--------------------------------------------------------------------- Gary North's Y2K Links and Forums

Summary and Comments

(feel free to mail this page) ---------------------------------------------------------------------- Category: Shipping_and_Transportation

Date: 1999-12-20 10:56:50

Subject: Gulf Oil Exports in Doubt -- Bloomberg

Link:http://quote.bloomberg.com/fgcgi.cgi?ptitle=Top%20Finan...

Comment: The Saudis admit that they have reserves for about 10 days. They are assuming that a shutdown of electricity will not go beyond this. Other Middle East oil exporters are in worse shape.

The media will not pick up on this story. Billions of people simply cannot comprehend it.

I assume that you can.

Ed Yardeni expects a 1974-level recession. We should be so lucky.

On Bloomberg's front page, as of 11 a.m., there is no trace of this story. On its Top Financial News page, it's missing. It was there at 7:14 a.m.

This article has gone down the memory hole.

This is from BLOOMBERG (Dec. 20).

* * * * * * * * * *

Top Financial News

Mon, 20 Dec 1999, 7:14am EST

Arab Gulf Oil Producers May Not Be Prepared for Millennium Bug, UN Says

By Sean Evers

Arab Gulf Oil Producers May Not Be Prepared for Millennium Bug

Dhahran, Saudi Arabia, Dec. 19 (Bloomberg) -- Gulf Arab states responsible for half the world's oil reserves may not be adequately prepared for the year 2000 computer problem, the United Nations and U.S. government officials said.

Computer failure and resulting disruption to production and transportation facilities in the six Arab Gulf states -- Saudi Arabia, Kuwait, Oman, Qatar, the United Arab Emirates and Bahrain -- could boost oil prices, which have already more than doubled this year.

Governments and companies in the Middle East won't be ready for the date changeover on Jan. 1, 2000, due to a lack of funding to deal with the ``millennium bug'' computer glitch, the United Nations has said in a report. The bug is a theoretical problem that may cause some computers to malfunction if they misread the two-digit date ``OO'' as 1900 instead of 2000.

``It would have been nice if they had started a year or two earlier, but we're optimistic there won't be any interruption in oil flow,'' said John Koskinen, chairman of the U.S. President's Council on Year 2000 Conversion. ``However, our oil inventories are sufficient to handle any eventuality for a few weeks.''

The U.S. government set up a reserve in 1975 to provide an emergency supply of oil in the event of a crisis, such as the Arab oil embargo of 1973. It currently holds about 573 million barrels of oil -- equal to two months of imports -- according to the Energy Department. The U.S. has tapped the reserve only once, in 1991, during the Persian Gulf War.

Oil companies doing business in the Gulf and local officials in the region said they are concerned about the lack of progress being made by government-run utilities, such as power and water.

Saudi Arabia Confident

However, Saudi Arabia, responsible for about 10 percent of the world's daily oil supply, said it is confident its computer systems will be ready to recognize the year 2000.

``Our worst case scenario would be to lose power for an extended period of time,'' said Saleh al-Zaid, head of the Y2K preparation team at Saudi Aramco, the state-owned oil company that exports more than 6 million barrels of oil per day.

``If that happened we would have enough oil stored at export terminals in the kingdom, Rotterdam and the U.S. to meet all our customers' requirements for about eight to nine days,'' he said.

Most of Saudi Arabia's critical oil installations have their own power plants. These include the Abqaiq facility, which can process 6 million barrels a day, as well as export terminals on the Gulf, gateway for 90 percent of its oil exports.

Mexico Ready, Too

Venezuela and Mexico, two other large exporters to the U.S., also said supplies won't be disrupted by computer breakdowns, and guaranteed all deliveries in the first days of 2000. They agreed to make up shortfalls in world output elsewhere if hobbled by the millennium bug.

Other Gulf producers, however, may not be in good shape.

Kuwait, which holds 9.3 percent of known global reserves, said the various components of its oil industry -- production, refining, shipping -- have different timetables for dealing with the computer bug. ``The production side is the most advanced and is finished testing,'' said Mifhari al-Obaid, an assistant managing director at the state-owned Kuwait Petroleum Corp. ``In an emergency we would be able to run manually if the data systems stop.''

At least one-third of all nations won't have fully tested and fixed their computers by Jan. 1, despite the expenditure of between $300 billion and $600 billion by the world's companies and governments, according to analysts. ``As far as some of the oil companies in the area, a lot of them have just looked at what we call the front-end IT systems, and have not looked at the embedded systems,'' said Ron Nelson, a Dubai-based Y2K computer consultant.

Hidden Threat

Embedded systems consist of computer chips used outside of computers -- in power-distribution equipment, pipeline pump controls and other devices.

``Everyone considered Y2K as a PC-based problem, when in reality it was much larger,'' he said.

U.S. companies are joining in the fight against time in the Persian Gulf. Exxon Mobil Corp. said it is working with its joint venture operations in Saudi Arabia to prepare for the bug. ``We have organized training workshops and set up different in-house committees to tackle this issue,'' said Curtis Brand, chief executive officer of Mobil Saudi Arabia Inc. ``We are ... comfortable with the progress.''

Saudi Aramco and Exxon Mobil are partners in the SAMREF refinery on the kingdom's west coast, which refines about 350,000 barrels a day of crude oil into gasoline, jet fuel and gasoil, a group of fuels that includes heating oil.

Link: http://quote.bloomberg.com/fgcgi.cgi?ptitle=Top%20Finan...

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

-- Greg Bittner (Greg@Bittner.net), December 21, 1999

Answers

Greg, remember the conspiracy theory on the Persian Gulf War, Bush protecting his stocks in Kuwait Oil Co.? Never saw proof on that one, but would love to take his pulse when he reads this article, heh.

-- Hokie (va@va.com), December 21, 1999.

Thank you So so much for getting this out here. I tried to access it, and couldn't. It seems it is a phantom news report.

-- Duke 1983 (Duke1983@AOL.com), December 21, 1999.

It was killed early on ... Bad news travels too fast for the spin doctors.

-- merville (merville@globalnet.co.uk), December 21, 1999.

Saudi Arabia is not telling the truth. Oh, maybe, this statement may have been partially true, but power is not the chokepoint. They will not be exporting crude next month, and perhaps very little for several months thereafter.

That is a fact. Funny thing is, they don't even know it.

-- Dog Gone (layinglow@rollover.now), December 21, 1999.

I saw the artical,"U.N. report: oilproducers may not be y2k-ready", it is in todays 12/21/99 Investor's business Daily.

-- jwhit (jwhit10238@aol.com), December 21, 1999.

Hmm. This story goes down the memory hole, and today the Nasdaq Index goes up a record 127 points (3.4% gain), to over 3900. Less than 16 months ago it was at 1500; since the beginning of this year it's up 77%. Of course the Street.com Index of internet stocks is up so much this year that it makes the Nasdaq Index look flat.

Yep, things might get interesting.

-- Don Florence (dflorence@zianet.com), December 21, 1999.