Bonnie,

I'd like to direct this recent press release from the oil and gas sector to you for analysis. I do respect your opinion on these matters. I guess I just see the glass as half full and prefer the positive spin.

I would, however, like to know what you make of this:

February 18, 1999

Oil, Gas Industries Y2K Efforts Show Marked ImprovementSurvey

WASHINGTONThe oil and natural gas industries are on track to solving their Year 2000-related computer systems challenges before the end of this year, a new survey shows.

The latest survey on oil and gas industry Y2K readiness, presented by the Natural Gas Council and the American Petroleum Institute on behalf of the gas and oil industries (members listed at the end of the release) to the Federal Energy Regulatory Commission today, shows that most companies are in the final stages of their Y2K repair programs. Almost all94 percentindicated they will be "Y2K Ready" by Sept. 30, 1999. The survey, completed at the end of January, is a follow-up to the initial gas-oil industry Y2K survey last summer.

"Based on these survey results, we believe that we are well on our way to being Y2K Ready when Jan. 1, 2000 arrives so that consumers will have an uninterrupted flow of fuel for heating, transportation and industrial uses," said Oliver G. "Rick" Richard III, chairman, CEO and president of Columbia Energy Group. Richard is the gas and oil industries representative on the senior advisory group of the Presidents Council on the Year 2000 Conversion.

He added that while there always could be localized problems or circumstances beyond the industrys control, "were feeling increasingly confident at this point."

According to the survey, as of January 1999:

More than four-fifths of the combined oil and gas industry companies, 86 percent, are in the final stages of fixing and testing business information systems to accommodate the Y2K date. That compares with 55 percent of the companies in the September 1998 survey.

As for the embedded hardware systems that must be corrected, 78 percent of respondents said they are in the final stages of fixing and testing hardware and embedded systems for their operational integrity. The response in the September 1998 survey was 46 percent. Nearly all respondents, 97 percent, said they expect to have their Y2K contingency plans in place and tested by the end of the third quarter.

One key discovery in the survey was that embedded chips do not pose a significant problem for the industries, said Ron Quiggins, director, Year 2000 Program, Shell Services Corporation and chairman of the API Year 2000 Task Force, said. "Were not finding the embedded chip failures that we thought we had."

The survey also asked a new question in which respondents were to identify the major challenges they face in achieving Y2K readiness by Dec. 31, 1999. One of the frequent responses was a lack of information regarding Y2K readiness by key utility providers, including telecommunications, electricity and water. "We highlighted that issue when we presented FERC with our September survey results, and since then have begun working closely with the telecommunications and electric power industries on our common Y2K concerns," Richard said.

The impending date rollover from 1999 to 2000 has prompted concerns that sophisticated computing and telecommunications equipment used throughout the industrial economy will be unable to recognize the "2000" date and will not work. This is known as the "Y2K problem."

In the gas and oil industries, individual companies are working to ensure that does not happen. They are identifying and assessing both hardware and software problems, fixing them and then confirming that they are ready for the year 2000 through validation of their repairs.

To further ensure the smooth operation of their industries, oil and gas companies and associations have coordinated their Y2K efforts through the Natural Gas Council and API. They share information on technical issues, testing and contingency planning; identify and resolve legal issues, including legislation; and communicate within the industries and with the public on their work.

The survey covers about 1,000 companies from all sectors of the gas and oil industries, whose customers represent 88 percent of the consumption of those fuels in the U.S. This represents a significant 34 percent increase, up from 66 percent, of the energy volume covered since the gas and oil industries first Y2K survey released in September 1998.

-- Anonymous, February 19, 1999

Answers

RG, your glass is LESS than half full due to non-compliant pipe lines, docks, and tankers in the middle east who produce half of our oil - no oil from there. Making the glass less than half full are non-compliant pipe lines, ports, and tankers from South America - no oil from there. The U.S. oil industries must HAVE the oil to refine it into diesel oil, heating oil, and gasoline. We do produce large quantities of gas - much or most from Texas. I live in Texas near the gulf coast where all those refineries are and all those gas lines. The Galveston County y2k man is very concerned about the pipe lines and gas lines. Will they be compliant? Maybe, maybe not. The question is will they have any oil to refine? Could this be what is meant by "circumstances beyond the industry's control?" Non-compliant middle east, non-compliant South America. Wanna make a bet? Marcella

-- Anonymous, February 19, 1999

Marcella, you've hit it right on the head. Good summary of the *real* situation and where the vulnerability is. We can debate the banks forever, but the oil supply situation is a brutal reality. Next question, who gets first grabs on what does trickle thru?

-- Anonymous, February 19, 1999

I found Chevron's Y2K Readiness Disclosure interesting reading. Under their Current Expectations section they state, "While the company believes that the impact of any individual Year 2000 failure will most likely be localized and limited to specific facilities or operations, the company is not yet able to assess the likelihood of significant business interruptions occurring in one or more of its operations around the world. Such interruptions could prevent the company from being able to manufacture and deliver refined products and chemicals products to customers. The company could also face interruptions in its ability to produce crude oil and natural gas."

I also thought that it was interesting that the company had spent $40 million as of the end of Sept. 98 and expects to spend $200 to $300 million before they are finished. Makes me go "hmmmm"

-- Anonymous, February 21, 1999

Gordon, I believe that the federal government gets the first grab at the oil.

-- Anonymous, February 22, 1999

What does this mean

"86 percent, are in the final stages of fixing and testing business information systems to accommodate the Y2K date"

They have lumped fixing and testing together. That's taking 20% (remediation) of your total project and 50% (testing) of your total project in a combined form that tells you nothing. By that standard, a company could be only 10% into their remediation phase, but being reported as in the final stages (final stages meaning after planning, inventory, assessment) of their "fixing and testing" phase. It sounds better than posting the aggregate results. The same applies to their embedded systems.

I will wait to see the broken down percentages before I shout for joy on this press release.

-- Anonymous, February 22, 1999

RG, since I had not studied the oil industry survey methodologies prior to your question, I had to take time to do some research on the surveys in question. The original FERC press release about the latest oil and gas survey is at:

http://www.ferc.fed.us/news1/pressreleases/y2k.pdf

In my opinion, such things as what is asked on a survey, how that data is tabulated, etc. is more important than what shows on a summary press release. This was the second oil and gas industry survey, the first being done in August, 1998, the second in December, 1998. I went to look at the survey template and discovered there were two. These can be found at:

http://www.ferc.fed.us/y2k/surveyform.pdf

http://www.ferc.fed.us/y2k/decsurve.pdf

I was surprised to discover that the reporting forms had been changed between surveys. Getting and compiling voluntary information from many sources is a difficult job in any field, and consistency in surveys which are to be compared to each other is important. It's not good form (pun intended) to change what you're asking from survey to survey, even in slight ways. At the least, it puts an increased burden on compiling the data, and at the worst it can skew the comparisons.

If you check out the survey templates, you'll notice that both have check boxes for Not Applicable, Planning, Inventory, Assessment, Remediation, and Validation. The August survey has boxes to check under the categories "By System: Software Systems and Firmware/Embedded Systems." Under "By Business Areas" it also has "Financial/Administration, Operations, and Interfaces (Business Partners)."

The December survey has only three rows to check instead of five. The software systems and firmware/embedded categories are changed to "Business IT Systems: Software and Hardware". The second row is "Operations and Embedded Systems (Plant controls and instrumentation). The final row is "Supply Chain".

Besides the changes in the survey forms, I noticed that the directions said, "Please indicate the stage your company is in for each of the below areas." This indication is by checking a box, and no details or percentages are asked for, nor is their room to provide them. In other words, there is no way to tell if a company which checks the "remediation" box has just started that stage or is well into that stage. The same applies for each part of a project. All the survey indicates is what stage(s) the company is in (Inventory, Assessment, Remediation, Validation) and *nothing* about their actual progress in that stage.

While there is room for debate about how NERC chose to summarize its survey data, the actual NERC surveys shine very brightly in comparison to the oil and gas industry survey. It's my opinion that the oil and gas survey is virtually worthless in determining where the industry stands in its remediation.

I did get a laugh when reading the page at:

http://www.ferc.fed.us/y2k/respo918982.html

This is a list of the survey "Sponsors". Not "participants" or "organizers" as I am used to seeing in other areas, but "Sponsors". It brought to mind all the commercials "sponsored by...". I couldn't help but think this was either a very unfortunate choice of wording, or that it was a clue to the industry mindset. (Or perhaps someone in their ad department was assigned the project of developing the survey pages.)

I did find some very informative pages, including the interesting "minutes" of the meeting prior to the press release of the recent survey. Because this post is already long, I'm going to post a new thread titled, "Profiles of the Natural Gas and Oil Industry", along with the URL of the minutes (and snips) on a new thread. There is data on electric utility gas consumption and total U.S. energy consumption, too. Will go to post that info now.

-- Anonymous, February 25, 1999

I forgot to include something else about the survey which should be addressed in this thread. On each survey form, after the "Please indicate which stage your company is in" line, which is in bold print, the boxes to check follow. After those, there is a box of "Definitions" for the stages. Some of those definitions also changed, or were re-worded, between surveys. It could be interpreted that the definitions, more predominantly in the first survey, ask respondents only to check the stages they are in IF those stages are "Complete". However, since completion was not indicated in the bold instruction line first encountered above the check boxes, and the wording was changed in the second survey, how to respond is rather ambiguous and dependent on how an individual read the survey. (Do people generally read an entire document before filling it out? In my experience, most don't. They look at the first bold line, go straight to the check boxes and get the "bleeping" form filled out as fast as they can.) There could very well have been a big disparity between what the survey compilers thought the companies had stated, and what the individual filers thought the survey asked for. This is another reason for my assessment that the survey was sadly lacking in providing definitive data. I've undoubtedly forgotten something else, but I'm hurrying to get this response and info out while I can. The demands on my time have increased a lot in several areas and I can't do as comprehensive a job as I'd like to.

-- Anonymous, February 25, 1999