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Post-Macondo, Offshore Risk Management Still Cause for Debate

Two years after the Macondo well blowout, the debate continued last week at the Offshore Technology Conference in Houston about whether oil and natural gas companies prioritize the the safety and risk management culture on drilling platforms or start-up dates for offshore drilling projects.

Risk and safety management in the offshore was the focus for several of the sessions last week at the world's largest offshore conference, which drew an estimated 89,000 delegates to the nation's energy capital.

Chevron Corp.'s Steve Thurston, vice president of deepwater exploration and production, told a packed auditorium hall last Monday that safety takes top billing for every project.

"It's clearly getting more costly and taking more time, but I don't think it's necessarily more risky," Thurston said during the panel discussion. "The steps that we are taking to reduce risk are more enhanced...We spend more diligence, [practice] more vigilance, more planning and more preparation."

Collaboration, he said, "is a very critical element of how we do our business."

An informal audience poll of those attending the opening plenary found that about four-fifths responding agreed that the industry is taking on more risk using higher pressures and higher temperatures to comb ever-deeper and ever-harsher environments looking for reserves. In addition, about two-thirds (65%) said collaboration between operators and contractors "could be better" or was "a major challenge" in managing risk.

Talisman Energy Inc. Vice President Kevin Lacy suggested that the industry borrow the playbook from another high-profile industry on safety and risk management. "We can take some lessons from the aircraft industry," he said. "The conditions that we operate in today, in deepwater environments, in high-pressure environments, are significantly more challenging than we've ever had in the last 50 years in the industry."

Offshore operators and contractors need to do a better job of understanding and preparing for low-risk but high-consequence events, such as Macondo, Lacy said.

"We normally think as humans, and certainly in the drilling industry, that a well control [problem] or blowout is bad luck...It's a one-off...But it's not...I don't believe an event can be rare if the fundamentals have been violated preceding it."

Transocean's Bill Ambrose, who's in charge of the North American division, said years ago it was possible for one person to know what was happening in a drilling operation. That's impossible today, he told the audience.

"As wells get more complex, the ability for any one person on the rig or on the team to understand the entire picture is smaller...There's so much more than any one person has to know...It's constantly changing," and "one person can't know everything they need to know about that drilling operation."

Most key decisions are made in command centers that are onshore, not on the offshore rig, Ambrose said.

"From a risk and insurance perspective, deepwater development is riskier now and is getting riskier," said attorney John Shugrue, a partner with ReedSmith, who shared a panel with several energy executives.

With memories of Macondo in the Gulf of Mexico still discussed in the hallways and on the exhibit floor, Shugrue noted that in the U.S. offshore and in other basins around the world, operators are moving into deeper waters and are drilling wells under higher pressures in more difficult-to-extract reservoirs.

"There's a greater risk that companies involved in those situations are not going to have adequate insurance protection and risk-transfer mechanisms to protect themselves against the liability and loss that they suffer," he said.

Drilling operators' ability to communicate with their project contractors also appears to be lacking, said Shugrue. These issues have come up in court claims between BP plc, which operated the Macondo well, and well contractor Halliburton Co. (see related story).

Panelist John Davis, who manages NCA Americas, said two years after Macondo, offshore service contractors and drilling operators continue to struggle with pushing safety versus speed of completion.

"A lot of consultants," said Davis, "are still in the pre-Macondo phase of 'let's get out there and get it done.'...It's important that we maintain our safety culture and make sure we are pushing that down. There's no first warning or second warning."

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