Saturday, July 24, 2010

Subsea Saturday: July 24 BP Oil Leak Update

1. Oilcast.

As the latest NOAA oilcast graphic shows (above), the surface of BP's oil lake visible in satellite photos presently is being pushed away from the Florida panhandle and toward the northwest, fouling more of the coastline of Louisiana where Bobby Jindal apparently welcomes it as an economic growth strategy:
Oil moving westward around the Mississippi Delta is collecting in the convergence line associated with the freshwater outflow -- this oil will continue moving westward threatening the Delta and shorelines west to Caillou Bay.
That doesn't mean we're in the clear, of course. Westerly winds and currents can, and eventually will, push it back toward us just as easily.

2. Bonnie Gone.

Former Tropical Storm Bonnie lost its status as a tropical storm and became a mere tropical depression overnight. The National Hurricane Center was saying early this morning, "Bonnie could degenerate into an area of low pressure... Warnings will likely be discontinued later this morning."

Two hours later NHC discontinued all warnings. Bonnie is gone. No storm, no depression, no Bonnie.

Here in Northwest Florida we barely noticed anything except high clouds and a very few abbreviated rain squalls. We happened to be in north Pensacola late yesterday afternoon and were caught in one weird, violent burst of a dust storm, followed by a ten-minute downpour. That was it.

By dinner time on the beach you could tell there had been enough rain to flood Via deLuna directly in front of the superior eatery, Florida Pizza. Then again, that often happens to this old section of Via deLuna, so it seems, even if there's been nothing more than a dewy morning.

3. Subsea Oil.

As Enid Sisskin has warned, danger lurks not just in the oil you see but in what you don't see. McClatchy News reports today,"researchers have definitively linked clouds of underwater oil in the northern Gulf of Mexico to BP's runaway Deepwater Horizon well... ."

This is the first comprehensive and irrefutable proof of a "link between the subsurface oil clouds commonly known as 'plumes' and the BP oil spill, USF officials said Friday."
The announcement came on the same day that the National Oceanic and Atmospheric Administration announced that its researchers have confirmed the existence of the subsea plumes at depths of 3,300 to 4,300 feet below the surface of the Gulf.
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Together, the two studies confirm what in the early days of the spill was denied by BP and viewed skeptically by NOAA's chief — that much of the crude that gushed from the Deepwater Horizon well stayed beneath the surface of the water.
Most of the testing NOAA conducted was south of Louisiana, Mississippi, but at least one of the underwater plumes appears to be relatively close to Florida. "One layer was 100 feet thick; it was found 45 nautical miles north-northeast of the well site, officials said."

One of the maps included in NOAA's 73-page report (above left) shows confirmed underwater plumes were discovered due south and about one longitudinal degree west of Pensacola. NOAA may not have tested east of there.

At the University of South Florida, marine scientists' findings were said to be based on "water sampling using three separate technologies: an optical device that measures red backscatter; the ship’s sonar; and filtrations that trapped microscopic particles."
Lab tests of these trapped particles confirmed in early June that the particles were microscopic oil droplets suspended at depth. The recent Compound-Specific Isotope Analysis (CSIA) further confirmed that these suspended oil droplets matched BP MC252 oil.
A BP spokesman contacted by the Los Angeles Times, you will not be surprised to learn, pretended to complete ignorance:
"We have only seen media reports, and have not yet seen the report and underlying data," BP spokesman Phil Cochrane said in an e-mail.
A scientist at the Mote Marine Laboratory in Sarasota says "the finding is important because oil that escaped from the mile-deep, blown-out well had been treated with dispersants... . It's more readily taken up and absorbed and ingested by marine animals," says Richard H. Pierce, director of Mote's Center for Ecotoxicology.
Although dispersed oil degrades more quickly over the long-run, in the short-term, it poses a more toxic threat to marine life, Pierce said.
The NOAA report is available to everyone (except, apparently, BP) right here. The University of South Florida report will be publicly released on Monday, McClatchy reports.

4. Asleep at the Switch

The Coast Guard's hearings in Louisiana about what caused the explosion of BP's Deepwater Horizon drilling platform are getting to be as exciting as Sam Ervin's Watergate hearings. Yesterday, Mike Williams, the New York Times reports,who was "the rig’s chief electronics technician... said the general safety alarm was habitually set to 'inhibited' to avoid waking up the crew with late-night sirens and emergency lights."
"They did not want people woke up at 3 a.m. from false alarms," Mr. Williams told the federal panel of investigators. Consequently, the alarm did not sound during the emergency, leaving workers to relay information through the loudspeaker system.

While it is not known whether it would have saved the workers who died in the April 20 disaster, the lack of a fully functioning alarm hampered the effort to safely evacuate the rig, Mr. Williams said.

Williams also testified to "several new details about the equipment on the rig, testifying that another Transocean official had turned a critical system for removing dangerous gas from the drilling shack to 'bypass mode.'"
When Mr. Williams questioned that decision, he said he was reprimanded.

“No, the damn thing’s been in bypass for five years,” he recalled being told by Mark Hay, the subsea supervisor. “Why’d you even mess with it?”

Other testimony at the hearing "addressed the role that shortcuts and mistakes played in compounding the rig’s troubles." These included mechanical errors, "390 repairs" left undone, and an incorrectly done test of emergency equipment that failed to detect a “kick of gas roughly an hour before the explosion."

5. Whither BP?

Overall, the evidence is mounting that not one of the oil drilling companies involved is without serious fault. All conspired to create a criminally negligent hot-dog culture that not only killed eleven workers but which put all life in the Gulf of Mexico at risk.

Can any of these leading corporations in the oil drilling industry survive the consequences of being caught? One expert we spoke with the other day was doubtful.

"I had a Ph.D. student who's now a higher up in the industry," he told us. "He's a top notch guy. He says BP is hurting financially and he doesn't expect it to survive another two years."

Derek Thompson for the estimable Grist Magazine found a bankruptcy wizard last month who agrees. "There is a reasonably high chance that BP could file for Chapter 11 bankruptcy in the next few years, or even months," he said. "[T]he result would be an 'absolute horror' for the government... ."

The prospect of a BP bankruptcy is not as crazy as you might think. Andrew Sorkin described why six weeks ago:
BP’s costs for the cleanup could run as high as $23 billion, according to Credit Suisse. On top of that, BP could face an additional $14 billion in claims from gulf fisherman and the tourism industry. So while conservative estimates put the bill at $15 billion, something approaching $40 billion is not out of the question. After all, little about this spill has turned out as expected.

The company has about $12 billion in cash and short-term investments, but there is already a debate about whether it should cut its dividend out of fear that it could run out of money. [It did - Beach Blogger] Of course, it could sell assets or seek loans, which in this environment is still not that easy.

As Zero Hedge Fund noted over a month ago, watching BP's common stock price doesn't necessarily give the clearest picture of BP's financial status. Think credit default swaps, the very kind of risky investment instruments that was the undoing of some of Wall Street's biggest securities firms and insurance companies.
[T]he real investing community is ever more carefully looking at the worst case, and its implications. Said implications would be vast, and in addition to wiping out billions in capital from BPs direct counterparties which are already limiting their BP exposure... would also impair indirect holders of pre-packaged securitized BP exposure.
Claims against BP for its part in the oil spill catastrophe now top $200 million. While that's a long way from the $20 billion pledge for a compensation fund which the White House exacted from the company, apparently no one has made public the actual documents setting up the fund. In connection with pending lawsuits, one federal judge has been asked to order a release of the details.

Today, fund administrator Kenneth Feinberg told an Alabama audience that he is concerned that "British energy giant BP Plc is holding up payments to economic victims of the Gulf of Mexico oil spill." He says he thinks it's more about needing documentation than having ready cash. We shall see.

Feinberg doesn't get his hands on the money until August. If then, we are tempted to say.

As one financial expert noted fifteen years ago, "Seeking shelter under the umbrella of the federal bankruptcy court has become an increasingly common corporate strategy in recent years." Take a quick trip down's bankruptcy's memory lane:
Cases such as Texaco, Wilson Foods, Continental, and others are some examples of solvent corporations using Chapter 11 to stave off potential financial disasters. Texaco argued that it needed protection because of its inability to pay its liabilities, which included a $10.3 billion award to Pennzoil. Wilson Foods and Continental argued that they needed protection because their high labor costs were making them uncompetitive. Manville, UNR Industries, and Amatex sought protection because they were deluged with lawsuits for asbestos-related diseases.
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Bankruptcy is no longer viewed as a last resort for insolvent companies, but is regarded as a strategy that can be used by financially solvent companies in an attempt to prevent potential financial disasters. An increasing number of financially sound companies have sought shelter under Chapter 11 not only to reorganize their present debts but also in order to renegotiate their liabilities, to void their contractual obligations, or to head off future liabilities.

Tavakolian, "Bankruptcy: An Emerging Corporate Strategy", 60 SAM Advanced
Management Journal 18 (1995) [full article by subscription only]
The consequences of such a move by BP would be devastating for claimants and Gulf coast businesses expecting to recover their losses. The moment a bankruptcy petition is filed, all creditor claims pending in court would be frozen. As Tavakolian explained:
The court prohibits all creditors from pursuing the company pending a bankruptcy court's approval of a plan to restructure the company's financial obligations. The automatic stay gives the company temporary relief from collection attempts, lawsuits, and foreclosure procedures, thereby allowing the company to focus on its operations.
Even if bankruptcy -- the now-common business strategy of so many capitalist enterprises -- isn't in BP's future, the most optimistic vision for the company isn't much prettier. "'BP will spend the coming decades circling the drain, mired in endless litigation, its reputation irreparably damaged, and its finances weakened," investment specialist Robert Bryce told Sorkin.

Beside all the fishermen, businesses, and property owners just who, may we ask, is going to compensate the oiled sea turtles, pelicans, fish, oysters, crab, and seaweed for what BP did to them?

4 comments:

Anonymous said...

BP is to sell assets in Texas, Canada and Egypt, to part-fund the clean-up cost of the Gulf of Mexico oil spill.

The oil giant said it had reached a $7bn (£4.6bn) deal with US-based oil production firm Apache Corp.

The proceeds will go towards a fund set up to pay for clean-up costs and claims for damages resulting from the spill.

The BBC has also learned that BP will sell assets in Pakistan and Vietnam over the next 12 months.

Analysts value the oil and gas wells and exploration sites at between $2bn and $4bn.

http://www.bbc.co.uk/news/business-10703955

I can't help but wonder if this is a "fire sale" price, and wonder, too, if BP intends to buy the assets back at a later date. For some reason everything they do lacks credibility with me.

BeachLover said...

If there was indeed a downpour in the beach's core area Saturday evening, it must've been quite localized. Not a drop down toward the eastern end of the beach.

twitter said...

BP is buying scientists to keep them publishing.

viagra online said...

I didn't know that oil could be in layer in the ocean. So It makes things harder when they are trying to solve the spill.