BP taps vast pool of crude in deepest oil well
BP drills deepest-ever oil well in Gulf of Mexico, taps vast pool of crud
NEW YORK (AP) -- Nearly seven miles below the Gulf of Mexico, oil company BP has tapped into a vast pool of crude after digging the deepest oil well in the world. The Tiber Prospect is expected to rank among the largest petroleum discoveries in the United States, potentially producing half as much crude in a day as Alaska's famous North Slope oil field.
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The company's chief of exploration on Wednesday estimated that the Tiber deposit holds between 4 billion and 6 billion barrels of oil equivalent, which includes natural gas. That would be enough to satisfy U.S. demand for crude for nearly one year. But BP does not yet know how much it can extract.
"The Gulf of Mexico is proving to be a growing oil province, and a profitable one if you can find the reserves," said Tyler Priest, professor and director of Global Studies at the Bauer College of Business at the University of Houston.
The Tiber well is about 250 miles southeast of Houston in U.S. waters. At 35,055 feet, it is as deep as Mount Everest is tall, not including more than 4,000 feet of water above it.
Drilling at those depths shows how far major oil producers will go to find new supplies as global reserves dwindle, and how technology has advanced, allowing them to reach once-unimaginable depths.
Deep-water operations are considered to be the last frontier for pristine oil deposits, and the entire petroleum industry is sweeping the ocean floor in search of more crude.
BP needs to invest years of work and millions of dollars before it draws the first drop of oil from Tiber. Such long waits are not uncommon. Three years after announcing a discovery at a site in the Gulf called Kaskida, BP has yet to begin producing oil there.
Projects like the Tiber well will not reduce U.S. dependency on foreign oil, which continues to grow. But new technology does permit access to major oil finds closer to U.S. shores.
BP expects Tiber to be among the company's richest finds in the Gulf on par with its crown jewel, the Thunder Horse development. Thunder Horse produces about 300,000 barrels of oil equivalent per day, as much crude as half of Alaska's famous North Slope.
Even if Tiber produces that much, it would still be a trickle compared with the largest oil producers in the world -- the Ghawar field in Saudi Arabia, which produces 5 million barrels per day.
But because it's close to home, Tiber would be especially attractive to refiners in America, where the government wants to cut down on oil imports from the Middle East.
"Early indications are that it's a significant positive discovery," said Matt Snyder, lead analyst with Wood MacKinzie's Gulf of Mexico research team.
Exploration companies recently have been pushing drilling operations farther from shore because of technological improvements that allow them to handle extreme depths and pressure, Snyder said.
It's an expensive process. A production platform costs more than $1 billion to build. Drilling a deep-water well can add another $100 million, and if crude is located, it could cost another $50 million to bring the oil to the surface.
"And when they finally get down there, it's very hot," said Leta Smith, a director with Cambridge Energy Research Associates' Global Oil Supply Group.
"It could be upwards of 250 degrees Fahrenheit. The pressures can be the most challenging aspect of it. These rocks are over-pressured, which means you need to have a lot of special equipment."
For an ambitious project like Tiber to pay off, experts say crude must cost at least $70 to $75 per barrel, though lower prices have never slowed the industry. When crude prices fell below $20 per barrel in the late 1990s, exploration and Thunder Horse never slowed.
"They're not swayed by daily price swings when it comes to planning deep-water exploration," Priest said.
BP's discovery is the latest in what's called the "lower tertiary" region, an ancient section of rock in the Gulf that is roughly 300 square miles and formed between 24 million and 65 million years ago.
Chevron Corp. drilled one of the first wells in the region in 2001, followed by more than a dozen others from companies such as Royal Dutch Shell, Australian oil company BHP Billiton, BP and Total SA, according to the U.S. Department of Interior's Minerals Management Service.
In 2006, Chevron estimated that the lower tertiary holds between 3 billion and 15 billion barrels. But it has taken years to develop wells for commercial use.
Smith said that the first drops of crude from the lower tertiary will arrive in 2010 with Shell's Perdido operation and Petrobras's Cascade and Chinook developments.
BP has a 62 percent working interest in the Tiber well. Petrobras owns 20 percent while ConocoPhillips owns 18 percent.
SEC bungled Madoff probes, agency watchdog says
SEC badly bungled probes of Madoff scheme, agency watchdog says -- incompetence, not corruption
WASHINGTON (AP) -- Pushing past years of "red flags," investigators at the Securities and Exchange Commission bungled their probes of Bernard Madoff so badly that his multibillion-dollar fraud not only flourished but he used the exams to suck in new investors, an agency watchdog declared Wednesday.
The report by the SEC inspector general shows that no smoking gun of corruption was found in the agency's conduct toward the disgraced financier. Instead it painted a grim picture of an agency hobbled by incompetence -- failing to pursue the most obvious leads -- that cleared the way for Madoff to continue what could be the biggest Ponzi scheme in U.S. history for more than a decade.
One of the most striking points in the report is that the investigations actually may have made things worse.
"Madoff proactively informed potential investors that the SEC had examined his operations" and found nothing amiss, it says. The fact that three SEC inspections and two investigations failed to detect the fraud gave credibility to Madoff's operations and encouraged more people to give him their money.
The report by inspector general David Kotz cites no evidence of improper ties between agency officials and Madoff, nor of senior SEC officials trying to influence the agency's probes of his business. Speculation had raged in December, when Madoff confessed to the scheme, that the financier's influence and ties to the SEC as a prominent Wall Street figure had prompted agency officials to pull their punches in investigations of his business.
The SEC enforcement staff "almost immediately caught (him) in lies and misrepresentations but failed to follow up on inconsistencies" and rejected whistleblowers' offers to provide additional evidence, the report says.
"The fact that for 16 years (the SEC) had on blinders and earmuffs is mind-numbing," said Jacob Frenkel, a former SEC enforcement attorney and federal prosecutor now in private law practice.
Four high-ranking SEC officials who were lambasted over the Madoff affair at a congressional hearing in February -- including the enforcement director and the head of the inspections office -- have left the agency.
SEC Chairman Mary Schapiro, appointed by President Barack Obama, took the helm in January. Enforcement efforts have been strengthened, and the agency has started a number of initiatives meant to protect investors in the wake of the financial crisis, officials say.
Madoff, who pleaded guilty in March, has begun serving a 150-year sentence in federal prison in North Carolina for a pyramid scheme that destroyed thousands of people's life savings, wrecked charities and gave the financial system yet another big jolt. The legions of investors who lost money included Hollywood celebrities, ordinary people and famous names in business and sports -- as well as big hedge funds, international banks and charitable foundations worldwide.
Revelations in December of the SEC's failure to uncover Madoff's massive scheme over more than a decade touched off one of the most painful scandals in the agency's 75-year history.
The inspector general plans to issue separate audits that will include recommendations for changes in the agency's enforcement and inspection operations.
His report "makes clear that the agency missed numerous opportunities to discover the fraud," new chairman Schapiro said in a statement. "It is a failure that we continue to regret, and one that has led us to reform in many ways how we regulate markets and protect investors."
Sen. Christopher Dodd, chairman of the Senate Banking Committee, said the panel has scheduled a hearing for Sept. 10 on Kotz's report, at which the inspector general is expected to testify. The testimony will "guide us as we continue our work on a bill to modernize financial regulations," Dodd said.
Between June 1992 and last December, the SEC received six "substantive complaints that raised significant red flags" regarding Madoff's operations. But "a thorough and competent investigation or examination was never performed," the Kotz's report says.
For example, Harry Markopolos, a fraud investigator who had worked in the securities industry, brought his allegations to the SEC about improprieties in Madoff's business starting in 2000 after determining there was no way Madoff could have been making the consistent returns he claimed. Markopolos and his investigators raised 29 specific warnings regarding Madoff's operations to SEC staff members in Boston, New York and Washington.
The agency also received complaints from a number of other sources, all containing specific information that called for a thorough examination of Madoff's business, the report says.
Many of the SEC staff members who conducted the investigations were "inexperienced," according to the report.
It cites examinations of Madoff's business done in 2004 and 2005 by the agency's inspections office. In both exams, the staff "made the surprising discovery" that Madoff's mysterious investment business was making far more money than his well-known wholesale brokerage operation. "However, no one identified this revelation as a cause for concern," the report says.
Madoff himself, who was once chairman of the Nasdaq Stock Market and had sat on SEC advisory committees, had boasted of his ties to the agency.
The inspector general's investigation found no evidence, though, that any SEC staff who worked on the exams or investigations of Madoff's business had financial or other improper connections with him that influenced the probes.
The disclosure in December of the agency's failure in the Madoff affair, coming after the financial crisis struck last fall, buttressed the mounting criticism from lawmakers and investor advocates that Wall Street and regulators in Washington had grown too close.
Christopher Cox, then the SEC chairman, responded by delivering a stunning rebuke to his own career staff, blaming them for the failure to uncover Madoff's wrongdoing. Cox's critics said targeting the staff was his attempt to salvage his own reputation.
Group: Insurers urged workers to fight reform
Consumer group says 2 health insurers illegally told workers to lobby against health reform
NEW YORK (AP) -- A consumer group says health insurers UnitedHealth and WellPoint pressured their employees to contact members of Congress and lobby against health care reform proposals that the companies disagreed with.
In a letter to California Attorney General Jerry Brown, the group Consumer Watchdog maintains both companies violated state labor laws. The group said Brown should investigate the insurers based on comments they sent to employees last month, while Congress was in recess and debate about health care reform was highly publicized.
The Attorney General's office said it is reviewing the letter.
In one e-mail, Minnetonka, Minn.-based UnitedHealth Group Inc. said workers looking to get in touch with elected officials could get help from "advocacy specialists." It said employees might be contacted about the issue during business hours.
WellPoint Inc., a Blue Cross/Blue Shield operator based in Indianapolis, said most of the proposed health care legislation was not responsible or sustainable. Its e-mail asserted that the laws could cause tens of millions of Americans to lose private health coverage and end up in a government-run insurance plan. Other consequences could include limited choice for customers, and increased premiums for those with private coverage due to new mandates and coverage requirements, it said.
Both companies run their own advocacy groups -- UnitedHealth's United for Health Reform, and WellPoint's Health Action Network. United's e-mail said United for Health Reform may contact employees, and specialists would be available to help the workers craft letters to their representatives.
"By working with an advocacy specialist to personalize your message, you can quickly and easily add your voice to this historic debate," the e-mail says. The letter advises employees to attend a town hall meeting, and encourages respectful and constructive comments.
WellPoint said Wednesday it has not been contacted by the Attorney General's office and has not seen any complaint.
"We believe it is important and permissible to provide up to date information about health reform to our associates," spokeswoman Cheryl Leamon said in an e-mail to The Associated Press.
UnitedHealth, responding to a request for comment, referred to its statement last month saying it had not encouraged employees to attend "anti-reform rallies." The company said it had only provided workers with information so they could contact elected officials or attend town halls if they chose to do so.
"We have stressed repeatedly that we strongly support bipartisan reform efforts to modernize health care and improve access to quality care on a sustainable basis for all Americans," the company wrote on Aug. 20.
Pfizer to pay record $2.3B penalty for drug promos
Repeat offender Pfizer paying record $2.3B settlement for illegal drug promotions
WASHINGTON (AP) -- Federal prosecutors hit Pfizer Inc. with a record-breaking $2.3 billion in fines Wednesday and called the world's largest drugmaker a repeating corporate cheat for illegal drug promotions that plied doctors with free golf, massages, and resort junkets.
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Announcing the penalty as a warning to all drug manufacturers, Justice Department officials said the overall settlement is the largest ever paid by a drug company for alleged violations of federal drug rules, and the $1.2 billion criminal fine is the largest ever in any U.S. criminal case. The total includes $1 billion in civil penalties and a $100 million criminal forfeiture.
Authorities called Pfizer a repeat offender, noting it is the company's fourth such settlement of government charges in the last decade. The allegations surround the marketing of 13 different drugs, including big sellers such as Viagra, Zoloft, and Lipitor.
As part of its illegal marketing, Pfizer invited doctors to consultant meetings at resort locations, paying their expenses and providing perks, prosecutors said.
"They were entertained with golf, massages, and other activities," said Mike Loucks, the U.S. attorney in Massachusetts.
Loucks said that even as Pfizer was negotiating deals on past misconduct, they were continuing to violate the very same laws with other drugs.
To prevent backsliding this time, Pfizer's conduct will be specially monitored by the Health and Human Service Department inspector general for five years.
In an unusual twist, the head of the Justice Department, Attorney General Eric Holder, did not participate in the record settlement, because he had represented Pfizer on these issues while in private practice.
Associate Attorney General Thomas Perrelli said the settlement illustrates ways the Justice Department "can help the American public at a time when budgets are tight and health care costs are rising."
Perrelli announced the settlement terms at a news conference with federal prosecutors and FBI, and Health and Human Services Department officials.
The settlement ends an investigation that also resulted in guilty pleas from two former Pfizer sales managers.
Officials said the U.S. industry has paid out more than $11 billion in such settlements over the past decade, but one consumer advocate voiced hope that Wednesday's penalty was so big it would curb the abuses.
"There's so much money in selling pills, that there's a tremendous temptation to cheat," said Bill Vaughan, an analyst at Consumers Union, the nonprofit publisher of Consumer Reports.
"There's a kind of mentality in this sector that (settlements) are the cost of doing business and we can cheat. This penalty is so huge I think consumers can have some hope that maybe these guys will tighten up and run a better ship."
The government said the company promoted four prescription drugs, including the pain killer Bextra, as treatments for medical conditions different from those the drugs had been approved for by federal regulators. Authorities said Pfizer's salesmen and women created phony doctor requests for medical information in order to send unsolicited information to doctors about unapproved uses and dosages.
Use of drugs for so-called "off-label" medical conditions is not uncommon, but drug manufacturers are prohibited from marketing drugs for uses that have not been approved by the Food and Drug Administration. They said the junkets and other company-paid perks were designed to promote Bextra and other drugs, to doctors for unapproved uses and dosages, backed by false and misleading claims about safety and effectiveness.
Bextra, for instance, was approved for arthritis, but Pfizer promoted it for acute pain and surgical pain, and in dosages above the approved maximum. In 2005, Bextra, one of a class of painkillers known as Cox-2 inhibitors, was pulled from the U.S. market amid mounting evidence it raised the risk of heart attack, stroke and death.
A Pfizer subsidiary, Pharmacia and Upjohn Inc., which was acquired in 2003, has entered an agreement to plead guilty to one count of felony misbranding. The criminal case applied only to Bextra.
The $1 billion in civil penalties was related to Bextra and a number of other medicines.
A portion of the civil penalty will be distributed to 49 states and the District of Columbia, according to agreements with each state's Medicaid program.
Pfizer's top lawyer, Amy Schulman, said the settlements "bring final closure to significant legal matters and help to enhance our focus on what we do best -- discovering, developing and delivering innovative medicines."
In her statement, Schulman said: "We regret certain actions taken in the past, but are proud of the action we've taken to strengthen our internal controls and pioneer new procedures."
In financial filings in January, the company had indicated that it would pay $2.3 billion over the allegations.
The civil settlement announced Wednesday covered Pfizer's promotions of Bextra, blockbuster nerve pain and epilepsy treatment Lyrica, schizophrenia medicine Geodon, antibiotic Zyvox and nine other medicines. The agreement with the Justice Department resolves the investigation into promotion of all those drugs, Pfizer said.
The government said Pfizer also paid kickbacks to market a host of big-name drugs: Aricept, Celebrex, Lipitor, Norvasc, Relpax, Viagra, Zithromax, Zoloft, and Zyrtec.
The allegations came to light thanks largely to five Pfizer employees and one Pennsylvania doctor, who will now share $102 million of the settlement money.
FBI Assistant Director Kevin Perkins praised the whistleblowers who decided to "speak out against a corporate giant that was blatantly violating the law and misleading the public through false marketing claims."
To rein in the abuses, the government's five-year monitoring will force Pfizer to notify doctors about Wednesday's agreement, encourage them to report any similar behavior, and publicly post any payments or perks it gives to doctors.
Under terms of the settlement, Pfizer must pay $1 billion to compensate Medicaid, Medicare, and other federal health care programs. Some of that money will be shared among the states: New York, for example, will receive $66 million, according to the state's attorney general, Andrew Cuomo.
When Pfizer originally disclosed the settlement figure, it also announced plans to acquire rival Wyeth for $68 billion. That deal, which would bolster Pfizer's position as the world's top drugmaker by revenue, is expected to close before year's end.
Shares of Pfizer dropped 14 cents to $16.24 in midday trading.
Fed minutes: officials saw recession's end in Aug.
WASHINGTON (AP) -- With the U.S. economy on the mend, Federal Reserve policymakers last month felt comfortable slowing the pace of one of its economic revival programs and not changing any others, according to documents released Wednesday.
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Minutes of the central bank's closed door deliberations, held Aug. 11-12, also showed Fed Chairman Ben Bernanke and his colleagues striking a much more hopeful note about the economy's prospects compared with an assessment made in late June. Many Fed officials saw "smaller downside risks," the documents stated.
Fed officials expected the pace of the recovery to "pick up" in 2010, but there was a range of views -- and considerable uncertainty -- about the likely strength of the upturn because of concerns about how consumers will behave.
After being pounded by the recession, consumer spending finally appeared to be leveling out, the housing market was firming and manufacturing was stabilizing, the Fed said. Plus, the outlook for other countries' economies improved, auguring well for the sale of U.S. exports.
All that strengthened the confidence of Fed officials that "the downturn in economic activity was ending." They also repeated a prediction that the economy would start growing again in the second half of this year. That expected growth will be helped by President Barack Obama's $787 billion package of tax cuts and increased government spending, they said.
Against that backdrop, the Fed at its August meeting, announced that it would gradually slow the pace of its program to buy the remainder of $300 billion worth of Treasury securities and shut it down at the end of October, a month later than previously scheduled. The program is designed to force interest rates down for mortgages and other consumer debt, and spur Americans to spend more money.
The Fed also did not change another program that aims to push down mortgage rates. In that venture, the Fed is on track to buy $1.25 trillion worth of securities issued by mortgage finance companies Fannie Mae and Freddie Mac by the end of the year.
"With the downside risks to the economic outlook now considerably reduced, but the economic recovery likely to be damped" Fed policymakers agreed that it didn't need to either expand or cut back those programs.
Summing up the Fed minutes, "the overriding theme is that the economy was just beginning to turn around," said Stephen Stanley, chief economist at RBS.
Fed officials suggested consumers will be a wild card in the unfolding recovery.
A "poor" jobs market, evaporated wealth from decimated home and stock values, hard-to-get credit and wages that aren't supposed to advance sharply anytime soon mean consumers are still facing "considerable headwinds," the minutes said. How consumers behave is crucial to the recovery because their spending accounts for roughly 70 percent of all economic activity.
"With these forces restraining spending, and with labor income likely to remain soft, (Fed) participants generally expected no more than moderate growth in consumer spending going forward," the Fed minutes stated.
Unemployment -- now at 9.4 percent and expected to top 10 percent this year-- is the biggest burden facing American consumers. Another source of uncertainty: the extent to which consumers will sock more money into savings, the Fed said.
To entice consumers to spend more, the Fed last month also left a key interest rate at a record low of near zero. It pledged to hold that bank lending rate at between zero and 0.25 percent for an "extended period." Economists predict that means through the rest of this year and may be longer.
"We suspect that it won't raise interest rates possibly until 2011," said Paul Dales, economist at Capital Economics Ltd.
As a result, commercial banks' prime lending rate, used as a peg for rates on home equity loans, certain credit cards and other consumer loans, will stay at about 3.25 percent, the lowest in decades.
Given weakness in the job market and that factories -- while improving -- are far from full throttle, inflation should stay contained, the Fed said. Fed officials did, however, acknowledge that some on Wall Street have expressed worry that the central bank's aggressive actions and the federal government's bloated budget deficit will spur inflation later on.
To address those concerns, the Fed said it is important to keep sending the message that it has the will and the tools necessary to reel in the trillions of dollars it has pumped into the financial system to revive the economy.
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