroserve Nigeria Ltd, online.

Schlumberger introduces new rotary steerable system

Schlumberger has launched the PowerDrive Orbit rotary steerable system (RSS). The new RSS expands the operating envelope of rotary steerable technology by extending system life, delivering precise directional control, and increasing drilling efficiency.

The newly designed pad actuation system, combined with real-time, three-axis shock-and-vibration measurements, allows the new RSS to withstand difficult drilling conditions, and operate at higher rotational speeds than conventional systems. The multi-axis continuous inclination and azimuthal gamma ray capabilities reduce the uncertainty of well positioning, and enable self-steering, to deliver a smoother wellbore.

The PowerDrive Orbit RSS was field tested in more than 500 runs over two years in challenging onshore and offshore drilling conditions, in regions that included the Middle East, onshore U.S., U.S. Gulf of Mexico, Colombia, Mexico, China, Venezuela and the North Sea.

Providing useful resources, articles and writings on crude oil, other petroleum products, energy and gas. By O'Niel Petroserve Nigeria Ltd, online.

News from IHS CERAWeek 2014: BHP sees world lagging U.S. in shale for foreseeable future

BHP Billiton expects the U.S. to maintain its lead in shale development for some time. “The shale-gas revolution is unlikely to go global quickly,” CEO Andrew Mackenzie said at the IHS CERAWeek energy conference in Houston. “We are unlikely to see gas replace coal globally at the scale and pace seen here in the U.S.”

Hydraulic fracturing and horizontal drilling have unlocked shale deposits of oil across the U.S., and drilling efficiency has helped boost rig yields to record volumes from the Permian to the Bakken play. The U.S. met 86% of its energy needs in the first 11 months of 2013, the highest level since 1986, data from the Energy Information Administration show.

Too many unknown factors make it “impossible to forecast” when the rest of the world will catch up to shale development in the U.S., Mackenzie said in an interview after his presentation.

“You don’t have anything like the complex gathering and distribution systems” in the U.S, he said. “It’s kind of tough to think how you could transport that to a part of the world which has not had a gas industry before.”

BHP holds more than 1.5 million acres in the Eagle Ford Shale and the Permian Basin of Texas, the Haynesville Shale of Louisiana and the Fayetteville Shale of Arkansas, according to a Dec. 10 presentation.

The U.S. holds the world’s second-largest amount of recoverable shale oil and the fourth-largest of shale gas, according to the EIA.

Providing useful resources, articles and writings on crude oil, other petroleum products, energy and gas. By O'Niel Petroserve Nigeria Ltd, online.

Rice University lab’s device evaluates fluid movement in fracturing operations

A tabletop device invented at Rice University can tell how efficiently a nanoparticle would travel through a well, and may provide a wealth of information for oil and gas producers. The device gathers data on how tracers - microscopic particles that can be pumped into and recovered from wells - move through deep rock formations that have been opened by hydraulic fracturing.

Drilling companies use fracturing to pump oil and gas from previously unreachable reservoirs. Fluids are pumped into a wellbore under high pressure to fracture rocks, and materials called “proppants,” like sand or ceramic, hold the fractures open. "They' re basically making a crack in the rock and filling it with little beads," said Rice chemist Andrew Barron, whose lab produced the device detailed in the Royal Society of Chemistry journal Environmental Science Processes and Impacts.

But the companies struggle to know which insertion wells - where fluids are pumped in - are connected to the production wells, where oil and gas are pumped out. "They may be pumping down three wells and producing from six, but they have very little idea of which well is connected to which," he said.

Tracer or sensor particles added to fracturing fluids help solve that problem, but there' s plenty of room for optimization, especially in minimizing the volume of nanoparticles used now, he said. "Ideally, we would take a very small amount of a particle that does not interact with proppant, rock or the gunk that' s been pumped downhole, inject it in one well and collect it at the production well. The time it takes to go from one to the other will tell you about the connectivity underground."

Barron explained the proppant itself accounts for most of the surface area the nanoparticles encounter, so it' s important to tune the tracers to the type of proppant used.

He said the industry lacks a uniform method to test and optimize custom-designed nanoparticles for particular formations and fluids. The ultimate goal is to optimize the particles, so they don' t clump together or stick to the rock or proppant, and can be reliably identified when they exit the production well.

The automated device by Barron, Rice alumnus Samuel Maguire-Boyle and their colleagues allows them to run nanotracers through a small model of a geological formation, and quickly analyze what comes out the other side.

The device sends a tiny amount of silver nanoparticle tracers in rapid pulses through a solid column, simulating the much longer path the particles would travel in a well. That gives the researchers an accurate look at both how sticky and how robust the particles are.

"We chose silver nanoparticles for their plasmon resonance,” said Barron. “They' re very easy to see (with a spectroscope) making for high-quality data.” He said silver nanoparticles would be impractical in a real well, but because they' re easy to modify with other useful chemicals, they are good models for custom nanoparticles.

"The process is simple enough that our undergraduates make different nanoparticles and very quickly test them to find out how they behave," Barron said.

The method also shows promise for tracking water from source to destination, which could be valuable for government agencies that want to understand how aquifers are linked or want to trace the flow of elements like pollutants in a water supply, he said.

Barron said the Rice lab won' t oversee production of the test rig, but it doesn' t have to. "We just published the paper, but if companies want to make their own, it includes the instructions. The supplementary material is basically a manual for how to do this," he said.

Co-authors of the paper include Rice undergraduates David Garner, Jessica Heimann and Lucy Gao, and graduate alumnus Alvin Orbaek.

The Robert A. Welch Foundation supported the research.

Providing useful resources, articles and writings on crude oil, other petroleum products, energy and gas. By O'Niel Petroserve Nigeria Ltd, online.