When it comes to offshore drilling, still treading in deep water

April 16, 2011

The bulletin flashed on a screen: Crisis in the gulf. Oil spill. Everyone to battle stations. And, thus, with great alacrity did oil company managers and engineers race to their appointed tables in various corners of the ballroom.

This “table top” exercise took place recently in a Marriott Hotel in a Houston suburb. The offshore drilling industry vows that it’s fully prepared to handle the kind of calamity that struck a year ago this Wednesday, when the Deepwater Horizon drilling rig exploded in a fireball that killed 11 workers and triggered the nation’s worst oil spill.

But the realities of petroleum engineering do not always follow the script. The question remains: Are we ready to go back into the deep water?

The industry, environmental groups and the Obama administration all give different answers, while Congress wrangles over Republican-backed legislation that would speed up approval of drilling permits — a political debate framed by $4-a-gallon gasoline.

No one doubts that the horror of last year has put the industry on its toes and sharpened the oversight of the federal government. Two industry groups have developed hardware packages that they say could be deployed quickly to cap a blown-out well in as little as 10 days.

The era in which oil companies would carelessly list a dead person as an expert to turn to in an oil spill, or mention walruses as an example of Gulf of Mexico marine life, is apparently over. What happened to BP, which is facing more than $40 billion in costs as a result of its Macondo well, is enough to sober up any oil exploration company.

But the problem has hardly been solved. Oil companies say the government has had trouble finding people qualified to judge permit applications and monitor the 276 deep-water wells and 46 deep-water production platforms in the Gulf of Mexico. And critics of the industry note that new wells will go deeper, testing the limits of technology that last year showed itself to be less robust than advertised. In this view, the industry and the government are like generals and admirals who have geared up to fight the last war.

“Hope is no strategy for success,” said Robert Bea, a University of California professor who headed a team of industry experts and academics known as the Deepwater Horizon Study Group. “Quite frankly, I think we’re scared. The scare is that we’ll go off half-cocked, half-prepared, have another significant loss of well control, and that’s going to be an industry stopper.”

Bea suggests that not all deep-water prospects should be treated equally. Some geological formations in what Bea calls the “golden zone” of the northern gulf have unusually high pressures, temperatures and gas-to-oil ratios. Combined with brittle rock, these features make the region an extremely tricky place to drill. No one, he said, has done a close analysis of the “failure modes” of drilling into such formations.

The industry is also advancing into the icy waters off the coast of Alaska. That poses a different set of challenges should something go wrong. Shell, which plans to drill off Alaska, says it was already prepared to deal with ice and now has added divers, added redundant mechanisms to its blowout preventer and relocated some controls to make them more accessible.

But Bill Snape, an attorney with the Center for Biological Diversity, which often goes to court to oppose offshore drilling, said: “If we take these highly risky drilling procedures to the Arctic, we are asking for an apocalypse. There is no capacity to deal with a spill even a fraction of the size that occurred with BP.”

Political controversy

The politics of drilling is especially contentious in Washington. With gas prices surging, Republicans in Congress have pushed legislation that would accelerate approvals of deep-water drilling and open up new areas off the Atlantic and Pacific coasts to oil and gas exploration. One bill passed last week by the House Natural Resources Committee would deem drilling permits to be approved automatically if the administration did not act on applications within 60 days.

Republicans assert that demonstrating an aggressively positive attitude about drilling can bring down gasoline prices.

“If the United States sends the signal to the world markets that we are going to utilize the resources we have here, based on what we know as being tremendous resources, I believe that will have a huge effect on worldwide crude prices,” said Rep. Doc Hastings, the Washington state Republican who chairs the Natural Resources Committee.

Oil experts, however, say there would be no near-term impact because drilling and development would take years before any new oil began to flow to the market.

Rep. Edward J. Markey, a Massachusetts Democrat and frequent critic of BP during the spill, scoffs at the GOP bills: “Its all ‘drill, baby, drill.’ ”

The Obama administration in recent weeks has approved 10 exploratory drilling applications for deep-water wells. This past week, Interior Secretary Ken Salazar and the top government regulator for the offshore industry, Michael Bromwich, visited a Noble Energy rig that is getting ready to resume drilling in deep water off the coast of Louisiana.

Speaking to reporters at a briefing earlier in the week, Salazar emphasized he is confident that it is possible to resume drilling “in a safe and responsible way.” But he shot back at Republicans in Congress who want to open up new areas to drilling.

“It is almost as if the Deepwater Horizon Macondo well never happened,” he said in a meeting with reporters.

Tremendous demand

Returning to deep-water drilling is not, however, a matter of will; it’s a matter of necessity if the world’s economies expect to maintain their current use of 88.5 billion barrels of oil a day. At that rate, oil producers need to discover and develop a field the size of Macondo every 131 / 2 hours, and most of the best prospects are offshore and often in deep waters.

Companies are drilling in deep water off the coasts of Brazil, West Africa and Russia. Soon they will try to tap into hydrocarbon prospects off Cuba, a mere 90 miles from Florida.

The major oil companies have expected that sooner rather than later, permitting would resume. For much of the past year, while the Obama administration imposed and then slowly lifted a moratorium on drilling in deep water off U.S. shores, the biggest oil companies have kept rigs waiting in the Gulf of Mexico for word that they could start drilling again.

In February, Noble Energy received a permit to resume drilling in 6,500 feet of water in the Mississippi Canyon, the same region as Macondo. The well was being drilled in June 2010 when operations were suspended as a result of the moratorium.

Chevron received a permit in March, the first exploratory well authorized by the government since the Macondo accident. The well will be drilled in 6,750 feet of water to a total depth of about 29,000 feet. The rig will probably be provided by Transocean, owner and operator of the Deepwater Horizon.

“They’ve been slowly starting to crank up the permit machine,” said Gary Luquette, president of exploration and production for Chevron in North America. “The process is much more rigorous in terms of information demands. We’ve seen well applications go from one-quarter-inch thick to 21 / 4-inch thick.”

Ready or not?

One way that the oil industry has tried to reassure regulators and the public about spills is by saying they are ginning up new strategies and equipment.

Marine Well Containment Corp., whose nine members include the world’s five biggest oil giants, says it will spend $1 billion to assemble a containment system that would be ready to go if needed. Another group has assembled capping stacks and vessels it says can be connected to a well within 96 hours to capture oil and gas.

But the technology is not new.

“The problem with Macondo was not the lack of technology,” said Owen Kratz, chief executive of Helix Energy Solutions, an oil services firm that makes ships capable of capturing oil from a blown-out well. “It was a lack of readiness to do it. It wasn’t organized and ready to deploy.”

The industry’s corporate culture has to change, critics say. But a recent incident provides a cautionary tale.

About 8 p.m. March 18, Anglo Suisse Offshore Partners, an eight-year-old Houston firm, notified the government’s National Response Center of three small spills, totaling less than four gallons, from a damaged well in the Mississippi Canyon, where BP was drilling last year.

But helicopters flying overhead spotted an oil slick 100 miles long. Beach on Louisiana’s Elmer’s Island and Grand Isle was soiled, just as it was last year. The Coast Guard rushed to clean up.

Looking at satellite photos, John Amos, a geologist who runs a blog called Sky Truth, calculated that the slick was not four gallons but no less than 640,728 gallons. The Coast Guard gave samples from the spill and from Anglo Suisse operations to Louisiana State University, which concluded that biomarker chemicals — the oil’s fingerprint — pointed to the area where Anglo Suisse was trying to cap the well, which had been damaged in a hurricane.

The Coast Guard says that the shoreline has been restored and that Anglo Suisse is responsible for costs. Anglo Suisse did not return calls for comment.

Ed Overton, a professor of environmental science at LSU, said, “It wasn’t one of the majors, but you still need to ask the question: How on top of things are these guys?”

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