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BP’s Gulf Oil Well Is Leaking Again: “It’s A Dead Ringer For The [BP] Oil, As Good A Match As I’ve Seen” … “I Think The Primary Source With High Probability Is Associated With [Last Year's Damaged BP] Well”

Leaking Oil Is a “Dead Ringer” For Oil From BP’s Gulf Well
The Press-Register reports today:

Scientific analysis has confirmed that oil bubbling up above BP’s sealed Deepwater Horizon well in recent days is a chemical match for the hundreds of millions of gallons of oil that spewed into the Gulf last summer.

The Press-Register collected samples of the oil about a mile from the well site on Tuesday and provided them to Ed Overton and Scott Miles, chemists with Louisiana State University.

The pair did much of the chemical work used by federal officials to fingerprint the BP oil, known as MC252.

“After examining the data, I think it’s a dead ringer for the MC252 oil, as good a match as I’ve seen,” Overton wrote in an email to the newspaper. “My guess is that it is probably coming from the broken riser pipe or sunken platform. … However, it should be confirmed, just to make sure there is no leak from the plugged well.”

MC252 is short for Macondo block 252, which is the official designation for the location of last year’s BP Gulf oil spill.

Overton is a LSU professor and oil spill expert, who has been a lead NOAA consultant for decades, and who analyzing Macondo oil samples last year for the federal government.

Here is video the Press-Register shot a couple of days ago:

And see this and this.

The Leak Is Associated With BP’s Well

The Press-Register reported yesterday:

Oil is once again fouling the Gulf of Mexico around the Deepwater Horizon well, which was capped a little over a year ago. [Deepwater Horizon is the name of the oil drilling rig drilling at BP's Macondo well, the one which exploded and sank last year.]

Tuesday afternoon, hundreds of small, circular patches of oily sheen dotted the surface within a mile of the wellhead. With just a bare sheen present over about a quarter-mile, the scene was a far cry from the massive slick that covered the Gulf last summer.

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Floating in a boat near the well site, Press-Register reporters watched blobs of oil rise to the surface and bloom into iridescent yellow patches. Those patches quickly expanded into rainbow sheens 4 to 5 feet across.

Each expanding bloom released a pronounced and pungent petroleum smell.

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“I think the primary source with high probability is associated with the Macondo well,” said Robert Bea, an internationally prominent petroleum engineer and professor emeritus at the Berkeley campus of the University of California. Bea responded to Press-Register questions via email after examining photographs taken by the newspaper.

“Perhaps connections that developed between the well annulus (outside the casing), the reservoir sands about 17,000 feet below the seafloor, and the natural seep fault features” could provide a pathway for oil to move from deep underground to the seafloor, Bea said.

“Looks suspicious. The point of surfacing about 1 mile from the well is about the point that the oil should show up, given the seafloor at 5,000 feet … natural circulation currents would cause the drift,” Bea said.

We May Never Be Able To Fully Stop the BP Leak

Washington’s Blog interviewed Dr. Bea a year ago, and the oil expert noted that we may never be able to fully stop BP’s oil leak:

Few people in the world know more about oil drilling disasters than Dr. Robert Bea.

Bea teaches engineering at the University of California Berkeley, and has 55 years of experience in engineering and management of design, construction, maintenance, operation, and decommissioning of engineered systems including offshore platforms, pipelines and floating facilities. Bea has worked for many years in governmental and quasi-governmental roles, and has been a high-level governmental adviser concerning disasters. He worked for 16 years as a top mechanical engineer and manager for Shell Oil, and has worked with Bechtel and the Army Corps of Engineers. One of the world’s top experts in offshore drilling problems, Bea is a member of the Deepwater Horizon Study Group, and has been interviewed by news media around the world concerning the BP oil disaster.

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WB: Is it possible that this fractured, subsea salt geology will make it difficult to permanently kill the oil leak using relief wells?Bea: Yes, it could. The Santa Barbara channel seeps are still leaking, decades after the oil well was supposedly capped. This well could keep leaking for years.

Scripps mapped out seafloor seeps in the area of the well prior to the blowout. Some of the natural seeps penetrate 10,000 to 15,000 feet beneath the seafloor. The oil will follow lines of weakness in the geology. The leak can travel several horizontal miles from the location of the leak.

[In other words, the geology beneath the seafloor is so fractured, with soft and unstable salt formations, that we may never be able to fully kill the well even with relief wells. Instead, the loss of containment of the oil reservoir caused by the drilling accident could cause oil to leak out through seeps for years to come. See this and this for further background].

***WB: I have heard that BP is underestimating the size of the oil reservoir (and see this). Is it possible that the reservoir is bigger than BP is estimating, and so – if not completely killed – the leak could therefore go on for longer than most assume?

Bea: That’s plausible.

WB: The chief electronics technician on the Deepwater Horizon said that the Macondo well was originally drilled in another location, but that “going faster caused the bottom of the well to split open, swallowing tools”, and that BP abandoned that well. You’ve spoken to that technician and looked into the incident, and concluded that “they damn near blew up the rig.” [See this and this].

Do you know where that abandoned well location is, and do you know if that well is still leaking?

Bea: The abandoned well is very close to the current well location. BP had to file reports showing the location of the abandoned well and the new well [with the Minerals Management Service], so the location of the abandoned well is known.

We don’t know if the abandoned well is leaking.

WB: Matthew Simmons talked about a second leaking well. There are rumors on the Internet that the original well is still leaking. Do you have any information that can either disprove or confirm that allegation?

Bea: There are two uncorroborated reports. One is that there is a leak 400 feet West of the present well’s surface location. There is another report that there is a leak several miles to the West.

[Bea does not know whether either report is true at this time, because BP is not sharing information with the government, let alone the public.]

Indeed, in June of 2010, BP officials admitted to damage beneath the seafloor, and numerous scientists have speculated that the blowout and subsequent clumsy attempts by BP to plug the well could have created new seeps, and made pre-existing natural seeps bigger.

If all patent litigations were adjudicated in 2008 the total cost would have been $31,224,000,000.

Click to Enlarge:

Source:
Focus, The Patent Lawsuit Economy

We’re hunkered down, but if you are anywhere else in the country (or world) you can track the coming blower via this site:

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click for larger interactive map

Map via Crisis Landing

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The End of the World, Part 1
By John Mauldin
August 27, 2011

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What Is the CBO Seeing (or Smoking?)
The End of the World, Part 1
Who Will Rescue the Rescuers?
The Problems of Debt in the Eurozone
Thoughts on Jackson Hole
Some Thoughts on Getting Older

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Fine, then. Uh oh, overflow, population, common food, but it’ll do to

Save yourself, serve yourself. World serves its own needs,
listen to your heart bleed – dummy with the rapture and
the revered and the right, right. You vitriolic, patriotic, slam,

fight, bright light, feeling pretty psyched.

It’s the end of the world as we know it.
It’s the end of the world as we know it.
It’s the end of the world as we know it and I feel fine.

R.E.M. song from 1987

It’s not really the end of the world, but to read some of the analysis and data over the past week, it’s hard not to wonder if it’s not the beginning of the Endgame at the very least. There is more to cover than I can really do justice to, but we will just start. We HAVE to look at the US data first (briefly) and then on to Europe, where it will may be the end of the euro experiment, depending on two voting populations. Can you spell “Banking Crisis,” gentle reader? A nod to Bernanke’s finger-pointing speech, some links on the scourge of high-frequency trading, and we end on a positive note about the Boomer generation growing older. And, I answer the question that is burning in your brain: “How many years of US corn production will China’s dollar reserves buy?” Write your answer down now. This letter may print out longer than usual, as there are plenty of charts. Let’s skip the “but firsts” and jump right in.

What Is the CBO Seeing (or Smoking?)

Last week I finally stopped being wishy-washy (with my 50-50% chance of a recession call) and said the US would be in recession within 12 months. And suggested that you consider moving to the sidelines your longer-term equity investments, except your conviction stocks. (I have some of those in the biotech space and simply intend to buy more if the prices go down. But remember, I am looking out ten years and expect an eventual bubble, so I don’t care if I am early for some of my high-risk money.) Stocks typically go down about 40% or more in a recession. David Rosenberg estimates that we have seen 27% of a typical bear-market move, so that would suggest the possibility of another 30% downdraft (give or take).

None of the data this week makes me want to change my opinion on recession. Rich Yamarone (Bloomberg Chief Economist) and I traded emails as we got new data this morning, comparing notes. He does better charts than I do, so we will use his. (I hear, by the way, that he is being addressed as Lord Vader in the halls of Bloomberg. Come to think of it, his voice is rather raspy.)

As he points out, when GDP year-over-year drops by more than 2%, we have always had a recession. So with today’s second-quarter revision (first revision of many) down to just 1% (technically 0.99%, but we are among friends here), where are we? At 1.5% year-over-year. Here is the chart:

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Prepare to be delighted for the next 6 minutes . . .
(go full screen)

The Known Universe takes viewers from the Himalayas through our atmosphere and the inky black of space to the afterglow of the Big Bang. Every star, planet, and quasar seen in the film is possible because of the world’s most complete four-dimensional map of the universe, the Digital Universe Atlas that is maintained and updated by astrophysicists at the American Museum of Natural History. The new film, created by the Museum, is part of an exhibition, Visions of the Cosmos: From the Milky Ocean to an Evolving Universe, at the Rubin Museum of Art in Manhattan through May 2010.

Data: Digital Universe, American Museum of Natural History

http://www.haydenplanetarium.org/universe/

Fantastic set of charts from Ron Griess of The Chart Store below –  weaves some of this into your long term thinking about Markets, price and valuation.

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Source: Lindau Mediatheque

Jackson Hole
August 26, 2011
Bob Eisenbeis

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Markets dipped when Chairman Bernanke failed in his Jackson Hole speech to deliver the hoped-for elixir of QE3, then rallied as attention turned to other issues like Hurricane Irene. But market expectations were unrealistic and motivated by self-interested desire for a positive jolt to equities, rather than a realistic assessment of Federal Reserve policy or what should or should not be done in the interest of the country.

Consistent with the theme of the Jackson Hole conference, which focused on longer-term growth issues facing the economy, Chairman Bernanke described the present state of the economy, current policy, and what the Fed and rest of the government could and couldn’t do to promote expansion and growth. He indicated that while the “hoped-for” pickup in the economy the FOMC expected earlier in the year had failed to materialize, the economy was still expanding; and over the longer run he did not believe that growth fundamentals had been seriously compromised by the shocks the economy had experienced during and after the financial crisis. Indeed, he said, the most likely scenario would be slow growth and a gradual recovery.

There were, however, several important parts of the speech that provided a realistic and objective assessment of why the recovery has been slow to materialize. Bernanke made it clear that he believed monetary policy was supportive of expansion, but he correctly pointed out that the Fed could not create jobs or clean up the dismal housing situation. He bluntly suggested that the recent budget and debt-ceiling debacle damaged consumer and business confidence and posed a downside risk. In the short run the burden was on Congress and the Administration to craft proactive fiscal policies to deal with the jobs issues and to clean up the excess supply of housing that were holding back the expansion.

Perhaps the most important part of the speech, however, was his observation that the quality of economic policy making would significantly impact the nation’s longer-run growth prospects. He implied that changes were needed; and he made concrete, broad-based suggestions for how to deal with the country’s fiscal and budget issues. In particular, he laid out what amounted to a two-stage process for getting the government’s financial spiral, which was driven by our aging population and rising health-care costs, under control.

The first task should be to put in place a credible plan for bringing expenditures and revenues into balance, establishing a more effective process for setting budget goals and ensuring they are carried out. The second step would be the difficult process of balancing the hard tradeoffs among competing choices that a credible budget process would require. This step would also require Congress to make sure that the public not only understood and bought into the budget control plan but also accepted the tradeoffs that had to be made to meet the plan’s goals.

Chairman Bernanke has clearly and correctly put his finger on the budget issues, how fiscal policy choices would determine the longer-term growth prospects for the economy, and what is needed to address those problems. The responsibility belongs to Congress, and time is short to put our house in order.

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Bob Eisenbeis is Cumberland’s Chief Monetary Economist. Prior to joining Cumberland Advisors he was the Executive Vice President and Director of Research at the Federal Reserve Bank of Atlanta. Bob is presently a member of the U.S. Shadow Financial Regulatory Committee and the Financial Economist Roundtable. His bio is found at www.cumber.com. He may be reached at Bob.Eisenbeis@cumber.com.

Sums up August pretty well:

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via Abstruse Goose

Thanks, Jim.

Succinct summation of week’s events:

Positives:

1) Bernanke showed his version of self restraint
2) July Durable Goods orders both headline and ex transports exceed forecasts but we know the world changed in Aug
3) July New Homes remain depressed, falling to lowest since Feb, better chance to eat into excessive existing home inventory
4) China preliminary HSBC mfr’g index rises to 49.8 from 49.3, below 50 still but better than feared
5) July Euro region mfr’g and services composite index unchanged vs expected decline
6) Better than expected earnings from Credit Agricole help to lift most European bank stocks on the week

Negatives:

1) July non defense capital goods ex aircraft, a core cap ex reading, falls 1.5% even before Aug turbulence
2) While Initial Claims boosted by VZ strike (yes, they get paid to strike) they remain stubbornly above 400k
3) Richmond Fed mfr’g survey falls 9 pts and follows weakness seen in Philly and NY regions
4) UoM confidence final reading has it at lowest since Nov ’08 but bounces from initial report of a 31 yr low
5) Greek bailout in disarray but should get resolved, Greek banks hanging on by a thread
6) Germany IFO business confidence falls to lowest since June ’10, ZEW investor confidence plunges
7) July New Homes sales remain depressed, no end in sight
8) MBA said purchase apps fall to lowest since 1996