Transocean semi fire in BP's GoM operations

Hi passinthru,

Unlikely that either will be 'proved right'. Anadarko are too valuable a customer to Noble.

Fair point of course -and one that will apply to many players in this.

If, of course, contracts are that flexible re location, then one can see why Noble would make their claim. For example, arguably Anadarko could use another deepwater rig off Mozambique  ;-)

rgds

ee

In reply to emptyend, post #313

3) there will be a further containment process undertaken in the coming week (no details given on the nature of that)

In the Kent Wells video, he indicated that once the LMRP cap was in place the choke & kill lines used for the top-kill operation, which were still in place and connected to a manifold, would be used to abstract further hydrocarbons to surface. I guess that when those lines are opened up it will reduce the pressure on the LMRP cap, reducing the rate of methane-hydrate formation, which may allow the cap to be sealed more tightly as well.

Cheers,

Mark

To my untrained eye it seems that the capture rate has improved from last night looking at http://www.freesharedata.com/bp-spill-cams. I have been trying to measure the distance the "plume" extends over the triangular "fangs" at the bottom of the LMRP.

Obviously very subjective and probably depends a lot on the angle of the shot but it looks to me like a lot more of white metal is being shown now.

So glass half full again let's assume the total flow rate is something like 15K. I think a lower bound of 12K was calculated and most people think it is 19K but I'll go for 15K to be optomistic.

We know they are capturing about 10K as of yesterday and they can improve on this a bit (I think they have judging by the "fang" test). So lets go for 12K from a tuned LMRP. They still have to connect up the choke and kill lines and take O&G off there and this might give them say another 2K( complete guess ). Optimistically then we could be down to 1-2K a day of spill for another 50days until they get the relief well drilled.

So let's assume the first 48 days spilt 15K/day then they have another 50 days at 2K this is a total spill size of 720 + 100K = 820K barrels. Pretty terrible but certainly not the armageddon - end of BP numbers that were once flying around.

They continue to skim/burn and disperce all the time.

To be honest my biggest worry is the oil getting into the marsh land which is indeed a terrible problem to cleanup. Human access is hard and also even when you get there removing the oil would be like trying to clean thousands of hectares of straw fields sprayed in oil with a toothbrush. This is not going to be easy or cheap.

I'm not dwelling too much on who is going to end up paying the most here. I can't see the other parties getting out of this scott free but until the court cases start it is pointless speculating.

My average is 533p and I might start to drip in a bit more once my bank pref dividends come rolling in again next month.

Log

In reply to loglorry, post #328

To be honest my biggest worry is the oil getting into the marsh land...

I know the Gulf Coast somewhat(having lived in Alabama for a couple of years) and it is pretty typically American (i.e. bigger than Blackpool).  My guess is that:

• the spill will be sufficiently contained/dispersed to make sure that not much hits the wetlands
• even if some gets in, it won't affect any sizeable percentage
• the oil that does get in will be dealt with by 'nature' - i.e. broken down by microbes, absorbed into soils etc

So, it is possible that the fuss at the moment is greater than the actual event warrants.  Nonetheless, it is the fuss that will drive the short term SP (while the real 'cost' will drive the longer term SP). 

I have bought some BP this morning.

AA

AA 

http://www.nytimes.com/2010/06/06/us/06rig.html

In reply to snaj, post #330

in the aftermath, arguments about who is in charge of the cleanup — often a signal that no one is in charge — have led to delays, distractions and disagreements over how to cap the well and defend the coastline.

AIUI the oil industry has been completely and utterly clear about who is in charge of the clean-up.....namely BP! There is no debate about that whatsoever.

However, the politicians have flip-flopped between a) saying that THEY are in charge (via Thad Allen) and b) seeking to dump on BP for not doing things as fast as they would like. They really can't have it both ways!

Interesting article, apart from that - wonder what SW10 and passinthru 's comments are?

In reply to snaj, post #330

Very interesting article (note that it is 4 pages long - easy to miss that and only look at the first page). These comments seem to substantiate some of passinthru's thoughts:

On April 1, a job log written by a Halliburton employee, Marvin Volek, warns that BP’s use of cement “was against our best practices.”

An April 18 internal Halliburton memorandum indicates that Halliburton again warned BP about its practices, this time saying that a “severe” gas flow problem would occur if the casings were not centered more carefully.

Around that same time, a BP document shows, company officials chose a type of casing with a greater risk of collapsing.

Despite noticing cementing problems, BP skipped a quality test of the cement around the pipe. Federal regulators also gave the rig a pass at several critical moments. After the rig encountered several problems, including the gas kicks and the pipe stuck in the well, the regulators did not demand a halt to the operation. Instead, they gave permission for a delay in a safety test of the blowout preventer.

An initial investigation by BP points to a range of missteps.

However, ISTM that the author misses the point that you can't simply "halt the operation". Operations being undertaken at the time of the accident had precisely that intent: to suspend the well! ISTM that there was something of a catch-22 situation: the BOP couldn't be safely tested because of ongoing operations to make the well safe, however, those operations were in themselves unsafe without a properly working BOP.

From the political POV this too is interesting:

But the partnership between BP and the government has strained along with the failure of efforts to plug the well. Mr. Salazar, for example, assured the public on May 2 that the administration was keeping its “boot on the neck” of BP. Next he was being publicly chastised by President Obama for using antagonistic language.

BP’s chief executive, Tony Hayward, told reporters at one point that the spill was “relatively tiny.” Federal officials soon released estimates indicating that the spill had far outpaced the Exxon Valdez disaster.

Under intense media scrutiny, at least a dozen federal agencies have taken part in the spill response, making decision-making slow, conflicted and confused, as they sought to apply numerous federal statutes.

 

Mark

In reply to snaj, post #330

That's a great article. It perfectly highlights the weakness of the legislation that covers these operations. How anyone can operate safely 'by exception' is unfathomable. One thing I've tended to take issue with in the reporting of all this stuff, is the underlying implication that these operations are too difficult, or inherently dangerous, or at the forefront of human technological endeavour. This is a misconception and it's simply not true. Just because economists or journalists or tv presenters don't understand the issues, doesn't mean that nobody else does! I'd like to be clear here; safety is not 'too hard'. Such an approach is a cop out, a lazy man's solution. These systems are hazardous, but they can be made safe by applying some basic principles that I tried to lay-out towards the beginning of this thread.

The absolutely crucial point identified in the article is in the testing of the BOP and the apparent federal authorisation to skip a test. This is unprofesional and potentially criminal. The test frequency has a huge impact on the theoretical safety of the item because of the time aspect of failures. The longer you leave something untested the more likely it is to fail on demand. A single skipped test would have an impact on the calculations and, unless Transocean performed new calculations for the new test frequency (and I VERY much doubt that they have), they are staring down the barrel of a gun. Cameron are probably in the clear if the contents of this article are accurate. They'll be riding into the sunset and buying up their own stock.

I really really would kill for a copy of the safety case. I hope it is made available during the trial(s).

Cheers,
ignatius

In reply to ignatius, post #333

I really really would kill for a copy of the safety case.

Oops.

I hope someone's done a risk assessment for that eventuality...

:-)

SW10

In reply to snaj, post #330

You almost get the impression from the article that drilling in the GOM is at best a very haphazard business. Can we put this to rest once and for all. Best practice - that which has been developed over many thousands of successful wells was not followed with this well. Barriers were not in place. Industry standards have been proved for the purpose of drilling. For the purpose of drilling in this depth of water and the consequences of the oil spill I will leave to the inquiry and inevitable change in procedures that will result.

I cannot speak for others, but during periods when I was aboard a rig, understanding that the conditions downhole were engineered to a known practice that should make the BOP irrelevant. Of course its nice to know it is there though and working! I might say at this time as many others I speak to (and friends at Total who will be reading this know) the BOP when retrieved to the surface might just show severe damage by tubulars from the well blowout rendering the BOP unusable. Not making excuses for Transocean as the BOP seems to have had some leaks anyway. Time and investigation will tell. And by the way, whenever I was on a drilling rig there was never any question on who was in charge of the downhole operations.

BP have been excellent in their response. However, they are too experienced not to have known from just hours after the blowout that cause and effect was going to land on their shoulders. Yes, they will try and recoup some costs from third parties, my own opinion is that the likes of Halliburton etc will bring logs and documentation of events to court pointing in a direction that BP will not like.

Looking ahead I see a fudge emerging whereby BP and others in the industry swallow some pride and absord costs by developing new systems and regulations and practice. These might be fine for all that happens above the sea bed. Salt drilling and multi system annular mud programmes aside, good engineering practice already exists.

As has been stated above, public relations need to be repaired and this will take years. Killing the well will take some pressure off.

passinthru

In reply to passinthru, post #335

when I was aboard a rig, understanding that the conditions downhole were engineered to a known practice that should make the BOP irrelevant. Of course its nice to know it is there though and working!

I agree.

BP have been excellent in their response.

I agree with that too. I think they've played an extraordinarily straight bat and (appear to) have hidden nothing about the event nor their subsequent efforts.

However, they are too experienced not to have known from just hours after the blowout that cause and effect was going to land on their shoulders. Yes, they will try and recoup some costs from third parties, my own opinion is that the likes of Halliburton etc will bring logs and documentation of events to court pointing in a direction that BP will not like.

I'm less sure about this. The thing that continues to bother me about this is the almost-exclusive focus on the engineering downhole. Note I use the word exclusive - I do accept that it has relevance.

It's the explosion

I still believe that the turning point in all of this was the explosion and I hope that the inquiry looks into that. If there wasn't an explosion, we'd have been in the unpleasant position of a well streaming thousands of barrels of oil and associated gas into the derrick. Nasty.

An evacuation would have taken place, power would have been shut down in some areas and the rig would have been able to remain on station with it's emergency crew. Footage of the blowout filmed from helcopters would have been all over screens and a backlas against Big Oil and BP would have been in full swing. Still no reason for a party.

BUT

But at least there would still have been a stable platform from which to address the problem, as well as an intact riser. Then the guys with fancy names and even fancier badges* could have had a go at bringing it under control.

It has happened

Consider that 33 years previously (almost to the day) the Ekofisk B blowout had an initial flow estimated at 28,000 bpd, with around 202,380 bbls released in total. The well was capped after just seven days.

Up to 30 to 40% of the oil evaporated after its initial release and the Norwegian Petroleum Directorate reckoned the total spill to have been between 80,000 bbls and 126,000 bbls, whilst rough seas and higher-than-average air temperatures aided the break up of much of the oil. There was no significant enviromental damage and no shoreline pollution.

Of course, Ekofisk is a platform rather than a floater, but the key remains that there was no fire. More here from the U.S. National Oceanic and Atmospheric Administration's National Ocean Service site.

Well engineering will be an important focus, but I think the investigation really must look at why there was a fire and why the Deepwater Horizon sank.

SW10

* By which I mean the successors to Red Adair, Boots and Coots et al.

In reply to passinthru, post #335

Best practice - that which has been developed over many thousands of successful wells was not followed with this well. Barriers were not in place. Industry standards have been proved for the purpose of drilling. For the purpose of drilling in this depth of water and the consequences of the oil spill I will leave to the inquiry and inevitable change in procedures that will result.......Looking ahead I see a fudge emerging whereby BP and others in the industry swallow some pride and absord costs by developing new systems and regulations and practice. These might be fine for all that happens above the sea bed. Salt drilling and multi system annular mud programmes aside, good engineering practice already exists.

The distinguishing and very difficult factor with this well is that catastrophic problems occurred at great depth. Hayward has been happily listing-off items which are "a first" - not because they haven't been done before but because they haven't been done at depth!

There will certainly be a raft of new regulations and perhaps some new systems. These might be as simple as saying that there are to be no regulatory waivers PERIOD given when drilling at depth? But it is surely going to be a process of setting incremental belt 'n braces safeguards rather than much that is radically new (or expensive to design).

One of my favourite books as a kid was a book about railway accidents, which chronicled how the safety systems that underpinned the modern railways were developed incrementally over many decades as a direct result of a series of crashes and failures. Eventually failures of materials, errors in working practices and other faults were all identified and elimnated one by one.....and then human error or someone taking "a risk too far" would throw up another accident - from which fresh lessons would again be learned and new practices introduced.  BUT there is always the pressure of continual pushback from people at the sharp end, keen to be more efficient or prepared to cut corners etc etc....and so, sooner or later, accidents WILL happen. The fact that they are extremely rare (at least on the scale of this one) is actually an indicator that there is quite a bit that is being done correctly - and I'd suggest that, even without new procedures or processes, it is very unlikely that another major incident of this type will occur any time soon....because the "pushback" will be working in the opposite direction and everyone will have "safety first" right at the front of their thoughts.......

...the problem with safety issues is always that, unless people have been recently reminded with hard evidence of the reasons for all the precautions, there will always be someone somewhere who eventually takes one risk too many.  Ultimately one cannot completely eliminate human nature!

ee

ps...entirely agree with SW10 that the central problem from which everything else flowed was that they lost the rig. This caused the multiple points of damage to the riser and complicated everything else that followed.

Goldman have come out with the note below. They seem to be pretty close to my estimates regarding the spill size. Maybe I can get a Goldman Sacs bonus too :-) It seems to have knocked the price but they still see 38% upside from here so can't be too bad:-

----
BP (BP) Disaster Could Cost $40K Per Barrel Spilled, Goldman Sachs Downgrades to Neutral

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June 7, 2010 10:23 AM EDT

After incorporating the potential damages from the Gulf of Mexico spill, Goldman Sachs no longer sees upside in BP plc (NYSE: BP) beyond the sector and has lowered its rating from Buy to Neutral.

In its analysis on the cost of the spill, the firm said based on the 1989 Exxon Valdez spill of 250 kbls which cost Exxon (NYSE: XOM) US$3.8 billion, or $10 billion in current dollars, it will cost BP US$40,000 per barrel spilled, or US$10 bn per 250 kbls.

The firm is assuming the new containing cap can collect total of 12 kbls/d from a total spill of 15 kbls/d until the first relief well halts the oil flow 100 days after the initial spill. This implies a spill of 800 kbls and a liability of US$36 billion, or US$23 billion post-tax.

In its analysis, the firm assume BP will not pay a dividend for the next two quarters and will resume at US$10c per quarter from 4Q.

The firm's new price target of $52 (from $69) still offers 38% upside, but this is close to the median of the sector

More gob flapping from the White House. This time from the Press Secretary.

Talk about condeming a man before the case has even got to court:

*Mon 7th Jun 2010   15:52:00

=DJ UPDATE: Gibbs: BP Penalties Seen At 'Many Billions Of Dollars'

 

  (adds comments from Gibbs on penalties in lede and third paragraph, BP costs in fourth paragraph)

 

   By Jared A. Favole

   Of DOW JONES NEWSWIRES

 

  WASHINGTON (Dow Jones)--White House Press Secretary Robert Gibbs on Monday said penalties against BP PLC (BP. BP.PLN) will likely be in the "many billions of dollars."

  U.S. Coast Guard Adm. Thad Allen said the company had collected about 11,000 barrels of oil from a ruptured well in the Gulf in the last 24 hours and is approaching collecting 15,000 barrels to 20,000 barrels.

  Gibbs, asked about the oil BP is collecting, said the costs associated with the spill will "greatly exceed" the amount recouped from selling the captured oil on the market. He said that in addition to response and recovery costs, there will be "penalties that will be involved in this in the many billions of dollars."

  BP on Monday said the cost of the oil spill had reached $1.25 billion.

  The company on Saturday had funneled up 10,500 barrels, which was well up from the just over 6,000 barrels it managed to collect the previous day. An estimated 12,000 to 19,000 barrels are gushing from the well daily, or about 500,000 to 800,000 gallons.

  BP's latest efforts follow a string of failed attempts to plug the well. The company and government have stressed that a final solution to the leak won't come until August, when relief wells the company is drilling will be completed.

  The number comes as the federal government said its response to the disaster will stretch until the fall.

  U.S. President Barack Obama traveled to Louisiana on Friday to survey the disaster and the impact it was having on local economies. Obama has faced criticism for imposing a six-month moratorium on exploratory, deep-water drilling in the Gulf amid concerns it would further imperil a region already reeling from commercial fishing restrictions and lost tourism caused by the disaster.

  He told residents there that he wanted to ensure deepwater-drilling could be done safely and give time for a presidential commission he formed to investigate the causes of the disaster and suggest potential regulatory changes.

  Eleven men were killed on the Deepwater Horizon oil rig when it caught fire April 20. Obama invited the families of the men to the White House for a meeting Thursday.

 

  -By Jared A. Favole, Dow Jones Newswires; 202.862.9256; jared.favole@dowjones.com

 

 

 

In reply to emptyend, post #337

One of my favourite books as a kid was a book about railway accidents....

I always suspected you were a bit odd, ee ;-)

From the article;
If a blowout were to occur, BP said in its plan, the first choice would be to use a containment dome to capture the leaking oil. But regulators did not require that a containment dome be kept on the rig to speed the response to a spill. After the rig explosion, BP took two weeks to build one on shore and three days to ship it out to sea before it was lowered over the gushing pipe on May 7.

Why would regulators demand a 'dome' be kept on the rig.  It would be a fat lot of use now wouldn't it?

I thought it was funny.

One other thing, it seems like all roads are leading to the BP company man and it looks like he or she is being pinned with a huge amount of the responsibility for this accident.  To be clear here, that's a bullshit argument in the legal sense.  People put under pressure make bad decisions, and they certainly can't be relied upon to take the correct emergency action when the world starts to fall apart.  One must assume that people always get it wrong - I get it wrong all the bloody time; these guys aren't super-human.

So the shoulda, woulda, coulda procedural arguments don't hold much water for me.  It's all about the failure of the engineered and tested systems.  The BOP to minimise the inventory and SW10's mysterious spark to cause the explosion.

Cheers,

ignatius

In reply to emptyend, post #337

There will certainly be a raft of new regulations and perhaps some new systems. These might be as simple as saying that there are to be no regulatory waivers PERIOD given when drilling at depth? But it is surely going to be a process of setting incremental belt 'n braces safeguards rather than much that is radically new (or expensive to design).

Quite agree and to this point I was careful to use the word 'fudge' but not in a sense of cutting corners. Every health and safety twonk on the planet will want his/her input and after tens of thousands of words digested what we will actually end up with is quite a lot of what we already have. Most operators (BP included regardless of the media comments) have quite strong safety records because they act on well understood procedures. But as I said very early on in this disaster - are we getting out of our depth!

Hi SW10

I still believe that the turning point in all of this was the explosion and I hope that the inquiry looks into that.

You will know more about this class of semi and its safety systems than me. I can quite understand the thinking behind your comments that a ignition should not have taken place. In fact, as to be nearly criminal that ignition took place. I cannot help but think in the months ahead in a court or in a presidential inquiry the CEO of Transocean is going to say something along the lines of - "the severity of the blowout was such that any safety system could be compromised and just why was oil and gas flying through the derrick anyway!" And of course the counter arguments will be just as predictable.

The best to hope for is that as time passes the rhetoric by all parties should diminish, particularly, as I believe they all need each other. As I have said - I expect to see Transocean still drilling deep ocean wells for BP and Halliburton doing the cementing. Say la vie.

Matt Simmons was being interviewed with Dylan Ratigan last night. I have not put a link to save you from the insult and waste of time. Briefly - Simmons was saying that the oil is not coming from the well that BP are trying to capture from but a 'open hole' area somewhere else in the GOM. This area is spewing out over 100k bbls per day. They 'BP' should be using tankers to suck up the massive oil plumes now floating submerged near the sea bed. Might have the above slightly mixed up as I was checking to see it was not actually 1st April at the time. Save us from 'experts'.

passinthru

Seems as if there could be another rig leaking in the GoM:

DJ Diamond Offshore Rig In Gulf Of Mexico May Have Leak-Report

 

  DOW JONES NEWSWIRES

 

   A deep-water drilling rig owned by Diamond Offshore Drilling Inc. (DO) and operating in the Gulf of Mexico may be leaking oil, the website BusinessInsider reported Tuesday, citing aerial photos it obtained.

  The Ocean Saratoga rig may be the source of the leak, the website said.

  A Diamond Offshore spokesman told the website that the company was hired by Taylor Energy to plug and abandon the existing well and declined comment on the reported leak.

  Meanwhile, at a press conference in Washington, D.C., the U.S. point person on the BP PLC (BP) Gulf of Mexico oil spill, Coast Guard Adm. Thad Allen, asked about reports of a leak at the Ocean Saratoga rig, said he had "no personal knowledge" of any leak there. He said he would look into the matter and report his findings to the media.

  The company's shares were 6.6% lower late in the morning, trading at $55.30.

  Earlier Tuesday Goldman Sachs cut to sell from neutral Diamond Offshore stock.

  Full story at: www.businessinsider.com/confirmed-there-is-a-second-leaking-rig-near-the-deepwater-2010-6

 

BP is also bringing in a second vessel to help in the processing since the current one is nearing its capacity (15000 bopd). The second vessel should be on site in two or three days and add 5000 - 10000 bopd of additional capacity.