Sept. 5, 2006
Mining Black Gold Off The Gulf Coast
Oil Companies Look For Homegrown Reserves At The Bottom Of The Sea
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Major Oil Discovery
Chevron announced it has hit oil in the Gulf of Mexico. The company says it may be the biggest find in a generation. Anthony Mason reports on what the impact at the pump might be.
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Shell's Ram-Powell is a 46-story structure floating 80 miles out in the Gulf of Mexico. (CBS)
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"If the technology can keep up with it, there's more reserves to be had there," said Marvin Odom, Shell Oil's VP for exploration and production.
Last week, Shell flew CBS News correspondent Anthony Mason and crew to the Ram-Powell, a 46-story structure floating 80 miles out in the Gulf to see the newest well the company is drilling.
The floating platform can handle 70,000 barrels of crude a day. To give you an idea of just how much that is — you could drive your car 55 million miles on that.
But there are lots of steps involved in getting from these wells to your wheels. Here's what goes into the price of a gallon of gas:
The Ram-Powell is one of the larger platforms in the Gulf. In all there are 4,000 oil structures in the waters. They supply a quarter of the country's energy — which is why every time a hurricane heads toward the Gulf, gas prices spike higher.
Shell's Mars platform was a sitting duck last year when Hurricane Katrina whipped through the Gulf.
"We knew it was the best that could be built, but we didn't know what we'd find the next day," said Frank Glaviano, one of Shell's vice presidents.
They found that the Mars' 1,000-ton drilling rig had snapped off and slammed into the platform. It used to look just like the towering rig on the Ram Powell.
"The entire drilling rig toppled," said Greg Guidry, who heads Shell's eastern Gulf operations.
The storm's winds snapped the massive bolts that hold the tower. A mammoth crane had to be brought in to hoist Mars' toppled rig back into place.
Shell officials told CBS News correspondent Bob Orr the costs from hurricanes Katrina and Rita were huge.
"It's in the hundreds of millions of dollars," Odom said of the costs.
Even with that repair bill, Shell still made a $25 billion profit last year because Katrina drove gasoline prices to record highs.
When Hurricane Ernesto threatened last week, half of Ram-Powell's workers were evacuated. Those workers are back on the platform now — but in Shell's New Orleans operations center, they're worried about another storm.
"We're already looking at the next one over here coming off Africa," engineer Larry Barfield said.
The storm is called Florence, and what we pay at the pump could literally depend on which way her winds blow.
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"Here's what goes into the price of a gallon of gas:
Getting the crude out of the ground makes up more than half the cost (53%)
Then refining (18.1%)
And distribution (9%)
And, finally, taxes (19.7%)"
(5 Sep Evening News)
What timeframe does it apply to, or alternatively what is the price of a gallon of gas that is comparable to these statistics/
Thanks.
Hap Miller
Yes, Katrina generated a $25 billion dollar profit for Shell. I wonder if the next storm will push them up to $50 billion in profit.