Gulf-Spill on The Infinite Unknown

My idea for stopping the oil leak

Jared Watkins — Fri, 04 Jun 2010 00:00:00 +0000

Here is my humble contribution for a possible way to cap/contain the oil leak. Kevlar 149 is very tough stuff. The info I could find says it’s good to about 27 million psi tensile modulus which I would hope would be enough to contain the oil. My idea is to have a short custom riser pipe fabricated with pads to anchor hold-down chains and a short steel cone on the bottom to align the pipe over the existing riser. A tight fit isn’t required.. because over the whole connection is a Kevlar sleeve that can be cinched under the existing pipe flange that is just under the now cutoff riser. I would also wrap the flange in a tire to protect the sleeve from the sharp edge and help seal the connection.

Spill Impact Measured in Trillions?

Jared Watkins — Mon, 03 May 2010 00:00:00 +0000

Reading more about the spill over the weekend.. the situation looks much worse than it did on friday. The visible surface area of the spill has grown much faster over the last few days than it should have if it were leaking at the rate of 5k barrels a day. The fear is that the piping will totally open up and release on the order of 165 – 250k barrels a day making it a bigger spill than the Valdez in as little as a couple days. Worse.. there is a pretty good chance at this point that the oil is going to migrate east and get caught up in the [gulf stream][2] which will carry it around to the east coast of Florida and potentially as far as NC affecting roughly half the east coast.

One can just imagine the broad impact to the economy from fishing to tourism to real estate along all that coast line as we move into the summer tourist season. Many businesses in coastal areas depend on busy summers to survive.. even in the best of times. Somehow I don’t think people will be going on eco-vacations to clean oil off their favorite beaches.

It sounds like we are just not equipped to deal with this sort of leak at this depth of water. We also don’t know how much oil might be hidden under the surface. So far they have been unable to close the main valve that rests on the sea floor.. no one is sure why it won’t close. The next plan is to try to drop a 40′ high dome over the well head which will capture the leak and pipe the leaking oil up a large hose to be collected at the surface. This plan is based on the 5k barrels per day figure… if the well has totally opened up though it’s hard to see how this approach would work. The dome plan is set to be attempted around next weekend and we should have a better idea by then what the rate of the leak might be.

From a trading standpoint the tanker companies might get a little bump depending on the severity of the leak and how they get it under control. Since the Jones Act only allows US owned and flagged ships to transport oil from the gulf to US ports I’ll be looking at OSG when they report on Tuesday to see if they mention anything related to the spill during their conference call. I don’t know who else is a big operator of these routes or how else this might be traded.

Is BP toast?

Jared Watkins — Sat, 01 May 2010 00:00:00 +0000

As BP is my favorite integrated oil company I’ve been following this gulf story closely. It certainly sounds like this mess with the blown well is going to take a long time.. maybe months to fix and you just know it’s going to be a daily story. Of course BP is insured.. and there are other companies involved that are taking a hit but every time the story comes up it’s BP getting trashed. I was already mostly out of the market as of a couple weeks ago.. but I further reduced my position in BP in favor of CVX early this week. If nothing else I think a few months of bad press will cause money to flow out of those involved companies (BP, RIG, APC, HAL) and into competitors. Of course.. that’s not really being fair given how much value those have already lost since the story broke.. but that’s market sentiment for you. As the story evolves it will be interesting to see who else gets dragged through the mud and what affect that has as you get further and further away from those with direct involvement. I expect any such decline will be temporary though… BP has good dividend support and is already looking pretty attractive at these levels. The other companies currently taking a hit aren’t so fortunate though… will they continue to slide downward while BP attracts more buyers for the yield?

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