Oil majors digging deeper and taking more risks

In a remote reach of the Gulf of Mexico, nearly 350 km from shore, a floating oil platform thrusts its tentacles deep into the ocean like a giant steel octopus.

The $3 billion rig, called Perdido, can pump oil from dozens of wells nearly two miles under the sea while simultaneously drilling new ones. It is part of a wave of ultra-deep platforms — all far more sophisticated than the rig used to drill the ill-fated BP well that blew up in April. These platforms have sprung up far from shore and have pushed the frontiers of technology in the gulf, a region that now accounts for a quarter of the nation’s oil output.

Major offshore accidents are not common. But whether through equipment failure or human error, the risks increase as the rigs get larger and more complicated.

Yet even as regulators investigate the causes of the Deepwater Horizon disaster, the broader dangers posed by the industry’s push into deeper waters have gone largely unscrutinised.

“Our ability to manage risks hasn’t caught up with our ability to explore and produce in deep water,” said Edward C Chow, a former industry executive who is now a senior fellow at the Centre for Strategic and International Studies. “The question now is, how are we going to protect against a blowout as well as all of the other associated risks offshore?”

Dangers do not directly increase with greater depth, according to experts like Chow. But they do rise as exploration and production rigs become more complex and more remote.
Perdido, for example, is more than a 20-hour supply boat journey from shore — far enough out that a major fire could burn out of control before assistance arrived.

Hurricanes regularly batter the region with giant waves and winds exceeding 100 mph. Underwater, both powerful currents and mudslides play havoc with delicate equipment and the pipelines that bring oil and gas back to shore.

The water temperature, which hovers at just above freezing at depths below 3,000 ft, can harden natural gas into crystallike structures called hydrates that can clog pipelines and other equipment. And because the wells are deeper than human divers can go, oil companies must rely on remote-controlled submarines to maintain their equipment or perform repairs.

Oil industry officials, while acknowledging the risks, say safety concerns are overblown.
Chris Smith, a senior manager at Royal Dutch Shell in charge of running Perdido’s production, said that projects like Perdido were engineered with multiple safety barriers and redundant systems.

“We’ve proven over the years, and the decades, that if the reserves justify it, we will find a way to do it,” Smith said. “The trick is how to do it safely.”

Perdido, which means ‘lost’ in Spanish, is at the cutting edge. The deepest offshore platform in the world, it is intended to pump oil from 35 wells over the next two decades.
Like dozens of other deepwater facilities that have sprung up in the gulf in recent years with names like Blind Faith, Mad Dog and Atlantis, Perdido uses the latest technology to tap offshore oil fields that were previously inaccessible.

In contrast to the Deepwater Horizon, a floating rig that was focused on drilling new wells, the Perdido platform is a vast hub that can drill and pump oil from wells across 30 miles of ocean floor. Below it is a subsea cityscape of pumps, pipes, valves, manifolds, wellheads and blowout preventers — all painted a bright yellow so as to be visible to the floodlights of the remote-controlled submarines that maintain it.

Improvement in efficiency

Shell, in reducing the weight of the platform, which can produce up to 1,30,000 barrels of oil a day, is among the first companies to use a new technique: Instead of pumping the drilled liquid to the platform and separating the oil, gas and water there, as is typically done, engineers installed new separation equipment directly on the sea floor. While that improves efficiency, the equipment is also more difficult to monitor and fix than if it were on the platform.

Thomas M Leschine, a marine expert at the University of Washington, Seattle, said oil companies and regulators have become complacent about the growing risks of offshore drilling because accidents are so rare.

“It’s clearly in the interest of the industry to believe their activities are safe,” said Leschine, who testified before Congress about safety issues in June.

Engineering innovations during the 1990s, like better seismic imaging technology, greatly pushed the boundaries of deepwater production — traditionally defined as deeper than 1,000 ft of water.

More than 20 per cent of all bids in the gulf last year were for leases in water deeper than 6,500 ft. The deepest well in production in the gulf — Perdido’s Tobago well — lies in 9,600 ft of water. Meanwhile, new ships that can drill in 12,000 ft of water have recently arrived in the gulf.

Problems are more common than the industry likes to admit.

“The industry has entered a new domain of vastly increased complexity and increased risks,” said Robert Bea, a professor at the University of California, Berkeley, who compared the drive into ever-deeper waters to deep space exploration, both in its rewards and its risks. “Going to the moon is hazardous. Going to Mars is even more hazardous.”

After the BP accident, the Obama administration imposed a six-month ban on deepwater drilling, and it is now considering how to allow operations to resume while improving safety.

But after years of lax oversight, critics say regulators must take a much closer look at the industry’s activities offshore. For instance, they say, the government must increase the number of platform inspections and carefully vet emergency response plans.

Oil companies insist that offshore drilling is often safer than land-based drilling because the investments involved are far larger and the safety procedures far more rigorous. They say that they have drilled more than 4,000 wells in the gulf’s deep waters, including 700 in waters deeper than 5,000 feet. Before the BP accident, just 1,800 barrels of oil were spilled in blowouts from 1979 to 2009, according to the interior department.
However, during congressional hearings in June, the industry’s titans acknowledged their inability to contain a deepwater spill and vowed to create a new response system.

Under a $1 billion initiative announced in July, four oil majors — Chevron, Conoco Phillips, Exxon and Shell — said they will design and build equipment that can be used to contain and cap well blowouts at depths of up to 10,000 ft. However, they say the new devices will not be tested and ready for 18 months, and the plan is not likely to work in places outside the gulf, like Alaska, where conditions differ.

Some experts worry that everyone is focusing too much on the causes of the recent crisis, not the next one. After the 1989 Exxon Valdez disaster, the industry concentrated on preventing another tanker spill. That plan was essentially useless in the BP accident.
“This is symptomatic of fighting the last war,” said Chow. “The industry is going to have to examine all of the offshore risks. There is a lot of catching up to do.”