Deepwater Horizon oil spill case

EMBA LONDON DICKENS COHORT FINAL EXAM, Dec 2012
Philippe Kunz – Global Operation – George Kastner

Deepwater Horizon oil spill

For an another tragedy as the Deepwater Horizon doesn’t happened again anymore
(en.wikipedia.org/wiki/BP)

The 20 April 2010 explosion on BP's offshore drilling rig in the Gulf of Mexico resulted in the deaths
of 11 people and injured 16 others. It caused the Deepwater Horizon to burn and sink, and started
the largest accidental offshore oil spill in the history of the petroleum industry.

Page 1


An environment conducive to a disaster.

In the late twentieth century, the demand for oil increases continuously, but oil and gas drilling in the
Gulf of Mexico deepwater, but mostly water "shallow" experiencing a sharp decline in output. The
total proven reserves to fall dramatically in 1986.

Production is maintained through new drilling in deeper water, but these reserves are depleted
quickly and are more dispersed and poorer than expected.

In 2001, the Bush administration and the NEP (National Energy Policy) push the Minerals
Management Service to adopt strong fiscal or financial incentives to encourage offshore drilling deep
that otherwise would not be profitable.

These incentives are reinforced January 26, 2004, with a decrease or elimination of royalties when
drilling deep and very deep, and in August 2005 through the Energy Policy Act always to promote
deep drilling more than 4,500 meters below the sea surface.

Complacency of security controls.

MMS also seems to be less demanding on impact studies and monitoring of safety procedures,
exploiting While admitting wells at this depth was still a technological challenge. MMS relies mainly
on an increase in gas production in exchange for exemption of royalty on gas production.

BP then proposes to offshore drilling the world's deepest. He rented until September 2013, the oil rig
Deepwater Horizon ultra-modern, built in 2001 and owned by Transocean. September 2, 2009, it
drilled the deepest oil well and gas ever made, until the fatal accident.

Edward J. Markey, a Democratic senator from Massachusetts, believes that relations climate and
proximity mixture of interests uniting oil and supervisors was conducive to a serious accident: "The
aggressive promotion (" boosterism ") feeds complacency and complacency which are causing
disasters.

MMS had authorized BP to rent and use the Deepwater Horizon, while exempting a "special
exception" ("categorical exclusion") dated 6 April 2009 from the obligation to comply with NEPA (Act
on the environment called "National Environmental Policy Act"). BP, just 11 days before the
explosion, was still lobbying to expand exemptions for oil tankers in the Gulf region.

No independent oversight organ.

MMS was placed by its supervisory authority in a particularly ambiguous: it had to collect royalties,
check the feasibility and safety of drilling, while being ordered by law to encourage increased
production by drilling very deep .

Low risk assessment.

MMS has produced three environmental assessments in 2007, one of which concerned the lease to
BP Deepwater Horizon. In each case, it seems to have downplayed the prospect of a major leak.

Page 2


Outsourcing without follow-up and controls.

MMS seems to mandate companies drilling in some areas, to identify what might under NEPA reduce
the environmental impact of a project or takes up - without checked by expert-cons - their assertions
and arguments.

Vertical integration (taken from www.bp.com)

When the oil started to flow from Alaska, no BP refineries or stations in the United States were there
to take it. Instead a 25% stake in Standard Oil of Ohio (Sohio) ensured that Sohio facilities were
standing by to bring the first Alaskan gasoline to market. BP’s stake in Sohio grew over the years, and
in 1987 BP bought the company outright, incorporating it into a new national business, BP America.

That same year the British government sold the last of the shares it held in BP. Fully privatized and in
a period of intense self-scrutiny, BP accelerated its sell-off of businesses – minerals, nutrition – that
weren’t core to what the company had always done well: find, refine, transport and sell fuel.

In the late 1990s, with stiff competition in the energy industry setting off a string of prominent
mergers, BP and Amoco joined (1998) to form BP Amoco. Then ARCO in 2000, BP’s old rival on the
North Slope of Alaska, joined the portfolio. Later, Castrol’s motor oils in 2000 and Aral’s distinctive
European operation would also join the group.

In 2000, after a period in which the group grew to include Amoco and ARCO and Castrol (with Aral
soon to follow in 2002) BP unveiled a new, unified global brand. Its identifier was a green, yellow and
white sunburst, symbolizing energy in all its dynamic forms.

Two factors for a catastrophe

Since 2007, BP has started to modify its company structure to a flat structure, and secondly the
relationship between BP and its subcontractor management for this industry could not be the right
way. These 2 factors have contributed to the Deepwater catastrophe. Nobody was ready for a so
huge event and without a clear and global rescue plan, this catastrophe and the ravages could not
beings avoided.

BP Accuses Halliburton of Destroying Evidence of Wrongdoing in Gulf Oil Spill (taken from
http://inhabitat.com)

It is coming to fists again over the Deepwater Horizon oil spill in the Gulf of Mexico. This time,
however, it isn’t the people of the gulf against big oil, it is the oil companies against each other. BP is
accusing Halliburton of knowingly destroying the results from a test on cement slurry at the site and
seemingly losing computer modeling of the cement at the Deepwater Horizon oil spill. Both are
considered pieces of evidence that could prove Halliburton installed faulty cement at the site of the
Deepwater Horizon oil spill, causing the well to rupture and spill 4.9 million barrels of oil into the Gulf
of Mexico.

Page 3


5 years of a black series, with 48 death or injured persons due to systematic, serious security
problems (taken fromen.wikipedia.org/wiki/BP)

- 2005 Texas City Refinery explosion
- 2006–2010: Refinery fatalities and safety violations
- 2010 Deepwater Horizon well explosion

Chronology of the Deepwater Horizon crisis (taken from http://www.bp.com)

To understand how BP has communicated during this crisis and the frequency of each press release
which was every weeks in plus of decision or special communications.

21 April 2010, BP confirms that Transocean Ltd issued the following statement today

"Transocean Ltd. Reports Fire on Semisubmersible Drilling Rig Deepwater Horizon"

“Transocean Ltd. (NYSE: RIG) (SIX: RIGN) today reported a fire onboard its semisubmersible drilling
rig Deepwater Horizon. The incident occurred April 20, 2010 at approximately 10:00 p.m. central
time in the United States Gulf of Mexico. The rig was located approximately 41 miles offshore
Louisiana on Mississippi Canyon block 252.”

04 May 2010, Work Begins To Drill Relief Well To Stop Oil Spill

BP today announced that work has begun to drill a relief well to intercept and isolate the oil well that
is spilling oil in the US Gulf of Mexico. The drilling began at 15:00CDT (21:00BST) on Sunday May 2.

25 May 2010, BP Briefs US Government on Initial Perspectives of Deepwater Horizon Investigation -
Focus is on Seven Control Mechanisms

BP announced today that its internal investigation team began sharing initial perspectives of its
review of the causes of the tragic Deepwater Horizon fire and oil spill. The investigation is a fact-
finding effort that has not reached final conclusions, but has identified various issues for further
inquiry. BP has shared these early perspectives with the Department of the Interior and will do so
with all official regulatory inquiries into the accident as requested.

The investigation team’s work thus far shows that this accident was brought about by the failure of a
number of processes, systems and equipment. There were multiple control mechanisms—
procedures and equipment—in place that should have prevented this accident or reduced the impact
of the spill: the investigation is focused on the following seven mechanisms.

1. The cement that seals the reservoir from the well;
2. The casing system, which seals the well bore;
3. The pressure tests to confirm the well is sealed;
4. The execution of procedures to detect and control hydrocarbons in the well, including the
use of the BOP;

Page 4


5. The BOP Emergency Disconnect System, which can be activated by pushing a button at
multiple locations on the rig;
6. The automatic closure of the BOP after its connection is lost with the rig; and
7. Features in the BOP to allow Remotely Operated Vehicles (ROV) to close the BOP and
thereby seal the well at the seabed after a blow-out.

26 May 2010, BP to Appoint Independent Mediator to Ensure Timely, Fair Claims Process

Today, BP announced that it will appoint an Independent Mediator to review and assist in the claims
process for the spill associated with the exploratory well that was being drilled by the Transocean
Deepwater Horizon in Mississippi Canyon, Block 25

16 June 2010, BP Confirms Scheduled White House Meeting

BP notes the comments made by President Obama last night.

23 June 2012, effective appointment of Bob Dudley

Effective immediately, Bob Dudley has been appointed President and Chief Executive Officer of BP’s
Gulf Coast Restoration Organization. Mr. Dudley will report to Tony Hayward, BP’s Group Chief
Executive.

27 July 2010, BP CEO Tony Hayward to Step Down and be Succeeded by Robert Dudley

BP today announced that, by mutual agreement with the BP board, Tony Hayward is to step down as
group chief executive with effect from October 1, 2010. He will be succeeded as of that date by
fellow executive director Robert Dudley.

30 July 2010, After the tragedy, BB hired James Lee Witt

BP announced it has hired Witt Associates, and its CEO James Lee Witt, to support BP’s work to
restore Gulf Coast communities in the wake of the oil and gas spill in the Gulf of Mexico.

Witt Associates, a public safety and crisis management consulting firm, founded by former FEMA
Director James Lee Witt, has unrivaled experience in emergency response, recovery, and mitigation.
The firm has successfully worked in the Gulf region and across the nation to engage with key
stakeholders and manage transparent and accountable long-term recovery efforts. BP will draw on
Witt’s expertise and strategic counsel on all aspects of BP’s long-term recovery work.

Misleading and bad communication without assuming the responsibilities (taken on
www.foxnews.com)

The company originally estimated the size of the leak at about 1,000 barrels a day but later accepted
government estimates of a leak of at least 5000 barrels per day

Lamar McKay, chairman of BP America, told the Senate Energy and Natural Resources Committee,
that his company was focused on a critical safety device that was supposed to shut off oil flow on the

Page 5


ocean floor in the event of a well blowout but which "failed to operate." Of the 126 people on the
Deepwater Horizon rig when it was engulfed in flames, only seven were BP employees, said McKay

But Steven Newman, CEO of Transocean, which owns the rig, suggested it wasn't his company at
fault. "The most significant clue is that these events occurred after the well construction process was
essentially complete. Drilling had been finished on April 17 as the well had been sealed with casing
and cement. For that reason, the one thing we do know is that on the evening of April 20 there was a
sudden, catastrophic failure of the cement, casing or both," Newman said.

But Tim Probert, an executive with Halliburton Inc., the subcontractor responsible for encasing the
well pipe in cement before plugging it -- a process dictated by BP's drilling plan -- said his company
finished its work "in accordance with the requirements" set out by BP. He said pressure tests were
conducted after the cementing work was finished to demonstrate well integrity.

Main problems finding (taken from Macondo well - Chief Counsels Report – 2011)

Technical Findings

The root technical cause of the blowout is now clear:
- The cement that BP and Halliburton pumped to the bottom of the well did not seal off
hydrocarbons in the formation. While we may never know for certain the exact reason why
the cement failed, several factors increased the risk of cement failure at Macondo.
- They include the following: First, drilling complications forced engineers to plan a ―finesse‖
cement job that called for, among other things, a low overall volume of cement.
- Second, the cement slurry itself was poorly designed—some of Halliburton‘s own internal
tests showed that the design was unstable, and subsequent testing by the Chief Counsel‘s
team raised further concerns. Third, BP‘s temporary abandonment procedures—finalized
only at the last minute—called for rig personnel to severely ―underbalance‖ the well before
installing any additional barriers to back up the cement job.
- BP missed a key opportunity to recognize the cement failure during the negative pressure
test that its well site leaders and Transocean personnel conducted on April 20. The test
clearly showed that hydrocarbons were leaking into the well, but BP‘s well site leaders
misinterpreted the result. It appears they did so in part because they accepted a facially
implausible theory suggested by certain experienced members of the Transocean rig crew.
- Transocean and Sperry Drilling rig personnel then missed a number of further signals that
hydrocarbons had entered the well and were rising to the surface during the final hour
before the blowout actually occurred. By the time they recognized a blowout was occurring
and activated the rig‘s blowout preventer, it was too late for that device to prevent an
explosion. By that time, hydrocarbons had already flowed past the blowout preventer and
were rushing upward through the riser pipe to the rig floor.

Page 6


Management Findings

All of the technical failures at Macondo can be traced back to management errors by the companies
involved in the incident.
- BP did not fully appreciate all of the risks that Macondo presented.
- It did not adequately supervise the work of its contractors, who in turn did not deliver to BP
all of the benefits of their expertise.
- BP personnel on the rig were not properly trained and supported, and all three companies
failed to communicate key information to people who could have made a difference.
Among other things:
- BP did not adequately identify or address risks created by last-minute changes to well design
and procedures. BP changed its plans repeatedly and up to the very last minute, sometimes
causing confusion and frustration among BP employees and rig personnel.
- When BP did send instructions and procedures to rig personnel, it often provided inadequate
detail and guidance.
- It is common in the offshore oil industry to focus on increasing efficiency to save rig time and
associated costs without affection risks. BP‘s management processes did not do so.
- Halliburton appears to have done little to supervise the work of its key cementing personnel
and does not appear to have meaningfully reviewed data that should have prompted it to
redesign the Macondo cement slurry.
- Transocean did not adequately train its employees in emergency procedures and kick
detection, and did not inform them of crucial lessons learned from a similar and recent near-
miss drilling incident.
- What the men and women who worked on Macondo lacked—and what every drilling
operation requires—was a culture of leadership responsibility. In remote offshore
environments, individuals must take personal ownership of safety issues with a single-
minded determination to ask questions and pursue advice until they are certain they get it
right.

Regulatory Findings

- The MMS regulatory structure in place in April 2010 was inadequate to address the risks of
deepwater drilling projects like Macondo.
- Then existing regulations had little relevance to the technical and management problems
that contributed to the blowout.
- Regulatory personnel did not have the training or experience to adequately evaluate the
overall safety or risk of the project.

Page 7


List of problem related to process or company culture

1. Too many incidents in 5 years due to a reactionary management culture that puts an
emphasis on cutting costs and efficiency while neglecting preventative maintenance
2. Quality control of the subcontractors and equipment: many concerning faulty valves, which
are critical for safety given the high temperatures and pressures.
3. Security process: The company trains contractors to recognize risky behavior and asks
employees for suggestions on how to improve safety. It says it has cut time lost to safety
incidents by 12 percent each year since 2000.
4. Engineering procedures: people are bad inform or with insufficient or incomplete procedures
5. Maintenance prevention: routine maintenance that might have averted the accident had
been delayed because of pressure to reduce expenses.
6. Management process: it must ensure that measures taken to save time and reduce costs do
not adversely affect overall risk
7. Lake of coordination management before the crisis
8. Insufficient trained personnel, equipment, and response resources
9. Operation competence training process
10. Improvement of company vertical Integration for a better involvement
11. Communication process, with a minimization of the dramatic situation or lies

The main problem is related to quality and the relationship with subcontractors

i.e to express it:

Halliburton, Transocean and BP return the mutual fault of the disaster. The lightness of the controls
after execution of tasks and the lack of follow-up. The fact is that better management of the quality
of the process for the construction of this well could have prevented the disaster.

Page 8


Recommendation is to improve quality

This improvement is from my point of view a key element of the well-functioning of each operation
as dangerous as oil prospection and industrialization. It will affect the way of how each steps of
procedure will be done, it will affect the employees implication and the way how they will do the
work, it will affect the equipment and how the maintenance will be done, and the most important,
the quality of all these components will reduce the number of incident and at the end, the number of
death.

The following points are to identify and to improve:

- All process management should be improved in term of efficiency to avoid money saving
argument of cost reduction which affect the time spent on quality control. Better improve
efficiency instead of cutting control steps
- Management of subcontractors strict with building contracts defining precise responsibilities,
task and procedures respect.
- Increase quality control on security elements of well: setting-up a common management
system with precise safety rules and training for all facilities
- Quality control subcontractors work, procedure of controls should be done
- One independent agency should be charged with inspecting oil rigs, investigating oil
companies and enforcing safety regulations, while the other would oversee leases for drilling
and collection of billions of dollars in royalties.
- Train technician on protocols and add more resources to be dedicated to improve technology
and response protocols to adequately.
- Better and transparent communication between stakeholders (population, government,
subcontractors, NGO, employees)
- Create an IT system which collects idea, comment or suggestion of employees willing
improve the process, the quality or the security of equipment, and motivate them to add
comments with rewards

Page 9


Page 10


Process that would be followed-up

Standard Operating Procedure for Drilling

Each of these steps have to be improve and taken in account seriously by the company to avoid a
maximum the risk of an incident with the following cycle.

Analyze – implement – train – control - correct

1. Definition And Introduction
2. Operator Pre-Qualification
3. Training
4. Supervision
5. Personal Protective Equipment (Ppe)
6. Communication
7. Emergency Response Plan (Erp)
8. Site Location
9. Housekeeping
10. Health And Hygiene
11. Environment
12. Drill Rig Safety Devices
13. Fire Protection

Page 11


14. Electrical
15. Fuel Handling
16. First Aid
17. Maintenance
18. Storage/Stacking/Handling
19. Community Relations
20. Security And Safety Precautions
21. Incident Reporting And Suspension Of Work
22. Meetings And Documentation

References

http://www.foxnews.com/politics/2010/05/11/senate-point-fingers-oil-spill-hearing/
http://www.uscg.mil/foia/docs/dwh/bpdwh.pdf
http://www.bp.com/sectiongenericarticle.do?categoryId=9014444&contentId=7027525
http://www.bp.com/genericarticle.do?categoryId=2012968&contentId=7064075
Macondo well - Chief Counsels Report – 2011 – pdf document
http://en.wikipedia.org/wiki/BP#2006.E2.80.932010:_Refinery_fatalities_and_safety_violations
http://fr.scribd.com/doc/32655563/BP-History
http://knowledgenetwork.thunderbird.edu/research/2010/08/18/bp-subcontracting/
http://inhabitat.com/bp-accusing-halliburton-of-destroying-evidence-of-wrongdoing-in-gulf-oil-spill/
http://fr.wikipedia.org/wiki/Deepwater_Horizon
http://money.cnn.com/2010/05/11/news/companies/BP_hearings/?npt=NP1
http://www.deepwater.com/
http://inhabitat.com/bp-accusing-halliburton-of-destroying-evidence-of-wrongdoing-in-gulf-oil-spill/
http://ftp.nirb.ca/01-SCREENINGS/COMPLETED%20SCREENINGS/2005/05EN058-
Diamonds%20North%20Resources%20Ltd/01-APPLICATION/050426-05EN058-BHP-SOP_Drilling-
ITAE.pdf
http://fr.wikipedia.org/wiki/Int%C3%A9gration_verticale
http://www.cbsnews.com/8301-505123_162-43041768/bps-history-of-oil-spills-and-accidents-same-
strategy-different-day/
http://www.nytimes.com/2010/05/09/business/09bp.html?pagewanted=all&_r=0

Page 12

Deepwater Horizon oil spill case

Recomendados

Recomendados

Más contenido relacionado

La actualidad más candente

La actualidad más candente (20)

Destacado

Destacado (6)

Similar a Deepwater Horizon oil spill case

Similar a Deepwater Horizon oil spill case (11)

Deepwater Horizon oil spill case