EN200 Assignment 3 Varun Munjal

Risk Management for Deepwater Oil Drilling

Introduction

Deepwater drilling is a high risk activity. Although catastrophic spills have a very low probability of happening, they can be extremely damaging. Statistics show that spills greater than 1000 barrels account for only 0.05% of all spills, but contain nearly 80% of the total volume spilled [1]. The explosion on the Deepwater Horizon oil rig in 2010 and environmental disaster that followed exposed the weaknesses in the risk management strategy of both BP, as well as the now defunct regulatory authority, the Minerals Management Service (MMS). In this report, the shortcomings in BPs risk management plan in three key areas will be analyzed and improvements for avoiding such incidents in the future will be suggested.

Mandate and Commitment

Shortcomings:

Culture:

BPs operating teams did not have a functional safety culture. They used to a trip and fall mentality

instead of promoting maximum safety in all functions [2]. Its approach to managing safety has been

to promote individual worker safety, but not process safety [3]. Such flaws were recognized in a

survey conducted a few weeks before the explosion. According to the survey, workers felt they

would face reprisals for reporting unsafe situations. These and other findings were left unheeded.

Resources:

All High Reliability Organizations (HRO) run complex operations that have to make a choice between

production and protection, when it comes to allocating resources. In the case of BP, the Deepwater

Horizon Study Group (DHSG) concluded that decisions were made by the company to divert

resources to production, even if it came at a cost of compromising protection. These decisions may

not have been conscious and well-informed. However, the difficulty in weighing something which is

sure (profits from production) against something that is unlikely to happen contributed to their

flawed decision making [2].

Performance indicators:

Future accidents and failures that do not happen are difficult to measure. Therefore, it is difficult to

establish thresholds of how much protection needs to be implemented and the decisions are left to

the perception of operators to ensure self-regulation based on industry standards. This is an issue

that most HROs are faced with but other organizations such as NASA, nuclear power plants, etc.

have developed risk based methodologies to assess the performance of their protection plans. BP

failed to learn lessons from other organizations and implement suitable performance indicators.

Accountability and responsibility:

The Deepwater Horizon was managed by at least three people, two from Transocean and one from

BP. There was no clear command and control structure, especially in the case of an emergency. BP

executives were not clear on who was really in-charge of the rig, even days after the incident [4].

EN200 Assignment 3 Varun Munjal

Recommendations:

In a multi-contractor arrangement, make one person in-charge of risk management. That person

should be empowered to overrule operational decisions that may compromise system safety. He

will also be the main point of contact for regulatory agencies.

Make one independent Federal agency with well-defined roles and which integrates all other federal

and state agencies involved

Ensure the federal agency has oversight not only on the owner of the rig, but also on subcontractors

retained by the owner

Ensure risk management plans proposed by the rig owner are site specific and not taken from rigs

based in other geographical regions

Selection of Risk Treatment Options

Shortcomings:

There was a risk of channeling when cement is injected into the annular space around the main

production tube. To mitigate this risk, centralizers are used. Halliburtons simulations showed that

21, specially made centralizers will be needed. However, only 6 were in stock and it was decided

that only the 6 will be used [3]. Thus, the risk treatment option selected for avoiding channeling was

sub-optimal.

BP wanted to minimize the risk of fracturing the well due to pressure exerted when cement is

pumped in and when it sets. It compromised on the cement job and lowered the quantity, pressure

and speed at which cement is pumped in, not following its own guidelines [3].

To minimize risk of cement fracturing due to nitrogen bubbles in the mix, laboratory tests are

performed on actual cement samples from the rig and the correct composition is determined.

Halliburtons tests showed that the cement will not be stable. However, these results were not

shared with BP [3]

Specialists from Schlumberger were available on standby to evaluate the cement job that BPs

procedures called for. This is to reduce the risk of damaging the well through further actions if the

cement might not hold. The evaluation was waived because initial indicators showed that there

were no problems [3].

In case of a kick, (hydrocarbons leaking into the casing and pushing mud up to the rig), the mud and

gas flowing on to the rig can be diverted into a mud gas separator or into the ocean. This is to

reduce the risk of an explosion. Operators decided to redirect it to the mud gas separator. As the gas

rose through the tube and expanded, it quickly overwhelmed the separator and ignited [2].

The blowout preventer is used to shut in the well in an emergency, to reduce the risk of an

explosion. But it was not engaged in time when the first indicators of a kick were observed [3].

BPs spill containment strategy planned for only 162,000 barrels of spillage per day, part of which

was to deploy floating booms near the coast to prevent oil from reaching the shoreline [1].

However, they were quite ineffective in doing that. This risk treatment strategy had the unintended

EN200 Assignment 3 Varun Munjal

consequence of becoming giving coastal populations a false sense of security and soon politicians

were scrambling to order more booms to protect their communities at BPs expense [3].

Recommendations:

Regulations must be revised to take into account the complexities of deepwater drilling. In some

instances, risk mitigation steps taken by BP did meet the regulations imposed by the MMS, but they

were still not sufficient to prevent a blowout. E.g. placement of cement cap before temporary

abandonment met MMS regulations but was not enough [2].

Any change in configuration of the well design should be documented and supported with

simulations, tests and other empirical data. Approvals for design changes came from MMS within a

day, which surely would not have been enough to thoroughly scrutinize them.

There should be checkpoints which would not allow further action to proceed until lab test results

or other required data has been received. In this case e.g., the cement job was allowed to go ahead

without first receiving the data from lab tests [3].

The use of surface booms to limit the extent of oil spills should be re-evaluated.

Political and cultural factors should be taken into account while deciding the risk treatment options.

These will vary from region to region, so one blanket plan will not work.

Risk Identification

Shortcomings:

The risk of oil reaching the coastline was vastly underestimated [4]. This was partly because of

government regulations that required BP to use MMS simulation data that probably used inaccurate

models. In this case, although the risk was identified, its severity was not assumed to be that high.

A full scale well blowout was not considered a possibility and thus was not identified as a risk [4].

Failure of the blowout preventer itself was not identified as a risk [4]. Therefore, there was no plan B

in case the blowout preventer didnt work. Containment domes and secondary wells were provided

later on as an afterthought

Using 6 centralizers instead of the recommended 21 was identified as a risk [2]. BPs contractor

Halliburton warned of severe gas flow problems. But BP did not consider that risk to be severe,

especially since test data confirming the risk had not been provided.

In case of a spill, only surface movement of oil was considered in the risk identification. Movement

of oil under water due to under surface currents was not identified as a risk. This resulted in

inadequate preparedness to prevent oil from reaching the coast [5].

Recommendations:

Deepwater drilling is vastly more complex and consequences more severe as compared to what has

been done till now. Whatever threshold is used for deciding that a risk has a low enough probability

to not spend resources on managing it, should be brought within the scope of risk identification.

EN200 Assignment 3 Varun Munjal

In addition to identifying the risks associated with each individual piece of equipment or process,

the interrelationships between them should also be considered. The probability of a component

failing on its own might be very low but it will likely increase when other components in the system

have failed. The risk associated with that component now is no longer negligible and should be

identified.

Industry should be encouraged to self-regulate and share information about minor or major events

that go unreported. Sometimes individual pieces of information may not be enough to identify a

major risk, but taken in aggregate might help form a pattern.

Risk management plan should be updated and re-submitted as the drilling process proceeds. New

risks should be identified and planned for as and when events like kicks happen.

Any change or deviation from the original well design should automatically include a new risk

identification and management plan.

References

1. C. Kousky, Managing the Risks of Deepwater Drilling, Resources Magazine, 2011, Vol. 177. 2. R. Bea et al, Final Report on the Investigation of the Macondo Well Blowout, Deepwater

Horizon Study Group, March 1 2011. 3. B. Graham et al, Deepwater: The Gulf Oil Disaster and the Future of Offshore Drilling. National

Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling, January 2011. 4. G. Cazan, N. King. BPs Preparedness for Major Oil Crisis is Questioned. The Wall Street

Journal, May 10 2010. 5. N. King, K. Johnson. BP Relied on Faulty US Data. The Wall Street Journal. June 24 2010.