Oil to keep flowing on January 1

greenspun.com : LUSENET : TimeBomb 2000 (Y2000) : One Thread

API just posted this news release on their website:

Link

It mentions a paper that I couldn't find on their site. I called, and they said it should be available, but they e-mailed me a copy. Long, but here it is:

-----------

In Y2K, Oil and Gas Industry Plans to Keep Fuels Flowing

The nation's oil and natural gas industry uses advanced technology in every facet of its operations-from exploration and production to transportation, refining and marketing. To continue providing the products the public demands, the industry has made an intensive effort to find solutions to the Year 2000 Problem-computer chips and software that read only the last two digits of a date and thus could misread 2000 as 1900.

The U.S. oil and gas industry is on course to have its computer systems ready for the Year 2000 (Y2K) before the end of 1999. Substantial progress has already been made in identifying potential problems, and in updating and testing the domestic industry's computer systems and embedded computer chips. The possibility of major disruptions to consumers is extremely low because of the industry's extensive preparations and wide-scale efforts to address problems well before the Year 2000, and because the industry has a long track record of delivering its products and serving its customers under all kinds of conditions.

The oil and gas industry's Y2K efforts are designed to make certain that its products will be available as usual on January 1, 2000, and thereafter. While there are some concerns about the ability of foreign oil suppliers to solve their computer problems in time, the overall impact on American energy consumers is expected to be slight-no more serious than that of a bad storm that inconveniences some people for a few days.

Survey Results

A January 1999 survey of the domestic oil and gas industry's Y2K readiness-released by the American Petroleum Institute and the Natural Gas Council in February 1999-shows that almost all of the companies responding-94 percent-will be Y2K ready by September 30, 1999. Here are the results of that survey, which included responses from 1,000 oil and gas companies that provide 88 percent of the oil and natural gas the nation consumes.

7 More than four-fifths (86 percent) of the oil and gas companies are in the final stages of fixing and testing their business information systems.

7 Seventy-eight percent of the respondents are in the final stages of fixing and testing hardware and embedded systems to ensure their operational integrity.

7 Embedded chips, once seen as a major obstacle in preparing the industry for Y2K, are not the problem they were thought to be.

7 Ninety-seven percent said they expect to have their Y2K contingency plans in place and tested before October 1, 1999.

The evaluation of the industry's preparedness for Y2K included companies of every size. And the survey explored every facet of the industry's readiness-planning, inventory, assessment, remediation and validation, and covered both information systems and embedded chips.

Industry's Suppliers and Marine Transportation

While the domestic oil and gas industry will be ready for the Year 2000, there is some uncertainty about its suppliers. Survey results revealed that the industry lacks sufficient information on the Y2K readiness of key utility providers-telecommunications, electricity and water. The industry is dependent upon them for uninterrupted service.

The industry is also dependent upon safe, reliable marine transportation. Oil producers have an overwhelming financial interest in protecting their product and in safeguarding the environment. Spilling oil is extremely costly to the industry in lost product, remediation, fines and penalties, and compensation to those who suffer losses.

Data from the U.S. Coast Guard confirm that the industry puts safety first.

In the U.S., our oil comes from Texas, Alaska, Louisiana, California, Oklahoma and 26 other states, and offshore from both state and federal waters, as well as 45 foreign nations. In 1997, the latest year that Coast Guard statistics are complete, the volume of oil spilled in U.S. waters declined by two-thirds compared to the year before, representing the lowest amount recorded since the Coast Guard began publishing data in 1973. And more than three-fourths of those spills were under 10 gallons-less than a car's fuel tank holds.

To protect that record and to build on it, oil companies have added Y2K compliance checks to the regular maintenance of their marine vessels. The industry is also working with the Coast Guard to address its concerns, both domestically and internationally.

The most recent industry data show that the oil and gas industry spent $8.1 billion to protect the air, land and water in 1997. Protecting the sea and the shore from spills is part of the industry's overall compliance with environmental laws, rules and regulations. Onboard testing for compliance is part of that responsibility.

Imports

The U.S. is largely self-sufficient in natural gas. In 1998, the nation consumed 21,375 billion cubic feet of natural gas. Less than 14 percent of that was imported. Canada was by far the leading foreign supplier of natural gas to the United States, with Mexico and Algeria providing only small fractions of the gas consumed in the U.S.

Oil, however, is another matter. The nation imported 56 percent of the crude oil consumed in the United States in 1998. That's an average daily rate of 10.4 million barrels of oil imports a day, according to the U.S. Department of Energy.

Estimated Crude and Products Imports by the U.S. from Leading Suppliers January-December 1998 (in thousands of barrels per day)

						          	                                                                 Percent of                                                              Domestic                                          Percent of          Product                          Imports          Total Imports       Supplied
Venezuela		1,683		  16.2%		       9.0%
Canada			1,576		  15.2%		       8.4%
Saudi Arabia		1,472		  14.2%		       7.9%
Mexico			1,335		  12.9%		       7.1%
Nigeria			  686		   6.6%		       3.7%
Angola			  448 		   4.3%		       2.4%
Iraq		          334		   3.2%		       1.8%
Colombia		  330		   3.2%		       1.8%
Virgin Islands		  293		   2.8%		       1.6%
Algeria			  288		   2.8%		       1.5%
Other 			1,937		  18.7%		      10.4%
-------------------------------------------------------------------
Total		       10,382	         100.0%	    	      55.6%

Source: DOE, Petroleum Supply Monthly, February 1999

Will these 10 nations, and others the United States relies on for oil, be Y2K ready by January 1, 2000? The U.S. Department of Energy has some encouraging answers.

DOE reported in February 1999 that the four largest exporters of petroleum to the United States (Venezuela, Canada, Saudi Arabia and Mexico) are preparing their computers for Y2K, "and expect all critical systems to be Y2K compliant by the end of 1999." Little is known about the Y2K readiness of Nigeria, Angola and Iraq. However, DOE says, "major international oil companies operating [there] have system-wide programs in place to counter the Y2K problem." Two other providers, Colombia and Algeria, are evaluating their systems and are reportedly beginning efforts to be Y2K ready. In addition, the United Kingdom, as well as Kuwait and Norway, expect to be Y2K compliant, DOE said.

Other observers offer a more pessimistic view. Science Applications International Corp. reported in November 1998 that there could be a Year 2000 interruption in the flow of oil from Latin America, the Middle East and Africa. And the Gartner Group, Inc. says, "at least 45 percent of all U.S. imported oil and oil products come from countries where there is an 80 percent probability that at least one mission critical failure will occur in 50 percent or more of all of the country's commercial and government enterprises."

However, it should be noted that those nations that regularly supply the U.S. would be hurt economically by any disruption in the flow of oil, and, therefore, have strong incentives to become Y2K ready. They need the money they receive from the sale of their oil to meet financial obligations, including spending on social programs. That gives them a strong interest in keeping their oil flowing.

That is why petroleum associations from the United Kingdom, Canada, Japan and Australia, as well as several state-owned companies, including Saudi-Aramco (Saudi Arabia) and PdVSA (Venezuela), are participating either directly or indirectly in API's Task Force on the Year 2000.

Moreover, API member-companies' operating divisions abroad are on track to be Y2K ready. They are operated according to American standards. They have contingency plans in place to deal with problems. And systems needed to circumvent local infrastructure failures, including telecommunications and electric power outages, are available and used on a regular basis.

To improve Y2K readiness abroad, and to determine the international oil industry's ability to meet the U.S. demand for energy, API's International Oil Y2K Work Group joined with the Federal Energy Regulatory Commission, federal agencies, and the International Energy Agency to create an International Oil Coordination Council. They exchange information on industry and government efforts and plan to assess the industry's Y2K readiness on an international scale.

Equally important, there is ample crude oil production capacity in the world. If one country cannot export, another may be able to compensate. Moreover, the importing of crude oil and petroleum products would not stop instantaneously even if there were a Y2K problem. There is always some crude oil enroute to the U.S. via tankers, and in reserves held in company inventories.

Strategic Petroleum Reserve

As a buffer to protect the economy against an interruption in foreign oil supplies-such as the two disruptions of the 1970s-the U.S. created a strategic petroleum reserve (SPR). In February 1999, the SPR held 571 million barrels of crude oil stored in salt caverns. That amounts to a 55-day supply of imported oil, based on 1998's average daily rate of oil imports.

In a move unrelated to Y2K concerns, the U.S. Department of Energy announced in February 1999 that it will add 28 million barrels of crude oil to the SPR, at the rate of about 100,000 barrels a day. And DOE will allow oil companies to store as much as 70 million additional barrels of oil at SPR storage caverns on the Texas-Louisiana coast.

Adding that additional oil would bring the SPR to a level equal to about 61 days of imported oil, based on 1998 imports. That would be a significant increase over today's level, although less than the 90-day supply of crude oil that the SPR was intended to provide when it was created.

Distribution System

The U.S. oil and natural gas industry is highly experienced in managing supply problems. A Y2K "glitch" would be akin to a sudden increase in demand, or a loss of supply.

In its 1989 report to the secretary of the U.S. Department of Energy, the National Petroleum Council said it had made 10 inventory studies over the past 50 years to help the federal government in its emergency preparedness. The NPC noted that "since the end of World War II, no serious petroleum shortages have occurred at the consumer level except gasoline lines in the era of price and allocation controls." Yet, NPC said, the system has experienced repeated stress, including refinery problems that led to reduced gasoline production in 1988, fuel-switching by electric utilities from natural gas to oil at the time of a heat wave in 1986, and a cold wave that reduced both crude and refinery production in 1983-84.

The oil and natural gas industry was able to overcome the stresses to its systems because contingency planning and crisis management are a fundamental part of each company's business plan. This industry is used to dealing with supply disruptions and demand spikes. Its flexibility enabled it to serve its customers during the hurricanes of 1998 that disrupted offshore production in the Gulf of Mexico and caused problems at some refineries. It brought its products to market despite the Persian Gulf crisis and gasoline supply difficulties of the summer of 1997. The industry seamlessly draws on inventory, or uses alternate routing to deliver its products, or copes with supply problems when refineries are off-line for maintenance by asking other refineries to pick up the demand.

The industry has demonstrated that it knows how to assure continuous supply for its customers even when disruptive events occur.

The NPC study, which did not consider the industry's Y2K problem, evaluated the impact of six hypothetical stress scenarios on the industry's ability to deliver. The scenarios were a disruption of oil imports, colder-than-normal weather, a disruption of natural gas imports from Canada, a disruption in the flow of products in a Midwestern pipeline, a 30-day shutdown of the Trans-Alaska Pipeline System and a 30-day disruption of oil imports from Canada. NPC reported that its "study essentially concludes that each of these disruptions could be handled with varying degrees of problems, but without major hardship, because of the resiliency and flexibility of the nation's supply system."

The industry has the ability to draw on crude oil and product stocks above the minimum level. And it has the ability to increase domestic production to some extent.

Conclusion

America's oil and natural gas industry uses advanced technologies to find, process and deliver one of the nation's most important commodities.

The industry has long managed the flow of its products successfully because it is expert at production, processing, storage and transportation. Potential dislocations have been dealt with without major problems. Only when price and allocation controls were imposed in the 1970s did consumers experience supply disruptions, long lines at the gasoline pumps and an inability to get the motor fuel they wanted when they wanted it.

Industry personnel who are responsible for its computer systems and embedded processors sounded an early warning that alerted the industry to the "Millennium bug." Over the past four years, the oil and gas industry has prepared collectively for the Year 2000 and expects to be ready to serve its customers on January 1, and far, far into the future.

For more on the industry's Y2K efforts, visit API's Web site at www.api.org/y2k.

-- Hoffmeister (hoff_meister@my-dejanews.com), March 08, 1999

Answers

It might have been helpful if they could have provided this information to the Year 2000 Senate Committee so it could have been implemented in their latest report.

The same could also be said of the 1,000 or so rural utilities that are now crying foul about the Senate Committee's findings about them.

Surely these bodies had ample opportunity to provide the Committee with their Y2K status.

-- Wondering (why@notreportingthistosenate.com), March 08, 1999.


Hoffmeister; I'am also Wondering even though incompatibility of statements is somewhat epidemic. Senator Bennett's comment last friday about discussions with Mr. Koskinen about what to reveal and how is still niggling me. Thanks for the post.

-- Watchful (seethesea@msn.com), March 08, 1999.

Hi Hoff,

I notice there was not much mention of the tankers (ships) themselves. As I understand it, these tankers use lots of embedded systems to keep their cargo balanced, and rough seas could literally crack the tankers in half if the balancing (and other) control systems didn't work right.

I have no idea of the date sensitivity of these embedded systems, but tankers (and oil ports) seem to be a critical link in getting foreign and Alaskan oil to us (and to Japan).

-- Dean -- from (almost) Duh Moines (dtmiller@nevia.net), March 08, 1999.


Chevron's SEC form 10-Q:

http://sec.yahoo.com/e/l/c/chv.html

The information on Year 2000 compliance is towards the end.

-- Kevin (mixesmusic@worldnet.att.net), March 08, 1999.


Hoff: an interesting and encouraging piece of the puzzle, if true. However, all of my arguments I had with you on the banking thread also apply to oil & gas. Namely that you can't look at any one company/industry/country in a vacuum: y2k is systemic and will peak simultaneously with the worst global economic mess the world has ever seen.

-- a (a@a.a), March 08, 1999.


Hi Hoff

Thanks for the post. Line by line this is the worst report I have seen. The entire gist seems to be that because they have never had problems they won't have any with y2k. They have not even identified all their problems yet. "More than four-fifths (86%) of oil and gas companies are in the final stages of fixing and testing their business information systems." As GN would say, Boola Boola. Where are the facts? Where are the surveys? What were the questions? Refineries? What do we need refineries for? This is so poorly done they should be embarrassed to release this garbage. This industry must be in terrible condition to allow such poor spin to be released. Read this line by line. All spin, no proof. Ah, I think I am finally angry.

-- Mike Lang (webflier@erols.com), March 08, 1999.


Does anyone have a link to Sen. Bennett's statement that Watchful mentioned?

-- Bill Byars (billbyars@softwaresmith.com), March 08, 1999.

Mike-

Since you asked:

The survey questions themselves are at: Link

A summary breakdown of the results is at: Link

In it, you'll notice that 78% are in remediation and validation of embedded systems, 40% of that being in validation.

The full set of links is at: Link

Note also that this data is as of December, 1998.

Of course, you could have found this yourself, if you weren't so interested in "getting angry".

a-

I'll make the same point here as well. The banking thread was a discrete problem, but the point I was trying to make is that a failure must have a cause. To merely say things can fail is one thing; to be able to demonstrate they will fail is quite another.

-- Hoffmeister (hoff_meister@my-dejanews.com), March 08, 1999.


Another threat to a steady oil supply is a general disruption of global trade:

http://www.joc.com/issues/990308/p1age1/e20324.htm

Experts warn of Y2K trade upheaval

Each nation's problem will become a global one

BY WILLIAM ROBERTS

JOURNAL OF COMMERCE STAFF

WASHINGTON -- Experts on the millennium computer bug warned Congress last week that international commerce and trade may face serious disruptions early next year because of computer failures in foreign countries.

Painting an alarming but uncertain picture, a National Intelligence Council officer and a State Department watchdog told a special Senate oversight panel on Friday that many foreign nations are not prepared.

"It is becoming increasingly clear that there will be Y2K-related problems in virtually very corner of the globe," Jacquelyn L. Williams-Bridgers, inspector general of the Department of State, told a hearing of the Senate Special Committee on the Year 2000 Technology Problem.

"Faced with a relentless and unforgiving deadline, countries have to make difficult decisions concerning the use of scarce resources to fix a problem that has not yet occurred," she said. Many computer programs use two digits to identify the year. Those systems will recognize "00" as 1900 rather than 2000. Without upgrading, the systems could fail on Jan. 1, 2000.

The international transportation sector is particularly vulnerable, she and Lawrence K. Gershwin, National Intelligence Council officer for science and technology, said. "Global linkages in telecommunications, financial systems, the manufacturing supply chain, oil supplies, trade and worldwide shipping and air transportation will virtually guarantee that Y2K problems will not be isolated to individual countries," Mr. Gershwin said.

Among the difficulties the two officials outlined:

Both the Panama and Suez canals face the risk of disrupted operations should traffic management systems or ship steering mechanisms fail. Panama officials say no ships will be allowed into the canal on Dec. 31. A Norwegian firm is working now on fixing the Suez Canal's traffic system.

China probably will experience failures in several areas, including transportation and power generation. An estimated 90% of software used in China, even by government offices and state-owned enterprises, is pirated, making it very difficult to approach vendors for fixes. China is planning to conduct a nationwide aviation test. Senior officials have been ordered to fly on New Year's Day.

Central and Eastern Europe are believed to face vulnerabilities in Soviet-designed nuclear power plants, though Western experts do not know what specific problems they may have. Many vendors of the software and equipment stopped operating after the fall of the Soviet Union.

Russia Gazprom natural gas pipeline network is susceptible to potential Y2K outages. It supplies nearly 50% of the total energy consumed by Russia. While Gazprom has backup plans, it is unclear whether these measures are sufficient to deal with the scale of problems that could occur.

Major oil-producing nations are behind in fixing their Y2K problems. Oil production and distribution is largely in the hands of multinational corporations, but the sector's use of information technology is highly intensive.

---------------------------------------------------------------------

-- Kevin (mixesmusic@worldnet.att.net), March 08, 1999.


The U.S. oil and gas industry is on course to have its computer
systems ready for the Year 2000 (Y2K) before the end of 1999.
Substantial progress has already been made in identifying potential
problems, and in updating and testing the domestic industry's
computer systems and embedded computer chips.


If this were March 1994 rather than March 1999, this could actually be considered as good news. However, given the reality of when it is and how little time is left, it clearly is quite bad. The rest is pretty much, as one poster put it, "boola boola", with no substance.

Y2K CANNOT BE FIXED!

-- Jack (jsprat@eld.net), March 08, 1999.


Kevin:

I know we all hate to see progress reports with phrases like "expect to be ready" and "on track" or "on schedule" or "don't expect serious problems". We always take those reports with a grain of salt, asking for hard data, as we should. But look at the gist of what you posted:

"alarming but uncertain picture", "face the risk of disrupted operations should traffic management systems or ship steering mechanisms fail", "probably will experience failures" , "believed to face vulnerabilities, though Western experts do not know what specific problems they may have", "is susceptible to potential Y2K outages" , "unclear whether these measures are sufficient"

Hoffmeister presents data, observations, measurements. You present worries. Which do you really prefer? I don't doubt that these are genuine worries. I know a lot of bad things will happen, even if I'm no better at detailing them than anyone else. But I think hazy worries are even harder to deal with than hazy hopes.

-- Flint (flintc@mindspring.com), March 08, 1999.


I don't buy it - and don't think next year I'll be able to buy it.

Oveall - the report repets extraneous facts and makes irrelevent conclusions that need to kept in the "ought-be" category. For example - safety (preventing spills) is irrelevent in considering whether soemthing can pumped at all if there is no power available for secondary and tertierary (-1 sp) recovery from older fields. Regulation and past economic "pressures" over a 30 year period of uninterrupted power and telecom support do not indicate whether pumps, gas turbines, and controllers will operate properly when faced with open/shut/shutdown commands.

Refineries and processing plants are not addressed - not with facts, number of systems, number of replaced components and controllers. Times, schedules and impacts. Without power and cooling water, they can't run. A Sept "copletion date" is so far off it means they don't know exactly - IMHO. And will have very little run time to fix failures afterwards.

The worst is the industry stat's - loudly crowed by Mr. K. as showing they are going to be ready - I disagree.

< 7 More than four-fifths (86 percent) of the oil and gas companies are in the final stages of fixing and testing their business information systems.

7 Seventy-eight percent of the respondents are in the final stages of fixing and testing hardware and embedded systems to ensure their operational integrity. >>

He's right: of 88% responding, 86% are in repair and remediation stage: so 78% are in repair and remediation - (where are the remaining 1/4 of the industry capacity, not yet out of assessment?)

Many companies may finish in time, some (most?) may finish in time to test and allow for schedule slip and waste and errors. But I don't believe - the report is skewed to make a good press release, and better headlines. The industry has not shown it will be "ready" by any means.

-- Robert A. Cook, P.E. (Kennesaw, GA) (
cook.r@csaatl.com), March 08, 1999.


Robert, I agree to some extent with your point. I don't think they have in any way shown the industry as a whole is out of the woods. It does appear, however, that some substantial progress is being made.

I think, though, you misunderstood some of the stats. If you look at the aggregate summary I posted a link to, the survey is broken into three parts: Business Systems, Embedded Systems, and Supply Chain. The 86% refers to Business Systems, and the 78% does refer specifically to Embedded Systems.

-- Hoffmeister (hoff_meister@my-dejanews.com), March 08, 1999.


Flint,

The title of this thread is "Oil to keep flowing on January 1". Sure, the news about the oil industry (not including Chevron) sounds good. But even if every oil company (and its vendors) was 100% compliant, that wouldn't guarantee oil flow to the U.S. in early 2000. The world transportation system could slow significantly.

Bottom line: a bicycle is still a prudent household addition for dealing with next year.

-- Kevin (mixesmusic@worldnet.att.net), March 08, 1999.


OK Hoff. The first thing on the first page of the website: API's y2k statement

Our goal is to be Y2K compliant by December 31, 1998.

So much for being able to believe anything else that they say. By the way, why do people believe these self-reporting businesses anyway?

Oil is nice, but gasoline is better. Even if they can supply the oil, I still have major reservations about their ability to refine the stuff. All smoke and mirrors.

-- Mike Lang (webflier@erols.com), March 08, 1999.



By the way, those three links don't work Hoff. Anyway, thanks for bringing this up. It certainly attractrd attention.

-- Mike Lang (webflier@erols.com), March 08, 1999.

Well, Mike, I just tried all three links and they worked for me. The first two are PDF files, though.

As for the December 31st statement, that refers to API's internal systems, not the Oil and Gas companies.

Robert:

Was re-reading your post. I think you also missed the point in regards to the comments about safety. The report is addressing the fact that they have been doing Y2k compliance tests on the tanker's as part of normal maintenance procedures.

-- Hoffmeister (hoff_meister@my-dejanews.com), March 09, 1999.


Moderation questions? read the FAQ