Just 10 deepwater exploration wells have been approved by the US authorities since the drilling ban precipitated by the Macondo disaster was lifted in October.
At a news conference in Washington DC, Ken Salazar, US interior secretary, announced that the ban was being relaxed conditionally, and said: “Operators who play by the rules and clear the higher bar can be allowed to resume (drilling).”
But it is taking time to adjust to the new rules. Indeed, this is a regulatory regime that remains in flux and has yet to be fully constructed and implemented. It means that oil companies pursuing the US Gulf deepwater prize will remain super-cautious about committing to further drilling until they are clear about where the regulatory goalposts have been moved to.
This situation is probably also influenced by nervy financial institutions involved in providing loans and debt facilities to smaller companies seeking to make their deepwater fortune.
The six-month moratorium was put in place following the explosion on April 20 that destroyed the Transocean rig Deepwater Horizon, leading to the worst offshore oil spill in US history, the calling to account of operator BP with key contractors and sweeping changes to the regulatory regime.
Some 5million barrels of oil escaped from the wrecked exploration well over a period of 87 days, before BP was eventually able to get it back under control and plugged.
In any case, the Obama administration had been under heavy pressure from the oil industry, industry, regional officials, political leaders and businesses to lift the moratorium, which allegedly brought about the loss of some 8,000 to 12,000 jobs in the region, albeit mostly on a temporary basis.
Until normal business is fully resumed, unemployment pressures will remain, especially in Louisiana State where personnel, equipment, ships and rigs remain idle in large numbers.
However, standards are being jacked up by the authorities and “normal” has been lifted to a different plane, which means every person, company and agency will henceforth have to raise their respective game, or they’ll be out.
Importantly, the US Gulf of Mexico is now supervised by the Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE), which was rapidly established in the wake of the disaster, as it was clear the Minerals Management Service was not fit for purpose.
As indicated already, the re-engineering process is only part-way complete and will be influenced by the 15 recommendations tabled in January this year, when the US Commission that was forged to examine the Macondo disaster reported.
Among those recommendations is that Congress should raise the liability cap (currently set at $75million) on offshore oil spills and that oil companies should fund a safety institute as part of their fees for drilling licences.
The 380-page report on the causes of the disaster described a systematic breakdown of safety and environmental safeguards in offshore drilling, involving industry as well as government. Indeed, the problems are best described as systemic – a deeply embedded culture that must be dismantled before true progress can be made.
What did surprise many is that the commission said the Obama administration had been “excessive” in ordering a six-month halt to offshore exploration.
The fact that the commission also recommended establishing a UK-style goal-setting process for improving safety standards also came under criticism.
Those critics include the environmental pressure group Greenpeace, which in essence said that it questioned the preparedness of UK North Sea operators to deal with a major spill, despite the improvements that stemmed from the Piper Alpha disaster and the Cullen Report that articulated the changes needed to offshore safety.
While there have been considerable improvements to the UK emergency response system for hydrocarbon spills at sea, primarily as a result of Piper Alpha and the Braer tanker grounding (strictly speaking a shipping incident), the Gulf of Mexico oil & gas fraternity has already gone considerably further than their UK counterparts, by forming the Marine Well Containment Company (MWCC) as a means of collectively responding to a future serious well control incident in the US Gulf of Mexico.
The manner in which MWCC was rapidly established by a group of leading GoM operators, notably ExxonMobil, Chevron, ConocoPhillips and Shell following the Macondo blowout, has echoes of Piper Alpha to it. In the UK, the industry set about a massive push to set its safety house in order straight after the Occidental-operated platform blew up on July 6, 1988, leading to the deaths of 167 offshore workers. In essence, they pre-empted much of the subsequent Cullen Report’s recommendations.
And so it seems with the MWCC, which was launched nine months ago, since when its membership has grown and critical containment systems manufactured.
At the heart of the $1billion MWCC initiative is a 300-ton, 9.5m high well-capping stack, which has been designed to handle up to 60,000 barrels of oil a day from a damaged subsea well, in water depths to 2,438m (8,000ft).
However, it should be pointed out that this is an interim system and that the full 100,000 barrels per day and 3,048m (10,000ft) systems mapped out when MWCC was set up are scheduled to be ready next year. There is nothing comparable anywhere else in the world.
Bear in mind that the US Interior Department now requires oil companies to prove they have access to spill-containment equipment, which is able to withstand even worst-case blowout scenarios, as a condition of winning a permit to drill in the deepwater Gulf of Mexico. So it is in their interest to join MWCC and/or be signed up to access a similar but lower capacity system established by Helix, a well services contractor with significant deepwater experience.
Whichever system, the main objective is to contain the oil with no flow to the sea. Once fully constructed, the components of either system will be fully tested and maintained in a state of continuous operational readiness, as an insurance policy that everyone hopes will never need to be used in anger.
The MWCC now has 10 members and Statoil is the latest to join. The other members include: ExxonMobil, Chevron, ConocoPhillips, Shell, BP, Apache, Anadarko, and BHP Billiton.
Statoil is also a member of the Helix Well Containment Group (HWCG), and has been granted drilling permits based on both HWCG and MWCC equipment.
In the event of an incident, MWCC and HWCG would support equipment mobilisation in the interim while MWCC will support the long term.
HWCG is a consortium of 22 deepwater operators, including a significant number of smaller companies.
Until early last month, its system was capable of facilitating control and containment of spills in water depths to 1,707m (5,600ft).
However, as of April 8, the system is now able to handle water depths to 2,438m, as well as capture and process up to 55,000bpd of oil and 95million cu ft of gas per day.
In the coming weeks, Helix is to add a 15,000psi (pounds per square inch) capping stack; the current one is rated 10,000psi.
The revised containment package will also utilise Helix Energy Solutions Group’s Q4000, the intervention vessel that was so effectively used during the response to the Deepwater Horizon disaster.