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Surprise! Analysts remain too Bullish:

“Exceptions to the long pattern of excessively optimistic forecasts are rare, as a progression of consensus earnings estimates for the S&P 500 shows (Exhibit 1). Only in years such as 2003 to 2006, when strong economic growth generated actual earnings that caught up with earlier predictions, do forecasts actually hit the mark.

This pattern confirms our earlier findings that analysts typically lag behind events in revising their forecasts to reflect new economic conditions. When economic growth accelerates, the size of the forecast error declines; when economic growth slows, it increases. So as economic growth cycles up and down, the actual earnings S&P 500 companies report occasionally coincide with the analysts’ forecasts, as they did, for example, in 1988, from 1994 to 1997, and from 2003 to 2006.

Moreover, analysts have been persistently overoptimistic for the past 25 years, with estimates ranging from 10 to 12 percent a year, compared with actual earnings growth of 6 percent. Over this time frame, actual earnings growth surpassed forecasts in only two instances, both during the earnings recovery following a recession. On average, analysts’ forecasts have been almost 100 percent too high.” (emphasis added)

The good news is the markets don’t take analysts nearly as seriously as they used to . . .

Note: I rarely quote McKinsey, as I have a pet theory they are at the root of all economic evil in the world. So far, my evidence is only anecdotal. If anyone wants a summer internship quantifying the negative impact of McKinsey on the world via actual data, please contact me.

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Source:
Equity analysts: Still too bullish
Marc Goedhart, Rishi Raj, and Abhishek Saxena
McKinsey Corporate Finance Practice, APRIL 2010
https://www.mckinseyquarterly.com/Equity_analysts_Still_too_bullish_2565

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This is a guest post by Richard Heinberg. It was previously published by the Post Carbon Institute.

Following the failure of the latest efforts to plug the gushing leak from BP’s Deepwater Horizon oil well in the Gulf of Mexico, and amid warnings that oil could continue to flow for another two months or more, perhaps it’s a good time to step back a moment mentally and look at the bigger picture—the context of our human history of resource extraction—to see how current events reveal deeper trends that will have even greater and longer-lasting significance.

Much of what follows may seem obvious to some readers, pedantic to others. But very few people seem to have much of a grasp of the basic technological, economic, and environmental issues that arise as resource extraction proceeds, and as a society adapts to depletion of its resource base. So, at the risk of boring the daylights out of those already familiar with the history of extractive industries, here follows a spotlighting of relevant issues, with the events in the Gulf of Mexico ever-present in the wings and poised to take center stage as the subject of some later comments. Readers in the “already familiar” category can skip straight to part 5.

1. The Pyramid Scheme

Perhaps it’s best to start with the most familiar metaphor: resource extraction always proceeds on the basis of the low-hanging fruit principle. We typically go after the most easily accessible, highest quality portions of the resource first, and save the hard-to-get, low-quality portions for later.

Geologists use a different metaphor; they commonly speak of a “resource pyramid.” The capstone represents the easily and cheaply extracted portion of the resource; the next layers are portions of the resource base that can be extracted with more difficulty and expense, and often with worse environmental impacts; while the remaining bulk of the pyramid represents resources that geologists believe are unlikely to be extracted under any realistic pricing scenario, usually because of depth, location, or quality issues. There’s a pyramid for oil, one for coal, one for iron ore, and so on.

As we chew our way down the layers of each pyramid, starting at the top, some fairly predictable things happen with regard to technology, economics, and environmental impacts. These effects often mutually interact, and I will try to highlight those mutual interactions as we go.

2. Technology

Some resources can be extracted, at least in initial stages, with very simple tools. Primitive mining was accomplished with stone and wooden picks and shovels, using reed baskets to carry ore (usually copper, gold, or silver) to nearby sites where it could be smelted in charcoal fires. Once copper, tin, and iron had been smelted in sufficient quantities, metal tools began to be used in mining.

Early coal mining consisted simply of digging lumps from surface outcrops, but by the 18th century British miners were working in shafts over 300 feet deep.

Many very early oil wells consisted of shallow pits (up to 100 ft deep) dug into natural seeps; the earliest known drilling for oil occurred in China in the fourth century, achieving depths of up to about 800 feet using bits attached to bamboo poles. As petroleum became a heavily traded commodity in the early 20th century, rotary drills using steel pipes and bits were developed, able to penetrate to depths of thousands of feet.

The patterns are clear and unsurprising: As resources near the Earth’s surface become depleted, we have to work harder and dig deeper to extract more of what we want and have come to need. Production problems lead to the development of new extractive technologies—which, in solving those problems, often also make more of the resource accessible. As a larger portion of the resource base becomes available to society, more uses for the resource are discovered. The new technologies themselves (starting with metal tools) also frequently wind up having other purposes—ones that may increase demand for the resource they were developed to extract.

There is no more significant or instructive example of these trends than the story of the steam engine—which was invented to pump water out of deepening coal mines, but (when applied to other ends, such as providing the motive power for railroads) became a prime user of coal. Tellingly, iron rails were also first used in coal mines. And thus, of course, began the Industrial Revolution.

Fast-forward to deepwater drilling rigs, satellite and seismic geological surveys, horizontal drilling, fracking, and Blowout Preventers (BOPs) for finding and extracting oil (and unconventional natural gas); Steam-Assisted Gravity Drainage (SAGD) technology for obtaining oil from tar sands; long-wall mining, Underground Coal Gasification (UCG), and Carbon Capture and Sequestration (CCS) in the coal industry; and so much more. Each extractive industry boasts its own fleet of cutting-edge technologies, each consisting of a suite of tool systems all working together to make the production of some fuel or ore cheaper or more environmentally benign.

The 21st-century search for useful non-renewable resources is testing the limits of science; and both the brawn and the intricacy of machines that have been developed to feed our growing human needs for nonrenewable resources are truly impressive. Watching some of these machines in action, it is tempting to think that human ingenuity has no bounds. Moreover, since we are still fairly close to the top of the pyramid with regard to many nonrenewable resources, it is also natural to assume that constantly improving machines will enable us to dig very far down indeed, so as to continue supplying our burgeoning collective appetite for energy and minerals for many generations to come.

However, as we are about to see, the development of extractive technologies also involves tradeoffs and limits.

3. Economics

Fancy extraction technology comes at a price. But investment in more expensive tools is often justified by greater efficiency of production, reduced environmental impacts, or by the ability to open more of the resource base to exploitation. The relationship between cost and payoff is captured to some extent by the simple ratio of Return on Investment (ROI), to which every drilling or mining company’s bean counters pay vigilant attention. This ratio can easily go sour in situations where the resource isn’t present in sufficient quantities (even using the newest oil exploration techniques, two out of three initial wells—each costing tens to hundreds of millions of dollars—still comes up dry) or where environmental problems get out of hand (note to self: at end of fiscal year, remember to review BP’s balance sheet for Gulf of Mexico operations).

But financial ROI is not the only return on investment that matters. If we’re discussing energy resources (oil, gas, or coal) then we also have to keep track of the ratio between the energy invested in exploration and production versus the energy yielded by the resources extracted. This is commonly termed Energy Return on Energy Invested, or EROEI. Technology uses energy, and bigger and more complicated machines usually use more of it. Moreover, the mining and refining of deeper or lower-grade fossil fuels generally takes more energy regardless of what technology is used.

When the amount of energy required to produce a given quantity of fuel equals the amount of energy obtained from burning it, that fuel ceases to be a net energy source. There may be financial reasons to continue the production process (including government subsidies or tax write-offs), but from an energetic standpoint the exercise has become pointless. The EROEI for fossil fuels is declining for all the above reasons.

Since each layer further down the resource pyramid requires more expensive extractive machinery, while yielding lower-quality or more expensively produced fuels or ores, one would expect that the market price for resources would continually be rising. But this has not been the case in most instances—until recently. During the 20th century, most commodity prices (including prices for metal ores and, often, fossil fuels) actually declined in inflation-adjusted terms. Why? More areas for exploration were continually being opened, while payoffs from the ability of new technology to access lower layers of the resource pyramid trumped both the extra cost of the technology itself and the declining resource quality (a factor that must be overcome with increasing investment in refining or ore upgrading).

Over the past few years, that situation has begun to change. A study, Increasing Global Nonrenewable Natural Resource Scarcity by Chris Clugston tracks the production levels and price of 57 Non-renewable Natural Resources (NNRs). Clugston begins by pointing out that

During the 20th century, global production levels associated with 56 of the 57 analyzed NNRs (98%) increased annually, while global price levels associated with 45 of the 57 analyzed NNRs (79%) decreased annually. Generally increasing global NNR production levels in conjunction with generally decreasing global NNR price levels indicate relative global NNR abundance during the 20th century. On the whole, global NNR supplies kept pace with ever-increasing global demand during the 20th century.

So far, so good. But that’s changing.

Generally slowing or declining global NNR production growth in conjunction with generally increasing global NNR prices indicate increasing NNR scarcity during the early years of the 21st century. . . . Annual global production levels increased during the 20th century, then decreased during the 21st century; while annual price levels decreased during the 20th century, then increased during the 21st century. . . .

Case in point: for petroleum, between the years 2000 and 2010 production increased 9 percent, while prices rose by almost 400 percent. No, we’re not “running out” of oil, but we are running out of cheap oil. Clugston echoes this conclusion more generally: “We are not about to ‘run out’ of any NNR; we are about to run ‘critically short’ of many.”

Something else we learn from petroleum: as production expands and high-quality deposits deplete, continually higher prices do not represent the full extent of the problems that arise. At some point, regardless of price, production reaches a maximum rate and begins to decline (this, of course, is what the whole “Peak Oil” discussion is all about). This “peaking” phenomenon has occurred with regard to the extraction of many different resources, and in many places and times, so its dynamics are now the subject of fairly sophisticated study.

Standard economic theory holds that, as a resource becomes scarce, potential buyers will bid prices upward; and as prices escalate, increasing numbers of users will turn to substitutes. It’s easy to point to historic examples where these things happened, but there have also been instances where prices responded in a highly non-linear fashion (more on that below), and where substitutes were unavailable or inadequate. In the case of fossil fuels, substitutes do exist; however, most have drawbacks of one kind or another (see my report Searching for a Miracle) and the scale of current global fossil fuel usage makes a full transition to substitutes a truly daunting prospect.

It is important to know whether commodity prices escalate linearly as petroleum and other on-renewable resources become scarcer. If they do, then the invisible hand of the market will solve many of the problems that scarcity brings: in addition to making substitutes more attractive, higher prices will motivate efforts to increase efficient usage of the resource. But a recent historic example calls such rosy scenarios for painless, market-led resource transitions into question. In the years and months leading up to July 2008, demand for oil was increasing, but global production remained stagnant. Traders bid the price up to a record $147 per barrel—and global financial mayhem followed.

While a concurrent derivatives/real estate crash was responsible for much of the bloodshed, dramatic slumps in the auto, airline, trucking, and shipping industries seemed closely tied to the oil price spike. These (along with the general economic convulsion) resulted in declining fuel demand, which in turn caused petroleum prices to plummet nearly to $30 per barrel in December 2008. This then led to curtailed investment in oil exploration—which, in due course, will provoke another rapid price rise as supplies dwindle. The cycle will presumably begin again; and each time it recurs, it will likely have an even more devastating economic impact. Not all non-renewable resources will provoke similar scenarios as they deplete, as very few are so essential to the economy that scarcity or price spikes could trigger a major recession. However, price volatility does seem to be a typical sign of depletion-led resource scarcity.

Finally, perhaps the most significant economic factor with regard to the extraction of nonrenewable resources is growth. Modern economies depend on growth in provision of goods and services; meanwhile, world population continues to expand. As we make our way down the down the pyramid, increasing appetites (growing population times growing per capita consumption rates) translate to increasing dependence on depleting resources. If total consumption rates were declining or even constant, the economic and environmental problems stemming from resource depletion would be easier to solve. Growth makes all such problems more intractable with every passing year.

4. Environmental Impacts

In many respects, advancing technology tends to reduce the environmental impact of each increment of resource extraction (though there are exceptions!).

Underground coal mining in the early days—only a few decades ago—was far more dangerous, dirty, and dreary than it is today, though mine disasters still occur (as we sadly discovered just a few weeks ago in West Virginia) and miners still die from pneumoconiosis.

Similarly, the oil business in the early 20th century lacked regulations and safety technology, and resulted in more frequent oil spills and fatal accidents than does today’s high-tech industry. The first successful exploratory oil wells nearly always produced gushers because there was little to prevent pressurized oil from shooting out the top of the drill pipe once reservoir contact was made. These days, gushers are extremely rare due to modern oil well pressure control systems.

In the deepwater Gulf of Mexico, we see on display all the most advanced technology for drilling safety and spill cleanup. Blowout preventers, pressure monitors, careful planning, regulations, and advanced engineering combine to make accidents rare. If something does go wrong, there are remote-controlled underwater vehicles, top kills, and junk shots to seal off the leaks, and oil booms and chemical dispersants to deal with the spill itself.

And yet, despite all this technology and expertise, we still we are witness to one of the worst environmental disasters in history. Why?

As we are still learning, the Deepwater Horizon disaster was due largely to gross negligence on part of several companies, primarily BP, and also to the approval of a flawed drilling plan by the Federal Government’s Minerals Management Service (MMS). Such lapses are to be anticipated. In a deepwater drilling operation with a budget running upwards of a hundred million dollars, every minute costs money, so there are strong incentives to cut costs. Often, engineers (who may be more concerned about safety) are overruled by management (who are more concerned about budgets and ROI).

Then there is the phenomenon—common throughout government—of regulators being figuratively (or literally) in bed with industries they are supposed to be regulating. So in March 2009, when BP filed a plan with the MMS, repeatedly asserting that it was “unlikely that an accidental surface or subsurface oil spill would occur from the proposed activities,” so unlikely in fact that “a blowout scenario . . . is not required for the operations proposed,” the regulators simply took the company at its word.

In the bigger scheme of things, an event such as the Deepwater Horizon explosion becomes more likely with every passing year, despite the continuing development of superior technology: as oil production levels grow to meet rising demand, and as the industry is forced to drill deeper in ever more hostile environments, there are more things to go wrong; and when problems happen, they are harder to fix.

While the world’s attention is appropriately riveted on the consequences of the Macondo blowout, it is important to remember the ongoing, routine environmental devastation that comprises the background static of contemporary industrial life: climate chaos, air and water pollution, and loss of biodiversity. In many instances of resource extraction—including “mountaintop removal” coal mining and tar sands oil production—massive environmental destruction is the result not of unforeseen accidents, but of normal operations.

With the convergence of climate change and “clean coal” technology we see the culmination of many of the trends discussed here. Climate change is an environmental consequence of nonrenewable resource usage, and one that is so horrendous it will stop civilization in its tracks. Therefore something must be done to stop it. Several key industrial nations can’t afford to give up coal, the highest-carbon fuel, because their economies depend on it and the alternatives would be too costly to develop. The ideal solution would be a new technology to clean up carbon emissions from burning coal. Voila! Such a technology exists—Carbon Capture and Sequestration (CCS), which entails burying carbon dioxide from the coal combustion process underground. But CCS will cost so much to build to scale that the technology will almost certainly never actually be implemented. (see China's Coal Bubble and How It Will Deflate US Efforts to "Develop Clean")

The upshot: there is no apparent solution to the coal/climate conundrum that preserves economic growth much longer. The trends end in some sort of unpredictable discontinuity.

5. Deepwater Horizon: Impact on Future Oil Production

Now, back to the events in the Gulf of Mexico.

The U.S. Department of Energy forecasts that “a vast majority” of projected increases in U.S. oil production in the near term will come from Gulf deepwater fields similar to the site of the Deepwater Horizon spill. Such deepwater fields currently represent about 70 percent of all Gulf oil production (the other 30 percent come from shallow depths, typically of a few hundred feet). Offshore oil provides almost a third of total U.S. oil production of 5.5 million barrels per day, and that percentage is rising. For the world as a whole, the International Energy Agency projects that by 2020 deepwater will be providing 40 percent of all oil being extracted. Why the emphasis on deepwater? Because we’ve already chewed our way down through the higher levels of the oil pyramid: there’s very little onshore or shallow-water oil left to find. So down we go!

The BP spill is likely to throw a wrench into these plans. Heavier regulations, and higher (more expensive) standards are on the way. President Obama has just ordered the suspension of all current U.S. deepwater drilling operations for six months, and future deepwater projects could be delayed by years.

Insurance costs for deepwater projects will soar (“The cost of insuring a rig against a so-called physical loss—damage to the rig itself—can easily surpass $3 million a year, and could reach $9 million depending on the deductible,” according to Rigzone www.rigzone.com/news/article.asp?hpf=1&a_id=93614). Total insurance claims on the Deepwater Horizon disaster could far exceed the total premiums paid by all oil drillers to insurance companies in 2010, so a bankrupting of some insurers is at least possible.

Further, deepwater projects require financing—however, in case anyone hasn’t noticed, the economy is falling apart. Banks aren’t lending because of all the bad loans on their books; and, though oil companies may be flush with cash, they prefer to spread risks around. Now that the risks associated with deepwater exploration appear much larger, and credit is tight in any case, fewer investors are likely to want to jump aboard.

Oil companies may want to just hang onto their cash by buying up their own stock shares. After all, the object of the game is to make a profit; producing more oil is just a means to that end, and if a better means is available, why not go with it? Sure, “financializing” the oil industry doesn’t work over the long term, as oil companies need booked reserves in order to attract investors, and maintaining reserves requires exploration. But who’s in it for the long term? Hey, in the long term, we’re dead. Maybe it’s time to cash out and let a new generation of managers figure out what to do next.

Then there is the problem of over-optimism. Developers of production projects are naturally inclined to talk up the prospects for the latest “play.” Later, when reality sets in, initial rosy forecasts may not be borne out. Case in point: BP’s flagship deepwater Gulf of Mexico project, Thunderhorse, was slated to produce a billion barrels of oil at the rate of 250,000 barrels a day (b/d). Production hit 172,000 b/d in January 2009, but then declined rapidly to 61,000 b/d by the end of last year.

BP has not commented publicly on the reason for this unexpected production crash, but outside observers are skeptical that the platform will ever actually produce the promised billion barrels. According to Post Carbon Institute Fellow Tom Whipple in “Peak Oil Review” for May 24, “At least 25 other deepwater projects are said to be facing problems of falling production, raising the question of just how much oil these very expensive deepwater projects will ever produce.” www.energybulletin.net/node/52897 Take one Thunderhorse, add a Deepwater Horizon, mix thoroughly, and what do you get? Investor jitters.

Economic optimists never tire of pointing out how enormous the resource pyramid is when viewed as a whole. When society is desperate, they say, we will go after energy resources and raw materials no matter where they are, no matter how expensive the process, and no matter how much environmental destruction comes with it. We’ll solve problems that arise as best we can and move on. Growth is inevitable and unstoppable, and if fuels and materials that enable growth exist, we will find and use them.

In reality, though, things may not work out that way. New extraction projects require the cooperation of many functioning systems including manufacturing/fabrication, finance, insurance, regulation, and advanced technical education. As that system of systems becomes more complicated, the sites of potential breakdown multiply. The current economic crisis is likely to rupture the system in multiple places, crippling extractive industries. Much of the remaining oil, coal, gas, and mineral resource base that could technically be extracted may well end up staying in the ground simply because society can’t continue to organize itself functionally at a high enough level to maintain the growing effort needed.

In short, the Deepwater Horizon story is not just an environmental tragedy. It is a story about the limits of both extractive technologies and the increasingly complex societal systems that support them. It’s a reminder that the whole project of basing unending economic growth on ever-increasing rates of extraction of depleting nonrenewable resources is wrongheaded from start to finish. And it’s a signal that hopes for our economy to magically “dematerialize” have turned out to be just that—mere hopes.

6. This Is What the End of the Oil Age Looks Like

There will be plenty of blame to go around, as events leading up to the fatal Deepwater Horizon rig explosion are sorted out. Even if further efforts to plug the gushing leak succeed, the damage to the Gulf environment and to the economy of the region are incalculable and will linger for a very long time indeed. The deadly stench from oil-oaked marshes—as spring turns to hot, fetid summer—will by itself ruin tens or hundreds of thousands of lives and livelihoods.

Then there’s the loss of the seafood industry: we’re talking about more than the crippling of the economic backbone of the region; anyone who’s spent time in New Orleans (my wife’s family all live there) knows that the people and culture of southern Louisiana are literally as well as figuratively composed of digested oysters, shrimp, and speckled trout. Given the historic political support from this part of the country for offshore drilling, and for the petroleum industry in general, this really amounts to sacrificing the faithful on the altar of oil.

President Obama has called the spill a “massive and potentially unprecedented environmental disaster,” and his representatives are now referring to it as both the worst oil spill and the worst environmental disaster in U.S. history.

But it’s much more than that. It is a sign that we’re nearing the end of a trail we’ve been following for at least a couple of centuries now.

Once again, I must repeat: we’re not even close to running out of oil, coal, gas, or most minerals. But we face a convergence of entirely predictable but severe consequences from the depletion of the concentrated, high-grade resources at the top of the pyramid: less affordable and more volatile commodity prices; worse environmental impacts—cumulative, mutually reinforcing impacts—both from accidents and from “normal” extraction operations; declining resource quality; declining EROEI for fossil fuels; and the need for massive new investment both to grow production levels, and to keep environmental consequences at bay.

And all of this is happening just as investment capital (needed to fix all these problems) is becoming scarce. In short, the monetary and non-monetary costs of growth have been rising faster than growth itself, and it looks as though we have now gotten to the inevitable point where growth may in fact no longer be an option.

The Deepwater Horizon disaster reminds us that, of all non-renewable resources, oil best deserves to be thought of as the Achilles heel of modern society. Without cheap oil, our industrial food system—from tractor to supermarket—shifts from feast to famine mode; our entire transportation system sputters to a halt. We even depend on oil to fuel the trains, ships, and trucks that haul the coal that supplies half our electricity. We make our computers from oil-derived plastics. Without oil, our whole societal ball of yarn begins to unravel.

But the era of cheap, easy petroleum is over; we are paying steadily more and more for what we put in our gas tanks—more not just in dollars, but in lives and health, in a failed foreign policy that spawns foreign wars and military occupations, and in the lost integrity of the biological systems that sustain life on this planet.

The only solution is to do proactively, and sooner, what we will end up doing anyway as a result of resource depletion and economic, environmental, and military ruin: end our dependence on the stuff. Everybody knows we must do this. Even a recent American president (an oil man, it should be noted) admitted that, “America is addicted to oil.” Will we let this addiction destroy us, or will we overcome it? Good intentions are not enough. We must make this the central practical, fiscal priority of the nation.

In my 2006 book, The Oil Depletion Protocol: A Plan to Avert Oil Wars, Terrorism and Economic Collapse, I laid out a simple formula that could guide us in systematically reducing our global dependence on oil. The same general plan could be adapted for use with all other nonrenewable resources. At the time, I naively thought that environmentalists would eagerly take up the idea, and that a few courageous politicians would champion it.

So far, there has in fact been very little interest in the Protocol. It turns out that nearly everyone likes the idea of using less oil, but nobody wants to take the step of actually mandating a reduction in its production and consumption, because that would require us to dethrone our Holy of Holies—economic growth. It’s so much more comfortable to spout support for the intention to build more electric cars—a technology that in fact will take decades to gain even moderate market penetration.

Fair enough. But where does that leave us? In an oily mess at the bottom of the Gulf of Mexico . . . and entangled in what may be the ultimate Catch 22: We want more petroleum-fueled economic growth, but we hate what the pursuit of petroleum is doing to us (not to mention the environment), and it looks as though “more” may not be an option much longer in any case.

There’s just no easy answer here, folks.

BP Frees Jammed Saw as Oil Nears Florida Beaches

BP PLC, has freed a jammed saw blade from a pipe that was slowing down the process of capping a well that has been spilling oil into the Gulf of Mexico for six weeks, a spokesman for the unified command center said Wednesday afternoon.

The company will replace part of the blade and then cut at the pipe on its other side, the spokesman said.

This will be the second cut to the pipe. If the saw can make a smooth cut it will increase the amount of oil that can be contained, U.S. Coast Guard Adm. Thad Allen, the national incident commander for the spill, said at a news conference earlier Wednesday.

BP has been under pressure to contain the massive oil spill that is affecting an increasingly wide swath of U.S. Gulf Coast shoreline. A six-foot-long oil sheen was found along Florida's Panhandle shoreline Wednesday.

Oil Nears Florida as Effort to Contain Well Hits Snag

Overnight, the response team was able to "successfully" make the first shear cut of the pipe, U.S. Coast Guard Adm. Thad Allen, the national incident commander for the spill, said at a news conference in Houma, La. However, a specialized saw got stuck while making a second fine cut that's needed before a containment device can be put in place.

If the response team is unable to dislodge the saw, another saw would have to be used, Adm. Allen said. He added that there's no question that a second cut can be made, but it remains uncertain how precise the cut will be. The smoother the cut is, the better the chance will be that the containment device will be able to capture a greater quantity of oil.

An announcement will be made later Wednesday about whether or not a second saw will be wielded, Adm. Allen said.

"As soon as the cut is made that separates the remainder of the riser pipe from the lower marine riser package, they will assess the quality of the cut and either move to install the top cap, which is the tighter device, with actually a rubber seal around it, or the top hat, which is a little wider and has less of a seal," he said.

The procedure, which has never been attempted at these depths, could increase the flow of oil spewing into the water by 20%, at least temporarily, government officials have said in recent days. Adm. Allen reiterated that projection, but said the increase in the flow rate wouldn't occur until the second cut is finished.

Wind Farms: Are All the Best Spots Taken?

In the US, a lack of transmission continues to be a primary restraint to the growth of onshore wind farms. The US has land aplenty with strong wind, but it remains undeveloped for lack of a way to get the power to market. Transmission lines cost roughly US$1 million per mile to build in the US. Given that prime wind sites are often far from where the wind power is needed, the price tag is hefty and the federal government has yet to resolve who will pay the bill. Wind developers shy away from proposing wind farms where no transmission yet exists and utilities don't want to put money into building transmission unless they know a generator stands ready to use the lines. Wind industry insiders call this the transmission chicken and egg dilemma.

'Transmission is the chink in the armour. That is where the frontier mentality still exists that everybody has to figure out their own way to get to market. It is causing great expense for generators and developers', said Andrew Spielman, a partner in law firm Hogan & Hartson, which has secured land use approvals for 725 MW of wind energy and an accompanying 80-mile (128 km)private transmission line in eastern Colorado.

While it can take a year to build a wind farm, transmission lines are likely to require at least five years – and sometimes decades if they run into public opposition.

US Wind Growth Likely To Drop in 2010

The study forecasts anywhere from 6.3-7.1 GW of wind could be installed in 2010, 40-60 percent lower than 2009 installations.

Google-Funded Geothermal Drilling System Could Reduce Costs

The process for creating geothermal wells is very similar to that used for extracting oil and gas, at least in the initial phases. . .

A better method, called “spallation,” which refers to chipping or flaking of stone, involves using jet engines to produce superheated, pressurized air which breaks rock.

This method, previously used to fracture granite and marble for commercial use but effective only in surface or close-to-surface applications, is now being applied to deep-well geothermal drilling, but with water as the medium instead of air.

Not only does the method save money by not using drill bits, which break or wear out, costing crews thousands of dollars and hours of time, but drilling is continuous and considerably faster – 30 feet per hour as compared to traditional drilling’s top speed of 10 feet per hour.

Obama pushes Kerry's climate bill

In an indication that Democrats could renew their push for climate change legislation this year, President Obama this afternoon said he would attempt to round up votes for legislation filed by Senator John Kerry.

Obama, speaking at Carnegie Mellon University, urged the US Senate to take action on a bill that aims to reduce reliance on foreign oil while putting a price on carbon emissions. It was the fourth time in 12 days that Obama urged the Senate to act, comments that come in the wake of a massive oil spill in the Gulf Coast.

David Strahan: Americans should be thanking BP

So, how is any of this good news?

First, it could have been so much worse. Had BP suffered a similar accident while drilling for Tiber, a three-billion-barrel field it discovered in the Gulf of Mexico last year under two miles of water, reservoir pressures and oil volumes would have been far higher, and there would be many fewer remotely operated submarines capable of working at this depth. Likewise, had such a spill occurred in the remote Arctic, galvanising a speedy response would have been still harder and impacts yet more devastating. Now at least regulations will be tightened, making such accidents less likely.

More important, the spill may finally spur Americans, who make up 5 per cent of the world's population but guzzle 25 per cent of the oil supply, to get serious about cutting their consumption.

BP Cites Broken Disk in 'Top Kill' Failure

BP PLC has concluded that its "top-kill" attempt last week to seal its broken well in the Gulf of Mexico may have failed due to a malfunctioning disk inside the well about 1,000 feet below the ocean floor.

The disk, part of the subsea safety infrastructure, may have ruptured during the surge of oil and gas up the well on April 20 that led to the explosion aboard the Deepwater Horizon rig, BP officials said. The rig sank two days later, triggering a leak that has since become the worst in U.S. history.

The broken disk may have prevented the heavy drilling mud injected into the well last week from getting far enough down the well to overcome the pressure from the escaping oil and gas, people familiar with BP's findings said. They said much of the drilling mud may also have escaped from the well into the rock formation outside the wellbore.

As a result, BP wasn't able to get sufficient pressure to keep the oil and gas at bay.

Almost one third of Gulf fishing grounds closed

NEW ORLEANS (AP) -- Almost one-third of federal waters in the Gulf of Mexico is closing to commercial and recreational fishing because of the oil spill.

The National Oceanographic and Atmospheric Administration expanded the area by 5 percent Tuesday. NOAA says as of 6 p.m. EDT Tuesday that nearly 76,000 square miles would be off-limits because of oil spreading from the Deepwater Horizon disaster. That's more than 31 percent of federal Gulf waters.

Spill Draws Criminal Probe

The U.S. has launched criminal and civil investigations into the Gulf of Mexico oil spill—the latest move by the Obama administration to show it is taking aggressive action amid bipartisan criticism of its response to the disaster.

"We have what we think is a sufficient basis for us to have begun a criminal investigation," said U.S. Attorney General Eric Holder Tuesday after meeting in New Orleans with state attorneys general and federal prosecutors from the region. Mr. Holder noted that 11 people died in the April 20 rig accident that precipitated the spill.

In a press conference, Mr. Holder said there is "a wide range of possible violations." He declined to specify the target of the investigation because he said authorities aren't "clear on who should ultimately be held liable" and didn't want to "cast aspersions."

Energy Stocks Lead Market Lower

"You're already looking at a situation where oil prices have been under pressure because of the outlook for demand," said strategist Dan Greenhaus, of Miller Tabak. "That [stock-market] sector already had a lot of problems because of that, and now the BP situation just adds to the list." . . .

The S&P 500's energy sector slid 4.3%, leading the index to a 1.7% decline overall. Transocean, the operator of the BP rig that exploded and caused the Gulf spill, fell 11.9%. Anadarko Petroleum fell 19.6%, while Halliburton was off 14.8%.

Meanwhile, crude-oil prices slipped to end below $73 a barrel, beginning June on a sour note. The commodity is coming off a 14.1% slide for May, the worst monthly performance since December 2008.

BP can take financial hit from spill

The British oil giant is worth $75 billion less on the open market than it was when the Deepwater Horizon rig exploded six weeks ago. Other companies involved in the spill — Transocean, Halliburton and Cameron — have all lost at least 30 percent in value.

Spill Clouds Future For Oilfield-Service Companies

"I don't think in the near term this is good for service companies or the industry because operations are disrupted," said Gene Shiels, a spokesman for Baker Hughes Inc . (BHI), which provides directional drilling services and drilling fluids for offshore drilling projects.

But Shiels added that in the long term, heightened standards for back-up systems or requirements to add more equipment to existing rigs could create opportunities for service companies.

Undersea oil pipelines vulnerable to hurricanes

The study found that the 31,000 miles of pipelines along the seafloor of the Gulf could crack or rupture unless they are buried or their supporting foundations are built to withstand hurricane-induced currents. "Major oil leaks from damaged pipelines could have irreversible impacts on the ocean environment," the authors wrote.

Researchers got a unique look at what a hurricane can do underwater during Ivan, a Category-4 hurricane with wind speeds of more than 130 mph in the Gulf. Ivan passed over a network of sensors on the ocean floor.

"This is the first time that anyone measured hurricane-induced stresses on the Gulf bottom," says study author Bill Teague of the Naval Research Laboratory in Mississippi.

The study's calculations are the first to show that hurricanes propel underwater currents with enough force to dig up the seabed as far as almost 300 feet below the surface, potentially creating underwater mudslides and damaging pipes and other equipment that rest on the bottom.

Feds meet with film director Cameron on oil spill

"Top kill" didn't stop the Gulf oil spill. How about something "titanic"?

Federal officials are hoping film director James Cameron can help them come up with ideas on how to stop the disastrous oil spill in the Gulf of Mexico.

Oil appears in Alabama & Mississippi; BP & Coast Guard scrambling

First Louisiana, today it's Alabama and Mississippi. True to NOAA's predictions, oil washed ashore on barrier islands off Alabama and Mississippi on Tuesday. In addition, significant slicks of crude offshore appeared to be moving toward those states' coasts.

Researchers scrambled to clean up tar balls and puddles of oil from the beaches of Alabama's Dauphin Island, while a strip of oil about two miles long and three feet wide stretched along Petit Bois Island, about five miles away off Mississippi.

If NOAA predictions hold, both Alabama and Mississippi's beaches will begin to see more than tar balls by the end of this week.

Oil spotted about 9 miles off Fla. coast

An oil sheen was confirmed about nine miles off the Florida coast, and officials are saying it could hit the white sands of Pensacola Beach as soon as Wednesday.

Obama’s Options for Addressing Oil Spill

We Must Finally Address Energy Crisis

The New York Times' Bob Herbert insists, "However and whenever the well gets capped, what we really need is leadership that calls on the American public to begin coping in a serious and sustained way with an energy crisis that we've been warned about for decades. If the worst environmental disaster in the country's history is not enough to bring about a reversal of our epic foolishness on the energy front, then nothing will."

Middle East Oil Troubles Could Lead to Lower Prices.

OPEC production grew to take advantage of the higher prices of early May, and high production is likely to continue as long as prices don’t collapse entirely.

Greed aside, another reason OPEC production could continue to grow is that floating oil storage is declining rapidly. Danish shipping company A.P. Moller-Maersk estimates that there are about 25 VLCC tankers, each of which holds about 2 million barrels of oil, being used for floating storage. That is about half the number of VLCCs being used for a similar purpose a year ago.

The decline in floating storage is a result of an easing of the crude market’s contango, a position where the price of oil for prompt delivery is lower than the price of future delivery. As the prompt and future prices converge, it becomes too expensive to store oil on a tanker.

On of the biggest users of floating storage is Iran, which Maersk estimates is storing oil on 20 of the 25 tankers. That’s not highly unusual because Iran’s lack of refining capability coupled with its limited on-shore storage and its 3.7 million b/d production capacity means the country has to put the black stuff somewhere.

Hunterston coal power station plan due to be submitted

If the proposal by Ayrshire Power is approved it would be the first plant in the UK to use carbon capture and storage (CCS) technology.

Environmentalists and locals have opposed the plan.

They argue it makes a mockery of the government's commitment to reducing carbon emissions.

Electric Car Warning Sounds: Don’t Expect Ring Tones

Although no one (at least yet) is making them do it, automakers are preparing to introduce quiet electric and plug-in hybrid cars that make sounds to alert pedestrians, the blind and others to their presence.

A 2009 study by the National Highway Traffic Safety Administration showed that hybrids (when they’re moving slowly, backing up, stopping or coming in or out of parking spaces) hit pedestrians and bicyclists more often than do other cars.

China will pay electric car subsidies to makers, rather than buyers

China, one of the most aggressive promoters of electric vehicles, is trying to defuse criticism that big EV subsidies favor rich folks who can afford cars over poorer Chinese who help the nation's severe air pollution problems by still getting around on bikes or public transit.

The Ministry of Finance announced a trial plan in five cities to pay an EV and hybrid subsidy up to 60,000 yuan ($8,784) directly to the carmakers. Private buyers of the EVs will get a smaller 3,000 yuan ($440) payment from dealers, the ministry said on its website, according to the Associated Press. Paying most of the money behind the scenes to manufacturers is aimed to make the subsidies more politically palatable.

Statistics alone paint an incomplete picture of women and bicycles

According to the statistics, there is a dramatic imbalance in bike riding along gender lines, with men using the bicycle as a primary means of transportation at a rate more than double that for women.

Data from the 2008 US Census Bureau's American Community Survey found that 2.7 percent of San Francisco's population commutes to work by bike. The survey reports that 3.7 percent of men ride to work, while only 1.6 percent of women do. A 2009 study in Scientific American found that men's cycling trips surpass women's by at least 2:1. In the competitive arena, 87 percent of competitive cyclists are male, according to 2009's active member demographic conducted by USA Cycling.

Chris Huhne warns of £4bn black hole in nuclear power budget

Britain is facing a £4bn black hole in unavoidable nuclear decommissioning and waste costs, Chris Huhne, the energy and climate change secretary disclosed tonight.

The decommissioning costs over the next four years revealed by officials to Huhne are so serious that he has already flagged the crisis up to the cabinet.

Huhne disclosed that in current financial year the Nuclear Decommissioning Authority's budget is expected to be in balance.From 2011-12, the deficit suddenly rises to £850m, in 2012-13 the gap increases further to £950m and then to £1.1bn in the two subsequent years.

The revelation will also hand further ammunition to those who say a new generation of nuclear power stations in Britain will end up being more expensive than the industry claims.

Temperatures reach record high in Pakistan

Mohenjo-daro, a ruined city in what is now Pakistan that contains the last traces of a 4,000-year-old civilisation that flourished on the banks of the river Indus, today entered the modern history books after government meteorologists recorded a temperature of 53.7C (129F). Only Al 'Aziziyah, in Libya (57.8C in 1922), Death valley in California (56.7 in 1913) and Tirat Zvi in Israel (53.9 in 1942) are thought to have been hotter.

According to the US National Oceanic and Atmospheric Association (NOAA), the national climate monitoring service that measures global temperatures by satellite, 2010 is shaping up to be one of the hottest years on record. The first four months were the hottest ever measured, with record spring temperatures in northern Africa, south Asia and Canada.

Live Q&A: Moneyless man Mark Boyle answers your questions

When Mark Boyle (aka the moneyless man) wrote last October on the Ethical Living Blog about how he lives without using money, his article was one of the most commented on of the year.

And it sparked a series of followups, including the chilly video above.

Scottish national park chief raises prospect of water exports

The Environment Agency, which rejects the proposal, estimated in 2006 that storing, piping and pumping water to the London area from Wales would be the cheapest mass transfer option but still cost £2.4m per million litres a day, while building new reservoirs in south-east England cost £1.6m per million litres a day. The agency said Cantlay's proposals were unnecessary and unworkable.

"Pumping water around uses a lot of energy so this would also increase greenhouse gases," a spokesman said. "There are better, cheaper solutions much closer to home. These include making better use of the water we have."

Debt measures could spark new recession: U.N.

The United Nations agency, which gathers unions, employers and governments to discuss employment issues, said public debt needed to be reduced in an orderly manner.

But a report by ILO Director-General Juan Somavia said that pressure from financial markets was pushing countries into stringent fiscal policies that jeopardize recovery, making it less likely that growth, employment and wages -- and hence tax revenues -- will recover soon.

A Bullish View of Wind Power Out West

But that intermittency – long considered a major shortcoming – may have little impact on the potential for wind to power much of the electric grid in the western United States, according to a new study by the Department of Energy’s National Renewable Energy Lab.

The study, released in late May, found that the power grid for five western states – Arizona, Colorado, Nevada, New Mexico and Wyoming – could operate on as much as 30 percent wind and 5 percent solar without the construction of extensive new infrastructure.

Global Programs Are Growing the Next Generation of Eco-Cities

For the first time in history, half of the world's population — some 3.2 billion people — lives in cities, which occupy just two percent of the Earth's land mass but generate a massive 80 percent of the planet's global warming emissions. By 2050 the world's cities will be home to 70 percent of the population, or more than six billion people.

To mitigate the impact of urban growth on climate change, visionary cities worldwide are implementing programs aimed at reducing their carbon footprints and moving toward carbon-neutral status. At the same time, a new generation of sustainable cities — from China to the Americas — is rising from the ground up.

Florida’s High Speed Rail

They’re common in Europe and Asia, but soon Florida will be sporting a high speed rail system as well. The state just received about 1.25 billion dollars in funding from the federal government for a railway stretching from Tampa to Miami.

CSX Upstate train deal ‘welcome news’

State and federal officials have brokered a deal with CSX Corp. to build a high-speed rail line running from Buffalo to Albany, ending months of negotiations.

Back in January, the state was awarded $153 million in federal funding for high-speed rail improvements.

The state and CSX, however, had fought over what the speed limit would be set at on the new high-speed rail line. The state wanted 110 mph as the maximum speed, while CSX wanted 90 mph.

Nigerian airlines to get bail-out

Nigeria's central bank is extending a 500bn naira ($3.3bn; £2.3bn) bail-out to its troubled airlines.

Virgin Atlantic has said it is looking to sell its 49% stake in Nigerian Eagle Airlines, formerly Virgin Nigeria.

Nigerian Eagle Airlines suspended its loss-making long-haul routes to the UK and South Africa last year to focus on domestic operations.

Hewlett-Packard to cut 9,000 jobs worldwide

Hewlett-Packard (HP) says it plans to spend $1bn (£686m) and shed 9,000 jobs over three years as it creates fully-automated commercial data centres.

The latest job losses come after 6,700 posts were shed last year to make savings.

The Density of Smart People

Clusters of smart people of the highly educated sort that economists refer to as "human capital" are the key engine of economic growth and development. Jane Jacobs argued that the clustering of talented and energetic in cities is the fundamental driving force of economic development. In a classic essay, "On the Mechanics of Economic Development," the Nobel prize-winning, University of Chicago economist Robert Lucas formalized Jacobs' insights and argued that human capital, or what can be called Jane Jacobs externalities, are indeed the key factor in economic growth and development. Still, the standard way economists measure human capital is to take the percentage of people in a country, state, or metropolitan area with a bachelor's degree or higher.

Toyota, Nissan and Honda increase production as demand rises in the U.S.

For the month of April, Toyota Motor Corp., Honda Motor Co. and Nissan Motor Co. increased global vehicle production in response to the increasing demand in Asia and the United States.

In a statement, Toyota disclosed that it built 62% more cars than a year earlier, with 591,109 vehicles made in April. Its exports rose by 117% to 150,118 units, while overseas output increased by 55%. Production in Japan rose by 71%. Nissan built 57% more cars and light trucks to 319,673 units compared with April 2009. Meanwhile, Honda made 27% more vehicles to 294,308 vehicles.

Report explores economic impact of NH’s local food

New Hampshire farms are less productive and profitable than those in Maine or Vermont but do a good job selling directly to an affluent, engaged population, according to a new report.

With interest in local food rising, the state Department of Agriculture had researchers at the University of New Hampshire analyze the economic impact of the New Hampshire food system, which includes about 81,000 people in farming, manufacturing, distribution or retail jobs.

New Thread--redirect to http://theoildrum.com/node/6551 This is a repeat of the earlier post, because of the large number of comments.

Note Wednesday afternoon updates at the bottom of the post!

There has been a lot of activity at the bottom of the Gulf today, not all of it immediately successful, but all working toward the current aim of being able to field the Lower Marine Riser package. That installation requires that the broken existing riser that connects to the Blowout Preventer (BOP) has to be removed. The bent riser has been exerting some lateral pressure on the BOP, and this might be relieved when it is cut off. To minimize the damage, the first cut is therefore going to be further down the riser, provided that they get the saw "unstuck," which it seems like they might have done, but no word yet on when cutting is to resume. (At 5 pm Wednesday I have added an UPDATE explaining how the diamond wire blunted, and how they might have fixed it, but now won't. They are going back to the Shear.)

(My post continues after the video. Please click, "There's more".)

VIDEO BELOW FOLD

http://www.cnn.com/video/flashLive/live.html?stream=3

http://www.cnn.com/video/flashLive/live.html?stream=stream/3&hpt=T1 The Lower Riser Assembly attached to the top of the BOP, the riser has folded over to the left.

I described the plan of attack in an earlier post, and what has happened, over the course of today has tried to follow that script. I say tried, because there have been a couple of glitches that developed over the course of the day. The large shearing machine (apparently owned by BTI) appeared on the scene, and in preparation for its use some of the pipes surrounding the main riser (the choke and kill lines) were first cut away using a diamond saw.

10:04 am just before the pipe was severed.

At the same time that this was going on, the wire saw that would make the final cut on the riser had been brought down to the site. The riser assembly has been cleaned of extraneous pipes already, and the wire saw would fit about the flange and below the bend.


The wire saw was then located ready to make the cut.

10:30 am Wire saw on riser

It was now time for the shearing machine (which I’m going to call a Shear from now on) to fit around the riser and to make the first cut through the pipe.

First shear location

Unfortunately the first cut did not appear successful, although there was a cloud of oil and gas released, indicating that the riser was at least breached. There was a pause, and the Shear moved to a new location closer to the riser. Again it tried to shear through the nest of pipes, that now included choke and kill lines. It was not successful, and returned to the surface where it was fixed, and returned to the site. UPDATE 1: Having written this post and not seeing much happening I went off for a couple of hours. On my return (and before Gail posted it), I did not check again and as the notes below show, the Shear worked at 7 pm. At 10:15 pm the wire saw was cutting through the riser. I apologize for the errors.

Wire sawing the riser.

END of UPDATE 1 UPDATE 2 below> In the meanwhile, a little calculation, based on reports that the White House has announced that the removal of the riser and drill pipe that are protruding from the Blowout Preventer (BOP) of the Deepwater Horizon well in the Gulf may increase the amount of the petroleum leak by 20% when the riser section is removed. There are two immediately obvious reasons why this might be the case.

The first of these is that there is a small amount of oil that was leaking up through the drill pipe that extended beyond the broken riser. That flow was one of the first things capped in the remedial effort. It did not have much impact on the overall flow volume, since the flow merely backed up and increased the flow through the main crack in the riser, but there may be a small increment of flow when this channel is re-opened with the cut below the fold in the riser.

The greater change in the flow, however, will likely come because the riser and DP, while not providing much increased resistance, did raise the pressure on the downstream side of the BOP by about 500 psi. We know that though the pressure down at the formation was at around 12,000 psi, up on the upstream side of the BOP it fluctuates in the 8,000 to 9,000 psi range. The higher resistance on the downstream side, reduces the pressure drop across the BOP by that 500 psi, and the flow rate will be reduced accordingly (the gap size through the BOP is assumed not to change).

However, if the pressure drop across the nozzle was at 6,000 psi in the current condition, (which with an orifice size of 0.6 inches, would give a flow rate of 512 gpm), then raising the pressure drop by 500 psi would only increase the flow rate to 532 gpm, or a difference of 4%--which might suggest that there is something about the drill-pipe flow that was initially capped which we don’t know yet. Alternately it may be that they think that removing the bend in the riser might ease the forces on the BOP, relaxing the metal a little and increasing the orifice size. After all it has only to open up by another 0.05 inches to give the increase in flow that the White House are predicting.

UPDATE 2: Sometime about midnight it appears that the cutting wire stopped moving and may be jammed in the cut, roughly half-way through. Possibly jammed wire at 12:30 am UPDATE 3 I went to bed and have just checked the comments and it does not appear, at 8:00 am that the saw restarted, and finished cutting the riser. At present the ROV is looking at the end of the riser, and the Shear. Oil and gas from the cut seems to be coming up around the end making it indistinct. Does anyone have a better version of what went on overnight?

UPDATE 4: On other feeds they are showing that a second cut is now being made by the wire saw, but the camera is further away. BP is predicting that the cut will be completed today and the LMRP installed. But it doesn't look good that they are still working with the Shear, because they can't use that for a final cut, and it implies that they may be having problems with the second cut also.

UPDATE 5: Part of the problem was apparently according to a BP spokesman that the cut through the first half had dulled the blade, so that when they got it restarted it would not cut. (What we do in those circumstances, which are not uncommon with diamond blades, is to run the blade through firebrick, and this erodes the material into which the diamonds have been pushed, and sharpen it. Then we drop the cutting pressure a little.) However, BP's current answer is going to beThe technician said that rather than trying again with the saw, the plan now was to use a large shear to cut the riser. The shear, which is about 20 feet long and nearly 10 feet high, was used to make an earlier cut in the riser about 50 feet from the wellhead. Because the shear will not make as clean a cut as the wire saw, modifications would have to be made to the containment cap that is to be lowered over the cut pipe. But the technician said that even with the switch to the shear and the modifications, he expected the containment cap could be in place by Thursday.

Oh, and I mentioned earlier that an ASJ system had cut through casing and pipes at the bottom of the North Sea. I had the orientation of that cut wrong (at least for the picture below) since in this case it was from the outside in, but I am aware of it being successful the other way. And so here is the picture of casing and cement cut by an ASJ. Sadly it was so long ago - around 23 years, that I can no longer remember exactly the pressure it was cut at, but I believe it was 5,000 psi. And to answer a comment because the nozzle is non-contact, the surfaces it is cutting don't have to be cylindrical.

ASJ cuts of casing from the bottom of the North Sea
Wed. UPDATE: The wire motionless in the slot at 12:30 am

Wed. UPDATE: The wire was apparently stuck for a number of hours and they may have changed the wire, and then restarted with a second cut. BP is still predicting that the cut will be completed today and the LMRP installed.

Wed. UPDATE 2 (5 pm Wednesday): Part of the problem was apparently according to a BP spokesman that the cut through the first half had dulled the blade, so that when they got it restarted it would not cut. (What we do in those circumstances, which are not uncommon with diamond blades, is to run the blade through firebrick, and this erodes the material into which the diamonds have been pushed, and sharpens it. Then we drop the cutting pressure a little.) However, BP's current answer is going to be:The technician said that rather than trying again with the saw, the plan now was to use a large shear to cut the riser. The shear, which is about 20 feet long and nearly 10 feet high, was used to make an earlier cut in the riser about 50 feet from the wellhead. Because the shear will not make as clean a cut as the wire saw, modifications would have to be made to the containment cap that is to be lowered over the cut pipe. But the technician said that even with the switch to the shear and the modifications, he expected the containment cap could be in place by Thursday.

New Thread--redirect to http://theoildrum.com/node/6551

There has been a lot of activity at the bottom of the Gulf today, not all of it immediately successful, but all working toward the current aim of being able to field the Lower Marine Riser package. That installation requires that the broken existing riser that connects to the Blowout Preventer (BOP) has to be removed. The bent riser has been exerting some lateral pressure on the BOP, and this might be relieved when it is cut off. To minimize the damage, the first cut is therefore going to be further down the riser, provided that they get the saw "unstuck."

(My post continues after the video. Please click, "There's more".)

The Lower Riser Assembly attached to the top of the BOP, the riser has folded over to the left.

I described the plan of attack in an earlier post, and what has happened, over the course of today has tried to follow that script. I say tried, because there have been a couple of glitches that developed over the course of the day. The large shearing machine (apparently owned by BTI) appeared on the scene, and in preparation for its use some of the pipes surrounding the main riser (the choke and kill lines) were first cut away using a diamond saw.

10:04 am just before the pipe was severed.

At the same time that this was going on, the wire saw that would make the final cut on the riser had been brought down to the site. The riser assembly has been cleaned of extraneous pipes already, and the wire saw would fit about the flange and below the bend.

The wire saw was then located ready to make the cut.

10:30 am Wire saw on riser

It was now time for the shearing machine (which I’m going to call a Shear from now on) to fit around the riser and to make the first cut through the pipe.

First shear location

Unfortunately the first cut did not appear successful, although there was a cloud of oil and gas released, indicating that the riser was at least breached. There was a pause, and the Shear moved to a new location closer to the riser. Again it tried to shear through the nest of pipes, that now included choke and kill lines. It was not successful, and returned to the surface where it was fixed, and returned to the site. UPDATE 1: Having written this post and not seeing much happening I went off for a couple of hours. On my return (and before Gail posted it), I did not check again and as the notes below show, the Shear worked at 7 pm. At 10:15 pm the wire saw was cutting through the riser. I apologize for the errors.

Wire sawing the riser.

END of UPDATE 1 UPDATE 2 below> In the meanwhile, a little calculation, based on reports that the White House has announced that the removal of the riser and drill pipe that are protruding from the Blowout Preventer (BOP) of the Deepwater Horizon well in the Gulf may increase the amount of the petroleum leak by 20% when the riser section is removed. There are two immediately obvious reasons why this might be the case.

The first of these is that there is a small amount of oil that was leaking up through the drill pipe that extended beyond the broken riser. That flow was one of the first things capped in the remedial effort. It did not have much impact on the overall flow volume, since the flow merely backed up and increased the flow through the main crack in the riser, but there may be a small increment of flow when this channel is re-opened with the cut below the fold in the riser.

The greater change in the flow, however, will likely come because the riser and DP, while not providing much increased resistance, did raise the pressure on the downstream side of the BOP by about 500 psi. We know that though the pressure down at the formation was at around 12,000 psi, up on the upstream side of the BOP it fluctuates in the 8,000 to 9,000 psi range. The higher resistance on the downstream side, reduces the pressure drop across the BOP by that 500 psi, and the flow rate will be reduced accordingly (the gap size through the BOP is assumed not to change).

However, if the pressure drop across the nozzle was at 6,000 psi in the current condition, (which with an orifice size of 0.6 inches, would give a flow rate of 512 gpm), then raising the pressure drop by 500 psi would only increase the flow rate to 532 gpm, or a difference of 4%--which might suggest that there is something about the drill-pipe flow that was initially capped which we don’t know yet. Alternately it may be that they think that removing the bend in the riser might ease the forces on the BOP, relaxing the metal a little and increasing the orifice size. After all it has only to open up by another 0.05 inches to give the increase in flow that the White House are predicting.

UPDATE 2: Sometime about midnight it appears that the cutting wire stopped moving and may be jammed in the cut, roughly half-way through.
Possibly jammed wire at 12:30 am
UPDATE 3 I went to bed and have just checked the comments and it does not appear, at 8:00 am that the saw restarted, and finished cutting the riser. At present the ROV is looking at the end of the riser, and the Shear. Oil and gas from the cut seems to be coming up around the end making it indistinct. Does anyone have a better version of what went on overnight?

UPDATE 4: On other feeds they are showing that a second cut is now being made by the wire saw, but the camera is further away. BP is predicting that the cut will be completed today and the LMRP installed. But it doesn't look good that they are still working with the Shear, because they can't use that for a final cut, and it implies that they may be having problems with the second cut also.

Oh, and I mentioned earlier that an ASJ system had cut through casing and pipes at the bottom of the North Sea. I had the orientation of that cut wrong (at least for the picture below) since in this case it was from the outside in, but I am aware of it being successful the other way. And so here is the picture of casing and cement cut by an ASJ. Sadly it was so long ago - around 23 years, that I can no longer remember exactly the pressure it was cut at, but I believe it was 5,000 psi.

ASJ cuts of casing from the bottom of the North Sea

Following yesterday’s further and dramatic selling in the 5 companies most directly tied to the Macondo well, BP, APC, RIG, HAL and CAM, the market cap loss for these names now total $119B since the April 20th close, the day of the accident. Add to this the market cap and potential profit loss seen in so many other energy names that will be impacted by changes in how future drilling will be done and of course the devastating impact on businesses in the Gulf Coast states and we can explain how it seemed to culminate in yesterday’s broad market selloff on the heels of concerns with slowing in China’s mfr’g sector and with European banks. Spanish bond yields today continue higher and the 10 yr yield spread to German bunds is at the highest since 1996. Spanish consumer confidence for May fell by 13 pts to a one yr low.

The bright spot in the news was last night’s ABC weekly consumer confidence poll which was up just 1 pt to -44 but was led by the Personal Finance component which rose to the highest since the 1st week of Jan. The overall index is now 3 pts above its one year average. This comes before the ADP jobs report Thursday and Friday’s Payroll figure and we hope it implies a continued improvement in the labor market. Mortgage apps continue to reflect the post home buying tax credit hangover as the purchase component fell 4.1% and is now down 39% over the past 4 weeks to the lowest since 1997. Refi’s continued to benefit from low rates as they were up 2.4% to the highest since Oct ‘09. US$ 3 mo LIBOR rose a touch but has been basically flattish for the past 4 days. While the Nikkei traded lower as did the yen, no one should be surprised over political turmoil in Japan as their PM resigned overnight.

II: Bulls 39.8 v 39.2 Bears 28.4 v 29.2

<Click on table for larger image>

• Congressional Budget Office (CBO) – Estimated Impact of the American Recovery and Reinvestment Act on Employment and Economic Output from January 2010 Through March 2010

The American Recovery and Reinvestment Act of 2009 (ARRA) contains a variety of provisions intended to boost economic activity and employment in the United States. Section 1512(e) of the law requires the Congressional Budget Office (CBO) to comment on the reports filed by certain recipients of funding under ARRA that detail how many jobs were created or retained through funded activities. This CBO report fulfills that requirement. It also provides CBO’s estimates of ARRA’s overall impact on employment and economic output in the first quarter of calendar year 2010. Those estimates—which CBO considers more comprehensive than the recipients’ reports—are based on evidence from similar policies enacted in the past and on the results of various economic models.

Comment

The table below shows actual GDP statistics over the last six years. Combining it with the table above, some interesting facts are revealed:

• Q3 2009 Final GDP real growth was 2.2%. The CBO estimates that 1.3% to 2.7% was due to government stimulus. So excluding stimulus it is possible Q3 2009 was still negative.

• Q4 2009 Final GDP real growth was 5.6%. The CBO estimates that 1.1% to 3.6% was due to government stimulus. So excluding stimulus it is possible Q4 2009 was as low as 2.0%.

• Q1 2010 Preliminary GDP real growth was 3.0%. The CBO estimates that 1.7% to 4.2% was due to government stimulus. So excluding stimulus it is possible Q1 2010 was still negative.

Add it up and only one quarter of the last seven (Q4 2009) has been able to show real growth in excess of government stimulus.

Let’s be clear … real growth means standards of living are advancing. Real growth means that economies are being more productive and real useful jobs are being created. Government stimulus is an attempt to manipulate growth statistics via inefficient and wasteful government spending. Stimulus does not advance standards of living.

While we agree that the “Great Recession” probably ended in the summer of 2009, the fact that the recovery is so dependent on government stimulus is not an encouraging sign.

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The Economist – The economy: A sticky gas-pedal
America contemplates yet more fiscal stimulus and leaves the pain for later
Mr Obama’s fiscal policy has been described as “gas now, brake later”: wider deficits in the near term to keep the economy out of depression (which would risk even bigger deficits), followed by a switch to deficit reduction to cap the rise in the national debt. The switch, however, remains a future abstraction. The latest initiatives would bring the total amount of stimulus since Mr Obama took office to well over $1 trillion (see table). Does the economy need all this? Despite turbulent markets, forecasts for American growth this year and next are being revised up, not down. On May 26th, the OECD predicted growth of 3.2% for 2010, up from 2.5% last November. But, it added, “it is unclear if output growth is yet self-sustaining and how the economy will respond as the effect of the stimulus ebbs.”

Today on the Chromium blog, we announced that we’re open-sourcing the RLZ library in Google Chrome as its own project. The RLZ library gives us the ability to accurately measure the success of marketing promotions and distribution partnerships in order to meet our contractual and financial obligations. For example, the RLZ library generates a query parameter that sometimes appears in Google search URLs in distributed products:


We’re excited to not only improve the transparency of Google Chrome, but also offer potentially useful code to the open source community. Please check it out and let us know what you think!

By Glenn Wilson, Product Manager

Good Evening: The calendar may say June, but today sure seemed like a May day to many investors. The distress signals were numerous and global, starting with Fitch’s decision to downgrade Spain’s sovereign debt rating by one notch on Friday. They continued over the weekend when BP’s “top-kill” effort failed and tensions rose in the Middle East. Overnight brought weaker than expected economic data in China and a curious warning from the ECB about the weakened state of banks within the EU. Risk aversion and currency volatility soared in response this morning, but after a decent rally attempt by U.S. stocks during the middle of the day, equities succumbed to yet another late sell off this afternoon. Whether or not we experience even lower prices in the near future, we may one day look back at the BP oil spill as a symbol of our ongoing distress.

Slow as they have been to issue actual downgrades to sovereign nations during the European version of the debt crisis, the ratings agencies are operating at light speed compared to their efforts to rescind previously gleaming opinions during the last cycle’s mortgage meltdown. Fitch took the first swipe at Spain on Friday, knocking Madrid’s credit down to AA+ from AAA. But the markets on Monday didn’t fare too badly on this news, nor did they shudder on word from BP that its leaking Gulf of Mexico oil well had slipped the noose of a proposed “top-kill”. U.S. stock market futures also betrayed no weakness yesterday and were up for most of the Memorial Day holiday.

Global equities began to descend overnight, however, reacting first to a weaker than expected Purchasing Managers survey in China (see below). Political malaise in Japan hurt the Nikkei somewhat, and the possibility of a diplomatic spat between Turkey and Israel made for a poor psychological backdrop worldwide. But stock indexes on the Continent didn’t start slipping in earnest until a downbeat ECB report was released (see below). The central bank did its best to be frank about the poor prospects for the EU banking system going forward, but equity and credit investors were less than thrilled with the ECB’s candor. Finally, Canada’s central bank hiked its policy rate by 25 bps, and though the move was widely expected, it gave some ammunition to those looking for global growth to downshift during the second half of 2010.

By the time stocks opened in New York this morning, the cumulative effect of the aforementioned negatives saw our major averages hit for losses of 1% or more during the first thirty minutes of trading. Two strong economic reports (construction spending & PMI) helped spark a rebound in share prices, however, and most of the averages were in positive territory before lunchtime. They spent the next few hours trading blows with the unchanged mark before the bottom fell out in the final half hour. When the dust cleared, losses ranged from the moderate (-1.1% for the Dow) to the eye-catching (-3.1% for the Russell 2000). Though helped by the weak stock market, Treasurys were somewhat hindered by low current yields, firm economic data, and another set of auctions this week. Still the 10 year note yield still managed to fall 4 bps by day’s end. The dollar benefited from a falling euro and a rising aversion to risk, while both these factors hindered commodity prices. Though the precious metals remained the stalwarts they’ve been of late, the CRB index itself shed nearly a full percentage point on Tuesday.

That oil continues to gush forth from a pipe near the bottom of the Gulf of Mexico is sad in so many ways. Lose/lose propositions often are, and while BP is bearing the brunt of this loss, the rest of the industry, its government regulators, thousands of fishermen, scores of wildlife and millions of residents are all feeling the pain, too. Hopes ran high only last week that loads of heavy mud could stanch the flow long enough to enable a cement well cap to be poured. Optimism that the spill might be contained or conquered was in part behind the more than 60 S&P points added between Tuesday’s low of 1041 and Thursday’s closing high at 1103.

Unfortunately for BP and everyone else, however, the “top-kill” strategy is now dead, and a true solution might not be found until relief wells are finished in August. Like so many problems that have cropped up since 2007, the ceaseless spread of oil in the Gulf of Mexico is problem caused by man that has eluded his most clever attempts to solve it. Worst case scenarios include seeing oil wash up in the Florida Keys, or even up the Eastern seaboard. Private industry and government are mostly helpless in the face of this unfolding disaster, except (of course) for the blame-laying and finger-pointing. It reminds me of the rancorous days after Lehman failed, when company after company felt forced to ask for help from a very unhappy Congress.

LIke subprime mortgages in early 2007 and Greek debt in early 2010, the BP oil spill has defied containment. If the two financial parallels have any predictive value, the mess in the Gulf will have impacts that last years — even if the leak is finally plugged during hurricane season. Back in 2007 and 2008, our government threw everything not nailed down at the mortgage crisis, first to prevent damaging foreclosures and later to prevent the whole system from imploding. The relief well otherwise known as Mr. Bernanke’s Quantitative Easing program did indeed keep the system solvent, but all efforts at top-killing home foreclosures have been for naught. They stand at a record today and look set to increase for months to come. Millions of otherwise innocent people were (and continue to be) hurt by the financial crisis, just as millions of Gulf coast residents will eventually be hurt by the spill.

What’s more, the sea of governmental red ink made worse by both the crisis and the recession that followed it looks set to spread out for years to come if nothing is done about it. Europe is now finding out that simply shifting debt from private hands to public ones can stress what had been even the soundest of sovereign credit ratings. What started in subprime here in the U.S. eventually infected the rest of the system; likewise the EU is seeing country after country enter the financial sick ward. We may be lucky enough to have already seen the lows in equity prices for now, but it sure seems as if there is some unfinished business to the downside in the months ahead. Like BP, all we can do is make the best choices possible to limit the damage. And, just like oil in a salt marsh or on a bird’s feathers, cleansing ourselves of the sticky debt burdens we’ve taken on will not be easy.

– Jack McHugh

Stocks, Oil Drop, Treasuries Rise as Middle-East Tension Grows
China’s Manufacturing Expansion Slows as Growth Cools
Bank Credit-Default Swaps Surge After ECB Raises Funding Alert
Canada G-7’s First to Lift Rate After World Recession
BP Needs ‘Lottery Win’ to Seal Oil Leak at First Try

Ok, not quite virginal — but I am on Virgin America, which has WiFi on their planes, so the travel day isn’t a total loss.

I am over the Rockies as I type this, and the ski trails and mountain tops are still snowy white, despite the June 1st date.

Here’s what I have been whiling the hours away with, winging westward:

• Greece urged to give up euro (UK Time) see also ECB warns of ‘hazardous contagion’ (FT)

• Sorkin: Answers on Credit Ratings Long Overdue (NYT)

• Well, which is it?
. . . . . -Beijing in a sweat as China’s economy overheats (Telegraph)
. . . . . -China economy slows on tightening and seasonal factors (Reuters)

• Spill wipes $23 billion off BP (Reuters)

• Shorting Reform (Michael Lewis)

• In 1979, Less Complicated Oil Leak Took 10 Months To Stop (TPM)

• The Impact of the Irrelevant on Decision-Making (NYT)

• How Craig McCaw Built a 4G Network on the Cheap (BusinessWeek)• How to Reboot Your Sleep Cycle (LifeHacker)

• Apple’s Lesson: Be Cool With Capital (WSJ)

• WikiLeaks Founder’s Mission: Total Transparency (The New Yorker)

• 7 mega-engineering projects by Shimizu (Pink Tentacle)

Finished watching Inglorious Basterds (eh) and now I am going to attack season 1 of Mad Men (I never saw a single episode!).

Any other linkage worth mentioning?

The New York Times – A Long, Lean Backlash to the Mini

“There is definitely a movement to a very lengthy look, especially among the young,” said Nevena Borissova, a partner in Curve, a progressive retailer with stores in New York, Los Angeles and Miami. Ms. Borissova favors radically stretched-out skirts and dresses that “drag on the floor, with raw edges, and worn with combat boots,” she said. And as she pointed out, these myriad calf- or ankle-grazing iterations of the milelong skirt bear no relation to “Big Love” or, for that matter, the Summer of Love. There is nothing remotely prim or saccharine about the latest interpretations of this look, with their distinctly urban overtones. Current versions, even the most languid, are likely to be toughened up with a military parka or a biker jacket and thick-soled shoes. A muted, and at times ascetic, successor to the sweet-as-a-bonbon, Hamptons-worthy maxi-dresses that first alighted on downtown streets a couple of summers ago, the new maxis are more Morticia than Ophelia. They are “darker and more sophisticated” than last summer’s flounced beach dresses, said Morgan Yakus, a partner in No.6, a haven for style-setters in downtown Manhattan.

Comment

The “Hemline Index” was first developed by technical analyst/economist George Taylor in 1926. It gained popularity around the 1929 stock market crash. The theory states that the stock market rises and falls with women’s hemlines. Below is a famous graphic depicting the stock market and hemlines from 1897 to 1990 constructed by Alan Shaw’s legendary technical analysis group at Smith Barney.

If this theory still holds, the story above is a bearish indicator for the stock market.

All those forecasts of the end of cities have yet to come to fruition. Perhaps the following chart, via Richard Florida (The Atlantic) helps to explain why:

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David Rosenberg offers us this thought provoking chart comparing the Gold rally with, well everything else.

The implication being, Gold has much further to run:

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GOLD RALLY IN CONTEXT WITH PRIOR SECULAR BULL MARKETS
measuring trough-to-peak percent change

courtesy of Gluskin Sheff

May ISM manufacturing was a better than expected 59.7 vs the forecast of 59. It’s down a touch from 60.4 in April but is above 50 for 10 straight months. New Orders were flat but at a high level of 65.7 while Backlogs rose 2 pts to 59.5. Employment rose by 1.3 pts to 59.8, the highest since May ‘04 (measures direction, not degree of improvement). Export Orders rose 1 pt to 62, the highest since Dec ‘88. Inventories at the manufacturing level fell almost 4 pts to the lowest since Dec and Customer Inventories continued the trend of being very lean, matching the lowest on record dating back to ‘97 for this one category as businesses still keep a tight lid on inventories. Overall growth was broad as 16 of 18 industries surveyed reported growth. Bottom line, the data was solid but the $64k question is what happens next as the European economy, bigger than ours, is threatened by a massive credit crunch and China’s growth, while strong, moderates.

Following yesterday’s 6.1% annualized Q1 GDP gain (vs expectations of 5.9%), the Bank of Canada raised rates by 25 bps to .50% as expected. While some may say that how can a major G7 country raise rates with all the global economic uncertainty, Canada’s strong banking and commodity focused economy is on much stronger footing and the BoC specifically said that even with the hike, “this decision still leaves considerable monetary stimulus in place.” With respect to future moves, the BoC said “given the considerable uncertainty surrounding the outlook, any further reduction of monetary stimulus would have to be weighed carefully against domestic and global economic developments.” In response to this uncertainty over when they may hike again, the Canadian $ sold off back above 1.5 vs the US$.

Nice guerilla art, via (of all places) Bloomberg:

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There is a fascinating competition from Sunlight Labs called Design for America:

The Design for America contest led to the most compelling, interesting visualizations of any of our contests. With about 72 entries, the design community stepped up and showed amazing ways for us to view government and imagine new ways for government to serve citizens. The category most illustrative of how government could work is probably the best Redesign of a .Gov Website. We had a lot of great entries in the category– including this wonderful redesign of the Social Security Administration, and a great upgrade of DOL.gov, but the one that really took the cake was a redesign of IRS.gov.

The redesign that was of most interest to TBP readers was the Bureau of Labor, most particularly, the redo of BLS. There is a ton of great data and info on the BLS site, but it is not the most accessible and easiest to find.

Here is the redo:

New Thread--redirect to http://theoildrum.com/node/6551

The decision to cut the riser and drill pipe (DP) from the top of the Blow-Out Preventer (BOP) as a first step in putting the Lower Marine Riser Package (LMRP) over the leaking oil well in the Gulf of Mexico is not quite as easy as it might sound to a layman. This post is going to talk a little about a couple of the problems, as well as an alternate way of doing it, and should end with a possibly slightly amusing anecdote.

The current plan is to carry out the operation in two parts, first the main body of the riser and contained DP will be cut using a large shearing machine, and then a precision cut will be made with a diamond wire cutter to prepare the surface to act as a support and seal for the LMRP. (Illustrations are below the fold). There are a couple of reasons why this is going to be done this way, and one or two concerns that will need to be watched as the operation continues. (UPDATES At 8:45 am I see that the riser in in the shearing machine, at 9:30 am it appears that they are using a diamond circular saw to cut the choke and kill lines - h/t gel. By 11 am they had the wire saw at the riser, and had started to shear the riser beyond the bend. At 12:50 pm after what may be two attempts to shear through the riser and associated piping the shearing machine has been removed from the riser, and appears to have been taken back to the surface ).

(To learn more about the technical basics of LMRP, please go to this post: http://www.theoildrum.com/node/6531)

Part of the problem lies in the considerable stress that the metal is under, which may make it more difficult to get the precise cut that is needed for the sealing surface. The weight of the collapsed riser on the kinked section of the riser means that the metal is under a considerable stress, and as the cut is being made that stress is going to be released. This is a particular problem if the saw blade is in the cut as that stress releases. As an illustration, large diamond wheels are used in granite quarrying as a way of making the first cut in a new layer of rock. As the quarry works down into the deposit, however, the stress in the rock increases. So that when the diamond saw cuts into the layer, the walls will move in slightly. Now if the diamond saw is rotating until it is removed, it will grind away that small movement and there is no problem. But if the saw is removed, and the cut restarted the next day, then it might be necessary to recut the same depth again, because the walls have moved in that far. The much worse thing to do is to leave the diamond saw in the cut overnight – the walls will move in and pinch the blade and you can’t get it back out without destroying it. Did I mention these blades can cost up to $100,000?

So given that it would be a bad idea to break the diamond wire in the cut, or trap it for that matter, the first step in the process is to take some of the load from the riser by cutting off the majority of the fallen pipe. To make this simpler and since the quality of the cut is not important, this will be done with a large shearing machine.

Large shearing machine used to cut through the main section of the riser (Unified Command )

For the second stage in the process the riser and pipe will be cut, at the top of the BOP using a wire saw to cut through both pipes. The diamond wire, which is held under tension in the design, should give a relatively smooth surface that can be used for the sealing surface to the LMRP.

One of the problems in using this tool, which is rather sensitive (in other circumstances we have broken several wires in a smaller model) is dealing with the central DP as the cut is being made, and with the flow of oil and gas past the wire, which can send it into vibration, over the relatively long cut.

Wire sawing the riser and drill pipe (Unified Command )

The two pulleys at the top of the saw are used, as well as guides, as tools to keep the wire under the correct level of tension.

A version of an underwater wire saw (Wachs)

It is relatively slow to cut, (perhaps 10 to 30 sq ft/ hour, depending on power and blade size) and requires patience to keep the applied loads at the right level (the joy of automatic equipment over manual operation). There are still possible risks, due to the remaining load on the metal being cut as it is being made, since the amount of metal left gets less over time. As a result it is likely that, in the same way as a forester will use wedges to stop the cut closing as he chops down a tree, so small metal wedges will be put into the cut in this case. The only difficulty that this imposes is that it will be difficult to access the central DP and difficult to deal with that, once cut through, since it is within the riser and not accessible. Hopefully it will be held in place by the bend of the pipe and riser, until the wire has passed through it.

Over the past twenty years diamond wire sawing has become more common as a way of cutting through a variety of materials. It has the advantage of making a relatively narrow cut, and the ability to cut through objects made of different materials, such as reinforced concrete. The cutting wire used to have small diamond particles embedded in the steel of the wire, but in more modern varieties the diamonds are embedded in a plastic such as Teflon, and set as beads along the wire, allowing better cooling during the cutting process.

Segmented diamond wire – new so that the paint is still over the diamonds (Wachs)

Now my students will tell you that I have a bad habit of slipping commercials for another technology into lectures, and so I am going to indulge, and mention that there is an alternate technique that could be used instead. And that is the use of a high pressure abrasive laden, waterjet cutting stream. These are becoming increasingly used in industrial manufacturing, although in that use the technique usually involves a different way of adding the abrasive to that which would be used in the current problem. In the conventional way of adding abrasive it is mixed into the jet after the water is accelerated, and, in the right circumstances, we have been able to cut through half-inch titanium with an accuracy of 0.001 inches. Those jet systems operate at pressures from 40,000 psi to about 90,000 psi. In the current case the abrasive is added to the water from a pressure vessel, and the technique is known as abrasive slurry jetting (ASJ). It allows equivalent cutting at about a tenth of the jet pressure (i.e. 5 - 10,000 psi). The tool has been developed for cutting off different oilwell parts from the wells under the North Sea. Because the jet cuts away from the nozzle, it can cut, for example, out from the center of a set of drill pipes, one nested inside the other, and separate them, as one of the last stages in decommissioning a well. It has a problem with range, the jet cutting to a shorter distance as the back pressure in the water increases, and for cutting down to 500 ft (the deepest we have tried) it can be improved to cut large risers by adding an air sheath around the outside of the jet.

One alternate way that is used for cutting tanks and other containers with possibly explosive content is to use a chain crawler around the pipe. This way the jet does not have to cut quite as far through the water.

Cutting a pipe using a crawler (NLB )

(And for those who question whether jets would work under this depth, Gulf Oil – as was – used an abrasive waterjet to drill a well down to 15,000 ft back in the early 1970’s but a fire destroyed the equipment and the research was stopped).

To end with the anecdote – which relates to the cleaning of oil rigs for inspection. The problem that arises is that barnacles and a variety of sea creatures and plants grow on these structures, and need to be removed. The historic method of doing this was to give a diver a chipping hammer, and send him down to chip off the offending coating. Now when a diver is in the sea there is not a lot of resistance, and so one has to clamp onto something to develop enough thrust to effectively use the hammer. The only object available is the rig itself, and wrapping one’s legs around a strut works to give the platform. The only problem is that the strut is covered in barnacles – ouch!

So the waterjet industry developed a zero-thrust gun (in other words the cutting jet on one end is matched by a jet of similar power on the other, so the forces are balanced) and the diver does not need to hold onto anything. It was taken out to one of the rigs in the North Sea and given to one of the divers.

He took it, without a word, and disappeared over the side of the rig. He was down underwater using it for about fifteen minutes and came back to the surface. He didn’t say anything, but walked over to the chipping hammer. He put down the lance, picked up the chipping hammer, and walked to the side of the platform. “So long , you son of a . . . .”, he said, and threw it overboard.

It was one of the fastest adaptations of a change in technology around the world that I have seen. Anyway I will talk about using jets for efficient cleaning in another post. Enjoy the day!

I thought new readers might be interested in what the US government--that is, the US Energy Information Administration-- has to say about future US oil production and future US renewable production. I have taken the forecast information from the Annual Energy Outlook 2010.

Figure A - Graph constructed from Table 1.3 of EIA's Monthly Energy Review

Figure A shows US historical energy consumption by source. One can see that the largest source of energy is petroleum. Natural gas and coal are close to tied for second place in US energy consumption.

Renewables make up only a small part of US energy supply. If you define renewables broadly (including hydroelectric (blue); ethanol + wood (orange); wind (tiny green line) and other renewables (invisible)), then renewable energy consumption has been close to flat since 1985. If you define renewables as only the newer renewables (wind and solar), then renewable energy supply is tiny, but growing rapidly from a small base.

Note: In the sections that follow, the figures numbered with numbers are from the Annual Energy Outlook 2010. Figures B and C (as well as Figure A above), are ones I constructed, using EIA data.

Forecast of US Total Energy Consumption

According to Figure 1, the EIA expects coal, nuclear, natural gas, and liquids to remain close to flat to 2035, with renewables providing the majority of growth. ("Liquids" is a new word that energy organizations have come up with, now that world crude oil production is flat. It includes substitutes of various kinds--including ethanol, coal to liquid, and natural gas liquids.)

We will see from later graphs that not all of these estimates seem reasonable. Clearly, if there are big cut-backs in fossil fuels because of carbon dioxide concerns, or because of issues with deepwater oil production, then EIA's forecasts are not correct.

Notice that the green renewables category shown at the top of own at the top of Figure 1 defines renewables broadly. Thus, if one compares to Figure A above, it includes the blue hydro-electric line, plus the orange ethanol + wood line, plus the green wind line, plus the invisible other renewables line. According to Figure 1, production of renewables has changed very little since 1980. Going forward, the EIA expects the renewable band to grow, but still to remain small compared to fossil fuels.

Breakdown of US Liquids Fuels Supply

Figure 2 shows where liquid fuels are expected to come from. Biofuels (the green band) are expected to grow from a tiny amount historically (invisible until recently), to a big band by 2035.

The purple band represents US's own domestic oil production. It has been declining (so the band is getting narrower). Growing forward, this band is to increase slightly in width--as we will see below, because of more deep-water oil production. Petroleum imports (dark blue) are expect to remain flat, and natural gas plant liquids (a lower energy product) are expected to grow.

Many Oil Drum readers (and staff members) would say that all of the EIA forecasts for 2035 are likely high. We have seen how the estimates by government agencies of the oil spill proved to be too low. Here, the government has a real desire to show a high number (so that no one is too concerned about the future), so a person wouldn't be too surprised if there is a little (or lot of) fudging on the high side.

Breakdown of Biofuels

Figure B. Graph I prepared of EIA projections, using reference case backup tables, from the Annual Energy Outlook Forecast 2010

To understand better where the increase in "biofuels" shown in EIA figure 2 is coming from, I put together Figure B, above, using backup data. According to this data, biofuels are expected to increase from 0.78 barrels per day in 2008 to 3.11 barrels per day in 2035, a more than three-fold increase (but not enough to make a big dent in the 19 million barrels a day of oil the US currently uses).

The biggest category both in 2008 and 2035 is US-produced ethanol. The forecast is that production will continue to increase, presumably mostly from cellulosic ethanol. Another major source of growth is "Other biomass derived fuels", which includes fuels created using pyrolysis or using gasification.

A question a person might reasonably ask is whether there really is enough biomass to be making all of the liquid fuels from it (some as cellulosic ethanol; some using pyrolysis or gasification). Another question is whether the cost of these processes can be brought down to levels similar to the price of gasoline. These processes are currently very expensive.

Cellulosic ethanol goals to date have been missed. The advanced biofuel mandate for 2010 was 100,000,000 gallons, but this was reduced to 6,500,000 gallons (less than 10% of the original), because of insufficient progress to date. Robert Rapier of The Oil Drum points out that the technology for cellulosic ethanol is more than 100 year old. In his view, lack of success is not from lack of funding. The reason for the lack of success is instead,"fundamental based on physics, chemistry, and the nature of biomass"--in his view, producing cellulosic ethanol in quantity cheaply can't be done!

Coal-to-liquids are included with biofuels, but even in 2035, are expected to be small (0.24 barrels per day).

Breakdown of US Crude Oil Production

We can also look at some detail behind the second category in Figure 2 above--namely forecast US crude oil production.

One can see from EIA's Figure 80 that historically, US domestic crude oil production has been in steep decline. The forecasts is for an increase to a little over 6 million barrels a day. This is still low in comparison to US oil consumption of 19 million barrels a day, and in comparison to historical US crude oil production, which has been as high as 9.6 million barrels a day in 1970.

The text (page 75) indicates that a significant share of new production relates to deepwater. It also seems to reflect offshore locations recently added, which are now under a moratorium.

In the short term, a vast majority of the increase comes from deepwater offshore fields. Fields that started producing in 2009 or are expected to start in the next few years include Great White, Norman, Tahiti, Gomez, Cascade, and Chinook. All are in water deeper than 800 meters, and most are in the Central Gulf of Mexico. Production from those fields, combined with increased production from fields that started producing in 2007 and 2008, contributes to the near-term growth in offshore production. Over the longer term, production from the continued development of other recent discoveries, as well as new discoveries, offsets production declines in older fields, resulting in an increase in production through 2035 (Figure 80).

Removal of the Congressional moratorium on drilling in the Eastern Gulf of Mexico, Atlantic, and Pacific regions of the Outer Continental Shelf also allows for more crude oil production from offshore areas in the Pacific after 2016, in the Atlantic after 2021, and in the Eastern Gulf of Mexico after 2025 [86]. In 2035, U.S. crude oil production includes 0.4 million barrels per day from the Pacific offshore, 0.2 million from the Atlantic offshore, and 0.1 million from the Eastern Gulf of Mexico. Lower 48 onshore production of crude oil continues to increase through 2035, primarily as a result of wider application of CO 2 EOR techniques. EOR makes up 37 percent of total onshore production in 2035, up from 12 percent in 2008. Continued exploitation of the Bakken shale formation and the startup of oil shale liquids production after 2023 also contribute to the growth in onshore oil production.

Clearly, if deepwater production is scaled back, this will have an impact on future US crude oil production.

Forecast Use of Liquid Fuels by Sector

When one looks at consumption by sector, it is pretty clear that the EIA is not expecting a big increase in electric cars. Instead, transportation use of oil is expected to grow, even with planned efficiency improvements.

Electricity Generation by Fuel

The EIA expects that in 2035, the vast majority of electricity generation will be from coal and natural gas, with increases in production taking place in both.

Renewables are expected to grow by 2035, but here again renewables are defined broadly, and the big piece - hydroelectric- has not been growing historically.

Renewable Generation Growth

Figure C - Expected electricity generation by fuel source, for renewable fuels, based on downloaded reference case forecasts.

Here, I have put together a graph of expected generation by renewable source, based on EIA forecasts. Hydroelectric is the largest, but is not expected to increase much. The biggest growth is expected to be in biomass. It would seem as though the large increase here would conflict with the large increase in biomass used for biofuels shown above.

Wind is expected to roughly increase to four times its 2008 amount by 2035. At this level, it would still provide less generation than hydropower does today.

Summary

The EIA in its forecasts is expecting very large growth from renewables, but even with this growth, fossil fuels are expected to continue to provide the vast majority of energy supply to 2035. The "new" renewables are expected to grow rapidly, but the "old" renewables are expected to grow much more slowly.

There is good reason to suspect EIA forecasts are too high, both for renewable energy and for other energy sources. The "new" renewables show very large increases. It is not clear that they are attainable. Also, if there is a conscious effort to scale back fossil fuel usage, this may reduce fossil fuel use going forward. If renewable energy sources are already estimated optimistically, total fuel use may drop by more than the forecasts would suggest.

BP Effort Turns to Capturing Oil, No Plugging Before August

BP Plc has given up trying to plug its leaking well in the Gulf of Mexico any sooner than August, laying out a series of steps to pipe the oil to the surface and ship it ashore for refining, said Thad Allen, the U.S. government’s national commander for the incident.

Undersea robots began sawing away damaged pipe today, preparing for the first of those attempts, Allen said today at a press conference in New Orleans. The new strategy, which is subject to disruption by tropical storms and hurricanes, will continue until relief wells being drilled can plug the damaged well from the bottom, he said. . .

“We’re talking about containing the well,” Allen said. “We don’t want to restrict the pressure or flow down that well bore because I don’t think we know the condition of it after the top kill.”

Relief Wells

The drilling of a second relief well resumed May 30, Allen said. It had been suspended for several days as BP and government officials, including Energy Secretary Steven Chu, weighed whether to use the rig that was drilling it to install a second blowout preventer atop the damaged one. BP decided not to, Allen said.

BP shares plunge as plots new plan to contain spill

BP fell by as much as 17 percent during London on Tuesday, wiping $23 billion off its market value, and were trading down 13 percent just before the market closed. The shares were hit by weekend news that its latest attempt to plug its blown-out seabed well had not worked, sparking fears oil could leak into the Gulf until August.

The shares have lost more than a third of their value, or about 46 billion pounds ($67 billion), since the leak started six weeks ago. The cost of dealing with the crisis now totals $990 million, and is rising.

How difficult are relief wells? Some comparisons with Montara

A more recent incident, last year’s Montara oil leak in the Timor Sea, was eventually stopped by a relief well operation after more than 10 weeks. It provides plenty of examples of just how difficult relief well operations can be even today.

US Interior Dept. Offers Deepwater Drilling Moratorium Details

The U.S. Interior Department said on Sunday that the moratorium requires oil and gas companies "to cease drilling new deepwater wells, including sidetrack and bypass activities." Sidetrack and bypass wells are typically drilled after exploratory wells have already been bored into the sea floor, and are frequently initiated when drilling companies are trying to work through issues that have occurred after the drilling, or "spudding" of an initial well.

The Interior Department also said that deepwater wells include any wells located 500 feet or more below sea level. Deepwater drilling is typically defined as drilling that occurs in depths of 1,000 feet or more.

Total OPEC May Output Up 0.19% From April - Dow Jones Survey

The Organization of Petroleum Exporting Countries saw overall crude oil output edge up in May, driven by higher production in Iraq, but the group's 11 quota-bound members pumped below the previous month's level, a survey by Dow Jones Newswires showed Tuesday.

The survey, which is based on input from oil traders, analysts and industry sources, estimates output by all 12 group members rose 0.19%, or 55,000 barrels a day, last month to 29.34 million barrels a day amid a sharp increase in production from Iraq.

FACTBOX-Key political risks to watch in Mexico

Raging drug violence, a tepid economic recovery, flagging momentum on economic reforms and declining oil output are all risks to watch for this year in Mexico, which needs to keep up investor confidence to maintain its debt ratings and emerge from recession.

Sewage ... a solution for 'peak phosphorous'

Phosphorous is a fertilizing nutrient that is vital to large-scale agriculture, and currently it can only be mined, but supplies are growing shorter and shorter.

Fortunately, there may be a solution. Ostara, a Canadian-based company backed in part by environmental legend Robbert Kennedy Jr., has patented a technique to extract valuable chemicals out of the waste stream (i.e.: sewage).

The result is called "Crystal Green" a slow-release chemical fertilizer that contains high levels of phosphorous and is extracted from an abundant, ever-flowing resource ... sewage.

Passing the Point of "Peak Water" Means Paying More for H2O

We have passed the point of "peak water"--or the end of cheap, easy-to-access water--in several places around the globe, experts say.

Those places include the Great Plains in the southern and central U.S., California's Central Valley, northern China, the Nile River Basin in northern Africa, the Jordan River Basin in the Middle East, India, and more.

195 Californias or 74 Texases to Replace Offshore Oil

The Real Challenges of Energy Transition

Then there are some not-so-simple facts.

You can’t simply substitute electricity for the heat value of displaced oil. You must also build an entirely new infrastructure of wires and electric engines and storage devices.

Building that new infrastructure will take decades of concerted effort and cost trillions of dollars…and require lots of petroleum, natural gas, and coal. We simply don’t know how to build solar panels and wind turbines and wires and generators without them.

Obama administration moves to distance itself from BP on oil spill response

Struggling to convey command of the worsening Gulf of Mexico oil spill, the Obama administration is taking steps to distance itself from BP and is dispatching Attorney General Eric H. Holder Jr. to the Gulf Coast to meet with federal and state prosecutors. The Holder trip could signal that the environmental calamity might become the subject of a criminal investigation.

Holder has said Justice Department lawyers are examining whether there was any "malfeasance" related to the leaking oil well, and investigators, who have already been on the coast for a month, have sent letters to BP instructing the company to preserve internal records related to the spill. But federal officials indicated that Holder's trip, which will include a news conference in New Orleans on Tuesday afternoon, will focus on enforcement of environmental laws and holding BP accountable.

BP oil spill: death and devastation – and it's just the start

The White House says the BP oil spill is probably the greatest environmental disaster the US has faced, but the true impact on surrounding ecosystems could take months or even years to emerge. Experts say the unprecedented depth of the spill, combined with the use of chemicals that broke the oil down before it reached the surface, pose an unknown threat.

We cannot deal with oil spill, admits U.S. military

The U.S. armed forces do not have the technology or know-how to deal with the Gulf of Mexico oil spill, its highest ranking military officer admitted Monday.

Adml Mike Mullen, the chairman of the Joint Chiefs of Staff, said they had no more tactics left in their arsenal after BP's latest failure to plug the leak.

Scientists to Back Dispersant Use, Despite Concerns

A federally convened group of scientists is set to recommend that BP PLC and the government continue spraying chemicals into the Gulf of Mexico to help prevent leaking oil from washing ashore, even though the scientists have serious concerns about the potential long-term damage to sea life.

The group's report, due this week, comes after BP's latest efforts to plug the leaking Deepwater Horizon oil well failed. If further interim measures to cap the well don't work, large additional amounts of the chemicals, known as "dispersants," could be sprayed into the Gulf until relief wells can be completed and the gusher capped, which could take until late late summer.

BP Set to Try Risky Move to Contain Flow

William Abel, a veteran well control expert, said one of the dangers is that the robots will not succeed in making a clean cut, and the cap won't seal properly. Also, once the pipe is sliced, oil could surge out, obscuring the view for engineers who rely on live images streamed from video cameras attached to the robots. There are also doubts among outside experts about how effective the cap will be.

"The big unknown is how much oil it will capture," said Greg McCormack, director of the Petroleum Extension Service of the University of Texas at Austin. One of BP's earlier containment efforts, which involved inserting a tube into the leak connected to a mile-long pipe to the surface, only managed to collect about 2,000 barrels a day on average—a small fraction of the total flow.

Another potential hazard: Hurricane season is about to start, and in rough storms the ship that is collecting oil from the leak—the Discoverer Enterprise—may have to temporarily disconnect from the cap system and move to safety. BP says it is building hurricane-related precautions into its plans for the containment system, which will be "continually refined."

White House Aims to Crack the Whip

Signs of a growing rift between the White House and BP were evident over the long holiday weekend. Obama environmental adviser Carol Browner on Sunday accused BP of having a "financial interest" in downplaying the scope of the spill, which she said is "without doubt the worst environmental disaster in our history."

At a congressional hearing on May 27, BP America chairman Lamar McKay said "I don't know" when asked by Rep. Edward Markey (D., Mass.) whether BP has a financial interest in underestimating the leak's size. Mr. McKay added "our position is to do everything we possibly can to stop this, provide as much data as we can as fast as we can, clean is up and deal all the economic claims."

BP didn't immediately respond to requests for comment on Monday.

The White House said that Energy Secretary Steven Chu on Saturday had directed BP to stop the top-kill procedure which it began on Wednesday, fearing it could weaken the well. The government also said it ordered BP to drill two relief wells, instead of one, as BP originally planned.

Concern for Crew Cleaning Up Oil Spill

Top Obama administration health officials are heading to the Gulf of Mexico amid increasing concern that the oil spill may be sickening some of the workers who are cleaning it up.

The administration has sent a mobile facility to provide medical care for workers here, a town on the Gulf coast that is serving as a staging area for cleanup operations for the spill, though it is still unclear if their symptoms are directly related to pollutants from the oil.

Permit Snafus on BP Well

Just a week before the Deepwater Horizon exploded, BP PLC asked regulators to approve three successive changes to its oil well over 24 hours, according to federal records reviewed by the Wall Street Journal.

The unusual rapid-fire requests to modify permits reveal that BP was tweaking a crucial aspect of the well's design up until its final days.

One of the design decisions outlined in the revised permits, drilling experts say, may have left the well more vulnerable to the blowout that occurred April 20, killing 11 workers and leaving crude oil gushing into the Gulf of Mexico.

The Minerals Management Service approved all the changes quickly, in one instance within five minutes of submission.

BP Was Concerned About Well Control Six Weeks Before Incident

E-mails released by the House Energy and Commerce Committee show BP told regulators they were having trouble maintaining control of the well six weeks before it exploded in the Gulf of Mexico, Bloomberg reported.

"We are in the midst of a well control situation on MC 252 #001 and have stuck pipe," BP executive Scherie Douglas wrote in an e-mail to Frank Patton, the U.S. Minerals Management Service's drilling engineer for the New Orleans district on March 10. "We are bringing out equipment to begin operations to sever the drillpipe, plugback the well and bypass."

Gulf oil leak sets off 'unbelievable array' of legal issues

Fishermen and property owners along the Gulf Coast have filed hundreds of lawsuits since April against oil company BP and its contractors amid a legal landscape that has changed dramatically since the Exxon Valdez tanker spill sullied Alaska's Prince William Sound 21 years ago.

The Valdez spill prompted Congress to pass the 1990 Oil Pollution Act — intended to give fishermen and others harmed by such spills a quicker route for settling their claims — and nearly two decades of litigation over that spill also has redefined centuries-old maritime law on the issue.

Obama Needs To Put BP Under Temporary Receivership

It’s time for the federal government to put BP under temporary receivership, which gives the government authority to take over BP’s operations in the Gulf of Mexico until the gusher is stopped. This is the only way the public know what’s going on, be confident enough resources are being put to stopping the gusher, ensure BP’s strategy is correct, know the government has enough clout to force BP to use a different one if necessary, and be sure the President is ultimately in charge.

If the government can take over giant global insurer AIG and the auto giant General Motors and replace their CEOs, in order to keep them financially solvent, it should be able to put BP’s north American operations into temporary receivership in order to stop one of the worst environmental disasters in U.S. history.

Scientists warn of unseen deepwater oil disaster

NEW ORLEANS (AP) -- Independent scientists and government officials say there's a disaster we can't see in the Gulf of Mexico's mysterious depths, the ruin of a world inhabited by enormous sperm whales and tiny, invisible plankton.

Researchers have said they have found at least two massive underwater plumes of what appears to be oil, each hundreds of feet deep and stretching for miles. Yet the chief executive of BP PLC - which has for weeks downplayed everything from the amount of oil spewing into the Gulf to the environmental impact - said there is "no evidence" that huge amounts of oil are suspended undersea.

BP CEO Tony Hayward said the oil naturally gravitates to the surface - and any oil below was just making its way up. However, researchers say the disaster in waters where light doesn't shine through could ripple across the food chain.

Gulf oil spill threat widens

Louisiana (Reuters) - Oil from BP's out-of-control Gulf of Mexico oil spill could threaten the Mississippi and Alabama coasts this week, U.S. forecasters said on Monday, as public anger surged over the country's worst environmental disaster.

On Tuesday, President Barack Obama will hold his first meeting with co-chairs of an oil spill commission he tapped to probe the worst oil spill in U.S. history and make policy recommendations about U.S. offshore oil drilling.

The commission will be similar to those that looked into the explosion of the space shuttle Challenger in 1986 and the Three Mile Island nuclear accident in 1979.

Oil Spill gutting confidence – and staining reputations

In the US, which assumes no engineering challenge is beyond conquer - nor does it lack the private capital to achieve it - the brackish rouge beneath the waves that is slowly strangling the Louisiana shore not only stains the sea and the sands.

That creeping black is also gutting confidence, upturning myths and ruining reputations.

When Americans learned at the weekend that British Petroleum (BP) - which drilled the hole in the seabed nearly two kilometres under the sea - had attempted to seal it 16 times since Thursday by forcing shredded rope, plastics, old tyres and even golf balls into the failed, four-storey high blow-out preventer, the crudity of the assault seemed strangely out of step with our times.

Oil: Investors move to safer havens in spite of strong demand

But higher prices have weakened resolve among its 11 quota-bound members, notably Iran and Venezuela, says David Kirsch, director of market intelligence at PFC Energy, a consultant. Opec is now pumping 1.4m more barrels a day than a year ago, in spite of no official change to output policy.

The cartel’s desire to keep prices steady – and relatively high, by historic standards – is also challenged by a spurt of new oil from non-members. Russia, for example, has defied expectations with increased output.

Opec’s next scheduled meeting is October. “The prospect of prices going below $70 and remaining there for several months will really change the dynamics within Opec,” says Mr Kirsch. Oil’s recent volatility could also disturb the tacit truce between producing and consuming countries, who acknowledge prices between $70 and $80 are enough to stimulate drilling without derailing fragile economies.

Caltech studies fish schools to improve wind farmsMay 31, 2010

Researchers at the California Institute of Technology are testing new wind farm configurations based on observations of schools of fish. By using vertical wind turbines and placing them better in relation to each other, wind farms may be able to produce 10 times the amount of energy per acre than is currently generated.

Pacific volcano erupts near Marianas islands

SAIPAN, Northern Marianas (AP) -- A volcanic eruption near the Pacific's Northern Mariana Islands shot clouds of ash and vapor nearly eight miles into the sky, federal scientists said.

The eruption occurred early Saturday and appeared to come from an underwater volcano off Sarigan, a sparsely inhabited island about 100 miles north of the U.S. commonwealth's main island of Saipan.

The Northern Marianas are about 3,800 miles southwest of Hawaii.

China’s shift away from cheap labor hard on all

SHANGHAI (AP) -- Global manufacturers struggling with life-or-death pressures to control costs are finding that the legions of low-wage Chinese workers they rely on have limits.

"The 80s and 90s generation workers need more care and respect and need to be motivated to work with enthusiasm," said Guangdong party chief Wang Yang, who has backed efforts to shift Guangdong up the industrial ladder away from reliance on exports of low tech, cheap products.

That transition is taking hold across China. Manufacturers, under pressure to deliver low prices in home markets, are struggling to attract and keep young workers who, brought up in an era of relative affluence, are proving less willing than earlier generations to "eat bitterness" by putting up with miserable working environments and poor wages. The strike at Honda also reflects broader trends of growing dissatisfaction among China's long-suffering workers with lagging wages and generally harsh working conditions.

Country-by-country look at Europe’s debt crisis

LONDON (AP) -- Europe's governments are struggling to deal with a mountain of debt made worse by the past three years of global financial and economic turmoil.

Here are thumbnail sketches of how some of the countries involved are faring - and what they're doing to escape the crisis.

Turkmenistan starts new $2 billion gas pipeline

SHATLYK, Turkmenistan (AP) -- Turkmenistan on Monday started work on a $2 billion gas pipeline that aims to boost its export capacity and increase the reclusive nation's economic and political clout in the global gas market.

President Gurbanguli Berdymukhamedov hailed the new 620-mile (1,000-kilometer) pipeline - dubbed East-West - stressing that Turkmen firms would build it on their own.

Turkmenistan's gas wealth has long been the focus of intense rivalry between Russia, China and the West. Russia had a lock on most of the country's gas exports until last December, when a major China-bound pipeline went into operation.

By building the new pipeline on its own, Turkmenistan will essentially get the final say about the ultimate destination of the natural gas: Russia, or the West.

Algerian president fires CEO of state oil firm

ALGIERS, Algeria (AP) -- Amid a growing corruption scandal, Algeria's president has fired the CEO and all top managers at the state-owned oil firm that dominates the North African country's economy, local media reported Monday.

CEO Mohammed Mezian and the four vice presidents of oil company Sonatrach were officially removed by presidential decree Sunday, the official APS news agency and other media reported, quoting the official government register.

They had already been jailed or placed under house arrest because of an investigation into the suspected embezzlement of hundreds of millions of dollars.

Hurricane Fears Push Oil Prices Higher

Oil prices continued the gains made last week, reaching $74.51 cents a barrel in electronic trading on the New York Mercantile Exchange. Despite Monday being a holiday in the US and the UK, predictions that this could be the worst hurricane season in five years, has investors nervous that supply lines could be disrupted in the same manner that Hurricane Katrina affected operations in the Gulf Coast in 2005.

New pipeline won’t sate Asian oil demand—Enbridge

Alberta, May 31 (Reuters) - The planned C$5.5 billion ($5.3 billion) Northern Gateway pipeline will not be big enough to satisfy demand for Canadian oil sands crude from Pacific Rim nations, Enbridge Inc (ENB.TO), the line's backer, said in regulatory filings.

The company, which filed for regulatory approvals for the 525,000 barrel per day oil line last week, said in the filing that the potential market for Canadian crude in China, Japan, and South Korea could be as high as 1.75 million barrels a day, more than three times the capacity of the proposed line.

The estimate excludes the possibility of further demand from refiners on the U.S. West Coast, which will need to replace declining production from Alaska's North Slope, Enbridge said.

Crescent Point’s ‘game-changer’ buoys Bakken prospects

“Crescent Point has a dominant position in two of the largest and most economic unconventional resource plays in Western Canada, the Lower Shaunavon and Bakken,” said Saxberg.

“These mainly untapped resource pools provide Crescent Point with over 5,000 drilling locations and the potential to add over 500 million barrels of reserves, which could potentially double our current net asset value.”

IEA sees 2010 boost in energy spend

Investments in the upstream oil and gas sector worldwide will rise between 9% and 10% in 2010 versus the previous year, a senior energy economist for the International Energy Agency (IEA) said today.

Money spent on exploration and development projects would however still be about 10% below its investment peak seen in 2008, Reuters cited Trevor Morgan as saying at an industry event.

"We don't actually see much of an increase in capacity on a net basis in the next 5 years," said Morgan.

Euro, stocks down on fears of coming slowdown

After the most volatile month of trading since the wake of Lehman Brothers' failure in the fall of 2008, investors now focused on pricing in to what extent reduced demand from the more fiscally austere euro zone would hit production in economies like China and South Korea.

Dealers brushed aside stronger-than-expected May export growth figures from Korea, which precede the rest of Asia, and solid Australian retail sales, taking more interest in forward-looking manufacturing indexes from China and India.

China's factories scaled back production last month and eased back hiring in response to a critical drop in new orders, an official survey showed on Tuesday.

Global rebound anemic: Roubini

(Reuters) - Advanced economies face years of anemic growth and the risk of a double-dip recession as their citizens cope with sluggish employment and highly indebted governments, economist Nouriel Roubini said on Monday.

"Labor market conditions will remain very weak in some advanced economies," said Roubini, known as Dr. Doom and most famous for having predicted the U.S. housing crisis.

"Savings will have to rise faster than consumption for the coming years. That is why growth will remain anemic," Roubini, who heads U.S.-based economic consultants RGE Monitor, told attendants at a seminar in Sao Paulo.

Key confident cycleway will add more jobs

The national cycleway project, which the Prime Minister lauded as a huge job-creator at last year's national jobs summit, has created 70 in a year.

"I'm confident we'll have 500 jobs on these schemes and I am confident 2000km will be completed by the end of 2011," he said yesterday, after the Herald reported that construction had yet to begin on three out of seven "quick-start" cycle trails he announced last winter.

Women’s Role in a Warming World

Women are likely to be hit harder by climate change than men due their social roles and the simple fact that a majority—as much as 70 percent—of the world’s poor are women. As a result, they are much more devastated by natural disasters than men. One researcher concludes that women are 14 times more likely than men to die in a natural disaster such as a tsunami. Experts predict climate change will only exacerbate such inequities.

Melbourne Bike Share. On a bicycle built for…more than two (Video)

WEIGHING 18 kilograms, they aren't light. But perhaps that will be what saves these sturdy bicycles from damage and vandalism.

The electric-blue bicycles proved surprisingly easy to use.

Forest City opens bicycle park

FOREST CITY — Colleen Hovinga and her two sons, Joey and Danny, put their bicycles in a bike rack in the new bicycle park in downtown Forest City just minutes after the it was officially declared open last month.

Artists Andy Sinnwell of Forest City and Steve Johnson of Clear Lake used bicycles to create sculptures in the park.

Virus Ravages Cassava Plants in Africa

The threat could become global. After rice and wheat, cassava is the world’s third-largest source of calories. Under many names, including manioc, tapioca and yuca, it is eaten by 800 million people in Africa, South America and Asia.

The danger has been likened to that of Phytophthora infestans, the blight that struck European potatoes in the 1840s, setting off a famine that killed perhaps a million people in Ireland and forced even more to emigrate.

That event changed the history of all English-speaking countries.

Iran well blaze 'may take 6 months to douse'

A fire at an Iranian oil rig near the Iraq border has killed three people and left at least 10 injured, with officials saying it could take up to six months to extinguish the blaze.

What Will it Take to End Our Oil Addiction?

Energy savings throughout the economy, such as through better building codes, will be needed to free up natural gas and electricity resources. This can then allow oil users to switch to these other fuels without overly straining supplies and prices.