Wednesday November 24, 3:34 pm Eastern Time
Oil industry has fingers crossed over Y2K bug
By Richard Valdmanis
NEW YORK, Nov 24 (Reuters) - Despite some glowing reports on Y2K readiness in the U.S. oil
and gas industry, private analysts, and even some of the more forthcoming oil companies, say
there is no way to know whether the computer glitch will result in fuel shortages to consumers.
``After all the research that's been done and all the data that's been collected, we don't really know
what will happen when the clock strikes 12 on New Year's Eve,' said Dr. Martin Weiss,
Chairman of Weiss Ratings Inc., which has been tracking Y2K compliance among major U.S.
companies for more than a year.
The Y2K bug refers to a software glitch in some older computers that only recognize the final two digits in a year. The glitch could
result in malfunctions if the computers mistake 2000 for 1900.
For the energy industry, which depends on the electrical grid as well as internal computer systems, the Y2K bug could lead to unsafe
operations at refineries and to shortages in fuel shipments - a daunting possibility for the leading nation in energy consumption at the
height of winter.
Despite trade group survey results that claim nearly 100 percent of the oil and gas industry will be ready for Y2K - a far more
encouraging percentage than the roughly 50 percent reported a year ago - some companies say it would be foolish to expect no
surprises.
They point out that the Y2K situation is one for which there is no precedent and the task of finding all non-compliant computer chips
in the interdependent petroleum and electricity industries is mammoth.
Enron Corp. (NYSE:ENE - news), a major U.S. petroleum company and pipeline operator, is among the companies unsure of what the
New Year will bring.
Despite their best efforts to upgrade their ``mission critical' systems -- those that are essential to their business -- the company says
``there is no assurance that (our Y2K) plan will succeed in accomplishing its purposes or that unforseen circumstances will not arise
during implementation of the plan that would materially and adversely affect Enron.'
Enron made the statement in a filing with the Securities and Exchange Commission.
The company also said that neither it nor utilities and outside entities on which the company depends are likely to find and replace all
non-compliant computer chips which could lead to what the company calls a ``cascading effect' of system failures.
``The problem is not, and will not be, unique to Enron,' the company added.
Though Enron has not announced any precautionary Y2K shutdowns, a number of other major U.S. pipeline operators have. For
example the Colonial Pipeline, the largest in the nation, plans an eight-hour shutdown starting on New Year's Eve.
Explorer Pipeline, the second largest, plans a 20-hour shutdown before the rollover into the new year.
The pipelines together supply nearly three million gallons of gasoline and other fuels per day between Houston, New York and
Chicago.
In preparation for the potential pipeline disruptions, as well as an expected buy up of fuel by nervous consumers, retail gasoline
operators are planning to stock up an extra seven days of gasoline supplies to their normal 30 day inventories, according to industry
and government officials.
The planned inventory build could also guard against any potential disruptions at U.S. refineries, which produce the gasoline.
By most accounts, refiners have put in the greatest amount of effort to iron out Y2K problems. According to Weiss Rating Co., the
majority of large U.S. oil refining companies, like Exxon Corp (NYSE:XON - news) and Mobil Corp. (NYSE:MOB - news), are either
average or above average in their adherance to Y2K plans mapped out more than a year ago, and only a handful, like Chevron Corp
(NYSE:CHV - news) and Ultramar Diamond Shamrock Corp (NYSE:UDS - news), are rated below average.
``While pipelines appear the more laggard group in the energy industry, refiners seem to be the more prepared,' said Dr. Weiss. ``Over
all, the energy sector appears to be taking the Y2K problem seriously - but that is no guarantee that the New Year will be a non-event.'
According to reports by the American Petroleum Institute (API), the Natural Gas Association and other industry trade groups, nearly
100 percent of the nation's refiners, retailers, and pipeline operators will be ready for the year 2000 turnover, which comes in less than
two months, by having Y2K proof systems in place and contingency plans if they break down.
``What the reports are saying is, the trade groups are confident these companies are going to be Y2K ready, and that's encouraging,'
said an official at the Federal Energy Regulatory Commission (FERC). ``But obviously nobody can make any guarantees.'
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