Peak Cheap Oil

[don]

Risk-Taking Rises as Oil Rigs in Gulf Drill Deeper

By JAD MOUAWAD and BARRY MEIER

In a remote reach of the Gulf of Mexico, nearly 200 miles 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 that was 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 unscrutinized.

“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 Center 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 Mr. 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 miles an hour. 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 feet, 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,” Mr. 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.

Shell, in reducing the weight of the platform, which can produce up to 130,000 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 Mr. 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 feet of water.

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

Problems are more common than the industry likes to admit.

For example, BP’s Thunder Horse platform, the company’s flagship project in the gulf, ran into one unexpected engineering problem after another before it even began production in 2008. Examples included a backward valve that nearly flooded the facility and faulty welding on subsea equipment that left pipes with dangerous cracks. Repairs delayed the project by three years.

Hurricanes are a constant menace. Hundreds of offshore platforms and pipelines were destroyed by hurricanes Rita and Katrina in 2005, shutting down the gulf’s entire oil and gas production for weeks. A Shell platform called Mars was badly damaged when its drilling rig tumbled over in Hurricane Katrina, shattering equipment, living quarters and the steel pipes that girdle all facilities. The two pipelines that take Mars’s oil and natural gas to shore were also badly damaged.

“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.”

Since the 1980s, the industry’s drive offshore has been encouraged by presidents and lawmakers of both parties who were seeking to expand domestic sources of energy and reap royalties from oil leases.

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.

The administration is also reorganizing the agency that oversees deepwater drilling, which was renamed the Bureau of Ocean Energy Management, Regulation and Enforcement. The agency’s new director, Michael R. Bromwich, is currently hosting forums with energy experts to examine “the different challenges” of offshore drilling, said a spokesman, Nicholas Pardi.

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.

“There was an overreliance on the industry’s representation that they could drill ultra-deep and ultra-safe,” said Representative Edward J. Markey, the Massachusetts Democrat who is chairman of the House Subcommittee on Energy and Environment. “The era of assuming an accident couldn’t happen is over.”

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.

Company executives have repeatedly cautioned against government overreaction to the BP spill, which they say resulted from a doomsday situation unlikely to repeat itself.

“The industry approach is that we always focus on prevention,” said Rex W. Tillerson, the chief executive of Exxon Mobil.

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, ConocoPhillips, Exxon and Shell — said they would design and build equipment that could be used to contain and cap well blowouts at depths of up to 10,000 feet. 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 Mr. Chow. “The industry is going to have to examine all of the offshore risks. There is a lot of catching up to do.”

http://www.nytimes.com/2010/08/30/bu....html?_r=1&hpw

[Master Shake]

Re: Peak Cheap Oil

Excellent article. Good find, Don.

[flintlock]

Re: Peak Cheap Oil

That really is telling. When you are drilling 12,000 feet deep to get to oil, that ain't cheap.

[Starving Steve]

Re: Peak Cheap Oil

That really is telling. When you are drilling 12,000 feet deep to get to oil, that ain't cheap.

I am in favour of all oil, no matter how deep, provided the oil doesn't come from Iran and other rogue nations. But an interesting question to ask: We have vast quantities of cheap oil in shallow water off the coast of central and southern California, so why aren't we drilling for that oil now? I swam in the seepage from that oil as a child whilst swimming in the water of Monterey Bay in California, so I know for sure the oil is there. The oil is light and sweet and plentiful.

Could it be that the West Coast snobs don't want drilling because it might damage their ten-million dollar coastal properties, especially their views of the open sea?

[Ghent12]

Re: Peak Cheap Oil

Could it be that the West Coast snobs don't want drilling because it might damage their ten-million dollar coastal properties, especially their views of the open sea?

Of course not. Nobody has ever used NIMBY to block an initiative that would help humanity.

[don]

Re: Peak Cheap Oil

Of course not. Nobody has ever used NIMBY to block an initiative that would help humanity.

Except the Iranians. Not (Americans) In My Back Yard

[aaron]

Re: Peak Cheap Oil

--> Why mess up the California coast when we can still pump oil out of the Iranian desert? First drain the enemies of their resources, then allies, and finally your own. This is Empire Building 101. Come on!

[GRG55]

Re: Peak Cheap Oil

Risk-Taking Rises as Oil Rigs in Gulf Drill Deeper

By JAD MOUAWAD and BARRY MEIER

In a remote reach of the Gulf of Mexico, nearly 200 miles 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 that was 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 unscrutinized.

“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 Center 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 Mr. 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 miles an hour. 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 feet, 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,” Mr. 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.

Shell, in reducing the weight of the platform, which can produce up to 130,000 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 Mr. 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 feet of water.

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

Problems are more common than the industry likes to admit.

For example, BP’s Thunder Horse platform, the company’s flagship project in the gulf, ran into one unexpected engineering problem after another before it even began production in 2008. Examples included a backward valve that nearly flooded the facility and faulty welding on subsea equipment that left pipes with dangerous cracks. Repairs delayed the project by three years.

Hurricanes are a constant menace. Hundreds of offshore platforms and pipelines were destroyed by hurricanes Rita and Katrina in 2005, shutting down the gulf’s entire oil and gas production for weeks. A Shell platform called Mars was badly damaged when its drilling rig tumbled over in Hurricane Katrina, shattering equipment, living quarters and the steel pipes that girdle all facilities. The two pipelines that take Mars’s oil and natural gas to shore were also badly damaged.

“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.”

Since the 1980s, the industry’s drive offshore has been encouraged by presidents and lawmakers of both parties who were seeking to expand domestic sources of energy and reap royalties from oil leases.

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.

The administration is also reorganizing the agency that oversees deepwater drilling, which was renamed the Bureau of Ocean Energy Management, Regulation and Enforcement. The agency’s new director, Michael R. Bromwich, is currently hosting forums with energy experts to examine “the different challenges” of offshore drilling, said a spokesman, Nicholas Pardi.

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.

“There was an overreliance on the industry’s representation that they could drill ultra-deep and ultra-safe,” said Representative Edward J. Markey, the Massachusetts Democrat who is chairman of the House Subcommittee on Energy and Environment. “The era of assuming an accident couldn’t happen is over.”

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.

Company executives have repeatedly cautioned against government overreaction to the BP spill, which they say resulted from a doomsday situation unlikely to repeat itself.

“The industry approach is that we always focus on prevention,” said Rex W. Tillerson, the chief executive of Exxon Mobil.

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, ConocoPhillips, Exxon and Shell — said they would design and build equipment that could be used to contain and cap well blowouts at depths of up to 10,000 feet. 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 Mr. Chow. “The industry is going to have to examine all of the offshore risks. There is a lot of catching up to do.”

http://www.nytimes.com/2010/08/30/bu....html?_r=1&hpw

Here's an alternate view, just to stir up debate.

If the oil industry has made so many deep water discoveries, has completed the wells and put them on production at a rate that is greater than the shallow wells are declining [see graph above], then maybe the track record ain't as bad as everyone is bleating about after all.

Drilling for hydrocarbons is a seriously risky business. After more than 100 years, blowouts are still happening on wells being drilling on land. The frenzy over "lax regulation", lack of adequate risk assessment, lack of preparedness for an offshore blowout, "criminal enterprises", BP vs Shell/Exxon/Chevron's drilling competency is all a circus sideshow.

If we send humans into space, no matter what we will occasionally lose an astronaut or seven. It comes with the territory. If we keep drilling offshore wells [deep or shallow] we will occasionally have an uncontrolled release of hydrocarbons into the environment. The object is to manage the risk to the lowest probability that is practical...and doing that should show steady declines in the major incidents and the amounts spilled with each blowout. But "Zero" it ain't. Those that think that the risk can be eliminated probably think the Fed can rescue the economy too.

Here's a chart of oil tanker spills over 700 tonnes by decade. This is what we should continue to expect over time from improved regulations, enforcement, but most of all procedures and technologies in deepwater drilling.



As for the aftermath of the Exxon Valdez, certainly that spill resulted in renewed efforts to prevent additional tanker spills. However, despite these efforts, since that time we have had the Haven, the Braer, the Aegean Sea, the Sea Empress and the Prestige...all tankers that spilled volumes significantly greater than the volume spilled by the Exxon Valdez.