WORLD: Disaster Plans Lacking at Deep Rigs

Publisher Name: 
Wall Street Journal
[DeepwaterJmp2]Associated Press

The
Deepwater Horizon oil rig burns in the Gulf of Mexico on April 21.

A huge jolt convulsed an oil rig in the Gulf of Mexico. The pipe down
to the well on the ocean floor, more than a mile below, snapped in two.
Workers battled a toxic spill.

That was 2003-seven years before
last month's Deepwater Horizon disaster, which killed 11 people and sent
crude spewing into the sea. And in 2004, managers of BP PLC, the oil giant
involved in both incidents, warned in a trade journal that the company
wasn't prepared for the long-term, round-the-clock task of dealing with a
deep-sea spill.

It still isn't, as Deepwater Horizon demonstrates
and as BP's chief executive, Tony
Hayward
said recently. It's "probably true" that BP didn't do
enough planning in advance of the disaster, Mr. Hayward said. There are
some capabilities, he said, "that we could have available to deploy
instantly, rather than creating as we go."

It's a problem that
spans the industry, whose major players include Chevron Corp, Royal Dutch Shell and
Petróleo Brasileiro SA. Without adequately planning for trouble, the
oil business has focused on developing experimental equipment and
techniques to drill in ever deeper waters, according to a Wall Street
Journal examination of previous deepwater accidents. As drillers pushed
the boundaries, regulators didn't always mandate preparation for
disaster recovery or perform independent monitoring.

The brief, roughly two-decade history of deepwater drilling has seen
serious problems: fires, equipment failures, wells that collapsed,
platforms that nearly sank. Since last July, one brand-new deepwater
rig-among the 40 or so operating in at least 1,000 feet of water in the
Gulf-was swept by fire. Another lost power and started to drift,
threatening to detach from the wellhead. Poor maintenance at a third
deepwater well led to a serious gas leak, according to regulatory
records.

By some measures, offshore drilling has become safer in
recent years. Industry backers argue that major accidents are rare. The
rate of serious injuries in U.S. waters fell 71% between 1998 and 2008,
and the number of serious oil spills has also been falling once
hurricanes are taken into account. Moreover, deepwater drilling is by
some measures safer than drilling in shallower waters, where rigs are
often older and operated by smaller companies.

Still, drilling
for oil at depths no human could survive presents special risks when
something does go wrong. The water pressure is crushing, the seabed
temperature is almost freezing, the underground conditions explosive.
The rapid push into deeper water means that some projects rely on
technology that hasn't been used before.

"It's like outer
space, in terms of the complexity of the operating environment," said
Robin West, who helped oversee offshore-drilling policy under President
Ronald Reagan and is now chairman of PFC Energy, a consulting firm.

In
2008, Chevron was plagued with accidents while using the Discoverer
Deep Seas rig in more than 7,000 feet of water in the Gulf. There was a
fire, then a leak deep under the sea. Finally the cement and steel
casing inside the well collapsed, allowing drilling fluid to flow out of
control. Workers stopped the flow only by permanently plugging the
well.

Chevron says the well was "safely and permanently"
abandoned after the problems. "One of Chevron's core values is the
safety of our employees, contractors and neighbors," Chevron spokesman
Kurt Glaubitz said. "It is fundamental to how we operate."

BP has
led the charge into the deepest, most challenging environments. Last
week Mr. Hayward, the CEO, said, "It's clear that we will find things we
can do differently."

As companies have moved farther offshore,
drilling has gotten increasingly expensive. BP was paying nearly
$500,000 a day to lease the Deepwater Horizon from Transocean Ltd. and paid
roughly that much again for other equipment and services.

One of the most serious safety hazards on rigs are "blowouts," the
uncontrolled flows of oil and natural gas like the one that brought down
the Deepwater Horizon. They remain relatively rare, but no more so than
in the 1960s, when equipment was much more primitive.

That's in
part because, even as the gear used to fight blowouts has improved, the
industry has steadily pushed into deeper waters.

"While drilling
as a whole may be advancing to keep up with these environments, some
parts lag behind," Texas A&M professors Samuel Noynaert and Jerome
Schubert wrote in a 2005 paper published in an industry journal. "An
area that has seen this stagnation and resulting call for change has
been blowout control in deep and ultra-deep waters."

The
professors declined to comment for this article.

Serious accidents
like the Deepwater Horizon have been rare, but not unheard of. In 2001,
an oil-and-gas-production platform off Brazil's coast exploded and
ultimately sank, killing 11 people.

Offshore drilling is almost as
old as the oil industry itself. In the 1890s, companies began
prospecting for oil from piers extending off the beach near Santa
Barbara, Calif. In 1947, Kerr McGee Corp. (which was later acquired by
Anandarko Petroleum Corp.) drilled the first well out of sight of land,
in the Gulf of Mexico.

In the past decade or so, what had been a
steady march into deeper water turned into a sprint, as easier-to-find
oil fields dwindled. In 1996, Royal Dutch Shell broke new ground with
its Mars platform, which floated in 3,000 feet of water. A decade later,
wells in 5,000 feet of water-almost a mile deep-were so common as to be
considered relatively routine. Several rigs working today can drill in
water as much as 12,000 feet deep, more than two miles above the ocean
floor.

DeepwaterJmp3 Associated Press

Petrobras' P-36 platform offshore Brazil in the
process of sinking after explosions in 2001

Shell says it has operated in the Gulf for five decades without "a
significant offshore well incident or platform spill in the deep water
Gulf of Mexico."

Drilling in deeper water doesn't change the
fundamental process, but it makes virtually everything harder. Rigs must
be bigger so they can hold more drilling pipe to stretch vast
distances. The pipes themselves must be stronger to withstand ocean
currents. Equipment on the sea floor must be sturdier to face extreme
pressures at depth.

Drill bits must be tougher so they don't melt
in the 400-degree temperatures they encounter deep in the earth. And it
is harder for drillers to exert just the right amount of pressure down
the well bore, enough to keep oil and gas from spurting upwards-a
blowout-but not so much that they crack open the rocks beneath the
surface, which could also lead to a blowout.

The use of untested
techniques has raised alarm bells among some engineers. In a paper
published in a trade journal last year, three industry engineers in
Denmark noted that many deepwater projects are "dependent on prototype
and novel technologies." They said, "there is significant uncertainty
related to the performance of these systems," because they haven't been
tested in real-world settings.

They couldn't be reached for
comment.

BP discovered that in 1999 at its Thunder Horse offshore oil field in
the Gulf of Mexico, where managers say hundreds of pieces of equipment
had to be created from scratch.

Not all the brand-new systems
worked. Thunder Horse had a near disaster in 2005, when a faulty control
system opened valves and allowed water to flood into the hull of a
drilling platform there. The multibillion-dollar platform almost sank.
BP spent months fixing equipment damaged in the flood.

And in
2006, as Thunder Horse was getting close to completion, workers
discovered a leak in one of the huge sets of valves on the seafloor that
control the flow of oil and gas from the wells. An investigation found
minute cracks in a protective coating on some of the pipes, allowing
corrosion that could, ultimately, have led to breakage of the pipes. BP
had to pull the equipment back to the surface for repairs, delaying the
project for months and raising the costs.

Equipment failure was
also to blame in the case of the Discoverer Enterprise, the rig that ran
into trouble in 2003 when the "riser," the pipe down to the seafloor,
snapped in two. That left the Enterprise floating free, with no
immediate way to control the well sitting on the sea floor more than a
mile below. That well, investigators later concluded, had the potential
to spew more oil in one week than was spilled in 1989 by the Exxon
Valdez, which ranks as one of the worst U.S. oil spills to date.

In
a 2004 article in a trade journal, two BP managers evaluated the
company's response to the Discoverer Enterprise incident. Their
conclusion: Although the company's initial reaction was strong, it had
"less focus" on the longer term and wasn't prepared for the nearly two
weeks of round-the-clock response even the fairly small spill required.

A BP spokesman said it follows a
"tried-and-tested approach to incident management."

Catastrophe
was averted in the Discoverer Enterprise case because, unlike at the
Deepwater Horizon, the well's "dead-man switch" was triggered when the
riser broke. A powerful contraption known as a blowout preventer sheared
off the pipe and sealed off the well. Some 2,450 barrels of drilling
fluid inside the riser spilled into the Gulf, but the well itself was
secure.

Today, the Discoverer Enterprise is located at the site
where the Deepwater Horizon sank, sucking up oil from the still-leaking
well through a special tube.

Drilling companies have pushed the
limits of technology in blowout preventers, also known as BOPs. Multiple
technical papers have called into question whether the shears are
powerful enough to cut through the tough steel used in modern drilling
pipe at the deepest wells. A 2004 study commissioned by federal
regulators found that only three of 14 newly built rigs had shears
powerful enough to cut through pipe at the equipment's maximum water
depth.

"This grim snapshot illustrates the lack of preparedness in
the industry to shear and seal a well with the last line of defense
against a blowout," the study said.

Andy Radford, a policy adviser
for the American Petroleum Institute, said the group recommends that
all blowout preventers be equipped with shears powerful enough to cut
through the pipe being used.

Some subsequent studies, including a
2007 paper co-authored by a BP engineer, have echoed those concerns.
"The use of higher strength, higher toughness drill pipe ... has in some
cases exceeded the capacity of some BOP shear rams to successfully and
or reliably shear drill pipe," the 2007 paper said.

When things go wrong in deep water, the problems are harder to solve.
"If we can touch the wellhead, we have a really super high chance of
making the flow stop," said Daniel Eby, vice president of Cudd Well
Control, a contractor that helps oil companies stop out-of-control
wells. "The problem comes when you can't touch it. And when you put that
wellhead in 5,000 feet of water, we can't touch it."

The current
crisis is widely expected to send insurance costs higher for deepwater
drilling. Lloyd & Partners Ltd., a London broker, recently said it
would cut back the amount of pollution insurance it offers to oil
companies by a third. In general, rates have risen for all drilling rigs
in recent years due to hurricane damage and other issues, but haven't
been consistently higher for deepwater rigs than for those in shallower
water.

Government regulators have long known that the deepwater
presents special challenges. After the 2003 accident on the Discoverer
Enterprise, researchers from the National Oceanic and Atmospheric
Administration conducted a study looking at how to tell where oil from
an undersea spill would reach the surface, and how to better coordinate
with workers respondomg to a spill.

The Minerals Management
Service, the government agency that oversees offshore drilling, in
recent years moved away from requiring specific safety measures in
offshore drilling and instead set broad performance goals that it was up
to the industry to meet.

MMS declined to make an official
available for an interview for this article. In a statement, the agency
said it's reviewing its oversight in light of the disaster.

In
joint MMS-Coast Guard hearings into the Deepwater Horizon accident,
Michael Saucier, an MMS official, testified that the agency "highly
encouraged," but didn't require, companies to have back-up systems to
trigger blowout preventers in case of an emergency.

"Highly
encourage? How does that translate to enforcement?" Coast Guard Capt.
Hung Nguyen, who is co-chairing the investigation, asked at the
hearings.

"There is no enforcement," Mr. Saucier replied.

Coast
Guard Lt. Cmdr. Michael Odom, who oversees Coast Guard inspections (the
Coast Guard inspects oil-company vessels above the water, while the MMS
oversees drilling) testified that current regulations for offshore
drilling may be out-of-date. He said many regulations were written years
ago, and focused on near-shore drilling operations.

"The pace of
technology has definitely outrun the regulations," Mr. Odom said at the
hearing.

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