1

2

BRENT SPOT PRICE

0

10

20

30

40

50

60

70

80

9003

/01/

1997

03/0

7/19

97

03/0

1/19

98

03/0

7/19

98

03/0

1/19

99

03/0

7/19

99

03/0

1/20

00

03/0

7/20

00

03/0

1/20

01

03/0

7/20

01

03/0

1/20

02

03/0

7/20

02

03/0

1/20

03

03/0

7/20

03

03/0

1/20

04

03/0

7/20

04

03/0

1/20

05

03/0

7/20

05

03/0

1/20

06

03/0

7/20

06

US$

3

Offshore Drilling Rigs

0

50

100

150

200

250

300

350

01/0

1/19

96

01/0

7/19

96

01/0

1/19

97

01/0

7/19

97

01/0

1/19

98

01/0

7/19

98

01/0

1/19

99

01/0

7/19

99

01/0

1/20

00

01/0

7/20

00

01/0

1/20

01

01/0

7/20

01

01/0

1/20

02

01/0

7/20

02

01/0

1/20

03

01/0

7/20

03

01/0

1/20

04

01/0

7/20

04

01/0

1/20

05

01/0

7/20

05

01/0

1/20

06

01/0

7/20

06

4

5

6

KatrinaKatrina’’s wraths wrath

7

Initial Yielding of K-Braces

Outer K-BracesBegin to Fail

K-Braces AlongLower Bay Fail

& Jacket Collapses

8

84

1950 1960 1970 1980 1990

78 93 97

HildaHildaFailuresFailures

CamilleCamilleFailuresFailures

JuanJuanFailuresFailures(sudden(sudden

hurricane)hurricane)

AndrewAndrewFailuresFailures

RP 2ARP 2A11stst Ed.Ed.

QualityQualityJointJoint

EquationsEquations

ModernModernDesignDesignCodeCode

OperatorOperatorSpecificSpecificCriteriaCriteria

25yr to 100yr25yr to 100yrreturn periodsreturn periods

ReassessmentReassessmentActivities (AIM)Activities (AIM)

UpdatedUpdatedWaveWaveRecipeRecipe

PlatformPlatformAssessmentAssessment

MMSMMSInspectionInspectionProgramProgram

PrePre--RP2ARP2A

9189‘4848

EarlyEarly--RP2ARP2A ModernModern--RP2ARP2A

2000

64 69

RP 2ARP 2A99thth Ed.Ed.

RP 2ARP 2A1919thth Ed.Ed.

RP 2ARP 2A2020thth Ed.Ed.

RP 2ARP 2ASect. 17Sect. 17

RP 2ARP 2A2121stst Ed.Ed.

ConsequenceConsequenceBasedBasedDesignDesign

05

KatrinaKatrinaFailuresFailures

IvanIvanFailuresFailures

LiliLiliFailuresFailures

02

API SIMAPI SIMTask GroupTask Group

HurricanesHurricanes

IndustryIndustrystandardsstandards

IndustryIndustrypracticepractice

9

‘64 ‘69 ‘84 ‘92

1950 1960 1970 1980 1990

‘78 ‘93 ‘97

HildaFailures

CamilleFailures

JuanFailures

(manned)

AndrewFailures

API RP 2A20th Edition

API RP 2A1st Edition

API RP 2A9th Edition

API RP 2A19th Edition

API RP 2ASupplement 1

Section 17

25-year to 100-yearCriteria ?

QualityJoint

Equations

ModernDesignCode

ReassessmentActivities

(AIM)

UpdatedWave Load

Recipe

ExistingPlatform

Assessment

MMSInspectionProgramBegins

Pre-RP 2A Early-RP 2A Modern-RP 2A

‘91‘89

‘‘8282‘‘7272‘‘4848

Inadequate deck elevation

Deeper Water Platforms (>100’)

Incomplete CP history

HurricanesHurricanes

IndustryIndustrystandardsstandards

DesignDesignpracticepractice

10

Design Wave 72 ft

(API RP2A )

Hurricane IvanHurricane Ivan

Normal sea level

Topsides

Jacket

Ivan 105 ft Katrina 100 ft

11

12

P36 at 08.11 a.m. on 15 March 2001

13

P36 at 11.24 a.m. on 18 March 2001

14

Loss of P36 at 11.41 a.m. on 20 March 2001

15

THE LOSS OF PETROBRAS P-36 - 20 March 2001

Operating Faults Identified by the Commission and Petrobras

1. Failure to blank off inlet to Emergency Drain Tank2. Closing of EDT atmospheric vent3. Opening of wrong valve for drain tank emptying4. Delay in operating drain tank pump5. Modification to stop ventilation dampers closing6. Opening watertight compartments without contingency7. Removal of all fire fighting pump contingency8. Inadequate or non-existent training of operating staff

16

OFFSHORE INDUSTRY CHANGES AFFECTING RISK OVER THE LAST 30 YEARS

OIL COMPANIES HAVE:

1. Ceased use of customised in-house specifications2. Reduced technical support staff3. Reduced internal technical development4. Concentrated on short term shareholder return5. Reduced in-house recruitment and training6. Increased contractor’s financial and technical risk7. Faced more competition from Government owned oil companies8. Accepted more local involvement in their developments9. Rapidly moved into deep and ultra deep production areas10. Rapidly increased their dependence on floating and sub-sea technology

CONTRACTORS HAVE:

1. Reduced technical support staff2. Reduced internal technical development3. Concentrated on short term shareholder return 4. Reduced in-house recruitment and training5. Accepted greater financial and technical risk6. Been forced to accept local partners7. Been forced to purchase local supplies8. Accepted risk of extending capability on projects9. Many projects are now prototype developments

17

RESULTS OF OFFSHORE INDUSTRY CHANGES OVER THE LAST 30 YEARS

1. Low margins have reduced investment in technology2. Independent checking and inspection reduced3. Technical standards have been lowered to achieve economy4. Material quality is often compromised by local supply5. Generation gap has developed throughout industry6. Rapid offshore expansion has exacerbated staff shortages 7. Local operating crews have less training and experience8. Mature fields are being taken over by Independents9. Many new geographic areas have started development10. Large step changes in technical development in deepwater11. New contractors and concepts have entered industry12. Major contractors are becoming more risk averse13. Adversarial roles have returned to contracting14. Insurance is becoming the technical safety net

18

Policy WordingsPolicy Wordings

•• Full value declaration Full value declaration –– New for oldNew for old•• LOPI LOPI –– ALOPALOP•• Physical DamagePhysical Damage•• Faulty DesignFaulty Design•• Etc Etc etcetc