Petroleum refinery remediation and susceptibility.greenspun.com : LUSENET : TimeBomb 2000 (Y2000) : One Thread
There's been a recent focus on the oil sector in this forum with considerable evaluation and concerns expressed on oil production- both foreign and domestic. I'd like to open some commentary on what is undoubtedly the most complex (and hence what I would think the most vulnerable) link in the supply chain - petroleum refineries. And I'm looking for specific examples and technical explanations from those that have actually been involved in refinery remediation. And I'm not refering to the smaller, frequently undercapitalized, specialty chemical operations.
What has been the chip failure rate? What other process systems are vulnerable? How extensive are their backup auxilary power systems? How would things have gone had there been no remediation efforts? What percent of chips or units are getting replaced? Assuming crude supply flows in unimpeded and power stays up what are the rollover prospects for refining operations?
Prevailing industry contentions have been that there has been a very small percent of chip failure problems, remediation efforts have been extensive and refining operations aren't as vulnerable as other links in the oil supply chain. Obviously there's been extensive contentions to the contary in this forum but the evidence seems nebulous and vague. I'm looking for specifics on this particular link in the oil supply chain. How vulnerable are petroleum refineries?
Also does anyone know specifics on planned refinery shutdowns during the rollover? I also saw a Calif thread on Chevron allocating supplies to their dealers in late Dec. Does anyone know any other such oil company plans?
Come on.... talk to Downstream Daddy, you techies!
-- Downstreamer (email@example.com), November 05, 1999
I think this is worth reposting every few days until some technical people respond.
-- Bill Byars (firstname.lastname@example.org), November 06, 1999.
Downstreamer, is there an oil industry section in the Usenet? If so, that might be a good place to get feedback.
-- Mitchell Barnes (email@example.com), November 06, 1999.
We've been down this road before several times... I did so back in June and got nothing...but recently one of my sources re-explained to me the utter ludicrous basis for the questions to begin with... No answers because the questions make invalid assumptions... assuming there was correct testing and remediation. More on this in my response to Downstreamer.
-- R.C. (firstname.lastname@example.org), November 06, 1999.
I think you'll find few takers on this because most testing was bench type-testing and not real testing on-line nor end-to-end. Thus most of the data that you're looking for in refineries is invalid and of no consequence. Many of the black box systems have no schematics and it is unknown how they will interact with other elements that have date-chips that are thought to be compliant.
Thus, fail rates are immaterial. To get the answers you ask for most of the embedded refineries which include all but perhaps a dozen or so smaller and older refineries ... these would have had to shut down for as much as 6 months to do correct, valid, thorough testing. This would have meant no income and instead a net loss for oil co's at a time when oil prices were very low and profits were already sagging badly. None of the oil co's wanted to do that. Besides to do so would have triggered signals that all was not well with Y2K and thus would have alerted the public early on, and perhaps produced a premature panic which clearly the gov't wants to avoid.
The refineries are very vulnerable but nearly so as are the oil wells themselves.
Regarding shutdowns... I have heard several oil co's had indicated to key personnell that they 'd shut down, then the following week reverse themselves only to re-reverse that position 2 weeks later, and then 10 days afterwards flip-flop again. It's become clear to me that as I listen to my contacts...nerves seem to be getting tense within some oil co's inner circles as the CDC rapidly approaches.
Most storage capacity is already in use to near capacity...yet as I hear it, most co's plan to keep retailers tanks topped off as a way to increase supply ... Remember a lot of tanks are empty and must remain so because of new EPA laws which over the last 15-20 years have reduced storage capacity by as much as 90% of what we had in the last oil crisis of 79-80. Real storage capacity, as I hear it, is about 3 to 5 days for finished gasoline products at most refineries. Heating oil and Diesel is far less.
At this point demand is so high and supplies are so tight that one or two refineries breaking down for a few weeks could be a critical factor and could send prices skyrocketing.
If you want to proof of non-compliant systems and parts...go check out the links we've previously provided at the Baker Hughes Inc Website which lists not only oil well systems but also refinery system parts that are non-compliant.
Downstreamer, we've been over this and over this since back in June. I guess you were on vacation. But we've had others in the oil biz comment on this before, repeatedly. Why is it so hard for you? Is it because you just think the oil futures market MUST be aware of this first or else it can't be real???
Wake up and smell the coffee.
-- R.C. (email@example.com), November 06, 1999.
Concerning the Bruce Beach interview with the oil company engineers: My first question was, "How serious is the problem?" I was surprised by the answer. Approximately 25% of the relevant systems had problems. (Referring to a refinery, see page 26) http://www.webpal.org/Gas.htm
-- Dave F (firstname.lastname@example.org), November 06, 1999.
RC, I figured I'd start a new thread on this but I did want to post one correction here.
I guess I'm skeptical because some of the info you've put out before is just flat wrong. I know it wasn't intentional. It was in an area outside your realm of expertise and we all make mistakes.
In your post to Shuggy, you contended that oil execs that took positions in the futures markets could be subject to prosecution from the SEC for insider trading. First, the SEC has no jurisdiction-its the CFTC. But primarily, its just BUNK. Price discovery is one of the central tenets of futures markets. These markets are supposed to reflect the views of all the participating experts. There has never been any illegalities or even ethical problems in trading your views of underlying fundamentals. And you are right-I'm confused- because these markets don't reflect refining operation risks. Are we ahead of the herd or is the threat being overstated? At this point I'm guessing its both.
-- Downstreamer (email@example.com), November 06, 1999.
I'm with you on this. Your post said it all. At this point we are just repeating ourselves to doubters. They come on looking for solid evidence of danger, then procede to minimize every negative report. I have also come to realize that there are stubborn, mindset infected, "experts" in every field, be that oil, banking, whatever. They can't bring themself to imagine a catastrophic failure of our wonderful life. I have a very good friend who is in the stock investment field. He comprehends the Y2k problem on one hand, but on the other hand he can't bring himself to give up his rosy thoughts of the roaring stock market and how he plans to handle the next pull back. When I told him that next year his entire stock market portfolio may be toast, he could only look at me and say "Naaahhhh!" That's his need and mindset, so God Bless him (and help him).
-- Gordon (firstname.lastname@example.org), November 06, 1999.
"I guess I'm skeptical because some of the info you've put out before is just flat wrong. I know it wasn't intentional. It was in an area outside your realm of expertise and we all make mistakes.
"In your post to Shuggy, you contended that oil execs that took positions in the futures markets could be subject to prosecution from the SEC for insider trading. First, the SEC has no jurisdiction-its the CFTC."
Actually Downstreamer I'm not wrong as I was referencing historically, NY Merc trading of oil (WTIC) didn't come along until after both oil crisis had come and gone. Circa 1982 I believe when NYMEX initiated the oil futures well after the prior 2 incidents of price collusion charges which came while only the SEC had jurisdiction, before the advent of oil futures trading. I know I was doing news reporting back then on those issues. There was no Merc trading of WTIC then so the CFTC was not involved. The SEC was because it was affecting company stock valuations. SO therefore it is not "bunk" as you contend. In reality, you don't know your history. Perhaps it was before your time. But if you care you can dig into the actual records. Go check out the Time/Newsweek or NY Times stories during those periods and/or better yet, go check out the NY Mercs historical oil charts to see when they started. CFTC had NO jurisdiction regarding the times in question. And frankly to this day, if the oil industry repeated today in the markets what they did back then... they'd go to jail. Case closed. Period!
The actual price collusion charges date back prior to the inception of NY Merc trading of WTIC anyway. This would have been while the SEC was still in oversight. The charges dealt with price collusion. We had rounds of investigations after the first crisis involving the 1973-74 Arab Oil Embargo... and then again in the stormy period at the end of the decade in 80/81 as I recall.
At that time I do know that as a reporter I covered the Federal probes into the oil industry price fixing charges. The oil industry was indeed hit by some severe fines. I don't remember if the oil execs ever actually did any jail time, but it was certainly moving on track to do so. If I remember correctly, there were deals made on these fellows to admit to wrong doing and pay fines, etc and admit to the crimes. One or two execs may have been found guilty and had suspended sentences or simply paid huge fines. Frankly I don't remember now exactly how it all finally turned out, but those guys were sweating bullets, especially the 2nd time around. Their companies were hit with massive fines.
I do know that during the Gulf War there was talk that the oil industry might again try some price collusion...but I do remember the interviews on TV/Radio from industry leaders who remembered and cited the recent prior history and were terrified of any such notion of price collusion charges and were doing somersaults to avoid even the merest hint of price collusion.
As recently as a year ago, I asked some upper level oil management types about any Y2K related price rises and these guys turned white with fear at the very thought of such an idea. They indicated that such notions were not only antithetical but due to the past, most companies have either written or unwritten policies regarding any such personal activities related to such events. These guys are almost scared of their own shadows in this regard. Nobody wants to get dragged back in front of Congress again to account for trading activities that might come under their scrutiny. These days, they'll hedge but that is about all. Nobody wants a repeat of those early "witch hunts" as they like to think of them. No more cutting corners...too much fear. Nowadays, they've got to contend with not only the SEC but also the CFTC as you alluded to. SEC does the stock aspects and CFTC of course the futures markets.
Now, granted I don't know all the technical rules these days from the CFTC in regards to Oil execs trading their own accounts but frankly these guys are too scared to get caught up in any market moves that might spark Congressional hearings and a PR Debacle for the industry. The SEC however has made it VERY CLEAR...and these guys watch their "p's" and "q's" carefully. So you are wayyy off base in your charges regarding my statements. The point is... you sir are mistaken in your assessment of what the industry is/can and will do in these matters. It is actually a fine line that the industry has chosen to avoid going down. The industry prefers to avoid ever getting caught up in a repeat of the last 2 crisis and get hit with charges of price fixing and collusion. You won't see them doing what you expect them to do...too dangerous for them in more ways than one.
Therefore, I repeat my assertions as stated earlier and stand behind them. They are valid and accurate regarding various industry sources including relatives in the biz. I suggest that you have misjudged the industry.
-- R.C. (email@example.com), November 07, 1999.
Thanks, you're right on target with your assessment. Thanks for reminding me.
-- R.C. (firstname.lastname@example.org), November 07, 1999.
Actually, if you want some interesting speculation, go to the web for Houston Chronicle and use their search engine for y2k. You have to register but it's free. They had a rather large exam of the Houston refinery situation, a worse case scenario and a LOT of statements by people involved in the oil and oil distribution industry around Houston. The statements were not very polly either. It was probably 6 months or so ago. The link originated here and is probably in the archives. Very unsettling stuff to be on the front page of a paper that large. Since then......nothing. I wonder why no followup, Hmmmmmm?
-- Lobo (email@example.com), November 07, 1999.
I appreciate your response.
I can't take issue with your historical summation about price collusion allegations in the past. The oil shortages in the 70s indeed predated NYMEX trading and CFTC jurisdiction there.
But you continue to mix futures trading regulation and price collusion in the same arguement. They are mutually exclusive concepts. My main point of contnetion with you and others has been there are not any regulatory restrictions that would preclude oil executives and oil companies from trading their convictions on y2k rollover problems or any other anticipated supply disruptions.
Lets go back to the Gulf War for an example. Traders thought supply problems might occur after that Jan 15, 1991 'get-the-hell-out-of- Kuwait' deadline. In Aug and Sept they bid crude economics up to $40/ barrel. I don't know or care if it was execs trading their own account, or company account positions, or hedgers, or speculators, or what. The market reacted to an anticipated supply risk. Nothing, not SEC regs or CFTC regs or scared oil execs, prevented the oil market from reflecting these supply concerns. And this 'price discovery' aspect of the market tells me the Gulf War was a far greater risk to supply than this pending rollover. Is it way off? Perhaps. But there's no price collusion regulations that would prevent it from reflecting rollover risks.
-- Downstreamer (firstname.lastname@example.org), November 07, 1999.