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Pressure to save time, money may have contributed to oil disaster

Cleanup and containment efforts continue at the Gulf of Mexico site of the oil spill following the Deepwater Horizon explosion.

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This particular well seemed jinxed. The oil prospect, named Macondo after the fictitious town where the novel "One Hundred Years of Solitude" took place, was tricky, with high pressures and temperatures. A different rig, the Transocean Marianas, had arrived to start drilling there Oct. 21 but on Nov. 28 was damaged and forced to shut down by Hurricane Ida. The Deepwater Horizon rig arrived in January, only to run into technical obstacles in the hole. Ultimately those cost an extra $20 million to $25 million and forced BP and Transocean to drill a new well, the one that later blew out and caused the spill.

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Given the high-stakes nature of offshore drilling, that figure seems trifling. Oppenheimer's Gheit estimates that developing Macondo and nearby fields could cost $8 billion to $10 billion. At current oil prices BP and its partners would make that back in less than five years, he said.

Yet even big public companies strive to boost their bottom lines. At Transocean, rig accidents and blowout preventer repairs had hurt earnings in the second quarter of 2009, and during an August conference call disappointed analysts wanted explanations.

"During the quarter, we had an unusual number of major operational incidents, mostly with respect to deepwater rigs, which resulted in a $30 million increase in lost revenue," Gregory L. Cauthen, Transocean's chief financial officer, said.

Transocean chief executive Steven Newman added, "We had a couple of human error incidents" and "a handful of BOP [blowout preventer] problems."

The "human errors" shut down two other rigs for four to six weeks each for repairs and investigations, according to a source close to Transocean. In one, an inattentive worker hoisted equipment too far, causing some large bolts and other parts to fall 167 feet to the rig floor, according to the Minerals and Management Service accident report. In the other, 17,500 pounds of steel casing was dropped by a crane and fell 10 feet.

Pressed by an investment analyst from Credit Suisse, Newman added that "We did a deep dive on each one of those incidents. . . . They were anomalies, and I think I would just leave it at that."

Concerns about time -- and money -- might also explain the installation of a test valve in the Deepwater Horizon's blowout preventer. In a 2004 letter, Transocean and BP agreed to substitute a test valve for one of three variable bore rams capable of pinching off oil flow in a blowout -- while acknowledging that the substitution would reduce redundancy and increase risk.

An article in the November/December 2006 issue of "Drilling Contractor" notes that "vitally important tests" of blowout preventers "carry a considerable cost in terms of rig time spent conducting the test, particularly in deepwater." The article, written by Gary Leach of Transocean and Bob Judge, chief engineer of Hydril, a GE unit that makes blowout preventers, said "substantial savings" were possible by leaving a test valve on the blowout preventer and turning it upside down to avoid having to withdraw pipe for testing. They said companies could save 12.5 hours or $260,000 of rig time with each test.

Yet BP recently told congressional investigators that it lost a precious day of time when it was trying to activate the blowout preventer after the accident; BP was baffled by the test valve's connections to the control panel.

Saving time was also the subject of a 2009 presentation by a Halliburton employee to the American Association of Drilling Engineers. He said "the cement slurry should develop compressive strength rapidly. This is particularly important in the deepwater environment given the associated rig cost."

Oil industry executives say that consequences of a catastrophic failure like the oil spill are so great that they have plenty of incentives, including financial, not to cut corners on safety.

Asked whether time pressure might have skewed key decisions on the rig, BP's senior spokesman Andrew Gowers said, "We have found no evidence that anything of that kind had anything to do with the incident." He added that "as the investigations go on, all sorts of other things may be drawn in but that will not be found to be an issue."

Rep. Michael C. Burgess (R-Tex.) said at the May 12 hearing of the House Subcommittee on Oversight and Investigations that inquiries "may reveal issues of mechanical failure, systems failure, human error or a combination of the three." But, he added, "What we hope we do not find is that corners were needlessly cut in order to save time and money, because ultimately now time and money are what are at risk."


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