Further #oilprices slippage may be ahead — and is Shell the new BP?

The International Energy Association is following on the thoughts I expressed in a blog post earlier this week and saying that oil could slump more before it has a longer-term rebound.

I personally don't expect oil prices to drop below $50/bbl (that's for West Texas Intermediate) for an extended period of time, but I do expect them to stay closer to there than to $65 for the rest of this third quarter, at least.

Meanwhile, Chris Tomlinson of the Houston Chronicle salutes Shell for warning that climate change is real. I advised him to take that with a grain of salt. I said that grain of salt is about 6 years old, and its name is British Petroleum. I mean, Beyond Petroleum. I mean BP.

You get the idea.

Exxon CEO delivers bracing dose of reality on #oilprices

ExxonMobil CEO
Rex Tillerson

Exxon CEO Rex Tillerson, not in this blog's Hall of Fame, due to the company's stance on climate change, and funding the deniers in the past, even more so under his predecessor Lee Raymond, nonetheless is willing to be honest about the world of oil itself.

So, folks like the GOP contingent of the Texas Legislature, especially Lite Guv Dan Patrick and his Texas Senate GOP minions, along with Comptroller Glenn Hegar, need to listen up to Rex's latest message.

He says oil will stay at $55 through at least part of 2017. Yes, two full years or more of oil (I presume he means WTI, not Brent) at an average of $55/barrel. BP's Bob Dudley is saying the same.

Both cite expected low demand growth and a world that is still awash with supplies over that whole time. On the demand side, besides Europe's and Japan's economies still being slow, and China slowing down, let's not forget that more stringent CAFE standards here in the US will kick in during the years ahead, dampening need here.

Meanwhile, as I blogged a couple of weeks ago, domestic storage at Cushing, Okla., continues to fill up, and will probably max out by the end of May. Commodities speculators are already buying storage elsewhere, but, given the words of Tillerson and Dudley, look ever more to be making losing bets. Because, we're awash in supply and prices haven't soared even with the speculators taking that much oil off the market. It's amazing how dumb some of these people can be.

Indeed, Tillerson said in another interview that Cushing maxing out could push prices even lower. Others, like Tom Kloza of OPIS, a respected name in oil analysis, are saying the same — that a Cushing maxout could push WTI back to $40/bbl. Inventories are already at an 80-year high and climbing.

Of course, spring and summer gas blending and other things mean that there will be ups and downs around that center point of $55. In fact, Tillerson said elsewhere he expects some volatility ahead.

That said, oil companies in the past have tried to buy up production when worried about that, or buy up overlaps if that might produce efficiencies. And, in what would be the mother of all non-nationalized oil companies, speculation continues to mount that Exxon is eyeballing a BP takeover.

And, as for claims that OPEC is dead? Tosh. The Gulf states, at least, have lower overhead than non-nationalized US oil companies, even in dying conventional plays, and certainly for tight oil.

Update: The city of Houston is getting a bracing dose of reality, too, as housing sales tumble.

Polishing Bush's BP apple

At first, I read this NYT column noting that Congress had a share of blame for the Deepwater Horizon disaster, and definitely agreed. Then, I got to the part where "the environmentalists" were blamed, and though I agree that Gang Green groups have made some pig-in-a-poke tradeoffs with Big Oil, I knew the author was stretching things.

Then, I noticed George W. Bush got nothing but kudos for trying to stop Congress, the GOP in Congress no less, from buttering up Big Oil. I also noticed that the Obama Administration also did NOT get blamed.

Then, I looked at the endline of the column and realized it was Executive Branch common oourtesy.

Oh, how deepwater oil drilling can go wrong

With the help of the New York Times, let us count the ways it DID go wrong with Deepwater Horizon, and could go wrong again in the future, unless President Obama actually does something during the drilling moratorium. (That said, as you read further down this long, quote-heavy post, and click the story link for more detail, you may not want to hold your breath over too much "does something" happening.

As it turns out, records and interviews show, blind shear rams can be surprisingly vulnerable. There are many ways for them to fail, some unavoidable, some exacerbated by the stunning water depths at which oil companies have begun to explore.

But they also can be rendered powerless by the failure of a single part, a point underscored in a confidential report that scrutinized the reliability of the Deepwater Horizon’s blowout preventer. The report, from 2000, concluded that the greatest vulnerability by far on the entire blowout preventer was one of the small shuttle valves leading to the blind shear ram. If this valve jammed or leaked, the report warned, the ram’s blades would not budge.

This sort of “single-point failure” figures prominently in an emerging theory of what went wrong with the Deepwater Horizon’s blind shear ram, according to interviews and documents. Some evidence suggests that when the crew activated the blind shear ram, its blades tried to cut the drill pipe, but then failed to finish the job because one or more of its shuttle valves leaked hydraulic fluid.

These kinds of weaknesses were understood inside the oil industry, documents and interviews show. And given the critical importance of the blind shear ram, offshore drillers began adding a layer of redundancy by equipping their blowout preventers with two blind shear rams.

So, it appears, again, that some of this is BP's fault, not Big Oil's fault. But, some of it is Big Oil in general:

Last year, Transocean commissioned a “strictly confidential” study of the reliability of blowout preventers used by deepwater rigs.

Using the world’s most authoritative database of oil rig accidents, a Norwegian company, Det Norske Veritas, focused on some 15,000 wells drilled off North America and in the North Sea from 1980 to 2006.

It found 11 cases where crews on deepwater rigs had lost control of their wells and then activated blowout preventers to prevent a spill. In only six of those cases were the wells brought under control, leading the researchers to conclude that in actual practice, blowout preventers used by deepwater rigs had a “failure” rate of 45 percent.

For all their confident pronouncements about blowout preventers (the “ultimate failsafe device,” some called it), oil industry executives had long known they could be vulnerable and temperamental.

Rising five or more floors and weighing hundreds of thousands of pounds, these devices were daunting in their scale and complexity. There were hundreds of ways they could malfunction or be improperly maintained, tested and operated. Not only did they have to withstand extreme environments, they were relied upon to tame the ferocious forces often unleashed when drilling rigs penetrate reservoirs of highly compressed oil and gas.

They were also costly to maintain. An industry study last year estimated the price of stopping operations to pull up a blowout preventer for repairs at $700 per minute.

Those costs could be enough to draw the attention of Wall Street.

Ahh, the old bottom line. That said, some industries accept more regulatory costs, or trade on a safety reputation as part of their bottom-line enhancement. Given that BP's safety record was so crappy under Tony Hayward's predecessor, Lord Browne, one wonders if he ever thought of that idea.

And that's not all:
>>In 1990, a blind shear ram could not snuff out a major blowout on a rig off Texas. It cut the pipe, but investigators found that the sealing mechanism was damaged. And in 1997, a blind shear ram was unable to slice through a thick joint connecting two sections of drill pipe during a blowout of a deep oil and gas well off the Louisiana coast. ...

(And) in two studies, in 2002 and 2004, one of the industry’s premier authorities on blowout preventers, West Engineering Services of Brookshire, Tex., found a more basic problem: even when everything worked right, some blind shear rams still failed to cut pipe.

West’s experts concluded that calculations used by makers of blowout preventers overestimated the cutting ability of blind shear rams, so-called because they close off wells like a window blind. Modern drill pipe is nearly twice as strong as older pipes of the same size. In addition, the intense pressure and frigid temperatures of deep water make it tougher to shear a pipe. These and other “additive pressures,” the researchers found, can demand hundreds of thousands of additional pounds of cutting force.



Yet when the team examined the performance of blind shear rams in blowout preventers on 14 new rigs, it found that seven had never been checked to see if their shear rams would work in deep water. Of the remaining seven, only three “were found able to shear pipe at their maximum rated water depths.”<<


And, the feds are at fault, too:
>>In 2001, just as BP and Transocean were pressing the Deepwater Horizon into service, the Minerals Management Service was being warned against allowing deepwater rigs to operate with only one blind shear ram. The agency had commissioned a study that documented more than 100 failures during testing of blowout preventers.



“All subsea B.O.P. stacks used for deepwater drilling should be equipped with two blind shear rams,” said the report, written by the SINTEF Group, a Scandinavian research organization that advises the oil industry and maintains detailed records on blowouts around the world.



The agency made no such requirement. Indeed, it waited until 2003 to require even one blind shear ram. By then, the industry had already started moving to two blind shear rams — although industry and government records show that roughly two-thirds of the rigs in the gulf today still have only one.<<
And, THAT is scary. Why, during the deepwater drilling moratorium, isn't Minerals MISmanagement Service requiring all deepwater rigs with just one ram to be retrofitted? Salazar, the story, notes has "recommended" such rules, but that's it. Equally scary is no testing requirements for backups like the deadman and autoshear. And, again, why isn't MMS promulgating new regs to this end during the moratorium?



Ultimately, it's a legacy of Reaganism + Newtism, combined with Clinton's natural neoliberalism, shifting Democrats far enough right that Barack Obama can talk about admiring Reagan.


That, in turn, leads to lies like this from Team Obama:

Barely three weeks before the Deepwater Horizon disaster, President Obama announced that he planned to open vast new tracts of ocean for oil exploration, including environmentally sensitive areas that for decades had been declared off limits by presidents from both parties.

Environmental groups were bitterly disappointed, but Mr. Obama said he had arrived at his decision after more than a year of study by his administration, including a careful weighing of environmental risks. Yet the administration’s examination did not question the oil industry’s confident assertions about its drilling technology. The well-known weaknesses of blowout preventers and blind shear rams simply did not make it onto the administration’s radar, interviews and documents show.

Mr. Hayes, the deputy interior secretary, said senior officials were reassured, perhaps wrongly, by “the NASA kind of fervor” over the oil industry’s seemingly “terrific technology.” They took comfort in what appeared to be a comprehensive regime of regulations. Most of all, he said, they were impressed by the rarity of significant oil spills even as more of the nation’s domestic oil supply was being drawn from ultradeep wells.

“The track record was good,” he said. “The results were significant.”

Not even environmental groups bitterly opposed to expanding offshore drilling were raising concerns about the industry’s technology for preventing deepwater spills, he added. “We were not being drawn by anybody to a potential issue with deepwater drilling or blowout preventers.”

Untrue. While not getting into every detail, non-Gang Green enviro groups have long worried about whether Big Oil could deliver.

Rich takes Obama to the BP cleaners

Again, Obamiacs will surely defend "their man." But, more and more mainstream liberal opinionators, like Frank Rich today, are saying that Obama, instead of just pointing fingers at BP, DOES have his share of blame for not really cleaning house at Interior in general and Minerals Management Service in particular.

That said, hiring Kenny Boy Salazar to run Interior made it clear that Obama, despite his climate change rhetoric, really wasn't that much of an environmentalist, wasn't that interested in environmentalism, and didn't really want to clean house.

Sidebar: Not a single Gang Green group has yet to even think about calling for Kenny Boy's head.

Reading between BP's escrow lines

That $20 billion escrow account? It won't be topped off until the end of 2013.

BP could be bankrupt by then. Or bought by ExxonMobil or Shell. All of which would render the account's topping off as kind of nugatory.

The Mighty Obama strikes out?

I didn't see too much of The One's speech, read snippets of it online, read more in the way of analysis of it. That said, nobody needed to tell me in advance that "pontificating platitudes" were likely. Also, now, can we get past the idea that he's that dynamic? Or eloquent? Can we also get past certain stereotypes (you have them too, many white liberals) that lie behind those presuppositions?

Face it, the speech sucked. It contained nothing new, other than Obama groveling more for the Senate to pass about anything he can call an "energy bill" with his name attached.

Where have we seen that one before? Oh, yeah. National health care. Stimulus.

Yes, Dear Leader, you have a share of BP blame

The Obama Administration has increased outsourcing inspections of offshore drilling rigs. Including Deepwater Horizon:

In May 2007, an auditor named David McKay arrived by helicopter on the oil rig Deepwater Horizon. His mission was to assess the rig's compliance with an international safety and environmental protection code.

McKay's visit lasted about a day, and he found that maintenance on some of the equipment was overdue by as much six months. Some of that work was "safety critical." But none of it stood in the way of the rig's recertification for another five years.

Yet, it's not just Obamiacs, but other Democrats who should know better, who chastise me, or wonder how I can say that in some ways, Obama has been worse than Bush.

Well, let's stop with the soft bigotry of low post-Bush expectations. Let's also remember that, on the environmental pitch, before his nuclear loan guarantees, before his nomination of Kenny boy Salazar, Obama never was a notable environmentalist. Hard ot be that when your hands are hugely outstrectched to companies like Exelon.

So, read the full story, find more outrage, and stop enabling him, dammit!

BP vs. Apollo 13

A great read from Timothy Egan about "can do," not vs. "can't do," but, "won't do."

And, as he compares BP's actions to those of Exxon 20-some years ago, it's clear that's what BP, as a Division I member of Big Oil, is all about. Not "can't do." But "won't do."

And, the longer we don't get a real climate bill, the longer Obama won't push the Senate to use reconciliation procedures even to pass the weak crap of a "climate bill" on its plate, and more, it's ever more clear that Just.Another.Politician.™ has some "won't do" issues too. And not just here. Torture, and other things, this is all about "looking forward," not backward.

BP: 50 percent is really 10 percent, right?

BP's latest attempt to shut off the Deepwater Horizon gush has not the greatest chance of success:

After several failed attempts to divert or block the well, BP's latest attempt involves cutting the broken riser pipe, making it spew as much as 20 percent more oil into the water for days while engineers try to position a cap over the opening.

Eric Smith, an associate director of the Tulane Energy Institute, said the strategy had about a 50 to 70 percent chance to succeed. He likened it to trying to place a tiny cap on a fire hydrant.

So, if it doesn't work, the 20 percent increase in the gush will be permanent? Adding yet more plumes to the already existing ones BP claims don't exist.

Ultimately, we have to look at BP's claim it can shut off the Deepwater Horizon gush with relief wells, by August. Is that believable? It took 10 months to shut off the huge 1979 Mexican well blowout. Yes, technology has advanced in 31 years, but that was a shallow-water well.

So, instead of two months, should we say four? Six? Or like Mexico 1979, 10 months? And, 10 months of a gush increased by 20 percent?

So, Obama wants a criminal probe of BP?

First, will this vaunted probe lead into Minerals Management Service as well as BP? If so, will it lead not just to career staff, but anybody appointed after Obama and Kenny Boy Salazar took over?

Answer: Not likely. DOJ will have a tough time proving criminality on BP's part. MMS won't get a look at, lest post-Obama MMS actions come on the radar.

Second, will Obama ask the Securities and Exchange Commission to get involved as well as Justice?

Answer: Not likely. That would mean that this was something serious, not just grandstanding.

Let's start with BP's claim it can shut off the Deepwater Horizon gush with relief wells, by August. Is that believable? It took 10 months to shut off the huge 1979 Mexican well blowout. Yes, technology has advanced in 31 years, but that was a shallow-water well.

A lie, if not under oath, is not criminal in the legal sense, but you know it is. So, is this another lie by BP to prop up its ever-fading stock value?

Seriously, if everybody knew it would take, say, 6 months not 2 for BP to fix this, and knowing this is affecting the U.S., not Mexico, unlike 1979, with attendant lawsuits, etc., where would you price BP's stock at? Ten bucks? Right in the heart of ExxonMobil or Shell takeover territory? Or by CNOOC or another Chinese oil company? Of course, if the suits and claims get thick enough, that could actually lessen BP's desirability as a takeover target.

In light of this, I think Robert Reich is right: We need to freeze BP's assets, at the least.

Third: That all said, a criminal probe is not the same as an incompetency probe. From President Obama through Rep. Ed Markey, the incompetence of Democratic elected officials in believing BP in specific and Big Oil in general also needs to be probed but probably won't be.

Answer: Of course not.

BP, open-heart surgery, Ed Markey

Considering Big Polluter did shortcuts on drilling Deepwater Horizon, do we really trust them to do "open-heart surgery" on their own cheating failure?

That's a big negatory there. Especially since Blossoming Plumes can't guarantee even this will contain all the oil.

And Ed Markey trusted BP before?
>>There is particular acrimony that BP's initial estimate of the leak at 5,000 barrels of oil a day dramatically understated the scale of the flow, which is now put at 12,000 to 19,000 barrels a day. Ed Markey, the Democratic chairman of a Congressional energy committee investigating the disaster, said BP was "either lying or they were incompetent".<< Gee, Ed, it took you now to believe BP might be lying? While you're at learning the truth, can you give us a tougher carbon-control bill than you did earlier this year? Meanwhile, a nutbar like David Vitter draws the wrong analogies after the blowout.

No, the Deepwater Horizon is not like a plane crash in general. Rather, it's like the Polish government's disastrous plane crash, where you learn the lessons of not flying a 40-year-old plane model, not letting passengers in the cockpit and other things.

BP keeps on lying and failing

The lying? The company had concerns about the Deepwater Horizon well nearly a year ago. But, that's not what officials indicated to Congress. Next question: Will Congress put BP's asshats under oath next time they speak? If not, then Congress is part of the problem, right?

It's getting so bad that, per a great AP enterprise story, BP won't even give a straight answer about why it lied in the past about things such as the rate of gushing.

The failing? BP's "junk shot" (how about shooting in Tony Hayward's "junk"?) doesn't seem to be working. Don't hold your breath on the "top kill," either:
The technician working on the project said Saturday pumping had again been halted and a review of the data so far was under way. “Right now, I would not be optimistic,” the technician (said).
Glenn Greenwald, with whom I agree on a lot of things, is only half right on this issue. It's true that there's not a whole lot Team Obama can do right now, post-blowout. But, so far, he's failed to devote any of his columns/blogs to how bad a choice Kenny Boy Salazar was to head Interior, just how little work Salazar did to truly clean house, not just at Minerals Management Service but across Interior, and more. He's also failed to look at how much or how little of an environmentalist Obama might really be, beyond the "green jobs" angle, which he really hasn't done much for anyway.

Glenn, this is the DOI, and the Administration, that was so willing to trust such a blatant liar as BP when it first signed off on expanding offshore drilling. What's so hard to get about why Team Obama has been a #fail precisely because it was a pre-blowout #fail? So, there's nothing much it can do now; defending Team Obama on that grounds is like defending it for not being able to shut a barn door after all the horses escaped, when many people knew that was a good possibility before the horses escaped.

C'mon, Glenn, you can do better.

ExxonMobilBP?

That's a scary thought. But, some investors and oil analysts are saying that BP may lose so much market value over Deepwater Horizon that either ExxonMobil or Royal Dutch Shell considers making a play for it.

ExxonMobilBP?

That's a scary thought. But, some investors and oil analysts are saying that BP may lose so much market value over Deepwater Horizon that either ExxonMobil or Royal Dutch Shell considers making a play for it.

Why doesn't Obama fire Kenny Boy Salazar?

Short answer: He needs a scapegoat.

Coming from an oil-and-gas state, and knowing MMS problems with former Interior Secretary Gale Norton, like him, being from Colorado, it's clear that Salazar knew a housecleaning was needed.

But now, we have a report by MMS's acting inspector general, that she deliberately sped up and made public:

The report began as a routine investigation, the acting inspector general, Mary Kendall, said in a cover letter to Interior Secretary Ken Salazar, whose department includes the agency.

"Unfortunately, given the events of April 20 of this year, this report had become anything but routine, and I feel compelled to release it now," she wrote.

Meanwhile, Kenny Boy pretends to be amazed:

Salazar called the latest report "deeply disturbing" and said it highlights the need for changes he has proposed, including a plan to abolish the minerals agency and replace it with three new entities.
The report "is further evidence of the cozy relationship between some elements of MMS and the oil and gas industry," Salazar said Tuesday. "I appreciate and fully support the inspector general's strong work to root out the bad apples in MMS.

Now, did he have a heads-up? Is Kendall speeding release to CYA for him? Anything and everything is possible.

Meanwhile, the Department of Justice is investigating BP, in what may become a criminal investigation.

How will Kenny Boy handle this? If MMS people are deposed, and it's clear that MMS had the same-old, same-old attitude after Jan. 20, 2009, and after his swearing in?

The easy way to measure the Deepwater Horitzon blowout?

Measure the methane part of the gush. I'll bet BP knows this one, too, and won't fess up.

Obama is now sweating BP bullets

And, short of impounding BP bank assets, realizing his administration is currently up an oil gusher without a paddle.

Of course, this is part of how Minerals Management Service is so effed up.

But, the information about MMS's nefariousness about BushCo made numerous headlines. Why Obama assumed it was really regulating offshore drilling, I don't know.

This, as I have said before, ultimately becomes an issue ofhis competency and management. And, so far, that's a fairly big fail.

Hey, neolib Obama-hugger Josh Marshall ... remember when you called me a "#fail" by e-mail response to my criticism of you saying Obama was on top of this 3 weeks ago?

Well, he's a #fail and so are you! Sadly for the Louisiana coast.

Obama-Salazar lies for BP continue

First, it's clear, and becoming clearer by the day, that Interior Secretary Ken Salazar flat-out lied in talking about how the Administration had put the kibosh on new offshore oil drilling after Deepwater Horizon:

“We’re also closing the loophole that has allowed some oil companies to bypass some critical environmental reviews,” he added in reference to the environmental waivers.

But records indicated that regulators continued granting the environmental waivers and permits for types of work like that occurring on the Deepwater Horizon.

In testifying before Congress on May 18, Mr. Salazar and officials from his agency said they recognized the problems with the waivers and they intended to try to rein them in. But Mr. Salazar also said that he was limited by a statutory requirement that he said obligated his agency to process drilling requests within 30 days after they have been submitted.

“That is what has driven a number of the categorical exclusions that have been given over time in the gulf,” he said.

But critics remained unsatisfied.

Shown the data indicating that waivers and permits were still being granted, Senator Benjamin L. Cardin, Democrat of Maryland, said he was “deeply troubled.”

I copy such a long chunk to wonder exactly how Salazar phrased himself in Congressional testimony. That said, I don't think he was sworn in, so he couldn't have perjured himself anyway.

Beyond that, it's not just the waivers, but the projects for which they're being granted:

In the days since President Obama announced a moratorium on permits for drilling new offshore oil wells and a halt to a controversial type of environmental waiver that was given to the Deepwater Horizon rig, at least seven new permits for various types of drilling and five environmental waivers have been granted, according to records.

At least six of the drilling projects that have been given waivers in the past four weeks are for waters that are deeper ... than Deepwater Horizon.

And, while Salazar blames Congress for requiring that drilling permits be approved in 30 days, he didn't mention this:

There is also a 60-day statute of limitations on contesting the waivers, which reduces the chances that they will be reversed if problems are found with the projects or the Obama administration’s review finds fault in the exemption process.

Meanwhile, Team Obama continues to talk tough on BP while actually doing little. Don't expect that to change from the thin-skinned (even more than BushCo, I think) Team Obama.

Meanwhile, if you want to know why Team Obama is so thin-skinned, here's a look at the latest on Grand Isle, La.

A century of BP 'fun' for Louisiana

Yep, the undersea/seafloor oil from BP's Deepwater Horizon blowout could linger, (and perhaps occasionally wash up on beaches?) ... for the next 100 years.

So, yes, Firedog Lake is right on why we SHOULD be mad at Team Obama, including the rotting fish head on this issue.

The one thing missing from the jeremiad is a call to immediately freeze all BP assets in the US, rather than just threatening to do so at some future date.

Too bad the Obamiacs who populate places like Talking Points Memo don't read, or listen to, stuff like this.