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The BP Gulf oil catastrophe — a ‘wake-up call'

By Erin ParkerAs we all know, the uncontrolled offshore oil well blow-out off the coast of Louisiana has spewed out massive quantities of crude oil into the Gulf of Mexico for about two months now.   We've seen the ongoing failed efforts to stop, or at least to contain the millions of gallons of crude that are blowing out of the well every day.   We've seen the horrific, widespread environmental and economic devastation to the Gulf coast region, and the early efforts to try and clean up this huge mess. Our hearts go out to the people who have been, and will be directly affected by this disaster. This massive and ongoing oil spill  should be considered a real ‘wake-up' call.

Not  too long ago we were hearing the slogan: "drill baby, drill."   Back in March, right before Deepwater Horizon exploded, even the president was on the bandwagon.  The Obama administration was proposing to open more than 167 million acres of ocean to new offshore oil and natural gas drilling! The target areas included large swathes of the Atlantic coast, the eastern Gulf coast and also the north coast of Alaska.   This proposal would effectively end the current moratorium on oil exploration along the East Coast from the northern tip of Delaware to the central coast of Florida.

In light of all we know now, there are a few valuable lessons to be learned from the Gulf oil spill:

Lesson #1 — History repeats itself

The blowout that destroyed the Deepwater Horizon mobile drilling platform and created the ongoing BP Gulf oil spill was not unprecedented.   In fact, a strikingly similar offshore drilling accident occurred back in 1979, with the Pemex Ixtoc 1 well blowout in the Bay of Campeche in the Gulf of Mexico.

Ixtoc 1 was being drilled about 62 miles northwest of Ciudad del Carmen by Sedco 135F, a mobile drilling platform.  The drill encountered a soft, porous strata at about 11,800' below the seafloor.   It's thought that the drilling mud began to escape into this porous material.

Sedco 135F, the mobile drilling platform that was drilling Ixtoc 1, exploded,  burned and then sank to the bottom of the Gulf (this sound familiar?).   Like the BP Gulf oil disaster, the failure of Ixtoc 1 was attributed to the lack of an adequate column of heavy drilling mud and the failure of the blowout preventer (BOP).     Just like in the BP Gulf oil disaster, the BOP hydraulic rams failed to shear through the drill pipe and cut off flow.

Eventually, relief wells were drilled near Ixtoc 1 and the well was capped after about 10 months.   Before it was all over, the Ixtoc 1 well gushed an estimated 140 million gallons of oil into the Gulf, a lot of which ended up on the shores of Texas. Like Ixtoc 1, the BP well will eventually be capped, but probably not before far surpassing Ixtoc 1 in terms of the total volume of oil spilled.

Lesson #2 — If something can go wrong, sooner or later it will

As with all human endeavors, Murphy's Law applies in this case.   Oil and gas drilling, especially deepwater offshore oil and gas drilling, is, and always will be, somewhat risky.   There are many variables and unknowns involved, and it should be expected that some of these could directly cause or contribute to a well failure.

Murphy's Law accurately sums up  a simple fact:  there will always be some degree of risk in everything we do.  This doesn't mean that the risks of offshore drilling can't be addressed and minimized — they can.   Old Murphy just doesn't think you should be surprised when and if things go wrong.

Lesson #3 — All this will pass

Time marches on and BP will eventually get their well capped.   While the current band-aids that they've applied either haven't worked or  haven’t worked very well, the proposed relief wells that BP will drill will very likely solve the problem (as they did with Ixtoc 1).   How long this will take is anyone's guess, but it will happen — hopefully it won't take 10 months!

Once the well is successfully capped, attention will shift fully to mop-up work and lots of interesting litigation.   As with the case of similar large oil spills in the past, time, hard work and natural processes will eventually reverse most of the damage, though it will take many years.

Lesson #4 — Hindsight is 20/20

It's  easy to blame BP — everybody's doing it. But mistakes will be made and accidents will happen.   There will surely be more oil spills in the future and when they happen, there will be more people that point fingers and say "hey dummy! you should have done it this way…"

Conclusion  

The  BP Gulf oil disaster is a wake-up call.  There’s obviously a major problem with current technology for  offshore drilling when  BP is out there dreaming up  solutions  on the fly.     Junk-shots, top-hats, top kill, etc. – heck, they’ve  tried just about everything but duct-tape and bailing wire!

The oil companies and their buddies, the government regulators need to get their heads around this problem and  find a way to fix it.   At a minimum there needs to be: 1.)  an effective and reliable BOP design, 2.) a ready secondary failsafe mechanism, 3.) an effective  method to get  to the wellhead and physically shut off the flow in the worst case scenario, and 4.) responsible and effective government oversight of these guys.

Instead of reversing moratoriums and expanding off-shore drilling, we  should instead think long and hard before allowing any  new offshore drilling permits until such time that a more  effective technology to prevent blowouts is developed.

***

Thanks for reading my post.   I hope you found it somewhat interesting and thought-provoking.   If you have any questions or comments, or if you think I should have my head soaked, please feel free to contact me at parkerengineer@gmail.com.

  • Ed Hahnenberg

    Erin … Pardon me for becoming political in my reply, but there is one trait President Obama exhibits time and again. He almost sounds like the kid in the fifth grade who blames everyone else around him for the trouble he’s in.

    For his year and a half in office, he has consistently blamed his predecessor for all the ills this country faces, from the economy to Katrina. His latest target is British Petroleum. Obviously as president he has a right to point the finger of blame at those who were responsible for the biggest manmade environmental disaster this country has ever had to contend with.

    However, as with so many things in life, the tragedy has had a soap opera quality to it.

    According to the administration, they were on top of the Gulf spill from day one and they pledged to put the boot to the throat of BP.

    No, BP will pay for every damage claim and the U.S. taxpayer will not pay a dime for clean-up…we’ve got the President’s word on that.

    The President called for a six-month moratorium on platform oil drilling and wants BP to pay for lost wages of those who will be laid off during the period. This week there will be a meeting of BP’s CEO and the President, and it won’t be nice. No sensible court would ever agree to that nonsense.

    Consider the relationship of BP to the U.S. taxpayer, not to mention those whose retirement pensions in both the U.S. and the UK are tied to BP’s bottom line.

    What if BP goes bankrupt?

    Based on analysis by Godman Sachs, using the Exxon Mobil Valdez spill in today’s dollars, they estimate that it will cost BP $40,000 per barrel for the containment, clean-up, litigation and related cost of the spill.
    So how much is spilling from the well? The best estimates suggest it is 20,000 barrels per day. The spill has been ongoing for over 50 days. This gets you to around 1 million barrels spilled so far, minus the 60,000 barrels that BP has collected in the past few days from the containment cap – so 940,000 barrels in the Gulf. Based on this, BP’s liability is $37.6 billion so far.

    If the spill is just 15,000 barrels per day – which would appear to be the minimum since it is what the containment cap is collecting daily – then the liability drops to $27.6 billion.

    It has been reported that BP said a worst case scenario for the spill is 60,000 barrels per day. If this was the case then you would have 2.94 million barrels in the ocean. This would bring BP’s liability up to $117.6 billion.

    The spill could be 100,000-200,000 barrels per day. If this was the case then you would have $198-$398 billion in liability.

    So you have potential liabilities for BP varying from $27.6 billion to $398 billion… quite a range.

    Of course, laws could cap the liability BP faces. But with Congress already seeking to re-write the laws, this would seem like a long shot.

    Before the spill, BP had assets of $241 billion and liabilities of $136 billion, or net assets of $105 billion. The company has cash flow of between $25-$40 billion per year.

    If the company ended all dividends and stopped spending on capital expenditures, it is conceivable that BP could handle even the worst case scenario. But it is also conceivable that if the spill is at the high end of these ranges, a bankruptcy could ultimately limit BP’s liability. What would happen to equity holders in such a scenario is unknown.

    So, today, when the President meets with the CEO of BP, if he continues to keep the boot to the throat of BP he may score political points. However, his non-stop political a__-kicking will continue to drive BP’s stock value down. If he keeps up the stern blame-game rhetoric, BP may go bankrupt, and he will be faced with yet more disaster spending that will increase our national debt to the point where no one will be able to stop the leak…not even if he and his all-knowing administration suck every drop of oil through a straw.

  • http://parkerengineer.design.officelive.com/default.aspx Erin Parker, P.E.

    Thanks for your thoughtful comments Ed!

    You raise a lot of interesting points. I agree that the political aspect of the BP disaster is every bit as interesting as the technical failures. BP’s failures aside, the government’s apparent mismanagement of off-shore drilling was probably the main contributing factor leading to the blow-out. Clearly, the MMS regulators were ‘out to lunch.’

    The Exxon Valdez disaster provides many clues to how this is likely to play out…

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