Monday, May 30, 2011

Macondo-related Observations

I've been thinking over the whole Deepwater Horizon/Macondo/Moratorium mess and here are a few thoughts.

The Long-string vs. liner tieback issue made no difference in the blowout and the number of centralizers had very little effect, BUT the entire episode is very illustrative of BP's management. Time and time again, BP was putting things together at the last second with little oversight on the big picture.

BP's internal emails are the most illustrative of the anarchy that reigned in BP's organization:
"One of BP‘s top cement experts also described ―the typical Halliburton
profile‖ as ―operationally competent and just good enough technically to get by."
- Ref. (PDF)
“Are you going to fire me?” - Ref.
You seem to love being the victim. Everything is someone else’s fault. You criticize nearly everything we do on the rig but don’t seem to realize that you are responsible for every(thing) we do on the rig.

You seem to think that running is more important that well control.

(Sims, the only BP engineer with a PE, to John Guide*, - Ref.
Out of all those emails, though, this pair takes the cake:
I believe there is a bladder effect on the mud below an annular preventer as we discussed. As we know the pressure differential was approximately 1400-1500 psi across an 18 ¾″ rubber annular preventer, 14.0 SOBM plus 16.0 ppg [pounds per gallon] Spacer in the riser, seawater and SOBM below the annular bladder. Due to a bladder effect, pressure can and will build below the annular bladder due to the differential pressure but cannot flow – the bladder prevents flow, but we see differrential pressure on the other side of the bladder.

Now consider this. The bladder effect is pushing 1400-1500 psi against all of the mud below, we have displaced to seawater from 8,367′ to just below the annular bladder where we expect to have a 2,350 psi negative pressure differential pressure due to a bladder effect we may only have a 850-950 psi negative pressure until we lighten the load in the riser.

When we displaced the riser to seawater, then we truly had a 2,350 psi differential and negative pressure.
- Robert Kaluza, BP Night Company Man on the Deepwater Horizon who was on duty when the well blew, explaining the "bladder effect"



- response by Patrick O'Bryan, Drilling VP for BP North America - Ref.

When everyone was trying to get off the rig to safety, nobody had a knife to cut the painter line that connected the liferaft to the rig. The liferaft was tethered to a sinking ship, nobody could find the safety knife on the raft, and BP's "Strict No-Knife Policy" was the only corporate policy of BP's that actually worked. There have been stabbings offshore (there are some surly characters offshore), but the "Strict No-Knife Policy" is typical big company bullshit that needs to stop. Every time I've been offshore, I've had a knife on hand (Leatherman Wave).

Another thing that's disgusted me: according to the testimony of multiple individuals, the USCG-certified Master on the Horizon told other crewmembers to leave an injured man behind on the rig before he jumped into the waters alone. No way to put it nicely; that was pretty shitty on his part and I have a feeling the Coasties will string his ass up for it.

Fortunately, a few things DID actually work. There were a few individuals who really stuck their neck out, for example, the Chief Mate (who kept one of the lifeboats on the rig until it was full to capacity, despite howling protests of those already inside) and the Chief Electrician (who, along with others, rescued the injured man mentioned above and kept his liferaft from drifting into the fire).

The US-flagged M/V Damon Bankston crew really are heroes. The more and more I read about the incident, the more I'm convinced that if it weren't for their quick response, there would be more than 11 dead. The Damon Bankston also had one INCREDIBLY important tool the Deepwater Horizon lacked: a fast rescue craft. The Deepwater Horizon tagged one of their large, slow, ungainly 75-man lifeboats as their "rescue craft" (in case of man overboard, etc.). The Damon Bankston had a dedicated, quick-launching, high performance (several hundred horsepower in a tiny craft) FRC that was also capable of rescuing incapacitated swimmers in rough waters** (a capability the Deepwater Horizon lacked). Every offshore platform I've ever been on has had a FRC (and all were constructed before the Deepwater Horizon). Now, there are some differences in a platform and a DP-rig, but still, the Horizon SHOULD have been designed with a FRC, in my professional opinion.

The US Coast Guard also blasted the flag-state of the Marshall Islands for lax enforcement of standards (which also turned out to have a few holes in them). The "flags of convenience" (nicknamed "Flags of Corporate Convenience") concept has never really set well with me. What I also don't like is there's been a push to drop Panama, who has slightly increased their regulatory requirements, for countries with even less regulation. I'm especially appalled by the idea of landlocked countries (like Mongolia) regulating merchant ships. The Russians and the Chinese lately seem to like Bolivia and Mongolia for some of their merchant ships. It just doesn't seem right to have a Marshall Islands-flagged ship sitting in US waters, when the ship was had never operated outside US waters and would NEVER operate in Marshall Islands territory. Note there's a USCG-led QUALSHIP initiative to up the standards on Flags of Convenience, but I'm not sure how effective it has been. Why not just use US-flagged drilling vessels (or at least require 30% or so of them be US-flagged)? I can name at least 1 modern US-flagged deepwater drilling rig in operation.

The qualifications of the DNV experts called in to investigate the BOP vs. the qualifications of BP's experts called in to knock the DNV BOP report was interesting. The DNV experts had an incredibly impressive resume. One of the leaders had a PhD in Materials Science and Engineering from Vandy and the other leader worked on the King's Cross Investigation. The King's Cross fire was a fairly standard trash fire that suddenly and unexpectedly flashed over and killed 31 people. The ins and outs of why was new to science (the Trench Effect, related to the Coandă effect) and it was even written up in my Fluid Dynamics textbook in college. It was literally an investigation so thorough it rewrote the textbooks. BP on the other hand put up one guy who had 'a year or two of engineering school before dropping out and working on rigs for 30+ years.' The expert was also a longtime contractor, not an actual BP employee. BP's expert completely flubbed basic materials science questions (that any senior in engineering could answer) to the point where the board stopped asking him questions. The BP expert wasn't a moron and he did have some interesting points about the DNV report, but nothing that undermined the DNV report in any significant way.

The damage thus far from the Moratorium has been greatly exaggerated, but I'll still be waiting to see what happens a few years down the line. A lot of these big deepwater projects have years-long lead times. Also, note that not every permit was actually drilled in the past and there always been a flow and ebb tide with drilling. Somedays, the rig count is high and rig dayrates are on the rise. Sometimes, everyone packs up and heads somewhere else or stacks the rigs in storage. I will say that the biggest benefit of US offshore oil isn't necessarily the jobs or the tax revenue (although those are important), but the effect on the Balance of Payments. Petroleum purchases are a HUGE portion of the US trade deficit and a big drag on the dollar (on the same level as the budget deficit?). Petroleum purchases are so huge, you often see disclaimers like 'non-petroleum trade deficit' in the fine print of charts in the WSJ, etc.

There's a quote in one of my favorite engineering disasters books, Inviting Disaster by Chiles. It goes something like 'operating on the cutting edge of technology is privilege conveyed on high-tech industries and those industries must protect and nourish that trust if they expect to stay in business and not have their franchise closed after too many failures dumped in societies lap.'*** That's a lesson the offshore industry must heed, or face the consequences. More costly errors and near misses cannot continue.

* The de facto leader on the Macondo well. Some video of John Guide testifying here.

** Note that the waters were completely calm the night of the blowout, but the Damon Bankston did have to fish out incapacitated swimmers, a capability the Deepwater Horizon's lifeboats would have been unable to perform alone.

*** It's near the end of the book. I loaned out my copy right now, so I can't nail it word for word at the moment, but I'm sure that's the gist of it.


jeffrey said...

Do you think the boom in shale fracking will divert investment away from deepwater drilling to such a degree that it could make questions about the moratorium's impact moot? And if so do you think anyone (Vitter/Landrieu) will acknowledge this impact when talking about the moratorium?

Clay said...

Short answer: In my opinion, Shale Gas probably won't mitigate any negative consequences of the Moratorium.


The offshore and shale are different. Some of the service companies (Schlumberger, for example) can take some of their offshore, Moratorium-effected workers and plug them into shale gas plays, but that won't be the case with lots of other segments of the offshore biz (say, helo pilots, crewboat workers, etc.).

I'm personally not sure how big a boom we'll actually see in Shale Gas.

Part of what worries me about Shale Gas is some of its proponents are outright snake oil salesmen. They've latched onto what they think is the "new new thing" and are running with it with no regard for fact or substance. They had a speaker at a Tulane Engineering Forum who promised 'all the gas you can burn at $3 per MMBTU.' The costs of production for most shale gas is more than $3 per MMBTU, and that's not considering any additional regulatory burden that might be added in the future.

The resource is definitely there, I'm mostly just worried about production costs. Chesapeake got bitten really, really badly when gas prices collapsed ( ). Chesapeake's CEO (who had become the largest shareholder, thanks to buying stock on margin [grr!]) went into bankruptcy when the price collapsed when demand slumped. One of the absolute keys to consider is what will demand be for all this shale gas? Will a sluggish economy drag down nat gas prices? Will Japan switch off nukes (~50% of their electric capacity) and go with LNG?

There are also two other major sources of nat gas to consider: LNG and Alaska. LNG is expanding as oil-producing nations start to try and maximize the revenue for their associated gas. Qatar, which is almost out of oil to export, is starting to dump massive amounts of Liquified Natural Gas (LNG) on the market and other oil producing nations are following suit. Alaska also has immense nat gas reserves that are currently trapped without an export pipeline. Palin (along with every other Alaskan governor since TAPS came on line) tried to get a gas pipeline built, but nobody wanted to take on that financial risk, despite state inducements.

Deepwater gas is also not to be ignored (Independence Hub tacked on 10% or so to US nat gas production overnight when it came online).

I wouldn't say I'm a shale gas skeptic (the resource is definitely there), I'm just wondering what the interplay between supply (shale, LNG, Alaska) and demand will be. It's a lot of variables up in the air. I'm definitely in the minority on that front, though. Most of industry is filled with shale gas apostles.

Clay said...

One more quick note: the maintenance plan on the BOP by Transocean is not what I would have done, but it's not as completely crazy as I thought initially. There was some thought about it. Although, their document control and records keeping were crap and it looks like at least one non-OEM solenoid valve made it into the system.

I would have stuck with the manufacturers recommendation to a T, that way if something goes wrong, it's their neck in the sling.