In this episode of Sound Off, Joe Perino gives some background on how the BP Macondo / Deepwater Horizon incident in the Gulf of Mexico led to the current trends in offshore drilling safety.
Joe gets into what exactly happened with to cause the Deepwater Horizon systems to fail as well as the government response to changes in oversight and regulation of offshore drilling.
As Joe mentions, this included a swift shake-up of which government bodies oversee this part of oil and gas operations.
Be sure to drop any comments or questions in the comment section below, or Oil 101 members can also reach out in the forums.
Listen to the Sound Off Oil and Gas Podcast Below:
Center for Offshore Safety (COS)
Center for Offshore Safety – SEMS Toolkit
Offshore Energy Safety Institute (OESI)
Bureau of Safety and Environmental Enforcement (BSEE)
Bureau of Ocean Energy Management (BOEM)
International Association of Drilling Contractors (IADC)
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Hello, I’m Joe Perino and welcome to Sound Off.
This oil and gas podcast is part of the EKT Interactive Learning Network and is brought to you by Oil 101, a free 10-part introduction to the oil and gas industry.
Today I am going to talk about a subject that I’ve been following closely for the past 6 years and that is what is happening with the offshore oil and gas safety and environmental area, particularly as a result of the BP Macondo or Deepwater Horizon incident that occurred in April of 2010. I am going to talk a little bit about the incident, what happened and why it happened, and then the response of government, the regulator, formerly the Minerals Management Service, and the industry response. Finally, I’ll wrap up with a few comments and perspectives of my own.
I’d like to take this opportunity to note that I am not speaking on behalf of any of these organizations, oil companies or entities. My perspectives are purely my own and not theirs.
First, just exactly what was the BP Mocando or Deepwater Horizon incident?
Well, it was a blow-out of a well on a deep water oil rig, which caught fire, caused the rig to explode and sink, resulting in a loss of 11 lives, the rig, and an oil spill that gushed for some 87 days before being capped on July 15 of 2010 and then eventually sealed on September 19, 2010.
It involved several players.
First, BP, the operator of the well; secondly, Transocean, who owned the Deepwater Horizon drilling platform; and third, Halliburton, an oil field service company, one of many companies working on the platform at that time.
What exactly happened? As Transocean was drilling the well under BP’s direction, it was customary to pump cement down around the outside of the drill casing to prevent any oil and gas from coming up around the exterior of that casing and up to the platform. In addition, drilling mud is used as a counterbalance to maintain pressure against the pressure of the oil and gas that would flow up as a result of the drill bit penetrating the oil and gas reservoir.
According to BP’s report on April 20th, managers misread pressure data and gave their approval for rig workers to replace the drilling fluid in the well with seawater, which was not heavy enough to prevent gas that had been leaking into the well from firing up the pipe to the rig, catching fire, and causing the explosion.
In addition, the attempt to seal the well by activating the blow-out preventer, whose shears would cut off the drill pipe and close the well head, failed. The drilled pipe coupled inside the blow-out preventer and the shears were not sufficiently strong to cut it off. The result of course was the oil leaking into the ocean from the ocean floor for the 87 days.
The government and regulatories investigated the incident and issued a formal report in March of 2011, pointing out a number of failures which included both physical ones, including mechanical, process and human error involved.
Report concluded that the primary cause of failure was that the blind shear rams of the blow-out preventer failed to fully close and seal due to a portion of the drilled pipe buckling between the shear blocks.
But also highlighted a number of other shortcomings, including one that BP had not used a diagnostic tool to test the strength of the cement that was put in by Halliburton.
Another was ignoring a pressure test that had failed. Another was for not plugging the pipe with cement.
Similarly, a White House commission likewise blamed BP and its partners for a series of cost-cutting decisions and an insufficient safety system but also concluded that the spill resulted from systemic root causes and absent significant reform in both industry practices and government policies might well reoccur.
This is what set into motion the changes that occurred in the regulator, the MMS, as well as what has happened since then in the industry as well as with operating companies and oil field service companies.
The first group to take action was the government and regulatory agencies.
Within five weeks of the incident, the Mining and Mineral Management Services was reorganized into the Bureau of Ocean Energy Management, Regulation and Enforcement. BOEMRE, or Bome-ray for short.
BOEMRE combined the two functions of the three that the Mining and Mineral Services used to do. If you recall, the Mining and Mineral Services did three things: One, they collected the revenues from the oil and gas production; secondly, they established a strategic plan for the development of the offshore resources along with approving drilling permits and production permits; then, third, they issued regulations and compliance rules on safety and environmental issues, which the operators have to comply with and they enforce those rules.
By late 2010, the revenue accounting function of the old MMS had been transferred from the MMS to the Department of Interior’s Office of Policy Management and Budget, where it continues to reside today and it is now called the Office of Natural Resources Revenue.
BOEM and BSEE
Later on in 2011, about a year later, BOEMRE was split into two parts. Part one was BOEM or Bome, and the second part was BSEE, or the Bureau of Safety Environmental Enforcement.
BOEM’s responsibilities included the strategic plan for the development of the outer continental shelf resources, meaning the leasing program; secondly, they handled all of the lease sales and the renewable energy programs; third, of course, is that they managed all of the drilling and production permits.
BSEE on the other hand, or [Bessie 00:07:18], was all about regulations and enforcement, and they’re responsible for issuing the standards and guidelines for offshore operators for operations, for spill response. They also have an enforcement division, and they’ve set up quite a few guidelines, rules and regulations that have been promulgated since 2011 and most recently in 2016 for compliance by the operators.
BSEE – Bureau of Safety Environmental Enforcement
Now, from this point forward, I’m not going to talk any further about the Bureau of Ocean Energy Management, or BOEME, but instead focus on the Bureau of Safety and Environmental Enforcement, or BSEE because it is what they have been doing that has prompted the industry response from operators, oil field service companies and contractors. Let’s spend a few minutes on what the Bureau of Safety and Environmental Enforcement has done since they’ve come into being in 2010 and then in 2011.
They’ve implemented a number of things.
They’ve promulgated enhanced well design encasing standards.
They’ve increased the number of inspectors and engineers in their workforce and they are still hiring today.
They have enhanced the blow-out preventer testing and maintenance review process.
They have sponsored the Ocean Energy Safety Institute, an R&D program to further the best available safe technologies for use in the offshore industry.
I’ll spend a few more minutes on the Ocean Energy Safety Institute a little bit later. They have implemented a new safety and environmental management system requirement that establishes performance based standards for the industry, meaning the operators, to maintain an active, integrated program for safety and environmental management.
Finally and most recently, they have implemented a well control rule, which stipulates requirements on the design and implementation of blow-out preventers and other safety devices and processes related to well control.
Probably the two most important things they have done relate to first the safety and environmental management system program, which makes mandatory the previously voluntary practices in the American Petroleum Institute, or API’s recommended practice 75.
Now operators are required to have a mandatory SEMS program to enhance the safety and environmental protection of offshore oil and gas drilling operations and production operations as well. Of course, operating companies have long had an HSE process, that is Health, Safety and Environmental, but now they’ve had to modify those programs to comply with APIRP 75 and the additional requirements of SEMS.
Now, perhaps the most controversial regulation that has come out of BSEE is the new well control rule which was just finalized in early 2016. It requires a number of changes for well control, including the latest industry standards for baseline requirements for the design, manufacture, repair and maintenance of blow-out preventers.
It does require more controls over the maintenance repair BOPs and for deep water BOPs, it requires the use of dual shear rams in the baseline standard, which was in API standard 53.
It expands the accumulator capacity, which contains the fluid that drives the rams across the blow-out preventer annulus to shear the well piping or drill string and it also requires adopting safe drilling margins consistent with the recommendations arising out of the Deepwater Horizon tragedy.
That’s probably quite a controversial one. There’s a number of other ones.
Of course, none of these rules are without controversy and the API has issued a statement that they don’t agree with everything in the well control rule, particularly around the safe margins, because it is a prescriptive requirement rather than allowing the drilling situation and the drillers to make an informed risk decision as to what the margin should be. Nevertheless, from my perspective, I imagine that this rule will stand as is and will be modified or interpreted as necessary going forward.
Now, let’s turn to the industry response.
In response to the BSEE requirement that mandates the adoption of APIRP 75, the API under its auspices established what is now known as the Center for Offshore Safety, COS, or [cause 00:12:13] for short. COS has a number of objectives and functions.
They include providing assistance to member companies for their implementation of the Center for Offshore Safety programs, which are focused around the implementation of the SEMS framework for operating companies, drilling contractors and service firms.
Secondly, they help assure that third party certification program auditors meet the program’s goals and objectives.
Third, they compile and analyze key industry performance metrics on safety. Fourth, they coordinate sponsored functions designed to facilitate the sharing and learning process among its members’ companies and with the industry and public.
The COS has a small, permanent staff and they are lead by respected industry veteran Charlie Williams, who has over 30 years experience at Shell Oil.
To date, they have implemented a number of things to help companies comply with the guidelines. They have a SEMS tool kit. They have an auditor and audit service provider documentation kit. They have a skills and knowledge management system guideline. They also have a site leadership engagement good practices.
Who are members of the COS?
Of course, most of your major operators and lease holders. Anadarko , BHP, BP, Chevron, Cobalt, Conoco, Exxon Mobil, Hess, Marathon, Murphy, Noble, Shell, Stat Oil and Total.
The drilling contractors include Diamond, Ensco, Noble, Pacific Sea Drill and Transocean. The service equipment and oil field service providers include Baker Hughes, Cameron, Halliburton, Ocean Engineering, Petroskills, Schlumberger, GE, United Fuel Supply, Helmerich and Payne, and FTO Services.
There are also affiliates, particularly the International Association for Drilling Contractors, but you can see this list is not exhaustive and not everybody that does operate in the offshore waters is a member.
Ocean Energy Safety Institute
Now I want to return to the Ocean Energy Safety Institute, an organization that was founded by and funded by BSEE and their purpose is to facilitate research and development; training of federal workers on identification and verification of best available and safest technology (or BAST); an implementation of operational improvements in the operations of offshore drilling safety and environmental protection; blow-out containment; and oil spill response.
The OESI is in fact a collaboration of BSEE with government, academia and scientific experts. It includes representatives from the University of Houston, the University of Texas, and Texas A&M University, and the Texas A&M Engineering Experimental Station or TEES.
Mary Kay O’Connor Process Safety Center has been selected to manage OESI and is responsible for managing the overall institute in conducting and managing their events and activities.
Now, you’ll find that OESI, COS and BSEE often have events in which representatives from all three of these functions as well as others, such as the IADC, all attend and share information and present to each other, so there’s a lot of cooperation going on there. The OESI is led by former Navy captain James Pettigrew, and he is their Director of Operations.
Now, I’d like to take a moment to summarize where we’ve been before offering some of my own perspectives. We have seen that the Deepwater Horizon or BP Macondo incident has led to changes on both the government and regulator side, as well as the industry.
The MMS was reorganized into ONRR, BOEM, and BSEE, with BSEE leading the charge with new regulations as well as enforcement, the most important of which is the requirement for a safety environmental management system and the new well control rule. Industry responded through the API by creating the Center for Offshore Safety, which is providing a shared framework for industry participants, operators, service providers and oil field service providers to comply with the SEM requirement as well as to establish guidelines and certifications for third party auditors so that everyone who participates’ programs can be certified.
At the same time, BSEE established the Ocean Energy Safety Institute to do research and development around best available safe technologies and to make sure that federal employees were as trained and as up to date as industry personnel are on safety and environmental practices and technologies.
Now, I’d like to offer some of my observations and perspectives on this whole area of offshore safety. In doing so, I make no claim to having inside or privileged information, nor have I attended every workshop or event that has been sponsored by BSEE, COS or the OESI. Nevertheless, there are some things that do pique my interest and are worth commenting on.
First, there are a lot of players in the space. Besides BSEE, COS, OESI, there’s also a number of other affiliated firms and sometimes it can be difficult to understand who’s doing what and who has which responsibility, at least to an outside observer.
In some cases, there may actually be some redundancy of effort. For example, the IADC collects safety information from its drilling contractors, but COS also collects this same information, especially on platforms which include drilling operations as well as production, so there’s some dual effort there.
Second, there’s a big data collection issue, not only on behalf of the government regulator but also on the half of industry.
For example, there are over 2000 production platforms in the Gulf of Mexico, not counting drill ships, platforms and rigs. This is a lot of assets to keep track of.
Also, because the industry is multi-layered where there are any number of subcontractors and contractors in a hierarchy that finally connect up to the operator, there are people of all sizes, small, medium and large that are part of the offshore industry.
This presents a problem because the largest operators and oil field service firms have their compliance programs well under way and in hand. In fact, Schlumberger just recently got theirs certified. What about small and medium people? How can they comply and report all the data they need to?
It would seem to me that the larger players need to make an effort to lead an industry consortium and a mechanism for all the players to report their data. At one presentation, Brad Smoland from BP reported that only about 60% of the data is being collected. Where’s the other 40%? Without such a mechanism to bring in the small and medium size players, this is going to be a problem. A corollary to that is if every individual company is doing their own thing, the regulator is going to be overwhelmed with all kinds of data in different formats and forms and they’re going to have to try to make sense out of this to track it and understand what it means. It would be far better if the industry itself collected its data in a form and format which then can satisfy regulators as well as industry participants, but this has yet to happen.
Another aspect particularly for drilling contractors is that everyone is going to have to be required to report safety data contractually, not only at the drilling contractor level but at all the contractor levels. It may take some time before this actually filters its way through the system and becomes part of standard way of operating, but unless the industry demands this, they won’t get all the data they want and need, and neither will the regulators.
Fourth, in an attempt to better get an idea of what the risks are in the offshore operation, at a recent OESI event, BSEE presented a model for estimating and predicting when and where such safety and environmental incidents might occur.
They used a model that was built for them by the Argonne National Laboratory. The results show that 80% of the safety and environmental events occurred on 20% of the offshore assets, so that’s not a surprise that it meets with the Peretto 80/20 rule. However, their model seemed a bit simplistic and I think they’re going to have to have a lot more data and a more detailed complexity model in order to do a better job of predicting when and where such events might occur on an offshore asset, a platform or rig. It is my hope that they continue this effort but it will require the cooperation and data-gathering from all of the industries installed assets in order to do this.
Finally, it is good to see that the upstream industry is cooperating to this degree. I started my career in the refining and chemical industry in the 70s before the [Bo-paul 00:22:15] incident, and the chemical and refining industry almost had to be dragged kicking and screaming into sharing the data on safety and environmental and today they are the leaders in doing so after these many years.
I’m hoping that it doesn’t take a generation or more for the upstream industry to learn to share and to resist their old ways of doing business by not sharing and keeping all their information private. This is one of the reasons why I encourage the industry to take charge of their own data. This information is their own intellectual property, their own IP, and if you’re a safe operator, it is an asset. I would much prefer to see them own their own data, provide what is necessary to the regulators, and then use this data on an industry wide basis for shared learning and improvement. This is what happened in the chemical industry and it can happen in the upstream industry as well.
As always, if you’ve got a question or a comment, we’d like to hear from you. Thanks for listening to this podcast.