Posts Tagged ‘petroleo’

OPEC Reaching Comfortable Middle Age, Turns 50 Tomorrow With Oil at $75

OPEC Turns 50 Years Old
A ceremony for the new OPEC headquarters in Austria on March 17, 2010. Photographer: Vladimir Weiss/Bloomberg

The Organization of Petroleum Exporting Countries turns 50 years old tomorrow, having survived a tumultuous history of wars, embargoes and in-fighting. The world’s oldest and largest energy producer group is now enjoying prices close to the $75 a barrel level that its largest member Saudi Arabia considers “ideal.”
OPEC’s Timeline:
Sept. 14, 1960: The organization was born in Baghdad. The five founding members — Iran, Iraq, Kuwait, Saudi Arabia and Venezuela — created the group during a five-day meeting in the Iraqi capital, dedicated to “the coordination and unification of the petroleum policies of Member Countries and the determination of the best means of safeguarding their interests.”
Sept. 1, 1965: The group moved its headquarters from Geneva to Vienna, where its secretariat is now based. Between 1961 and 1971 the following six countries join: Qatar, Indonesia, Libya, the United Arab Emirates, Algeria and Nigeria.
October, 1973: The six-month Arab oil embargo pitted OPEC’s Arab members against the U.S. and Israel in a politically-motivated suspension of exports that pushed prices above $12 a barrel. The Paris-based International Energy Agency was created in 1974 by consumer nations, in response to the oil price shock. Ecuador and Gabon join OPEC in 1973 and 1975, respectively, only to leave the group later.
Dec. 20, 1975: Ilich Ramirez Sanchez, known as Carlos the Jackal, took more than 60 hostages during a raid on OPEC’s Vienna headquarters to protest against treatment of Palestinians by Israel.
October, 1978: Protests and strikes in OPEC member Iran against ruling Shah Reza Pahlavi, deposed the following year in a revolution, cut the country’s oil production within three months to a 27-year low.
Sept. 23, 1980: Iraq invaded Iran in the first war between OPEC members. During the eight-year conflict, with its attacks on oil-tankers in the Persian Gulf, group production plunged to a 20-year low.
October, 1981: OPEC members agreed to maintain oil prices within a range of $32 to $38 a barrel.
August, 1985: Saudi Arabia abandoned the system of “posting” oil prices to one in favor of letting the retail value of refined products such as gasoline determine the cost of crude.
1986: OPEC members switched to a new pricing system in which futures contracts traded on exchanges in New York and London effectively determined the cost of oil shipments.
Aug. 2, 1990: Iraq’s invasion of Kuwait marked the second war among OPEC members. Repelled the following year by a U.S.-led coalition, withdrawing Iraqi troops set fire to Kuwait’s oil wells.
Nov. 29, 1997: At a meeting in Jakarta, OPEC raised production quotas for the first time in four years as the Asian financial crisis unfolds, sending prices as low as $10 the following December. Analysts often refer to the event as “the Ghost of Jakarta.”
June 24, 1998: OPEC was assisted by non-members including Mexico, Russia and Norway in cutting production as demand collapsed, helping revive prices. The coordinated action followed initial talks between Saudi Arabia, Venezuela and Mexico.
March 19, 2003: Aircraft and missile attacks on Iraq begin, followed by a U.S. and U.K. troop invasion that subsequently topples Saddam Hussein’s government in Baghdad.
Jan. 1, 2007: Angola joined OPEC, its first new member since the 1970s. In November, Ecuador re-joined the organization following a 15-year absence.
Sept. 10, 2008: Indonesia exited the oil group after becoming a net importer, leaving the total number of members at 12.
Dec. 18, 2008: OPEC announced the largest production cut in its history as the financial crisis sent prices plunging from a record $147.27 a barrel in July, 2008, to near $30 by the year- end. Oil prices then climb 78 percent during 2009.
Sept. 14, 2010: In happy middle age, OPEC turns 50, with oil prices near $75 a barrel and above $70 a barrel for all but two weeks of this year.
To contact the reporter on this story: Grant Smith in London at

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Venezuela’s oil exports down 16% in second quarter

Aug 25, 2010

Eric Watkins
OGJ Oil Diplomacy Editor

LOS ANGELES, Aug. 25 — Venezuela’s oil exports dropped 16% in this year’s second quarter, largely due to increased use of domestic fuels for electric power, according to a quarterly report by the central bank.

The report showed the country’s gross domestic product down by 1.9%, led by a 2% drop in oil sector GDP.

“The behavior of this activity in the quarter is mainly due to lower crude output, which was offset by the growth in refined products to satisfy higher demand in the internal market related to the use of thermoelectric plants for energy generation,” the bank said.

The bank’s report coincided with the latest statistics from the Organization of Petroleum Exporting Countries, which said oil exports brought Venezuela revenue of around $54.2 billion in 2009, down nearly 40% from $89.1 billion in 2008.

OPEC blamed the fall in international oil prices across global markets for the country’s drop in revenue, with Venezuela’s basket price for 2009 averaging $57.08/bbl, down from $86.49/bbl in 2008.

However, Venezuela’s export revenues could decline as the country plans to take advantage of its hefty reserves of oil and gas to increase its use of thermoelectric power over hydropower during the next 5 years.

Venezuela now relies on hydropower for 80% of its electricity supply, while thermoelectric plants only supply 20%. Caracas wants to bring that ratio to 50-50 by 2015, according to official media.

Electricity shortage
The Agencia Venezolana de Noticias (AVN) reported the balance is needed as Venezuela faced shortages of electricity earlier this year due to a drought that reduced the power generation at main hydropower plants.

AVN last week reported water levels at the country’s main hydroelectric dam, Guri, are 3.04 m below optimum levels. The Guri plant supplies 70% of Venezuela’s electricity, but a drought brought water levels so low that the government was forced to introduce rationing across the country.

According to AVN, Venezuela aims to install 15,000 Mw of new electricity capacity over the next 5 years, of which 12,000 Mw would be generated by thermoelectric plants, while 3,000 Mw would come from new hydropower plants.

But that plan could create problems of its own. While more thermoelectric power could insulate Venezuela from electricity shortages due to drought, the use of more oil and gas could substantially reduce the country’s exports, its main source of foreign exchange.

In fact, Venezuela depends on oil for more than 90% of its export income, and a continued drop in revenues could affect its ability to meet spending and debt obligations.

PDVSA continues drilling
Meanwhile, Venezuela’s state-owned Petroleos de Venezuela SA this week said it began drilling in the Jusepin oil field with one of the rigs seized from Tulsa-based Helmerich & Payne Inc. earlier this year (OGJ Newsletter, July 12, 2010).

According to Venezuela’s Oil Minister Rafael Ramirez, who also serves as president of PDVSA, costs at the project have fallen more than 50% to $20,000/day from $43,000/day when H&P ran it. PDVSA said the well drilled by the nationalized rig should produce 2,000 b/d of oil.

Contact Eric Watkins at

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Top five bottlenecks in the Gulf oil spill response

Local officials complain about lack of urgency in the federal Gulf oil spill response. Here are five reasons that the government seems to be dragging its heels.

Temp Headline Image
Workers skim a large patch of weathered oil by hand near the boat ramp at Ken Combs Pier in Gulfport, Miss. The Gulf oil spill became the largest ever in the Gulf of Mexico on Thursday, based on the highest of the federal government’s estimates.
(Amanda McCoy/The Sun Herald/AP)

By Patrik Jonsson, Staff writer
posted July 1, 2010 at 7:46 pm EDT
Atlanta —
With each oily wave hitting marshes and beaches from the Gulf oil spill, desperation grows along the already stained Gulf Coast.
In part, the magnitude of the spill has simply overwhelmed the ability of the White House and BP to completely contain it. But it is clear that bureaucratic red tape – echoing the post-Katrina federal response five years ago – has bogged down clean-up efforts as a host of agencies – OSHA, EPA, Coast Guard, Army Corps of Engineers and others – weigh in on most decisions.
Meanwhile, as November elections approach, the oil spill has a political dimension as both parties begin to use the massive oil slick from the Deepwater Horizon accident to bolster their prospects. Democrats will point out Republican ties to Big Oil, and Republicans will chide what they’ll call a lackadaiscal response by the White House.
IN PICTURES: The Gulf oil spill’s impact on nature
If the Macondo well is capped, oil cleanup is ramped up, and no hurricanes hit the slick, the oil spill crisis is likely to eventually abate. But the impression many Gulf Coast residents have so far is of a Keystone Kops response, where mundane regulations and misplaced priorities stand in the way of protecting local livelihoods and the Gulf’s natural environment.
“The cleanup effort is drowning in the proverbial sea of red tape,” writes Gulf Coast native Winston Groom, the author of “Forrest Gump,” in the Weekly Standard.
Here are the top five bottlenecks impeding the Gulf oil spill cleanup so far:
Enough life vests? The Coast Guard has not eased any of its safety regulations and will likely continue to refuse to do so. A Louisiana effort involving 16 oil-sucking barges was shut down for nearly a day on June 18 by the Coast Guard, which wanted to make sure there were enough life vests and fire extinguishers on board.
“The Coast Guard is not going to compromise safety … that’s our No. 1 priority,” Coast Guard spokesman Robert Brassel told The Daily Caller. Louisiana Gov. Bobby Jindal called it “frustrating.”
The Jones Act. It’s unclear to what extent the Jones Act, a 1920 protectionist law that mandates only US vessels and crews operate within the US three-mile maritime border, has really affected the ability to move foreign oil skimmers into the spill theater.
At issue in the law is both availability and proximity of US based skimming vessels. Several nations have said their offers of help have been rebuffed at least in part by US officials citing the Jones Act. This week, Obama sent out a call for more nations to join the clean-up response, but the President has not publicly addressed the legal and practical issues around US law and the foreign fleets ready to help.
“We want all the skimming vessels in the world deployed,” Plaquemines Parish President Billy Nungesser tells the Times-Picayune newspaper in New Orleans.
( says, “In reality, the Jones Act has yet to be an issue in the response efforts…. So far, offers from six foreign countries or entities have been accepted and only one offer has been rejected. Fifteen foreign-flag vessels are working on the cleanup, and none required a waiver.”)
EPA says no, then yes. Three days after the accident, the Dutch government offered advanced skimming equipment capable of sucking up oiled water, separating out most of the oil, and returning the cleaner water to the Gulf. But citing discharge regulations that demand that 99.9985 percent of the returned water is oil-free, the EPA initially turned down the offer. A month into the crisis, the EPA backed off those regulations, and the Dutch equipment was airlifted to the Gulf.
‘Ever hear of Radio Shack?’ In a recent fly-over of a spill area near Perdido Bay, BP official Doug Suttles expressed amazement that spotter plane pilots couldn’t communicate directly with skimming boats on the surface to direct them to oil patches. “We need to get the skimmers to the oil,” Suttles said. Local officials in Escambia County, Fla., have been asking for weeks for plane-to-ship communications, to little avail.
“Haven’t they ever heard of Radio Shack?” writes Mr. Groom.
Who’s in charge here? President Obama has said “the buck stops” with him. But the actual incident response command structure is a Gordian Knot for local officials requesting help and resources. Frustrated by red tape, some officials have been warned they’ll be arrested if they take matters into their own hands. The lack of a clear command structure has hampered the ability to move resources like booms and skimmers quickly, especially in a still-growing spill that’s at the whim of the Gulf’s ever-changing tides, currents and winds.
While most of the criticism has been heaped on federal agencies and the Obama administration, questions are being raised about the extent to which the four Gulf state governors (all Republicans) are responding too – specifically, on deployment of National Guard troops under their command.
In a recent investigative report, CBS News found that Louisiana’s Gov. Jindal had deployed just 1,053 of the 6,000 troops available to him. “Alabama has deployed 432 troops of 3,000 available,” according to CBS. “Even fewer have been deployed in Florida – 97 troops out of 2,500 – and Mississippi – 58 troops out of 6,000.”
Jindal told CBS that the White House had instructed state officials that “Coast Guard and BP had to authorize individual tasks” for National Guard units.
But Coast Guard Adm. Thad Allen, the national incident commander in charge of the government’s response to the spill, disputed that. “There is nothing standing in the governor’s way from utilizing more National Guard troops,” Allen told CBS.
“Whether it’s simple confusion or the infusion of politics into the spill, the fact remains thousands of helping hands remain waiting to be used,” concluded CBS.
IN PICTURES: The Gulf oil spill’s impact on nature
Gulf oil spill: The story so far
Jones Act: Maritime politics strain Gulf oil spill cleanup
After Gulf swimmers report illness, questions about opening a beach

Top five bottlenecks in the Gulf oil spill response –

A lake of leaks reflects problems that stretch to the Orinoco

As the world watched BP battle with the devastating effects of the oil spill in the Gulf of Mexico, another problem with leaking crude nearby has managed to escape much attention.

Venezuela’s state oil company, Petróleos de Venezuela (PDVSA), has been trying to play down a chronic problem of leakages from thousands of miles of pipelines that criss-cross Lake Maracaibo, a large brackish lake connected to the Caribbean.

Critics argue that the extensive oil slicks that have appeared on the lake in recent months are a direct result of PDVSA’s negligence since the expropriation last year of 76 oil service companies that worked on the lake. Mismanagement, a problem that has tainted the economic performance of President Hugo Chávez’s government as a whole, has had a disastrous impact on Venezuela’s oil output over the last few years and is likely to hobble production for years to come.

The US Energy Information Administration estimates that Venezuela’s crude oil production averaged 2.2m barrels a day in 2009, about 190,000 b/d lower than in 2008 and down from 3.2m b/d in 1997, before Mr Chávez came to power.

PDVSA, which disputes those numbers, has made a concerted drive to attract foreign investment into the oil-rich Orinoco Belt in order to boost production. In February it signed contracts with foreign oil companies for projects that could add 2.1m b/d to output and bring some $80bn (£51bn, €61bn) in investment from Chinese and Russian companies as well as majors such as Italy’s ENI, Chevron of the US and Spain’s Repsol.

Although this represented a vote of confidence in Venezuela just three years after a wave of nationalisations in the Orinoco, experts estimate that it could take at least three or four years for sagging output to recover. Efficient co-ordination of the projects, technical requirements and capital commitments are all barriers.

One of the pitfalls is whether PDVSA, which is keeping a 60 per cent stake in the projects, allows its minority partners a fair degree of operational control. Given its own patchy management record, experts argue that PDVSA must allow partners to become more integral players in its joint ventures. PDVSA’s partners are not involved in the sale of their output, for which PDVSA instead compensates them at the end of each year. Companies privately complain that PDVSA is not paying them enough to cover running costs and reinvest in expanding production.

With oil revenues providing about half of government expenditure, Mr Chávez may still face several lean years ahead.


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venezuela in the news this week… we’ll see what comes of it…

this is the latest one from the Financial Times.
(Note: Highlights in bold and italics, MasterBlog)

Venezuela: Bolivarian bravado

By John Paul Rathbone and Benedict Mander

Published: August 5 2010 23:20 | Last updated: August 5 2010 23:20

Hugo Chávez

The giant Pepsi globe that once loomed above Plaza Venezuela in the traffic-clogged heart of Caracas had long been a landmark of the South American capital’s skyline. Now it is gone, dismantled piece by piece in June.

Much like the demolition of a statue of Christopher Columbus in the same square six years earlier, its removal was a crude symbol of President Hugo Chávez’s self-appointed role as the region’s anti-US, anti-capitalist and anti-imperialist standard-bearer.

It was also a reminder of faded hopes that relations would improve either with the US under President Barack Obama, following the mutual antagonism of the George W. Bush era; or with America’s closest ally in the region, neighbouring Colombia. If anything, Mr Chávez has raised the volume of his nationalist-Marxist rhetoric as his problems have grown both at home and abroad.

In July, when Colombian leaders again accused Venezuela of sheltering Marxist guerrillas intent on destabilising their country, and were confident enough of their case to present it to the Organization of American States, Mr Chávez promptly called it an act of US-inspired “aggression” and broke off relations with Bogotá. Havana, which receives subsidised Venezuelan oil in return for medical services, lent Caracas rhetorical support: “We strive for peace and harmony,” said President Raúl Castro. “But … let no one have the least doubt on which side Cuba will stand.’’

Meanwhile, with the country in recession, red-hued government propaganda in multiple media hails Mr Chávez’s “Bolivarian revolution”. The president has taken to expounding how it is “bad to be rich” – though one graffito snipes back from a grimy Caracas wall: “If it’s bad to be rich, it’s worse to be poor.”

All this might otherwise be ignored as the bitter internal politics of a volatile tropical republic were it not for Venezuela’s strategic importance and fears that Mr Chávez might consolidate his grip on power at legislative elections next month.

“Elections are of great importance for Chávez. They give him legitimacy both at home and abroad – they give him an air of respectability,” says Teodoro Petkoff, a garrulous former leftist guerrilla who now edits the Caracas-based newspaper Tal Cual.

A clear victory for Mr Chávez’s United Socialist party of Venezuela at the September 26 polls would be likely to herald further radicalisation of his socialist project, ease the way for his election to a third six-year term in 2012 and thus boost worries elsewhere about regional tensions.

Watching the results most closely will be neighbours in the Andes – a regional tinderbox, given the prevalence of clashing ideologies, well-equipped troops and armed guerrilla and paramilitary groups – and Cuba, as Venezuela’s closest ideological ally.

A further geopolitical consideration stems from Venezuela’s role as transshipment point for what is said to be more than half the cocaine shipped across the Atlantic to Europe every year. The country’s trafficking situation is deteriorating, the UN warns in its latest World Drugs Report.

Also watching the election closely will be those energy importers who ogle the country’s vast crude oil reserves, the largest outside the Middle East. As those reserves are easily accessible and use proved technologies, BP’s deep-water oil spill in the Gulf of Mexico has heightened their strategic value still further. That is as true for the US, which remains Venezuela’s biggest single oil market, as for rising energy users such as China, which recently curried favour as well as securing future oil supplies with a $20bn soft loan to Caracas.

With term limits abolished following a referendum last year, Mr Chávez has frequently expressed a wish to remain in office until 2021 – the 200th anniversary of independence from Spain – to see through his revolution. Yet, after 11 years in power, the extent to which he has succeeded in instilling in voters a mindset compatible with what he calls “21st century socialism” is debatable. (For example, he has condemned a widespread fondness for whiskey and Hummers.)

The government has therefore been working to boost its chances of maintaining in September the two-thirds majority necessary to push legislation through the National Assembly.

Changes to the electoral system this year mean rural areas will return more deputies than before, hindering the metropolitan-based opposition. State-owned media can meanwhile drench the country in pro-government propaganda. (While newspapers such as Mr Petkoff’s are highly critical, private sector broadcasters have been largely cowed into submission.)

Most unsettling of all is the possibility that Mr Chávez’s party might lose the vote yet still maintain effective control. In 2008, for example, the president res­ponded to the election of an opposition candidate as Caracas mayor by inventing a more senior post and ap­pointing a candidate of his choosing.

Another possibility, much discussed in the capital, is that he could rule by decree during the 100 days between the elections and the new deputies taking up their seats, changing irrevocably the legal landscape to his liking. A recent 40 per cent pay rise ensures the army’s loyalty.

“Chávez will not leave power voluntarily,” says Diego Arria, a leading opposition figure and former governor of Caracas. “This is a president whose motto is: ‘fatherland, socialism or death’. When they say death they mean us, not themselves.”

Such drastic outcomes may never come to pass. Despite the recession, crumbling public services, a series of damaging scandals and rampant violent crime, Mr Chávez still commands the support of about two in every five Venezuelans – roughly the same ap­proval rating as Mr Obama in the US.

In large part, this is due to his emotional bond with the poor, who in 2008 made up 28 per cent of the population, according to the UN. “Even with hunger and unemployment, I’m sticking with Chávez,” runs one refrain popular in the capital’s slums.

Gregory Wilpert, editor of pro-Chávez website, emphasises that many have benefited from the government-run social programmes. “The process of devolving local governance to communities via the communal councils and other forms of participation also gives many people a real feeling of being a part of the political process,” he adds. Critics say such councils usurp the power of elected municipal governments.

. . .

Either way, to gain a decisive victory, Mr Chávez will need to win over undecided voters – the ni-nis, or neither-nors – who account for about one in three of the electorate, according to polls.

In 2006, when he was re-elected at the peak of both his popularity and the oil price boom, that problem was partly solved by throwing money around. The trouble for “chavistas” today is that there is less to spend. This year, for example, while the rest of the region is expected to grow by 5.2 per cent, Venezuela’s economy is forecast to shrink by 3 per cent, the UN Economic Commission for Latin America estimates. Inflation, meanwhile, is running at about 30 per cent.

Paradoxically, because oil prices are hovering around $80 a barrel, a healthy level historically, government finances are not in perilous shape. Rather, the main cause of the continuing recession is mismanagement – the biggest rock on which Mr Chávez’s revolution has floundered.

PDVSA, the state-owned oil company that is the dynamo of the economy, has been leached to fund social projects with cash that otherwise would have been used for much-needed investment. The non-oil economy has been hobbled too.

Capital flight has been propelled by the nationalisation drive Mr Chávez has launched in a range of sectors, including energy, finance and telecommunications. Attempts to prevent such flight have made matters worse. The rationing of foreign exchange has made importing harder, fuelling scarcity, inflation and a flourishing black market – dollars sell for about four times the cheapest official rate.

The multinationals that once made the country their regional base, attracted by its relative stability and large internal market, have upped sticks. A web of regulations has tightened around those private companies that have remained – most publicly at Polar, the food and beverage company that is an emblem of Venezuelan popular culture, which Mr Chávez has threatened to nationalise against union wishes. Private investment has slumped amid the deteriorating business climate. As for nationalised companies, the state has been unable to pick up the slack.

Since nationalisation in 2008, production in the cement sector has fallen 20 per cent, and in the steel sector by as much as 80 per cent, according to Caracas-based consultancy Ecoanalítica. Most embarrassing of all were the 100,000 tonnes of food found recently rotting in the warehouses of state-run food distribution network PDVAL. Mr Chávez blamed “US-backed fascist oligarchs”.

The opposition has failed to capitalise on such problems. One reason is that much of the electorate remains distrustful following early at­tempts to unseat the president including a botched coup in 2002 and a national strike that paralysed the economy.

. A final factor is that many of its candidates are drawn from two discredited parties, Democratic Action and the Social Christians, which once dominated the country’s politics.

Dissidents from Mr Chávez’s party and former personal allies pose a potential threat. But some of the most prominent opponents have been hounded out of the country or imprisoned. General Raúl Baduel, a former close friend who called the president a “traitor” has been controversially jailed for corruption.

. . .

All this has devalued Mr Chávez’s reputation abroad. He still enjoys occasional celebrity support, from Argentine footballer Diego Maradona and Hollywood film producer Oliver Stone, for example. Oil also ensures Caracas secures the odd multibillion-dollar deal – most notably an arms agreement with Moscow, after the US stopped selling weapons to Venezuela in 2006. Caracas and Havana remain locked in a symbiotic embrace. But the president’s vision retains little credence with the region’s leftwing, and many of the area’s leaders and diplomats are embarrassed by his virulent rhetoric and off-colour jokes.

Mr Chávez has thus failed to bring closer to reality the Latin American union he espouses in evocations of his 19th century independence hero, Simón Bolívar. Sometimes, as when he closed the frontier with Colombia, he has worked against it.

Yet his command of Venezuela – its economy, army and institutions, including the judiciary – has never been stronger. There is therefore every chance that Mr Chávez, whose political style tends towards confrontation rather than negotiation, will endure. ¡Venceremos! – “we will conquer” – as the former tank commander is fond of saying.


see related post from the same FT piece: / Comment / Analysis – Venezuela: Bolivarian bravado

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The evidence keeps mounting against BP in the Macondo well explosion. The
post below is long but thorough!

Compiled by Washington’s Blog <> from the NY
Times, Bloomberg, LA Times, and the Times of London.

The New York Times noted
> yesterday:
Even though it was more than a month before the explosion, the [Deepwater
Horizon] rig’s safety audit was conducted against the backdrop of what seems
to have been a losing battle to control the well.
On the March visit, Lloyd’s investigators reported “a high degree of focus
and activity relating to well control issues,” adding that “specialists were
aboard the rig to conduct subsea explosions to help alleviate these well
control issues.”
As I pointed out
> last month:
The Deepwater Horizon blew up on April 20th, and sank a couple of days
later. BP has been criticized for failing to report on the seriousness of
the blow out for several weeks.
However, as a whistleblower previously told
<> 60
Minutes, there was an accident at the rig a month or more prior to the April
20th explosion:
[Mike Williams, the chief electronics technician on the Deepwater Horizon,
and one of the last workers to leave the doomed rig] … says going faster
caused the bottom of the well to split open, swallowing tools and that
drilling fluid called “mud.”
“We actually got stuck. And we got stuck so bad we had to send tools down
into the drill pipe and sever the pipe,” Williams explained.
That well was abandoned and Deepwater Horizon had to drill a new route to
the oil. It cost BP more than two weeks and millions of dollars.
As Bloomberg reports
> today, problems at the
well actually started in February:
BP Plc was struggling to seal cracks in its Macondo well as far back as
February, more than two months before an explosion killed 11 and spewed oil
into the Gulf of Mexico.
It took 10 days to plug the first cracks, according to reports BP filed with
the Minerals Management Service that were later delivered to congressional
investigators. Cracks in the surrounding rock continued to complicate the
drilling operation during the ensuing weeks. Left unsealed, they can allow
explosive natural gas to rush up the shaft.
“Once they realized they had oil down there, all the decisions they made
were designed to get that oil at the lowest cost,” said Peter Galvin of the
Center for Biological Diversity, which has been working with congressional
investigators probing the disaster. “It’s been a doomed voyage from the
On Feb. 13, BP told the minerals service it was trying to seal cracks in the
well about 40 miles (64 kilometers) off the Louisiana coast, drilling
documents obtained by Bloomberg show. Investigators are still trying to
determine whether the fissures played a role in the disaster.
The company attempted a “cement squeeze,” which involves pumping cement to
seal the fissures, according to a well activity report. Over the following
week the company made repeated attempts to plug cracks that were draining
expensive drilling fluid, known as “mud,” into the surrounding rocks.
BP used three different substances to plug the holes before succeeding, the
documents show.
“Most of the time you do a squeeze and then let it dry and you’re done,”
said John Wang, an assistant professor of petroleum and natural gas
engineering at Penn State in University Park, Pennsylvania. “It dries within
a few hours.”
Repeated squeeze attempts are unusual and may indicate rig workers are using
the wrong kind of cement, Wang said.
In other words, the well started losing integrity in February, and may have
never been permanently stabilized. If cracks in the well were never properly
sealed, then the well may have been unstable starting in February and
continuing until the April 20 explosion. (There is substantial evidence
> that there are cracks in the well now.)
Bloomberg continues:
In early March, BP told the minerals agency the company was having trouble
maintaining control of surging natural gas, according to e-mails released
May 30 by the House Energy and Commerce Committee, which is investigating
the spill.
While gas surges are common in oil drilling, companies have abandoned wells
if they determine the risk is too high.
On March 10, BP executive Scherie Douglas e-mailed Frank Patton, the mineral
service’s drilling engineer for the New Orleans district, telling him: “We’
re in the midst of a well control situation.”
The incident was a “showstopper,” said Robert Bea, an engineering professor
at the University of California, Berkeley, who has consulted with the
Interior Department on offshore drilling safety. “They damn near blew up the
And the wives of oil rig workers killed in the blast testified
> that their husbands reported that the rig had problems
controlling well pressure weeks before explosion.
In other words, not only is it possible that the well casing was somewhat
unstable for months before the blow out, but BP may have ignored standard
drilling practices by failing to abandon the well when the natural gas began
surging too violently.
Sure, the rig didn’t actually catch fire and sink until April, but cracks in
the well and dangerous natural gas surges may mean that BP never fully had
control of the well.
I’m not the only one asking such questions. It is worth re-reading the
following passage from the Bloomberg article quoted above:
On Feb. 13, BP told the minerals service it was trying to seal cracks in the
well … drilling documents obtained by Bloomberg show. Investigators are
still trying to determine whether the fissures played a role in the
Damaged Blowout Preventer
Whether or not BP had lost control of the well earlier, it was confirmed
yesterday that BP had damaged its key piece of safety equipment – the
blowout preventer – earlier, yet kept drilling.
The Los Angeles Times reported
> Monday:
BP officials knew about a problem on a crucial well safety device at least
three months before the catastrophic April 20 explosion in the Gulf of
Mexico but failed to repair it, according to testimony Tuesday from the
company’s well manager.
Ronald Sepulvado testified that he was aware of a leak on a control pod atop
the well’s blowout preventer and notified his supervisor in Houston about
the problem, which Sepulvado didn’t consider crucial. The 450-ton hydraulic
device, designed to prevent gas or oil from blasting out of the drill hole,
failed during the disaster, which killed 11 men on the Deepwater Horizon rig
and set off the worst offshore oil spill in U.S. history.
Investigators said BP did not disclose the matter to the appropriate federal
agency and failed to suspend drilling operations until the problem was
resolved, as required by law.
The New York Times adds
> the following details:
Federal investigators said Tuesday at a panel that continuing to drill
despite problems related to the blowout preventer might have been a
violation of federal regulations that require a work stoppage if the
equipment is found not to work properly.
While the equipment report says the device’s control panels were in fair
condition, it also cites a range of problems, including a leaking door seal,
a diaphragm on the purge air pump needing replacement and several
error-response messages.
The device’s annulars, which are large valves used to control wellbore
fluids, also encountered “extraordinary difficulties” surrounding their
maintenance, the report said.
And as I pointed out
> in May:
Several weeks before the Gulf oil explosion, a key piece of safety equipment
– the blowout preventer – was damaged.
As the Times of London reports
ece> :
[Mike Williams, the chief electronics technician on the Deepwater Horizon,
and one of the last workers to leave the doomed rig] claimed that the
blowout preventer was then damaged when a crewman accidentally moved a
joystick, applying hundreds of thousands of pounds of force. Pieces of
rubber were found in the drilling fluid, which he said implied damage to a
crucial seal. But a supervisor declared the find to be “not a big deal”, Mr
Williams alleged.
UC Berkeley engineering professor Bob Bea told 60 Minutes that a damaged
blowout preventer not only may lead to a catastrophic accident like the Gulf
oil spill, but leads to inaccurate pressure readings, so that the well
operator doesn’t know the real situation, and cannot keep the rig safe.
There are many other examples of criminal negligence by BP, Halliburton and
Transocean as well. See
> this,
> this,
> this,
> this,
<> this,
> this,
<> this,
> this,
<> this,
appen> this,
berg> this, <> this,
> this,
> this,
> this,
UEc2VjA3luX3RvcF9zdG9yeQRzbGsDYnBiZWdpbnNub3Zl> this and
> this.

View article…

China Oil Spill PHOTOS: Official Warns Of ‘Severe Threat’

First Posted: 07-21-10 08:37 AM | Updated: 07-21-10 04:21 PM

(AP) BEIJING — China’s largest reported oil spill had more than doubled by Wednesday, closing beaches on the Yellow Sea and prompting an environmental official to warn the sticky black crude posed a “severe threat” to sea life and water quality.

Some workers trying to clean up the inky beaches wore little more than rubber gloves, complicating efforts, one official said. But 40 oil-control boats and hundreds of fishing boats were also deployed in the area.

“I’ve been to a few bays today and discovered they were almost entirely covered with dark oil,” said Zhong Yu, a worker with the environmental group Greenpeace China, who spent Wednesday on a boat inspecting the spill.

“The oil is half-solid and half liquid and is as sticky as asphalt,” she told The Associated Press.

The oil was spread over 165 square miles (430 square kilometers) of water five days since a pipeline at a busy northeastern port exploded. State media says no more oil is leaking into the sea, but the amount of oil spilled was not clear Wednesday. Based on the known figures, the spill is significantly dwarfed by the BP oil spill off the U.S. coast.

See photos of the spill and the explosion:

Greenpeace China released photos Wednesday of straw mats of about 2 square meters (21 square feet) in size scattered on the inky sea, meant to absorb the oil.

Zhong said it was still difficult for Greenpeace China to estimate the spill’s real size and the damage it is causing.

But one maritime official with the city of Dalian, where the port is located, was already warning of environmental dangers.

“The oil spill will pose a severe threat to marine animals, and water quality, and the sea birds,” Huang Yong, deputy bureau chief for the China Maritime Safety Administration in Dalian, told Dragon TV.

At least one person died in cleanup efforts. A 25-year-old firefighter, Zhang Liang, drowned Tuesday when a wave threw him from a vessel and pushed him out to sea, the state-run Xinhua News Agency reported. Another man who fell in was rescued.

Beaches near Dalian, once named China’s most livable city, were closing as oil started reaching their shores, Xinhua News Agency reported.

Officials at all levels were turning out on the beaches for cleanup, using sometimes makeshift equipment.

“We don’t have proper oil cleanup materials, so our workers are wearing rubber gloves and using chopsticks,” an official with the Jinshitan Golden Beach Administration Committee told the Beijing Youth Daily newspaper in apparent exasperation. “This kind of inefficiency means the oil will keep coming to shore. … This stretch of oil is really difficult to clean up in the short term.”

China Central Television earlier reported an estimate of 1,500 tons of oil has spilled. That would amount roughly to 400,000 gallons (1,500,000 liters) – as compared with 94 million to 184 million gallons in the BP oil spill off the U.S. coast.

State Oceanic Administration released the latest size of the contaminated area in a statement Tuesday.

Though the slick has continued to expand – it covered a 70-square-mile (180-square-kilometer) stretch earlier this week – state media has said no more oil was leaking into the Yellow Sea.

The cause of the explosion that started the spill was still not clear. The pipeline is owned by China National Petroleum Corp., Asia’s biggest oil and gas producer by volume.

Images of 100-foot-high (30-meter-high) flames shooting up near part of China’s strategic oil reserves late Friday drew the immediate attention of President Hu Jintao and other top leaders. Now the challenge is cleaning up the greasy brown plume.

“Our priority is to collect the spilled oil within five days to reduce the possibility of contaminating international waters,” Dalian’s vice mayor, Dai Yulin, told Xinhua on Tuesday.

But an official with the State Oceanic Administration has warned the spill will be difficult to clean up even in twice that amount of time.

The Dalian port is China’s second largest for crude oil imports, and last week’s spill appears to be the country’s largest in recent memory.

Some locals said the area’s economy was already hurting from the spill.

“Let’s wait and see how well they deal with the oil until Sept. 1, if the oil can’t be cleaned up by then, the seafood products will all be ruined,” an unnamed fisherman told Dragon TV. “No one will buy them in the market because of the smell of the oil.”

China Oil Spill PHOTOS: Official Warns Of ‘Severe Threat’


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