Monday, June 28, 2010

The BP Oil Leak - Where is it taking us?


What if they are not telling us the whole truth about the oil spill? We already were told first by the Coast Guard that the spill was 1,000 barrels a day. Then BP said 5,000 a day, followed by increases to 12,000 to 20,000, 40,000, and now they are planning on recovering 53,000 barrels of 60,000 that are spewing out.

Current scientific estimates range up to 100,000 a day and the BP "worst case" estimate in their permit was for 162,000. That means the actual flow rate could be between 100,000 and 162.000 a day, or 20 to 32 times more than they first estimated (5,000).

So will the two relief holes be able to block off a leak 20 - 32 times larger than originally thought? That might explain why two relief holes instead of one were necessary from the beginning. If the oil flow rate is approaching 100,000 barrels it might be too much pressure for one or even two relief holes to stop the spill.

So what if they fail to seal off the leak? Well first off BP will be salvaging oil at a rate of about 55,000 barrels a day. No one seems to be paying attention to the fact that salvaged oil, that captured as part of the clean up, means there is lost royalty revenue that would have eventually streamed into federal government coffers (and partially shared with Gulf states) from the production of oil and gas at the site.

BP's lease to drill on the outer continental shelf means the company would have paid an 18.75 percent royalty to the federal government for all produced oil and gas. At a capture rate of 55,000 barrels a day the oil is worth at today's price for crude ($78.22), a total of $43 million a day. The lost royalty is about $8 million a day. Not a bad revenue stream and royalty savings for the company. The irony is BP was not even going to produce oil from the well, just cap it for future production. Most of the deep water wells being built are for future production.

Another interesting fact is that the highest production well flow rates for land or sea drilling are about 25,000 barrels a day. If the BP spill is around 100,000 barrels a day that is almost five times more oil than the best producing oil wells in the world. I suspect that means BP has a financial windfall from the royalty free oil. The $43 million a day revenue could offset the estimated clean up cost for BP which is now over $23 billion. Viewed another way, it would take one and one-half years of capturing the oil to equal $23 billion.

So what happens if they cannot seal the leak with the relief wells? The answer is rather foreboding. You see a failure to seal the leak may result in an increase in the flow rate to 100,000 barrels or more a day. Oceanographer John Kessler said that the crude gushing from the well contains 40 percent methane, compared to about 5 percent found in typical oil deposits. Methane is a natural gas that could potentially suffocate marine life and create "dead zones" where oxygen is so depleted that nothing lives. "This is the most vigorous methane eruption in modern human history," Kessler said.

There is also a problem with the oil remaining underwater. No one has a clue how much is staying below the surface in the form of oil plumes but some scientists have estimated it could be equal to the surface oil. When it remains underwater it is impossible to track by satellite. It is also impossible to know how much oil has reached the Gulf "Loop Current", the flow from the Gulf around the tip of Florida and up the East Coast.

We do know that on May 19 scientists monitoring the surface spill with the European Space Agency Envisat radar satellite stated that oil had reached the Loop Current. When it reaches Florida it becomes the Gulf Stream. Since the Loop Current is a very intense deep ocean current, it will accelerate the mixing of the oil and water which may remove the oil film on the surface and prevent further tracking it with satellites, but the pollution is likely to affect the coral reef marine ecosystem.

If the oil continues up the Gulf Stream scientists say it should remain 50-60 miles away from the Eastern Beaches but weather patterns could change that. Eventually the oil could continue in the Gulf Stream all the way to Europe. Such a result could have a catastrophic impact on the world.

Extreme results could be the extinction of sea life in the Gulf region. If it also reaches Europe the high level of toxicity will hurt the ocean life in the region. A prolonged failure to seal the leak could result in pollution of the entire Atlantic Ocean.

There is a possibility the methane gas, the natural gases in this field, could erupt and break through the ocean floor creating a tsunami of immense destructive capability aimed at any area from Florida to Texas and into Mexico as well as the release of poisonous gases into the region. Who knows what happens if the oil leak keeps expanding and eventually causes a rift in the ocean floor large enough to create a tectonic shift?

Another more likely disaster scenario is for the continued leak to impact on our economic recovery which is extremely fragile and teetering right now. We cannot handle an extended disaster on top of the Wall Street and housing fiasco, the lingering health care questions, wars and deaths in Iraq and Afghanistan, and a host of other policy issues where the president seems opposed to the will of the people.

If we fail to maintain an economic recovery mode we could all be in for a very serious time ahead. Right now we should remain aware of events and cautious about projections and know that we cannot continue to spend far more than we have and increase the national debt at a record pace.


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