June 16, 2008
Elaine Meinel Supkis
Right on the heels of the joyous glee over the fake news that Saudi Arabia's declining oil fields will flood the earth with black goo, there is an oil rig fire in Norway and the world price of oil, instead of dropping, shoots upwards to new highs! This is a classic sign that we are at the Hubbert Oil Peak: consumption is outstripping output. Either the world consumes less or we pump more and there ain't no more 'more', is there? Also, the biggest oil consortiums are cutting back on US retail outlets. They plan to drop this entirely. No profits there!
June 16 (Bloomberg) -- Crude oil rose to a record $139.89 a barrel in New York as a weaker dollar bolstered the appeal of commodities as a hedge, and a fire cut North Sea output.
The U.S. currency fell as much as 0.8 percent against the euro, making commodity purchases cheaper to foreign investors. StatoilHydro ASA's 150,000 barrel-a-day Oseberg oil and gas field off the Norwegian coast was shut after a fire broke out in a high-voltage room on a platform yesterday.
This all happened overnight. When I finished the previous story about the housing bubble history at midnight, I checked the news and there was nothing about a fire and the price of oil had dropped a tad due to the news the Saudis were going to wave a magic wand and a gusher in the desert would shower us with cheap oil. Now, harsh reality reenters and smashes all the oil market shorts.
(AP) — Norwegian oil company StatoilHydro ASA says it has halted oil and gas production on a North Sea platform after a fire broke out.
The operator says the fire was soon extinguished on the Oseberg A platform on Sunday afternoon and there was no need to evacuate personnel. The rig is situated 80 miles northwest of the port city of Bergen on Norway's western coast.
This was not a big fire. We have had much, much, much worse fires in the past. Each one of these did affect oil markets but not to the sudden degree this smaller rig fire has caused. Indeed, it took full-scale destruction of a number of Gulf of Mexico oil rigs during the disastrous hurricane season two years ago to have any effect on oil prices. In other words, the price of oil was dropping two years ago due to less consumption and oil in Saudi Arabia in 2005-2006 was being pumped and sold at a record rate. So it took vast destruction to get prices to go up. Since then, the Saudi pumping has flagged considerably by over a million barrels a day and this loss means world oil supplies are tight as a drum for the foreseeable future. Perhaps, for good.
Piper Alpha Platform
06 Jul 1988
Block 15, UK Continental Shelf
The Piper Field was discovered by Occidental in January 1973, with the Piper Alpha platform becoming operational in 1976. Located about 120 miles north-east of Aberdeen, the platform initally produced crude oil. In late 1980, gas conversion equipment was installed allowing the facility to produce gas as well as oil. A sub-sea pipeline, shared with the Claymore platform, connected Piper Alpha to the Flotta oil terminal on the Orkney Islands. Piper Alpha also had gas pipelines connecting it to both the Tartan platform and to the separate MCP-O1 gas processing platform. In total, Piper Alpha had four main transport risers: an oil export riser, the Claymore gas riser, the Tartan gas riser and the MCP-01 gas riser.
Explosion and Fire
On 06 July 1988, work began on one of two condensate-injection pumps, designated A and B, which were used to compress gas on the platform prior to transport of the gas to Flotta. A pressure safety valve was removed from compressor A for recalibration and re-certification and two blind flanges were fitted onto the open pipework. The dayshift crew then finished for the day.
During the evening of 06 July, pump B tripped and the nightshift crew decided that pump A should be brought back into service. Once the pump was operational, gas condensate leaked from the two blind flanges and, at around 2200 hours, the gas ignited and exploded, causing fires and damage to other areas with the further release of gas and oil. Some twenty minutes later, the Tartan gas riser failed and a second major explosion occurred followed by widespread fire. Fifty minutes later, at around 2250 hours, the MCP-01 gas riser failed resulting in a third major explosion. Further explosions then ensued, followed by the eventual structural collapse of a significant proportion of the installation.
167 men died as a result of the explosions and fire on board the Piper Alpha, including two operators of a Fast Rescue Craft. 62 men survived, mostly by jumping into the sea from the high decks of the platform. Between 1988 and 1990, the two-part Cullen Inquiry established the causes of the tragedy and made recommendations for future safety regimes offshore. 106 recommendations were made which were subsequently accepted and implemented by the offshore operators.
I remember that rig fire. The poor crew had no escape methods except to jump from a very high platform into the raging, frigid North Sea. The oil rigs were supposed to be powerful and safe at the same time. This was false! In one terrible winter storm, an entire platform vanished into the raging seas! The people who work these rigs are like Chinese coal miners: risking life and limb in very harsh conditions. Unlike coal workers, they are well-paid. But the dangers are great. Indeed, unlike oil facilities on land, the crew can't live a safe distance from danger. They literally live right on top of the volatile energy source!
Just ferrying the workers to and from these rigs is difficult and dangerous. There is little room for carelessness. One thoughtless action can trigger an inferno. The nervous effects of listening to violent storm winds howling outside also takes its toll. We drive around in comfort, free as a lark if we aren't stuck in a traffic jam, all the while, consuming oil that takes people's lives. Our comfort and pleasures are thanks to others taking great risks.
And the price of oil reflects some of this. We are seeing the price of risk rise as oil supplies come to peak production. What sort of difficult places will be drilled next? Russia is already staking out the Artic Ocean basin for exploration! That is truly harsh conditions. Also, there is Greenland and the Antarctic, both of which probably have vast oil reservoirs of oil. Here are some other oil rig fires that are from the last couple of years:
BBC News: Scots ’should handle’ oil safety:
First Minister Alex Salmond has said the Scottish Government should handle North Sea offshore safety.
He was speaking as an investigation got under way into the cause of a major fire that broke out on a platform.
More than 100 workers were evacuated from the Thistle Alpha platform after Sunday’s fire but no-one was hurt.
The Health and Safety Executive (HSE) said its inspectors would visit the site, 120 miles north-west of Shetland, as soon as weather conditions allowed.
The quick response of two USS Port Royal crew members saved the life of an Iraqi contract worker overcome by smoke inhalation while fighting a fire here May 26.
As part of Commander, Task Group 158.1 emergency response team, Chief Petty Officer Doreen Lehner and Petty Officer 3rd Class Heather Watts were the only medical personnel on the scene when an Iraqi Southern Oil Company worker collapsed due to smoke inhalation.
Injuries from smoke inhalation and the toxic by-products of combustion in fires account for 75 percent of fire-related deaths in the U.S. Typically, the victim's lungs fill up with mucus and fluid, making it difficult to breathe.
A fire on a Mexican offshore oil platform cut off 422 barrels per day (bpd) of production on Tuesday, state-owned energy monopoly Pemex said, a tiny fraction of Mexico's overall output.
The fire broke out at the Kab-121 well on the Kab-101 platform, which was damaged in an earlier blaze on Oct. 23 that killed 21 workers.
The state-controlled firm also has been struck this year by a small Marxist rebel group that twice bombed onshore fuel pipelines, crippling chunks of industry for several days.
The number of confirmed deaths in Wednesday's oil platform fire off the western coast of India has risen to 10.
However, the navy says more than 350 workers have been rescued. Some people are still reported trapped or missing.
The platform, in India's most important oil field, was completely destroyed in the fire, which emergency services managed to extinguish late Wednesday.
It is obvious that oil rig fires, far from vanishing, are very much with us. The means of putting out these fires has improved greatly. But they still happen. Now on to the other news today, the major oil producers and refiners are no longer selling us gasoline directly. They are withdrawing behind an army of sub-contractors. This way, they become invisible and thus, not the subject of consumer ire.
Most operators barely turn a profit on the gas they sell, raking in a whopping 11 cents per gallon, according to The Wall Street Journal. Stations buy the gas from refiners, who purchase crude on the open market or drill for it themselves. Oil prices have been rising faster than refined gasoline prices, so margins have been shrinking for the retail operators.
Exxon Mobil (XOM) announced yesterday it's had it with the measly returns on selling gas to consumers. Following the industry trend away from the retail gas station business, the oil giant plans to unload the 2,200 stations it still owns.
I was talking to the guy I buy diesel from who runs the gas station where I photograph prices all the time. He told me, he would be happy to get 11¢ on the gallon! He only gets 2¢ a gallon. And a lot of fury and grief from his customers. He told me that people are buying less and less at his market and the competition is killing him due to rapidly rising prices. He pays more and more for his merchandise but can't charge more and more due to competition. He was very bitter about this.
'You are my main source for diesel!' I told him, shaking my head. He agreed that I was a good customer who understood him. It was very sad, talking to him. All around me, I see things shutting down or going away. Once this process is over, there will be a lot less competition to choose from and I will have to travel further to get what I need. This is how inflation can be a big killer.