Unprecedented risks face the oil and gas industry in the coming decades in the quest for more energy supplies, but everyone should work cooperatively now to prepare for issues down the road and possible tragedies, BP plc CEO Bob Dudley said Tuesday.
The CEO, in his first public address to the energy industry since taking the helm last year, spoke to a packed luncheon crowd in Houston at CERAWeek 2011, the 30th annual energy conference sponsored by IHS Cambridge Energy Research Associates (CERA).
"I think it would be a mistake to dismiss our experience of the last year simply as a 'Black Swan,' a one-in-a-million occurrence that carries no wider application for our industry as a whole. As we have learned in the past 11 months, one company's calamity quickly becomes every company's concern."
BP's management team embraced the findings of the presidential commission that investigated last April's blowout of the Macondo well and the sinking of the Deepwater Horizon rig in the deepwater Gulf of Mexico (GOM), which killed 11 men and shuttered most businesses and activities along the GOM for months. BP operated the well; contractors Transocean Ltd. and Halliburton also have been implicated in the faulty design.
Some energy executives have insisted publicly that the Macondo well blowout was more a matter of how BP and its contractors operated -- an outlier event not typical of the industry. Dudley thinks otherwise.
"Anyone who does not believe there will be industry-level changes after the Deepwater Horizon accident is, I think, being unrealistic," he said. "After major industrial accidents, there are always lessons to learn and changes to make. Sometimes these are chiefly made by governments and regulators."
BP already has implemented several major safety standards internally and intervened to halt operations when corrective action was needed, said Dudley.
"In terms of prevention, we are enhancing our own standards for blowout preventer testing, cementing, well-integrity testing, rig audits and other well operations. Could industrywide standards on these areas also be enhanced? We think we should look at this and indeed we're working on it with industry groups."
Dudley predicted that in a decade or so there will be a new generation of blowout preventers more advanced than those used by the industry today. "But will we have standards in place to make sure everyone has to use them?"
BP today is working to "systematize" what it learned from the Macondo blowout through large-scale "SimOps," or simultaneous operations, Dudley said. It also is enhancing its real-time ranging technology developed during the incident, which cuts the time needed for logging to about six hours from about two days "because the drillbit doesn't have to be removed."
The logging tool was field tested on a land rig in Wyoming before it was tested in the GOM. More work remains to improve its mechanical reliability for future wells.
"We're also reviewing the physical clean-up to see what worked well and what needs further development. One key innovation, for example, was the 'Sand Shark,' which 'lifts and sifts' sand to remove oil," said Dudley.
Today, he said, BP will not drill a deepwater reservoir using a dynamically positioned vessel like the Deepwater Horizon unless it can:
"We also learned a huge amount about crisis management. We got some things right and some things wrong. But we learned what corporate responsibility really means when the chips are down."
There is much still to do, Dudley told the crowd.
"Never before had anyone experienced a blown-out well at a depth of more than 5,000 feet, more than 50 miles out to sea, at a subsea pressure of 2,240 psi [pounds per square inch] and a water temperature of 39 degrees Fahrenheit," said the CEO.
Regulators, he said, "need to find the right balance -- ensuring safety without placing unnecessary constraints on operators. But ensuring that outcome means the industry has to go further than ever before to ensure safe operations -- wider than the upstream, wider than the U.S. And that is because the industry faces an unprecedented risk profile in the coming decades."
Even though the world is slowly becoming less dependent on oil, "we will still need to find more of it," said the CEO. "With many of the world's major basins in decline, our industry will thus have no choice but to look to new and increasingly challenging frontiers. These include the Arctic, unconventional sources, and yes, the deepwater...Blazing new trails always carries risk."
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