Tuesday PM July 13th, 2010
by: Ed Mayberry, July 13, 2010 5:07:00 pm
BP is still waiting to start tests on a new cap atop the gushing Gulf of Mexico oil leak, saying the work requires extreme precision. The company wants to slowly close off the cap in hopes of containing the oil leak for the first time since April 20th. The tests will tell if the cap can hold, and also if there are leaks that hadn't been discovered before. If the test shows the cap can't be closed, the company plans to collect the leaking oil with vessels on the surface of the Gulf.
BP plans to sell some of its pipeline and oil storage assets for $289 million. Magellan Midstream Partners says it will acquire storage facilities for 7.8 million barrels of crude and more than 100 miles of active petroleum pipelines from BP's pipeline division in North America. Analysts have expected BP to shed some of its assets to help pay for the Gulf oil spill. The company has spent more than $3 billion on cleanup and damages so far, and it has agreed to set aside another $20 billion for future damage claims. The deal is expected to close within 60 days.
A BP Alaska spokesman says the company remains interested in getting natural gas from Alaska's North Slope to market and is evaluating two proposed pipeline projects. The feasibility of each project is being tested by the market, with Transcanada and Denali seeking shipping commitments for the competing projects. Transcanada is working with ExxonMobil to advance its project; Denali is a joint effort of ConocoPhillips and BP America. BP Alaska is considered a separate entity. Spokesman Steve Rinehart says the goal is getting gas to market in the most efficient, financially smart way. A press report raised questions about BP's future in Alaska, saying BP was in talks to possibly sell assets, including a stake in the Prudhoe Bay oil field. BP spokesmen declined to comment on "speculation."
BP owns part of the blown-out well that's spewing oil in the Gulf. But when it comes to paying for the cleanup, the British oil giant stands alone. A BP spokesman says that partner Moex Offshore refuses to pay a $111 million cleanup bill that BP requested from it last month. The other minority owner, Anadarko Petroleum, refused a $272 million bill from BP last week. Moex declined immediate comment. Anadarko argued for the past several weeks that BP was reckless in its handling of the well, excusing the minority partners from what could be billions of dollars in cleanup costs and damage claims.
The Obama administration says it has sent a fourth bill to BP and other parties seeking $99.7 million for costs related to the response and cleanup of the spill. The administration says three earlier bills, totaling $122.2 million, have been paid in full. The White House has said all along that BP is responsible for the disaster and must pay all costs associated with the response to the spill, including efforts to stop the leak, reduce the oil's spread and the long-term recovery of the Gulf Coast region.
U.S. Coast Guard officials say test results have confirmed tar balls from the massive Gulf oil spill have been found on a second Texas beach. Chief Warrant Officer Lionel Bryant says that tar balls found on a Galveston beach last week are from the Deepwater Horizon oil well. Tar balls located July 5th on McFaddin Beach, a stretch of coast east of Bolivar Peninsula, were the first confirmation that crude from the massive BP oil spill had reached Texas shores. Last week, new laboratory results had officials backing off claims that many of the tar balls that had recently washed up on Texas shores were from the oil rig. The confusion was attributed to contradictory test results from two labs.
Diamond Offshore Drilling has pulled another rig out of the Gulf of Mexico due to the deepwater petroleum drilling moratorium. The Houston-based company said that it has ordered the Ocean Confidence rig to the Republic of Congo. The rig departed the Gulf over the weekend. Diamond Offshore said it rewrote a drilling contract with Murphy Exploration and Production. Its current contract with Murphy was changed to a one-year commitment in the Gulf that will begin when Murphy is confident it can get permits to drill. In exchange, the companies signed a new agreement to drill off the coast of the Republic of Congo. Last week, Diamond Offshore said it was moving another Gulf rig to Egypt.
News media in the Gulf of Mexico will be able to get closer to many areas affected by the massive oil leak. The Coast Guard has changed its policy on not allowing the media near boom safety zones. News organizations had argued that being kept at least 65 feet away from a boom prevented them from effectively covering the oil spill. Retired Coast Guard Admiral Thad Allen, the government's point man for the spill, says restricting the media was not the intent of the policy, but to keep out people who are just hanging around and may damage vital equipment. Now, credentialed media will have unrestricted access and will be able to travel freely within boom safety zones. The only exceptions are if being in the area creates a safety or security risk.
The International Energy Agency says world oil demand will rise next year despite a drop in rich countries, where efficiency savings and fuel substitution should outweigh a boost from faster economic growth. The Paris-based agency says global oil demand for 2011 should rise by a daily 1.3 million barrels to 87.8 million barrels a day. That's a 1.6 percent rise on this year, boosted by a 3.8 percent annual increase in demand from emerging economies such as China. But demand in rich countries will resume its decline, falling by 0.5 percent compared with 2010. In its monthly report on the oil markets, the IEA said its outlook for 2010 is largely unchanged at 86.5 million barrels a day, a 2.1 percent increase from 2009.
A consultant says rig workers' inexcusable failure to use enough pressure-control devices led to a natural gas well blowout in Pennsylvania last month. Consultant John Vittitow's report also criticizes the drilling crew's lack of training and proper equipment tests. He says he knows of no company that would cut the same corners. The State Department of Environmental Protection has ordered all companies to obey a set of safety procedures designed to prevent a repeat. Department Secretary John Hanger says the incident is embarrassing to the well owner, Texas-based EOG Resources. Explosive gas and toxic wastewater blasted out of control for 16 hours at EOG's Marcellus shale in rural Clearfield County in early June. No one was hurt.
Job openings dropped in May from the previous month and layoffs edged up, fresh evidence that employers are reluctant to add workers. The Labor Department says job openings fell to 3.2 million from 3.3 million in April. The dip follows two months of increasing openings, driven partly by temporary government hiring for the 2010 census. April's upwardly revised figure was the highest in 18 months, as private job openings also rose. May's total is 37 percent above the low point of 2.3 million openings in July 2009. But it's still far below pre-recession levels of about 4.5 million openings per month. Layoffs increased to 1.9 million, but remain at pre-recession levels. The department says layoffs rose to a peak of 2.6 million in January 2009.
The federal deficit has topped $1 trillion with three months still to go in the current budget year, showing the continued impact of a deep recession on the government's finances. The Treasury Department says that through the first nine months of this budget year, the deficit totals $1 trillion, down by 7.6 percent from the $1.09 trillion in red ink run up during the same period a year ago. The June deficit totaled $68.4 billion, the second highest June deficit on record, but down from the all-time high of $94.3 billion in June 2009, a month when the government was spending heavily to stabilize the financial and jump-start economic growth.
The U.S trade deficit widened in May to the highest level in 18 months as a rebounding economy pushed up demand for imports of foreign-made cars, computers and clothing. The Commerce Department says the trade deficit increased 4.8 percent to $42.3 billion, the largest imbalance since November 2008. American exports of goods and services rose 2.4 percent but this increase was outpaced by a 2.9 percent rise in imports. American manufacturing has been a standout performer so far in this recovery, benefiting from a global economic recovery. But the concern is that export sales will be hurt by the European debt crisis, which has dampened growth prospects in Europe.
Ford says sales were down 17 percent across its main European markets in June as scrappage schemes expired and the economy showed feeble growth. The company says 118,800 new Fords were registered last month in 19 European countries—24,400 fewer than a year earlier. For the first half, Ford said new registrations in the main European markets were down by 3.9 percent, or 29,300 vehicles, to 716,900. Ford said it is doing well in growth markets and increasing volumes and market share in Russia, Turkey and Spain. Ford of Europe Vice President Ingvar Sviggum said that "we will not sacrifice profitability for volume or share." He added that "unsustainable heavy discounting" damages brand reputations and further weakens the market.
U.S. magazines recorded a slight gain in advertising pages during the second quarter as businesses began to restore their marketing budgets. It was the first quarterly increase in two years. According to the Publishers Information Bureau, magazines sold about 43,000 ad pages collectively during the second quarter, up 0.8 percent from a year ago. As a whole, magazines have a long road to recovery. Ad pages fell 26 percent last year. But some individual titles fared better than the pack. Vanity Fair climbed 30 percent in the second quarter, OK Weekly was up 37 percent and Seventeen was up 22 percent. Even Playboy, which drew attention this week as founder Hugh Hefner proposed to take its parent company private, saw a big jump—up nearly 54 percent.
Manor Downs could soon by done. The Austin-area track has not applied, with state regulators, for any live horse racing dates 2011. The Austin American-Statesman reports that Manor Downs is planning to end simulcasting on July 25th amid the stalled economy and a slump in the Texas horse racing industry. Manor CEO Howard Phillips has informed the Texas Racing Commission of the plans. Phillips says business at the track is off 40 percent since 2008, with losses that year close to $1 million. Manor raced a total of 14 days on weekends in March and early April, down from 18 in recent years. Retama Park is in talks to see if the track north of San Antonio, which does not have quarter horse racing, could pick up some of Manor's dates.