In BP We Trust

During the recent weeks, when we learned that the National Oceanographic and Atmospheric Administration (NOAA) is refused access to research and measure the spill by British Petroleum (BP), and the US Coast Guard warns reporters, research scientists and engineers away from the area, stating that they are simply following orders --- from BP --- one might surmise the sovereignty of the United States of America has been ceded to an oil multinational.

It would certainly appear that way. Many complaints have been heard from a variety of scientists and engineers, eager to monitor, research and learn from this catastrophe, in order to better prepare, and avoid, future such occurrences.

But what of the past decade and BP's other adventures?

Well, in this study by the GAO from October of 2007 (p.54):

In another case, on June 28, 2006, CFTC brought an enforcement action against BP Products North America, Inc., alleging, among other things, that BP cornered the physical propane market and manipulated the price of propane in February 2004.63 Also on June 28, 2006, DOJ announced that a former BP trader had pled guilty to conspiracy to manipulate and corner the physical propane market.(emphasis added - JW)

Hmmm......interesting stuff here!

This is especially interesting, from a strictly financial and market manipulation angle, as it was Goldman Sachs, Morgan Stanley, Deutsch Bank, BP, Royal Dutch/Shell et al., who originally financed the InterContinental Exchange (ICE), and later purchased the International Petroleum Exchange, changing its name to ICE Futures.

A well-researched report published by the Air Transport Association in 2007 had some interesting data-based graphs pertaining to oil and energy futures market manipulation via leveraged speculation.


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Another ATA graph gives an even better portrayal of ICE's good fortunes.


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Please note the position (the small blue sphere to the far right) of ICE. Much the same position in 2007 and 2008 as well.


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Now a recent article at the propulica.org site explains a bit of BP's sad record:

A series of internal investigations over the past decade warned senior BP managers that the company repeatedly disregarded safety and environmental rules and risked a serious accident if it did not change its ways.

The confidential inquiries, which have not previously been made public, focused on a rash of problems at BP's Alaska oil-drilling unit that undermined the company’s publicly proclaimed commitment to safe operations. They described instances in which management flouted safety by neglecting aging equipment, pressured or harassed employees not to report problems, and cut short or delayed inspections in order to reduce production costs. Executives were not held accountable for the failures, and some were promoted despite them.

They also include a study done (by James Baker III, no less, and several other fellows) on BP's refinery safety record. Not too confidence-inspiring, as one might expect.

Now the Telegraph, an excellent newspaper in the United Kingdom, mentions that BP's CEO (the one who yearns "..to get his life back."), Tony Hayward, very recently sold BP shares prior to the oil spill:

Tony Hayward cashed in about a third of his holding in the company one month before a well on the Deepwater Horizon rig burst, causing an environmental disaster.

Mr Hayward, whose pay package is £4 million a year, then paid off the mortgage on his family’s mansion in Kent, which is estimated to be valued at more than £1.2 million.

And, as one would expect, BP's stock price has suddenly fallen quite recently.

Now, I am not suggesting Mr. Hayward, upstanding fellow that he is (just kidding), knew beforehand of the spill.

But judging from Propublica's excellent and revealing article, Hayward would certainly have access to internal reports coming from that rig, including various problems occurring, and one might surmise he would actually read these senior management-destined reports?

Well, at least someone profited from this incredible ecological and economic catastrophe.....unfortunately, not the specific individual one would wish to be the lucky party!

And once again it is extremely important to mention that this oil rig, as one might easily expect, wasn't a union rig. Since the news has finally been reported that the senior management ignored pressure reading fluctuation problems (as well as others), and the marine engineer overseeing the rig was neither a licensed engineer nor had any formal training, the obviousness of why union employees should be mandatory is readily apparent.

With union workers goes union safety.



References

GAO-08-25. Trends in Energy Derivatives Markets Raise Questions about CFTC’s Oversight. Oct. 2007.
http://www.gao.gov/new.items/d0825.pdf

Telegraph.co.uk. BP chief Tony Hayward sold shares weeks before oil spill. June 5, 2010.
http://www.telegraph.co.uk/finance/newsbysector/energy/oilandgas/7804922...

Air Transport Association. Some info on oil speculation. July 7, 2008 (last revised).
http://www.raa.org/Portals/0/Presentations/ata-stopoilspec.pdf
(Originally from: Heimlich, John [VP and chief economist, ATA]. Reformulating Commercial Aviation. August 20, 2008.)

Morgan Stanley P/E Global Exchange chart, p. 3.
http://www.capitallink.com/companyprofile/panalystcoverage/panalystcover...

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Comments

Congressional hearings and testimony

There is so much information out there and I have a hard time believing an untrained, unskilled person was put on the rig. Licensing doesn't mean that much in engineering, most engineers don't take state certifications because they are so out of date and not relevant to the skills required to do the job.

here's one with a lot of technical details, from the House Energy Committee.

I'll try to dig out more. There is a lot on deaths and frankly good sound bytes to pull at the heart strings, plus real stuff to increase death benefits...

but the technical issues are hard to dig out.

Another place to be wary. BP is being pummeled to pay for all sorts of stuff. Now on some of these, it's clear motivations are of a different nature than the public good or solving the problem, cleaning up the spill.

For example, some of these spill clean up technologies are worth millions, if not a few billion in subcontracts with BP. They need to make sure it's not hype to agree to write up such a contract.

Same with businesses, If some business is claiming $250,000 financial loss, well, I'm sorry they need the tax and business receipts to back it all up and that does take time to verify.

So, it's common to blame workers and engineers. But I am watching this, from a technical level, and on that score, what's happening near the spill site, the efforts to cap the leak and so on, I don't see any screw ups, I see a real super engineering bitch instead.

On the clean up, another story. But it's also clear Matt Simmons esp. either is nuts or has some sort of motivation to go on air with these stories which cannot be validated.

So, in other words, expecting a corporation, even as big as BP, to act like the globe's disaster response team is pretty intense frankly. We saw our government royally screw that up during Katrina and that's supposed to be one of their jobs.

But blaming an engineer? Honestly, I'm not so sure. Blaming a BP company dude demanding engineers bypass safety due to some corporate profit bottom line? I can 100% believe that one!

Yes of course BP is evil, but usually the real engineers and technical people are not evil and I'm pretty sure they are busting their ass on those boats because I'm tracking on it all. Even technical corporations, completely dependent upon Scientists and Engineers for their business model, love to poop on them, hang 'em out to dry. The truth is in terms of power within a corporations, these people should rule and the PR, attorneys and marketing people should be pooped on and hung out to dry. As well as idiot bean counters and probably #1 are investors, large institutional investors who pound on a stock the minute a corporation increases it's labor, safety and investments costs, i.e. cuts just a tad into quarterly profits, OMG! they should be pooped on and hung out to dry.

We watched them all upset because China was going to raise wages! I mean anything that isn't outright evil, "investors" issue a "sell order"!

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You misconstrue

"So, it's common to blame workers and engineers."

You are misconstruing what I, and others, are saying. The blame is not on the workers and real engineers, the blame is on the criminal irresponsibility of the BP management and the possible fact that they weren't employing capable technical people.

This isn't the first time BP has acted in this manner, by a long shot. Read Propublica's articles.

Also, when they ignored (according to witness testimony, per the NY Times and the USCG investigation to date) the pressure fluctuations, they were doing exactly the same as an auto driver ignoring their oil pressure gauge warning light, etc., and continuing on at full-speed ahead.

Don't react so personally to this. No one is claiming the engineers and techs are evil!

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on just that one line in your post

You won't see me argue for BP, or try to claim they do not cut safety, put people at risk, bribe governments, spend billions to dismantle regulatory agencies and legislation or any of it. I'm just looking at that one line in your post.

I'm not reacting to your post, I'm reacting to the massive misinformation on Cable news as well as the press. This stuff is exceedingly nasty to understand, in particular flow rate calculations or what's really going on a mile below the sea and what even people are looking at on spillcam. So, I've watched, heard and read enormous misinformation on the technical details, esp. in terms of current "stop the leak" efforts.

There is a huge difference between engineering management and expertise. So, "management" might have ordered engineers to ignore pressure readings and so on, they may have labor arbitraged them, squeezed them, got them to quit, who knows....

I'm just going after very detailed technical specifics because on the technical end and this is where the spill will stop, although we can go into clean up technology too, to me is the critical thing. Also because most people on the Internets do not have enough technical backgrounds to discern whether something is real or not.

Then, the ones who will stop this leak are the engineers. Yet they are getting lumped in with BP executives and their sociopathic PR people and blood sucking attorneys. They are sitting in a sea of oil, on ships, burning gas and oil off of ships, it's very crowded there and to me, looks very scary for further danger.

This is why I started putting up those threads on the technical efforts, for I fear more corporate pressures could put at risk safety and make the engineering efforts screw up. That's not good. It's also not good for their overall morale to think while they are busting their butts the entire world hates and blames them. This is just the technical people, which is actually a lot of subcontractors, including Transocean and Oceaneering.

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One very crucial item...

...which has become apparent through all this, and especially given BP's extremely lengthy existence, is that there appears to be absolutely no contingency plan in place for such a catastrophe as this, and one would believe, given the mix of gas and methane they were drilling into, some type of contingency plan would have existed.

This is truly inexcusable, and points directly to the senior-most management. Tony was to busy watching the price on his stock options to bother with any actual management!

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oh yeah!

Who knew we'd be doing petroleum engineering 101 self-study online, but the more I read....

How can one make the probability of a blow out 100% at these depths? the only good news is probably ROV technologies will be further funded and advanced, which seems like a very good idea rather than continually trying to put people on planets as if that makes a lot of practical sense.

But I read that the BOP had places where nothing could cut through them, at certain junction points.....I guess we'll read more about those things now and their failure rates. If they claim "improbable" I think all need to dig into those calculations.

Big Pharma does the same thing, claiming "death is a rare occurrence"! Well, you look at the death rates and it's like 100,000 people are gonna die if 10,000,000 take these drugs (Vioxx was something like this), which is absolutely insane. The death rates on "approved drugs" is clearly too high too.

I mean this statistical lying crap is driving me nuts. You notice this? We're seeing a pattern where risk is trivialized away over and over. What do they not understand about delta and epsilon?

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Management is always to blame, and always shifts it elsewhere

My first incident with amoral and unethical management in the Private Sector was when a massive electrical storm blew caused multiple hard drive head crashes at the place where I was an operations supervisor.

After performing an all-night recovery, requiring much technical expertise on my part, I detailed everything which had occurred, and since I was concerned with the programming and hardware side, and not fully engaged with their applications, I warned them to check ALL DATA to see what hadn't been fully recovered.

One month goes by then senior management calls me in and attempts to blame the loss of some billing data on me.

The entire facility had to be pulled offline that night due to multiple lightning strikes against the facility --- even though they had a large scale UPS station, and lightning arrestors (the first lightning strike hit a nearby power line, causing a 30-foot circular eletrical arc, acting as an electromagnet, pulling in further lightning strikes which it then deflected into the facility.

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exactly, then you know what I'm referring to

It's also management who could order engineers to do really stupid shit. Odds are they did many times in the past, so keeping them at bay from the technical people is just something I"m worried about. That's what they do. Demand or order something impossible or absurd, then when it shows up they past the blame to the technical people, go unscathed and probably get a bonus. Nothing has changed since high school.

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pay the salaries of everybody out of a job

Did you hear that today? Salazar who frankly should never have been appointed, he's a real corporate troll, esp. in the Senate, said BP should pay the salaries of all of the laid off oil rig workers.

I found that to be ridiculous in a lot of ways. Should the government pay my salary because they are busy enabling offshore outsourcing and insourcing displacing U.S. workers? (in full, not the peanuts of UI).
Should the lobbyists? (well, uh yeah).

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Further explanation on BP and Goldman Sachs connection

An excellent, short and concise explanation of ICE and what they were doing below:

Goldman Sachs, Morgan Stanley, BP, TOT, Shell, DB and Societe General founded the Intercontinental Exchange in 2000. ICE is an online commodities and futures marketplace. It is outside the US and operates free from the constraints of US laws. The exchange was set up to facilitate ”dark pool” trading in the commodities markets. Billions of dollars are being placed on oil futures contracts at the ICE and the beauty of this scam is that they NEVER take delivery, per se. They just ratchet up the price with leveraged speculation using your TARP money. This year alone they ratcheted up the global cost of oil from $40 to $80 per barrel.

A Congressional investigation into energy trading in 2003 discovered that ICE was being used to facilitate “round-trip” trades. “Round-trip” trades occur when one firm sells energy to another and then the second firm simultaneously sells the same amount of energy back to the first company at exactly the same price. No commodity ever changes hands. But when done on an exchange, these transactions send a price signal to the market and they artificially boost revenue for the company. This is nothing more than a massive fraud, pure and simple.

Also, Tim Dickenson's article over at the Rolling Stone is outstanding!

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ut oh, oil flow isn't constant, moving target

I had just assuming that the oil flow out of the well or from the ground would be a constant, static, stable, one number. There was an interview with one of the estimate Prof's and said that is false, it's a moving target.

Even worse, he was saying the actual flow rate affects the design of the relief well and also risks safety.

Jez.

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$60 Billion

There is no mention of whether this includes civil and criminal fines so I'm betting it doesn't.

This has been percolating at 40,000 barrels a day since it started and they are now recovering 15,000 a day but cutting the elbow increased flow by 20% - its still putting out 33,000 barrels a day. The new estimates are for prior to the elbow being cut.

The flow looks much greater even now than prior to them cutting the elbow imo. Either way start plugging in $4,300 a barrel in fines for violating the clean water act and well this will get ugly when all other things are added in.

Keeping in mind that this could well go on for 6 more months easily BP is toast.

$4.3 Billion in Property Values

The spill may cost the London-based company $37 billion in cleanup and reimbursements for economic damage to the tourism and fishing industries, according to a June 2 report by Credit Suisse Group AG. The report didn’t include the effect on property values.

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no surprise there

I was hoping to put up a collection of more economic numbers on the never ending BP saga soon. But there is no way, regardless of the fact BP probably has profits larger than most nations GDP, that they can pay out all of that is being demanded. If you are of a mind to tackle it, feel free.

Others have been writing some good posts recently and that actually is the point of the site, of course one has to write and format a good post, which is a job. ;)

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Two Kinds of Disaster Recovery - a Third Kind in the Oil Patch

Jim, as you found out there's 2 major ways to recover data - high availability - where everything is rolled forward in real time, and snapshot or point in time. A third possibility is none at all, like the oil patch.

Management rarely pays for HA. So you have to explain what will happen when it all goes down. I have done HA and it is pricey with duplicate sets of hardware and off-site production environments. Real pros will test to DR recovery with drills from time to time.

Real DR as in the IT world is coming to the oil patch. Deepwater Horizon is forcing the issue.

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Burton Leed

$1.3 Trillion, and counting...

"A study started two years before the devastating oil spill in the Gulf of Mexico suggests resources valued at $1.3 trillion US are at risk from the oozing crude.

The study by Earth Economics of Seattle was released Thursday after researchers refocused it to gauge the impact of the spill. The report also factors in environmental degradation from oil and gas activity in the region over the years.

The trillion-dollar figure is based on the economic and human impact of the Mississippi Delta region, according to John Day, professor emeritus in the Department of Oceanography and Coastal Sciences at Louisiana State University."

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James question

I was going to write up another "oil open thread" with a host of info, this time focused on the real economic impact. Do you want to do this instead? This is of course controversial and this site pops up as a news source, so accuracy, credibility and whipping out the calculator directly is important.

You can email me too or we could do a "dual" authorship, whatever works. I've been digging around but it isn't "jellied", this reference is great.

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It's all yours, Mr. Oak.

No thanks, that's fine, you handling it by your lonesome will be fine.

I've been working on something else, which I've been really struggling with, as the government reports I've been reading are truly depressing -- from the standpoint of the government as an extension of a criminal enterprise.

Not even sure I'll be bothering with it, given what these reports state.

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writing up good articles/BP 48 deadline

that are cited, referenced and actually make sense in the writing of them....takes enormous effort. I know we have at least two lurkers on here who can pull it off, but they chicken out!

This deadline is BS. What do they want them to do, fly in a tanker, duct tape some more lines, seriously. While I can see faulting them for not preparing larger capacity in the first place, I cannot see pressuring them because that pressure will go down to the engineers. What do they want, a huge mistake, making it worse? And what kind of consequence if they don't? Are they gonna go down there to the bottom and hammer on something to make it all better?

Seriously. On the cleanup, that's another story. Cable news are all doing show and tells on various technologies, almost a VC showcase on TV. I frankly think they should give them all some money....if it proves they don't work, they simply don't get more money, end of story. But there are many which look good. I'm not sure about this bacteria stuff to eat the oil though, no mention of oxygen depletion in these dog n ponyies.

Anyway, as your friendly neighborhood admin, I see the statistics on the site and you have some fans.

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