API: U.S. petroleum industry cuts Y2K risk

The U.S. petroleum industry is making good progress on readiness for the Year 2000 (Y2K) computer problem, American Petroleum Institute told a U.S. congressional committee recently.

Red Cavaney, API president, told a special Senate committee on the Y2K problem, "We have a responsibility to our customers, our employees, and our shareholders to be prepared, and we will meet that responsibility."

Capt. Phillip M. Davies, area operations manager of Chevron Shipping Co. LLC, also testified on behalf of API. He said that, after participating in several international Y2K conferences for the maritime community, "My opinion of the readiness of the oil shipping industry to meet the challenges of Y2K has changed considerably. We have generally prepared well, and we do not expect major problems at the turn of the millennium."

API view

Cavaney said that oil and gas companies have been assessing, repairing, and testing software, hardware, and embedded processors. The work is being validated with equipment testing both online and offline, he said.

Companies also have been preparing contingency plans to ensure that there are effective responses to virtually any eventuality, Cavaney said.

The oil and gas industry has been working for more than 5 years on the challenge of Y2K computer conversions, Cavaney said. API established a Y2K task force in early 1997 to better coordinate the industry's efforts, and the task force is sharing technical information directly among more than 50 participating oil and gas companies, as well as indirectly with thousands of others through an Internet website and other means.

API's task force also is sharing information with the electric power and telecommunications industries because of the oil and gas industry's interrelationship with those industries and reliance on their Y2K preparations.

Cavaney said the latest survey on oil and gas industry Y2K readiness, jointly conducted by API and the Natural Gas Council, found most companies are in the final stages of their Y2K repair programs and 94% indicated they will be "Y2K-ready" by Sept. 30.

The survey, completed in late January, covers 1,000 companies from all sectors of the oil and gas industries, whose customers represent 88% of the consumption of those fuels in the U.S.

Cavaney said that, in addition to the readiness survey results, there are other reasons to be confident about the industry's ability to meet the challenge.

He said companies are drafting contingency plans, in addition to preparing systems and facilities, so they can run equipment using mechanical devices or through manual operations in the event of a computer malfunction.

Import concerns

Regarding U.S. dependency on foreign energy, Cavaney noted the U.S. is largely self-sufficient in natural gas, with less than 14% of consumption being met with imports in 1998. Canada was the largest foreign supplier.

He said the U.S. depends more heavily on foreign sources for oil and imported 56% of its oil in 1998. He said the U.S. Department of Energy indicates the four largest foreign suppliers-Venezuela, Canada, Saudi Arabia, and Mexico-should be Y2K ready by yearend. Other countries also reporting their readiness preparations are on target as well, Cavaney said.

API, DOE, Federal Energy Regulatory Commission, and International Energy Agency also have formed the International Oil Coordination Council to exchange information and assess the industry's Y2K readiness on an international scale.

Cavaney said that, should problems occur outside the U.S., the U.S. industry will have several options. Due to the world supply surplus, he said that, if one country cannot export oil, another is likely to compensate. And he said that, if several suppliers experience Y2K problems, U.S. firms would have time to shift supplies and compensate for shortfalls.

Cavaney also noted the U.S. Strategic Petroleum Reserve could be used to serve as a buffer in the event of a severe disruption.

Shipping efforts

Capt. Davies testified that data on Y2K preparations have been shared on an unprecedented scale among major oil companies, independent tanker operators, and manufacturers.

He said API and its member companies support the U.S. Coast Guard effort to develop national guidance to ensure key elements are dealt with in local government contingency plans for ports. Such guidance should provide sufficient flexibility to allow individual ports to address their own specific needs, he added.

"The U.S. Coast Guard, through the captains of the ports or district commanders, should take the lead in all major ports to convene stakeholder groups that would be charged with assessing port readiness, addressing potential areas of deficiency and preparing appropriate contingency plans," Davies said.