Oil Majors Building GoM Disaster-Response System
Earlier today, I listened to Byron King — who knows the energy sector as well as anyone — explain how US energy policy is going to chase away all of the deep sea rigs from the Gulf of Mexico. That means we ae going to be in deep trouble in the future.
King is a really sharp guy. But I was relieved to see that Exxon Mobil, Chevron, Royal Dutch Shell and ConocoPhillips are even sharper: The four majors are trying to make the case that they should be allowed to drill in the Gulf, and that they have a plan — unlike BP — to deal with future disasters:
“Four of the world’s largest oil companies are creating a strike force to stanch oil spills in the deep waters of the Gulf of Mexico in a billion-dollar bid to regain the confidence of the White House after BP PLC’s disaster . . .
The new system, consisting of several oil-collection ships and an array of subsurface containment equipment, resembles the one developed by BP during three months of trial and error after its leased rig exploded April 20, unleashing the worst offshore oil spill in U.S. history. But the companies say it will be ready to go at all times and can be used on the wide variety of equipment found in the deepwater Gulf.”
That is very good news for energy consumers. It gives a face saving resolution to everyone, let’s the White House declare victory, and lets the oil keep on flowing.
Whenever I find myself as the most bullish guy at a conference, I always look around and go “Huh?” To be blunt, the end of civilization discussions I keep hearing are no fun to listen to. Tiresome, truth be told.
Regardless, this is an excellent announcement — now let’s see if they follow through on it.
>
Source:
Oil Majors Building Disaster-Response System
ANGEL GONZALEZ
WSJ, JULY 21, 2010, 6:18 P.M.
http://online.wsj.com/article/SB10001424052748704684604575381422950478384.html
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July 21st, 2010 at 8:04 pm
Today, July 21st 2010, Matt Simmons told Bloomberg that the Gulf clean up will cost a trillion dollars.
I’ll take the under on that.
July 21st, 2010 at 8:11 pm
I’d be more impressed if the four had agreed an industry-wide strong certification program for blow off preventers and then to buy and operate only certified BoP instead of continuously cutting corners. What the hell is wrong with top management?
July 21st, 2010 at 8:24 pm
I would imagine this move has as much to do with self preservation as anything else. Is BP even going to make it out of this mess in one piece?
July 21st, 2010 at 8:25 pm
Dammit, BR, the GE ad is blocking your content. They need to put a ‘close window’ button on their dreck.
Can the oil industry tools tell us how to deal with the indirect pollution stream — c02, mercury and other toxic fallout, as well as the alarming masses of plastics floating in our oceans?
If not, they’re even slicker than they are sharp (the oily MFs).
July 21st, 2010 at 8:32 pm
” To be blunt, the end of civilization discussions I keep hearing are no fun to listen to. Tiresome, truth be told.”
Such are secular bear markets. No fun at all :(
July 21st, 2010 at 8:34 pm
ZedLoch
Oh no, Secular bear markets are a blast — if you avoid the downside.
But the recession/depression porn is fatiguing . . .
July 21st, 2010 at 8:35 pm
IMHO, big oil wanted to keep GoM under the radar screen. Both in terms of the amount of oil and gas and the safety concerns. Out of sight out of mind.
When you go back to the one chart BR put up of the wells and pipelines, it makes Texas look like a small pond. And all underwater. Huge.
And yeah, the USG is predictable, controllable and relatively safe compared to other places. And they actually get more skilled American labor, which they pay a pittance.
They had a free ride. Tax subsidies, loose regulation , …
My sense is this spill was a wake-up call. You can buy a lot of prevention and safety for $20B.
And do the numbers on the well. 80,000 bbl per day times the spot price times 365 days a year. That’s GS territory. BP probably took the biggest hit having the production volume disclosed. Now everyone is going to want to drill the GoM. Read one report of Macondo tapping a 1B BBL cavern. Not sure about that. But sure the BP 250M bbl was a gross understatement. Why invite other bidders.
So the big guys know how to make nice nice. Good. About time.
July 21st, 2010 at 8:40 pm
@BR:
“To be blunt, the end of civilization discussions I keep hearing are no fun to listen to. Tiresome, truth be told. ”
But you keep encouraging the bears to speak their mind.
As if. You need buyers not sellers. But you also need interest and uncertainty to successfully play the indexes against what few retail players are still there.
July 21st, 2010 at 8:50 pm
Wha?
A private sector solution? Forget about it. You can’t trust those guys. They’re out to kill the planet and ruin the environment. They must be destroyed.
We’re “this close” to being able to run our engines on Unicorn farts and pixie dust.
July 21st, 2010 at 8:54 pm
you know, it’s ~funny, in the wake of this ‘Oil Spill’, We don’t hear too much from the “Peak Oil”-ers..
maybe they figured out http://search.yippy.com/search?input-form=clusty-simple&v%3Asources=webplus&v%3Aproject=clusty&query=Peak+Oil+is+a+Hoax (?)
~~
though, re: BOPs , esp. BP’s ..
BP Had Blow Out Preventer Modified in China to Save Money
July 20th, 2010
Via: Guardian:
BP ordered the owner of the Deepwater Horizon rig, whose explosion led to the worst environmental disaster in US history, to overhaul a crucial piece of the rig’s safety equipment in China, the Observer has learnt. The blow-out preventer – the last line of defence against an out-of-control well – subsequently failed to activate and is at the centre of investigations into what caused the disaster.
Experts say that the practice of having such engineering work carried out in China, rather than the US, saves money and is common in the industry…”
http://cryptogon.com/?p=16537
We, the USG, should kick them(BP) off the North Slope, and out of the DoD Procurement process, to begin with..
http://search.yippy.com/search?input-form=clusty-simple&v%3Asources=webplus&v%3Aproject=clusty&query=BP+Alyeska
http://search.yippy.com/search?input-form=clusty-simple&v%3Asources=webplus&v%3Aproject=clusty&query=BP+Billions+from+Pentagon
July 21st, 2010 at 9:00 pm
As one of those guys patiently awaiting the Eschaton, TEOTWAWKI, you know, Miller Time, all I have to say is:
fnord…no, um
http://www.theonion.com/video/proposed-classified-bill-will-defend-against-flesh,14175/
(h/t Indecisionforever, dailyshow)
And remember, when cannibalism goes ‘fashion forward’ [that one's for you, MEH], don’t eat the fat, resist the temptation, just empty calories, go for the lean (besides, they’ll never expect it).
July 21st, 2010 at 9:07 pm
@areq: My experience with true natural meat eaters is they actually prefer what is referred to as “the sweatmeats”. The innards. They hollow out, leaving the lean and fat.
Go for the gusto.
July 21st, 2010 at 9:08 pm
“Sweetmeats”. Freudian slip.
July 21st, 2010 at 9:10 pm
@Andy: Unicorn farts and pixie dust.
Keeper
July 21st, 2010 at 9:18 pm
But the recession/depression porn is fatiguing . . .
no kidding- especially to those us us who have jobs-
fucking whiners
July 21st, 2010 at 9:22 pm
Sounds like the makings of a wonderful empanada! So your stomping grounds were in New Guinea? What? Did the US Govt send you there to find the shoes left behind by Mikey “BBQ” Rockefeller?
July 21st, 2010 at 9:35 pm
I rather prefer the recession/depression porn. It fatigues me not at all. I’m not sure what it has to do w/ oil companies agreeing to save money by only buying one set of emergency clean-up gear. Is that good news or recession/depression porn? And where are the anti-trust lawyers? Market competitors can’t collaborate in this manner without the express written consent of the Antitrust Division of the US Department of Justice (a more Orwellian name would be hard to imagine).
July 21st, 2010 at 9:42 pm
Byron King is long-term in terms of vision — I was a subscriber to his Agora newsletter (at least I think it was an Agora offering.) Course as oil rose steadily to $147 he looked 100% right. Then the energy market reversed BIG-TIME (I still remember Sharon Epperson’s live update on CNBC from the pits when things changed– her words: “The banks are selling.”) Unfortunately Byron’s picks got taken to the wood shed AND THEN SOME. The couple of his picks I had were down 50%+. OUCH. I then sold them off and took the remainder over to the crackhead, leveraged ETFs. Said loss then turned into a 25% gain (so I was fortunate to make it back PLUS a profit.) Unfortunately I then bit on Eric Janzen’s call in March ’09 the Treasury market was about to blow up. Didn’t happen. Finally sold out at back where I had started overall. Fun?! Not particularly. I had a friend call me up (on a day my Byron King picks were getting particularly shellacked) to “check my pulse.”
So the Gulf gets the emergency plan. But many of the recent finds have been in deeper water off the coast of Brazil. What do they get? Could really screw up the 2016 Games…
July 21st, 2010 at 9:43 pm
speaking of: “Unicorn farts and pixie dust…”
We should have a(nother) look at:
Prius vs. Hummer
Robert Clayton Dean (Texas USA) Transport
Quick, which has a smaller total impact on the environment?
Well, you know if the answer was the Prius, I wouldn’t be posting this. Dog bites man, and all that.
It turns out that, factoring in all costs, that the Hummer is more Gaia-friendly than the Prius. The punch line? Its not even close.
When you pool together all the combined energy it takes to drive and build a Toyota Prius, the flagship car of energy fanatics, it takes almost 50 percent more energy than a Hummer – the Prius’s arch nemesis.
More proof, if any was needed, that much of the modern environmental movement is about being seen to care, rather than actually accomplishing anything…”
http://www.samizdata.net/blog/archives/2007/03/prius_v_hummer.html
http://search.yippy.com/search?input-form=clusty-simple&v%3Asources=webplus&v%3Aproject=clusty&query=Prius+v.+Hummer
July 21st, 2010 at 9:49 pm
@MEH:
Indeed. The Prius is just a luxury vehicle for preening environmentalist emperors that have no clothes. And it apparently, when the gas pedal is unintentionally depressed, unintentionally accelerates.
July 21st, 2010 at 9:50 pm
much of the modern environmental movement is about being seen to care, rather than actually accomplishing anything…
awesome line there Hoffer-
it’s all a fashion statement
July 21st, 2010 at 9:56 pm
Is there an i-Phone app for that, ahab? LOL. If not, probably will be soon.
July 21st, 2010 at 10:01 pm
manny-
so . . .inquiring minds want to know-
WTF w/ CV’s site . . .
it appears I missed some drama
July 21st, 2010 at 10:02 pm
Meh – the Prius vs Hummer article has been pretty thoroughly discredited.
July 21st, 2010 at 10:13 pm
but c’mon Thor-
there is a premium for the Prius- you have to weigh that over what it costs over the expected ownership time of the vehicle-
but it’s all nonsense in any event-
in the end- however many years that is-
it will be like Mad Max- searching around for fuel- how many years will a few million Prius’s get us? A couple-
who cares???
July 21st, 2010 at 10:15 pm
I posted a month ago that I drove past a BP station and bought my gas somewhere else, anywhere else. I wrote to BP and recommended that they donate 10 cents for every gallon purchased at a BP station into a relief fund for families and communities of the GOM. I bought a tank of gas today at that same BP station.
Only now the BP sign has been removed, the pump logos covered up, and the owner is switching to Marathon.
I think the idea of donating for BP station purchases is the only way to save the BP franchise gas network. It would make buying gas at BP like texting $5 to the gulf families. If BP management is too dumb to see that then they deserve to lose all the BP franschises on the way to losing their own jobs.
July 21st, 2010 at 10:15 pm
I missed it as well, ahab. Have no clue. Will nobody fill you in?
July 21st, 2010 at 10:17 pm
Ahab – oh yes, the Prius is mostly hype, yuppie toy. Just saying the Hummer comparison is bogus.
July 21st, 2010 at 10:30 pm
@Andy,
Your argument is a strawman. It is not the private sector that is the problem. Everyone knows that, but it is a convenient target for you to rail against. What is the problem is the 30 years of laissez faire governing and how we now all have to live with the consequences of allowing BP, and Massey Energy to ignore the rules they didn’t wish to follow. Rail against that.
July 21st, 2010 at 10:33 pm
Fears of imminent and universal upheaval and chaos are ubiquitous these days.
“To be blunt, the end of civilization discussions I keep hearing are no fun to listen to. Tiresome, truth be told.”
This AND peak oil debunking?
Peace of mind lies beyond hysteria. There have always been problems, always will be.
Parts of this thread have calmed my head so I’m gonna quit while I’m ahead and go to bed.
Good night, all
July 21st, 2010 at 10:51 pm
Your argument is a strawman
would you rather have it be a tinman? Or cowardly lion?
beware the flying monkeys-
in any event- it’s irrelevant who’s in charge- as long as they cater to your particular religious/political bent- then regardless what happens- it’s all good and all bad things not your man’s fault- it was the douche bags on the other side doing him in-
I call bullshit on all of it-
better to stand aside and let anarchy reign
July 21st, 2010 at 10:51 pm
Okay, I can buy this but and this is a big but, make the plans open to public scrutiny. Put them on a website somewhere. Let other people scrutinize them – otherwise this is just another exercise in TUYM (Trust us you morons).
see:
http://www.montrealgazette.com/news/Agency+withholds+elements+plans+spills/3303185/story.html
July 21st, 2010 at 11:00 pm
Ahab – hah, tell us how you really feel ;-)
I’d dying to know what that original post over at CV’s was by the way!!!
July 21st, 2010 at 11:11 pm
thor-
no clue- but my man CV said the following to my inquiry-
_________________________________
@ahab (9:01)
“what did I miss that caused the general strike by CV?”
Answer:
- Boredom
- Complacency
- Lack of Commitment
- Lack of Effort
- Lack of Ideas
- Lack of Feedback
Such things cause a SCIOPERO (a general strike)… These things happen from time to time in “socialist” regimes…
It happens when governments devoid individuals of HOPE…
______________________
so there it is
July 21st, 2010 at 11:21 pm
Thor,
Questioned, may be one thing, Debunked? ’tis another..
the summation comes from this type of analysis:
“..Lifecycle analysis is nothing new to the auto industry. It’s been done internally for decades with cars and all manner of household appliances and electronics. What is new this decade is that a significant portion of shoppers are considering it, spurred by the recent movement toward environmental consumerism, and pop-culture books like 2002’s Cradle to Cradle, by William McDonough and Michael Braungart, which focuses on the recycling of consumer goods.
CNW’s research was done largely ‘under the radar,’ using publicly available data along with phone and mail research and on-site analysis of assembly plants. The research included demographics such as how far the vehicle was expected to go in its lifetime and over how many years the vehicle will remain with its initial buyer. Other factors included lifetime maintenance, mechanical repairs, and accident repairs; design and development costs; manufacturing (including energy in employee commuting); administrative support; transportation to retail; dealership operations; and the cost of recycling and disposing of parts and materials.
HUMMER has, for example, established a new national network of new, standalone Quonset hut, hangar-style dedicated dealership facilities over the past several years, and a completely new assembly plant was built for the assembly of the H2 SUV, which would bring their lifetime cost up significantly.
After all the numbers had been crunched, among vehicles sold in the U.S. in the 2005 calendar year, CNW found the least expensive vehicle to be the Scion xB at 48 cents per mile in overall energy costs. The most energy-expensive vehicle was the Maybach at $11.58 per mile in energy costs over its estimated lifetime. The VW Phaeton, Rolls-Royce line, and Bentley line followed closely behind. In all of these instances, these are overall energy costs incurred from inception through disposal, not energy costs associated only with vehicle ownership.
To compare, the Toyota Prius involves $3.25 per mile in energy costs over its lifetime, according to CNW, while several full-size SUVs scored lower. A Dodge Viper involves only $2.18 in energy per mile over its lifetime. The Range Rover Sport costs $2.42, and the Cadillac Escalade costs $2.75.
“If a consumer is concerned about fuel economy because of family budgets or depleting oil supplies, it is perfectly logical to consider buying high-fuel-economy vehicles, said Art Spinella, president of CNW, in a release. “But if the concern is the broader issues such as environmental impact of energy usage, some high-mileage vehicles actually cost society more than conventional or even larger models over their lifetime…”
http://www.thecarconnection.com/tips-article/1010861_prius-versus-hummer-exploding-the-myth
July 21st, 2010 at 11:26 pm
When you deal with carbon, bad things can happen. Whether it’s a coal mine, sugar mill, cotton gin, grain elevator or oil and gas well, each will at some point go Boom! A sour gas blowout can kill hundreds. God forbid that the Black Sea ever turns over. The hydrogen sulfide would kill millions in a few days.
We make progress by learning from mistakes. If the blow out preventer on the BP well was defective for whatever reason, rest assured it will not be the cause of the next calamity and there will surely be another, in the future…
If ‘Big Oil’ gets their act together in the gulf and can continue to produce, then ‘we’ win.
The phrase ‘nattering nabobs of negativism’ was uttered by a Veep that was impeached but I still like that phrase.
Hopefully we are close to a trough in negative psychology. Cycles run their course. If you own em, you got to trade em til there is a positive return on cash which may be 5 to 10 years from now. Enjoy!
July 21st, 2010 at 11:47 pm
I’m guessing my bicycle beats both the Hummer and the Prius hands down up and sideways. All it needs is a ham sandwich for it and myself to ride for miles and miles.
July 21st, 2010 at 11:51 pm
The “free market” “at work”:
http://www.nytimes.com/2010/07/22/us/22transocean.html?hp
July 21st, 2010 at 11:55 pm
Meh – I remember this story from last year when I first read about it. I spent some time digging around and it would appear that there are about as many sources to counter this argument as there are studies and articles that would support it. In the end, as with most things of this nature, I think it’s really about what you want to believe.
Personally, I have no interest in driving either a Prius (small, ugly, and over hyped) as I do a Hummer (large, ugly, and over hyped). I drive a Volvo – not so ugly, but gives me the illusion that I’m safe ;-)
Simon – lol!
July 21st, 2010 at 11:58 pm
When industry (take your pick, oil, banking, real estate, etc.) says they can regulate themselves, it is a big joke on the citizens of this country because History (especially recent) has proven otherwise. Exxon still has not cleaned up Prudhoe Bay, http://www.nature.com/ngeo/journal/v3/n2/abs/ngeo749.html
The reality is that the days of US petroleum production are over, and deepwater drilling does more harm now than good from a risk perspective as seen from recent events (fishing, tourism are better choices for the gulf economy). US production peaked in ~1970 and now we are dropping below ~1950 levels. Energy efficiency and non-hydrocarbon energy is the only way to go because the petroleum industry is entering old age and CO2 output needs to be reduced with climate change moving right along, http://www.realclimate.org/
See Table 1.2 graphs, PDF.
http://www.eia.doe.gov/emeu/aer/overview.html
If people drive inefficient cars and have to pay higher market rates for gasoline, so be it.
July 21st, 2010 at 11:59 pm
well-
tried to answer a few poster’s questions-
but it appears my comments were sequestered-
not my blog-
so whatever . . .
July 22nd, 2010 at 12:05 am
Ahab – No comment ;-)
July 22nd, 2010 at 12:42 am
I found another report dubunking the Hummer vs. Prius.
It’s pretty convicing that the study had some serious biases in it. Their numbers are based on energy cost / liftime miles. Their estimate for the H3 lifetime miles is more that double that for the Prius. The have the Prius being driving 109,000 miles in 12 years. Ego the hummer is lower cost per mile.
Take a look:
http://www.pacinst.org/topics/integrity_of_science/case_studies/hummer_vs_prius.pdf
I like the quote from Carl Sagan “Extraordinary claims require extraordinary proof!”
To the point of the original post, it’s great that the majors want to be prepared should there be another disaster. However, I wouldn’t trust them as far as I could throw them.
July 22nd, 2010 at 3:42 am
Yes BR, it’s tough out there–goldbug eschatology is a numbing cross between high school economics class and an episode of “The Flintstones.” But baby, that’s what you get for attending a conference larded with guys who bury metal in the back yard and hoard freeze-dried food. Viva Vancouver!
July 22nd, 2010 at 9:44 am
though, to be Clear, the Reason, for bringing up the “Prius v. Hummer”-Agitprop, was to begin to delineate that many things are not as ‘good’ as they first appear (or, as Sold)..
w/this: ““Four of the world’s largest oil companies are creating a strike force to stanch oil spills in the deep waters of the Gulf of Mexico in a billion-dollar bid … The new system…”
We should wonder, and, more productively, understand the state of affairs, that were extant, in Alaska c. 1989 ..
LSS: Alyeska’s ‘Response Plan’ read beautifully, though, problem was, the Assets (described) were not there..
in a sense, a different facet of ‘Caveat Emptor’ ~!
July 22nd, 2010 at 10:23 am
@MEH – Prius / Hummer
I haven’t dug deep enough to make a clear opinion, but here’s a counterpoint:
http://www.hybridcars.com/environment-stories/dust-to-dust-energy-costs.html
“If reporters had dug a little deeper, they would have clearly seen what the podcast interview exposed: the Hummer H3 looks a whole lot better than the hybrids because it uses “crude old technology that has long ago been paid for,” according to Spinella. On the other hand, the hybrids are new and complex, and the cost of the R&D energy required to make the necessary transformation of our cars from oversized, high-emissions gas guzzlers to something new and better has not yet been amortized over any significant period of time.”
July 22nd, 2010 at 1:09 pm
dss:
We might have different opinions on what “laissez faire” actually is….
July 22nd, 2010 at 4:43 pm
Darmah,
w/: “… and the cost of the R&D energy required to make the necessary transformation of our cars from oversized, high-emissions gas guzzlers to something new and better has not yet been amortized over any significant period of time.”
We should be, as well, circumspect..
http://search.yippy.com/search?input-form=clusty-simple&v%3Asources=webplus&v%3Aproject=clusty&query=GM+EV-1
http://search.yippy.com/search?input-form=clusty-simple&v%3Asources=webplus&v%3Aproject=clusty&query=NASA+Lunar+Rover
http://search.yippy.com/search?input-form=clusty-simple&v%3Asources=webplus&v%3Aproject=clusty&query=19th+Century+Electric+Automobile
towit, When are those guys starting their Count?
or, differently, there’s so much ‘Spin’ on that take, that it should be wrapped w/ Cu-wire and placed between a pair of Magnets … (then, it may be more useful (: )
http://www.animations.physics.unsw.edu.au/jw/electricmotors.html
July 22nd, 2010 at 5:16 pm
[...] create a rapid-response force to deal with future oil spills is a great development, Barry Ritholtz writes at The Big Picture. “It gives a face-saving resolution to everyone, lets the White House [...]
July 23rd, 2010 at 12:15 am
To be blunt, the end of civilization discussions I keep hearing are no fun to listen to. Tiresome, truth be told.
why have we gotten so hysterical?
July 23rd, 2010 at 9:38 pm
silence…