IEAs Y2K Oil Supply & Ripple Effects (United Nations Web-site)greenspun.com : LUSENET : TimeBomb 2000 (Y2000) : One Thread
From the United Nations Y2K meeting web-pages...
Update on the IEA's Y2K Activities
1. The IEA organised regional awareness raising seminars on the Y2K problem and its impact on the oil industry in Caracas and Singapore in March and April and in Abu Dhabi in May. Attendance at successive seminars has grown and delegates have actively participated in the dissemination and sharing of a wide range of lessons learned. The agendas for each seminar sought to bring together suppliers and customers, both at industry and government levels. Experts from companies and organisations, which are well advanced and actively involved in Y2K preparations, imparted their knowledge to regional delegates. The delegates in turn educated the speakers with the intricacies of their own political and economic environment and highlighted specific concerns. For many the seminars have provided a neutral zone, in which they are able to discuss freely mutual concerns with their peers. A fourth seminar is planned for Moscow in mid-June or early July and the SEQ may include Y2K concerns in their planned disruption simulation exercises in September. The seminars have helped to test the validity of the many comforting government and corporate assurances of Y2K preparedness. What emerges is a picture of substantial commitment to meeting the Y2K challenge complicated by concerns about liability, budgetary constraints and a lack of sufficient inter and intra sectoral dialogue.
2. In addition to the seminars, the IEA has created a section of its website dedicated to Y2K and its potential effects on the oil industry. The website is updated regularly and is one of the most visited sections of the IEAs website. Visitors to the site are able to download a detailed report describing and illustrating the problem in the oil industry. The report was presented and distributed at each of the IEAs regional seminars as well as at APECs Y2K symposium on 22nd 23rd April in Singapore. This report is currently in the process of revision and improvement.
3. Efforts to raise awareness and focus attention on vulnerable sectors must continue throughout the year. The public will expect that every possible effort has been made to deal with the problem and that all reasonable precautions have been taken. Government assurances will need to be both convincing and substantiated. The IEAs Y2K activities could play an important role in these assurances. The publics behaviour in the weeks leading up to the "roll-over" may be a key indicator, ex post, of our collective level of preparedness.
4. It is important that the public understand that some problems are inevitable. In such a dynamic IT domain, even the most careful inventory will omit some computer systems and software that may be susceptible to the problem. Furthermore, independent testing of systems that have reportedly been corrected has repeatedly uncovered additional Y2K problems. In integrated processes, such as refineries, the communication linkages between individual systems provide an area for further concern. A key finding of the Abu Dhabi conference was that while individual vendors were prepared to take responsibility for the Y2K compliance of their own equipment, they were unwilling to guarantee that it would function correctly when used in conjunction with those of other vendors.
5. Each of the IEAs Y2K seminars has raised new issues. A number of these have potential policy implications and governments should consider whether they merit positive action.
6. One of the most important findings is that just-in-time energy supplies present the greatest risk of failure. These energy supplies, electricity and gas, are dependent on a complex delivery infrastructure. Electricity is the ultimate just-in-time commodity with virtually no storage capability. Generation, transmission and distribution all present potential areas for concern. After electricity, gas is most at risk. Global oil supply is potentially the most flexible and forgiving of temporary Y2K problems, because there is substantial oil storage capacity. Additional flexibility is also provided by oil in transit to the consuming countries via tankers, which may, however, have their own Y2K problems. IEA stockholding requirements have a key role to play in ensuring that oil is indeed the most flexible and forgiving of fuels in response to short-term Y2K problems.
7. Principle drivers in the oil industrys Y2K preparations have been the twin desires to ensure business continuity into the millennium and to mitigate corporate liability. A Preoccupation with liability can lead to defensive compliance and delays dialogue with competitors, customers and other sectors. Fortunately many businesses have come to realise their interdependencies and competitive concerns have been successfully put to one side during Y2K discussions in an effort to ensure collective service continuity.
8. Although the December 31st "rollover" represents the most obvious manifestation of the Y2K problem, industry experts at the IEAs seminars have drawn attention to the fact that other trigger dates and events occur before and after December 31st 1999. Ripple effects may continue into the second quarter of 2000. One instance of this phenomenon may arise in the form of an accumulation of payment problems between businesses if invoicing or banking systems are affected. Leap year recognition problems may also cause difficulties in the new year. 9. Companies in the oil industry are already switching from the remediation phase of their Y2K programme to the contingency planning phase. For those institutions coming to the problem late, contingency planning may be the only measure they have time to put in place before the rollover occurs. Interdependencies have highlighted the necessity of such plans regardless of a company or countrys own state of readiness. Although every oil company already operates contingency plans they are not designed to deal with potential problems that may arise from multiple concurrent failures across the company and across sectors. Some problems are inevitable and Y2K specific plans must be developed to deal with them.
10. Presentations by some North American speakers have drawn attention to the fact that they have not found single "show-stopping" failures in their oil industry. However it is important to realise that ripple effects caused by several seemingly innocuous glitches have a potentially greater impact than discrete "show-stopping" failures where the root cause is easily identified. Problems in some sectors have the potential to ripple through the economic system. Faulty payment procedures are such an example. An oil tanker might not encounter any "show-stopping" engine or navigational failures physically preventing it from leaving port, but a problem in a telex system generating letters of credit thousands of miles away could prevent it from loading or sailing.
Vulnerabilities still exist at all levels of the oil supply chain. Some are described below.
11. Oil and gas pipelines have been identified as an area of ongoing concern. Most potential problems lie in pipeline control and monitoring systems and a vulnerability to disruptions in the electricity supply. An example of this vulnerability was demonstrated in Iraq earlier this year. A missile destroyed a single repeater station used to pass flow and pressure information to the control centre on the Kirkuk - Ceyhan pipeline. Although the pipeline itself was reportedly undamaged, this "blinding" of the control centre resulted in the closure of this major export line for a week. The financial consequences of such closures are obvious.
12. Refineries have very high current utilisation rates throughout the world, often greater than 100% of the nameplate capacity, so even small problems can have a global impact. Most refineries operate highly complex and integrated production systems. As a result they face probably the highest risk of Y2K failure of any link in the oil supply chain. The ripple effect of refinery failures has the potential to affect regional oil product markets and eventually the crude oil market itself.
13. Offshore oil production is generally at greater risk than onshore production because of the accessibility problems encountered when testing subsea equipment. Checking subsea equipment is both expensive and time consuming. Problems in safety systems are of particular concern as they may precipitate platform shutdowns. Interdependence between oil and gas production is also of concern. Failures in onshore gas processing facilities would not only close offshore gas production platforms but also those oil platforms where associated gas was produced. Any failures in the gas supply chain would inevitably lead to fuel switching with some of that demand being directed toward oil. Shut-ins of offshore gas production might therefore be associated with a surge in oil demand, as for many consumers the rollover occurs in mid-winter and demand for heating is likely to be high. The political fallout arising from an inability to provide home heating could be significant.
14. The maritime industry is susceptible to risks in tankers (Y2K failure rates of 20% - 30% in onboard systems are commonly expected), congested waterways (particularly navigation) and port facilities. Modern tankers are highly automated and many have crews of only 12 15 members. Switching to manual controls in the event of failures in the automated systems is therefore not a practical option. Little information is available on the compliance of individual port facilities and no one body seems able to provide it. It is likely that coastguards will have to rely on historical records of general seaworthiness to determine the risk factor for individual vessels. Where compliancy certificates do exist, their value is questionable.
Oil Demand Implications
15. A key finding of the IEAs seminars is that many oil-consuming countries are considering building oil stocks for precautionary reasons during the last quarter of 1999. What this means in practice is that oil demand may increase during Q4 1999, causing some tightness in the market. This precautionary stockbuilding during Q4 1999 is likely to be offset by destocking during Q1 2000 with correspondingly lower oil demand.
16. Y2K problems may influence oil demand in either direction. For example, problems in the electricity and gas industries could boost demand for oil as consumers, particularly those in industry with dual-fired boilers, attempted to switch to oil. Alternatively Y2K problems may dampen the general level of economic activity, as some economists have suggested, and result in lower oil demand. Problems in oil consuming equipment such as power stations and refineries would also precipitate lower oil demand. The net impact of Y2K on oil demand is unpredictable. Any impact on the oil market could be influenced by the availability of strategic stocks.
17. In the case of the oil supply chain the net impact is only likely to be negative, as it is difficult to imagine problems in the supply chain that would lead to more oil being produced than is normally the case. The oil supply chain is extremely complex and heavily dependent on other sectors such as shipping, telecom, electricity, water, banking and labour. Problems in these other sectors could quickly ripple through the oil supply chain, resulting in less oil reaching consumers. The Y2K readiness of these interdependent sectors is crucial to the oil industrys preparedness for the rollover date. These potential supply chain problems are the driving force behind the plans of many oil-consuming countries that are considering building precautionary stocks during Q4 1999.
IEA Further Work
18. The IEAs Y2K activities to date have been entirely funded by two member countries (the United States and Japan) via voluntary contributions. Given the short lead time for starting this work, these activities were not part of the IEAs work programme. The funds provided for that work are now exhausted and additional work in this area must either be funded via further voluntary contributions or by deferring other activities in the work programme. Member governments will need to consider the resource implications of further Y2K activities by the IEA. Unlike many IEA work programme items, Y2K is a transitory issue and does not have any permanent resource implications. The IEAs involvement so far has been widely appreciated and it would seem natural that it continues to strongly contribute to this problem area, basically by helping to disseminate information and assist member governments to take action, wherever appropriate.
19. Beyond activities already planned (the seminar in Moscow in June or July, and the Y2K element in the SEQ disruption simulation exercise in September), examples of areas that the IEA might consider further on the Y2K issue as options and possibilities, are:
Y2K work at the IEA to date has largely concentrated on the oil industry and particularly the major non-member countries and regions that export large quantities of oil to the OECD. This work has however demonstrated the inter-dependencies between the energy industries. Oil refineries and production facilities for example cannot function without electricity. Similarly most electricity supply industries (ESI) require delivery of fossil fuels to maintain an adequate supply of electricity. A wider study encompassing the potential inter-fuel impacts would seem prudent.
Several organisations (e.g. UN, API, Unipede, WEC, Eurelectric, UCPTE, and the International Y2K Cooperation Center) have indicated a keen interest to work with the IEA on this issue during the remainder of 1999. This is especially true of the electricity industry, where concerns exist about problems in one countrys ESI rippling into neighbouring states via interconnections. Electricity problems are of immediate concern since grids are highly interdependent. Issues such as whether individual national/state/provincial/company Y2K strategies reinforce or undercut collective readiness are of particular concern. For example, do the plans of some states to effectively disconnect themselves from internationally connected grids improve or worsen the overall situation. Individual countries following an isolationist approach may increase the volatility of those countries that remaining part of an interconnected grid.
In the case of electricity, a particular area of concern is fluctuations in load. If neighbouring customer countries or large domestic consumers (e.g. iron and steel industry) reduce their demand without giving notice, during the period leading up to and after the date rollover, it could provoke a problem in the ESI where otherwise none would have existed. Greater co-ordination could help avoid such problems and it has been suggested that the IEA could play an international co-ordinating role.
Failures in one energy system would have consequences for other energy systems. For example, failures in electricity and/or gas might raise the demand for oil. Obtaining information on how consumers might switch between different fuels would enable governments to prepare contingency plans to deal with these possible outcomes. The IEAs energy diversification expertise could contribute to the preparation of these contingency plans.
The supply of gas is a particular concern in Western Europe. Dependence on distant Russian gas supplies and on the long gas pipelines that pass through Eastern Europe inevitably raise supply security issues. Failures in European gas supplies could have ripple effects elsewhere in the world as European gas consumers attempted to switch to oil. The use of security of supply analysis undertaken by the IEA in recent years, e.g. The IEA Natural Gas Security Study published in 1995, could help member governments in their preparations.
The IEAs work on the Y2K issues facing the oil industry has demonstrated that the maritime industry is a particular area of concern. Since a large percentage of global oil supply is transported by tanker, problems arising at sea and/or in port facilities would disrupt the flow of oil to consuming countries. Potential navigation problems in the worlds choke points such as the Suez Canal, Panama Canal, English Channel, Molucca, Bosphorus, Hormuz and Bab el Mandeb are of concern. The IEA could play a role in ensuring that adequate consideration is being taken of these vulnerable choke points.
Because of the inter-dependencies between sectors, intra and inter-sectoral working groups have been formed in some regions. More work needs to be done in this area to develop contingency plans that encompass interconnectivities amongst and within sectors. Encouragement should be given to foster increased sharing of information as Y2K is a global problem, where interdependence is the greatest source of vulnerability. More dialogue amongst customers, suppliers and interdependent sectors will reduce the likelihood of Y2K failures and reduce expensive litigation after the fact.
The IEA has a key role to play in sharing information between sectors and within the energy sector in particular. The IEAs Y2K team members were pleased to find that the IEA was viewed by those attending its seminars as able to bring together different groups who treated the IEAs seminars as a neutral forum in which they could meet and openly discuss the issues. At the Singapore conference, for example, several customers had been trying unsuccessfully to meet with their single supplier for months. They met at the IEAs conference and were able to start to address the Y2K issue together for the first time. The Singapore conference also resulted in a follow-up conference being organised between some of the participants. It was attended by 500.
-- Diane J. Squire (firstname.lastname@example.org), June 17, 1999
International Y2K Coordinators Are Mapping Year-End Strategy (United Nations--USIA)
-- Diane J. Squire (email@example.com), June 17, 1999.
Great post on a critical area of concern. The next step will be to determine just how much of a shortfall it will take to seriously foul up the economy. Previous reports have stated that the 1974 shortage was only 5% below previous demand. For me, the biggest point is that this sector has the potential to create a massive restructuring of current point of sale availability. By which I mean rationing. During WWII there were various coupon allowances and I think some were for as little as 2 gallons a week. Others here may remember it better because I was only a kid at that time. Anyway, even if they allowed 5 or 10 gallons a week, that will mean a big change in how we travel.
-- Gordon (firstname.lastname@example.org), June 17, 1999.
I posted this in another thread but the obvious connection between the UN post above and this one brings me to post it agian.
The Oil Industry and the Year 2000 Problem
http://www.iea.org/ieay2k/y2khome.htm#Table of Contents
The International Energy Agency is the energy forum for 24 Member countries. IEA Member governments are committed to taking joint measures to meet oil supply emergencies. They have also agreed to share energy information, to co-ordinate their energy policies and to co-operate in the development of rational energy programmes. These provisions are embodied in the Agreement on an International Energy Program, which established the Agency in 1974. Decision of the Council of the Organisation for Economic Co-operation and Development to establish an International Energy Agency.
This paper reports on the current state of Year 2000 (Y2K) readiness in the oil industry. Detailing numerous examples encountered during testing, it demonstrates that the industry is not immune to the Y2K phenomenon.
This paper should help policy makers appreciate the scope and depth of the Y2K problem as they consider whether additional measures are warranted at the government or international level. In particular, policy makers are invited to consider whether there is a risk that business specific events might collectively take on systematic importance and whether collective contingency plans should be put in place to mitigate such risk. The IEA, as an energy security agent of its 24 member countries is prepared to address any such risk.
Preliminary Findings http://www.iea.org/ieay2k/html/prefind.htm
Support Infrastructure Could Cause Problems
Like any other part of the economy, the oil industry is heavily dependent on the electricity, telecommunications and water utilities. Given that these are highly complex, it is not unreasonable to expect that the oil industry will suffer some difficulties as a result of Y2K problems occurring in these sectors. Many oil refineries have their own electricity generating plants and it may therefore be possible to escape some of the worst consequences of electricity utility failures. However, some impact on the oil industry of utility related failures does appear inevitable.
Offshore Oil Production Most at Risk
Offshore oil platforms and rigs contain complex equipment and finding all systems that may be susceptible to Y2K problems is likely to be prove difficult. Furthermore, since many of these systems are difficult to reach, not least because some of them are submerged, they inevitably present oil companies with awkward testing difficulties. The pipelines from these offshore platforms to onshore processing and collection facilities also add to the difficulties caused by offshore oil production. Onshore oil production facilities and pipelines are somewhat easier to check for Y2K compliance than their offshore counterparts.
Annex A: Examples of Y2K Problems in the Oil Industry http://www.iea.org/ieay2k/html/ annexa.htm
Annex A: Examples of Y2K Problems in the Oil Industry
The scale of the Y2K problem is highlighted by Shell Expro's finding that it alone has at least 50,000 microchips in devices operating in the North Sea.
Tests by Shell in Scotland, uncovered a problem in an oil rig pump. In a simulation, one hour after pumping started at 23:00 (high tide) on 31.12.1999 the system rolled over to 01.01.100. As a result of this anomalous date the pump discharged continuously, instead of for the programmed two hour period, causing the oil rig to float as the tide receded.
Shell Services identified a problem with a fiscal metering system monitoring a gas pipeline which will fail in the millennium if left uncorrected. Fiscal metering of oil and gas production is widely used by host countries in support of taxation accounting. The impact of such a failure is unknown. It remains to be seen whether production would automatically be terminated, or could simply continue without being recorded.
Ascent Logic Corporation, a risk management technology firm in San Jose California, has inspected Y2K projects at several oil companies with embedded chips on the sea floor that control wellheads. "Most of those chips will shut down on January 1st 2000" says Ascent President and CEO Larry McArthur. "The question now is, is there enough diving capacity and time remaining to get a significant portion of these replaced?"
The oil industry is also affected by the Y2K readiness of its customers. Shell Expro notes that it is not enough for it to be Y2K compliant; if its main gas customer (British Gas for example) is not also compliant, a bottleneck might arise in the physical supply chain.
Despite the detailed examples of Y2K problems encountered in the oil industry, the Oil and Gas Journal (February 15th 1999) has drawn attention to the fact that embedded computer chips are proving to be less of a Year 2000 threat to the oil and gas industry than was previously thought. A director of a major oil company is quoted as saying "companies have not found nearly as many of these systems to be non-compliant as was anticipated when we started." However, looking for a few non-compliant systems represents basically the same managerial challenge as looking for a large number, with similar resource implications.
Shipping and Ports
The UK International Group of Protection & Indemnity Club (UK P& amp;I Club), a non-profit protection and indemnity mutual insurance organisation, conducted a survey of its members and found their awareness of Y2K problems to be generally low. It also found that there was little co-operation within the shipping industry in dealing with the issue. A director at P&I has stated that "There is a great deal of interdependence on Year 2000 issues throughout the shipping and transportation industry." He continues "It is not enough for systems to work within a ship. They have to be integrated with other vessels, port installations and far-flung supply chains."
Shell has devoted considerable resources to ensuring that its tanker fleet is compliant. Their findings indicate that their largest and most automated ships contain dozens of embedded processors. Worryingly, the original suppliers of the processors informed Shell that less than 10 per cent were likely to be non-Y2K compliant. However, detailed tests conducted by an outside contractor found that over 20 per cent of the shipboard systems were non-compliant and in addition approximately a further 10 per cent were suspect as regards date-related failure or malfunction. Thus the 10 % level of non-compliance quoted by the original suppliers was very optimistic by comparison to the 20 to 30 % failure rate found by the detailed independent survey. This example clearly illustrates the implications of relying upon manufacturers' guarantees alone.
By mid-1998 Shell had located around 3,000 embedded chips on its 50 vessels, equating to some 60 chips per ship on average. Tests on one of their Very Large Crude Carriers (VLCC) built in 1996 resulted in the discovery of failures in seven areas, including radar system mapping, ballast monitoring and ship's performance monitoring. According to Shell, "Not one of these failures would stop the ship, but they might if they all happened together." Similar tests on a Shell gas carrier built in the early 1970's resulted in systems failures governing equipment for unloading the cargo and navigation. Shell estimated that it would be spending up to $20,000 per ship to ensure that its tankers were Y2K compliant by its self-imposed December 31st 1998 deadline.
Separate estimates prepared by marine insurers appear to support Shell's findings on the number of faulty embedded chips. The insurers' estimates suggest that there may be more than 50 embedded chips in an average modern ship and that between 20% and 30% may not be millennium compliant. A survey of marine manufacturers conducted by the US Coastguard found 20% of the embedded chips tested were non-Y2K compliant. Whilst a recent report by London's Entropy Management Limited suggests that in big tankers and carriers, there may be more than 100 embedded chips per vessel. Uses for these chips reportedly range from controlling the operation of engine rooms to navigation, communications and cargo management systems. Entropy estimates that up to 20% of these chips could fail because of millennium problems.
Evidence prepared by The International Association of Independent Tanker Owners ("Intertanko") responsible for approximately 70 per cent of all the petroleum and petroleum products imported by the US highlights several additional problems to those identified by Shell's contractor (see above). Intertanko reports problems in alarm systems and strength and stability monitors. Noting that "Within our industry, there have already been reports of documented Y2K failures of ship main control, radar mapping, ballast monitoring, cargo loading, engine room vibration and ship performance monitoring systems." The radar mapping problem results from the fact that charts are dated and the radar system is unlikely to opt for an incorrectly dated map.
Currently the world's third largest charterer of tankers, BP, commands considerable influence in the industry. It is adopting a tough attitude with regard to the Y2K readiness of its charters. As from the 1st January 1999 it is refusing to employ vessels managed by companies that have not met BP's requirements on the Y2K issue. In May 1998 BP wrote to the 650 companies that it had chartered tankers from during the preceding two years requesting information about their state of Y2K readiness. It was made clear to the companies that failure to respond to the questionnaire would result in termination of charter dealings with BP. Although the questionnaire was very simple, comprising only 12 questions, half of which required the response yes or no, only 25% were initially returned. This 25% did however represent 50% - 60% of BP's charter requirements. Subsequent warning letters raised the response rate to around 50%, or 75% of BP's usage. The interesting point to note from this example is that half of all the companies that BP had used in the previous two years were unable or unwilling to satisfy them that their tankers were Y2K compliant. As a consequence these companies have lost tanker chartering business equivalent to a quarter of BP's annual requirements. The Y2K effect therefore has had a direct impact on the finances of many tanker chartering companies by early 1999.
The US Senate's survey of major transportation agencies and companies in September 1998 obtained a similar response rate to BP's. Of the 32 maritime shippers, major airlines, airports, railroads, trucking companies and city transit agencies surveyed, only 16 responded, despite over 100 telephone calls offering assistance. BP is clearly therefore not alone in being unable to receive guarantees of Y2K compliance from the transport industry.
AEA technologies, formerly part of the UK Atomic Energy Authority, has more than 100 consultants working on Y2K projects around the world. Clients include owners of tankers and passenger liners. AEA Technologies has observed real failures ? with verified evidence ? of embedded processor systems in ships, including:
Ship performance monitoring
Engine room vibration monitor
Service aid for ship control systems
Ship main control systems.
In addition to the Y2K problem, the tanker fleet may also face date- related difficulties associated with the Global Positioning System (GPS). This network of satellites allows planes, trains and ships to identify their precise location. Systems manufactured before 1994 will reach the end of their built-in calendars at midnight, Greenwich Mean Time, on August 22nd 1999. At this point they will rollover and the calendar will restart, operating for approximately 20 years (1024 weeks to be exact). Some people expect logistical errors on this date.
A GPS receiver determines its position by triangulating the difference in the time it takes for signals from two GPS satellites to reach it, a matter of milliseconds. The only time the week would enter into the calculation is as the system rolls over from Week 1023 to Week 0. A GPS receiver that is not prepared for the date rollover would think that the one or both of the satellites had taken 18 years to send a signal that should have taken less than a second. The US Federal Aviation Administration, a major user of GPS data, has upgraded its systems to handle the system rollover, as have airlines.
A recent report by Dow Jones Newswires (also carried by the Associated Press in Singapore) indicates that China's refineries may be at risk from the Y2K problem. A senior official of the China National Petroleum Corporation (CNPC), speaking on condition of anonymity, stated in a telephone interview that the Y2K problem "will lead to unimaginable results for CNPC." CNPC operates 46% of China's total crude oil refining capacity and was one of 18 state-owned enterprises recently told by China's State Council to address the Y2K problem with immediate effect. The anonymous CNPC official believes that the operation of 48 of the CNPC's 50 kinds of computer-based refining facilities and equipment will be affected in some way. He added that "once affected, the refining units will be out of control". China Petroleum News reported that the Y2K problem will affect about 30% of CNPC's 24,188 computer-based geological sensors and other equipment used in crude oil production and refining.
The scale of the problem facing refineries is illustrated by the following quote from Shell's website: "Major facilities like refineries and chemical plants are operated using highly sophisticated control technology. There may be thousands of embedded computer chips in the plant run with several layers of networks. In an extreme case, if safety-critical criteria at a plant cannot be met, then the plant can be shut down. But what happens, for example, to the continuous gas supply from North Sea fields into Britain ? a stream heavily controlled by IT (information technology) systems? Will it just be switched off if the safety-critical issues are not resolved?" This quotation emphasises both the scale of the problem at a refinery level and the interdependence of offshore production in the North Sea.
In Sweden a number of problems have already been found in nuclear power stations. At the three-reactor Forsmark station maintenance personnel found that the plant's data system was unable to recognise the first two digits of the year 2000 and that this would have resulted in an automatic shutdown. Vattenfall, the owner of the Forsmark station, has been working on the Y2K problem since 1996.
In the US a Midwestern electricity utility ran a test for Y2K compliance. When the clock turned over to the year 2000, a safety system mistakenly detected dangerous operating conditions and the power generators shut down. It took programmers three days to fix the problem. When they re-ran the test a different sector failed, again shutting down the system.
A technical advisor to Pacific Northwest has noted that as of November 23rd 1998 some 65 nuclear reactors in the former Soviet Union were not Y2K ready. Lack of time and money mean that Russia is facing particular difficulties in preparing for the problems associated with the new millennium.
-- Brian (email@example.com), June 17, 1999.
Also see this article in the April issue of Wired about Texaco's Y2K efforts:
-- Linkmeister (firstname.lastname@example.org), June 17, 1999.
Thanks for the posting of this article. I'd like to address a few points that relate to my own investigations and interviews with folks in the know inside the oil industry.
Regarding the following phrase in the post's point #3.
"The IEAs Y2K activities could play an important role in these assurances. The publics behaviour in the weeks leading up to the "roll-over" may be a key indicator, ex post, of our collective level of preparedness."
My comment: Hmmm. Sounds to me like my former fellow spin meisters... ( I used to do that for a living for a variety of political campaigns even at the White House level )...are trying to tell us something by not stating it overtly. Any honest admissions of problems will depend upon the mood of the people. Bottom line: Don't expect much from them. Their not expecting much help from you. They figure you'll go ballistic soon enough so why be honest.
Regarding the following in the Post's point #4.
"that some problems are inevitable."
No kidding!!! Gee, why won't they state that on "60 Minutes" or World News Tonite with Peter J.?
Also the statement: "Furthermore, independent testing of systems that have reportedly been corrected has repeatedly uncovered additional Y2K problems. "
Well now, that is a fact! My sources state that in many cases there is no fix. Parts to replace systems are not available. A new system will have to be designed, built and installed. Backlogs in parts availability in certain key components have shut down some key oil wells that will never come back.
Next statement (still in Point #4): "In integrated processes, such as refineries, the communication linkages between individual systems provide an area for further concern."
My response: Oh yes, big time concern, but right now as big as it is...there are even more terrifying concerns that make the communications problems semi-moot issues. Like Electrical power. Power is the really big nightmare (apart from embedded systems components vendors). But you could have no power problems and selected minor chip problems and deal with those just fine...but lose your telecommunications that relays the critical control information and you can lose the system just as much as if there were no power. So yes it too is a very big and lethal concern also.
Now on to Point #6. "Global oil supply is potentially the most flexible and forgiving of temporary Y2K problems, because there is substantial oil storage capacity."
My response: WRONG, WRONG, WRONG. Technically they're sorta correct. Yeh, there are a lot of structures still standing. They've not been maintained and have been outlawed by the UN, the Kyoto accords and here in the USA by the EPA. I know of one particular refinery that has one of the largest "tank farms" in the USA. At one time the kept them all full and could store perhaps 90 days of supply in those tanks. Today with, Just in Time Delivery/Inventory management policies the typical inventory on hand at this particular refinery is one and a half days! It fluctuates between hours to as much as 3 days. Seldom more than 3 days and sometimes the well runs dry folks! This is typical of many other refineries and storage areas also. Why? Well there is the inventory tax factor. The return on money factor (no return on $$ if just sitting in tanks) Also, gasoline doesn't store too well and is a pain to try and keep in storage...thanks in no small way to the EPA. The EPA is the main culprit for limited gasoline storage because new severe environmental regulations were devised to conform to new UN specifications. At the refinery I cited above, the EPA ruled that most of those tanks are unusable not because they were leaking or in disrepair, but because they might. They objected to the possibility that there were so many that perhaps a real disaster could occur if more than one leaked. Therefore, nearly 90% of the storage capacity was outlawed by the bureaucrats. This is rather typical of most other geographical areas in the country. Technically, yes there are a lot of structures but not a lot of one legally approved to be used. And many that are available are limited to only one product type. No more Kerosene in the tank for one month and then cleaned out for Diesel Fuel the next month. No, the EPA doesn't like mix and match. So capacity is not what it seems. Combine that with the tax men cometh from Feds, State, County and City and you've got the oil boys trying to play it close to the vest with JIT inventories. And... Refineries are running at full capacity just to meet demand. There is now, no more slow times in which inventories could be built up anyway. Another Spinmeister myth blown to smithereens!
Point #7 --- Oh sure there's cooperation... these guys don't trust each other and are not telling each other the truth. They're telling just enough to make it look good and hope the other guy might spill his guts or slip up and reveal something that can be used to advantage against the competitor on the short term.
Point #10. OKAY FOLKS, This one is a show stopper and a real barn- burner: "10. Presentations by some North American speakers have drawn attention to the fact that they have not found single "show-stopping" failures in their oil industry"
My response is: I guess that depends on one's definition of a "show- stopping" failure. What they don't tell you is that there have been numerous fires and accidents in refineries that have stopped production in the past year, most of which were Y2K testing related. Wow, the spin meisters really did slip this one in. There was one major fire that I know for sure was Y2K testing related. It occured on the west coast in northern California. Now, to me, that ought to rank as a show-stopper because it certainly stopped production for an extended period. I don't think the plant has made it back online yet. Who are these guys trying to fool?
They continue in Point #10: "Continuing Vulnerabilities Vulnerabilities still exist at all levels of the oil supply chain. Some are described below."
My response: No kidding!??!!!!!
Point #12... Well, I admire their courage to say that... and they really didn't understate the situationregarding capacity to demand.
Now in a follow up post to Diane's original post... Brian re-posted his lengthy article... and I found that it too is glossing over problems. I loved the following comment in the article:
"A director of a major oil company is quoted as saying "companies have not found nearly as many of these systems to be non-compliant as was anticipated when we started." However, looking for a few non- compliant systems represents basically the same managerial challenge as looking for a large number, with similar resource implications."
Yes, I've got one source that laughed his ____ off at that comment. He knows the guy who said it.They did consulting work for the fellow's company. They are lying through their teeth yet technically telling the truth. How could this be. They would quit looking and testing certain systems when they realized that certain systems all seemed to fail. They were told to simply quit testing any more of those systems and just move on not counting them. Then they stipulated to only test the systems that were easily accessable. The oil companies for the most part are only testing a small fraction of their totals and even then the skewed the results. It's not like they did a reflective polling sample that is statistically in the ball park of being even half way accurate. The really critical systems by the way were found to have the highest failure rate incidence running close to 25% and the fail rates for non-critical systems (that had no bearing on physical operations) were negligible). Bill Clinton's and Reagan's spin meister's would be proud, Bush's old spin doctors would be envious.I should know, I used to be one of them.
BOTTOM LINE: The industry is telling us between the lines that they are in deep doo doo and they realize it, but that there's not much they cand do except spin-away and hope for the best. They'rebending over and kissing their butts. They KNOW they're gonna have a LOT of problems. They want to tell you but they also don't want to get sued or mobbed by rioters, so they will state itin hard to read and understand bureaucratese... that way afterwards they can say..."See we told youso."...but no one paid any attention.
Therefore... as I said on another thread. Y2K's severity will most likely be more or less severe based on what happens with the oil and natural gas industry. They will more than likely be the key as towhether the other utilities continue functioning or not. While everybody is interdependent, the oil industry has the greatest potential threat hanging over it, severe enough to possibly take down the grid and thereby all the other utilities. Keep that fact in mind as you continue reading and reseaching on Y2K.
Also remember no Major Oil company is Y2K compliant because much of their embedded systems never got tested. Especially those at the bottom of the sea. Therefore, no major oil company will be Y2K compliant on 1/1/2000. At least one company, Chevron, I believe admitted that they won't make it. I at least commend that company for at least being honest enough to state so. As far as I know, it hasn't hurt their stock's values that much in trading.
-- R.C. (email@example.com), June 18, 1999.
Pooooole...Daaaaavis.....Where are yoooouuuu?
-- Charles R. (firstname.lastname@example.org), June 18, 1999.
Thank you R.C.
Would the NorCal refinery you spoke of be the most recent Chevron Oil Refinery fire or the earlier TASCO fire? (Exxon was also "down for maintenance" during the same time).
With 3 refineries down, Bay Area gasoline prices shot up to close to $2.00 per gallon at a time when an all time low ranged between the 70 to 90 cents per gallon.
I do expect higher gasoline prices next year.
-- Diane J. Squire (email@example.com), June 18, 1999.
Thanks for the info. This thread is the trump card.
-- Rick (firstname.lastname@example.org), June 18, 1999.
In answer to your question, I think it was the Chevron plant, but it's been awhile and I don't recall for certain. Exxon has had its share of problems also, as I'm told. But I really think it was Chevron. As I recall it was the one near San Francisco. There have been other instances of related testing problems as well, but with less dramatic impact and publicity. Yes, I think at the minimum we'll see a fairly dramatic rise in gasoline prices. I think that would be a safe bet.
-- R.C. (email@example.com), June 20, 1999.
No mopeds but two Cannondale bikes, interchangeable parts.
My car is now a pile of gold ounces. Depending on how it goes, and let's face it it's a no brainer that it's going to devastating, I wouldn't want to own a Hummer for example. I would sell any gas guzzlers asap, depending on how long it takes (!) to get back to approaching normal you will be able to pick up luxury autos at pennies on the dollar.
-- Andy (2000EOD@prodigy.net), June 20, 1999.
"Yes, I think at the minimum we'll see a fairly dramatic rise in gasoline prices. I think that would be a safe bet."
Agree. And welcome to the real world, gas prices in Europe are scandalous, nearly all of it is tax. Then you have 17.5% VAT (tax) on every purchase you make. Then the regular gubbmint taxes, say 40%. You have literally signed your life away in Europe as regards taxes, it's approaching 50% in Ireland and Germany, at least in the USA it's not *quite* so bad :)
But the gas hikes will be a BIG blow to confidence - hence put them off as long as possible. Won't be pretty.
-- Andy (2000EOD@prodigy.net), June 20, 1999.
Is there anyone on this forum that has read all of the above and still doesn't expect a depression next year? It seems inevitable to me. I'd really like to hear from anyone who disagrees. This issue seems to be ignored by some that openly doubt other dire forecasts.
-- Gus (firstname.lastname@example.org), June 20, 1999.