Wall Street Journal
May 11, 2010
By RUSSELL GOLD, STEPHEN POWER And VANESSA O’CONNELL
Executives from BP PLC, Transocean Ltd. and Halliburton Co. began pointing fingers on Monday over who bears ultimate responsibility for the April 20 oil-rig explosion that took 11 lives and is spilling oil into the Gulf of Mexico. The question will loom large at a Senate hearing Tuesday that will hear from executives of the three companies.
BP, Transocean and Halliburton are set to blame each other in Congressional hearings for last month’s big oil-rig explosion and spill. Neil King, Bob O’Brien and Neal Lipschutz discuss. Also, Kara Scannell weighs in on Congressional hearings intended to find out what caused Thursday’s sudden market plunge.
BP, the well owner, blames the failure of a big set of valves on the sea floor, known as the blowout preventer, to halt the blowout once it started.
A different account comes from Halliburton, a contractor in the drilling. This account is corroborated to some extent by Transocean, as well as by two workers on the drilling rig, The Wall Street Journal has determined.
This account describes a failure to place a cement plug within the well. The plug is designed to prevent gas from escaping up the pipe to the surface.
Before such a plug is placed, the job of keeping underground gas from coming up the pipe is done by heavy drilling fluid inside the well, commonly known as “mud.” The plug is normally put in before the mud is removed, but according to the account of Halliburton, Transocean and the two workers, in this case, that wasn’t donedrilling mud was removed before a final cement plug was placed in the well.
It is not clear why such a decision would have been made. Rig owner Transocean says that BP, as owner of the well that was just being completed, made key decisions on how to proceed. BP declined to comment on this account of the drilling procedures.
Tim Probert, Halliburton’s president of global business lines, plans to testify Tuesday that his company had finished an earlier step, cementing the casing, filling in the area between the pipe and the walls of the well; pressure tests showed the casing had been properly constructed, he will testify.
At this point it is common practice to pour wet cement down into the pipe. The wet cement, which is heavier than the drilling mud, sinks down through the drilling mud and then hardens into a plug thousands of feet down in the well.
The mud then is removed and displaced by seawater; the hardened cement plug holds back any underground gas.
In this case, a decision was made, shortly before the explosion, to perform the remaining tasks in reverse order, according to the expected Senate testimony of Mr. Probert, the Halliburton executive.
“We understand that the drilling contractor then proceeded to displace the riser with seawater prior to the planned placement of the final cement plugŠ,” Mr. Probert says in the prepared testimony, which was reviewed by The Wall Street Journal. The “riser” is part of the pipe running from the sea floor up to the drilling rig at the surface.
Lloyd Heinze, chairman of the petroleum engineering department at Texas Tech University, agrees that this is an unusual approach. “Normally, you would not evacuate the riser until you were done with the last plug at the sea floor,” he said in an interview.
A worker who was on the drilling rig said in an interview that Halliburton was getting ready to set a final cement plug at 8,000 feet below the rig when workers received other instructions. “Usually we set the cement plug at that point and let it set for six hours, then displace the well,” said the worker, meaning take out the mud.
According to this worker, BP asked permission from the federal Minerals Management Service to displace the mud before the final plugging operation had begun. The mud in the well weighed 14.3 pounds per gallon; it was displaced by seawater that weighed nearly 50% less. Like BP, the MMS declined to comment on this account.
As the heavy mud was taken out and replaced with much lighter seawater, “that’s when the well came at us, basically,” said the worker, who was involved in the cementing process.
The worker’s account is corroborated by an email account sent by another person on the rig. He said that engineers wanted to flood the well with sea water before setting the final plug. As they were taking out the mud, the blowout began with a flood of drilling fluid being pushed out of the well, followed by a series of explosions.
Halliburton’s Mr. Probert’s prepared statement says: “Prior to the point in the well construction plan that the Halliburton personnel would have set the final cement plug, the catastrophic incident occurred. As a result, the final cement plug was never set.”
Halliburton says it was following Transocean’s orders and is “contractually bound to comply with the well owner’s instructions on all matters relating to the performance of all work ] related activities.”
Transocean Chief Executive Steven Newman is expected to tell the Senate the explosion occurred “after the well construction process was essentially finished.” His prepared testimony then blames the blowout on a failure of the well’s lining, saying the blowout had to be caused by “a sudden, catastrophic failure of the cement, the casing or both.”
When asked Monday night, Transocean agreed that the cement plug had not been placed in the well but that it had started the process of removing the mud, which it said was at BP’s behest.
Such plugs are placed only temporarily. The idea is that the well owner can later reopen the well and begin producing oil from it.
The chairman of BP unit BP America Inc., Lamar McKay, is expected to testify that “we are looking at why the blowout preventer did not work because that was to be the fail-safe in case of an accident.ŠTransocean’s blowout preventer failed to operate.” According to his prepared statement, reviewed by the Journal, he will say, “All of us urgently want to understand how this vital piece of equipment and its built-in redundancy systems failed and what measures are required to prevent this from ever happening again.”
Mr. Newman of Transocean says in his prepared testimony that it “simply makes no sense” to blame the blowout preventer. At the point that the blowout occurred, “the well barriersthe cementing and the casingwere responsible for controlling any pressure from the reservoir,” his testimony says.
Two Senate panels, on Energy and Natural Resources and on Environment and Public Works, are to hear the testimony. In addition, the U.S. Coast Guard and the MMS are holding hearings Tuesday and Wednesday in Kenner, La.
BP’s efforts to control the leaking oil haven’t worked so far. As a result, reverberations from the disaster could affect BP’s global ambitions to expand its already large footprint in deep-water drilling. No other company has invested as heavily as BP has in the high-risk, high-reward business of deep-water oil exploration.
BP Chief Executive Tony Hayward said Monday that the global oil industry “has drilled over 5,000 wells in greater than 1,000 feet of water and has not hitherto had an issue of this sort to contend with.”
Neil King Jr. and Rebecca Smith contributed to this article.
Write to Russell Gold at russell.gold@wsj.com , Stephen Power at stephen.power@wsj.com and Vanessa O’Connell at vanessa.o’connell@wsj.com
Interior Plans to Split Minerals Management Service
By SIOBHAN HUGHES And STEPHEN POWER
WASHINGTON. The Interior Department plans to announce Tuesday its intent to split the Minerals Management Service into two divisions, one focusing on gathering royalties from oil and gas companies and another focused on safety inspections.
An Interior Department official confirmed the plan. Interior Secretary Ken Salazar will make an announcement at 1 p.m. EDT.
The Associated Press reported on the planned split earlier Tuesday.
The reorganization comes amid a vast Gulf Coast oil spill that has called into question the efficacy of the government’s regulation. The tiny agency currently plays dual roles, focusing on collecting money as well as on ensuring the safety of oil rigs. Some former employees have said that amounts to a conflict-of-interest, as employees must focus on keeping oil revenue flowing while also focusing on safety.
A Wall Street Journal examination of the MMS’s track record last week found several instances of the agency identifying potential safety problems and then either not requiring follow-up or relying on the industry to craft a solution. In some cases, the industry didn’t do its part.
The Journal also found that the safety record of U.S. offshore drilling compares unfavorably, in terms of deaths and serious accidents, to other major oil-producing countries. Over the past five years, an offshore oil worker in the U.S. was more than four times as likely to be killed than a worker in European waters, and 23% more likely to sustain an injury, according to International Association of Drilling Contractors data, which is adjusted for man-hours worked.
The U.K.home to one of the largest offshore-drilling industries in the worldhas already adopted a regulatory structure similar to the one that the Obama administration is moving toward. In 1998, after a fire aboard a North Sea platform killed 167 people, the U.K. separated its offshore safety-oversight agency from the revenue-gathering side.
After that change, the U.K.’s safety record improved. The improvements also came at a time of increased mechanization of rigs, which improved the safety of offshore drilling world-wide.
Write to Siobhan Hughes at siobhan.hughes@dowjones.com