Oil prices...

[pilferk]

Oil hits record, then reverses

Barrel price wavers as production, options cause stir

By JOHN WILEN | The Associated Press ? Published June 17, 2008

So far, today, it's fallen another buck or two...so far.

We'll see if that trend continues.

Again, I think the volitility of the market might be a sign we've expanded the bubble enough, for now, and might see a small "burst".   I HOPE we see prices closer to $100 a barrel coming up, maybe less than that.  But I suspect that the oil man in the white house, the oil companies, and the speculators will likely do something (wittingly or unwittingly) that keeps the prices floating high.

[AxlsMainMan]

But I suspect that the oil man in the white house, the oil companies, and the speculators will likely do something (wittingly or unwittingly) that keeps the prices floating high.

As long as the war continues to rage in Iraq, the dollar will likely only get weaker, and the price of oil will only get higher.

Hello "100 year war"

[AxlsMainMan]

Oil prices soften on US inventory report

5 hours ago

LONDON (AFP) ? Oil prices softened Wednesday on news that US stockpiles had declined last week roughly in line with expectations and as the market mulled a possible output hike by OPEC kingpin Saudi Arabia.

New York's main oil futures contract, light sweet crude for July delivery, fell 1.51 dollars 132.50 dollars per barrel in late afternoon European trading.

The contract had struck a record high point 139.89 dollars on Monday as the market was gripped by supply jitters and the weak dollar, despite news that Saudi Arabia could lift production to help dampen prices.

Brent North Sea crude for August delivery gave up 89 cents at 132.83 dollars after reaching an all-time high of 139.32 dollars on Monday.

The weekly report from the US Energy Information Administration revealed that crude reserves had fallen by 1.2 million barrels to 301 million barrels for the week ending June 13.

Analysts had foreseen a bigger decline of 1.7 million barrels but the difference was not deemed overly significant and the fall sparked another bout of profit-taking after Monday's records.

Stocks of gasoline (petrol) were down 1.2 million barrels, compared with forecasts of an increase of 850,000 barrels, while distillates rose 2.6 million barrels, against predictions of an increase of 1.8 million barrels.

US President George W. Bush on Wednesday urged Congress to lift a decades-old ban on offshore oil drilling to reduce dependence on foreign imports and offset sky-high energy prices.

Calling the ban "outdated and counterproductive," Bush asked the Democratic-controlled Congress to take action to expand access to the nation's Outer Continental Shelf.

Bush chastised Congress for blocking his Republican administration's efforts to boost domestic oil production and called on lawmakers to increase access to the Outer Continental Shelf, citing experts who say access the OCS could produce about 18 billion barrels of oil.

Under the 1981 federal moratorium, states are prohibited from allowing offshore oil and gas drilling and exploration, protecting virtually the entire Atlantic and Pacific coastlines and sections of the Gulf of Mexico.

Critics of lifting the drilling moratorium say it would jeopardize the environment and that production would take years to get up and running, and thus is not a realistic answer to the current supply crunch.

On Tuesday, crude futures had retreated from record heights amid profit taking ahead of Saudi Arabia's expected output increase.

Over the weekend, UN Secretary General Ban Ki-Moon announced that Saudi Arabia had told him it would increase output by 200,000 barrels a day in July.

The UN chief's remarks came ahead of a meeting to be hosted by Saudi Arabia in Jeddah this Sunday, when major oil producers and consumers will discuss skyrocketing oil prices that are weighing on global economic growth.

Analysts have expressed doubt about whether the mooted Saudi output hike would lower oil prices in the long-term amid fierce demand from Asian powerhouse economies China and India.

Global finance officials fear that soaring crude oil prices pose a threat to world economic growth as higher inflation leads central banks to raise interest rates.

http://afp.google.com/article/ALeqM5iOsZyMxiFpCnjpZEh8rgE3DMH6BQ

[AxlsMainMan]

$138.6/L here in Napanee, Ontario..

That's up 10 cents from yesterday!

[Dr. Blutarsky]

Bush urges Congress to lift offshore drilling ban

By H. JOSEF HEBERT, Associated Press Writer 28 minutes ago

WASHINGTON - With gasoline topping $4 a gallon, President Bush urged Congress on Wednesday to lift its long-standing ban on offshore oil and gas drilling, saying the United States needs to increase its energy production. Democrats quickly rejected the idea.

"There is no excuse for delay," the president said in a statement in the Rose Garden. With the presidential election just months away, Bush made a pointed attack on Democrats, accusing them of obstructing his energy proposals and blaming them for high gasoline costs. His proposal echoed a call by Republican presidential candidate John McCain to open the Continental Shelf for exploration

"Families across the country are looking to Washington for a response," Bush said.

Congressional Democrats were quick to reject the push for lifting the drilling moratorium, saying oil companies already have 68 million acres offshore waters under lease that are not being developed.

House Speaker Nancy Pelosi called Bush's proposals "another page from (an)... energy policy that was literally written by the oil industry ? give away more public resources."

Sen. Barack Obama, the Democrats' presumptive presidential nominee, rejected lifting the drilling moratorium that has been supported by a succession of presidents for nearly two decades.

"This is not something that's going to give consumers short-term relief and it is not a long-term solution to our problems with fossil fuels generally and oil in particular," said Obama. Senate Majority Leader Harry Reid, lumping Bush with McCain, accused them of staging a "cynical campaign ploy" that won't help lower energy prices.

"Despite what President Bush, John McCain and their friends in the oil industry claim, we cannot drill our way out of this problem," Reid said. "The math is simple: America has just three percent of the world's oil reserves, but Americans use a quarter of its oil."

White House spokesman Tony Fratto retorted: "Anyone out there saying that something can be done overnight, or in a matter of months, to deal with high gasoline prices is trying to fool people. There is no tool in the toolbox out there that will lower gas prices overnight, or in weeks, or probably not even in months."

Bush said offshore drilling could yield up to 18 billion barrels of oil over time, although it would take years for production to start. Bush also said offshore drilling would take pressure off prices over time.

There are two prohibitions on offshore drilling, one imposed by Congress and another by executive order signed by Bush's father in 1990. Bush's brother, Jeb, fiercely opposed offshore drilling when he was governor of Florida. What the president now proposes would rescind his father's decision ? but the president took the position that Congress has to act first and then he would follow behind.

Asked why Bush doesn't act first and lift the ban, Keith Hennessey, the director of the president's economic council, said: "He thinks that probably the most productive way to work with this Congress is to try to do it in tandem."

Before Bush spoke, the House Appropriations Committee postponed a vote it had scheduled for Wednesday on legislation doing the opposite of what the president asked ? extending Congress' ban on offshore drilling. Lawmakers said they wanted to focus on a disaster relief bill for the battered Midwest.

Bush also proposed opening the Arctic National Wildlife Refuge for drilling, lifting restrictions on oil shale leasing in the Green River Basin of Colorado, Utah and Wyoming and easing the regulatory process to expand oil refining capacity.

With Americans deeply pessimistic about the economy, Bush tried to put on the onus on Congress. He acknowledged that his new proposals would take years to have a full effect, hardly the type of news that will help drivers at the gas stations now. The White House says no quick fix exists.

Still, Bush said Congress was obstructing progress ? and directly contributing to consumers' pain at the pump.

"I know the Democratic leaders have opposed some of these policies in the past," Bush said. "Now that their opposition has helped drive gas prices to record levels, I ask them to reconsider their positions."

Bush said that if congressional leaders head home for their July 4 recess without taking action, they will need to explain why "$4 a gallon gasoline is not enough incentive for them to act. And Americans will rightly ask how high gas prices have to rise before the Democratic-controlled Congress will do something about it."

Bush said restrictions on offshore drilling have become "outdated and counterproductive."

In a nod to the environmental arguments against drilling, Bush said technology has come a long way. These days, he said, oil exploration off the coastline can be done in a way that "is out of sight, protects coral reefs and habitats, and protects against oil spills."

Congressional Democrats, joined by some GOP lawmakers from coastal states, have opposed lifting the prohibition that has barred energy companies from waters along both the East and West coasts and in the eastern Gulf of Mexico for 27 years.

On Monday, McCain made lifting the federal ban on offshore oil and gas development a key part of his energy plan. McCain said states should be allowed to pursue energy exploration in waters near their coasts and get some of the royalty revenue.

Obama retorted that the Arizona senator had flip-flopped on that issue.


http://news.yahoo.com/s/ap/20080618/ap_on_go_pr_wh/offshore_oil

[SLCPUNK]

More drilling isn't going to solve our enormous demand problem.

[TAP]

More drilling isn't going to solve our enormous demand problem.

Call me polluxm, but it sure feels like we've been manipulated into the off-shore drilling agenda by those with a vested interest. I see certain GOPers are still pushing the
'Chinese are drilling 50 miles off Florida' myth too.

[SLCPUNK]

It's a political game before the election and nothing more than a stop gap measure at best.

In order to deal realistically with current and future energy needs the focus/money needs to be put into alternatives.

[Dr. Blutarsky]

More domestic drilling won't solve our problem completely, but it is a part of a solution which will lessen our dependence on foregn oil along with alternative energy sources ( hydrogen vehicles, flex fuel, etc).

Sitting on our hands won't accomplish anything, which is what we have been doing.

[TAP]

More domestic drilling won't solve our problem completely, but it is a part of a solution which will lessen our dependence on foregn oil along with alternative energy sources ( hydrogen vehicles, flex fuel, etc).

Can we guarantee that the oil goes to domestic markets? It's not going to be drilled by the US governments, why won't the oil companies just take that oil and throw it onto the world market?

[SLCPUNK]

More domestic drilling won't solve our problem completely, but it is a part of a solution which will lessen our dependence on foregn oil...

It will, but not enough to make a difference.

Once we got ANWR up and running for instance, it would eliminate maybe 4 percent of our foreign dependency according to the Energy Information Administration.

Sitting on our hands won't accomplish anything, which is what we have been doing.

That's what your two oil men did with their republican congress for the first six years, you're right.

And now look where we are.

[Doc Emmett Brown]

More domestic drilling won't solve our problem completely, but it is a part of a solution which will lessen our dependence on foregn oil...

It will, but not enough to make a difference.

Once we got ANWR up and running for instance, it would eliminate maybe 4 percent of our foreign dependency according to the Energy Information Administration.

and that percent is on the downward spiral too...

This is a good article about Conoco, an American oil company drilling in Alaska: http://money.cnn.com/2008/05/01/news/companies/hunt_for_oil.fortune/

A little excerpt from it:
The fields that since the late 1970s have provided more than 20% of America's oil are slowly running dry. It's a phenomenon that is hardly limited to Alaska. The world's five largest oil companies are replacing only 82% of the oil they pump each year, as once-prodigious fields fade and state entities in such countries as Venezuela and Russia consolidate ever more control over their oil and gas.

We really need to step up R&D into alternative energy sources, pronto!

[Doc Emmett Brown]

More domestic drilling won't solve our problem completely, but it is a part of a solution which will lessen our dependence on foregn oil along with alternative energy sources ( hydrogen vehicles, flex fuel, etc).

Can we guarantee that the oil goes to domestic markets? It's not going to be drilled by the US governments, why won't the oil companies just take that oil and throw it onto the world market?

I believe it is not guaranteed.  According to this except from the article above:

...He spent a recent summer on an exploration ship shooting seismic in its icy shoals. What did he find? Conoco won't say. Neither will Royal Dutch Shell (RDS.A), which teamed up with Conoco on the project. So loath were they to reveal the information after it was first gathered that they assigned two pistol-toting guards to accompany the briefcase full of data back to Anchorage. This much we do know: Conoco and Shell agreed to pay a combined $2.6 billion for the right to drill in the Chukchi. Is that a measure of the field's potential - or of the oil companies' desperation?

Once a company (American or otherwise) has paid for the right to drill, it is now their oil and can sell to whomever they please.  So yes, a lot of it might end up in China.

[TAP]

http://www.eia.doe.gov/oiaf/aeo/otheranalysis/ongr.html

The OCS is estimated to contain substantial resources of crude oil and natural gas; however, some areas of the OCS are subject to drilling restrictions. With energy prices rising over the past several years, there has been increased interest in the development of more domestic oil and natural gas supply, including OCS resources. In the past, Federal efforts to encourage exploration and development activities in the deep waters of the OCS have been limited primarily to regulations that would reduce royalty payments by lease holders. More recently, the States of Alaska and Virginia have asked the Federal Government to consider leasing in areas off their coastlines that are off limits as a result of actions by the President or Congress. In response, the Minerals Management Service (MMS) of the U.S. Department of the Interior has included in its proposed 5-year leasing plan for 2007-2012 sales of one lease in the Mid-Atlantic area off the coastline of Virginia and two leases in the North Aleutian Basin area of Alaska. Development in both areas still would require lifting of the current ban on drilling.

For AEO2007, an OCS access case was prepared to examine the potential impacts of the lifting of Federal restrictions on access to the OCS in the Pacific, the Atlantic, and the eastern Gulf of Mexico. Currently, except for a relatively small tract in the eastern Gulf, resources in those areas are legally off limits to exploration and development. Mean estimates from the MMS indicate that technically recoverable resources currently off limits in the lower 48 OCS total 18 billion barrels of crude oil and 77 trillion cubic feet of natural gas (Table 10).

Although existing moratoria on leasing in the OCS will expire in 2012, the AEO2007 reference case assumes that they will be reinstated, as they have in the past. Current restrictions are therefore assumed to prevail for the remainder of the projection period, with no exploration or development allowed in areas currently unavailable to leasing. The OCS access case assumes that the current moratoria will not be reinstated, and that exploration and development of resources in those areas will begin in 2012.

Assumptions about exploration, development, and production of economical fields (drilling schedules, costs, platform selection, reserves-to-production ratios, etc.) in the OCS access case are based on data for fields in the western Gulf of Mexico that are of similar water depth and size. Exploration and development on the OCS in the Pacific, the Atlantic, and the eastern Gulf are assumed to proceed at rates similar to those seen in the early development of the Gulf region. In addition, it is assumed that local infrastructure issues and other potential non-Federal impediments will be resolved after Federal access restrictions have been lifted. With these assumptions, technically recoverable undiscovered resources in the lower 48 OCS increase to 59 billion barrels of oil and 288 trillion cubic feet of natural gas, as compared with the reference case levels of 41 billion barrels and 210 trillion cubic feet.

The projections in the OCS access case indicate that access to the Pacific, Atlantic, and eastern Gulf regions would not have a significant impact on domestic crude oil and natural gas production or prices before 2030. Leasing would begin no sooner than 2012, and production would not be expected to start before 2017. Total domestic production of crude oil from 2012 through 2030 in the OCS access case is projected to be 1.6 percent higher than in the reference case, and 3 percent higher in 2030 alone, at 5.6 million barrels per day. For the lower 48 OCS, annual crude oil production in 2030 is projected to be 7 percent higher?2.4 million barrels per day in the OCS access case compared with 2.2 million barrels per day in the reference case (Figure 20). Because oil prices are determined on the international market, however, any impact on average wellhead prices is expected to be insignificant.

Similarly, lower 48 natural gas production is not projected to increase substantially by 2030 as a result of increased access to the OCS. Cumulatively, lower 48 natural gas production from 2012 through 2030 is projected to be 1.8 percent higher in the OCS access case than in the reference case. Production levels in the OCS access case are projected at 19.0 trillion cubic feet in 2030, a 3-percent increase over the reference case projection of 18.4 trillion cubic feet. However, natural gas production from the lower 48 offshore in 2030 is projected to be 18 percent (590 billion cubic feet) higher in the OCS access case (Figure 21). In 2030, the OCS access case projects a decrease of $0.13 in the average wellhead price of natural gas (2005 dollars per thousand cubic feet), a decrease of 250 billion cubic feet in imports of liquefied natural gas, and an increase of 360 billion cubic feet in natural gas consumption relative to the reference case projections. In addition, despite the increase in production from previously restricted areas after 2012, total natural gas production from the lower 48 OCS is projected generally to decline after 2020.

Although a significant volume of undiscovered, technically recoverable oil and natural gas resources is added in the OCS access case, conversion of those resources to production would require both time and money. In addition, the average field size in the Pacific and Atlantic regions tends to be smaller than the average in the Gulf of Mexico, implying that a significant portion of the additional resource would not be economically attractive to develop at the reference case prices.

[russkwtx]

As the biggest consumer of oil in the world (by far), the US needs a crash program in renewable energies and get those to market as soon as possible. We are an affluent society and can do it, but it takes political will and leadership, not partisan politics. At the same time, the structure of American society (built around autos, trucking,  distance travel and suburbs) has to evolve and change, as do the behaviors of Americans. The price of gas will bring about behavioral changes, probably short-term, in driving and vehicle purchases. But more fundamentally, the structure of society and how we live have to change--those aspects were predicated on access to cheap and reliable energy sources, which is no longer true. We face daunting tasks in the future as we remake our society, but the end result will be a better society and one that is more secure and healthier (if Washington does not screw it up).

[Dr. Blutarsky]

More domestic drilling won't solve our problem completely, but it is a part of a solution which will lessen our dependence on foregn oil...

It will, but not enough to make a difference.

Once we got ANWR up and running for instance, it would eliminate maybe 4 percent of our foreign dependency according to the Energy Information Administration.

Sitting on our hands won't accomplish anything, which is what we have been doing.

That's what your two oil men did with their republican congress for the first six years, you're right.

And now look where we are.

You act as if I'm close friends with them 

Bush / Cheney did not do shit. Congress did not do shit. President Clinton in the /90's did not do shit.  No one did a damn thing about it.

[TAP]

I don't know about anyone else, but I'm shocked..... 

http://www.nytimes.com/2008/06/19/world/middleeast/19iraq.html

Four Western oil companies are in the final stages of negotiations this month on contracts that will return them to Iraq, 36 years after losing their oil concession to nationalization as Saddam Hussein rose to power.

Exxon Mobil, Shell, Total and BP ? the original partners in the Iraq Petroleum Company ? along with Chevron and a number of smaller oil companies, are in talks with Iraq?s Oil Ministry for no-bid contracts to service Iraq?s largest fields, according to ministry officials, oil company officials and an American diplomat. ...

The no-bid contracts are unusual for the industry, and the offers prevailed over others by more than 40 companies, including companies in Russia, China and India. The contracts, which would run for one to two years and are relatively small by industry standards, would nonetheless give the companies an advantage in bidding on future contracts in a country that many experts consider to be the best hope for a large-scale increase in oil production.

There was suspicion among many in the Arab world and among parts of the American public that the United States had gone to war in Iraq precisely to secure the oil wealth these contracts seek to extract. The Bush administration has said that the war was necessary to combat terrorism. It is not clear what role the United States played in awarding the contracts; there are still American advisers to Iraq?s Oil Ministry.

[Dr. Blutarsky]

This should raise oil prices even more since we get so much oil from Nigeria... maybe not, see article below this one 


Shell Shuts Down Nigerian Oil Field After Attack

Thursday, June 19, 2008


 AP

An undated file photo shows an offshore oil platform owned by Shell oil company in the Niger Delta, Nigeria.

LAGOS, Nigeria ?  Royal Dutch Shell said it shut down production at an offshore oil installation that produces about 200,000 barrels per day after the most powerful militant group in Nigeria said it launched an attack there Thursday.

A leader of the Movement for the Emancipation of the Niger Delta told The Associated Press that militants attacked the Bonga oil field more than 65 miles from land. But the fighters weren't able to enter a computer control room, which they had hoped to destroy.

The militant leader spoke on condition of anonymity to avoid punishment by authorities.

Olav Ljosne, a spokesman for Royal Dutch Shell, confirmed an attack, but gave no details. He said production had been stopped from the field.

The militants also said they kidnapped a foreign worker from a supply vessel they met while returning home from the attack, but there was no immediate confirmation of that.

Attacks against offshore facilities are exceedingly rare. Oil industry officials consider their operations on the high seas much safer than those in the creeks and swamps of Nigeria's southern Niger Delta, where most of the attacks during two years of increased violence have taken place.

Militant attacks on oil infrastructure have trimmed about a quarter of total oil production in Nigeria, which is Africa's biggest producer and a member of OPEC.

The turmoil in Nigeria's south has helped send oil prices to historical heights, giving the militants more leverage in their drive to force the federal government to send more oil industry proceeds to their areas.

Despite being the home of almost all of Nigeria's petroleum reserves, the country's south is as desperately poor as the rest of the country, which is Africa's most populous with 140 million people.

But criminality and militancy are closely linked, with many of the militant groups accused of stealing crude oil from wells and pipelines for sale in overseas market and helping politicians rig elections.

http://www.foxnews.com/story/0,2933,368923,00.html

[Dr. Blutarsky]

More from the Blutarsky News Agency 

Oil drops as China says it will raise fuel prices
Thursday June 19, 10:53 am ET
By John Wilen, AP Business Writer
Oil prices drop after China says it will raise fuel prices, which could dampen demand

NEW YORK (AP) -- Oil prices dropped Thursday after China said it will raise fuel prices, a move that could dampen the booming Asian nation's oil consumption. Retail gas prices slid overnight.

Light, sweet crude for July delivery fell $2.10 to $134.58 a barrel on the New York Mercantile Exchange, but dipped more than $3 at times.

China disclosed that it will raise the prices of gasoline, diesel, aviation kerosene and electricity. It was not immediately clear if those price hikes would be implemented by lowering fuel subsidies.

Growing Chinese demand for oil has underpinned the multiyear rally in oil prices. But higher prices could crimp that demand. Concerns about spiking Chinese demand for diesel due to cleanup operations in the aftermath of last month's earthquake contributed to oil's run-up in recent weeks.

"This could change the psychology of the market completely," said James Cordier, president of Tampa, Fla.-based trading firms Liberty Trading Group and OptionSellers.com.

Lower demand in China "would be a major factor in driving prices down," said Phil Flynn, an analyst at Alaron Trading Corp. in Chicago.

Also pressuring prices Thursday were the dollar's gains against the euro. Investors who buy commodities such as oil as a hedge against inflation when the dollar falls tend to sell when the greenback gains ground. Also, a stronger dollar makes oil more expensive to overseas investors.

Price declines were limited Thursday by news of an attack on a Nigerian oil field. A leader of the Movement for the Emancipation of the Niger Delta told The Associated Press that militant fighters traveled in boats through heavy seas to attack the Bonga oil field more than 65 miles from land. But they were not able to enter a computer control room that they had hoped to destroy.

A Royal Dutch Shell spokesman confirmed an attack, but gave no details. He said production had been stopped from the field, which normally produces about 200,000 barrels of crude per day.

The news added to concerns about the threat of a strike by Nigerian white-collar oil workers. Crude futures climbed more than $2 a barrel on Wednesday on reports that Nigerian oil workers were about to strike after talks between U.S. energy giant Chevron Corp. and the country's white-collar oil industry workers had broken down. A later news report said the walkout had been avoided.

At the pump, meanwhile, gas prices slipped 0.2 cent overnight to a national average of $4.073 a gallon, according to a survey of stations by AAA and the Oil Price Information Service. Gas prices have followed oil futures higher this year. But with oil prices stalled in a rough range between $132 and $139, gas prices appear to have topped out, for now.

In other Nymex trading, July gasoline futures fell 6.58 cents to $3.4009 a gallon, and July heating oil futures fell 7.28 cents to $3.7872 a gallon. July natural gas futures fell 7.6 cents to $13.134 per 1,000 cubic feet. The Energy Department said natural gas inventories rose by 57 billion cubic feet last week, toward the lower end of the range of analyst estimates.

In London, August Brent crude futures fell $1.83 to $134.61 a barrel on the ICE Futures Exchange.

Associated Press writers George Jahn in Vienna, Austria, and Gillian Wong in Singapore contributed to this report.

http://biz.yahoo.com/ap/080619/oil_prices.html

[Doc Emmett Brown]

June 19, 2008
The New York Times

Dearth of Ships Delays Drilling of Offshore Oil

As President Bush calls for repealing a ban on drilling off most of the coast of the United States, a shortage of ships used for deep-water offshore drilling promises to impede any rapid turnaround in oil exploration and supply.

In recent years, this global shortage of drill-ships has created a critical bottleneck, frustrating energy company executives and constraining their ability to exploit known reserves or find new ones. Slow growth in oil supplies, at a time of soaring demand, has been a major factor in the spike of oil and gasoline prices.

Mr. Bush called on Congress Wednesday to end a longstanding federal ban on offshore drilling and open the Arctic National Wildlife Refuge for oil exploration, arguing that the steps were needed to lower gasoline prices and bolster national security. But even as oil trades at more than $135 a barrel ? up from $68 a year ago ? the world?s existing drill-ships are booked solid for the next five years. Some oil companies have been forced to postpone exploration while waiting for a drilling rig, executives and analysts said.

Demand is so high that shipbuilders, the biggest of whom are in Asia, have raised prices since last year by as much as $100 million a vessel to about half a billion dollars. 

?The crunch on rigs is everywhere,? said Alberto Guimaraes, a senior executive at Petrobras, the Brazilian oil company that has discovered some of the most promising offshore oil but has been unable to get at it.

?Almost 100 percent of the oil companies are constrained in their investment program because there is no rig available,? he said.

As a result, drilling costs for some of the newest deepwater rigs in the Gulf of Mexico ? the nation?s top source of domestic oil and natural gas supplies ? have reached about $600,000 a day, compared with $150,000 a day in 2002.

These record prices have spurred a new wave of drill-ship construction. This boom could lead to renewed offshore oil exploration that would eventually bring more supplies to the oil market, and push down prices.

Already, 16 new drill-ships are scheduled to be delivered to oil companies this year ? more than double the number delivered over the last six years combined. In fact, 75 ultra-deepwater rigs should be delivered from 2008 to 2011, according to ODS-Petrodata, a firm that tracks drilling rigs.

Shipyards from South Korea to Norway are working overtime to meet a huge influx of orders.

Robert L. Long, the chief executive office of Transocean, the world?s largest drilling company, said he has nine deepwater rigs under construction, eight of which are already under contract for periods ranging from four to seven years once they leave the shipyards. He expects to receive the ships between the beginning of 2009 and the end of 2010.

Transocean believes the deepwater market will continue to be constrained until at least 2012. Over three-quarters of the drill-ships currently under construction have already been contracted to oil companies eager to benefit from triple-digit oil prices, Mr. Long said.

Petrobras, whose full name is Petr?leo Brasileiro, is expected to drive much of the growth in the booming new market. The company has outlined an aggressive program to increase its drilling capacity, and plans to contract or build 69 deepwater drill-ships by 2017.

Brazil stunned the oil world when it announced the discovery of a vast oil field 200 miles south of Rio de Janeiro last November, turning the country?s deep blue waters into the world?s most exciting oil frontier. Energy experts said the field could turn out to be just a small part of the largest oil discovery in 30 years.

But seven months later, the problem is still how to retrieve it. Petrobras has only three rigs capable of drilling in waters that exceed 6,500 feet, like the sites of the new fields.

But drilling constraints are not the only problem facing international oil companies, which are seeking to expand at a furious pace after a decade of underinvestment in the 1990s. They have also had to contend with a doubling of development costs across the industry in the last five years, more acute competition for energy resources, shortages in steel, engineering and manufacturing capacity, and pressures posed by an aging work force.

Also, gaining access to countries that hold oil reserves is becoming tougher as many oil-rich governments see fewer incentives to raise production as they reap the benefits of higher prices.

full story http://www.nytimes.com/2008/06/19/business/19drillship.html