RFF suggests putting deepwater risks in context

Resources for the Future, an independent economic research group, suggests that neither government or the oil and gas industry yet has adjusted to the high-risk context of deepwater operations. RAF recommends setting liability caps for individual wells at a level reflecting damages from worst-case spill scenarios.

Lynn Scarlett, RFF visiting scholar and former deputy secretary of the interior, made this comment during a Feb. 15 luncheon symposium hosted by ConocoPhillips at its Houston headquarters.

“One might argue it is rocket science,” Scarlett said of regulating drilling and production activities in the deepwater Gulf of Mexico. “No project is business as usual.”

RFF recommends that third-party insurance should be researched as a possible way to strengthen external monitoring of deepwater oil and gas operations. If insurance pools are used to assist smaller firms, fees should be related to risk, Scarlett said.

She said both government and the private sector lacked capacity and practices for performing adequate risk assessments.

‘You just don’t know what you don’t know,” Scarlett said, adding that risk assessment capacity and practices will be a key issue for both industry and regulators going forward after the April 2010 Macondo well blowout and resulting massive oil spill in the gulf.

Industry keeping tabs on funding request for US BOEMRE

President Barack Obama requested $358.4 million to fund the Bureau of Ocean Energy Management, Regulation, and Enforcement (BOEMRE) in fiscal 2012. Oil companies operating in deepwater and offshore drilling contractors will be watching closely to see how Congress responds.

Following the April 2010 blowout of the Macondo well and the resulting oil spill in the Gulf of Mexico, government officials have acknowledged BOEMRE, formerly the Minerals Management Service, historically was underfunded. Lack of funding reportedly has hindered the agency's regulatory oversight of oil and gas activities.

Industry spokesmen have told OGJ that BOEMRE needs technically savvy inspectors and engineers who can keep up with deepwater drilling advances. BOEMRE also needs enough people to help streamline the approval process for deepwater drilling permits.

The requested BOEMRE budget marks a 50% increase above the 2010 funding level after adjusting for the reorganization of the MMS. Additional funding would be used to hire more inspectors, engineers, scientists, and others to oversee industry operations and to review offshore safety systems.

Industry agrees that BOEMRE needs more people. One issue that cannot be resolved by any budget request is the question of how to recruit and train additional BOEMRE inspectors so that they can be brought up to speed on the complex drilling equipment that they will be inspecting.

Real-time IT becoming more important to drilling contractors

Real-time drilling information is become more important to contractors and operators following the April 2010 deepwater Macondo well blowout and resulting explosion and fire on Transocean Ltd.’s Deepwater Horizon semisubmersible, speakers acknowledged at a recent energy forum in Houston.

Investigators looking into the cause of the accident have questioned who had access to what drilling information about the Macondo well and the timing of that information. The blast killed 11 crew members, and the semi later sank. Industry and government jointly responded to a massive oil spill in the Gulf of Mexico.

During a Feb. 2 panel discussion on consolidation within service companies, Amy Meyers Jaffe of Rice University’s Baker Institute suggested “the better players” among drilling contractors are going to offer top-notch information services.

“I see a real push post-Macondo for real-time information,” said Jaffe. She moderated the panel discussion during an Energy Mergers and Acquisitions Forum sponsored by Mergermarket.

William D. Marsh, Baker Hughes Inc. vice-president legal-Western Hemisphere, agreed that software and IT is becoming much more important to Baker Hughes and its competitors.

Lackland H. Bloom, a managing director with J.P. Morgan, said that IT remains the domain of major service companies. He described “isolated circumstances” for information-services companies outside the oil and gas industry to gain exposure within the energy industry.

Oil companies review their safety policies following Macondo spill

Oil and gas industry executives surveyed by Delotte LLP were about evenly split regarding whether changing US offshore regulations actually will improve drilling safety.

Of 201 executives polled earlier this month, 41% said yes while 42% said no. The rest said they don't know.

Regarding future corporate health and safety policy, 57% said their companies are more likely to review and update HSE policy as a result of BP PLC's Macondo well blowout and the resulting explosion and fire on Transocean Ltd.'s Deepwater Horizon semisubmersible. The accident triggered a massive oil spill in the Gulf of Mexico.

Nearly 60% of those polled said any improvements in drilling safety will come from the industry itself rather than from government regulations or third-party insurance and financing requirements.

Macondo oil spill highlights gulf coast vunerabilities

Hurricanes and oil spills along the Gulf of Mexico typically bring renewed attention to the region’s disappearing wetlands and its fragile barrier islands. Countless people saw many pictures of oily brown pelicans and their stained nesting grounds in the aftermath of the Macondo well blowout and subsequent oil spill.

An inaugural World Delta Dialogues conference in New Orleans during October focused on the Mississippi River Delta where an estimated 25 sq miles/year erodes into open water. Some 350 people, including representatives from oil companies, attended the conference organized by America’s Wetlands Foundation.

Entergy Corp., a nuclear power provider, used the conference as a forum to release a study entitled “Building a Resilient Energy Gulf Coast.” America’s Energy Coast and America’s Wetlands Foundation supported the study. Entergy helped commission the study done by McKinsey & Co. and Swiss Re.

Global warming, rising sea levels, subsidence, and stronger, more frequent hurricanes all make the gulf coast vulnerable, said Wayne Leonard, Entergy chairman and chief executive officer. He called the study a “call to arms” for governors, lawmakers, and oil and gas companies.

The study examined potential benefits of various options, including changes in levees and coastal building codes along with changes in offshore drilling practices and production platform standards.

The study examined coastal counties and parishes along Texas, Coastal Mississippi, and Alabama where energy is key to the economy. A study executive report said that the gulf region averages losses of $14 billion/year, and that those losses are expected to climb in coming years.

Helix Q4000 is a key player in oil spill response

The Helix Q4000 multiservice vessel certainly has laid its claim to fame during the highly publicized oil spill response and containment efforts involving BP PLC’s Macondo well in the Gulf of Mexico off Louisiana.

The Q4000 has performed numerous roles since the Apr. 20 blowout of the deepwater well. Cranes on the Q4000 lowered equipment to the seabed in 5,000 ft of water. The vessel also served as a receiving platform for oil and gas diverted from the spill, and was home to the equipment that then flared that oil and gas. It’s also been used to inject heavy drilling mud into the Macondo during the top kill and now the static kill efforts.

When BP pumped cement into the Macondo well from the top, the Q4000 was involved. Owned by Helix Energy Solutions Group, the Q4000 was commissioned in 1999 by Cal Dive International and built at Keppel AmFELS shipyard in Brownsville, Tex.

The Q4000 is built on a semisubmersible design featuring a large deck space that enables various tasks, including subsea completion, decommissioning, and handling coiled tubing.

For now at least, the Q4000 has become a household word for anyone closely following the oil spill response efforts. That’s pretty remarkable publicity for an oil service vessel.

NOAA tracking spilled Macondo oil and its consequences

National Oceanic and Atmospheric Administration scientists are working throughout the Gulf of Mexico to assess where spilled Macondo oil has gone, where it might go, and to figure out the extent of any potential damages to the gulf ecosystem.

During a news conference on July 27, NOAA Administrator Jane Lubchenco said preliminary findings indicate the light crude has been biodegraded quickly by naturally occurring bacteria that is abundant in the warm-water gulf.

“We do know that over 600 miles of the gulf coast shoreline have already been oiled, and some [oil] remains on the surface although the amount on the surface is less and less,” Lubchenco said. “Recent satellite imagery indicates surface oil is continuing to break up into smaller scattered patches,” that are predominantly light sheens containing little recoverable oil.

NOAA scientists are studying short-term and long-term impacts. Four NOAA vessels, two aircraft, and five sea turtle rescue boats currently are busy with missions ranging from seafood safety to detecting submerged oil.

The NOAA ship Nancy Foster is using a remotely operated vehicle to monitor deep water bottom and coral habitats exposed to the oil dispersant mixture. The NOAA ship Oregon II is collecting samples of fish and shrimp off Louisiana that will be tested for contaminants.

A Twin Otter aircraft is using a multispectral scanner to measure surface oil density and thickness, and a second Twin Otter is providing aerial observations and surveys of dolphins, whales, and sea turtles in the area of the spill.

Gulf of Mexico becomes science laboratory for dispersants

President Barack Obama requested $2 million in supplemental federal funds for dispersant research associated with the oil spill in the Gulf of Mexico. Record volumes of dispersants have been used on the gulf's surface and in the subsea at 5,000 ft of water. Most previous research on dispersants involved laboratory testing, but the spill resulted in scientists monitoring the effects of chemical dispersant on a much grander scale.

Lisa P. Jackson, administrator of the US Environmental Protection Agency, testified on July 15 before a subcommittee of the Senate Committee on Appropriations about the request for funding dispersant research.

Dispersants played a big role in the Macondo oil spill response efforts. Scientists and others are studying the effects that dispersants might have on marine life. Federal officials and Louisiana state officials granted BP authorization to use approved dispersants to break down the oil into smaller drops.

In May, EPA and the US Coast Guard issued a directive requiring BP to implement a monitoring and assessment plan for subsurface and surface applications of dispersants. Federal authorities on May 26 asked BP to significantly decrease the overall volume of dispersants being used.

“Since that directive, we have seen the total volume of dispersants used fall by almost 70% from their peak levels,” Jackson said. EPA set up an extensive network to monitor the air, water, and sediments for the presence of dispersants and crude oil components.

The next phase of EPA’s testing will assess the acute toxicity of multiple concentrations of Louisiana sweet crude oil alone and combinations of Louisiana sweet crude oil with dispersants.

Is GOM drilling moratorium hurting or helping rig safety?

The International Association of Drilling Contractors (IADC) is urging its members to contact federal lawmakers to convey IADC’s dismay regarding the blanket suspension of deepwater drilling in the Gulf of Mexico.

IADC Chairman Louis A. Raspino said uncertainty from Washington, DC, regarding deepwater drilling threatens the future of the US offshore drilling industry. Raspino, chief executive officer and president of Pride International Inc., spoke during an IADC town hall meeting in Houston on July 7.

The Interior Department imposed a 6-month moratorium on new deepwater drilling in the gulf following an Apr. 20 explosion and fire on the Deepwater Horizon semisubmersible drilling rig, which was working for BP PLC and partners on the Macondo well in 5,000 ft of water on Mississippi Canyon Block 252.

“Just about every rig sitting in the gulf right now is trying to find a way out of the gulf,” Raspino said. A federal judge in New Orleans issued a temporary injunction that effectively blocks the drilling moratorium, but the federal government is appealing that ruling to the appeals court.

Raspino and others speaking at the meeting all emphasized the importance of rig safety, but they also suggested that the motivation behind the moratorium was more about anti-drilling politics than it was about rig safety.

The moratorium is more likely to reduce safety than to improve safety, said Tom E. Williams, a member of a team of scientists advising Secretary of the Interior Ken Salazar. Williams is managing director of Nautilus International LLC.

Several others at the town hall meeting emphasized that the US has higher environmental standards and drilling safety regulations than do many other countries.

“The national security issue is not even being discussed,” in Washington, Raspino said regarding the likelihood that a decrease in US drilling will contribute to higher US dependence upon imported oil.

Surveys show “sea of discontent” with subsea equipment

EnergyPoint Research Inc. reports its oil field service surveys suggest oil companies are significantly less satisfied with equipment available for subsea and deepwater projects than with equipment for surface-based applications.

“As the industry searches for ways to avoid a repeat of the catastrophe in the Gulf of Mexico, it may prove helpful to develop a more thorough appreciation of what drives the lower scores for subsea equipment,” EnergyPoint Research said on June 10.

“Data indicate customers see subsea blowout preventers, wellheads and trees, and riser and flexjoints as particularly lacking,” said EnergyPoint Research, suggesting this dissatisfaction stems in part from rapid growth within the subsea business. “Notably, ratings for subsea BOPs trail those of surface BOPs by material margins.”

Meanwhile, remotely operated vehicles received the highest long-term ratings of any subsea product category EnergyPoint tracked in its survey. The findings stem from more than 5,600 customer evaluations of oil field product suppliers since 2005.

Indeed, ROVs have proved to be the workhorses in dealing with the failed BOP and resulting oil spill in the gulf since the Apr. 20 deepwater Macondo well blowout and resulting explosion and fire to Transocean Ltd.’s Deepwater Horizon semisubmersible. BP PLC operates Macondo on Mississippi Canyon Block 252.

BP flooded with thousands of ideas on how to stop oil spill

Drilling and well-control experts aren’t the only ones with ideas about how to resolve the oil spill in the Gulf of Mexico. BP PLC, operator of the runaway Macondo well, reports it received some 40,000 ideas on the evolving situation since the Apr. 20 deepwater blowout.

“A lot of people have had some really good ideas,” Kent Wells, BP senior vice-president of exploration and production, said during a June 7 technical briefing in Houston. Some ideas “were bang on” he said, adding they suggested similar strategies as the ones already being developed by industry experts and federal scientists.

Some ideas were good but would not work in 5,000 ft of water, he said, adding other ideas were very creative and held potential, but they would have taken too long. Although none of the ideas from the public yet have proven to be game changers providing instant answers, BP found them to be useful.

“They have helped us rethink things, Wells said. “They’ve helped us tweak things.”

Some ideas, such as using explosives, were impractical, Wells said. BP received ideas on how to stop the flow as well as suggestions for collection systems and how to prevent the formation of gas hydrates.

Process management proving key in oil spill response

BP PLC executives painstakingly examined each part of each step in the “top kill” operation they started May 26 in efforts to halt the flow of oil and gas from a deepwater runaway well. Meanwhile, the public grows increasingly impatient for an end to the oil spill.

The longer it takes to stem the leaking Macondo well in 5,000 ft of water off Louisiana, the more detailed information BP is releasing about the process management behind each option being considered.

On its web site, BP posted illustrations showing a fleet of specialized vessels on the surface standing ready to do the top kill work. Progress at the seabed was monitored via video from numerous remotely operated vehicles. An illustration of subsea activity for the top kill emphasizes the complexity and the safety issues involved in deepwater efforts.

Doug Suttles, chief operating officer for BP Exploration & Production, told reporters that nothing is simple in 5,000 ft of water, and that any individual step can take longer than expected.

“I wish this thing would come to an end and come to an end very quickly,” Suttles said during a May 24 news conference from Robert, La. “I think everyone is very, very frustrated.”

What the public is learning is that nothing in the deepwater oil spill response effort happens instantly. Every decision is being made with much deliberation between BP, scientists, industry experts, and government officials.

So far, testimony from regulatory investigations primarily has involved talk about equipment. But I suspect process management issues also will come into play as regulators and companies figure out exactly what happened so that such an accident can be avoided in the future.

BP sets up numerous hotlines to deal with oil spill

I have received several emails from people with suggestions on how to stop the flow of oil leaking from BP’s deepwater Macondo well on Mississippi Canyon Block 252. Other readers are emailing me with questions about how they can volunteer or telling me that they have boats available to use in the Gulf of Mexico oil spill response.

BP has set up a number of hotlines for people to call with various offers or with damage claims:
--To report oiled shoreline or request volunteer information, call 866-448-5816.
--To submit alternate response technology, services, or products, call 281-366-5511.
--To submit your vessel to help with skimming, call 281-366-5511.
--To submit a claim for damages, call 800-440-0858.
--To report oiled wildlife, call 866-557-1401.

Some readers are asking why I am not reporting about oiled birds. The short answer is that there were few oiled birds as of early May. BP is working with various wildlife response organizations to ensure quality care for any oiled wildlife.

The first oiled bird to be recovered was a northern gannet, a seabird. It was caught on Apr. 30 and treated by Tristate Bird Rescue and Research, a company of bird experts hired by BP to rehabilitate wildlife.

Expertise and training is required to properly feed, hydrate, and clean oiled birds. The Joint Information Center is advising the public against attempting to rescue oiled or injured birds. People instead are urged to call the Oiled Wildlife hotline at 866-557-1401.