Shakes and superstition: Exxon faces backlash in Papua New Guinea

FILE PHOTO: The ExxonMobil Hides Gas Conditioning Plant process area is seen in Papua New Guinea in this handout photo dated March 1, 2018. ExxonMobil/Handout via REUTERS/File Phot

By Jonathan Barrett and Henning Gloystein

SYDNEY/SINGAPORE (Reuters) – A deadly earthquake that struck ExxonMobil’s $19 billion gas project in the mountains of Papua New Guinea is sparking a backlash against the U.S. energy giant that could prove harder to fix than buried roads and broken pipes.

Some spooked locals blame Exxon <XOM.N> and its project partners of causing, or at least magnifying, the 7.5 magnitude quake on Feb. 26 and a series of intense aftershocks that continue to pound the impoverished and isolated region.

While firmly denied by Exxon and debunked by geologists, the accusations suggest that the project known as PNG LNG, one of the most successful liquefied natural gas (LNG) developments in the world, is sorely lacking goodwill from at least parts of the local population.

The concerns about the project – the country’s biggest revenue earner – are even being expressed at senior levels in the Papua New Guinea government.

PNG’s Vice Minister for Petroleum and Energy, Manasseh Makiba, told Reuters in a phone interview there should be an inquiry to respond to local concerns that mother nature had reacted after the ground was disturbed by drilling.

Graphic on Papua New Guinea’s earthquakes and aftershocks: http://reut.rs/2tq3zY6

“It could be man-made but that cannot be confirmed until a proper scientific inquiry can be done,” said Makiba, who represents parts of the quake-hit area. “We need to resolve that.”

PNG’s Minister for Finance James Marape has also demanded answers from the company.

“In a world of science and knowledge, I now demand answer(s) from Exxon and my own government as to the cause of this unusual trend in my Hela,” wrote Marape on his private feed on Facebook, referring to the quake-struck province.

He is among many who have lit up social media in PNG, with blogs and Facebook posts pointing the finger at the oil and gas sector’s alleged contribution to the disaster.

Around Exxon’s operation, communities remain fearful as the death toll climbs, with 18 more killed by a 6.7 magnitude aftershock on Wednesday.

Papua New Guinea straddles the geologically active Pacific Ring of Fire.

Chris McKee, acting director of the Geohazards Management Division in Port Moresby, said there was no link between the project and seismic activity, which has included more than 120 quakes of magnitude 4.5 and greater in the week after the initial hit.

Graphic on Papua New Guinea government revenue and LNG income – http://reut.rs/2D3KAlP

“Earthquake activity has been going on much longer than the oil and gas industry presence in the region – there is no connection at all,” McKee said.

Scientific evidence strongly suggests the earthquake was “naturally occurring and consistent with prior events”, an Exxon spokeswoman said in a statement.

CORPORATE SUPPORT

Led by Exxon, with a one-third stake, and its Australian partners Oil Search <OSH.AX> and Santos <STO.AX>, PNG LNG could be shut for months as it inspects pipelines, the processing plant and the gas field for damage.

Exxon said it was giving $1 million to assist communities affected by the earthquake and was providing on-the-ground support to relief agencies so that resources could reach areas in greatest need.

“Logistics remains a challenge with roads cut and communication with remote communities difficult,” a company spokeswoman said. “We are continuing to provide logistics and human resources to help aid agencies to deliver support to our communities for the long term as they recover from this event.”

Oil Search Managing Director Peter Botten said he had not witnessed any local animosity toward the LNG project. Oil Search was constantly balancing the need for relief aid and keeping the community-sustaining business going when allocating post-quake resources, he said.

Graphic on share price performance of oil majors – http://reut.rs/2FeHCRw

“There’s a lot of concern the gods have been offended and specifically this is about education, and what earthquakes are about,” Botten told Reuters in a phone interview from PNG’s capital Port Moresby. “This is a communication issue.”

Most of the nations 8 million inhabitants live in remote communities where traditional beliefs remain strongly held.

SHAKY GROUND

Exxon has previously faced resentment in PNG, which contains vast natural resources but remains desperately poor.

Martyn Namorong, national coordinator for landowner rights and governance lobby group PNG Resource Governance Coalition, said the quake had reawakened concerns raised in 2012 when a landslide tore through a quarry used by Exxon, killing at least 25 people.

“It’s not just a localized thing or an ignorant thing. People are wondering what might be the contributing factor of oil and gas extraction,” said Namorong, referring to the quake.

Exxon said at the time it had closed the Tumbi quarry five months before the landslide.

“Tumbi was a tragic event that had its own unique set of circumstances,” Exxon told Reuters in an email, without elaborating.

Concerns flared again last year when the oil major had to evacuate staff due to unrest in Hela province, where the project’s Hides Gas processing unit is located.

The trouble was linked to national elections and disputes over royalties from the PNG LNG project, which generates around $3 billion in sales per year at current LNG prices.

“PEOPLE ARE TERRIFIED”

The earthquake forced a closure of the Hides Gas processing facility which feeds a 700-km (435 miles) pipeline snaking through the jungle to the LNG plant and export terminal near Port Moresby.

The disruption in Papua New Guinea comes shortly after Exxon reported disappointing results, with PNG LNG a rare bright spot. Its shares have underperformed compared with its main competitors Royal Dutch Shell, Chevron, BP  and Total.

“PNG LNG had reportedly been running at a very healthy 20 percent above nameplate capacity… There will be some hit to the PNG industry,” said Readul Islam, research analyst at consultancy Rystad Energy.

If repairs take long, the quakes could even delay plans with France’s Total to double output to around 16 million tonnes per annum at an estimated cost of $13 billion.

The companies plan to add three new LNG units, or trains, with two underpinned by gas from the Elk-Antelope fields, run by Total, and one underpinned by existing fields and a new Exxon-run field.

Repairs have been complicated by landslides blocking roads and the closure of the Komo airfield, which is the main lifeline of the region to the outside world.

Oil Search’s Botten said, importantly, the integrity of the gas facilities had been maintained and there were no leaks.

Still, the aftershocks have kept the local population on edge.

“The people are terrified,” said Australian Sally Lloyd, from near the quake zone in Mount Hagen. “They think the world is coming to an end.”

(Reporting by Jonathan Barrett in SYDNEY and Henning Gloystein in SINGAPORE; additional reporting by Gary McWilliams in HOUSTON and Tom Westbrook in SYDNEY; Editing by Lincoln Feast)

Exxon Mobil fined for Louisiana refinery explosion that injured four

FILE PHOTO: Storage tanks are seen inside the Exxonmobil Baton Rouge Refinery in Baton Rouge, Louisiana, U.S. on November 6, 2015. REUTERS/Lee Celano/File Photo

By Erwin Seba

HOUSTON (Reuters) – Exxon Mobil Corp has been fined about $165,000 by U.S. regulators for safety lapses including inadequate training and equipment maintenance over an explosion that injured four workers at an aging Baton Rouge, Louisiana, refinery last year.

The U.S. Occupational Safety and Health Administration (OSHA) issued nine citations, several of which echo previous cautions by federal agencies at two other Exxon plants. The citations, issued in May, were seen by Reuters this month.

A separate investigation by the U.S. Chemical Safety Board (CSB) is ongoing and its report on the incident is due by year-end.

Exxon said it is contesting the OSHA citations and fines.

The facility was faulted five years ago by the U.S. Environmental Protection Agency (EPA) for failing to address corrosion on pipes and valves and for inadequate shutdown and emergency procedures provided to workers.

The Nov. 22, 2016 explosion on a sulfuric-acid alkylation unit that makes octane-boosting components of gasoline in the sprawling Baton Rouge refinery and chemical plant injured four workers, two of them severely. Two of the affected workers declined to comment; others could not be reached.

A worker on the alkylation unit removed the cover of a malfunctioning valve on an isobutane line and used a wrench to turn the value stem, Exxon reported to the Louisiana Department of Environmental Quality in a letter. Volatile isobutane is converted in the alkylation unit to a component of gasoline.

As the operator turned the valve stem, portions of the valve fell out, releasing isobutane, according to the Exxon letter, which was ignited by a welding machine 70 feet away.

One worker was knocked off a scaffold next to the alkylation unit and left dangling over the fire, according to two sources. Another worker was burned over most of her body.

Exxon’s safety procedures and training for operators on the alkylation unit were lacking, equipment was not properly maintained, and required inspections were not carried out within required time periods, according to a copy of the citations seen by Reuters.

“We cooperated with OSHA’s investigation and shared extensive information and records,” said Exxon spokeswoman Charlotte Huffaker. “We are contesting the citations and associated penalty.”

Huffaker said “nothing is more important” to Exxon than maintaining a safe workplace for workers and residents near its facilities.

Eight of the nine citations were listed as serious, each carrying a fine of $12,675. The ninth, for failing to carry out external visual and ultrasonic inspections of piping, totaled $63,373.

The latter fine was higher because Exxon was cited in 2016 for violating the same inspection standard at a Baytown, Texas, refining and chemical plant complex, OSHA said in the citation.

In a report issued in May after a two-year investigation of a 2015 explosion at an 86-year-old Torrance, California, refinery then owned by Exxon, the CSB said the company lacked a procedure for operating a fluidic catalytic cracking unit in an idled mode, as was being done when the explosion took place.

Exxon sold the Torrance refinery to PBF Energy Inc in July 2016.

In 2012, the EPA inspected the Baton Rouge refinery as part of a risk management prevention program. It found Exxon had not examined in five years more than 1,000 underground pipes, many of which were corroded, according to the agency’s report on the inspection. The EPA also said emergency and shutdown procedures failed to provide needed details for operators.

Huffaker said in an email that Exxon contested the violations, and said the EPA withdrew all but two of its findings. She did not specify the two violations but said Exxon resolved those issues.

 

(Reporting by Erwin Seba; Editing by Gary McWilliams and Tom Brown)

 

Wall Street falls after Fed raises rates; energy weighs

Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S.

By Rodrigo Campos

NEW YORK (Reuters) – U.S. stocks fell in volatile trading on Wednesday after the Federal Reserve raised interest rates by a quarter point and signaled hikes could come next year at a faster pace than some expected.

The Fed’s decision comes as President-elect Donald Trump, who will be sworn in next month, is seen cutting taxes and increasing spending on infrastructure. Central bank policymakers shifted their outlook to one of slightly faster growth and lower unemployment.

“The Fed ramped up the pace of rate hikes on a hope and a prayer of faster growth in 2017,” said Brian Jacobsen, chief portfolio strategist at Wells Fargo Funds Management in Menomonee Falls, Wisconsin.

“Until Trump’s tax and spending plan actually gets implemented, it’s hard to justify the slight increase in the slope of rate hikes.”

The Dow Jones industrial average fell 27.9 points, or 0.14 percent, to 19,883.31, the S&P 500 lost 6.02 points, or 0.26 percent, to 2,265.7 and the Nasdaq Composite dropped 7.17 points, or 0.13 percent, to 5,456.66.

Since the Nov. 8 U.S. presidential election, stocks have risen on bets that Trump will enact business-friendly policies and stimulate the economy. However, some market participants are concerned that equities are pricing in a very favorable scenario, leaving them vulnerable.

Markets had all but priced in a rate increase at the Fed but the faster pace of increases seen next year may give traders an excuse to cash in the recent gains.

“I’m beginning to think the market might be looking for an excuse to take some profits,” said David Schiegoleit, managing director at U.S. Bank Private Client Reserve in Los Angeles.

“We’ve had such a strong run here for the past couple of weeks that any excuse to take some money off the board might hold a little bit more water than usual. That could be what we see here and heading into the close.”

Oil prices fell more than 3 percent on renewed concerns about an oil glut sparked by rising U.S. crude inventories in storage.

Oil major Exxon declined 1.6 percent and was among the largest drags on the Dow.

Declining issues outnumbered advancing ones on the NYSE by a 2.47-to-1 ratio; on Nasdaq, a 2.29-to-1 ratio favored decliners.

The S&P 500 posted 30 new 52-week highs and 1 new lows; the Nasdaq Composite recorded 102 new highs and 38 new lows.

(Reporting by Rodrigo Campos, additional reporting by Chuck Mikolajczak; Editing by Nick Zieminski)

U.S. top court rejects Exxon appeal in groundwater contamination case

Exxon Storage Tanks

By Lawrence Hurley

WASHINGTON (Reuters) – The U.S. Supreme Court on Monday rejected Exxon Mobil Corp’s appeal of a $236 million judgment against the oil company in a case brought by the state of New Hampshire over groundwater contamination linked to a gasoline additive.

The justices left in place the New Hampshire Supreme Court’s 2015 ruling upholding the judgment by a jury that in 2013 spurned Exxon’s claims that the contamination linked to its fuel additive was not its fault but rather the fault of the local gas stations and storage facilities that spilled it.

Exxon argued in its appeal that its due process rights were violated because New Hampshire had not proved the company’s liability for the alleged pollution at each individual site.

The additive at the center of the case is called methyl tertiary butyl ether, or MTBE. It is an oxygen-containing substance that was added to gasoline to promote more complete combustion and reduce air pollution.

It was one of several additives that had been recommended by regulators to reduce emissions but has now largely been phased out of the U.S. fuel supply because of the hazard it poses to groundwater.

New Hampshire’s lawsuit against Exxon, headquartered in Irving, Texas, dates back to 2003.

State officials called the $236 million judgment the largest MTBE-related verdict since states and other agencies began making claims for remediation and other damages. Exxon said in court papers it is the largest-ever jury verdict in New Hampshire.

In 2014, Exxon also appealed to the U.S. Supreme Court a $105 million jury verdict in favor of New York City over MTBE contamination, but the court declined to hear the case.

The case is Exxon Mobil v. New Hampshire, U.S. Supreme Court, No. 15-933.

(Reporting by Lawrence Hurley; Editing by Will Dunham)