Halliburton Sues BP In Texas - Alleges Misrepresentation

- Halliburton Files Lawsuit Against BP

Friday, September 02, 2011
Halliburton Co.

On September 1, 2011, Halliburton filed claims against BP in Texas state court for negligent misrepresentation, business disparagement and defamation related to the April 20, 2010, Macondo incident. Halliburton has also moved to amend its claims against BP in the multi-district litigation in New Orleans, Louisiana, to include fraud.

These allegations are based upon BP providing Halliburton with inaccurate information prior to performing cementing services on April 19, 2010, and BP's use of and omission of that information in subsequent public statements, filings and governmental investigations.

Halliburton has learned that BP provided Halliburton inaccurate information about the actual location of hydrocarbon zones in the Macondo well. The actual location of the hydrocarbon zones is critical information required prior to performing cementing services and is necessary to achieve desired cement placement.

Halliburton remains confident that all the work it performed with respect to the Macondo well was completed in accordance with BP's specifications for its well construction plan and instructions, and that Halliburton is fully indemnified under the contract.

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Halliburton Sues BP In Texas - Alleges Misrepresentation

Friday, September 02, 2011
Dow Jones Newswires
by Melodie Warner

Halliburton filed a negligent misrepresentation, business disparagement and defamation lawsuit against BP in Texas state court related to the April 2010 Macondo explosion and oil spill in the Gulf of Mexico.

Halliburton has also moved to amend its multi-district litigation in New Orleans to include fraud claims against BP.

The oilfield-services company alleges BP provided Halliburton with inaccurate information--such as the actual location of hydrocarbon zones in the Macondo well--before cementing services began on April 19, 2010. Halliburton also claims BP has used and omitted that information in subsequent public statements, filings and governmental investigations.

"This lawsuit is the latest attempt by Halliburton to divert attention from its role in the Deepwater Horizon incident and its failure to meet its responsibilities," BP said in a statement. The energy giant said it has accepted responsibility for responding to the spill and is accordingly paying costs and compensation. BP "expects other parties to accept their responsibilities and bear their share of the costs," the statement said.

Last fall, BP released a report that largely faulted Transocean, the owner of the Deepwater Horizon drilling rig, and Halliburton for last year's disastrous Gulf of Mexico oil spill. While government investigations have generally assigned blame to both BP and its contractors, Transocean disclosed an internal investigation in June that focused almost entirely on decisions made by BP.

Halliburton said Friday it remains confident that all the work it performed was completed in accordance with BP's specifications, and that Halliburton is fully indemnified under the contract.

Shares of Halliburton were trading 2.8% lower at $41.83 moments after the opening bell.

Copyright (c) 2011 Dow Jones & Company, Inc.


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Lawsuit Against BP Tossed

- Lawsuit Against BP Tossed

Monday, July 18, 2011
Houston Chronicle
by Tom Fowler

A federal judge has dismissed racketeering claims brought by Gulf Coast businesses and residents against BP for last year's massive oil spill.

The plaintiffs alleged that BP defrauded regulators in connection with the safety of its drilling operations and its response to the spill. They invoked the Racketeer Influenced and Corrupt Organizations Act, a law typically used against organized crime.

U.S. District Judge Carl Barbier dismissed the claims Friday. The decision does not affect other damage claims still pending from the same plaintiffs.

The judge also set aside a lawsuit filed against BP by Anadarko Petroleum Corp., one of its partners on the Macondo well. He ruled that the two companies' prior contractual agreements required them to try to settle such disputes through arbitration before suing.

Anadarko argued that BP had voided that requirement by, among other things, demanding that Anadarko produce evidence in the civil case.

"We respect today's decision, which does nothing to diminish our claims; it simply addresses the venue in which they may be resolved," Anadarko spokesman John Christiansen said in a statement.

Anadarko has not set aside funds explicitly for possible spill-related liabilities but has said during analyst meetings that it has up to $3.4 billion in cash on hand and a $5 billion credit line it acquired after the accident.

BP, which has set aside more than $40 billion in reserves, said in a prepared statement after the ruling that Anadarko shares liability under the federal Oil Pollution Act.

"Anadarko has blatantly disregarded its responsibilities to the residents of the Gulf Coast by failing to pay its fair share of the costs relating to the accident and resulting spill," it said. "BP remains focused on ensuring that Anadarko lives up to its obligations as a co-leasehold owner of the Macondo prospect and as a 'responsible party' under OPA."

Copyright (c) 2011, Houston Chronicle. Distributed by McClatchy-Tribune Information Services.

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BP, Weatherford In Settlement on Deepwater Horizon

- BP, Weatherford In Settlement on Deepwater Horizon

Monday, June 20, 2011
Dow Jones Newswires
by Drew FitzGerald

BP on Monday reached a settlement with Weatherford's U.S. subsidiary that indemnifies the oil-services company from future Deepwater Horizon-related disaster claims.

Under the deal, Weatherford agreed to pay BP $75 million to spend on its Gulf Coast recovery fund. The entire cost of the settlement is being funded by insurance policies Weatherford had in place when the disaster happened.

The deal ties up another end in a web of litigation for companies that worked on the drilling rig, which exploded last year and caused one of the largest oil spills in U.S. history. Weatherford provided BP with products and services for the Macondo oil well, along with rig-owner Transocean and contractor Halliburton.

Under the latest agreement, BP indemnified Weatherford from all current and future environmental, pollution, personal, business, property and economic loss claims arising from the accident.

Separately, Transocean said Friday that insurers of its sunken rig have asked a federal judge to decide if BP and other owners of the doomed Macondo well are entitled to any coverage for the accident.

Copyright (c) 2011 Dow Jones & Company, Inc.

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Petsec Enters Sale, Purchase Agreement with Horizon

- Petsec Enters Sale, Purchase Agreement with Horizon

Friday, June 03, 2011
Petsec Energy Ltd.

Petsec Energy has agreed to sell 100% of the company's wholly owned subsidiary, Petsec Petroleum LLC, which holds Petsec Energy's entire interest (25% working interest) in Block 22/12, Beibu Gulf, China.

Petsec Energy has entered into a Sale and Purchase Agreement with Horizon for a A $38 million cash payment, plus options with a 3 year term and exercise price of 37 cents/share over 15 million Horizon Oil.

The sale –which is expected to be completed during June 2011 –follows previous advice from Petsec Energy that it had decided to put the China interests on the market and to use sale proceeds to fund a significant expansion of the Company's USA petroleum operations.

Petsec's Chairman, Mr. Terry Fern, said the sale of the China interests, combined with Petsec's existing Gulf of Mexico gas production, would provide funds to launch the Company into a new era of growth in the USA.

"Our Board took the view that the required funding of US $37 million to develop the Company's 12.25% interest in the 6.12/12.8W oil fields, in Block 22/12, would deliver better and earlier returns if applied to shale oil operations in the USA," Mr. Fern said.

"As well as our strategy of moving into areas where the shale source rocks are liquid rich, Petsec is also making the structured transition to greater focus on oil exploration generally –in particular since there is currently an oversupply of natural gas in the USA and a relatively low price as a consequence," he said.

"This includes our previously stated move away from the exploration and production of smaller, natural gas targets, which at current US natural gas prices are marginally economic. Instead, we have set a minimum prospect target of greater than 20 billion cubic feet of gas equivalent (Bcfe) and with concentration on those prospects that are likely to have higher hydrocarbon liquids content and hold associated oil."

Petsec, which last week announced that it was debt free after eliminating US $100 million of debt during the past three years, plans to accelerate its move into the shale oil business as well as transitioning its traditional Gulf of Mexico oil and gas exploration and production focus to the Gulf Coast and onshore Louisiana and Texas.

Last year the Company participated in the Marathon gas/condensate discovery onshore Louisiana with a well drilled to 18,800 feet. The follow-up Marathon No 2 well is currently drilling ahead at 17,300 feet, with a target total depth of 21,000 feet.

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Witnesses Say Gulf Drilling Ban Was A Harsh Blow

- Witnesses Say Gulf Drilling Ban Was A Harsh Blow

Friday, June 03, 2011
Houston Chronicle
by Jennifer A. Dlouhy

The Obama administration's reactions to last year's BP oil spill did more damage than the crude itself, Mississippi Gov. Haley Barbour and Gulf Coast employers told a House committee Thursday.

Barbour said little oil reached Mississippi's shores, but the administration's May 2010 decision to impose a five-month ban on most deep-water drilling has left a lasting impact.

The moratorium "not only cost jobs in all the Gulf states, it hurt the economy nationally by reducing domestic oil production," Barbour told the House Oversight and Government Reform Committee.

Barbour, a Republican who recently ruled out a presidential bid, added that the government is still moving too slowly in approving deep-water projects.

"This will have a lasting impact on an already out-of-balance oil trade deficit," Barbour said. "Great jobs are being lost."

But Obama's top offshore drilling regulator -- Michael Bromwich, head of the Interior Department's Bureau of Ocean Energy Management, Regulation and Enforcement -- testified that the post-spill priority was boosting the safety of oil and gas operations near U.S. coasts.

The ocean energy bureau has approved 55 permits for shallow-water wells since new safety rules were imposed last June.

The agency also has permitted 15 deep-water drilling projects for which applicants were required to prove they could contain oil if an underwater well blew out as BP's Macondo well did.

After the resulting explosion on April 20, 2010, killed 11 Deepwater Horizon drilling rig workers and unleashed a 5-million-barrel oil spill, the administration overhauled the government's oversight of offshore drilling to eliminate possible conflicts of interest.

Rep. Darrell Issa, R-Calif., said those bureaucratic changes and a subsequent slowdown in the permitting of offshore drilling projects exacerbated economic damage from the spill.

"Much of the suffering and loss from the spill was made worse by poor decisions of administration officials," said Issa, the panel chairman. "When the administration did act, its major accomplishment was a hasty bureaucratic reorganization" and an offshore drilling shutdown that has caused "a paralyzing loss of jobs."

Cory Kief, president of Larose, La.-based Offshore Towing, said his tugboat company -- once hired to tow dozens of shallow-water rigs monthly -- has been hit hard by the drilling decline.

"We understand that precious lives were lost, and that an environmental disaster that was some 60 years in the making should not be ignored," Kief said. "However, there was a governmental agency that had a hand to play in this along with the others."

But Bromwich, the ocean energy bureau director, said that even if it takes more time for oil companies to satisfy new safety rules and for regulators to verify their compliance, that's better than the alternative.

"Our new regulations to strengthen drilling safety and protect the environment have required operators to work to make sure they drill safely, and our drilling engineers have to work to ensure compliance with the expanded set of requirements," Bromwich said. "That takes more time than the process that existed previously, when the rules were inadequate and some of our reviews were insufficiently exacting."

"This may be frustrating to some in the industry, but the additional rules and heightened scrutiny are completely appropriate and in the best interest of the nation."

The presidential commission that investigated the Deepwater Horizon disaster found that oil companies lost control of Gulf wells 79 times from 1996 to 2009, Bromwich noted.

"That's 79 near-misses -- 79 almost-Deepwater Horizons," Bromwich said.

It's impossible to reduce risk to zero, he said, "but we have to work constructively to try to manage those risks in a balanced way so we don't impose inappropriately high costs on industry and yet we do raise the bar on safety."

Bromwich added that he "would not have been comfortable" relaunching deep-water drilling after the spill without first strengthening offshore safety rules.

But Barbour argued that the government overreacted -- especially given a history of more than 31,000 oil wells drilled in the Gulf without devastating spills.

Barbour likened the deep-water drilling ban and subsequent safety regulations to outlawing left turns "because they're a little more dangerous."

U.S. economic needs and the urgency of domestic energy production outweigh the risk, Barbour said.

"The risk of one in 31,000 is worth taking when you're talking about something that is so important to the economy of the United States of America," he said.

Copyright (c) 2011, Houston Chronicle

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BP Gains 2.1% After Settlement Payment From MOEX

- BP Gains 2.1% After Settlement Payment From MOEX



May 20, 2011

BP (NYSE:BP) is higher after the oil major reached a settlement with MOEX Offshore 2007 LLC -- which had a 10% stake in the Macondo oil well -- over claims related to the Deepwater Horizon accident.

BP said MOEX will pay $1.065 billion, which BP will immediately apply to the $20 billion trust it established in the wake of the disaster.

BP said MOEX "has joined BP in recognizing and acknowledging the findings by the Presidential Commission that the accident was the result of a number of separate risk factors, oversights and outright mistakes by multiple parties."

In return for the payment, BP will indemnify MOEX for compensatory claims arising from the accident. MOEX is majority owned by Japan's Mitsui & Co. BP said the agreement is not an admission of liability by any party.

BP shares are up 2.1%, or $0.93, to $44.81.

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BP, MOEX Agree to $1.1B Settlement for Macondo Spill

- BP, MOEX Agree to $1.1B Settlement for Macondo Spill

Friday, May 20, 2011
BP plc

BP has reached agreement with MOEX and its affiliates, Mitsui Oil Exploration and MOEX USA, to settle all claims between the companies related to the Deepwater Horizon accident.

MOEX - which had a ten percent interest in the Macondo well - has joined BP in recognizing and acknowledging the findings by the Presidential Commission that the accident was the result of a number of separate risk factors, oversights and outright mistakes by multiple parties and a number of causes. Like BP, MOEX Offshore has also recognized and acknowledged the conclusions of the United States Coast Guard that, among other things, the safety management systems of both Transocean and its Deepwater Horizon rig had significant deficiencies that rendered them ineffective in preventing the accident. MOEX has concluded that entering into a settlement with BP is in its best interest. The agreement is not an admission of liability by any party regarding the accident.

Under the settlement agreement, MOEX USA Corporation, the parent company of MOEX Offshore 2007, will pay BP $ 1.065 billion. BP will immediately apply the payment to the $20 billion trust it established to meet individual, business and government claims, as well as the cost of the Natural Resource Damages.

The parties have also agreed to mutual releases of claims against each other. BP has agreed to indemnify MOEX for compensatory claims arising from the accident. BP's indemnity excludes civil, criminal or administrative fines and penalties, claims for punitive damages, and certain other claims.

"This settlement is an important step forward for BP and the Gulf communities," said BP group chief executive Bob Dudley. "MOEX is the first company to join BP in helping to meet our shared responsibilities in the Gulf, and Mitsui, through MOEX USA Corporation, is showing great corporate citizenship in standing behind its affiliate and making a contribution to meet the costs of this tragic accident. We call on the other parties involved in the Macondo well to follow the lead of the MOEX and Mitsui parties."

BP and the Mitsui group are committed to enhancing their business relationship globally now that the issues surrounding the Macondo well have been resolved between the two companies.

Today's settlement is the most recent step BP has taken to raise funds to help BP meet its commitments in the Gulf of Mexico. BP has so far concluded agreements for asset divestments totaling approximately $25 billion, and has recently announced that it will also divest a number of operated oil and gas fields in the UK and two of its US refineries - Texas City and Carson - along with their associated marketing interests.

BP is also working to ensure that the other parties involved in the Macondo well - notably, Transocean, which owned and operated the Deepwater Horizon rig; Halliburton, which designed and pumped the unstable cement that the Presidential Commission found was a key cause of the accident; and Anadarko, which owned 25 percent of the project - contribute appropriately. From the outset, BP has committed to paying all legitimate claims and fulfilling its obligations to the Gulf communities under the Oil Pollution Act. To date, BP has paid nearly $6 billion in claims.

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Dudley: The Lessons of Deepwater Horizon

Dudley: The Lessons of Deepwater Horizon

Wednesday, April 20, 2011
The Wall Street Journal
by Bob Dudley

A year ago [Wednesday, April 20], the Deepwater Horizon drilling rig exploded, killing 11 men and causing the largest offshore oil spill in U.S. history. At BP we regret that the accident happened and the impact it has had on the environment of the Gulf Coast and people living there.

From the start, we committed to pay all legitimate claims and work to restore the damage caused by the oil spill. We pledged to cooperate fully with all investigations into the cause of the accident. Finally, we said we would work to embed the lessons learned into the fabric of our organization and share those lessons with our industry colleagues and government regulators.

One year on, where do we stand with regard to those commitments?

First, we are paying claims. BP set aside $20 billion in a fund to compensate individuals, businesses and governments that were impacted, as well as for natural resource damages. So far, more than $5 billion in claims and other payments has been paid out of that fund.

In cooperation with federal and state government scientists, we're conducting a thorough assessment of the spill's environmental impact.

We've created a $500 million fund to support further scientific research on the spill's long-term impact. And we're supporting efforts by the region's governors to restore key industries, such as tourism and seafood.

But we know that we must do more than make good on the economic losses from the spill. BP has to change as well. The steps we have taken so far include:

• Creating a central safety and operational-risk organization reporting directly to me. This organization has the mandate and resources to drive safe, reliable operations that comply with regulations, and it has the authority to intervene in our operations anywhere in the world. We are also linking the management of employees' performance and reward directly to safety and to compliance with BP's standards.
• We will not use rigs on our projects that do not conform to our standards. We have either turned away rigs or are negotiating for modifications to particular rigs that will bring them up to our standards.

In the last few months, we have shut down several platforms to request modifications consistent with BP's standards. One of these was our Holstein platform in the Gulf of Mexico, which was shut down after we discovered incorrect specifications for some bolts.
BP engineers and technicians have traveled to Russia, Angola, Australia, Brazil and elsewhere to share what we've learned about the accident with government policy makers, regulators, academics, industry partners and the general public.

• We have also asked recently retired Adm. Frank "Skip" Bowman to join our board of directors. A former head of the U.S. nuclear navy, he has spent his entire career dealing with safety-related issues in a sector admired for its safety record.

Changing BP alone, however, is not enough. There are lessons from Deepwater Horizon for the entire industry. As the commission appointed by President [Barack] Obama to investigate the accident concluded, "Deepwater energy exploration and production, particularly at the frontiers of experience, involve risks for which neither industry nor government has been adequately prepared, but for which they can and must be prepared in the future."

In conjunction with the other major oil and gas companies that operate in the U.S., BP has joined the Marine Well Containment Corporation, a specially created entity designed to maintain preparedness for any future spills in the Gulf of Mexico. We've donated specialized equipment developed during last summer's containment effort, so that all of industry is better prepared.

Looking ahead, it is important to keep in mind that the global demand for energy will rise inexorably in coming decades--nearly 40% by 2030, according to BP estimates. That's roughly twice the current energy consumption of the entire U.S. Even as energy companies develop alternatives, the world will still need a large volume of oil.

Given the maturity of many existing fields, much of that oil will need to come from newer sources, such as the deep water. Right now, around 7% of the world's oil supplies are coming from the deep water, a total we expect will rise to nearly 10% by the end of this decade. That means we must have better safety technology, more effective equipment and the capability to deal with a blowout in the deep water.

BP gets it. BP is changing. We are committed to working together with our industry colleagues and government regulators to ensure a safer, stronger energy future.

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Deepwater Horizon Spurs Development of Spill Prevention Systems

Deepwater Horizon Spurs Development of Spill Prevention Systems

Wednesday, April 20, 2011

Rigzone Staff

The Deepwater Horizon oil spill disaster in April 2010 prompted the creation of oil spill response systems for use in the Gulf of Mexico and in the North Sea. Two oil spill prevention systems are now available for oil and gas producers in the Gulf of Mexico, and a well capping device is currently under construction in the UK that will be used as part of the UK oil and gas industry's oil spill response efforts.

Helix Well Containment Group

The Helix Well Containment Group (HWCG) plans to conduct a third tabletop exercise in late May to increase its members' coordination and preparedness for a subsea well containment incident. The group already has conducted two tabletop exercises this spring. The most recent exercise in late March brought together more than 225 technical professionals from the oil and gas industry.

HWCC has signed an agreement with Helix Energy Solutions Group, which will provide primary components of the well containment response system. The Helix Fast Response System (HFRS), which has been developed using Helix Energy Solutions Group assets that were deployed in the Deepwater Horizon incident, is expected to be fully operational for water depths of up to 10,000 feet by this summer.

Twenty-three deepwater Gulf operators comprise the HWCG consortium; these operators represent two-thirds of the deepwater operators in the Gulf of Mexico and approximately half of all deepwater oil and gas production in the Gulf. Members include Anadarko Petroleum Corp.; Apache Corp.; ATP Oil & Gas; BHP Billiton; Cobalt International Energy; Deep Gulf Energy; Eni; Energy Resource Technology GOM; Hess Corp.; LLOG Exploration Company; Marathon Oil Company; Marubeni Oil & Gas; Murphy Exploration & Production; Newfield Exploration Company; Nexen Petroleum; Noble Energy; Plains Exploration & Production; Repsol E&P USA; Statoil; Stone Energy; Walter Oil & Gas Corporation; Woodside Energy; and W&T Offshore.

Marine Well Containment Company

The Marine Well Containment Company (MWCC) in February launched its interim rapid response system to capture and contain oil from potential underwater well blowouts in the deepwater Gulf. The system can operate in up to 8,000 feet of water and process up to 60,000 b/d of fluid. Work is underway to expand the system to operate in up to 10,000 feet of water and process up to 100,000 b/d, with components to be delivered in 2012.

Capping Stack, Marine Well Containment Co.

ExxonMobil, ConocoPhillips and Chevron announced the plan to build and develop the system last July; since then, BP, Anadarko Petroleum Corp., Apache Corp., BHP Billiton, Shell, Hess Corp. and Statoil have joined MWCC. These 10 companies operated approximately 70 percent of deepwater wells drilled in the U.S. Gulf of Mexico between 2007 through 2009. The non-profit, stand-alone organization is open to all companies operating in the U.S. Gulf of Mexico.

Cooperation, Encouragement of Innovation Needed

The private sector worked hand in glove with the U.S. Coast Guard's research and development division and U.S. Navy research centers to assess technology, particularly for surface containment applications, said Owen Kratz, Helix president and chief executive officer, while testifying before Congress on April 4. "The NOAA also had tremendous value to bring to bear," said Kratz. "We certainly encourage those government agencies to work closely with industry organizations like the HWCG and Marine Well Containment Corporation established by some of the major integrated oil companies."

Helix used the lessons it learned from its participation in containing the Deepwater Horizon oil spill to its approach to containment efforts in the future. While coordinating and idea sharing is very important to making advances, Kratz noted that the U.S. government can assist the industry by minimizing the cost of capital by reinvigorating programs specifically designed to advance maritime industrial development. A familiar program of this type is the U.S. Maritime Administration (MARAD)'s loan guarantee program. Kratz said MARAD could help responsibly and within fiscal constraints, and has a "proven track record for bringing innovative vessel designs to market.

"As we have seen, the most innovative vessel designs will be the most useful going forward," Kratz said. The Q4000, built in Texas with MARAD financing, provides an excellent example, and was instrumental in bringing the Macondo blowout under control, Kratz said.

The Q4000 Drilling Platform

Having a diverse array of players in upstream oil and gas has allowed for technological innovation. "When the government fails to respond appropriately to permitting concerns or creates significant doubt which undermines business confidence, it saps potential investment capital necessary to innovate," Kratz said.

UK Well Capping Device

Energy industry association Oil & Gas UK in March confirmed that construction of a well capping device was underway at Cameron Ltd., in Leeds, UK. The capping device will become a key element of the UK offshore oil and gas industry's oil spill response contingency plans. Completion of the device is due this summer.

The cap is modular in design, with specifications that allow it to be deployed in the widest range of possible oil spill scenarios that could typically be encountered in the UK Continental shelf including west of Shetland.

The device has an overall working pressure rating of 15,000 psi, and is capable of capping a well flowing up to 75,000 b/d and in water depths of up to 5,500 feet. Capping should be achieved within 20-30 days of the incident, depending on weather and well site conditions.

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Deepwater Horizon: One Year Later

Deepwater Horizon: One Year Later

Wednesday, April 20, 2011
Rigzone Staff
by Jaime Kammerzell

A year ago today, an explosion on Transocean's Deepwater Horizon ultra-deepwater semisubmersible, positioned at the Macondo Prospect in Mississippi Canyon Block 252, in the Gulf of Mexico, took the lives of 11 men and caused the largest marine oil spill in history.

At 9:45 p.m. on April 20, 2010, while plugging the well for later production, seawater erupted from the marine riser onto the rig, shooting 240 ft into the air. A combination of mud, methane gas, and water quickly followed. The gas then ignited, causing explosions onboard. Attempts to activate the blowout preventer failed. Survivors said they had less than five minutes to escape after the alarm went off. Multiple ships attempted to put out the fire, but it could not be extinguished. After burning for 36 hours, the Deepwater Horizon sank in about 5,000 ft of water on April 22, 2010.

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A total of 126 people were onboard the Deepwater Horizon at the time of the explosion. Only 115 evacuated. Those who were able to escape took lifeboats to the M/V Damon B Bankston workboat nearby, which had been servicing the Deepwater Horizon. The US Coast Guard searched for three days.

Although BP was the operator of the Mocondo field, it was working with Transocean and Halliburton to plug the well for later completion as a subsea producer. BP believes that Transocean and Halliburton share the blame for the disaster.

According to Transocean, its employees had been performing routine work and did not notice any problems leading up to the explosion. Halliburton had finished running production casing and cementing 20 hours before the blowout. Transocean's CEO, Steven Newman, pointed his finger at Halliburton when he said, "there was a sudden, catastrophic failure of the cement, the casing or both."

When the semisubmersible sank, it left the well gushing oil out of the riser into the Gulf of Mexico. The resulting oil slick covered about 28,958 sq mi and reached beaches in Louisiana, Mississippi, Alabama and Florida by June 9th, when BP reported that it had lost more than $82 billion, close to half its value.

BP began drilling two relief wells on May 2 and May 16. In an attempt to stop the oil spill sooner, BP also tried using remotely operated underwater vehicles to close the BOP valves on the well head. This failed. BP then tried to place a 125 tonne containment dome over the largest leak to pipe oil to a storage vessel on the surface, but this attempt failed when gas leaked from the pipe and mixed with the cold water, which formed methane hydrate crystals that blocked the opening at the top of the dome. Pumping heavy drilling fluids into the BOP to restrict oil flow and permanently seal it with cement failed as well.

BP then tried positioning a riser insertion tube into the burst pipe. This worked adequately until the damaged riser could be capped on June 3rd. A washer plugged the end of the riser and diverted it to the insertion tube. Gas was flared and oil was stored on board the Discoverer Enterprise drillship. But this solution didn't last long. A second containment system, which connected directly to the BOP, was installed on June 16. The oil and gas were diverted to the Q4000 service vessel where it was burned. This worked well, so the Discoverer Clear Leader drillship and Helix Producer I FPSO joined in the effort, offloading oil to the Evi Knutsen and Juanita tankers. Two more vessels, the Seillean FPSO and Toisa Pices well testing vessels processed oil and offloaded to the Loch Rannoch shuttle tanker.

BP was pleased with this solution and announced on July 5, 2010, that it was recovering about 25,000 b/d and flaring 57.1 Mcf/d. However, the government estimated that the cap only captured about half of the leaking oil. BP made further adjustments to its cap solution and replaced the original cap on July 10 with a Flange Transition Spool and a 3 Ram Stack. On July 15, BP tested its new and improved cap by shutting off pipes that brought oil to the surface ships. This allowed the total pressure of the gushing oil to flow into the cap. The cap contained the oil and stopped the leak.

Meanwhile, BP continued to drill the two relief wells, which took four months to reach the Macondo well on September 15. BP pumped cement into the well 17,977 ft below the sea floor to permanently seal it. It took three days to complete. BP then permanently completed and abandoned the initial Macondo well as well as the two relief wells.

Though the oil has stopped gushing into the GOM, the aftermath remains today. Aside from the environmental and fishing and tourism impact, offshore exploration and production has been slow to return to pre-disaster levels. This is due mainly to governmental restraints.

On May 27th, President Obama instituted a temporary moratorium on offshore drilling in 500 ft or more of water, which also suspended drilling on 33 wells already in progress. He also implemented new standards for equipment and procedures.

The US Department of the Interior then issued tighter standards for barriers at underwater wells and BOPs on June 8, 2010. At the same time, the Interior Department started requiring CEOs of drilling companies to certify that their operations comply with the new regulations, including equipment testing and personnel training. Drilling in less than 500 ft of water resumed under the new standards. However, the deepwater drilling ban remained in effect until June 22, when a US federal judge in New Orleans lifted the moratorium saying it was "a blanket, generic, indeed punitive moratorium," as well as a potential harm to the economy, businesses and workers.

In response, Interior Secretary Salazar immediately issued a new order that contained additional information showing why the moratorium was necessary. The Interior Department defended Salazar's actions, saying Interior Secretary Ken Salazar "has merely fulfilled his continuing duty to manage the [Outer Continental Shelf] by reanalyzing the previously directed suspensions, evaluating new information on the adequacy of safety and environmental protection standards for OCS lease operations in the Gulf of Mexico, and issuing a new decision."

Interior Secretary, Ken Salazar

The deepwater ban went in effect again until November 30, 2010. However, President Obama lifted the drilling ban in deepwater GOM waters on Oct. 11, 2010. Salazar said in a statement that drilling in waters deeper than 500 ft can resume if operators follow the new Drilling Safety Rule.

"Under these new rules, operators will need to comply with tougher requirements for everything from well design and cementing practices to blowout preventers and employee training," Salazar said. "They will also need to develop comprehensive plans to manage risks and hazards at every step of the drilling process, so as to reduce the risk of human error."

Though the drilling ban was lifted in October, the Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE) didn't approve the first post-moratorium deepwater drilling permit until Feb. 28, 2011.

On Jan. 11, 2011, the White House released a report of its investigation of the oil spill. The report stated, "BP, Halliburton, and Transocean did not adequately identify or address risks of an accident…As a result, officials made a series of decisions that saved BP, Halliburton, and Transocean time and money—but without full appreciation of the associated risks."

Transocean and Halliburton attempted to sidestep the blame and pointed fingers at BP saying they were just following orders. Halliburton further criticized BP for its failure to run a cement bond log test.

In March, US Investigators, who hired Det Norske Veritas (DNV) to examine the failed blowout preventor, released a report that found a piece of drill pipe that was trapped inside the blowout preventer kept it from closing. The report didn't blame BP, Transocoean or Halliburton for the equipment failure. It simply focused on the cause of the failure.

According to a Reuters report from April 3, 2011, BP will be resuming its operations in the GOM in July 2011. The operator will be restricted to maintaining or increasing production on existing platforms. BP will not be permitted to drill exploration wells.


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Murphy Oil climbs after receiving deepwater drilling permit

Murphy Oil climbs after receiving deepwater drilling permit



The Interior Department yesterday granted a deepwater drilling permit to Murphy Oil (MUR) for a sidetrack well, according to a press release issued by the Interior Department's Bureau of Ocean Energy Management, Regulation and Enforcement. A sidetrack well is drilled to a new geologic target or a new location within the original target from the existing wellbore.

The company had a rig on location when drilling preparation activities were halted due to the temporary drilling suspensions imposed following the Deepwater Horizon oil spill. In early afternoon trading, Murphy gained $2.41, or 3.21%, to $77.48.

BP Spill Study Says BOP Needs Further Work

BP Spill Study Says BOP Needs Further Work

Thursday, March 31, 2011
Parks Paton Hoepfl & Brown
by  G. Allen Brooks



Last week, the results were released from the forensic study of the blowout preventer (BOP) used on BP Ltd.’s (BP-NYSE) Macondo well in the Gulf of Mexico that blew out last year causing an explosion, fire and eventual sinking of the Deepwater Horizon semi-submersible drilling rig and this nation’s greatest offshore environmental accident.

Den Norske Veritas (DNV), the Norwegian engineering and risk-management firm hired by the U.S. Department of the Interior to assess the BOP and determine its role in last year’s Deepwater Horizon disaster, after examining and testing the unit recovered from the ocean floor, prepared a 200-page report with a 351-page appendix.

The inspectors’ conclusion was that the shear ram valves in the BOP were unable to fully sever the drillpipe as the unit is designed to do because the pipe inside buckled from the well’s initial blow-out and was out of alignment that prevented complete closure.

DNV found that the shear rams had closed to within 1.4 inches.  This gap, albeit small, provided sufficient room for an estimated 4.9 million barrels of oil to escape.

While the report details the failure, the conclusions confirm the early belief of many drilling engineers consulted about the disaster.

The inability of the shear rams to cut the pipe because of it being off center highlight potential problems for companies drilling over-pressured wells.

The buckling of the pipe was due to the high pressure fluids roaring up the drilling pipe and annulus lifting the pipe until it hit an obstacle.  At that point, the momentum of the pipe and pressures and heat of the flows resulted in its bending.

Exhibit 10.  Why BP’s Macondo Well Spilled Oil

Source:  The Wall Street Journal

The report quickly generated further criticism of the offshore oil and gas industry and its safety procedures in drilling deepwater wells that tend to exhibit high formation pressures.

All facets of the oil and oilfield service industry involved in drilling these wells is working on ways to improve the performance of the drilling and safety equipment, especially the BOP.

There still remain unanswered questions about what actually caused the well to blow out and there will be more information and hypotheses presented down the road, but the DNV report was the last major report on the equipment involved in the accident.

The belief of most observers is that the Deepwater Horizon disaster was the result of a confluence of questionable decisions and actions by all parties involved that resulted in the creation of an unbalanced pressure differential between the downhole formation and the equipment designed to hold back that pressure.

Criticism of the DNV report came immediately from political opponents of offshore drilling including Rep. Edward Markey (D., Mass.) who said, “This report calls into question whether oil-industry claims about the effectiveness of blowout preventers are just a bunch of hot air.”  The man responsible for overseeing U.S. offshore drilling rules until he retired in 2009, Elmer Danenberger III, was quoted by The Wall Street Journal as saying, “They have to rethink the whole design,” meaning the BOP.

The DNV report concluded that the BOP failure was due to a design flaw and not the operation, abuse or maintenance of the BOP by the companies involved in drilling the Macondo well.

The BOP in question was manufactured by Cameron International (CAM-NYSE), the leading provider to the drilling industry of such units for over 90 years.  The BOP has been the industry’s last and best defense against well pressures, which often came as a result of encountering pockets of higher-pressured natural gas at shallower depths while drilling a well.  In fact, the BOP that became the signature product for Cameron was developed in response to several high-pressure well workover accidents in 1922.

The co-founder and majority owner of then Cameron Iron Works, James Abercrombie, was also a successful contract driller with a history of putting out well fires and blow-outs, long before Red Adair made the occupation of fire-fighting glamorous.

In late 1921, Mr. Abercrombie secured a contract to work over a troublesome well in the Hull field in Liberty County, northeast of Houston.  This was a field with many small pockets of high pressured gas.  In the course of working over wells in this field, Mr. Abercrombie’s company had lost its newest and best rig and had encountered three blowouts.

While each of the blowouts resulted in lost equipment, fortunately no one was hurt.

The episode, however, focused Mr. Abercrombie on ways to design equipment that could be used to prevent wells from blowing out.

Originally, he had used an elementary blowout preventer called a “boll weevil.”  It was essentially a piece of heavy-gauge pipe surrounded by a thick lead casing.  There was stopcock on top of the arrangement.  If it was suspected that a well might blowout, the unit was slipped over the well’s casing and the stopcock closed.  The unit proved impractical as a well containment device but mainly it was used to try to give the drilling workers time to get away from the rig before the well blew.

There was another preventer on the market designed to improve on the “boll weevil” and Mr. Abercrombie purchased one of them to use on his next well workover in the Hull field.  Unfortunately it, too, failed to prevent another blowout.  Mr. Abercrombie came up with the idea of a ram-type preventer with the faces of the rams closing in on the drillpipe in order to close off the pressure in the well.  With a sketch of the concept, Mr. Abercrombie went to his co-founder and partner, Henry Cameron, the next morning and sketched out his concept in the sawdust and dirt of the machine shop’s floor.  With a casting produced by Howard Hughes’ nearby shop, Mr. Cameron machined the design.

A patent application was filed on April 14, 1922, but patent number 1,569,247 was not issued until January 12, 1926.

As the unit was tested it was discovered that it leaked when pressure increased.  Mr. Cameron designed a fix whereby the increasing pressure would force open a notch in the corner of the ram face and force it to close tighter.  Patent number 1,498,610 was issued as a modification to the original BOP design but before the original patent was even granted.

By adding steel and cast iron parts to the BOP and being able to guarantee the unit would work to shut off 2,000 pounds of flowing pressure, the orders started coming in, not only from domestic companies in Texas, Louisiana and California, but also for use in foreign locations such as Mexico and Venezuela.  The Cameron Iron Works company was on its way to a glorious history that continues today.  [Much of this history about Cameron comes from the book, Mr. Jim, by Patrick J. Nicholson.]

We have high confidence that the engineers in the drilling business will figure out how to improve the performance and safety of the drilling process, just as they have for the past 150+ years.  Well control episodes have occurred throughout the history of the petroleum industry.  The Deepwater Horizon was the latest and most devastating, both due to the loss of 11 lives and the environmental damage to the Gulf of Mexico from the oil spill.

The evidence from the investigations of the disaster continues to show the Macondo well blowout was an accident.  All aspects of our daily lives, including the energy, involve risks.  We need to better understand the risks and their potential ramifications.  Importantly, we need to keep a perspective on risk and our risk tolerance.  We don’t stop driving after a car accident.  We don’t stop flying after a plane accident.  We shouldn’t stop drilling after a drilling accident.

ExxonMobil Gets BOEMRE Nod for GOM Deepwater Drilling Permit

Tuesday, March 22, 2011

The Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE) approved a fourth deepwater drilling permit that complies with rigorous new safety standards implemented in the wake of the Deepwater Horizon explosion and resulting oil spill. This includes satisfying the requirement to demonstrate the capacity to contain a subsea blowout. The approved permit is a revised permit to drill a new well for ExxonMobil's Well #3 in Keathley Canyon Block 919 in 6,941 ft. water depth, approximately 240 miles off the Louisiana coastline, south of Lafayette, La. This is the first permit approved that designates the Marine Well Containment Company (MWCC) containment system as its containment solution.

"Today's permit approval is the fourth to be approved in the month since the industry confirmed its capability to contain a deepwater loss of well control and blowout. We will continue to review and approve applications that demonstrate the ability to operate safely in deep water," said BOEMRE Director Michael R. Bromwich. "As we have seen, the rate of deepwater permit applications is increasing, which reflects growing confidence in the industry that it understands and can comply with the applicable requirements, including the containment requirement. We expect additional permit approvals in the near future."

ExxonMobil's Well #3 is a new well. The operator had a rig on-location and an approved Permit to Drill a New Well when activities were suspended due to the temporary drilling suspensions imposed following the Deepwater Horizon oil spill.

ExxonMobil has contracted with the MWCC to use its capping stack to stop the flow of oil should a well control event occur. As part of its approval process, the bureau reviewed ExxonMobil's containment capability available for the specific well proposed in the permit application and confirmed that the capabilities of the capping stack met the requirements specific to the proposed well's characteristics.

BOEMRE has worked diligently to help industry adapt to and comply with new, rigorous safety practices. These standards ensure that oil and gas development continues, while also incorporating key lessons learned from the Deepwater Horizon oil spill. This new permit meets the new safety regulations and information requirements in Notices to Lessees (NTL) N06 and N10, and the Interim Final Safety Rule.

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