Week in Oil & Gas: Punting in Copenhagen and Gulf of Mexico Leases -- Abridged

The odds Congress would be able to pass climate-change legislation this year dimmed by the minute last week, as the political wrangling moved to the Senate Finance Committee and the debate focused once again on jobs and the economy.

The bill’s molasses-like progress through the Senate has rippled through the international community and has effectively crushed chances of reaching a global climate change agreement in time for the summit scheduled next month in Copenhagen.

At least, that was the official word coming from world leaders this weekend.

Instead, leaders including President Obama and Denmark Prime Minister Lars Lokke Rasmussen — who also is chairman of the climate summit  — agreed to downgrade the mission of the Copenhagen conference.

So, next month when the world’s leaders descend on Copenhagen, they will strive for a “politically binding” agreement, not the binding treaty on global warming they had intended on. A second summit aimed at reaching a fully binding legal agreement could be scheduled in the future.

Congress’ inability to pass climate-change legislation that would set a cap on greenhouse gas emissions has been viewed as one of the biggest hurdles to negotiations in the lead up to Copenhagen.

That’s not to say, a U.S. climate bill won’t be passed. Pressure from other countries, energy companies and organizations to pass climate legislation is mounting. But the timeline is narrowing and it looks like its best chances will be sometime after the New Year and before April.

Even the Paris-based International Energy Agency spoke assertively in its 2009 World Energy Outlook about the need to limit the concentration of carbon in the atmosphere.  The annual report released last week provides some insight into the world’s energy resources as well as projections on just how quickly we are consuming them.

The IEA received plenty of unwelcome coverage as well this year, after former staffers said the agency has been lying about energy reserves for years — an item fellow BNET Energy blogger Chris Morrison dug into last week.

The report itself garnered plenty of attention for what it said about energy demand, oil and gas production and its view on reducing greenhouse gas emissions.

Demand is projected to rise 40 percent from 2007 levels by 2030, with the vast majority of it coming from developing nations like China and India. Meeting the IEA’s projected energy demand will cost $26 trillion.

The IEA — stressing the need to get off the fossil fuel train — pushed for countries to take up energy efficiency efforts, produce renewable energy, nuclear energy and biofuels, improve fuel economy in cars and develop carbon capture and storage to clean up coal.

The IEA also spent considerable time talking about unconventional natural gas production in the U.S. In short, it’s an international game-changer that will create a global gas glut, the IEA says.

Speaking of U.S. oil and gas production, the Department of Interior Secretary Ken Salazar announced last week a lease sale for the central Gulf of Mexico Outer Continental Shelf.

The good news for industry folks? The lease sale will offer about 36 million acres and could produce up to 1.3 billion barrels of oil and 5.4 trillion cubic feet of natural gas.

The bad news? The leases have been shortened. Now oil and gas producers would have five years — not eight — to explore wells in blocks between 400 and 800 meters deep. Leases for blocks between 800 and 1,600 meters deep would go from 10-term to seven-year terms.

All of this had American Petroleum Institute President Jack Gerard rather steamed and in a statement said the action was “one more impediment to the development of the domestic oil and natural gas necessary for the American economy to prosper.”

So how is domestic production?

Oil-field service company Baker Hughes’ weekly rig count report provided a bit of good news. The number of oil and gas rigs in the U.S. inched up to 1,101, or 2.1 percent, from the previous week.

Much of the increase came from oil rigs, which increased 29 to 361 from the previous week. Meanwhile, gas rig numbers dropped by six to 728 as producers continue to cut back due to falling prices.