wsj-close calls

8/2/2019 WSJ-Close Calls

1/4

Far Offshore, a Rash of Close CallsBy Russell Gold and Ben Casselman2,236 words9 December 2010The Wall Street JournalJA1English(Copyright (c) 2010, Dow Jones & Company, Inc.)The oil industry has said the Deepwater Horizon rig catastrophe was a unique event, the result of anunprecedented series of missteps that are unlikely to be repeated. The recent history of offshore drillingsuggests otherwise.In the months before and after the rig exploded and sank, killing 11 and spilling millions of barrels of oil intothe Gulf of Mexico, the industry was hit with several serious spills and alarming near-misses, some of themstrikingly similar to what happened aboard the Deepwater Horizon.

A blowout off the coast of Australia left oil flowing into the Timor Sea for weeks. An out-of-control well in theGulf of Mexico dislodged a 4,000-pound piece of equipment on the deck of the Lorris Bouzigard drilling rigas workers scurried to safety. A gas leak in the North Sea aboard a production platform came within a roguespark of a Deepwater Horizon-scale disaster off the coast of Norway.Data from regulators around the world suggest that after years of improvement, the offshore-drillingindustry's safety record declined over the past two years.The Wall Street Journal reviewed statistics from four countries with large offshore oil industries and modernregulatory systems: the U.S., Great Britain, Norway and Australia. (A fifth, Brazil, declined to make its dataavailable.) Each country uses different approaches to measure losses of well control or spills, but they reveala similar trend.In the U.S. portion of the Gulf of Mexico in 2009, there were 28 major drilling-related spills, natural-gasreleases or incidents in which workers lost control of a well. That is up 4% from 2008, 56% from 2007, and

nearly two-thirds from 2006. Taking into account the number of hours worked on offshore rigs, the rate ofthese incidents rose every year from 2006 to 2009.The U.K.'s Health and Safety Executive counted 85 serious oil and gas releases in the 12 months endedMarch 31, up 39% from a year earlier. Taking into account the number of hours worked offshore, the rate ofincidents was the highest since 2004-05.In Norway, companies had 37 oil and gas releases and "well incidents" in 2009, according to the country'soffshore regulator. That is up 48% from 2008 and is the highest level since 2003. Norway's rate of incidentsper man-hour rose 42% in 2009, to its highest level since 2005.In Australia in the first half of this year, there were 23 oil spills, gas releases and incidents in which oil or gasentered a well, threatening a blowout, according to Australia's National Offshore Petroleum Safety Authority.That is almost as many as the 24 such incidents in all of 2009. The incident rate, accounting for hoursworked, has more than doubled since 2005."Why does the safety performance of the offshore industry seem to be deteriorating?" asks Jane Cutler, aformer oil executive who now heads Australia's offshore regulator. Her answer: "People can forget to beafraid."The American Petroleum Institute, which represents the U.S. oil industry, cautions against reading too muchinto the statistics. "Drawing sweeping conclusions from a limited analysis of this data is simply not valid," theinstitute said in a statement. In the past, API experts have pointed to other data that indicate the industry'srecord is improving, such as a steady decline in the volume of oil spilled each year."I do not believe there is an outbreak or a rash of accidents," says Lee Hunt, president of the InternationalAssociation of Drilling Contractors, a trade group. "When they do happen, there is generally a high level of

Page 1 of 4 2012 Factiva, Inc. All rights reserved.


2/4

competency demonstrated in resolving the situation successfully."Still, oil companies that drill around the world are re-examining their procedures, in large part out of fear thata mistake could lead to their own costly disaster. BP Plc has estimated that the Gulf spill will cost thecompany and its partners, which owned the blown-out well, $40 billion.There are various possible explanations for the recent spate of problems. Investigations into the DeepwaterHorizon and some other recent incidents have pointed to the industry's difficulties finding and retaining

enough experienced workers, its struggles to balance safety priorities with profit demands, and occasionallapses in the face of lax regulation. These challenges have become more pronounced as oil companiescontinue to push the limits of technology and experience in deeper water, harsher environments and morecomplex oil reservoirs, the investigators say.Nevertheless, investment in deep-water oil is speeding up. Drilling there is critical to sating the growingglobal thirst for fuel. The potential payoffs -- shareholder profits for oil companies, tax revenue, jobs andenergy independence for governments -- are too big to stop offshore development.The Obama administration ended its six-month moratorium on deep-water drilling in October, one monthahead of schedule, although it has reversed plans to expand drilling into new areas. The European Unionbriefly considered its own moratorium, but backed down under pressure from member nations that saidexisting regulations were sufficient."Onshore oil production is decreasing. Shallow water is decreasing. Deep water is the only place that isincreasing," says Rafael Sandrea, an industry consultant. "That is why everyone is heading in that direction."

Since the Deepwater Horizon blowout, industry and regulators have promised to take steps to preventanother such disaster. New rules are being developed for the Gulf of Mexico. In the U.S. and Europe, newrapid-response systems are in the works to contain deep-water oil leaks.The industry's faith in its ability to safely develop oil and gas from facilities at sea is largely unshaken. TheDeepwater Horizon "was an isolated incident," says Erik Milito, a senior official at the American PetroleumInstitute. "We do not believe there is a systemic failure across the industry."The industry points to a lengthy track record -- 50,000 wells drilled in the Gulf of Mexico without acatastrophe similar to what unfolded earlier this year.But some experts say such statistics mask the increasing challenge of offshore drilling. With each passingyear, the wells are getting more complex because the easy drilling locations already were tapped. Most ofthose 50,000 wells were easy compared to the Deepwater Horizon's well.

David M. Pritchard, a petroleum engineer and consultant, studied a database of 5,000 Gulf of Mexico wellssince 1993. The data is compiled by industry to allow companies to compare their performance against theirpeers. The wells are indexed by drilling difficulty. Mr. Pritchard looked for wells that were at least as complexas the well the Deepwater Horizon was trying to drill. He found 43."What is the real risk of occurrence of a catastrophic failure? Is it one in 50,000, or is it now one in 43?" asksMr. Pritchard. He says he worries the industry is in "total denial" about the risks it faces.The American Petroleum Institute says it is looking at Mr. Pritchard's research as part of a wide-rangingexamination of deep-water well-design issues. It expects to issue recommendations next year.The Deepwater Horizon isn't the only offshore oil facility to run into problems recently. Several lower-profileincidents illuminate the industry's growing struggle to manage deep-water risks.On April 19, 2009, almost exactly a year before the Deepwater Horizon exploded less than 20 miles away,another Gulf drilling rig was rocked by a violent blast. Noble Corp.'s Lorris Bouzigard rig was working in morethan 2,000 feet of water when a bubble of explosive gas raced up the well, pushing ahead of it heavy drillingfluid and knocking out of place a two-ton piece of metal, according to a subsequent federal investigation. Rigworkers recalled a "deafening roar" and struggled to regain control as other crew members rushed tolifeboats.The workers were able to trigger a massive set of valves called the blowout preventer, shutting off the well,and the gas dispersed without igniting. No one was injured.Federal investigators concluded that, as was the case with the Deepwater Horizon, the rig's crew didn'timmediately detect gas entering the well, in part because computer screens in the control room weren't



3/4

configured to show problems clearly. Moreover, investigators said, workers for the well's owner, LLOGExploration Co., had made a last-minute procedural change, eliminating a step that might have cleared gasout of the well.Bob McMann, vice president of drilling for Covington, La.-based LLOG, says the company accepts most ofthe investigators' findings, including its workers' failure to follow the planned procedure. He says the incident"wasn't even close" to being a major disaster, and credited workers' training and skill with resolving thesituation quickly. Noble declined to discuss the incident.

Several months later, on the other side of the world, workers failed to contain another big problem. On Aug.21, 2009, a Thai company drilling in the Timor Sea 400 miles west of Darwin, Australia, lost control of an oilwell being drilled from its Montara platform.The operator, a unit of state-controlled PTT PCL, had completed drilling a 12,450-foot well in March 2009and temporarily shut it down. PTT returned in August and began work to connect the well so it could produceoil.A few hours after the well was reopened, it burped about 50 barrels of oil and an undetermined amount ofgas. After alarms died down, work resumed. Two hours later, a major blowout occurred. The well spilledseveral hundred barrels a day of oil into the sea for six weeks. A fire melted the drilling rig and platform,causing an estimated $150 million in damage.An Australian government report on the incident made public last month criticized PTT for "widespread andsystemic" shortcomings. The blowout, it said, was "an accident waiting to happen." Investigators said that

local regulators were too cozy with PTT and didn't engage in rigorous oversight, a charge similar to oneleveled at U.S. regulators in the aftermath of the Deepwater Horizon spill.Another similarity between the PTT and BP spills: Workers missed a key opportunity to discover the problemusing a pressure test. In the case of the PTT blowout, workers didn't run a pressure test that could haveshown them the well was leaking, according to the government investigation. In the case of the DeepwaterHorizon, workers did run such a test, but misinterpreted the results, in what both BP and outsideinvestigators have described as a crucial mistake.Ms. Cutler, the Australian federal offshore regulator, blames the PTT accident on "incompetent personnel,staff and contractors." PTT has acknowledged "deficiencies" and promised a new commitment to safeoperations, according to a statement.On May 19 of this year, a month after the Deepwater Horizon accident, with the industry under world-widescrutiny and the BP well still gushing, another major offshore disaster was narrowly avoided. This occurredaboard the Gullfaks C producing platform off the coast of Norway, a country considered to have high

standards for safe and environmentally responsible offshore exploration.A 16,000-foot well being drilled from the platform encountered a series of well-control problems, includingtwo serious gas influxes, but the operator, Statoil ASA, pressed on. An internal Statoil report from Novembersays its workers didn't notice when pressure on the pipe increased, a clear sign of trouble.Eventually, the pipe burst and heavy drilling mud began leaking out of the well into underground rocks. Theloss of mud left less weight inside the well, allowing oil and gas to force their way up toward the surface.Fortunately, the oil carried solids along with it, plugging up the holes in the pipe and stopping the flow on itsown."It is as close as you can be to an explosion," says Goril Tjetland, a former Statoil petroleum geologist whonow works with the Bellona Foundation, a Norwegian environmental-advocacy group.Norway's offshore regulator, the Petroleum Safety Authority, concluded that Statoil hadn't assigned workers

with the right experience to the project, which involved a particularly difficult type of drilling. "Only chance . . .prevented the incident from developing into a major accident," the regulator concluded in a report. Alarmedby a rise in such incidents, the regulator noted that "limited competence may be a contributing factor."The industry and its backers point out that none of the three incidents rival the Deepwater Horizon in scopeor damage. In fact, they say, the mishaps show how in most instances, procedures and technology in placesaved the day or mitigated the damage.Some experts say the spate of accidents shows that the Deepwater Horizon wasn't an isolated event, andthat by describing the disaster as a "low probability, high consequence event," the industry has blinded itselfto the likelihood that such accidents will recur.Page 3 of 4 2012 Factiva, Inc. All rights reserved.


4/4

"This accident was bound to happen," says Nancy Leveson, a Massachusetts Institute of Technologyprofessor and engineering safety expert who has studied the Deepwater Horizon disaster. "It might nothappen on that day. It might not happen on that rig. But it was bound to happen."

License this article from Dow Jones Reprint ServiceDocument J000000020101209e6c90002j

http://www.djreprints.com/link/DJRFactiva.html?FACTIVA=wjco20101209000098http://www.djreprints.com/link/DJRFactiva.html?FACTIVA=wjco20101209000098

wsj-close calls

Documents