Offshore in depth

By the time you read this, the movie Deepwater Horizon will be in theaters across the U.S., bringing renewed attention to the biggest oil industry disaster in history. I haven’t seen the film, but early reviews of the $100-million production say that the story portrays rig workers as heroes fighting for survival, and oil company executives as bad guys, whose greed caused the accident.

Given the current oilpatch slump, the industry doesn’t need the bad publicity. The movie is “inspired by a true story,” but it doesn’t convey the effort and expense that the industry has made, to improve offshore safety, and to take a more sophisticated, strategic approach to managing risk.

Legacy of disaster. The Macondo incident had huge consequences that changed the offshore drilling industry forever. BP estimates that it has spent $60.1 billion in fines, reclamation and settlements resulting from the blowout and spill. The U.S. Department of Interior (DOI) split its Minerals Management Service into the Bureau of Ocean Energy Management (BOEM) and Bureau of Safety and Environmental Enforcement (BSEE), to assure objective oversight of commercial and safety aspects of operating on the Outer Continental Shelf (OCS).

At least four industry consortia have invested millions of dollars in capping stacks, response vessels, training and rapid-containment drills. Before 2010, offshore drilling was a complex and expensive undertaking; after the disaster, the task is even harder, and the industry faces new levels of scrutiny and regulation.

Focus on personal safety. The upstream oil and gas industry has always placed a high priority on personal safety. Contractors and suppliers must have satisfactory safety records to participate in offshore projects, and virtually every meeting between operators and service company personnel begins with a “safety moment.” The emphasis on safe work practices has resulted in rates for non-fatal job-related injuries and illnesses that are about one-third lower than for the entire U.S. private sector, according to API.

Incidents still occur. While the industry’s personal safety record is admirable, serious incidents continue to occur. Despite repercussions of the Macondo disaster, BSEE reported that drillers lost control of 15 wells in the Gulf of Mexico in 2013 and 2014, including one blowout that resulted in “a massive explosion and fire on the rig.”

Process safety targets risks. The narrow focus on personal safety and the failure to implement “defense in depth” with multiple independent barriers for well control were factors in the Macondo and subsequent blowouts, according to Andrew Hopkins, in his 2012 book, Disastrous Decisions: The Human and Organizational Causes of the Gulf of Mexico Blowout. To prevent future incidents, the industry has already begun the paradigm shift that Hopkins recommends, from focusing primarily on personal safety to using best practices for both personal and process safety.

Process safety requires more strategic thinking than personal safety. Unlike personal safety incidents that may harm an individual, process safety incidents can result in multiple injuries and fatalities, serious environmental impacts, and severe financial losses. Process safety management requires a commitment to a safety culture from senior management, comprehensive risk assessment, establishing multiple preventive barriers, enhanced specifications, maintenance and testing of well control equipment, competent crews and predetermined recovery measures.

New rules support process safety. New rules, promulgated this year by the DOI, encourage the industry to embrace process safety.

In April, DOI announced final well control regulations to reduce the risk of blowouts on the OCS. The regulations are intended to ensure that operators and drilling contractors are cultivating a “greater culture of safety that minimizes risk.” The rules include requirements for blowout preventer systems, double shear rams, third-party reviews of equipment, real-time monitoring, safe drilling margins, inspection intervals and other reforms related to well design and control, and subsea containment.

In July, DOI released additional regulations governing drilling in the Arctic, mandating that oil companies establish internal controls for oil spill prevention, containment and response, as well as requiring that capping stacks and containment domes be staged close to the drilling location.

Economic impact. Offshore operators, with guidance from API, are already implementing many of the measures called for in the OCS regulations released in April. Full compliance will require additional work and expense by operators, who are already suffering from low commodity prices.

The Dallas Morning News reported that during the review period, Exxon Mobil estimated the new rules would cost the industry $25 billion over the next 10 years, because increased costs would make many offshore prospects uneconomic.

The economics of Arctic drilling are even more tenuous, and exploration there is not likely to resume until oil prices are substantially higher. In response to the new Arctic rules, National Ocean Industries Association President Randall Luthi issued a statement, saying that “prescriptive requirements in the rule could thwart industry innovation … and may not actually increase operational safety.”

Ongoing vigilance needed. For the most part, oil and gas companies have operated safely for decades, with minimal impact offshore and in the Arctic. However, given the consequences of offshore blowouts—one Macondo is too many—regulatory scrutiny and public pressure will continue. The industry can’t stop being vigilant, and a process safety approach offers a viable strategy to prevent future disasters. 

About the Authors

Ron Bitto

Contributing Editor

Ron Bitto has more than 30 years of experience as a technology marketer and writer in the upstream oil and gas industry. RON.BITTO@GMAIL.COM