by Chris Mayer of the Daily Reckoning
In 1972, Russia's wheat crop failed. Russia had to dip into the global grain markets to meet demand. Before Washington knew the plight of its Cold War adversary, Russia bought up all of the surplus wheat in the US. Dubbed "The Great Grain Robbery," Russia's purchases sent grain prices soaring around the world.
Grain prices soon hit 125-year highs in Chicago. In a 10-month span, soybeans went from $3.31 to $12.90 a bushel. Food prices around the world rose 50% in 1973.
Some of the old traders are wondering if it's happening all over again.
On Thursday, wheat prices hit $7.25 a bushel, a 71% increase since the June low. It's the biggest one-month jump in three decades. The last time prices got this high was during the food crisis in 2008. (Wheat prices topped out at $13 then.) You may recall the ensuing food riots across the globe from Haiti to Egypt to Bangladesh.
Russia is again the center of attention. The worst heat wave and drought in a century has baked crops to a crisp in Russia, Ukraine and Kazakhstan. These three are among the biggest exporters of wheat in the world. They provide critical food supplies to the largest importing regions in the world - the Middle East and North Africa.
In some areas of Russia, the heat and lack of rain killed half the crop. Withered wheat stalks litter the usually fertile fields along the Volga River. This is one of the world's breadbaskets. Russia and the Ukraine alone were supposed to supply 18% of the world's wheat. Now it looks like Russia's exports could drop to zero.
Originally, forecasts called for 81-85 million metric tons of wheat, rye, barley and other crops. Now the Russian Grain Union says 72-78 million. Skeptics abound on that number, which looks too optimistic. The head of Glencore, the giant grain-trading house, thinks the real number will be closer to 65 million tonnes.
Holy smokes, I hear you say. Yes, it is bad. But it gets worse.
It's so bad that Glencore begged Moscow to ban the export of grain - as it did in the food crisis of 2007-2008. That's because Glencore thinks that trading houses around the world won't be able to fulfill their contracts to deliver grains. When Moscow bans exports, then trading houses can declare force majeure, a clause that allows them to escape these deals. On Thursday afternoon, Russia did just that.
Russia's crop failure comes at a bad time. Most of the world's wheat exporters are having problems. The Aussies battle locusts. The Canadians suffer from too much rain. Even European farmers struggle with drought. The Italians' beloved tomato crop will come up 10-15% short this year. Belgian potato farmers say drought will nick their yields. Polish fruit orchards will be down by a fifth. The French wheat farmers curse the skies as their wheat fields shrivel in the sun. The English sheep farmers, short on hay and grass, have sold their flocks early. Even the Dutch expect 10% fewer tulip bulbs this year.
The market is tightening and there are ripple effects across the globe. Over the weekend, Egypt bought 180,000 metric tons of wheat - its second purchase in two weeks and more than expected. Egypt is the world's largest importer.
One key difference this time around compared to 2007-08 is that inventories are in better shape - at least on paper. But I have to wonder. In India, government officials have let their once-plentiful grain stockpiles rot in the fields. India thinks food is too important to leave to the private sector. The government is in charge of food stockpiles. In a common display of government folly, bureaucrats, apparently, threw thin plastic sheets over these supplies and let them sit in the fields to rot and wash away in the rains.
The savior in all this looks like it will be the US. Stockpiles here should be healthy, at almost 30 million tons.
It seems like only yesterday the market took a cheerful look at the grain markets and said all was well. Global harvests looked like they were going to put in another record. I warned that nothing counts until the crops hit the bin.
Now that record harvest is gone, kaput, in just a month's time.
So what are the effects of all this? Expect ripples across the food chain. Prices for everything will rise. Prices for cocoa, coffee and pork bellies have already gone up. Beer brewers will pay more for barley, as the barley crop will be down by 20%. All flour-related products - breads, biscuits and the like - will be more costly. As The Financial Times reported, "Food executives are also warning about surging prices for feeding and malting barley, which could push higher the retail cost of products from poultry to beer."
How will this go over with the already rattled consumer in a fragile recovery? Many companies seem reluctant to raise prices. As Domino's CEO said, "Consumers are still hurting out there." Many companies hedge their exposure to food commodities, but if these prices continue to climb, it could crimp their bottom lines.
Meanwhile, the fertilizer stocks have rallied. From July 6 lows, PotashCorp (NYSE:POT) shares are up 34% and Mosaic (NYSE:MOS) is up 31%. The logic is simple enough. High grain prices inspire more planting. More planting means more fertilizer use. Already, as we've seen, volumes are snapping back in the fertilizer business. In their last quarterly reports, both Potash and Mosaic doubled their profits from a year ago.
Recent events show you, once again, the challenges in meeting the world's demand for food. The food crisis of 2007-2008 was not a one-off event. It was a warning. And today, we see again how quickly and easily we can get to another food crisis.
Hang onto those fertilizer stocks.
Chris Mayer,
for The Daily Reckoning
Monday, August 9, 2010
Saturday, August 7, 2010
Going Deep: An Interview with President of Chevron Arica & Latin America Exploration and Production Co.
By Byron W. King Pittsburgh, Pennysylvania
Recently, I had a long talk with Ali Moshiri, President of Chevron Africa and Latin America Exploration and Production Company. Mr. Moshiri has been working for Chevron for over 30 years. He’s one busy man, whose responsibilities begin in the southern waters of the Gulf of Mexico and extend to the cold reaches of the southern Atlantic Ocean.
In our talk, Mr. Moshiri and I looked at the future of offshore oil and gas exploration and development. Here’s part of what we discussed...
Byron W. King: Mr. Moshiri, you run a division of Chevron that includes Africa and Latin America. How much oil and gas do you pull out of the ground every day?
Ali Moshiri: For Africa and Latin America, on a gross basis, Chevron is producing somewhere around 840,000 barrels per day.
BWK: That’s about 1% of all the oil that the world uses every day, at 85 million barrels per day. Can you say some more about what’s happening in the areas with which you deal?
AM: (My area is ) the Atlantic Basin... If you look down at the southern part of the Americas and Africa, people are ignoring the contribution it’s making worldwide.
The basins in this area are different. It’s not necessarily like the Middle East, that they are huge fields. But there are many accumulations. On the aggregate, they’re significant. Not only to the Chevron portfolio, but overall to the supply of oil to the market.
If you look at this area, they’ll always be a net exporter. They’ll always produce more than they can consume. My personal view is that if they continue their level of economic growth, that they assume is going to be above global, they’ll still be an exporter.
It creates an environment for industry to include them as part of the energy equation. The barrels can move to other locations where they don’t have that balance.
BWK: Are you only looking for oil? What’s the larger hydrocarbon picture?
AM: The (Atlantic) basins have similarity, but at the same time the basins have both oil and gas. It’s not just oil. At the moment, the focus has been tremendously towards oil. I believe that both basins in West Africa as well as in Latin America have tremendous potential for gas for the future. But because of lack of infrastructure, they haven’t got to the point similar to Asia Pacific of the Middle East yet.
But if you look ahead 15 years, they’ll get to the point of contributing natural gas, through LNG (liquefied natural gas) or pipeline... That’s the next phase. Today it’s very much focused on the oil side.
BWK: In the Middle East, you’re looking at a mature, 60-70 year old concept of exploration. Also, culturally, you’ve got similarities of climate, ethnicity to some extent, religion too. Not that everybody’s the same. But by comparison, if you’re moving from the Caribbean Basin to West Africa to Brazil to Angola, you’re going to see a lot of different people and different governments and different cultures that you’re going to have to work with. Can you comment?
AM: Absolutely. If you look at the Chevron operations, we deal with ten different countries. Three of them are in OPEC. Two of them are observers in OPEC. Therefore five of them are very much within the framework of the OPEC community. That shows that each of them have (their) oil policy and different view compared to when you look at places like the US, Australia, UK and Europe.
For that matter, you have to deal with each country separately. You have to understand, first of all, the geology, the technical aspects of it. And also the policies. The policies vary.
I’m not saying it’s good or bad, whether it’s in the hands of the government or the private sector. That’s what we deal with in this area. Not only do we have to worry about the technical side, but also about the fiscal, commercial aspects of it as well.
BWK: Can you comment about what you’ve seen over the past 20 years, with the rise of the national oil companies (NOCs) in these regions, and how you’ve had to adapt from the way you used to do business to the way you have to do business now in the NOC environment?
AM: The reality is that with the truly conventional aspects of oil and gas, the technology is there. The know-how is there. Whether or not we have it, or a service company has it. It’s there. So the view of the NOC is that they have more than one option on just the conventional (development).
For example, (what) if you discover an oil field on land, say light oil? Then building it, developing it, putting it into the market is relatively conventional. So what we would focus on is increasing the recovery factor. We focus on getting more out of the ground.
The next phase is what I’d say depends on technology. You get into deepwater. The technology is different. The incremental cost is significant. Room for efficiency becomes a greater part of how we develop things. Yes, everybody (says that they) can develop deepwater. But how do you manage expensive wells that you’ve got to drill? How do you test the basin? How do you commit to the investment? Those are significant.
As you see in the market today, it’s almost becoming like there are a lot of people who can explore. But there are not a lot of people who can develop deep water.
BWK: I had a chance to visit a Chevron operation in the Gulf of Mexico (GOM) in March. Chevron had the Transocean vessel, Discoverer Inspiration, drilling in over 6,700 feet of water, about 200 miles off the Louisiana coastline. The target depth was over 30,000 feet. It was quite an operation.
AM: I’m glad you took a visit to some of our operations. (You should see) some of the other remote places like offshore, deepwater off Nigeria. You can see how those places are highly technically driven.
And for as much as we’ve gone so far into developing these (deepwater) fields, the technology is not there to work over the wells when there are problems. The technology is not there to create efficiency for working over some of these wells. For example, if a well goes off production in West Africa, and it’s in the swamp, or in Block Zero, off Angola, in shallow water, we move a rig in and we know how to work over the well.
But if a well goes off production and it comes to a work-over, if it’s in deepwater, in say 8,000 feet of water, then you almost have to spend as much to work over a well as you spent to drill the well. Therefore, we are looking for the technology, and expanding our expertise, how to go back and do some of that work. To work those kinds of wells over.
BWK: Can you describe how Chevron’s relationships are changing over time, with the NOCs?
AM: Yes, our relationship with the NOCs is changing, moving to a different direction. The next phase goes several years down the road and gets into the non-conventional hydrocarbons. Like tight sands and shale gas. I always use the US as the base, where we started.
I’ve been in this business 32 years with Chevron. I remember when 500 feet of water was deep water. But now 500 feet of water is a conventional development, or work-over, with high recovery factor. And I think we need to expand that one all the way.
In some of the other regions, especially my region, we are not to that point yet. Again, it’s because some of these basins have not matured yet.
BWK: Can you elaborate on that concept of maturity? How are things different between, say the US and further south in the Atlantic Basin?
AM: (The US) Gulf of Mexico shelf is mature. But if you look at it south, from Mexico down to Argentina, or West Africa or sub Sahara or East Africa, we are still at the first phase of understanding the basins, understanding the potential, developing the technology around it, and being able to transport it.
Some of the discoveries (that) some of the companies have, in sub Sahara Africa, the transportation is going to be the issue. That region is going through a different phase. The transportation is about one phase behind where we are in the US.
According to Chevron’s Mr. Moshiri, there’s great potential for future energy development in the Atlantic Basin. The hydrocarbon resource is there – both oil and natural gas – and development is at an early stage.
The future will see more exploration and development, moving from oil into gas. The local markets will doubtless expand, but there’s still quite a bit available for export. But to accomplish this, the transportation infrastructure needs to expand. In short, there’s much left to accomplish in an immense swath of the world.
The Future Challenge of Energy Development
There are great opportunities for future exploration and energy development in Latin America and Africa. This will require trillions of dollars of capital over many years. That, plus world-class technology, superb and skilled people, as well as close coordination between developers and the national host governments.
Chevron, the subject of this article, is one of the world’s best independent oil companies. From its roots in the California oil patch of more than a century past, Chevron has a solid record of successful exploration and development. Chevron has great financial strength, and a deep pool of technical competence. Chevron’s success – certainly in deepwater development – is built upon its highly skilled and talented people such as Mr. Moshiri and the many members of his extensive team.
That said, there are many other companies working on deepwater oil exploration and development projects across the world. They range from very big to not very big, from independent to nationally-owned and operated.
If you’re interested in learning about another aspect of deepwater development, I can tell you about a small, Canadian company that is developing a remarkable play in offshore Africa. To access my full presentation, just click here.
Until we meet again,
Byron W. King
for The Daily Reckoning
Recently, I had a long talk with Ali Moshiri, President of Chevron Africa and Latin America Exploration and Production Company. Mr. Moshiri has been working for Chevron for over 30 years. He’s one busy man, whose responsibilities begin in the southern waters of the Gulf of Mexico and extend to the cold reaches of the southern Atlantic Ocean.
In our talk, Mr. Moshiri and I looked at the future of offshore oil and gas exploration and development. Here’s part of what we discussed...
Byron W. King: Mr. Moshiri, you run a division of Chevron that includes Africa and Latin America. How much oil and gas do you pull out of the ground every day?
Ali Moshiri: For Africa and Latin America, on a gross basis, Chevron is producing somewhere around 840,000 barrels per day.
BWK: That’s about 1% of all the oil that the world uses every day, at 85 million barrels per day. Can you say some more about what’s happening in the areas with which you deal?
AM: (My area is ) the Atlantic Basin... If you look down at the southern part of the Americas and Africa, people are ignoring the contribution it’s making worldwide.
The basins in this area are different. It’s not necessarily like the Middle East, that they are huge fields. But there are many accumulations. On the aggregate, they’re significant. Not only to the Chevron portfolio, but overall to the supply of oil to the market.
If you look at this area, they’ll always be a net exporter. They’ll always produce more than they can consume. My personal view is that if they continue their level of economic growth, that they assume is going to be above global, they’ll still be an exporter.
It creates an environment for industry to include them as part of the energy equation. The barrels can move to other locations where they don’t have that balance.
BWK: Are you only looking for oil? What’s the larger hydrocarbon picture?
AM: The (Atlantic) basins have similarity, but at the same time the basins have both oil and gas. It’s not just oil. At the moment, the focus has been tremendously towards oil. I believe that both basins in West Africa as well as in Latin America have tremendous potential for gas for the future. But because of lack of infrastructure, they haven’t got to the point similar to Asia Pacific of the Middle East yet.
But if you look ahead 15 years, they’ll get to the point of contributing natural gas, through LNG (liquefied natural gas) or pipeline... That’s the next phase. Today it’s very much focused on the oil side.
BWK: In the Middle East, you’re looking at a mature, 60-70 year old concept of exploration. Also, culturally, you’ve got similarities of climate, ethnicity to some extent, religion too. Not that everybody’s the same. But by comparison, if you’re moving from the Caribbean Basin to West Africa to Brazil to Angola, you’re going to see a lot of different people and different governments and different cultures that you’re going to have to work with. Can you comment?
AM: Absolutely. If you look at the Chevron operations, we deal with ten different countries. Three of them are in OPEC. Two of them are observers in OPEC. Therefore five of them are very much within the framework of the OPEC community. That shows that each of them have (their) oil policy and different view compared to when you look at places like the US, Australia, UK and Europe.
For that matter, you have to deal with each country separately. You have to understand, first of all, the geology, the technical aspects of it. And also the policies. The policies vary.
I’m not saying it’s good or bad, whether it’s in the hands of the government or the private sector. That’s what we deal with in this area. Not only do we have to worry about the technical side, but also about the fiscal, commercial aspects of it as well.
BWK: Can you comment about what you’ve seen over the past 20 years, with the rise of the national oil companies (NOCs) in these regions, and how you’ve had to adapt from the way you used to do business to the way you have to do business now in the NOC environment?
AM: The reality is that with the truly conventional aspects of oil and gas, the technology is there. The know-how is there. Whether or not we have it, or a service company has it. It’s there. So the view of the NOC is that they have more than one option on just the conventional (development).
For example, (what) if you discover an oil field on land, say light oil? Then building it, developing it, putting it into the market is relatively conventional. So what we would focus on is increasing the recovery factor. We focus on getting more out of the ground.
The next phase is what I’d say depends on technology. You get into deepwater. The technology is different. The incremental cost is significant. Room for efficiency becomes a greater part of how we develop things. Yes, everybody (says that they) can develop deepwater. But how do you manage expensive wells that you’ve got to drill? How do you test the basin? How do you commit to the investment? Those are significant.
As you see in the market today, it’s almost becoming like there are a lot of people who can explore. But there are not a lot of people who can develop deep water.
BWK: I had a chance to visit a Chevron operation in the Gulf of Mexico (GOM) in March. Chevron had the Transocean vessel, Discoverer Inspiration, drilling in over 6,700 feet of water, about 200 miles off the Louisiana coastline. The target depth was over 30,000 feet. It was quite an operation.
AM: I’m glad you took a visit to some of our operations. (You should see) some of the other remote places like offshore, deepwater off Nigeria. You can see how those places are highly technically driven.
And for as much as we’ve gone so far into developing these (deepwater) fields, the technology is not there to work over the wells when there are problems. The technology is not there to create efficiency for working over some of these wells. For example, if a well goes off production in West Africa, and it’s in the swamp, or in Block Zero, off Angola, in shallow water, we move a rig in and we know how to work over the well.
But if a well goes off production and it comes to a work-over, if it’s in deepwater, in say 8,000 feet of water, then you almost have to spend as much to work over a well as you spent to drill the well. Therefore, we are looking for the technology, and expanding our expertise, how to go back and do some of that work. To work those kinds of wells over.
BWK: Can you describe how Chevron’s relationships are changing over time, with the NOCs?
AM: Yes, our relationship with the NOCs is changing, moving to a different direction. The next phase goes several years down the road and gets into the non-conventional hydrocarbons. Like tight sands and shale gas. I always use the US as the base, where we started.
I’ve been in this business 32 years with Chevron. I remember when 500 feet of water was deep water. But now 500 feet of water is a conventional development, or work-over, with high recovery factor. And I think we need to expand that one all the way.
In some of the other regions, especially my region, we are not to that point yet. Again, it’s because some of these basins have not matured yet.
BWK: Can you elaborate on that concept of maturity? How are things different between, say the US and further south in the Atlantic Basin?
AM: (The US) Gulf of Mexico shelf is mature. But if you look at it south, from Mexico down to Argentina, or West Africa or sub Sahara or East Africa, we are still at the first phase of understanding the basins, understanding the potential, developing the technology around it, and being able to transport it.
Some of the discoveries (that) some of the companies have, in sub Sahara Africa, the transportation is going to be the issue. That region is going through a different phase. The transportation is about one phase behind where we are in the US.
According to Chevron’s Mr. Moshiri, there’s great potential for future energy development in the Atlantic Basin. The hydrocarbon resource is there – both oil and natural gas – and development is at an early stage.
The future will see more exploration and development, moving from oil into gas. The local markets will doubtless expand, but there’s still quite a bit available for export. But to accomplish this, the transportation infrastructure needs to expand. In short, there’s much left to accomplish in an immense swath of the world.
The Future Challenge of Energy Development
There are great opportunities for future exploration and energy development in Latin America and Africa. This will require trillions of dollars of capital over many years. That, plus world-class technology, superb and skilled people, as well as close coordination between developers and the national host governments.
Chevron, the subject of this article, is one of the world’s best independent oil companies. From its roots in the California oil patch of more than a century past, Chevron has a solid record of successful exploration and development. Chevron has great financial strength, and a deep pool of technical competence. Chevron’s success – certainly in deepwater development – is built upon its highly skilled and talented people such as Mr. Moshiri and the many members of his extensive team.
That said, there are many other companies working on deepwater oil exploration and development projects across the world. They range from very big to not very big, from independent to nationally-owned and operated.
If you’re interested in learning about another aspect of deepwater development, I can tell you about a small, Canadian company that is developing a remarkable play in offshore Africa. To access my full presentation, just click here.
Until we meet again,
Byron W. King
for The Daily Reckoning
Wednesday, August 4, 2010
According to the feds, 74% of all the oil leaked into the Gulf has already been removed.
Despite headlines screaming “the worst oil spill in history,” it turns out the BP blowout disaster wasn’t really as big a deal as you’d have thought.
Oh, well… sorry.
According to the feds, 74% of all the oil leaked into the Gulf has already been removed. “Much of the rest,” The New York Times summarizes a government report released today, “is so diluted that it does not seem to pose much additional risk of harm.”
Nearly half -- 41% -- of the oil simply “evaporated, dissolved or dispersed” -- taken care of by Mother Nature herself. That’s a larger share of spill containment than all of BP’s burning, skimming, recovery, dispersing and plugging efforts… combined.
The report estimates about a million barrels of crude oil remains floating in the Gulf.
“Of course, it's not good to blow out your oil wells,” Byron King explains. “But we can be thankful that nature has oil-eating bacteria out there. Add oil to the seawater, with heat from the sun, and sunlight, and stir it up with wind and wave and you see that the oil is going away faster than many people expected.
“In a normal environment, oil-eating bacteria are in equilibrium with their surroundings. If there's not much oil in the water, the bacteria are few and far between. But if you add oil to the mix, the bacteria bloom.
“As the bloom progresses, more bacteria eat more and more of the oil. They eat the oil until it's mostly gone. When the ‘oil food’ is gone, the bacteria die off. The result is much less oil, and much more microscopic biomass in the water.”
Cheers,
Addison Wiggin
The 5 Min. Forecast
P.S. Small question: If so many people hate this new video format, why is it grabbing so much attention?
Thank you for reading The 5 Min. Forecast! We greatly value your questions and comments. Please send all feedback to 5minforecast@agorafinancial.com
Oh, well… sorry.
According to the feds, 74% of all the oil leaked into the Gulf has already been removed. “Much of the rest,” The New York Times summarizes a government report released today, “is so diluted that it does not seem to pose much additional risk of harm.”
Nearly half -- 41% -- of the oil simply “evaporated, dissolved or dispersed” -- taken care of by Mother Nature herself. That’s a larger share of spill containment than all of BP’s burning, skimming, recovery, dispersing and plugging efforts… combined.
The report estimates about a million barrels of crude oil remains floating in the Gulf.
“Of course, it's not good to blow out your oil wells,” Byron King explains. “But we can be thankful that nature has oil-eating bacteria out there. Add oil to the seawater, with heat from the sun, and sunlight, and stir it up with wind and wave and you see that the oil is going away faster than many people expected.
“In a normal environment, oil-eating bacteria are in equilibrium with their surroundings. If there's not much oil in the water, the bacteria are few and far between. But if you add oil to the mix, the bacteria bloom.
“As the bloom progresses, more bacteria eat more and more of the oil. They eat the oil until it's mostly gone. When the ‘oil food’ is gone, the bacteria die off. The result is much less oil, and much more microscopic biomass in the water.”
Cheers,
Addison Wiggin
The 5 Min. Forecast
P.S. Small question: If so many people hate this new video format, why is it grabbing so much attention?
Thank you for reading The 5 Min. Forecast! We greatly value your questions and comments. Please send all feedback to 5minforecast@agorafinancial.com
Thursday, July 22, 2010
Abandoning the Capped Oil Well: What Could Possibly Go Wrong?
Thursday, July 22, 2010
FROM: http://georgewashington2.blogspot.com/2010/07/abandoning-capped-oil-well-what-could.html
BP will leave the cap on the oil well while it vacates the area for a number of days to avoid the coming tropical storm.
What could possibly go wrong?
One expert warns that increasing pressure might have an unintended danger:
Bill Gale, a California engineer and industrial explosion expert who is a member of the Deepwater Horizon Study Group, said… that gas hydrate crystals could be plugging any holes in the underground portion of the well, and they could get dislodged as pressure builds.
(Gale was formerly Chief Loss Prevention Engineer for Bechtel in San Francisco, obtained his undergraduate degree in Chemical Engineering, Masters in Civil Engineering and PhD in Fire Safety Engineering Science from the University of California, Berkeley. Gale is a registered professional engineer in both mechanical engineering and fire protection engineering, and has more than forty years of industrial loss prevention, process safety management, and fire protection/fire safety engineering experience.)
In other words, there may have been a destruction of a portion of the steel well casing which was temporarily plugged by methane hydrate crystals. Leaving the well cap may slowly raise the pressure in the well to the point where the hydrate crystals are dislodged, in which case the well might really start leaking.
Indeed, the relationship between methane hydrate, pressure and temperature is well-known:
Sound farfetched? Maybe.
But remember that the "top hat" containment dome failed because it got plugged up with methane hydrate crystals.
And remember that there's a lot of methane down there. Indeed, while most crude oil contains 5% methane, the crude oil gushing out of the blown out well is 40% methane.
Although even less likely, scientists say that the methane could disturb the seafloor itself. As the St. Peterburg Times points out:
Disturbing those [methane hydrate] deposits — say, by drilling an oil well through them — can turn that solid methane into a liquid, leaving the ocean floor unstable, explained [Carol Lutken of the University of Mississippi, which is part of a consortium with SRI which has been conducting methane research in the Gulf of Mexico for years].
***
Generally the oil industry tries to avoid methane areas during drilling for safety reasons. But the U.S. Energy Department wants to find a way to harvest fuel from those methane deposits, Lutken said. [I've previously discussed that issue in detail.]
So what's the bottom line?
I am not predicting that anything bad will happen. Hopefully, when the storm is over and the underwater ROV submersibles return to the spill site, everything will be peaceful and stable.
But there are many variables such as methane hydrates which - in a worst-case scenario - could complicate matters.
W said...
Suppose for a moment that the well is actually leaking.
The oil and gas is finding its way into pathways that it cut through the compromised well bore, and over time, it slowly hollows out a space as the fluid flows.
The flow into the other geological structures get larger and larger, and those, may (who knows) in turn, seep.
From this logic, seeps can happen miles (many) away that are really from pressure in this reservoir.
The longer the pressure is on, the more likely that if there are other pathways it will punch its way through it.
It can end up creating a much bigger problem.
July 22, 2010 4:17 PM
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FROM: http://georgewashington2.blogspot.com/2010/07/abandoning-capped-oil-well-what-could.html
BP will leave the cap on the oil well while it vacates the area for a number of days to avoid the coming tropical storm.
What could possibly go wrong?
One expert warns that increasing pressure might have an unintended danger:
Bill Gale, a California engineer and industrial explosion expert who is a member of the Deepwater Horizon Study Group, said… that gas hydrate crystals could be plugging any holes in the underground portion of the well, and they could get dislodged as pressure builds.
(Gale was formerly Chief Loss Prevention Engineer for Bechtel in San Francisco, obtained his undergraduate degree in Chemical Engineering, Masters in Civil Engineering and PhD in Fire Safety Engineering Science from the University of California, Berkeley. Gale is a registered professional engineer in both mechanical engineering and fire protection engineering, and has more than forty years of industrial loss prevention, process safety management, and fire protection/fire safety engineering experience.)
In other words, there may have been a destruction of a portion of the steel well casing which was temporarily plugged by methane hydrate crystals. Leaving the well cap may slowly raise the pressure in the well to the point where the hydrate crystals are dislodged, in which case the well might really start leaking.
Indeed, the relationship between methane hydrate, pressure and temperature is well-known:
Sound farfetched? Maybe.
But remember that the "top hat" containment dome failed because it got plugged up with methane hydrate crystals.
And remember that there's a lot of methane down there. Indeed, while most crude oil contains 5% methane, the crude oil gushing out of the blown out well is 40% methane.
Although even less likely, scientists say that the methane could disturb the seafloor itself. As the St. Peterburg Times points out:
Disturbing those [methane hydrate] deposits — say, by drilling an oil well through them — can turn that solid methane into a liquid, leaving the ocean floor unstable, explained [Carol Lutken of the University of Mississippi, which is part of a consortium with SRI which has been conducting methane research in the Gulf of Mexico for years].
***
Generally the oil industry tries to avoid methane areas during drilling for safety reasons. But the U.S. Energy Department wants to find a way to harvest fuel from those methane deposits, Lutken said. [I've previously discussed that issue in detail.]
So what's the bottom line?
I am not predicting that anything bad will happen. Hopefully, when the storm is over and the underwater ROV submersibles return to the spill site, everything will be peaceful and stable.
But there are many variables such as methane hydrates which - in a worst-case scenario - could complicate matters.
W said...
Suppose for a moment that the well is actually leaking.
The oil and gas is finding its way into pathways that it cut through the compromised well bore, and over time, it slowly hollows out a space as the fluid flows.
The flow into the other geological structures get larger and larger, and those, may (who knows) in turn, seep.
From this logic, seeps can happen miles (many) away that are really from pressure in this reservoir.
The longer the pressure is on, the more likely that if there are other pathways it will punch its way through it.
It can end up creating a much bigger problem.
July 22, 2010 4:17 PM
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Monday, July 19, 2010
So You Thought Coal Was Dirty? Coal or Deep Water Drilling anyone ?
Bob Irish Reporting: Delray Beach,FL Monday July 19, 2010
Dear IDE Reader:
Our energy world will never be the same again, thanks to BP. But in re-examining our energy priorities, one sector remains ignored and all-but forgotten. And no way that should be the case, says our own Laura Rodini, IDE’s Chief Operating Officer. For the surprising lesson of BP’s Gulf Disaster, read below.
It’s been 90 days since the BP oil spill began in the Gulf of Mexico, and while BP managed to place a cap on top of the spewing oil late last week, there is no guarantee that the spill is contained.
There’s been a depressing amount of oil spilled - 9 times more oil than the Exxon Valdez, and growing!
And now with hurricane season underway, containment efforts are in danger.
Right now Congress is investigating whether deepwater drilling really is a safe means of oil production.
Which leads us to Andy Gordon’s very interesting pick in this month’s Sound Profits newsletter. You might call this a ‘contrarian pick.’
It’s a substance people normally think is dirtier than oil.
But in light of all that’s going on in the Gulf, I’d say it’s time to think again!
Coal Mythbuster: It’s Not Dirty
Coal is the most misunderstood and underrated of all the energy sectors. Since the 70s, we have tripled our consumption of coal. It provides half the electricity we use.
Yet, everybody discounts coal while championing their favorite pie-in-the-sky alternative...
Obama doesn’t get it. He’s using the BP crisis to push one of his pet projects – the development of solar and wind energy sources – into the forefront of technology development.
The World Bank doesn’t get it either. They’re also pushing so-called clean energy on developing countries.
And most investors don’t get it. They’re getting into other oil majors like Exxon Mobil and Chevron instead of investing in coal.
What these folks fail to understand is that coal is not dirty. The amount of emissions released into the atmosphere has actually shrunk by 40%.
That’s because today’s power plants emit far less pollutants (nasty stuff like SO2, NOX, Particulates, mercury) than the plants from the ‘70s, according to the National Energy Technology Laboratory.
And “scrubbers” installed in older power plants get rid of 99% of the pollutants that used to escape through their chimney stacks. In 2005, 22% of coal-fired capacity east of the Mississippi had these scrubbers. By the end of this year, over 50% of capacity is expected to be scrubbed.
That’s 90.6 gigawatts of coal-fired generation that will be retrofitted with new scrubbers by the end of 2011, according to the EIA.
The other good thing about coal is that we simply have a lot of it lying around....about 262 billion tons, according to the Energy Information Agency.
It accounts for 94% of all our fossil energy reserves – there’s more coal than oil in the U.S. And there’s enough coal in the world to last us another 235 years.
Add in the fact that coal is cheap to use. It’s the number-one fuel of China for a reason, you know.
It’s also hard to replace. Every man, woman and child in the U.S. consumes 3.8 tons of coal per year. That is the equivalent of 17,593 Big Macs.
Another way of looking at this is that the U.S. would have to build 250 nuclear reactors...or produce 17 more trillion cubic feet...or build 500 more damns the size of the gigantic Hoover Dam to replace the coal we use.
How are you going to come close to replacing that? The answer of course is you can’t.
In this month’s Sound Profits issue, Andy recommends one company that’s primed to ride coal’s under-the-radar comeback for major gains. As a Master Limited Partnership, it doesn’t have to pay taxes on its profits. Because it’s allowed to pass on the bulk of its income to shareholders, it sports a juicy 6.6% dividend!
As demand from China and India continue to rise (and maybe the US too, once it sees the light on dangerous offshore oil rigs), this company is primed to shine. In fact, Andy is projecting 80% gains in under two years!
Andy says that coal is not the “bridge to the future” as the so-called energy specialists claim it is. Coal is the future.
For all of the details – including Andy’s Buy Under price - sign up for the Sound Profits newsletter today. You can read all of the details about Sound Profits here.
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Copyright © 2010 by Fourth Avenue Financial. All rights reserved. The Fourth Avenue Financial unites the stock-picking talents of several analysts and editors. Each of the services is based on individual trading/investment philosophies or vehicles and specific investment approaches.
Fourth Avenue Financials Investor's Daily Edge is intended specifically for mature investors with a strong sense of individual responsibility who want to arbitrage different viewpoints to optimize their personal investment strategy. We reserve the right to remove readers we believe do not meet these criteria from our distribution list without prior notice.
You are welcome to distribute this message, at your discretion, to others who you believe share the values of the Fourth Avenue Financial.
NOTE TO OUR READERS: Fourth Avenue Financial or Early To Rise does not act as an investment advisor or advocate the purchase or sale of any security or investment. Investments recommended in this publication should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company in question.
Fourth Avenue Financial expressly forbids its writers from having a financial interest in any security that they recommend to their readers. Furthermore, all other employees and agents of Fourth Avenue Financial and its affiliate companies must wait 24 hours before following an initial recommendation published on the Internet, or 72 hours after a printed publication is mailed.
Email: feedback@investorsdailyedge.com | phone 800.718.2891
We respect your privacy. You can view our privacy policy here.
© Copyright Early to Rise, LLC., 2010
Dear IDE Reader:
Our energy world will never be the same again, thanks to BP. But in re-examining our energy priorities, one sector remains ignored and all-but forgotten. And no way that should be the case, says our own Laura Rodini, IDE’s Chief Operating Officer. For the surprising lesson of BP’s Gulf Disaster, read below.
It’s been 90 days since the BP oil spill began in the Gulf of Mexico, and while BP managed to place a cap on top of the spewing oil late last week, there is no guarantee that the spill is contained.
There’s been a depressing amount of oil spilled - 9 times more oil than the Exxon Valdez, and growing!
And now with hurricane season underway, containment efforts are in danger.
Right now Congress is investigating whether deepwater drilling really is a safe means of oil production.
Which leads us to Andy Gordon’s very interesting pick in this month’s Sound Profits newsletter. You might call this a ‘contrarian pick.’
It’s a substance people normally think is dirtier than oil.
But in light of all that’s going on in the Gulf, I’d say it’s time to think again!
Coal Mythbuster: It’s Not Dirty
Coal is the most misunderstood and underrated of all the energy sectors. Since the 70s, we have tripled our consumption of coal. It provides half the electricity we use.
Yet, everybody discounts coal while championing their favorite pie-in-the-sky alternative...
Obama doesn’t get it. He’s using the BP crisis to push one of his pet projects – the development of solar and wind energy sources – into the forefront of technology development.
The World Bank doesn’t get it either. They’re also pushing so-called clean energy on developing countries.
And most investors don’t get it. They’re getting into other oil majors like Exxon Mobil and Chevron instead of investing in coal.
What these folks fail to understand is that coal is not dirty. The amount of emissions released into the atmosphere has actually shrunk by 40%.
That’s because today’s power plants emit far less pollutants (nasty stuff like SO2, NOX, Particulates, mercury) than the plants from the ‘70s, according to the National Energy Technology Laboratory.
And “scrubbers” installed in older power plants get rid of 99% of the pollutants that used to escape through their chimney stacks. In 2005, 22% of coal-fired capacity east of the Mississippi had these scrubbers. By the end of this year, over 50% of capacity is expected to be scrubbed.
That’s 90.6 gigawatts of coal-fired generation that will be retrofitted with new scrubbers by the end of 2011, according to the EIA.
The other good thing about coal is that we simply have a lot of it lying around....about 262 billion tons, according to the Energy Information Agency.
It accounts for 94% of all our fossil energy reserves – there’s more coal than oil in the U.S. And there’s enough coal in the world to last us another 235 years.
Add in the fact that coal is cheap to use. It’s the number-one fuel of China for a reason, you know.
It’s also hard to replace. Every man, woman and child in the U.S. consumes 3.8 tons of coal per year. That is the equivalent of 17,593 Big Macs.
Another way of looking at this is that the U.S. would have to build 250 nuclear reactors...or produce 17 more trillion cubic feet...or build 500 more damns the size of the gigantic Hoover Dam to replace the coal we use.
How are you going to come close to replacing that? The answer of course is you can’t.
In this month’s Sound Profits issue, Andy recommends one company that’s primed to ride coal’s under-the-radar comeback for major gains. As a Master Limited Partnership, it doesn’t have to pay taxes on its profits. Because it’s allowed to pass on the bulk of its income to shareholders, it sports a juicy 6.6% dividend!
As demand from China and India continue to rise (and maybe the US too, once it sees the light on dangerous offshore oil rigs), this company is primed to shine. In fact, Andy is projecting 80% gains in under two years!
Andy says that coal is not the “bridge to the future” as the so-called energy specialists claim it is. Coal is the future.
For all of the details – including Andy’s Buy Under price - sign up for the Sound Profits newsletter today. You can read all of the details about Sound Profits here.
---------------------------------------------------------------------------
We want your feedback! Let us know your thoughts on this article. Email us at: feedback@investorsdailyedge.com
Market Window
To unsubscribe from Investor's Daily Edge and any associated external offers, Click here
To cancel or for any other subscription issues, write us at:
Investor's Daily Edge
PO Box 7835
Delray Beach, FL 33482
800.718.2891
Copyright © 2010 by Fourth Avenue Financial. All rights reserved. The Fourth Avenue Financial unites the stock-picking talents of several analysts and editors. Each of the services is based on individual trading/investment philosophies or vehicles and specific investment approaches.
Fourth Avenue Financials Investor's Daily Edge is intended specifically for mature investors with a strong sense of individual responsibility who want to arbitrage different viewpoints to optimize their personal investment strategy. We reserve the right to remove readers we believe do not meet these criteria from our distribution list without prior notice.
You are welcome to distribute this message, at your discretion, to others who you believe share the values of the Fourth Avenue Financial.
NOTE TO OUR READERS: Fourth Avenue Financial or Early To Rise does not act as an investment advisor or advocate the purchase or sale of any security or investment. Investments recommended in this publication should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company in question.
Fourth Avenue Financial expressly forbids its writers from having a financial interest in any security that they recommend to their readers. Furthermore, all other employees and agents of Fourth Avenue Financial and its affiliate companies must wait 24 hours before following an initial recommendation published on the Internet, or 72 hours after a printed publication is mailed.
Email: feedback@investorsdailyedge.com | phone 800.718.2891
We respect your privacy. You can view our privacy policy here.
© Copyright Early to Rise, LLC., 2010
Government Censorship - Oil Spill in Gulf of Mexico might cause Tsunami !
There is a top secret program with some oil companies and the US government called "Deep Water Drilling" and the well that was being drilled was one of those. Even though it was at least one mile below the sea floor the whole well that was tapped may have been 5- 6 miles deep into the mantel of the Earth and the kind of pressure from that being tapped is something that will destroy attempts to cap the well.
Cassitation is a super-sonic implosion. A bubble may come up and sink every ship and platform within a 50 mile radius. The well has been at 100,000 lbs. per square inch pressure. That is why they have took so long capping the well.
Chris Landowe has written 2 papers about predicting that things like this could happen before it happened. All these wells may crack the ocean floor and have a volcano erupt under water, like Mt. St Helens under water
and then a tsunami would obliterate Florida,basically put it under the ocean.
Cloud of Death followed by Tsunami traveling at 400-600 MPH 1/2
Cassitation is a super-sonic implosion. A bubble may come up and sink every ship and platform within a 50 mile radius. The well has been at 100,000 lbs. per square inch pressure. That is why they have took so long capping the well.
Chris Landowe has written 2 papers about predicting that things like this could happen before it happened. All these wells may crack the ocean floor and have a volcano erupt under water, like Mt. St Helens under water
and then a tsunami would obliterate Florida,basically put it under the ocean.
Cloud of Death followed by Tsunami traveling at 400-600 MPH 1/2
Sunday, July 18, 2010
URGENT - GULF OIL SPILL CAUSING TOXIC RAIN, KILLING CROPS??
I predicted that the oil would rise into the atmosphere and would rain
down on everyone as the winds of the Gulf of Mexico sweep over the southern United States. This seems to confirm what I had predicted to my colleagues at the Dept. of Homeland Security. An EPA official also confirmed that he thought this would happen. I believe the investigators may find lead poisoning to be occurring from the lead in the oil that has risen into the atmosphere around the Gulf.
Here is another video confirming that it is actually raining oil on the streets. British Petroleum may have created the largest environmental
disaster the world has seen since the atomic bombs on Nagasaki and Hiroshima. BP are corporate terrorists. Does that seem harsh? Well,all
they cared about was saving $500,000 for some saftey fixture and now the
Caribbean ,Southern USA and Mexico will bear the consequences of dying crops, animals and eventually people.
URGENT - GULF OIL SPILL CAUSING TOXIC RAIN, KILLING CROPS??
Toxic Oil Spill Rains Warned Could Destroy North America
Corexit 9500 molecules will be able to "phase transition" from their present liquid to a gaseous state allowing them to be absorbed into clouds and allowing their release as "toxic rain" upon all of Eastern North America contaminating water & food supply etc... Excerpt: A dire report prepared for President Medvedev by Russia's Ministry of Natural Resources is warning today that the British Petroleum (BP) oil and gas leak in the Gulf of Mexico is about to become the worst environmental catastrophe in all of human history threatening the entire eastern half of the North American continent with "total destruction". Russian scientists are basing their apocalyptic destruction assessment due to BP's use of millions of gallons of the chemical dispersal agent known as Corexit 9500 which is being pumped directly into the leak of this wellhead over a mile under the Gulf of Mexico waters and designed, this report says, to keep hidden from the American public the full, and tragic, extent of this leak that is now estimated to be over 2.9 million gallons a day. Scientists Warn Gulf Of Mexico Sea Floor Fractured "Beyond Repair" Scientists Warn Gulf Of Mexico Sea Floor Fractured "Beyond Repair" By: Sorcha Faal, and as reported to her Western Subscribers A dire report circulating in the Kremlin today that was prepared for Prime Minister Putin by Anatoly Sagalevich of Russia's Shirshov Institute of Oceanology warns that the Gulf of Mexico sea floor has been fractured "beyond all repair" and our World should begin preparing for an ecological disaster "beyond comprehension" unless "extraordinary measures" are undertaken to stop the massive flow of oil into our Planet's eleventh largest body of water. Most important to note about Sagalevich's warning is that he and his fellow scientists from the Russian Academy of Sciences are the only human beings to have actually been to the Gulf of Mexico oil leak site after their being called to the disaster scene by British oil giant BP shortly after the April 22nd sinking of the Deepwater Horizon oil platform. BP's calling on Sagalevich after this catastrophe began is due to his being the holder of the World's record for the deepest freshwater dive and his expertise with Russia's two Deep Submergence Vehicles MIR 1 and MIR 2 [photo 2nd left] which are able to take their crews to the depth of 6,000 meters (19,685 ft). According to Sagalevich's report, the oil leaking into the Gulf of Mexico is not just coming from the 22 inch well bore site being shown on American television, but from at least 18 other sites on the "fractured seafloor" with the largest being nearly 11 kilometers (7 miles) from where the Deepwater Horizon sank and is spewing into these precious waters an estimated 2 million gallons of oil a day. Interesting to note in this report is Sagalevich stating that he and the other Russian scientists were required by the United States to sign documents forbidding them to report their findings to either the American public or media, and which they had to do in order to legally operate in US territorial waters. However, Sagalevich says that he and the other scientists gave nearly hourly updates to both US government and BP officials about what they were seeing on the sea floor, including the US Senator from their State of Florida Bill Nelson who after one such briefing stated to the MSNBC news service "Andrea we're looking into something new right now, that there's reports of oil that's seeping up from the seabed... which would indicate, if that's true, that the well casing itself is actually pierced... underneath the seabed. So, you know, the problems could be just enormous with what we're facing." Though not directly stated in Sagalevich's report, Russian scientists findings on the true state of the Gulf of Mexico oil disaster are beyond doubt being leaked to his longtime friend, and former US President George W. Bush's top energy advisor Matthew Simmons, who US media reports state has openly said: "Matthew Simmons is sticking by his story that there's another giant leak in the Gulf of Mexico blowing massive amounts of oil into the Gulf of Mexico. On CNBC's Fast Money, he says he'd be surprised if BP lasted this summer, saying this is disaster is entirely BP's fault."cancelsave
down on everyone as the winds of the Gulf of Mexico sweep over the southern United States. This seems to confirm what I had predicted to my colleagues at the Dept. of Homeland Security. An EPA official also confirmed that he thought this would happen. I believe the investigators may find lead poisoning to be occurring from the lead in the oil that has risen into the atmosphere around the Gulf.
Here is another video confirming that it is actually raining oil on the streets. British Petroleum may have created the largest environmental
disaster the world has seen since the atomic bombs on Nagasaki and Hiroshima. BP are corporate terrorists. Does that seem harsh? Well,all
they cared about was saving $500,000 for some saftey fixture and now the
Caribbean ,Southern USA and Mexico will bear the consequences of dying crops, animals and eventually people.
URGENT - GULF OIL SPILL CAUSING TOXIC RAIN, KILLING CROPS??
Toxic Oil Spill Rains Warned Could Destroy North America
Corexit 9500 molecules will be able to "phase transition" from their present liquid to a gaseous state allowing them to be absorbed into clouds and allowing their release as "toxic rain" upon all of Eastern North America contaminating water & food supply etc... Excerpt: A dire report prepared for President Medvedev by Russia's Ministry of Natural Resources is warning today that the British Petroleum (BP) oil and gas leak in the Gulf of Mexico is about to become the worst environmental catastrophe in all of human history threatening the entire eastern half of the North American continent with "total destruction". Russian scientists are basing their apocalyptic destruction assessment due to BP's use of millions of gallons of the chemical dispersal agent known as Corexit 9500 which is being pumped directly into the leak of this wellhead over a mile under the Gulf of Mexico waters and designed, this report says, to keep hidden from the American public the full, and tragic, extent of this leak that is now estimated to be over 2.9 million gallons a day. Scientists Warn Gulf Of Mexico Sea Floor Fractured "Beyond Repair" Scientists Warn Gulf Of Mexico Sea Floor Fractured "Beyond Repair" By: Sorcha Faal, and as reported to her Western Subscribers A dire report circulating in the Kremlin today that was prepared for Prime Minister Putin by Anatoly Sagalevich of Russia's Shirshov Institute of Oceanology warns that the Gulf of Mexico sea floor has been fractured "beyond all repair" and our World should begin preparing for an ecological disaster "beyond comprehension" unless "extraordinary measures" are undertaken to stop the massive flow of oil into our Planet's eleventh largest body of water. Most important to note about Sagalevich's warning is that he and his fellow scientists from the Russian Academy of Sciences are the only human beings to have actually been to the Gulf of Mexico oil leak site after their being called to the disaster scene by British oil giant BP shortly after the April 22nd sinking of the Deepwater Horizon oil platform. BP's calling on Sagalevich after this catastrophe began is due to his being the holder of the World's record for the deepest freshwater dive and his expertise with Russia's two Deep Submergence Vehicles MIR 1 and MIR 2 [photo 2nd left] which are able to take their crews to the depth of 6,000 meters (19,685 ft). According to Sagalevich's report, the oil leaking into the Gulf of Mexico is not just coming from the 22 inch well bore site being shown on American television, but from at least 18 other sites on the "fractured seafloor" with the largest being nearly 11 kilometers (7 miles) from where the Deepwater Horizon sank and is spewing into these precious waters an estimated 2 million gallons of oil a day. Interesting to note in this report is Sagalevich stating that he and the other Russian scientists were required by the United States to sign documents forbidding them to report their findings to either the American public or media, and which they had to do in order to legally operate in US territorial waters. However, Sagalevich says that he and the other scientists gave nearly hourly updates to both US government and BP officials about what they were seeing on the sea floor, including the US Senator from their State of Florida Bill Nelson who after one such briefing stated to the MSNBC news service "Andrea we're looking into something new right now, that there's reports of oil that's seeping up from the seabed... which would indicate, if that's true, that the well casing itself is actually pierced... underneath the seabed. So, you know, the problems could be just enormous with what we're facing." Though not directly stated in Sagalevich's report, Russian scientists findings on the true state of the Gulf of Mexico oil disaster are beyond doubt being leaked to his longtime friend, and former US President George W. Bush's top energy advisor Matthew Simmons, who US media reports state has openly said: "Matthew Simmons is sticking by his story that there's another giant leak in the Gulf of Mexico blowing massive amounts of oil into the Gulf of Mexico. On CNBC's Fast Money, he says he'd be surprised if BP lasted this summer, saying this is disaster is entirely BP's fault."cancelsave
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