U.S. says OPEC needs to pump more oil quickly

Reuters Story - March 03, 2000 17:09

(Adds Richardson comments, closing prices, grant details)

By Tom Doggett

WASHINGTON, March 3 (Reuters) - With the politically painful prospect of $2-a-gallon gasoline looming in the United States this summer, U.S. Energy Secretary Bill Richardson called on Friday for OPEC to swiftly boost oil production to ease tight world supplies.

The oil ministers of Saudi Arabia and Venezuela, two of OPEC's most influential members, and non-OPEC Mexico met this week to try to calm growing fears among industrialized countries that petroleum prices are spiraling out of control and will slow economic growth.

But assurance by the trio that they would support some kind of increase in oil production -- without identifying specific volumes or timing -- fell short of what industry analysts, U.S. lawmakers and oil traders had sought.

"We're not out of the woods yet," said Richardson, adding that OPEC must boost output "in a timely fashion...and get oil into the market."

Richardson said he would continue to be in close contact with key oil ministers, and planned to speak with Kuwait's oil minister next week.

"I have very good relations with them," Richardson said, referring to his counterparts. "Our talks are very candid and very open."

He said recent output talks with OPEC countries, as well as leading oil producers Mexico and Norway, have been positive and that he expects OPEC to agree to raise its production levels when it meets at the end of the month. He has said world oil supplies are about two million barrels a day short of demand.

Richardson refused to say whether he would press the OPEC ministers for a bigger increase if the Clinton administration believed the amount proposed was insufficient to meet world demand.

"Things are moving in the right direction and we don't want to send signals that would alter that positive movement," he said.

Richardson said releasing oil from the Strategic Petroleum Reserve was still an option being considered by the White House to tackle low oil supplies, but he would not say when, or if, reserve oil might be put on the market.

"We're not going to trigger or signal when (the reserve) is going to be used," Richardson said.

U.S. lawmakers, worried about gasoline prices becoming an issue in the November election, have clamored for the administration to release oil from the 570-million-barrel reserve. At present a gallon of gasoline costs $1.42, up 51 cents from a year ago.

In the jittery New York oil futures market, crude prices fell 18 cents a barrel to $31.51 on Friday after reaching the day before their highest level since the 1991 Gulf War.

Richardson also said the White House was taking a close look at what options it had to encourage American companies to drill more oil domestically. "It is clear that we have to have a comprehensive strategy," he said. "We're looking at ways to help our domestic producers." U.S. oil production last year was at the lowest level in half a century.

To conserve oil, Richardson said the Energy Department will provide over $133 million in grants beginning in April. They will be awarded to states and reduce energy bills of low-income families by an average of 25 percent by helping to insulate homes and providing other assistance against bad weather.

(-Tom Doggett, Washington Energy Desk, 202-898-8320)

-- Norm (back@inbusiness.com), March 04, 2000

Answers

A possible explanation why there is no mention of Y2K and embedded systems problems: these concerns are probably not part of the reporter's "beat".

If the reporter has not been paying close attention to the large number of post rollover problems involving refineries and pipelines, and if he has little or no knowledge of Y2K and embedded systems, there would be little chance of his making the connection.

Problems with planes and trains are similar cases in point.

Generally speaking, neither media nor government is making these connections. One of the many reasons for this is that those in government and those in the media rarely have the technical background needed to understand the technical issues and make the necessary connections: they don't have the expertise in the different subject areas or they don't have ready access to those who do.

-- Possible Explanation (Possible Explanation@ahhah?.cum), March 04, 2000.

Another possible explanation why there is no mention of Y2K and embedded systems problems: They are non-existent.

-- Ra (tion@l.1), March 04, 2000.

Possible:

I'm curious as to why the oil industry is pointed to as having embedded system problems when other industies don't seem to be having the same problems. I know squat about the oil industry but I know a fair amount about embedded systems in electric and gas utilities. Many of the systems used in the oil industries are the same or similar to what we use in utilities. I've seen almost zero problems in our embedded systems since the rollover. So why do you think these same systems should be having problems in oil?

-- Jim Cooke (JJCooke@yahoo.com), March 04, 2000.

Jim Cooke:

I am forwarding one interesting bit of background on embeddeds and the energy sector that may shed some light on the connection.

This material was posted on the web in May of 1999. I don't have the date of the actual report handy. If the URL is still good, it is probably at that site.

Forwarded Material:

Oil Refineries Are at Risk, Says IEA Report

Link: http://www.iea.org/ieay2k/html/refine.htm

Refineries are by design highly complex relying heavily on computers for smooth operation. An extensive survey of a refinery in the UK identified 94 systems requiring investigation for Y2K compliance. Of the systems assessed it was found that three would fail and that two of these three failures would cause a shutdown.

Attempting to trace even a small number of potential Y2K problems at a refinery is undeniably a major undertaking.

Refining is but a part of the general problem facing oil companies trying to address Y2K issues. It is a technologically intensive industry and companies are likely to operate myriad date sensitive integrated systems.

Embedded processors are the main source of this sensitivity and are found in devices such as flow meters, transmitters and smart valves. They are found throughout the oil industry and in all sectors, including drilling platforms, production platforms, pipelines and process plants. In the case of process plants, the devices containing embedded chips are interconnected, making the problem even more complex and increasing the possibility of Y2K failure.

A pilot inventory and assessment of a catalytic cracker and co-generation plant in the US revealed 1,035 systems of which 21% were not Y2K compliant and 6% that would lead to serious plant shutdowns or reduced production capabilities. The catalytic cracker would fail, rendering the refinery incapable of making gasoline. Given the widespread use of catalytic crackers in modern refineries, questions must inevitably be raised about their reliability in other refineries. For the co-generation plant 19% of the hardware, 36% of the software and 24% of the custom code was found to be non-compliant.

In late 1997 one oil companys engineers testing valve control equipment in their refineries discovered thousands of terminals controlling the dispensation of oil to have microchips with Y2K problems. All of the chips required replacement, however it was discovered that the replacement chips would not fit on the existing motherboards. It was therefore necessary to order both new chips and motherboards. Worse still, the replacement motherboards were found not to fit the old valves so the valves themselves had to be replaced. This example demonstrates how a Y2K problem can escalate beyond the original fault to include systems that may actually be compliant. An items Y2K compliancy is therefore no guarantee that its replacement will not be necessitated by problems arising in other equipment.

End of Forwarded Material

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

-- Possible Explanation (Possible Explanation@ahhah?.cum), March 04, 2000.

Richardson also said the White House was taking a close look at what options it had to encourage American companies to drill more oil domestically. "It is clear that we have to have a comprehensive strategy," he said. "We're looking at ways to help our domestic producers." U.S. oil production last year was at the lowest level in half a century.

Interesting that we haven't had a strategy w/respect to domestic oil production - as long as the price per barrel was low enough it more economical for domestic producers to cap their wells. You can bet that with prices where they are right now, many of those capped wells in Texas and Oklahoma are being rushed back into production as quickly as possible.

OPEC couldn't get it's act together for years. They all cheated on "quotas", and flooded the world with cheap oil all through the 1990's. Then, all of a sudden, they line up lock-step and cut production.

Hey, it's supply and demand economics at it's best, and it ain't rocket science. U.S. domestic production will go back up substantially this year, and prices will stabilize somewhere maybe 25 to 30% higher than last year. Same thing happened twice in the early and late 1970's.

Those who forget history are damned to repea

-- Nom (nom@de.plume), March 04, 2000.

Possible,

Thanks for the forwarded material. I think I read this while I was working on utility Y2K remediation.

Electrical generation and natural gas transport and distribution is every bit as complicated as oil production. As an example, we had over 6500 embedded systems of which about 60% were deemed critical. We managed to either repair, replace, or work around all of them and I'd say the record so far proves we did a good job. I'm still not clear why the oil industry couldn't have done the same thing.

I'm also a little suspicious of some of the facts and figures from that article. We never replaced any "chips". The system was repaired by either replacing at the board level or by replacing the entire system. I can't imagine anyone desoldering chips to remediate a system. A lot of the fixes were done by software and not by replacing any of the hardware.

We believed that we had a lot replacement to do in 1997. As it turned out, we only had to repair or replace about 5% of those critical items. All the rest either didn't have any date issues, the dates were OK, or we could workaround a bad date. I would be suprised if the oil industry was any different.

-- Jim Cooke (JJCooke@yahoo.com), March 04, 2000.