BP & Herman v Hermann the German Barbarian.
Sadly BP has failed in its latest attempt at plugging their GOM oil well. The aftermath is likely to alter BP far beyond current expectations. Going down with BP shareholders seems to be President Obama, whose detached management style seems to be turning him into likely one termer.
MAY 30, 2010, 12:42 A.M. ET
'Top Kill' Fails to Stop Flow of Oil From Gulf Leak
BP PLC has abandoned an attempt to plug a mile-deep oil and natural-gas gusher in the Gulf of Mexico by injecting thousands of barrels of drilling fluid and will now, after three days, try a new method.
"We have been unable to overcome the flow from the well," BP Chief Operating Officer Doug Suttles said Saturday in a news briefing. "We now believe it is time to move on to the next of our options," he said, adding it wasn't clear exactly why the procedure called a top kill failed to stem the flow of oil and gas. The decision to give up on the top-kill attempt was made late Saturday afternoon after consultation with U.S. Secretary of Energy Steven Chu and Interior Secretary Ken Salazar.
The failure is a huge blow to BP, which had big hopes for the top kill, and will increase the pressure being piled on the company by the Obama administration and legislators from both parties on Capitol Hill, where a number of investigations are under way. BP started the top kill Wednesday afternoon, shooting heavy drilling fluids into the broken valve known as a blowout preventer. The mud was driven by a 30,000 horsepower pump installed on a ship at the surface. But it was clear from the start that a lot of the "kill mud" was leaking out instead of going down into the well. BP tried to get around that problem with a series of "junk shots," in which materials like shredded rubber tires, pieces of rope and golf balls were fired in to clog the valve. In a statement, BP said that despite pumping over 30,000 barrels of mud in three attempts at rates of as much as 80 barrels a minute, the operation "did not overcome the flow from the well."
Engineers will now try to contain the flow of oil from the leak with a "lower marine riser package," or LMRP, cap. This operation would involve removing a broken drilling pipe, or riser, that lies atop the blowout preventer and capping the valve with a siphon that will take the oil to the surface. BP said the operation had never been carried out in 5,000 feet of water and its success couldn't be assured.
-----Mr. Suttles said the LMRP-cap procedure would take four to seven days. The LMRP cap is a newly made version of a type of device referred to as a top hat.
"The next thing to do is to capture all of the flow or as much of the flow as we can," he said. "We believe the LMRP cap has the potential to capture the great majority of [the leaking oil]," if it works. Mr. Suttles declined to give a percentage probability that the new containment effort would succeed, noting that nothing like this had been attempted at 5,000 feet below the surface of the sea. BP had said it gave the now-failed top-kill procedure a 60%-70% chance of success.
Documents Show Early Worries About Safety of Rig
By IAN URBINA Published: May 29, 2010
WASHINGTON — Internal documents from BP show that there were serious problems and safety concerns with the Deepwater Horizon rig far earlier than those the company described to Congress last week.
The problems involved the well casing and the blowout preventer, which are considered critical pieces in the chain of events that led to the disaster on the rig.
The documents show that in March, after several weeks of problems on the rig, BP was struggling with a loss of “well control.” And as far back as 11 months ago, it was concerned about the well casing and the blowout preventer.
On June 22, for example, BP engineers expressed concerns that the metal casing the company wanted to use might collapse under high pressure.
“This would certainly be a worst-case scenario,” Mark E. Hafle, a senior drilling engineer at BP, warned in an internal report. “However, I have seen it happen so know it can occur.”
The company went ahead with the casing, but only after getting special permission from BP colleagues because it violated the company’s safety policies and design standards. The internal reports do not explain why the company allowed for an exception. BP documents released last week to The Times revealed that company officials knew the casing was the riskier of two options.
Though his report indicates that the company was aware of certain risks and that it made the exception, Mr. Hafle, testifying before a panel on Friday in Louisiana about the cause of the rig disaster, rejected the notion that the company had taken risks.
-----BP’s concerns about the casing did not go away after Mr. Hafle’s 2009 report.
In April of this year, BP engineers concluded that the casing was “unlikely to be a successful cement job,” according to a document, referring to how the casing would be sealed to prevent gases from escaping up the well.
The document also says that the plan for casing the well is “unable to fulfill M.M.S. regulations,” referring to the Minerals Management Service.
A second version of the same document says “It is possible to obtain a successful cement job” and “It is possible to fulfill M.M.S. regulations.”
Andrew Gowers, a BP spokesman, said the second document was produced after further testing had been done.
-----A parade of witnesses at hearings last week told about bad decisions and cut corners in the days and hours before the explosion of the rig, but BP’s internal documents provide a clearer picture of when company and federal officials saw problems emerging.
In addition to focusing on the casing, investigators are also focusing on the blowout preventer, a fail-safe device that was supposed to slice through a drill pipe in a last-ditch effort to close off the well when the disaster struck. The blowout preventer did not work, which is one of the reasons oil has continued to spill into the gulf, though the reason it failed remains unclear.
Federal drilling records and well reports obtained through the Freedom of Information Act and BP’s internal documents, including more than 50,000 pages of company e-mail messages, inspection reports, engineering studies and other company records obtained by The Times from Congressional investigators, shed new light on the extent and timing of problems with the blowout preventer and the casing long before the explosion.
-----The documents show that in March, after problems on the rig that included drilling mud falling into the formation, sudden gas releases known as “kicks” and a pipe falling into the well, BP officials informed federal regulators that they were struggling with a loss of “well control.”
On at least three occasions, BP records indicate, the blowout preventer was leaking fluid, which the manufacturer of the device has said limits its ability to operate properly.
“The most important thing at a time like this is to stop everything and get the operation under control,” said Greg McCormack, director of the Petroleum Extension Service at the University of Texas, Austin, offering his assessment about the documents.
He added that he was surprised that regulators and company officials did not commence a review of whether drilling should continue after the well was brought under control.
------Bob Sherrill, an expert on blowout preventers and the owner of Blackwater Subsea, an engineering consulting firm, said the conditions on the rig in February and March and the language used by the operator referring to a loss of well control “sounds like they were facing a blowout scenario.”
Mr. Sherrill said federal regulators made the right call in delaying the blowout test, because doing a test before the well is stable risks gas kicks. But once the well was stable, he added, it would have made sense for regulators to investigate the problems further.
http://www.nytimes.com/2010/05/30/us/30rig.html?pagewanted=1&hp
In other news, it seems to be open war between the French run ECB and the sovereign nation state of Germany. The ECB seems to be making a power grab by joining the Brussels attempt to force through a European debt union. I doubt that German voters are in any mood to play milch cow to Brussels and Club Med forever. My guess is that we will not have to wait very long for Berlin’s riposte to the ECB-Brussels power play. Below that, Italy gets a taste of the Greek disease.
MAY 29, 2010
After Debt Crisis, New Tension Between ECB, Germany
FRANKFURT—The rift between the European Central Bank and Germany appeared to widen, as a top bank official offered what economists saw as a critique of the response of the euro zone's largest member to the rescue of Greece and other debt-burdened economies.
In a speech Friday in Morocco, ECB executive board member Lorenzo Bini Smaghi said that "in one large euro-area country it was thought that public support for swift action could be achieved only by dramatizing the situation, for instance, by telling the public that 'the euro is in danger' or by considering the possibility of expelling a country from the euro area."
Mr. Bini Smaghi didn't specifically name Germany. But the implication is clear, says Barclays Capital economist Julian Callow, that "this is a public chiding of Germany."
In March, German Chancellor Angela Merkel said there needs to be a mechanism under which "as a last resort, it's possible to exclude a country from the euro zone if again and again it doesn't fulfill the requirements."
----Such rhetoric made the eventual price tag higher, Mr. Bini Smaghi suggested. In the middle of a crisis, speaking about the euro being in danger or about expulsion of a member country is "like fanning the flames," and made the cost of the support package higher, he said.
"This is very strong and unusual for the ECB to call out a single country; without any doubt it refers to Germany," says Carsten Brzeski, economist at ING Bank.
The ECB declined to comment on whether Mr. Bini Smaghi's reference was directed at Germany.
------In a rare show of defiance for the consensus-driven ECB, Germany's central bank head Axel Weber told the German newspaper Börsen-Zeitung that he viewed the bond-buying decision "critically" and that it carried "substantial stability risks." National central bank governors such as Mr. Weber sit on the ECB's policy-setting Governing Council. Germany's Jürgen Stark, who like Mr. Bini Smaghi is on the ECB's Frankfurt-based executive committee, later said in a German television interview that he shared Mr. Weber's view that the bond purchases potentially posed risks to stability.
Advance guard of angry women lead Italians into European protests over austerity cuts
Italy is the latest eurozone nation to be threatened by finacial woe - after Silvio Berlusconi assured his compatriots for months that they had weathered the crisis.
By Nick Squires in Rome Published: 7:49PM BST 29 May 2010
They were the advance guard of an army of Italians whose anger is rising as their country joins the rest of the continent struggling with the worst economic crisis of recent times.
Waving banners, blowing whistles and chanting "Shame!", hundreds of public service workers rallied outside Italy's parliament in Rome to protest against the austerity package announced by the centre-Right government of Silvio Berlusconi.
The measures aim to shave 24 billion euros off government spending in the next two years.
They include a crackdown on tax evasion and welfare fraud, a three year salary freeze for Italy's 3.4 million civil servants and substantial cuts to regional government which will almost certainly result in less money for hospitals and schools.
In pushing through the package with an emergency parliamentary decree, Italy joined Portugal and Spain in trying to fend off contagion from the crisis which has brought deadly riots to Greece and shaken confidence in the euro. The cuts are greater in scale than the £6 billion of immediate savings recently announced by Britain's new coalition government, but are comparable with what the UK may face over the next 12 months.
The protesters, mostly women, who had gathered outside Italy's lower house of parliament in Piazza di Montecitorio, a cobbled square lined with expensive hotels and boutiques, were stung by the announcement and fearful for the future.
For months Mr Berlusconi had been assuring his countrymen that Italy has weathered the global economic crisis much better than the rest of Europe.
The government's overnight switch from breezy optimism to dire warnings of "very tough sacrifices" in order to spare Italy from a Greek-style bailout, and associated international ignominy attached, made the announcement of the austerity package all the more shocking to those with most to lose.
We end with Europe’s unknown Caesar trying to march his armies against the wrong problem. Brussels Caesar Herman is leading his army of Franco-Belgian bureaucrats deep into the Teutoburg Forest. The problem is not Germany but Club Med. Below, the Telegraph covers the coming rout of the Euro.
Quintili Rompuy, D-Mark redde!
Herman and his Frankenstein euro have done enough damage already
The single currency was created by eurocrats, foisted upon its people and bound to end in tears. Now they want to tinker with banks when deep reform is needed.
By Liam Halligan Published: 9:49PM BST 29 May 2010
Last week I heard something that almost caused me to lose my temper. It came from the lips of Herman Van Rompuy, a profoundly uninspiring man who, somehow, is European Council President.
Van Rompuy's position makes him, on paper, the most senior policy-maker in the European Union – with its 27 member states and 500 million people. No one elected him to high office and few voters know what he thinks. Until his elevation was stitched up in the well-upholstered Eurocrat backrooms of Brussels, his EU-wide profile was zero.
Last Tuesday, Van Rompuy deigned to comment on the fiscal, financial and political chaos that is the eurozone – a chaos now in danger of plunging the entire Western world into a second bout of systemic instability, similar to what followed the collapse of Lehman Brothers in September 2008.
"We are clearly confronted with a tension within the system," Van Rompuy opined. "The dilemma of being a monetary union and not a fully-fledged economic and political union. The tension has been there since the single currency was created. However, the general public was not really made aware of it."
It was the last sentence that got my goat. My initial response, I admit, was a four-letter word. It could have been "What?!" but it wasn't. Despite what Van Rompuy says, some of us – economists, politicians and commentators – have been shouting about the dangers of the eurozone for many years.
When we did, the trough-nuzzling, self-appointed EU elite, which Van Rompuy represents down to the tip of his Mont Blanc pen, dismissed our concerns as "alarmist" and "anti-European". Meanwhile, the Brussels publicity machine spent vast amounts of taxpayers' money on propaganda telling the Western European public that the eurozone was not only safe, but if their countries didn't join then "jobs and growth" would suffer.
There was, of course, always a fundamental contradiction at the heart of the single currency project. While the European Central Bank controls interest rates and the money supply, each country's fiscal surplus or deficit is driven by the tax and spending decisions of its own sovereign government.
So it's simply impossible to enforce collective fiscal discipline in a currency union of individual states, each answerable to its own electorate. The only alternative is to subjugate domestic voters and create a federal government across the eurozone, with a common fiscal policy allowing cross-border transfers. But that's political union – something voters absolutely don't want.
-----Nobel-Prize winning economist, Milton Friedman, also weighed in early, warning the single currency would ultimately cause major problems. "The euro was really adopted for political and not economic purposes, as a step towards the myth of the United States of Europe," Friedman declared in September 1997. "I believe its effect will be exactly the opposite."
How right he was. How right many ordinary voters were as well – those without media platforms. Right across Europe, much of the public has been deeply suspicious of the euro ever since the idea was conceived. The French only voted "Oui" to joining by the narrowest of margins, after their government cobbled together votes from former colonies. The German public, like citizens in so many other member states, was never granted a referendum.
Since the single currency's launch in 1999, in fact, there hasn't been a single independent opinion poll in Germany in favour of euro membership. No wonder the hard-working German public is seething about the Greek bail-out – and who can blame them.
-----The sovereign debt crisis that started with Greece is now casting a long shadow not only across the eurozone, but all of Europe and the entire Western world. Just as the global economy is climbing out of recession, the instability of the Frankenstein currency union which the Brussels crew created could spark another deeply damaging asset-price plunge.
Even if that's avoided, the euro's fall is harming other economies. The single currency is down 25pc against the dollar since last October – making life more difficult for US exporters to Europe.
Many say sterling's recent "depreciation" is helping the UK economy recover. But while the pound has indeed fallen 12pc against the dollar during the past six months, its appreciated 11pc against a suffering single currency. Britain does over three times more trade with the eurozone than it does with the States, so the euro's decline has undercut the UK's trade-weighted competitiveness.
-----As if they haven't done enough already, the eurocrats seem determined to do even more damage with their economically-illiterate meddling. While they should be helping to push through the massive fiscal consolidation that needs to happen across the whole of Western Europe, the EU elite has instead dreamed up a levy on the region's banking sector, the proceeds of which could deal with a future banking crisis.
I'm no defender of Western banks, but this levy is a very bad idea. There is a big "moral hazard" – in that if banks are forced to put money aside for a bailout, they will feel entitled to state help and keep acting recklessly. The money the levy would raise – around 1pc of annual GDP over 15 years – is tiny anyway. The UK government has spent five times that on bank bailouts since "sub-prime" began. The money anyway won't be there when needed, because cash-strapped EU governments would already have spent it.
The biggest problem with the levy, though, is it's a diversion from what really needs to happen – that is, deep structural banking reform, above all the separation of investment and commercial banking in the form of a new "Glass-Steagall" divide.
There is no alternative to reinstating that firewall, so denying risk-driven money men access to taxpayer-backed retail deposits. That's the only way to stop the banks from plunging nations states ever deeper into debt.
GI.
