Less than one-third of the drilling rigs now operating in the Gulf of Mexico (GOM) apparently have been impacted by a possible defect in bolts that are connected to well blowout preventers (BOP), according to the Bureau of Safety, Environment and Enforcement (BSEE).
The federal agency issued a safety notice on Jan. 29 ordering some offshore operators to suspend GOM drilling activity after discovering there may be faulty bolts manufactured by General Electric (GE) that connect BOP stacks. Safety Alert No. 303 was issued after BSEE officials met with industry members to discuss initial findings associated with a “pollution incident involving the discharge of synthetic base mud” into the GOM following the “loss of integrity” on a connector.
“During this meeting, a qualified third-party presented preliminary evidence that the stress corrosion cracking caused by hydrogen embrittlement was a contributor to the incident,” the BSEE noted. “It was introduced that zinc electroplating without proper baking,” required under ASTM B633, “was a possible cause of hydrogen embrittlement. During this meeting, BSEE was informed of two other rigs as having H-4 connector bolt failures.”
Late last month BSEE officials said they had received information from the “connector vendor,” identified as the oil and gas unit of General Electric (GE), “which identified rigs as having blowout preventer (BOP) stack connectors that may contain bolts that may no longer be fit for purpose.” GE manufactures bolts to connect BOPs, tubing and other equipment under water for operators worldwide.
“Less than a third of the rigs operating in the Gulf were affected by GE’s safety notice,” said BSEE officials. “The inspections and verifications are being done on a rolling basis.”
Of the 83 rigs now operating in the GOM, 24 were identified by BSEE as using the faulty H4 Connector, but not all of the BOPs would have bolts from the bad batch. Six rigs were cleared to return to activities on Wednesday. Eighteen were inspecting the bolts or were in the process of completing operations, according to officials. GE’s H-4 Connector is an 18.75-inch clamp that attaches BOPs to the well below. About 30-40 GE customers potentially are affected, according to GE. A spokesman said the bolt replacement process is “well under way…Many of these replacements are already processed.”
Rowan Cos. plc CEO Matt Ralls said replacing the bolts on BOPs could have a “significant impact” on the industry if it turns out more bolts and BOPs will require inspections or fixes. Rowan is a global rig manufacturer. “Everything today in the industry is on significant back order,” Ralls told an audience at the Credit Suisse Energy Summit in Colorado. “Deliveries have been pushed out on everything, and I’m sure if they have to replace all those bolts, it will take a while to get through the whole fleet.”
FBR Capital Markets said the BSEE alert was “not a blanket stop-work order but rather a process to allow operators to safely replace the affected equipment in conjunction with individual risk assessment time lines, submitted to and approved by the regulator.”
“We expect rig downtime to be two-three weeks,” which includes the time to raise the equipment to the surface, replace the bolts and return the equipment to the seafloor, said Credit Suisse analyst Gregory Lewis. Even though the BSEE order only affects GOM drilling, “discussions with one driller lead us to believe it will be up to each operator whether to pull the BOP and replace the bolt outside the U.S. Gulf.”
The “reality of the post-Macondo world” is that headlines involving GOM “rig equipment/component problems still evoke flinching instinct,” said Tudor, Pickering, Holt & Co. Focusing only on the downtime impact is “too simplistic” (and unfair to offshore drillers) to crack open an Excel spreadsheet and let worst-case scenario machinations run wild. Our take, via process of triangulation, is that this issue’s bark is worse than the bite in terms of its collective impact on the offshore drilling industry’s earnings profile.”
For one thing, “it is faulty logic to assume every floater with a GE/Hydril BOP is subject to connector bolts replacement as we came across numerous floaters which had GE/Hydril BOPs but a wellhead/riser connector by a different vendor. In addition, GE’s safety notice…applies only to a certain family (H-4) of subsea connector bolts. Even when connector bolts need replacing, the length of downtime is context-dependent…” It might be “one day if subsea stack is sitting on a rig deck versus a week or so if a rig is making a hole and thus has to stop, pull the drill stem, perform a cement job and then pull the BOP/riser.”
Assuming five days of downtime for every rig affected, up to 10% of 1Q2013 profits for the rig operations could be affected, according to UBS Investment Research, which may include Diamond Offshore Drilling Inc., Ensco plc, Noble Corp. and Transocean Ltd.
Transocean confirmed that a plan is in place to replace some bolts, but “we do not expect this issue to have a significant impact on our business.” Ensco said Thursday the “relevant bolts” in its subsea and floater systems already had been replaced or were scheduled for evaluation.
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