Thursday, April 29, 2010

New York Times on BP oil spill

This article appeared in the New York Times today. Pretty much corresponds to what I blogged about

"Oil Spill’s Blow to BP’s Image May Eclipse Out-of-Pocket Costs
Published: April 29, 2010

HAMMOND, La. — BP says that the offshore drilling accident that is spewing thousands of barrels of oil a day into the Gulf of Mexico could cost the company several hundred million dollars.
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Nobody really knows whether the London-based oil giant is being too conservative about the cost for the April 20 accident, which some experts say could end up as the biggest oil spill in history. The 1989 grounding of the Exxon Valdez off Alaska, for example, cost Exxon Mobil more than $4.3 billion, including compensatory payments, cleanup costs, settlements and fines.

But regardless of the out-of-pocket costs, the long-term damage to BP’s reputation — and possibly, its future prospects for drilling in the Gulf of Mexico — is likely to be far higher, according to industry analysts.

The magnitude of the Deepwater Horizon disaster seems to be finally sinking in with investors. BP’s stock plunged more than 8 percent Thursday in American trading in an otherwise strong day for stocks. Since the accident, the American depositary receipts of the company have fallen about 13 percent, closing Thursday at $52.56.

For Tony Hayward, who has led BP for the last three years, the accident threatens to overshadow all of the efforts he has made to burnish the tattered reputation of the company after a refinery explosion in Texas in 2005 and a pipeline leak in Alaska in 2006.

As Mr. Hayward said to fellow executives in his London office recently, “What the hell did we do to deserve this?”

A BP spokesman said no executives were available for an interview Thursday. But in response to a written question, Mr. Hayward said, “Reputationally, and in every other way, we will be judged by the quality, intensity, speed and efficacy of our response.”

So far, the company’s failure to stop the seepage from the underwater well has frustrated government officials. On Thursday, President Obama offered the assistance of an array of government agencies, including the military, while noting that, under federal law, “BP is ultimately responsible for funding the cost of response and cleanup operations.”

Mr. Hayward, who has blamed the rig’s owner and operator, Transocean, for the accident, said that it was nevertheless BP’s responsibility to deal with the immediate problem. “We take it with the utmost seriousness,” he wrote. “Nothing else matters right now.”

Wall Street experts say that while the company is spending an estimated $6 million a day on fixing the mess, it is impossible to accurately estimate how much the incident will eventually cost.

BP, which leased the platform from Transocean, has said that drilling and operating relief wells to plug the runaway well may cost as much as $300 million, but those same wells will eventually be used to produce profitable oil.

The cost of an environmental cleanup will depend largely on how much oil reaches shore. The government could assess fines or other penalties. And lawyers have already filed a flurry of suits on behalf of commercial fisherman, shrimpers and injured oil workers against BP; Transocean; Cameron, the company that manufactured the blowout preventer; and other companies involved in the drilling process.

Cleanup costs will be divided among BP, which has a 65 percent ownership of the field, and minority partners Anadarko and Mitsui.

Transocean’s stock price fell nearly 7.5 percent Thursday, and is down more than 14 percent since the accident. The company has insurance that covers the rig that was lost, but any broader assessment of Transocean’s liability will be determined after investigators understand what caused the accident.

Regardless of the final assessment of blame, Wall Street analysts warned that everything BP does from now on will come under increased scrutiny by regulators and that potential partners in drilling ventures may well look elsewhere.

“In the last two years, it seemed BP had really cleaned up their act,” said Fadel Gheit, a managing director and oil analyst at Oppenheimer & Company. “Now it looks like a house of cards that has totally collapsed.”

Under Mr. Hayward’s predecessor, John Browne, BP rebranded itself as “Beyond Petroleum,” a company that was environmentally conscious and wanted to develop alternative energy sources like solar and wind power. Its insignia of a blooming flower was intended to portray the company as one that was responsive to growing public concerns about climate change.

But the company seemed to lose its focus on maintenance and safety, BP executives later acknowledged. The 2005 explosion at a refinery in Texas City, Tex., killed 15 workers and injured hundreds more. The Occupational Safety and Health Administration fined BP a record $87 million for neglecting to correct safety violations.

Only a year later, a leaky BP oil pipeline in Alaska forced the shutdown of one of the nation’s biggest oil fields. BP was fined $20 million in criminal penalties after prosecutors said the company had neglected corroding pipelines. Soon after the incident, Mr. Browne quit amid tabloid headlines about his private life.

Mr. Hayward, a geologist who had been in charge of exploration and production, took over and promised to refocus the company and change the culture, emphasizing safety.

He also expanded the company’s already aggressive exploratory efforts in the deep waters of the gulf. Last year, the same platform that has now sunk to the sea floor drilled the deepest well in history, opening one of the largest new fields in the world.

Despite the accident, BP says it remains committed to its gulf drilling program, which contributes 11 percent of the company’s worldwide production.

Senior executives insist that the explosion that sank the Deepwater Horizon rig and killed 11 workers does not reflect the company’s safety standards or Mr. Hayward’s management.

“This accident took place on a rig owned, managed and operated by Transocean,” said Andrew Gowers, a BP spokesman. “It involves the failure of a piece of equipment on that rig. So the unfolding events do not arise from a failure of BP’s safety systems.”

But critics in Congress and elsewhere have questioned BP’s commitment to safety.

Last year, when the federal Minerals Management Service proposed a rule that would have required companies to have their safety and environmental management programs audited once every three years, BP and other companies objected. The agency is also investigating charges by a whistle-blower that the company discarded important records from its Atlantis Gulf platform as required by law.

Henry A. Waxman of California, chairman of the House Energy and Commerce Committee, is demanding documents from BP and its drilling contractors in what looks likely to be a full-blown investigation. “A striking feature of the incident is the apparent lack of an adequate plan to contain the spreading environmental damage,” he said in a letter to company officials.

The faltering cleanup effort comes at a time when the company’s business is otherwise going well. Continuing the excellent performance of recent years, BP just announced earnings of $5.6 billion for the first quarter, more than double the profit during the same quarter a year ago.

“Certainly, BP will survive this,” said Cathy Milostan, an oil stock analyst at Morningstar. “This will test Tony and his ability to respond to this situation. We will see if we are seeing a new BP.”

John M. Broder contributed reporting from Washington.

A version of this article appeared in print on April 30, 2010, on page B1 of the National edition.

Wednesday, April 28, 2010

BP is not Beyond Petroleum

Our friends at BP who claim to be Beyond Petroleum have struck once more. This gigantic corporation that blew up a refinery in Texas City has now managed to blow up an oil rig in the Gulf Of Mexico. The Texas City refinery explosion killed 15 workers, injured 170 workers, and BP paid a fine of 373 million dollars for that “accident”. The oil rig explosion in the Gulf of Mexico caused 11 deaths and is creating an environmental disaster of gigantic proportion. The US Coast Guard is considering setting the slick alight to burn off the more volatile components in the slick. The problem is that some of the oil that is leaking from a mile below the surface of the gulf is heavy oil and will pollute the Gulf for years to come. There is little doubt that some oil will end up in the onshore marshes and will cause significant environmental harm to these marshes.

The company should change its name from Beyond Petroleum to Bloody Pathetic. BP is not bloody pathetic at making money it is just bloody pathetic at safety and when a company earns over $6 billion in a quarter they can afford to pay fines to buy their way out of trouble. Paying fines to BP is like me paying for a cup of coffee at Starbucks. The problem with fines is that it really does not reflect the severity of the “crime” relative to the net worth of the corporation that violates the law. On Tuesday we had Goldman Sachs executives testify in the Senate hearing. Their “crime” was to sell financial instruments they knew were destined for failure and that Goldman Sachs profited from in their failure. It was pretty amazing to hear bleeps in the questioning that Senator Levin posed to Goldman executives. Of course he was bleeped because he was reading verbatim from emails that Goldman employees wrote about how “sh---y” the deals were for investors.

Today on the evening news I saw that AstraZeneca agreed to a Federal fine of over $500 million for off label marketing of Sorequel a drug that was not approved for the indications AstraZeneca’s salespeople were promoting. AstroZeneca is a British and Swedish company. I guess the management of AstraZeneca is singing “who is Sorequel now”. For British Petroleum and British Pharmaceuticals it has been a bad week for the British. The list of drug companies fined by the FDA for off label promotion include Eli Lilly 1.4 billion dollars for Xyprexa, and Pfizer 2.3 billion dollars for Bextra. Merck was fined 671 million dollars for overcharging for Vioxx and Pepcid. All these unlawful activities must have given the shareholders of Merck very painful heartburn.

The question to be asked is the following: are there any honest and caring companies out there? I have to admit that most companies are honest and their management does care about their employees and customers. These companies will continue to thrive if they continue to market quality products and services at a reasonable price. A new company just went public with an initial stock offering this week. This company is Codexis and they claim to manufacture bio-fuels and have the big oil firm Royal Dutch Shell as an early investor. I bet they do not make it big but at least they will hemorrhage on land rather than out in the Gulf of Mexico. I wonder if my “gangrene friends” at the University of California in Bezerkley are questioning the wisdom of having partnered with BP for bio-fuels. Perhaps BP will stand for Bezerkley Petroleum and the fuel will have a deep red glow when burned.

Saturday, April 24, 2010

Electric Bikes and Microwave Ovens

Earth Day has come and gone and it is time for a positive blog this week. My old microwave oven died last night after ten years of almost daily use. Microwave ovens are a pretty darn good technology. Almost all the heat from the electric power source is transmitted to the food. For baking potatoes I estimate the microwave to save three quarters the energy compared with a convection oven. I love baked potatoes and popcorn, the two foods that microwave oven cook perfectly. The Sierra Club estimates even greater saving using a microwave oven. I extracted this from their web site: “Microwave ovens use much less energy than conventional ovens, so they can save you some pocket change. Let’s assume you are paying 12 cents a kilowatt-hour for your electricity. If you run a medium-size (1,000-watt) microwave at high power for 15 minutes, you’d spend 3 cents. A typical electric oven run at 350 degrees for one hour would cost you 24 cents. Do that every day, and you save yourself $75 a year with the microwave. More significantly, by keeping the kitchen cool in summer, a microwave may reduce your air conditioning costs.”

This morning I had to go to Best Buy to find the best buy on a replacement microwave oven. The recession and globalization has lowered the price of an item such as a microwave oven so I only had to fork out a single Ben Franklin for the purchase. I see the US Treasury has unveiled a new $100 Bill with old Ben and some new anti-counterfeiting features. This bill will go into circulation in February 2011. I am glad to see they kept the color shifting ink on the bottom right corner. The Green Machine played a significant role is getting this technology incorporated in the 1996 $100 bill. The optically variable nano pigment was invented by a friend of mine named Roger Phillips in Santa Rosa California.

Anyway off of that tangent and now to the point of this blog. Outside the Best Buy in Marin City they had about fifteen models of electric bicycles on show. They had a fellow from Sanyo demonstrating a high end electric bicycle that cost about $2,300. This lithium ion job with pedal assist and regenerative braking has a range of 40 miles. The regenerative braking prevents the bicycle from exceeding a speed of 15 mph downhill. The pedal assist helps extend range as much amperage is drawn during the initial acceleration from a dead stop. This is kind of like a Prius of bicycles that folds and can be taken on public transport such as BART. The electric motor in the Sanyo bike is small motor fit into the hub of the front wheel. The bike has LED head lamps as well as tail lights and brake lights. Most of the bikes on show were equipped with lithium ion batteries and rear hub motors and were priced at about $1,000. There were a few models that use lead acid batteries and have the motor attached to the frame of the bike and propel the wheel via a chain, these lower end bicycles cost approximately $500.

The manager of the store as well as the person from Sanyo explained the performance of the various bikes and also told me that the Marin City store had sold the most electric bikes of all the Best Buy stores in California. This made the Green Machine very happy knowing that his fellow citizens in the county the George Bush Senior referred to as the hot tub capital of the USA are buying green machines. Let’s show the country we can also heat our hot tubs with solar thermal systems. Perhaps old George who likes sky diving may tour our beautiful county just north of the Golden Gate on an electric bike and drop into the Green Machine’s hot tub in the back yard. If Alfalfa dropped in I would give him some hot wax that I melted using sunlight.

Wednesday, April 21, 2010

Earth DAY

April 22 is the day we celebrate Earth Day. The first celebration of this event was in 1970 and we have been trying to convince the earth’s inhabitants of the precarious state of the planet for the past forty years. Global human populations have almost doubled in the forty years from 3.6 billion to 6.8 billion. Livestock populations are more than twice what they were in 1970. For the first time in human history the collective mass of livestock exceeds the collective mass of humans.

Now the zinger; private vehicles owned by the humans on earth have tripled to a level of over 900 million in these forty years. Even in the Ignited States we have increased the number of registered vehicles from 107 million to 245 million in the past forty years. I guess the humans on earth paid lip service to earth day and spent the other 364 days of the year recreating in their vehicles. What a mess we are in!

On earth day I have to admit that like the astronauts in Apollo 13 “Houston we have a problem”. Their mission was launched on April 11, 1970 and had to abort and return on April 17, 1970. Their mission was termed a “successful failure”. The three heroes returned to earth to celebrate the first earth day five days later. We should admit right here and now our mission on earth has been a “successful failure”. Never before have so many enjoyed private vehicles, meat, Starbucks Coffee, a longer life span, and general wealth. But and it’s a big BUT we are successfully failing to deal with dwindling natural resources.

I work with extremely intelligent and very well educated people, yet many of them naively believe we will have electric cars that solve the oil problem, we will have bio-engineered diesel fuel to replace fossil fuel, we will have technical solutions to all of the problems we will face because we are smart. Right now we do not need “technical solutions” we need adaptive human behavior. We need less from the earth and more from ourselves. We need to look in the mirror and admit our mission is an Apollo 13 mission. We will not get to walk on the moon but we can use our smarts to get back to planet earth.

We can admit to our collective failure and reset the course. The human population does not need to double again, the livestock population does not need to double, and certainly the number of vehicles does not need to triple. The question is whether the modern lifestyle is a “successful failure” or a “failed success”. Irrespective of the way we term our past history we must change course.

Saturday, April 17, 2010

Comments of the PV Blogs

I received quite a few emails about the last two blogs. The blog on Sudhir’s home PV system drew several emails that asked why would he invest in something that has so little return? I asked Suhir to give me the dollars per year he has saved rather than the kilowatt hours and he told me the savings are averaging $2,000 a year. This is due to the fact that the utility pays him a pretty hefty price of about 33 cents per kilowatt hour he dispatches to the grid as the peak performance of his PV system corresponds to the peak demand for electricity from the utility. Electricity prices will increase at 5 or 6% a year so Sudhir will be saving $3,000 each year in six or seven years. Sudhir also made his investment in 2007 before the stock market plunged so he is pretty happy to have a PV system rather than phantom stocks. Sudhir you are a real green machine.

A few of the readers were dismayed that I scoffed at the solar plane. My disdain is not with the idea that an explorer is breaking new ground. I applaud anyone who has millions to spend on a dream and make that dream happen. My point was the idea is not practical for a mass solution for air transportation. The Cessna 150 that outperforms the behemoth PV Plane sold over 25,000 units and it is not green but is a practical small plane for many pilots. Planes simply cannot be made very green as they are heavier than air systems that need thrust and wingspan to stay aloft. The 12,000 PV cells that produce 30 kilowatts could have been sent to 10,000 villagers in Africa who each could enjoy 3 watts of power to light their mud huts with LED lights so kids can read at night.

I did this calculation about the carbon footprint of burning a wax candle versus using a LED light. A candle has the output of about 13 lumens and a LED will emit 130 lumens per watt so a candle is about equal to using a 0.1 watt LED. A candle that has a mass of 50 grams will burn for about 8 hours and will emit 150 approximately grams of CO2. The 0.1 watt LED lit for 8 hours by charge and discharge of an inexpensive nickel metal hydride battery will emit about 0.5 grams of CO2 if charged from the average electricity on the US grid. The LED is 300 times as green as the candle. Of course there are emissions associated with the manufacture of the battery, the PV system and the LED but there are also emissions associated with the manufacture of the candle. The battery can be recharged 300 times, the LED will last for 100,000 hours of operation, the PV system wil have a useful life of 25 years while the candle is single use. The best use of LEDs, rechargeable batteries, and PV cells will be in simple applications such as lights for a mud hut in Africa. 3 watts of power would be enough to power an array of LEDs that would light up a kids life. I need to come up with the best use for the candle wax but a hot waxing of Alfalfa may be one such optimum use.

Wednesday, April 14, 2010

Solar Plane A Real Dumb Idea!!!

Today’s blog is about the most outrageous green technology demonstration project that I have come across. We have news from Switzerland that a rich guy managed to keep an airplane powered only by sunlight afloat for one and a half hours at an altitude of almost 4,000 feet. Was this a brilliant use of nearly twelve thousand solar cells on a wing the size of a jumbo jet? The problem is the plane could only carry the pilot and had to be made of extremely light composites. The costly contraption had four electric motor engines with a total power or forty horses or 30 kilowatts. It managed an air speed of 45 miles per hour.

According to the US DOE the next step is to equip the plane with lithium ion batteries so it can continue to fly at night. Of course the plane cannot fly continuously without batteries as the sun will set. This is because the earth spins far faster than the plane flies. The earth spins at about 1,000 miles per hour and the plane only races to the spectacular speed of 45 miles per hour. The plane could fly continuously above the Arctic Circle in the summer. Perhaps the best use for this plane should be for the Hollywood remake of “Stop the world I want to get off”.

Here are the specifications of the plane:

Wingspan 63.40 meters
Length 21.85 meters
Height 6.40 meters
Motor power 4 x 10 HP electric engines
Solar cells 11,628 (10,748 on the wing,
880 on the horizontal stabilizer)
Average flying speed 70 km/hour
Maximum altitude 8,500 m (27,900 ft)
Weight 1,600 kg
Take-off speed 35 km/hour

Here is the news provided by the US DOE

“A solar-powered aircraft took its maiden flight on April 7 in Switzerland, achieving the latest milestone in a project that aims to launch a zero-emission flight around the world in 2012. Solar Impulse HB-SIA, a lightweight prototype with the 208-foot wingspan of a Boeing 747-400, climbed to just under 4,000 feet during its 87-minute flight. The aircraft has nearly 12,000 silicon mono-crystalline solar cells on its wings and on its horizontal stabilizer, and those solar cells provide power to the craft's four electric engines. A test pilot put the craft through a series of maneuvers before safely landing the Solar Impulse at an airstrip. Solar Impulse chairman and co-founder Bertrand Piccard noted that the project had taken an important step with the recent achievement, although the team still has far to go before it is able to fly a craft all night in preparation for the around-the-world flight.
Piccard, who was the first to pilot a balloon non-stop around the globe, initiated the Solar Impulse Project in 2003. The co-founder has since been joined by a team that includes multi-disciplinary scientists and advisers from a number of countries. In December 2009, the Solar Impulse completed a short inaugural takeoff-and-landing at an airport in preparation for this initial extended flight. Solar Impulse backers plan further testing of this model, which relies on minimal instrumentation and an unpressurized cabin. The next major goal is to make a 36-hour flight, which would require the addition of lithium-polymer batteries for night flight. Following that, a second aircraft, Solar Impulse HB-SIB, will be developed to attempt several consecutive 24-hour flight cycles. Success in those trials would enable the Solar Impulse to attempt its first trans-Atlantic crossing, currently scheduled for 2012. Meeting that benchmark would clear the Solar Impulse for an around-the-world solar journey.”

Friday, April 9, 2010

Sam and Sudhir Two Green Gringos

My friend Sudhir who is true green (he invested in PV cells for his home) remarked last week that the Green Machine has not blogged in a positive manner for quite long. Sudhir how right you are! The Green Machine has been somewhat negative because a lot of green want to bees are seeing the opportunity to line their pockets by either simply ripping off the government or by going public with their overhyped stocks. Back in 1969 VC stood for Viet Cong. Now these VCs who claim to be super capitalists have found the dumbest investor of all to make money. Yeah the US and State Governments are being told that advanced batteries in advanced vehicles will create Green Jobs. This like the Tet offensive is a sneak attack on us.

But I will now turn my battery terminal to positive and tell you about a couple of technologies that are going to work and are going to be cash flow positive. LED lights have shone brightly for me for several years. In one of my first Thermo Thursdays (the predecessor email to this blog), I touted CREE as a company that was going to blaze a trail in LEDs. This company is one hot stock . I also opined that hybrid vehicles with a small nickel metal hydride battery and small engine would proliferate and become widely available in models from all of the major auto makers. This has transpired and even GM now offers hybrid cars, trucks and God forbid SUVs. I have touted diesel engines and while these have been slow in coming to the Ignited States we are now seeing some market penetration.

Sudhir also shared with me cost and operating data from his PV system on his roof at home. Sudhir installed his system in August of 2007 and did this when government rebates were still fairly low. He spent $30,000 net of tax benefits on his 4.2 kilowatt DC system. The system yields 3.8 kilowatt hour peak AC for a unit cost of $7,895 per kilowatt AC. So far in the 31 months since installation his system has dispatched 16,681 kilowatt hours to the grid. I calculated the total number of hours in the 31 months and calculated what on-stream factor his system has operated at during this time. This equates to 19.2% of all hours day and night. This is what one would expect for a PV system in Northern California.

My friend Sam was a little more patient in installing a PV system on his roof. By waiting till January 2010 to install his 2.1 kilowatt AC system he only spent $11,000 of his own money as the Feds and State now provide larger rebates and the price of the PV cells has dropped as well due to the glut of production capacity. Sam only spent $5,288 per kilowatt AC for his system. As his system has only operated for three months without long summer days his on-stream factor equals 15.1% of all the hours day and night. Of course this will increase to a similar fraction of the time when he operates his system through the spring, summer and the fall. Sam generated and dispatched 566 kilowatt hours in the past three months. I applaud and take my hat off to Sudhir and Sam for being green machines.

I will eat the same hat if Bloom can operate their fuel cell with an on-stream rate of 98% over a period of ten years with an efficiency of 57% LHV. I wonder if it was the British or the Americans who came up with the phrase “I will eat my hat”. Most probably the British as anything tastes better than Bangers and Mash. By the way TET stands for Tesla Equals Tucker.

Saturday, April 3, 2010

Is the Nissan Leaf an Evergreen?

The gardeners at Renault Nissan have been working hard and have turned over a new leaf. They have designed and built an all electric plug in car called the Leaf. They claim the car will travel 100 miles on single charge. The car is equipped with 24 kilowatt hours of lithium batteries and has a mass of 2,700 pounds. With this size battery and this mass it is likely the car will have a range of 100 miles in a city such as Topeka Kansas. In San Francisco with all of our hills the range will likely be reduced to 80 miles. The car will certainly be a good city car and meet the requirements of a small niche market. The price for the car has been set just above $32,000 and there will be federal and state credits resulting a cost of about $20,000 if one were to purchase it here in San Francisco.

This all sounds great on the surface a “zero” emissions car of the future that does not use oil from a far off enemy of the USA. Well the vehicle is not zero emissions. The average kilowatt hour of energy generated in these ignited states has 1.3 pounds of carbon dioxide emissions. Transmission losses plus the loss in converting the AC electricity to DC will increase the emissions to 1.6 pounds of carbon dioxide for each kilowatt hour of stored battery power. The car will therefore emit 0.4 pounds of carbon dioxide if the full range of 100 miles can be reached. This is about the same emissions as a Prius that costs a similar amount and can be driven continuously on a 1,000 mile highway trip.

Nissan is not forecasting sales of a million Leafs a year they say they will be happy with 50,000 sales a year. Of course they will be happy with just a small number of sales as they are likely loosing money on each car they sell for $32,000. I do not want to repeat my arguments on the high cost of the lithium battery pack but Nissan and their battery partner Panasonic do not likely have batteries that cost half the cost of A 123. If they do, it just means A 123’s death will come sooner. My take on the leaf is the battery pack costs about $20,000 and the car costs Nissan $37,000 and losing $5,000 on a vehicle is worth the publicity they get since all the $5,000 came from the grants our federal government gave them to build a factory to assemble the Leaf in the USA.

The Leaf will launch towards year end and this tree Nissan has planted will not be an evergreen. The leaves will fall and then compost when the political climate changes after a few elections and a government that realizes the subsidies are just helping a few and wasting money decides to end the subsidies. Perhaps the Green Machine is an old fool and is wrong but I do believe there is no fuel like an old fuel and fossil fuels are very old.