International Energy Agency says Libyan oil exports halted, production down to a 'trickle'

CAIRO - Libya's oil exports have "ground to a halt" because of the fighting between rebels and pro-government forces, and it could be months before the country's crude resurfaces on world markets, the International Energy Agency said Tuesday.

The Paris-based group, whose members are mainly oil-consuming industrial nations such as the United States, also said that production from the North African nation appeared to have "slowed to a trickle" as the fighting and mounting unrest prompted an exodus of foreign oil workers and led international companies to halt their operations in the country.

The IEA said that while the rebellion against Libyan leader Moammar Gadhafi continues, "what is becoming clearer is the country's oil production and exports could be off the market for many months due to both war-inflicted damage on oil infrastructure and international sanctions."

The fighting in Libya, which has served as the stage for the most violent of the anti-regime protests sweeping the Middle East, drove oil prices as high as almost $107 per barrel last week on the New York Mercantile Exchange before they quickly cooled after the massive earthquake that ravaged Japan. The U.S. benchmark crude futures contract was around $99 per barrel in electronic trading on the Merc on Tuesday.

The assessment, presented in the IEA's latest month oil market report, reaffirms the belief of many in the market that Libya's vital oil industry was all-but-shuttered amid the fighting. The country sits atop Africa's largest proven reserves of conventional crude, and had produced about 1.6 million barrels per day. Most of its exports went to Europe.

At least three of the major ports in the east are no longer exporting, and an official with the Arabian Gulf Oil Co. in the east said Monday that they were not expecting another tanker until mid-April from the terminal in Tobruk, near the Egyptian border.

Other ports have been shut down, with the Ras Lanouf facility suffering a fire at a kerosene storage facility. Even if they are open, tankers have steered clear because of the shelling by pro-Gadhafi forces.

Similarly, analysts believe that what little production remains is likely to have been shut in, or will be shut down, given that the net outcome of shipping oil through pipelines during a military campaign could easily be a major explosion.

Gadhafi's forces have been pushing to recapture the eastern ports, which represent at least 65 percent of the country's export capacity. The country's oil minister has said output is down by about two-thirds of its normal level, but the fighting, communication cuts and other challenges have made it impossible to independently verify the figures put forward both by the government or the rebels.

Many analysts believe that they may try to restart the fields with what limited oil labor force available to the state-run National Oil Co., but that such a step would be essentially irrelevant given that there appear to be few willing buyers of Libyan oil because of the mounting international sanctions on the country.

"While approximately half the country's output was halted in the first few weeks of the rebellion, by 11 March it appeared that production had slowed to a trickle, not least because of the fighting," the IEA said. "Indeed, it is understood that most oil field operations have been shut-in or sharply curtailed, with transport routes choked off."

Other members of the 12-nation Organization of the Petroleum Exporting Countries - most notably Saudi Arabia - have ramped up production to offset the loss of Libyan oil. Several minister have said there are informal discussions about whether there was a need to meet ahead of their June gathering to determine whether their output quotas needed to be revised to cool surging prices.

The IEA said OPEC crude oil output was down slightly less than 100,000 barrels per day in February, with increases from other members of the producer bloc largely offsetting the drop in Libya's production.

Copyright 2011 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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BP to sell $7.06 billion in Argentina assets to help cover gulf oil spill costs

BP has agreed to sell its share of an Argentina-based oil and gas company for $7.06 billion in cash, bringing to about $21 billion its total sales of assets to help cover costs stemming from the Gulf of Mexico oil spill.

After the sale, BP will be most of the way toward its goal of selling as much as $30 billion in assets by the end of 2011 to help cover spill costs and bolster cash holdings to assure investors and lenders of the oil giant's financial stability. The sales are expected to reduce BP's assets by 10 to 15 percent.

The price of the Argentina operations fell $2 billion to $3 billion short of what many analysts expected. Nonetheless, the latest sale of what is considered a non-core asset for BP demonstrates the huge scale of the London-based oil firm's operations. In addition to asset sales, BP is raising more than $2.5 billion a quarter for spill costs from the suspension of its dividend.

BP announced Sunday that it would sell its 60 percent interest in Pan American Energy's oil and gas operations in Argentina to Bridas Corp., which already owns the other 40 percent.

BP acquired the interest when it bought Amoco in 1999. Since then, BP has revived output from the aging Argentine fields, which now produce about 100,000 barrels of oil a day and 450 million cubic feet of natural gas per day. The vast bulk of that production comes from one field, Cerro Dragon, about 900 miles south of Buenos Aires.

But Argentina's tax policies have diminished the attractiveness of operating there, analysts said.

Bridas was founded by the Bulgheroni family of Argentina. In May, the China National Offshore Oil Corp., which has been expanding its worldwide operations, bought 50 percent of Bridas for $3.1 billion. CNOOC's deep pockets helped make the BP sale possible; it will provide much of the cash for the transaction.

The price CNOOC paid earlier this year for its share of Bridas led many analysts to believe that BP would get more for its interests. The CNOOC purchase of Bridas implied a value of $15.5 billion for the entire Pan American Energy operation. That would have translated into a price of $9.3 billion for BP's share.

The sale does not include Pan American's operations in Bolivia.

"Today's agreement further demonstrates both the high quality and attractiveness of the assets throughout BP's global portfolio and also the company's ability to meet our significant financial commitments arising from the Gulf of Mexico tragedy," BP chief executive Bob Dudley said in a statement.

At the end of the third quarter, BP had incurred costs of $11.6 billion as a result of the oil spill, not counting the $3 billion first installment it had paid into a $20 billion escrow fund. Even after those payments, the company had nearly $13 billion in cash and $17 billion of bank facilities it could draw down. The company expects the total cost of the oil spill to ultimately reach $40 billion.

Dudley said BP would seek to sell other assets that might be "strategically more valuable to others than to BP."

Under the terms of the agreement, Bridas will pay BP a cash deposit of $3.53 billion, with the balance of the proceeds due on completion of the sale, which is expected to be completed by Dec. 28.

In China, CNOOC announced that it would join with Bridas's Argentine shareholders to provide $4.94 billion, or 70 percent, of the purchase price. The remaining 30 percent will be covered by loans, or additional cash contributions if necessary.

As of Dec. 31, 2009, BP's 60 percent interest in Pan American accounted for 917 million barrels of oil equivalent reserves, about 5 percent of the company's overall reserves. Production from Pan American accounted for 3.6 percent of BP's global output.

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'Risk/reward equation' used in building gulf well, BP worker testifies

A BP drilling engineer involved in the planning of the Macondo well declined to testify before a federal investigative panel Friday, invoking through his lawyer his Fifth Amendment right against self-incrimination.

Mark Hafle, who was involved in some of the most heavily scrutinized decisions about the well, became the third BP employee to invoke his constitutional right not to answer questions from the panel. Hafle had testified in an earlier round of hearings.

As Friday's hearing proceeded, another BP employee who wrote one of the most widely derided e-mails to surface in investigations of the Deepwater Horizon disaster testified under oath and gave a more benign explanation of the document.

In an e-mail four days before the April 20 blowout in the Gulf of Mexico, drilling engineer Brett Cocales addressed one of the most controversial decisions in the construction of the Macondo well, saying in part, "who cares, it's done, end of story, will probably be fine."

In the e-mail, he went on to defend the decision based on "the risk/reward equation."

Congressional investigators have cited the decision as evidence that BP might have cut corners to save time and money. Testifying before a separate federal investigative panel in Houston on Friday, Cocales said, "Those are my words."

But he said they had nothing to do with financial considerations.

Cocales said he was weighing engineering risks associated with alternative approaches, and he thought less risk was associated with the course BP took.

At the time, he said, he thought the "worst-case scenario" was that BP would have to do remediation work on the well, not that safety would be jeopardized, he testified Friday.

But he acknowledged that there "was still a risk of channeling" - a term that refers to gaps in the cement lining between the steel well pipe and the rock formation that could give gas a path to escape.

At issue was the number of devices called centralizers installed to center the pipe in the well. Halliburton, a contractor to BP, recommended 21 but BP used six. In a report to BP two days before the explosion, Halliburton warned that with as many as seven centralizers the well could have a "SEVERE" gas flow problem.

Cocales on Friday became the fourth BP employee to testify that, before the blowout, he did not read that warning.

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Great Plains oil pipeline plan sparks grass-roots activism, high-stakes lobbying

A massive feat of engineering by any measure, the Keystone pipeline expansion project would transport crude oil close to 1,700 miles from "oil sands" in the icy reaches of Hardisty, Alberta, down through the Great Plains to the refineries of Port Arthur, Tex. In doing so, the giant pipe also promises to allay some fears about U.S. energy security: The oil will come from a trusted ally, and its cross-continental path avoids visions of another deep-sea drilling disaster.

But the decision on whether to issue a permit to the project, opposed by environmental groups, rests with the State Department, which has little expertise in engineering or environmental matters. And reflecting the chaos of U.S. energy and environmental policy, the proposed pipeline is pitting Montana landowners against pipe fitters in Nebraska and creating unlikely allies of Nebraska ranchers and chieftains from Alberta's indigenous communities.

On one hand the move to extend TransCanada's existing pipeline - which runs from Hardisty to the Illinois towns of Wood River and Patoka and has a daily capacity of 435,000 barrels - offers obvious benefits. The extension will generate 13,000 construction and 7,000 manufacturing jobs in the United States over roughly two years, according to the company, and could transport as much as 500,000 additional barrels of oil a day. It also could help stabilize electricity prices for several rural co-ops along the route.

"Everyone's saying we've got to get less dependent on Middle East oil, and this is a perfect opportunity to bring this oil in," said William Hite, general president of the United Association, the union for plumbers and pipe fitters.

But the crude comes from an area known as "tar sands" or "oil sands," where operators extract a viscous oil called "bitumen" from formations of sand, clay and water. The process consumes more energy and water than most conventional drilling methods, can require clear-cuts of forests and creates tailings that can pollute nearby waterways. Canada has the world's third-largest reserve of heavy crude after Saudi Arabia and Venezuela and accounts for 20 percent of U.S. crude imports.

At least 65 lawmakers - nearly all Democrats - have written the State Department raising questions about the pipeline, while 40 Republicans have written letters backing it.

"When I think of the State Department I think of many things they do well," said Sen. Mike Johanns (R-Neb.). "But I would tell you, siting pipelines is not anything I would think of when I think of State Department expertise."

Environmental issues

The National Wildlife Federation's senior vice president, Jeremy Symons, said the Obama administration cannot claim to be fighting global warming while signing off on oil imports from such an energy-intensive operation. "What does it mean when the U.S. bellies up to the trough and says, 'Give me your dirty energy?' " Symons said.

Symons also noted that TransCanada submitted a 2009 market assessment in its Canadian permit application suggesting the extension will raise heavy crude prices in the United States by removing the "oversupply" in the Midwest, where the price has been discounted. The analysis said that by extending the pipeline to the Gulf Coast, with many more refineries and buyers, the Canadian heavy crude price could be expected to increase by around $3 a barrel, giving the Canadian oil industry at least $2 billion in additional revenue each year.

But the pipeline will traverse environmentally sensitive areas such as Nebraska's Sand Hills and the Ogalalla Aquifer, which provides drinking water for 2 million people. Local ranchers and farmers have questioned why the pipeline needs to pass through an area where the aquifer runs just a few feet below the ground and the sandy soil makes it harder for vegetation to regrow once it's been disturbed.

"We know what it takes to try to maintain the land in a productive state," said Teri Taylor, who runs a cow-calf operation with her husband and son that would have miles of pipeline laid across it. "We are unable to even fathom what it would take to reclaim the land."

Oil pipelines are not uncommon in the United States. There are nearly 147,000 miles of them already, according to the Transportation Department's 2008 statistics, with 50,000 miles devoted to transporting crude.

An Energy Department-commissioned analysis, which has not been released but has been obtained by The Washington Post, provides some fodder to both sides' arguments. The report says the United States can obtain the Canadian crude it needs for the next decade without the Keystone extension, but it suggests that increasing oil-sands imports and reducing overall U.S. oil demand would "have the potential to very substantially reduce U.S. dependency on non-Canadian foreign oil, including from the Middle East." It also concludes that a decision to block the pipeline would not affect Canadian oil sands production, since the heavy crude would go to Asia instead.

TransCanada chief executive Russ Girling said his company "has done a rigorous review of the rerouting to make sure that it has the least environmental impact," adding that "we will leave the environment in exactly the same condition where we found it."

The Nebraska Farmers Union has passed a resolution demanding the pipeline project be relocated or blocked. Relocation would entail the running the pipeline through more populated areas as well as wetlands, and it could delay the process by another six months.

TransCanada said it will employ extra precautions that are usually reserved for a high-pressure operation. But Nebraska state Sen. Tony Fulton (R), a former engineer who chairs the legislative sportsmen's forum, said he would be more comfortable with the pipeline if another Canadian company, Enbridge, could explain why its pipeline in Michigan ruptured and released more than 800,000 gallons of oil last summer into the and a nearby creek.

"Why are we so hellbent on moving this so quickly?" Fulton said.

At the State Department

The State Department is under pressure to reach a conclusion this year on the permit application, which was filed in September 2008. The draft Environmental Impact Statement it issued in April sparked an unusually high number of comments. The Environmental Protection Agency sharply criticized it, saying it did not fully explore the potential environmental impact or the prospect of a more rapid transition to alternative energy that would make the imports unnecessary.

Daniel Clune, the principal deputy assistant secretary in the Bureau of Oceans and International Environmental and Scientific Affairs, said State Department officials have "been engaged in very serious discussions with" the EPA and other relevant agencies.

Lobbying on both sides has been intense. TransCanada has run television and radio ads in Nebraska and Washington, D.C., and Laborers' Local 1140 in Nebraska has made more than 600,000 robo-calls to Nebraskans. More than 100 activists demonstrated outside Nebraska's capitol early this month, and the Texas-based Stop Tarsands Oil Pipelines has gotten local politicians to demand a more-detailed environmental analysis.

Opponents such as Bold Nebraska director Jane Kleeb are using e-mail, Facebook and monthly conference calls to strategize with others along the pipeline's route - in states including Montana, South Dakota, Kansas and Texas. They have also forged connections with Canadian First Nations activists through the Indigenous Environmental Network, which has sent speakers to Nebraska to help mobilize opposition there.

While Secretary of State Hillary Rodham Clinton prompted an uproar in mid-October when she declared that the department was "inclined" to grant the permit, officials now say they will not release a final environmental analysis before next month. Once that process is complete, the state has another 90 days to make a "national interest determination" that focuses on economic and security considerations.

"All other things being equal, there would be an advantage in getting our oil from a close ally like Canada," Clune said. "What we're trying to do is make the best decision for the country."

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Increase in oil revenue amid unrest in Arab world gives Russia some breathing room

MOSCOW - With the price of oil climbing to more than $100 a barrel, Russia has a little more weight to throw around on the world stage, and it is doing just that.

The stepped-up flow of petrodollars into the government's coffers relieves what had been a worrisome budget deficit and lessens the urgency of reform. Good relations with the West - and especially the "reset" with Washington - are not quite so pressing when the economy here is in good shape.

Russia is benefiting tangibly from the turmoil in the Middle East and North Africa. Urals crude sold for $113 this week, up from $75 a year ago. Of that, $76.50 goes into the Russian treasury. And the spike in oil income has compensated for growing weakness elsewhere. It arrived just as Gazprom - the natural-gas giant that until recently was a potent weapon in Russia's foreign policy - has seen its clout in Europe washing away amid a flood of competition.

An emboldened Prime Minister Vladimir Putin was in Brussels in late February angrily lecturing the Europeans on energy policy and the uprisings in the Arab world. After months in which Moscow and Washington have tried to put their differences over Georgia on a back burner, President Dmitry Medvedev two weeks ago accused the country of threatening the security of the 2014 Winter Olympics, to be held in Sochi, near the border of a breakaway region of Georgia.

Earlier this year, Russia's warming relations with Poland went sour over the handling of the investigation into the plane crash that killed Poland's president and other top leaders this past spring.

But with increased oil revenue also comes the danger of complacency. Bureaucrats, defense contractors, pensioners and workers in construction and finance all stand to gain from the money coming in, along with the oil companies. But the cash also feeds corruption, encourages increased financial opacity and discourages attempts to shake up the system - all of which could spell trouble for Russia down the road.

"All of the dominant groups in Russia get a share of the increased oil revenue," said Alexander Auzan, an economist and adviser to Medvedev. "Yet it contradicts their long-term interests."

Largest oil producer

It's a powerful prop for the status quo - which Auzan and others say is unsustainable.

But as Sergei Guriev, head of the New Economic School in Moscow, pointed out, any change is going to involve a cost for someone, so why take the risk if the money is flowing in?

Russia is currently the world's largest oil producer. When the price last spiked, in 2007, Moscow was flooded with money and people close to Putin were suggesting that Russia was genuinely self-sufficient and had no need to engage more deeply with the West. The economic crisis the following year brought that talk to an abrupt end, and Medvedev began pushing for a Western-oriented program of modernization and diversification away from dependence on energy exports.

The Kremlin moved to stimulate the economy in 2008 by increasing government salaries and hiking pensions by 35 percent. Now it is stuck with those increases. With oil revenue providing 40 percent of the Russian budget, the Gaidar Institute for Economic Policy here has calculated that at any price less than $105 a barrel the government will be in the red.

That tempers any inclination toward hubris, said Daniel Treisman, a political scientist at UCLA who follows Russian developments. The Kremlin was looking at a difficult financial crunch, with parliamentary elections coming late this year and a presidential election next March, so the timing of this rise in revenue is more a relief than a goad to aggressive behavior.

"We don't need high prices," said Leonid Grigoriev, an economist and former World Bank adviser. "We need good relations, a long-term market and reasonable prices," which he put in the $70-to-$90 range.

Russia will not turn its back on the West, by any means, he said. But, especially in an election year, its leaders may be more vocal in pointing up differences with the West. In 2010, Russia had enough problems at home that it was actively trying to avoid them abroad; now, with money to address domestic issues, that caution may not be so evident.

Treisman, like many others, did not think much would ever come of Medvedev's modernization plans - it's not the sort of change, he said, that can be ordered from the top down. But the oil bulge makes the Westernization of the Russian economy less likely. It helps big companies - which, Grigoriev said, already dominate the economy to a much greater extent than in other developed countries - and it hurts small ones, where jobs and creativity tend to be nurtured.

Information technology firms, with high labor costs, will suffer, Guriev said, and they are central to Medvedev's vision for the future of Russia.

Gazprom loses clout

Part of what got Putin so riled up in Brussels was Europe's treatment of Gazprom, a gigantic state-owned operation that at one time had unchallenged sway in the European energy market. Gazprom was a powerful tool in the Kremlin's hands, useful when threatening Ukraine and a reminder to the rest of Europe that Russia had to be given its due.

But that was before American companies began extracting cheap natural gas from shale deposits, and before developments in liquefied natural gas (LNG) technology made inexpensive transportation by ship possible.

Qatar set up a new LNG port to ship gas to the United States, but when it couldn't compete there it turned to Europe instead. Today, Europe can buy gas cheaper from Qatar than it can get by pipeline from Russia. European companies have been renegotiating their contracts with Gazprom - downward - and the European Union has insisted that Gazprom divest itself of its pipelines.

Russia will still sell gas to Europe, said Pierre Noel, an energy expert at England's University of Cambridge, "but the pricing regime is changing." Gazprom, he said, will eventually have to change with it.

But the turmoil in North Africa has temporarily masked even Gazprom's difficulties. When the Libyan gas pipeline across the Mediterranean was shut down, Italy, which is Gazprom's second-biggest customer, relented for now in trying to renegotiate its contract.

If production in Algeria, a much bigger supplier than Libya, were to be disrupted, that would make Gazprom a power to be reckoned with again.

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Rising fuel prices putting everyone in a bind

NEW YORK - High fuel prices are putting the squeeze on drivers just as they are starting to feel better about the economy. They also are forcing tough choices on small-business owners, who are loath to charge more for fear of losing cost-conscious customers.

Gasoline prices rose 4 percent last week to a national average of $3.29 per gallon. That's the highest level to date for this time of year, when prices are typically low. And with unrest in the Middle East and North Africa pushing the cost of crude oil into the $100-a-barrel range, analysts say pump prices probably are headed higher.

Bryon Gongaware, an owner of the Floral Trunk and Gifts in White Bear Lake, Minn., didn't raise his $7 flower delivery charge when gas prices spiked in 2008, and he doesn't plan to do so this time, either.

"I don't think the economy is solid enough that you can be careless about raising prices," he said.

That means the extra costs that come from driving the store's delivery van 70,000 miles a year come from only one place: "Right out of the bottom line," he said.

For drivers such as Robert Wagner, 51, a high school teacher from Thornton, Colo., the higher fuel prices mean cutting back on movies and dinners out for him, his wife and their two children. "We're very, very frugal right now," he said as he trickled enough $3.09-per-gallon gasoline into his Chevrolet Suburban to get him to his next pay day.

Analysts and economists worry that by lowering profits for businesses and reducing disposable income for drivers, high gasoline prices could slow the recovering economy.

For a year, analysts estimate, oil at $100 a barrel would reduce U.S. economic growth by 0.2 or 0.3 of a percentage point. Rather than grow an estimated 3.7 percent this year, the economy would expand 3.4 percent or 3.5 percent. That probably would mean less hiring and higher unemployment.

Americans are less prepared to absorb the increase in gasoline prices than the last time they rose to this level, in 2008, because the unemployment rate is higher and real estate values are lower, said David Portalatin, an analyst for market research firm NPD Group.

It has been four months since gasoline was more than $3 per gallon. During that time, drivers have spent $14 billion more on gasoline than they did a year ago, Portalatin said.

Diane Swonk, chief economist at Mesirow Financial in Chicago, said this year's cut in payroll taxes offers consumers a buffer against higher fuel prices. Still, she expects all but the wealthiest Americans to cut back on discretionary spending. And the longer prices stay high, the more damage they do.

Gasoline prices rose throughout last fall as the developing nations of Asia and the recovering economies of the West began using more oil.

In recent weeks, upheaval in the Middle East and North Africa stoked fears that oil supplies would be disrupted, and oil prices exceeded $100 per barrel for only the second time in history.

Much of the most dramatic unrest took place in countries that are not big producers of oil. But when Libya plunged into chaos, there were disruptions in shipments of its high-quality crude, which is well-suited to making gasoline. That sent refiners scrambling to find other sources of high-quality oil. Gasoline prices rose further.

Gasoline prices typically fall in the winter and rise in the spring as refiners switch to more expensive summer blends of gasoline. Since 2000, prices in May have been 52 cents per gallon on average higher than in February, according to the Energy Information Administration.

Tom Kloza, chief oil analyst at the Oil Price Information Service, believes that the normal seasonal rise in prices has been pulled ahead by events in the Middle East, but he still expects prices to rise further. He predicts prices will reach $3.50 to $3.75 per gallon, barring more chaos in the Middle East.

"When we get over $3.75 we are looking at very serious consequences for the economy," he says.

For every 25-cent increase in the price of gasoline, the nation spends an extra $3 billion filling up its cars and trucks, Kloza says.

For Jay Ricker, who owns 51 convenience stores in Indiana that sell gasoline under BP and Marathon brands, that's less money for the "affordable luxuries" he offers - cappuccinos and candy bars that people enjoy, but can do without. "I hate these high prices," he says. "People don't want to come in and buy something I make money off." Drivers often get angry when gasoline prices spike for reasons that aren't apparent, such as refinery problems or overseas demand for oil.

This time, though, the dramatic news reports from the Middle East are making customers more understanding, says Scott Hartman, CEO of Rutter's Farm Stores, which owns 56 convenience stores and gas stations near Harrisburg, York and Lancaster, Pa.

"Whenever you see chaos in the Middle East, people expect higher prices, and this has been more widespread than most of us have seen in our lifetimes," he says. "It's quite clear our customers know what's going on." That doesn't mean they like it.

When asked about fuel prices at a RaceTrac service station in Dallas, Shaun DuFresne tapped the screen on the pump, showing he had just spent $90.14 for diesel - at $3.50 a gallon - to fill his 2006 Ford F-250 pickup truck. Then he said something unprintable.

- Associated Press

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Freak accident or frontier enterprise? Deep-water drilling is still a big unknown.

BP's internal report on the causes of the Deepwater Horizon blowout, released earlier this month, summarized the calamity as the result of eight separate breaches of physical and operational barriers, any one of which could have, and should have, stopped the unfolding disaster. The blowout, in the BP scenario, was very much a freak event. A long shot.

A graphic in the report showed the barriers arrayed like eight slices of Swiss cheese. All the holes, the report states, "lined up" to enable the blowout:

"[A] complex and interlinked series of mechanical failures, human judgments, engineering design, operational implementation and team interfaces came together to allow the initiation and escalation of the accident."

There is a different, and simpler, way to describe what happened: They weren't careful enough.

For the can-do culture of petroleum engineers, this catastrophe should heighten respect for the way bad things can happen to what looks like proven technology. Oil drilling is a risky business, and deep-water drilling is riskier still. Depth matters. And as the industry went deeper, it didn't commensurately increase its safety margin -- or prepare for the worst-case scenario.

On land, on sea, in the air, in space, in our laboratories, on our farms, we are surrounded by technologies of increasing complexity, all of them vulnerable, at some level, to catastrophes of human origin. Engineers do amazing things, but they aren't always as smart as they think, nor their systems as robust as they seem on paper.

The more complex the job, the more potential infiltration points for gremlins.

"We believed that the blowout preventer was the ultimate fail-safe mechanism," BP CEO Tony Hayward testified before Congress in June, bringing to mind the captain of the Titanic, believing that his ship was unsinkable.

Charles Perrow, in his seminal book on technological disasters, "Normal Accidents," writes, "We have produced designs so complicated that we cannot anticipate all the possible interactions of the inevitable failures; we add safety devices" -- think blowout preventers -- "that are deceived or avoided or defeated by hidden paths in the system."

His argument is that such accidents, though rare, are integral characteristics of the system, with its interlinked components. That's what happened here.

The pivotal moment came late on the afternoon and into the early evening of April 20. The Horizon crew conducted two pressure tests to look for any signs of hydrocarbons flowing in the well, which had already been cemented. For reasons that remain somewhat murky -- most of the key figures either have refused to testify or died in the explosion -- the BP "company man" and the Transocean crew decided that the results of the pressure tests were benign.

As in many industrial accidents involving complex technology, they were trying to interpret something they couldn't see directly -- what was happening below the bottom of the sea. The critical hardware, the blowout preventer, was a mile deep.

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BP announces changes aimed at helping cover costs from gulf oil spill

BP said Tuesday that it will restart its suspended dividend payments, put its troubled Texas City refinery up for sale and sell another $13 billion in assets, a move aimed at covering costs flowing from last year's the massive oil spill in the Gulf of Mexico.

The British oil giant also said that it has sent a bill for $6 billion to its partners in the ill-fated Macondo oil well, Anadarko Petroleum and Mitsui, who it believes share liability for the disaster that killed 11 people and leaked nearly 5 million barrels of oil.

BP added $1 billion to its estimate of oil spill costs, bringing pre-tax charges related to the incident to a total of $40.9 billion. That figure does not include any payments by the partners, who say BP bears sole responsibility.

The announcements, including fourth-quarter operating earnings that were about 30 percent higher than a year earlier, closed out a catastrophic year for BP. Yet they painted a picture of a business on course to emerge largely intact, albeit about 15 percent smaller than it was before the spill.

BP chief executive Robert Dudley said that the company was pruning its least essential operations but would increase capital spending to $20 billion this year to explore and develop its most promising oil and gas prospects worldwide, including new frontiers in the Russian Arctic, Australia, the South China Sea and off Brazil's coast.

"We will be a different kind of company in the upstream going forward," said Dudley, who became chief executive after Tony Hayward resigned in the wake of the oil spill disaster. "We are taking this moment to make a broad strategic change," Dudley said, adding that BP would seek "different ways of unlocking value in the portfolio."

But BP executives in a Web cast said that the company's total production of oil and gas was equal to 3.67 million barrels a day, down 9 percent from a year earlier because of divestments, lower output in Organization of Petroleum Exporting Countries, and development delays in the Gulf of Mexico.

Moreover, Dudley said that output would slide to 3.4 million barrels a day this year after further asset sales.

The projections left investors cautious about BP stock on a day when the market rose broadly. Shares of BP closed Tuesday at $47.98, down 51 cents or 1.1 percent. BP stock closed at $60.48 a share on April 20, hours before the Macondo blowout, and fell as low at $27.02 a share in late June.

The restoration of dividend payments was widely anticipated. BP set the new dividend at 7 cents a share, half the previous level. That will cost the company about $5 billion a year, leaving a substantial amount of cash to fund an escrow account for spill damages. Dudley said that BP would be careful to avoid setting the divided so high that it would have to rely on very high commodity prices to meet its payments without borrowing.

BP executives also said that the Texas City refinery, where a 2005 explosion killed 15 people, no longer fit into the company's strategic plans. BP has poured money into upgrading the facility and settling victims' claims since the accident. But it said it now hoped to sell the refinery, the third largest in the United States, by the end of 2012.

BP said it would also sell its Carson refinery near Los Angeles, reducing BP's total U.S. refining capacity by half.

Dudley said he remained committed to deepwater projects, despite last year's spill. He said BP had 19 deepwater wells planned for the Gulf of Mexico and off Angola's shore.

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Waste from BP oil spill cleanup has gulf residents near landfills concerned

GRAND ISLE, LA. -- The pile of soiled boom sitting more than four feet high and cooking under the summer sun at an abandoned shipyard here will be a part of the oil spill that endures.

As beach cleanup is scaled down, the fate of all the oily trash created and collected along the Gulf Coast is causing a raging debate that BP and federal officials are trying hard to curb.

"We're getting all kinds of complaints from people," said Burnell Tolbert, president of the NAACP branch in nearby Lafourche Parish, a staging area where more than 2,500 tons of waste has been deposited.

People want to know what is in those trash bags, where they will end up and if the workers handling the oily trash are safe, he said.

The answers are leaving important groups unsatisfied. One coastal county threatened to sue BP if it continues to put trash from the spill in a local landfill. Not wanting to get into a tussle with the residents, the company relented, diverting the trash to other landfills. Others are arguing that too much of the trash is going to low-income and minority communities.

The oil from BP's rig explosion in April has already created more than 45,000 tons of garbage -- the solid oil and all the materials used to gather it -- and much more oily liquid waste. The trash is being shipped every day to nine landfills that store household garbage and non-hazardous industrial waste in communities across Louisiana, Alabama, Mississippi and Florida.

The Coast Guard, the Environmental Protection Agency and BP are "working hand in hand" to manage all that trash -- and are reaching out to community groups to try to allay fears that chemicals from the oil-soaked material could seep into the groundwater drinking supply, said BP spokesman Scott Dean.

The federal government issued a 34-page plan directing BP to recycle and reuse as much trash as it can and to post information about the trash it is collecting online. (So far about 50 tons of trash has been recycled, according to BP.) The government also has asked the company to start holding meetings with the communities around the landfills.

Still, contractors working for BP bag tons of trash daily. From Grand Isle alone, anywhere between eight and 16 dump trucks a day carry trash to landfills throughout Louisiana. The oily water is processed for refining.

From the isle, waste is trucked to places such as Venice, La. -- a small strip of land surrounded by bayous in the southernmost reaches of the state. The big landfill there -- with its rolling hills of decaying metal and household trash -- has already received 2,800 tons of oily waste, according to BP.

'A slap in the face'

Kindra Arnesen, who lives about four miles from the landfill, sent her children to live 200 miles inland because she's worried about all that the oil spill has left in its wake.

"I grew up being told not to even throw a Coke bottle in the bayou," she said. "Now look. What are we leaving for our children?"

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