"Oils well that ends well" except that fat lady hasn't sung yet ... More Oil Problems revealed

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Despite the crowing by the pollies and the oil industry PR folks we've got problems. New wire stories to follow below my comments.

1. We've got 3 US refineries now with problems already (not 2 but 3)that have hit the wires. Others are reportedly experiencing at least minor glitches but apparently the only reports going public are the more serious ones that can't be hidden or hidden for long.

Some of my sources inside the refining end tell me things are still worrisome, and nobody thinks its over yet. Many of my old contacts are keeping tight lips and not talking other than to say its not over. Concerns will gradually ease up as time passes into February and March. All it takes is one wrong incident...and yes, chips are malfunctioning...no one is talking about it though.

#2. I've not been able to get in touch with my remaining oilwell field contacts to get any reports. Don't ask me, I don't know what is going on in that area... ditto for pipelines other than one refiner source in La. says there were at least some minor problems that he'd heard of but no details...at this point can't consider that serious.

#3. Meanwhile we get more reports trickling into the press. You've seen the OPIS report of the 3 USA refineries in difficulty... now ADD A 4th one... this time... overseas in China... with Shell having troubles... this from Bloomberg Newswire for 1/5/2000

Bloomberg Energy Wed, 05 Jan 2000, 4:21am EST

1/5 3:21 Shell to Cut Refining Output 20% in Singapore This Month as Margins Shrink By Lim Le Min Shell Singapore Cuts Refining Output 20 Percent in January

Singapore, Jan. 5 (Bloomberg) -- The Royal Dutch/Shell Group, the world's second-largest publicly traded oil company, will cut Singapore refinery output 20 percent in January from the previous month.

The company, the largest of four oil refiners in Singapore, said it will run its facility on the island of Bukom at 28,000 metric tons a day, about 47.5 percent of capacity. Singapore, the world's third largest export center for refined oil products, has capacity totaling 1.26 million barrels a day.

Shell didn't give reasons for the decrease and declined to comment on why it was cutting production to the lowest in at least 15 months. Shell ran its Singapore refinery at 29,000 metric tons a day in September 1998.

Shell's cuts come as supply of refined oil products like diesel and kerosene overwhelm demand in Asia, because of the recent startup of refineries in India and Taiwan.

Profit margins for simple oil refining in Singapore for Dubai crude, the most commonly used feed stock among Singapore refiners, fell to minus $0.82 a barrel Dec. 28. The margins reached a six-month low of minus $2.92 a barrel on Dec. 8.

Shares of Shell Transport & Trading Co., which represents 40 percent of the Royal Dutch/Shell Group, fell 1.5 percent, or 7.25 pence, to 476p yesterday. #4. Seems as though somebody in Australia dropped the ball with aviation fuel...this story is a PreY2k problem... here's the details from Bloomberg newswire again.

1/5 3:52 Exxon Mobil Faces $33 Mln Bill After Bad Fuels Ground Australian Pilots By Stephen Wisenthal Exxon Mobil Fuel Bill May Reach A$50 Mln, Say Australian Pilots

Melbourne, Jan. 5 (Bloomberg) -- Exxon Mobil Corp. faces a bill of A$50 million (US$33 million) to compensate owners of planes grounded by contaminated fuel, said a pilots' group that plans to sue the world's largest publicly owned oil company.

More than 40% of some 10,000 propeller-driven aircraft in Australia were out of service last month after Mobil Oil Australia Ltd. quarantined 6 million liters of aviation fuel produced at its Altona refinery near Melbourne.

The bad fuel left a sticky residue when burned, causing engines to run roughly and even lose power. The problem came at the worst time of the year for many operators of small planes, said Spencer Ferrier, a lawyer with Ferrier and Associates in Sydney and treasurer of the Aircraft Owners and Pilots Association (AOPA) of Australia. ``We think (the cost) will be as high as 50 million'' Australian dollars to flying services grounded during the peak Christmas season, Ferrier said. ``Some .. flying clubs earn a third of their income in the holiday period.''

AOPA will first act ``on behalf of a selected person'' to prove its case for damages from Mobil, said Ferrier, who is representing the association. ``Once we've proved it in one clear case, we can then go on to prove it in others,'' he added. ``A chemical that's used as a normal part of the refinery process,'' caused the contamination, said Mobil Australia spokesman Alan Bailey. Testing procedures have been set up to ensure the problem doesn't reoccur. ``We don't really have a response (to the potential lawsuit) at this point, pending further information as to what the basis of this claim might be,'' said Bailey. ``Virtually all the airports now have aviation gasoline available to them,'' he said.

Mobil is one of Australia's four petroleum refiners and marketers, along with BP Amoco Plc, Caltex Australia Ltd. and Royal Dutch/Shell Group, the other major local producer of aviation fuel. BP Amoco sold some of the fuel produced at the Altona plant, said Bailey.

#5. It's already been posted elsewhere but Nigeria's oil is down. Reportedly by guerrillas bombing a pipeline. Of course we have to take wonder about this. Yes we know about rebellion problems and it may really be true...but at this point, it is politically incorrect for anyone in the oil industry to admit to anything Y2K related. PERIOD. A good way to lose your job...

Nevertheless...one thing is quite clear... Y2K is more than a BITR and its just getting started.

As I noted in my post-rollover assessment, I downgraded potentials to no more than a '5'...on the scale. I see nothing to drop it any lower at this time because, "we've only just begun" and the first real post rollover window is just now getting underway lasting til early Feb.

All it takes is one little incident not caught quickly enough and a refinery could go Kaboom. Will it happen? I don't know. I'm not trying to scare folks here...but the jury is still out on oil embeddeds as evidenced by what problems have managed to eeek out to the press. So don't let the pollies "snow" you and I don't think the TEOTWAWKI folks have any reason to keep holding to that notion, at least in regards to oil. Meanwhile, stop ridiculing the ultimate doomers, it's unbecoming.

To those who've ridiculed or questioned my sources...or demanded that I prove myself in some way, go public or what not I don't need to. What you say or do or what I say or do has no bearing upon what happens...so shut up and wait to see what developes. There's a lot more yet to come and we don't know how serious it will be.

FOR THE RECORD... I gave ranges of percents of possibilities ...(see my final assessment before rollover and my comment afterwards)... I didn't predict TEOTWAWKI but I keep getting lumped into that camp. I gave only smaller percentage chances for problems lasting more than 4 to 6 months for oil as a likely scenario. My projection ranges, aside from the rollover have been within parameters so far. I felt we had a good chance for 4 or 5 refineries to go down or experience serious problems for indefinite periods... We are at 3 now here in USA (1 overseas...but I don't count overseas towards my projections) and were only now 4+ days into this thing and we're probably still aways off from the real peak for any problems even involving these embeddeds Remember the TAVA report indicated problems after Jan 31 with embeddeds... so we shall see ... no need to panic and no need to gloat like a blithering idiot about to get kicked in the pants by the goat from behind.

One final comment... to Downstreamer... on the oil markets...hmmm off only 6 cents and gasoline was up. Shortages of jet fuel ... Europe was hoarding it??? hmmm... Let me say that we'll see who has the last laugh on this one, hmmm??? I'd say things didn't exactly turn out as you figured for day 1 of Post rollover trading in the oil pits, now did they? Things are gonna roll back and forth awhile, and that is as much as I'll venture forth on pricing. Oh, and again, watch the California refineries carefully.



-- RC (racambab@mailcity.com), January 05, 2000

Answers

Thanks for the update.

-- number six (!@!.com), January 05, 2000.

R.C.,

What do you mean by "hit the wires" for these 3 US refineries? Are we talking about complete non-production or curtailed? Are these refineries big producers or bit players?

You described a scenario of only 5 US refinery shutdowns as an "exceedingly optimistic" prediction. So far, we are beyond "exceedingly".

Regards,

Shuggy.

-- Shuggy (shimei123@yahoo.co.uk), January 05, 2000.


uh.....? Let's see. "said it will run its facility on the island of Bukom at 28,000 metric tons a day", "Shell ran its Singapore refinery at 29,000 metric tons a day in September 1998." "Shell's cuts come as supply of refined oil products like diesel and kerosene overwhelm demand in Asia, because of the recent startup of refineries in India and Taiwan. Profit margins for simple oil refining in Singapore for Dubai crude, the most commonly used feed stock among Singapore refiners, fell to minus $0.82 a barrel Dec. 28. The margins reached a six-month low of minus $2.92 a barrel on Dec. 8."

Let's see if I have this straight. There is a huge glut of kero and diesel in Asia, Shell is losing money on every barrel processed over there, they are cutting back production to about the same as 9/98 (within 4%).

What does this have to do with Y2K?

-- Ken Seger (kenseger@earthlink.net), January 05, 2000.


RC thanks for the post. If you keep this up those......" Doomers gone Polly" who wanted you head on a platter may have to retract for a while. My oh my only wishing to be in the "right crowd" all the while.....

-- kevin (innxxs@yahoo.com), January 05, 2000.

R.C. Thanks for the up-date. I think most of us understand the "don't tell" policies being implemented by most, if not all companies. Some of the stuff is leaking out and it's really because of a lot of the folks on this forum that is allowing us to see the real picture. I'm not a doomer but I don't think we've even seen the tip of the iceberg. Again thanks for the post.

-- shockwave (vission441@aol.com), January 05, 2000.


Seger----- The jist of RC's post is it's still early, and unlike the reporting going that all's well. The " all clear" may have went up premature...

-- kevin (innxxs@yahoo.com), January 05, 2000.

Thanks RC!

No, don't go public, unless you wanna fry your sources, huh? Then TB2000'd be left with waiting for spin to trickle into the mainstream presses.

-- Hokie (Hokie_@hotmail.com), January 05, 2000.


RC, you are holding on strong, I give you credit for that. However, I work for a very large refining co. and well, yes we have a problem with an Alky unit. Delaware city has cat cracker down, and I think Motiva in the gulf is down. But these things happen and will continue to happen, so until we have 75% of US refinery's down, calm down. Just last year Tosco Avon went down, Chevron soon followed, Bayway did a turn around, motiva lost a cat cracker, these things happen, they will happen next year and every year after that. When you super heat crude under high pressure, things can and do go wrong. I could go on for hours about the parts and how long it takes to machine them, but for what. We anticipate problems every year. And besides, if any thing happens now it won't be y2k issue, let's be honest with each other. According to everyone else y2k is over. We just look like we are searching for a problem, I know cause I did it yesterday

-- Tatonka (xyz@gas.com), January 05, 2000.

RC,

Good to see you watching oil markets for a reflection on the severity of the problem. That's been my contention all along. Around here at TB2000 talk is cheap. Conversely, big money and inside info is reflected in these spot and futures markets. I'm not saying they're perfect but I am saying they are, and will continue to be, a more accurate reflection of underlying fundamentals than some anonymous forum.

As I said in an earlier post, that price reversal yesterday DID seem to indicate that something was amiss in the oil patch or some big money knew something that we didn't. Oil markets are gonna be soaking up a lot of this Y2k stockpile and this warm weather certainly isn't condusive to big heating consumption. Notice the nat gas tanked 15 cents early on. I'm with ya- the oil industry isn't out of the woods but I continue to doubt the severity of the embedded issue.

I also told Andy on an earlier post that I took half my chips off the table last week because of the y2k uncertainty and the acknowledgement that I'm gonna be at such a competitive informational disadvantage to the industry insiders in the first few days of post rollover.

Based on prelims, it looks like Norco was a power outage, Coastal's cat cracker prob isn't unusual on any given cold weather weekend, and that Wood River refinery just reduced crude runs- the back ends running fine (industry sources on this contention). There seems to be many more refinery sputters than just these listed in the OPIS article. If they're back up in short order- its business as usual. If they're down for months you'll be right.

Brents off about 25 cents and the NYMEX crude should be as well in early trading. Well see if big money comes in on the buy side again today.

I'm watching crack spreads for indications of severe refining problems (ie: the products to move up relative the crude). The jet diffs are getting interesting.

RC and others,

Love to have you all over at the new petroleum market forum. Check it out:

OIl Market Forum

-- Downstreamer (downstream@bigfoot.com), January 05, 2000.


Opps, Didn't take.

http://pub3.ezboard.com/fdownstreamventurespetroleummarkets

-- Downstreamer (downstream@bigfoot.com), January 05, 2000.



lin k

-- Downstreamer (downstream@bigfoot.com), January 05, 2000.

RC,

Was there a gulf coast platform which had a blowout over the weekend? I remember seeing a CNN Headline News bottom of screen item from Louisianna about it.

But I thought there were all those down-the-hole blowout preventers, full of sensors and control chips to detect the pressure variation and plug the well. Unless there is some truth to unaccessable embeddeds on offshore platforms and the mischief that they may cause.

WW

-- Wildweasel (vtmldm@epix.net), January 05, 2000.


RC:

Thanks for the update. To me, nothing you've said seems to be of any particular concern. We are seeing minor issues in the over all picture. i.e. 3 out of 90+ refineries in the US or 4 out of some 250+ refinaries in the world. Lets say its double that because we don't know everything. The only we can know if this is abnormal, is to examine how many used to have issues at any one time prior to rollover and make a before and after comparison. Otherwise these numbers are meaningless to us to make any real judgments on. They represent data not information. I prefer to make judgments on information.

BTW I noticed you didn't get around to repsonding to my challenge to you.

A challange to RC as he still has predictions in play...

-- Interested Spectator (is@the_ring.side), January 05, 2000.


Kevin - If you read my venting over at http://hv.greenspun.com/bboard/q-and-a-fetch-msg.tcl?msg_id=002DeH you'll know I'm still holding my breath on Y2K, though I do think we've dodged the biggest bullet. So I do agree that there will be Y2K problems in the future. WHether we will see them in the press is another thing... Now we only have to worry about the gnats.

My point is that RC's refinery #4 slow down is not related to Y2K, I'll assume 1,2, & 3 were related to Y2K otherwise why mention them.

Actually I think the biggest threat is the same one that has been around for a few years and has not gotten better, the stock market. I'm really amazed that it has held together this long. If you look at Price/Earning Ratio, ROI, Assets/share, profit/share, dividend/share (HA!) and other conventional barometers, it just does NOT make any sense whatsoever! The craziness is worst in the dot.coms, but other sectors have their fair share of lunacy.

-- Ken Seger (kenseger@earthlink.net), January 05, 2000.


Ken...

Please note in that story RC gave us... take a look at what Shell didn't say...

"Shell didn't give reasons for the decrease and declined to comment on why it was cutting production to the lowest in at least 15 months."

Frankly speaking... they're not commenting on why the decrease. They are not denying it is Y2K and they are not saying that it is either. Then again that might be because it is not y2K...but given the atmospherics...when a problem comes up...everyone has been rushing to say "its not Y2K"... but Shell is not denying as one would expect. What's up with that??? My guess is that its Y2K and they don't want to admit it...but that's just my guess.

-- Dick Moody (dickmoody@yahoo.com), January 05, 2000.



Shell traders indicated to a friend of mine Wood River'd be back up to capacity by Friday. Its probably very routine.

-- Downstreamer (downstream@bigfoot.com), January 05, 2000.

A major operator of offshore supply vessels has experienced problems with onboard p.c.'s, about 30% of its fleet, which is an inconvenience. However, I heard reports of more difficult problems with vessels equipped with DP (Dynamic Positioning). Also, I overheard sveral reports of ships not under command in the Gulf immediately following Y2K rollover. Yes, there was a blowout in South Marsh Island block after Y2K, reported in N.O. Times Picayune

-- (mariner@sat.net), January 10, 2000.

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