In response to two losses in federal courtrooms in the last two weeks, the Department of Interior issued a new order yesterday to suspend the drilling of deepwater wells in the Gulf of Mexico. Besides the name change, this new order corrects the weaknesses in the previous order that was overturned by the courts and is more directed, focusing on actual forms of well control, rather than simple water depth. The order makes a lot of sense.
The primary change is rather than restricting offshore drilling by depth (previously greater than 500 feet), it is restricted to floating rigs that use subsea BOPs (blowout preventers). In justifying its decision, Interior cited failures in what it called "augmented tests" on the BOPs from the 2 rigs assigned to drill the relief wells, Transocean's DDII and DDIII. Interior required these 2 stacks to be subjected to these additional tests, varying from the normal "stump" tests they usually receive prior to splashing (running them to bottom). These 2 BOPs failed 4 tests, including failure of the EDS (emergency disconnect system), failure of the deadman system, both due to bad valves, and failure to close the casing shear rams due to a faulty control pod. These failures are on BOP stacks owned by Transocean, built in 2004 and 2005. I have to say that it's chilling that these state of the art BOPs suffered failures identical to the failures of the Deepwater Horizon's stack that failed so catastrophically in real life.
I understand the economic issues with a deepwater suspension. I understand the stress and worry with which my colleagues in deepwater operations are experiencing; however, I have one question for all the industry lobbyists and representatives who are howling about this stoppage:
Virtually all of the industry opposes the dirlling suspension without qualification, ignoring the above question. They cite loss of American jobs as one of the biggest reasons, as well as lost production from new wells. Most objective people admit that a 6 month pause won't affect long term production in the deepwater that significantly, but everyone argues about loss of jobs, including all the politicians. The problem is, the loss of jobs issue is created by the drilling companies in the way they are organized. Most large drilling company rigs, including all of Transocean's, are foreigned flagged. What that means is, that these rigs are inspected differently, and have different labor and wage regulations that US flagged rigs. They do this so they can lower costs, especially if the rig moves. Right now, if Transocean moves one of its rigs from the US to waters off another country, they will fire all the American crew, then hire cheap foreign workers when they get there. If the US government required all rigs drilling in US waters to be US flagged, then 75% of the crew are required to be Americans. So, if that rig goes somewhere else, then the vast majority of the crew keeps their jobs; their commute is just longer. Employment problem solved.
I've been saying for weeks now that the US should change its offshore policy to if you drill here, you live here. Instead of having a British company based in London, hiring a drilling company based in Switzerland that owns rigs built in South Korea and flagged in the Marshall Islands, serviced by a company whose CEO is based in Abu Dhabi, these companies should be required to domicile in the US. I don't mean a subsidiary like BP America, I mean an autonomous company, incorporated in the US, whose CEO resides permanently in the US, within reach of US law. Then, US workers get to build US rigs, US workers crew and service those rigs, and the federal government gets the benefit of royalty payments, can enforce US safety regulations, and everyone in our game has skin in our game.
How hard is that?
More on The Daily Hurricane Energy page.
The primary change is rather than restricting offshore drilling by depth (previously greater than 500 feet), it is restricted to floating rigs that use subsea BOPs (blowout preventers). In justifying its decision, Interior cited failures in what it called "augmented tests" on the BOPs from the 2 rigs assigned to drill the relief wells, Transocean's DDII and DDIII. Interior required these 2 stacks to be subjected to these additional tests, varying from the normal "stump" tests they usually receive prior to splashing (running them to bottom). These 2 BOPs failed 4 tests, including failure of the EDS (emergency disconnect system), failure of the deadman system, both due to bad valves, and failure to close the casing shear rams due to a faulty control pod. These failures are on BOP stacks owned by Transocean, built in 2004 and 2005. I have to say that it's chilling that these state of the art BOPs suffered failures identical to the failures of the Deepwater Horizon's stack that failed so catastrophically in real life.
I understand the economic issues with a deepwater suspension. I understand the stress and worry with which my colleagues in deepwater operations are experiencing; however, I have one question for all the industry lobbyists and representatives who are howling about this stoppage:
What caused every single safety system to fail on the Deepwater Horizon causing the loss of 11 lives, loss of the rig, and the largest environmental catastrophy in US history?Until someone can answer me that, and how it's been fixed, I cannot support just going back to doing the same thing we were doing before. I am unwilling to put these folks lives at stake for money. The money can be replaced by BP and other deepwater operators while this is fixed.
Virtually all of the industry opposes the dirlling suspension without qualification, ignoring the above question. They cite loss of American jobs as one of the biggest reasons, as well as lost production from new wells. Most objective people admit that a 6 month pause won't affect long term production in the deepwater that significantly, but everyone argues about loss of jobs, including all the politicians. The problem is, the loss of jobs issue is created by the drilling companies in the way they are organized. Most large drilling company rigs, including all of Transocean's, are foreigned flagged. What that means is, that these rigs are inspected differently, and have different labor and wage regulations that US flagged rigs. They do this so they can lower costs, especially if the rig moves. Right now, if Transocean moves one of its rigs from the US to waters off another country, they will fire all the American crew, then hire cheap foreign workers when they get there. If the US government required all rigs drilling in US waters to be US flagged, then 75% of the crew are required to be Americans. So, if that rig goes somewhere else, then the vast majority of the crew keeps their jobs; their commute is just longer. Employment problem solved.
I've been saying for weeks now that the US should change its offshore policy to if you drill here, you live here. Instead of having a British company based in London, hiring a drilling company based in Switzerland that owns rigs built in South Korea and flagged in the Marshall Islands, serviced by a company whose CEO is based in Abu Dhabi, these companies should be required to domicile in the US. I don't mean a subsidiary like BP America, I mean an autonomous company, incorporated in the US, whose CEO resides permanently in the US, within reach of US law. Then, US workers get to build US rigs, US workers crew and service those rigs, and the federal government gets the benefit of royalty payments, can enforce US safety regulations, and everyone in our game has skin in our game.
How hard is that?
More on The Daily Hurricane Energy page.
Bob,
I will read more of what you have posted earlier.
It is hard to argue with 'keeping Americans employed.' But, we have certainly transitioned into a global economy and "creative destruction" is inevitable.
I think we have shared enough for now,
Thanks,
chris
Chris,
You need to read my original piece on this subject. What companies do on private lands is their business. When it comes to drilling on federal lands, federal waters? If you drill here, you live here. This is not protectionism, it is keeping those who benefit from the people's lands within the reach of US law. You are equating tariff wars over farm and manufactured goods with the ability to destroy tens of billions of dollars of property and livelihoods. You're conflating to unrelated issues. This is not a competitive issue. It is self defense. Keeping Americans employed is a great side benefit. Just like the Japanese, Brazilians, and Venezuelans do.
Bob,
What you have called for in you last paragraph is indeed "tariffs and protectionism." ("if you drill here, you live here...Then, US workers get to build US rigs, US workers crew and service those rigs, and the federal government gets the benefit of royalty payments.")
We have a system in place to regulate BP. It is obvious this US Federal Government system has failed just as miserable as has the business ethic of BP.
So, start with the current law and subject it to the same scrutiny you have proposed with your question. "What caused every single safety system to fail on the Deepwater Horizon causing the loss of 11 lives, loss of the rig, and the largest environmental catastrophy in US history?"
My view is that the US Federal Government oversight was one of the "every single safety systems to fail." We should not ask the government, which participated in the events which led up to this disaster to come forth with more regulation. We should demand to know why the government oversight allowed BP to stray so far from acceptable practices.
It is wrong to call for a change in the law in the middle of an incident. We find out why, that is educate ourselves and examine our regulatory options later.
Now I won't spend a minute on your 'free market' comment. Those were your words, not mine.
By the way, I believe every one of those who lost their lives, were Americans who lived in the gulf coast region of our country. God bless each and every one of them and their families.
Thanks,
Chris
Amen to that!
Tariffs and protectionism? You're words, not mine. The "global economic model" of which you glowingly speak is the "run over the United States" model, since we have been run by "free marketers" for far to many years ourselves. Many countries have restrictions on operations by foreign countries. We're one of the few that doesn't; AND we let companies, whose CEO's are out of the reach of US law, operate freely in our waters with little or no oversight. Time for that to stop. Call it whatever you want. When tens of thousands of Americans are subject to losing their jobs because of your "global economic model" maybe a little protectionism is in order.
Bob,
You have indicted the global economics model and called for an American protectionist model. Tell us which of those named "British ...Switzerland ...South Korea ...Marshall Islands... Abu Dhabi" you want to engage in games of "tariffs and protectionism?"
If my previous comment came off as impolite, excuse me.
I read this thread in an effort to gain knowledge.
Thanks,
Chris
Conservationist Rick Steiner was on Countdown tonight and called it the height of irresponsibility to continue deep water drilling without: 1) a clearly defined blow out risk assessment, 2) a blow out prevention plan, 3) a blow out response plan and 4) an oil spill response plan. Hard to disagree with that list, given what we've witnessed over the last 3 months. Yet many in the oil industry seem content to keep rolling the dice and promising to do better and hoping for the best.
BP's lack of preparedness put fisherman, cooks, barmaids, and sales clerks, to name a few, out of work. Bp is even accused of preparing to dramatically cut compensation payments to many of them, due to "incomplete forms." For the oil industry to be complaining about, even exaggerating, the loss of oil industry jobs resulting from the de facto drilling moratorium seems at best self-centered, at worst arrogant.
Anyone wanting to complain about the content of Eljefe's posts....feel free to start and write your own blogs.
Bob, I agree with you. Allowing these companies to move overseas with no repercussions is a major part of what is wrong with our economy to begin with.
And for those who keep saying, "We don't ground all airplanes when there is one crash...." please keep in mind that is EXACTLY what BUSH did after 9/11. I didn't hear anyone bitching about that. ALL air traffic was grounded for several days. It only takes one major incident or one major oil spill and then we're screwed.
Nice, nondescript tomato thrown from the sidelines. Anything substantial to criticize, or are you just lobbing in complaints about content?
You were doing well until you began to lecture on international economics. Stick to oil field tech and I will keep reading.
Thanks
Oh come one, once the "catastrophe" part of this is over and the MSM has something new to talk about, we'll forget about it within 6 months, just like we did with the earthquake in Haiti that left hundreds of thousands of people (or more) homeless, just like we did the Gulf Coast six months after Katrina and Rita, just like we did Galveston and Bolivar less than 6 days after Ike because of the financial meltdown, just like we did ...
What are the lives of eleven human beings after all when we're talking about big money?
The economy is the trump card that the exploiters use every time they get their hand caught in the cookie jar.
Like somehow a fictional economic concept like job creation or job loss compares to the destruction of eco-systems that took thousands, if not millions, of years to evolve and form. Irreplaceable habitats that are connected to our very own ability to even exist on this planet. What a bunch of fools.
This is all a joke. Big business bullshit flung in our faces to distract us from the fact that once this disaster fades from memory they will be back to screwing everyone over.
Even with the very reason they put a ban on offshore drilling staring them in the face, they can stand up and say they don't know why everyone wants to stop them from drilling offshore.
OIL EXECS "Gee, were just trying to fuel the oil addiction we created in the first place... Don't know why everyone is so upset at the millions of gallons of oil being pumped daily into the ocean. After all, Billy Bob needs to be able to fill the 60 gallon fuel tank on his Ford Powerstroke, so he can make the 2 hour commute to his office in town."