Oil accidents can happen anywhere

They said the probability of it happening was very remote. They have been conducting these operations for decades and they have well-established safety systems and procedures, and the resources and expertise to handle any eventualities in their work place.

But the accident that many had thought would never happen, happened. An oil rig exploded last April 20, leaving British energy giant BP to deal with a mega crude oil gusher on the sea floor of the Gulf of Mexico just off the US Gulf Coast.

Worst than Exxon Valdez accident

Up till the BP incident, the Exxon Valdez accident at Blight Reef in Alaska in 1989 had been dubbed as the world’s worst environment disaster, leaving a thick sheet of black goo spreading to 2,100 km of coastline and 11,000 square miles of ocean, and affecting sea birds, otters, sea lions, coral reefs and other ocean wildlife.

The BP disaster at the Gulf of Mexico, on the other hand, spewed more than 4.9 million barrels of black oil into the ocean, or roughly 6.5 times more than Exxon Valdez, during a record-breaking 87 days until the oil well head had been capped and all leaks apparently contained.

If Exxon Valdez’s challenge to a speedy control of the disaster had been the harsh weather conditions and the remoteness of the accident site, BP’s was the fact that the oil head was beneath 5,000 feet of water. In fact, it was only two day after the oil rig’s explosion that BP noticed the leak.

High cost of disaster

Until the ruptured oil head was capped, the final estimate of crude lost into the ocean was an average of 2.6 million gallons a day. If you convert this to our 5-gallon water refills, you’re talking of about 520,000 containers a day. Until the accident was contained, some 45 million 5-galloners were released into the sea.

In terms of costs, BP estimates it had spent already $6.1 billion to cover expenses in containing the oil leak, containing and recovering spilt oil, and paying claims and fines. U.S. officials think the cost could go higher since only 800,000 barrels had been recovered.

If Exxon Corp. (now ExxonMobil), which was held culpable in the Exxon Valdez accident, shelled out $3.4 billion for fines and clean-up costs, BP may have to prepare $17.6 billion more to pay with the estimated 4.1 billion barrels lost in sea. It took Exxon more than 20 years to financially recover from the Valdez tragedy; it definitely will chip off a significant amount from BP’s goodwill and financial equity.

If there is one other lesson that may be gleaned from this tragedy, it is the specter of an accident happening in a densely populated area. In the case of the two accidents being discussed, the biggest damage so far was to the environment and the workers who perished in the explosion.

Disaster at Pandacan

The disasters that occurred at Alaska, and recently at the Gulf of Mexico, can happen at Pandacan, Manila. It sits at the center of an urban poor community that is home to about 84,000 people.

The oil that will be lost may be insignificant when compared with the quantity lost by BP at the Gulf of Mexico or by Exxon Valdez at Alaska. Spilt unburned oil products may pollute the Pasig River and surrounding ground area.

The real disaster, however, would be the explosion that could lead to raging fires and, yes, plenty of lives lost including the elderly, housewives and children.

New investment for Pandacan replacement

We have stressed over and over again that the oil companies had best consider relocating the Pandacan oil storage to a less populated area. Pandacan may have been the best site 100 years or even 50 years ago. But now, the oil companies must face the reality that the continued presence of the oil storage facilities causes imminent danger to the populace in the surrounding area.

In the first place, all the petroleum product receiving and dispensing equipment together with the storage facilities, offloading piers and the underground pipelines have been fully depreciated. Investments made at Pandacan have been fully recovered many times over since its inception almost a hundred years ago.

Unless the retained earnings of the oil companies have been depleted with dividends sent to its “mother company,” there must be sufficient provisions in retained earnings for future capital outlays. Now is the time to plan for new investment to replace Pandacan.

One possible option

Ramon Ang of San Miguel, majority owner of Petron Corp., has broached the idea of moving the oil depots from Pandacan to the North Harbor. Although Shell’s Ed Chua had brusquely quashed the idea, Ramon Ang’s team is earnestly looking at a major development project that will also include a grains terminal complex to service its food and beverage business.

This is just one of the options available to answer the concerns of the continued presence of large oil storage facilities in the middle of the densely populated Pandacan area. Any possible relocation site, and surely there are many, has to respond to threats of urban encroachment, terrorist attacks and environmental hazards.

DOE should prod not cuddle

The Department of Energy, instead of coddling the oil companies and just supporting the status quo, should prod the oil industry major players to allocate a share of their earnings for the necessary investments to relocate the Pandacan oil depot.

By the way, aside from the potential explosion that the Pandacan terminal poses, there is the environmental hazard that needs to be remedied soonest. Since 1914, the area has been the repository of accidental oil spills, not significant in volume if each incident is taken singly.

But over almost a hundred years, one can expect this to have accumulated. The possibility of oil products making their way to the area’s aquifer system is not remote, and however slight, may have been ingested by people drawing water from deep wells around the area.

The sooner this mess is cleaned, the better.

Invitation for collegiate basketball fans

Students and collegiate basketball fans are invited to join the three ongoing surveys being conducted by the Philippine Collegiate Champions League (PCCL) thru the official website, www.collegiatechampionsleague.net. Survey ends on September 3, 2010.

Visit www.CollegiateChampionsLeague.net  for more details about the 2010 Philippine Collegiate Championship games. 

Should you wish to share any insights, write me at Link Edge, 25^th Floor, 139 Corporate Center, Valero Street, Salcedo Village, 1227 Makati City. Or e-mail me at [email protected]. For a compilation of previous articles, visit www.BizlinksPhilippines.net.