A reported refinery prob got the oil complex rocking and rolling again today. NYMEX crude moonshot another 65 cents with the heating oil up over 3 cents/ gal and the gasoline up about 2.75 cents (after Friday's 3.5 cent gain).

But the big news is the magnitude of this Venezuelan refinery problem. There's only 2 refineries in this hemisphere over 500,000 barrels a day- one is St Croix (Virgin Islands) and this one in Venezuela. It has a catalytic cracker with a mechanical problem that was earlier reported to be out of service for as much as 3 weeks. Around the NYMEX close there was a Bridge news story (private $ service, can't link in) that says the Venz are Force Majeuring buyers (meaning 'Act of God'contractual clause ~we ain't delivering) and the cat cracker may be down through FEB. Cat crackers take the light ends off the crude distillation column and crack the larger hydrocarbon molecules with a catalyst to boost octanes. They are the most important units for volume gasoline productions.

This is big stuff. This one refinery probably accountued for a third of our US gasoline imports (but lets keep this in perspective, the US produces about 8 million barrels a day of gasoline and imports 300-400,000 barrels / day).

More info at your trusty petro forum here:

Croaked Cat Cracker Story

-- Downstreamer (downstream@bigfoot.com), January 18, 2000

Answers

Paging Gordo & RC... Whatcha hearing?

-- Downstreamer (downstream@bigfoot.com), January 18, 2000.

downstreamer--thanks for the info. just to rule out what the non- believers will say. 1) when was the last time something this significant happened and did you see a long term impact from it? also 2) what could cause this type of mechanical malfunction?

thanks.

-- tt (cuddluppy@aol.com), January 18, 2000.

(Poking my head around the corner reluctantly) I'll wisper softly a question. "Any one check out the embedded controls"? That is they are not crispy crtters!

~~~~~~~~~~~~~~~~~~~~~~~Shakey~~~~~~~~~~~~~~~~~~~~~~~~

-- Shakey (in_a_Bunker@forty.feet), January 18, 2000.

Streamer:

Let me thank you hanging in here on this board and not bailing like so many others. I am glad to have a report like this one, right at my fingertips, because you took the time.

Keep us posted, and thanks again.

(Didn't the neighbors used to have a cat named cracker?)

-- semper paratus (still_here_with@my.pals), January 18, 2000.

http://biz.yahoo.com/rf/ 000118/2v.html

Tuesday January 18, 3:08 pm Eastern Time

Venezuela issues force majeure after cracker down

CARACAS, Jan 18 (Reuters) - Venezuelan state oil company Petroleos de Venezuela declared a force majeure on oil exports after a huge catalytic cracker was shut down unexpectedly, regional traders said.

The notice was served to clients Tuesday afternoon after the 108,000 barrel per day (bpd) cracker at the Amuay refinery was shut down on Sunday night after a system failure.

One trader said the unit would remain shut for 20-30 days, while another said it would shut for 35 days. It produces about 70,000 bpd of high octane gasoline for export and also some gas oil.

Venezuela is the largest supplier of crude oil and refined products to the United States, and the Amuay cracker is the country's largest such unit.

The unit normally produces several types of export gasoline, particularly popular on the the U.S. Atlantic coast, including RFG, 87 octane unleaded and 95 octane.

-- Homer Beanfang (Bats@inbellfry.com), January 18, 2000.

I guess we best be filling the cars up again. :> Keep us posted.

-- Moore dinty Moore (dac@ccrtc.com), January 18, 2000.

Downstreamer, Thank you for this post. I find it interesting that the first news story listed the problem as a "mechanical failure," with down time "up to 3 weeks," while the later report called it a "system failure" with a down time up to 35 days (so far).

"System" to me indicates "computer/embedded system." Am I reading too much into this word??

-- No Polly (nopolly@hotmail.com), January 18, 2000.

So, another big old refinery problem. Probably just Ven squirrels venting their frustration at their Yanqui brothers' hogging all the fame. I've still not heard if Motiva's back up at Del City, problems appear to be persisting at Yorktown, and crude and products are all flying. There's simply no one to stop the big boys once they start to move. They moved into crude, they're moving into metals as well. They went long into aluminum today and copper spiked also. I'm starting to think the show's not over re:Y2K. That being said, the news came out today that the UN in it's infinite capacity for ignorance appointed some German dork who'd previously been a fly in Saddam's jockstrap when he was a UN weapons inspector on the old teams. You remember them, the spy guys? The ones who got thrown out of town? Now, quite naturally the Iraqui's weren't thrilled with the choice and motivated their allies France, Russia et al. to publicly protest this appointment. Combine all this crap with OPEC's new vigilance in action program and you have a recipe for big moves. Thirty bucks is within reach. Heat hit post gulf war highs today. That is astounding, now we can't even scream about gulf war highs being approached, 'cause we're over them! Holy freeholies batman!

> 2000-01-18 12:07:02 EST > ***VENEZUELAN REFINERY PROBLEM PUSHES REFINED PRODUCTS UP FURTHER > 1/18 - - Reports of a major problem with one of the largest catcrackers in the western hemisphere has sent refined products futures higher this > morning, in some cases helping them surpass post Gulf War highs. > Industry reports say that Venezuela has suffered a mechanical problem at its huge 635,000 b/d Amuay Bay refinery and the unit may be lost for as long as three weeks. The 110,000 b/d catcracker is Venezuela's largest producer of finished gasoline, and traditionally accounts for a number of cargoes each month to the U.S. East Coast. > Gasoline futures were up some 2.03cts gal just after midday, with about a penny of the increase attributed to the refinery news. February no-lead stood at 76.55cts gal. > While the unit's downtime shouldn't have much impact on distillate production, the news helped galvanize an already strong No. 2 oil futures market. Just after Noon EST, February No. 2 oil futures were up 2.345cts gal to 76.15cts gal. > - Tom Kloza, tkloza@opisnet.com

-- Gordon (g_gecko_69@hotmail.com), January 18, 2000.

"A commodity in hand is infinitely more valuable than a promise to deliver" - Y2K mantra

-- itsy (itsy@bitsy.spout), January 18, 2000.

Hey, it's beginning to sound like old times around here .....

>"<

-- (nuts@needa.newaddress), January 18, 2000.

...And does any remember Paul Milne's csy2k/deja "NOT ONE DROP" of oil from Venezuela post and the grief he has gotten for it?

-- Total Doomer (sky@falling.com), January 18, 2000.

This is from the BOSTON GLOBE (Oct. 26, 1999).

* * * * * * * * * * * * *

ARAGUANA, Venezuela - The skyline along this hot and arid peninsula, which lies between the northern coast of Venezuela and the island of Aruba, is dominated not by buildings but by an endless maze of metal.

More than 940,000 barrels of petroleum flow through miles of pipes, tanks, and ovens and onto supertankers each day, most of it destined for the East Coast of the United States.

At the core of this carefully orchestrated movement of oil through twisted steel, large banks of computers monitor every step, making the world's largest oil refinery a crucial laboratory for one of the world's most important technological experiments.

From Venezuela to Beijing, governments and corporations around the world are scurrying to solve the Y2K problem, all with varying degrees of optimism. As is widely known, on Jan. 1 older computers may interpret the year '00 as 1900 instead of 2000. If the Y2K bug is not fixed, specialists warn, there could be computer crashes and disruptions in service from utilities, businesses, and governments.

The effects of a computer meltdown would be devastating for countries like Venezuela and Mexico, Latin America's biggest oil producers, whose economies depend heavily on how much petroleum they sell to the United States. For Americans who get most of their oil from Latin America - and who are being assured that most critical systems in the United States are now Y2K-compliant - an oil supply disruption could mean everything from higher prices at the gas pumps next year to long- term fuel shortages.

Officials at both Petroleos de Venezuela, S.A. (PDVSA) and Petroleos de Mexico (PEMEX) sound confident when they talk about their Y2K conversion strategies. Both companies, which are state-controlled monopolies, say they have updated more than 95 percent of their computers.

But even the most optimistic programmers admit they won't know whether their preparations will work until that Saturday in January.

''Everything from our payroll to the pipelines and our health clinics is run mostly by technology,'' said Luis Paredes, Y2K project director for PDVSA in Paraguana. ''We've taken care of just about everything, but there are so many possibilities of what could happen at midnight.''

To underscore the concerns that something could happen on New Year's Day, both corporations have developed dozens of contingency plans to cover virtually every aspect of their operations. PEMEX alone, which delivers about 1.3 million barrels of oil a day to the United States, has prepared 281 different emergency responses in case anything goes wrong.

At the PDVSA refinery in Paraguana, which was created in 1997 when two separate refineries were connected by a 15-mile pipeline that runs alongside the main highway, technicians have been working since mid-1998 to update their computers.

Most of the crude oil here comes from wells around Lake Maracaibo and the Gulf of Venezuela to the southwest. When it arrives, it is cleaned, cooked, distilled, and mixed with additives that produce everything from unleaded gasoline to kerosene and propane gas.

The mixtures are then stored in massive tanks that must preserve the proper chemical combination of each product. From there, the final products are sent via a spaghetti bowl of narrow, silver-colored pipes to the docks for delivery onto waiting tankers.

To cut labor costs and modernize its systems, the Venezuelan operation, like many US oil companies, began investing billions of dollars more than 20 years ago to automate nearly every step of the production process from the well to the tanker.

But relying so much on technology has also made it more vulnerable to any glitch that might occur. So far, PDVSA has spent more than $200 million to adapt its entire computer system.

''There's an understanding that this is not just a technical issue, but a serious business matter,'' said Ivan Crespo, Y2K director at the company's headquarters in Caracas. ''If something goes wrong, it could affect our ability to deliver to our clients or the way we pay our suppliers.''

By contrast, PEMEX, which gets most of its heavy crude oil from offshore platforms in the Gulf of Mexico, has not invested as much in technology - it even exports most of its heaviest petroleum to the United States for refining - meaning that while its production processes may not be as advanced as PDVSA's, it faces less Y2K risk. Experts say the company's financial departments are the most dependent on computers.

''It still has many systems and computers that must be Y2K compliant,'' said Alredo Jalife-Rahme, an international relations professor at the University of the Americas in Mexico City who has studied PEMEX's operations. ''They say they've solved nearly all their problems, but it is a very closed institution and we haven't had any outside observer who can verify what they've done.''

To help remedy their Y2K problems and to reassure their American clients, both the Venezuelan and Mexican firms have collaborated with national and international Y2K commissions, such as the American Petroleum Institute's Year 2000 task force.

Ron Quiggins, the task force chairman, said the US petroleum industry is about 90 percent compliant, based on its last quarterly survey. What's more, he added, any disturbances that might happen abroad from the Y2K bug probably won't be immediately felt because the United States has about three months' worth of oil reserves saved up.

''We are basically a risk-based industry, so this is nothing more than managing another risk,'' said Quiggins. ''But unlike the electricity and telephone industry, we can store fuel even if our supply chain is cut off.''

George Baker, a petroleum industry analyst in Houston, agrees up to a point. Although any temporary glitches in Venezuela and Mexico could be made up by domestic producers without any dramatic surge in retail gas prices, that could change if companies try to profit off the fears of scarcity.

''This industry has some irrational components, and scarcity has a market value,'' Baker said. ''Even if the underlying reality is that there is enough fuel, gasoline marketers know how to work a scarcity scenario at the pump.''

For many US petroleum industry officials, the biggest concerns about foreign providers like PDVSA and PEMEX are not so much about the companies' Y2K strategies but about whether their respective governments, suppliers, and banks will be ready.

A US Senate report released in August concluded that Venezuela was 12 to 18 months behind schedule in adapting its most critical government and business systems, mostly because of the political and economic turmoil that has gripped that country. It also predicted that 33 percent of all Mexico's computer systems would fail because of Y2K problems.

Mexican officials dismiss such reports as ''misinformation.'' And they argue that more than 5 million computers in three major sectors - government, financial, and nonfinancial - have been successfully converted.

''We benefit from the fact that many of our most important systems are concentrated in a small number of organizations, like PEMEX,'' said Antonio Puig Escudero, president of Mexico's Institute on Statistics, Geography and Information, the federal agency that oversees the country's Y2K commission.

Even if all this Y2K anxiety ultimately turns out to be more hype than crash, Puig notes that there has been a benefit to all that worrying.

''This has been a huge challenge for us, but here has been an unexpected positive impact,'' Puig said. ''This has increased our cultural awareness of computers.''

-- Rick (rick@wmrs.edu), January 18, 2000.

I previously posted that I thought oil would self regulate at $40/brl. If refineries keep crashing, all bets are off. Producing more oil is not a problem, getting it into a usable form is a complex problem. Oil=$30, Gas=$2.50 by end of Feb. Ooopps.

-- surrounded (hiding@thefirststate.com), January 18, 2000.

Gordon,

The German dork that they appointed is not german at all. It's a Swedish dude that served since his resignation in 1997 as the swedish ambassedor to the U.S. of A.....

Sooo, leave us german's out of it.... We have enough problems with our own campaign finance scandal....

-- STFrancis (STFrancis@heaven.com), January 19, 2000.