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Trust Eroding in Oil Pipelines Close to Home

Elizabeth Douglass, LA Times
After the trouble in Alaska, some question the safety of California’s aging network. Officials are addressing the public’s fears.
The pipeline problems that shut down the largest U.S. oil field early this month brought a chilling reminder of what can go wrong with the extensive, aging maze of pipelines that carries volatile fuels across the nation.

Poor pipeline maintenance led to extensive corrosion and leaks, leading oil giant BP to turn off the spigots at Alaska’s Prudhoe Bay. Energy markets were roiled, but no human lives were threatened in Alaska’s North Slope wilderness.

California’s unusually large web of oil, fuel and natural gas pipelines also has been plagued with corrosion and other maintenance and safety issues. Here, however, the risk is compounded by the spread of suburbia, where houses now crowd pipelines that were built and buried in the middle of what was nowhere.

Sometimes, pipelines can be deadly neighbors.
(21 Aug 2006)

Simmons: pipeline crisis ‘could halve flow of oil’

Saeed Shah, Belfast Telegraph
The price of crude oil could hit $300 (£158) a barrel if BP’s pipeline corrosion crisis in Alaska turns out to be an endemic problem for the industry, according to the leading oil industry analyst Matthew Simmons.

Mr Simmons, a US-based industry commentator and financier, said BP’s discovery of unexpectedly severe corrosion in its pipelines at Prudhoe Bay, Alaska, could just be the tip of the iceberg. He described the sudden emergence of the issue as the “Pearl Harbour Day” for energy.

He said that if drastic remedial work was required to fix or rebuild pipelines across the world, the flow of crude oil could halve, sending prices soaring.

Mr Simmons, who shot to prominence by arguing that the world’s biggest producer, Saudi Arabia, was running out of oil, said: “The industry cut too many corners when prices were low. For 25 years, there was not a proper maintenance programme. We backed ourselves into a system – rigs, pipelines and refineries – that rusted away.”

He said the oil industry was now confronted with a dual problem: the view that oil supply has “peaked” and, now, the issue of corrosion of infrastructure.

“The anecdotal evidence is so widespread that it is undeniable. Until we had something as stunning as Prudhoe Bay, the industry was able to say that incidents were one-offs or that these allegations came from disgruntled employees,” Mr Simmons said.
(22 Aug 2006)

BP denies it manipulated Alaska pipeline data

Associated Press via MSNBC
Oil giant says it did not mislead regulators about inspections
LONDON – BP PLC on Monday denied allegations that the oil giant manipulated data from inspections of pipelines at Prudhoe Bay in Alaska, where operations were curtailed this month following a pipeline leak.

The Financial Times reported that the U.S. Environmental Protection Agency was probing allegations by BP workers that the company manipulated data to avoid replacing pipelines.

“We’ve been working with the DOT (Department of Transportation) and the EPA since we notified them of the original leak two weeks ago,” said Robert Wine, a BP spokesman in London.
(21 Aug 2006)

Exxon: Oil, gas and that’s it

Steve Hargreaves,
The company says its not interested in renewables. But when your business relies on a finite resource, is this really the best strategy?
NEW YORK — It’s the most profitable corporation in the world. It’s in a business that juggles geopolitics, economics and ecological health. It provides a finite resource which forms the backbone of our modern economy.

Nearly every American is a customer and anxious about our nation’s oil dependence.

Yet for all this, Exxon Mobil (Charts), the company that pocketed over $36 billion in 2005 alone, has said publicly that’s it’s not interested in investing in renewable energy.

“There are very few that are economical without subsidies,” Henry Hubble, vice president for investor relations, said during a recent conference call. “We don’t think it makes sense to invest in it at this point.”

For Exxon and its shareholders, who make their money from a resource that is running out, how much sense does this make?

According to some analysts, a lot.
(22 Aug 2006)
The oil industry receives tremendous subsidies, both direct and indirect (such as military expenditures). As one example, see U.S. Has Royalty Plan to Give Windfall to Oil Companies -BA

Oil prices ‘may retreat to $58 in 2008’

Reuters, Trade Arabia
International oil firms and Opec producers have learned from the 1980s price crash and those harsh lessons are helping them to plan for an orderly retreat from today’s record prices.

The history of oil is punctuated by price collapses but the sharp falls of the mid-1980s were different from most in that they were partly triggered by the industry, which flooded the market with oil and ultimately lost money on uneconomic fields.

“The chief executives of Exxon Mobil, BP and the rest remember those days. No one wants to make the same mistake twice in their career,” recalled an industry insider who worked for a major oil company at the time.

A Reuters poll of analysts sees oil easing from this year’s $78 a barrel peak to $64 in 2007 and $56 in 2008.

“We don’t see prices falling off a cliff in the second quarter of 2007. We do not expect a catastrophic scenario,” said Carl Calabro, an analyst at PFC Energy.
(17 Aug 2006)

Costs surge threatens Big Oil’s output plans

Alex Lawler, Reuters
LONDON, Aug 18 (Reuters) – The world’s top oil firms are struggling to expand oil and gas output, hit by a tight market for drilling rigs and rising costs, hampering development of new supply at a time of record prices.

Production is falling at many companies even as capital spending rises. Crude oil has more than tripled since early 2002 to $70 a barrel, driven by worries about supplies and growing world demand.

Norway’s Norsk Hydro (NHY.OL: Quote, Profile, Research) cut its 2006 output goal in June and Statoil (STL.OL: Quote, Profile, Research) in July said it may miss its target — signs that a tight market for rigs and other services is hitting firms’ ability to develop projects on time.

“Company production targets and market expectations for production growth are at risk of disappointment,” Deutsche Bank analysts said in an August 10 note.

“Delays to drilling programmes and project start-up seem increasingly likely.”

Oil and gas output at eight major European oil firms dropped a collective 530,000 barrels of oil equivalent a day in the second quarter, Deutsche estimates. That is equal to half of daily oil demand in The Netherlands.
(18 Aug 2006)