Eldon Ball • Houston
A new perspective
A group of energy industry risk management professionals met recently in Houston to discuss the program for an upcoming conference on that very topic (more about that later). As the discussion moved around the table, several points became clear regarding the Macondo spill in the Gulf of Mexico (GoM) and the fallout to expect from it:
- No one saw it coming
- Contracts are going to change
- Partnerships are going to change
- Everyone is going to be a lot more careful.
No one saw it coming. That is, no offshore operator consciously thought about a disastrous event that could knock 40% off their market cap, cost them billions of dollars (eventually) in cleanup expenses, legal fees and damage claims and bring international scorn upon them. Now, of course, every operator with any kind of offshore operation anywhere in the world is aware of that possibility.
Contracts are going to change. It’s inevitable. In the future, contracts will assign – or exempt from – liability specifically and in no uncertain detail. In fact, one of the topics that will make it into the program will be risk assessment of contractual agreements. It will assess how to understand and make clear who is responsible for what.
Partnerships are going to change. Operators are already vetting future partnerships based on safety and environmental records. It only makes sense. Mitigating risk will involve opting out of doing business with any partner, contractor, vendor, or service supplier that could do you damage.
Everyone is going to be a lot more careful. This goes without saying, but it’s worth saying anyway. Even if you consider the Macondo event a once-in-a-lifetime conspiracy of circumstance, a “perfect storm” of unintended consequences, you will certainly be more aware of the potential for just such a risk. Offshore operators are now on high alert regarding risk mitigation. It doesn’t take new regulations or a ban on drilling to make the point. The potential economic fallout is motivating enough. Call it a new perspective.
The conference, incidentally, is called Petrosafe Offshore. It’s set for June 14-15, 2011, at the Riverside Hilton in New Orleans. A group of the best and brightest is putting together the program as we speak, and it promises to be one of the most telling and unbridled of its kind. We’ll have more later as the event unfolds.
New production at Telemark
ATP Oil & Gas Corp. has begun first oil production at its Mississippi Canyon 941 No. 3 well in the deepwater Gulf of Mexico. The initial rate and associated pressures exceeded original expectations and the well established a rate of more than 7,000 boe/d.
The Mississippi Canyon 941 No. 3 well is located on the Mirage field and is the second well brought on production at the Telemark Hub location using the ATP Titan floating drilling and production platform.
The Mississippi Canyon 941 No. 3 well is located on the Mirage Field and is the second well brought on production at the Telemark Hub location using the ATPTitan floating drilling and production platform. In compliance with the US Bureau of Offshore Energy Management (BOEM) guidelines with initial production, the MC 941 No. 3 will be renamed the MC 941 A-1.
When drilled, the A-1 well encountered four Miocene sands totaling 266 ft (81 m) of pay. The A-1 well is completed at a measured depth of 16,300 ft (4,968 m) in two of the discovered sands. Plans are to commingle production from the two completed sands.
ATP operates the deepwater Telemark Hub in approximately 4,000 ft (1,219 m) of water with a 100% working interest and holds a 100% ownership in ATP Titan LLC, which owns the ATPTitan and associated pipelines and infrastructure.
De facto moratorium?
When US Secretary the Interior Ken Salazar issued an order last month that officially ended the moratorium on deepwater drilling in the GoM, the offshore operators issued a muted sigh. Muted, that is, because no one is convinced that the announcement is much more than a political device that may not have much if any effect on drilling in the GoM.
The reason for so much caution on the subject is that a de facto moratorium also exists in the form of long delays by the BOEMRE (née MMS) in the process of approving drilling permits.
Without permits, of course, drilling can’t begin, regardless of the existence or not of a moratorium. So while headlines suggest that all is back to normal – disregarding for the moment the new generation of regulations and reporting requirements – in fact it remains to be seen if anything has changed.
To that point, National Ocean Industries Association (NOIA) President Randall Luthi issued a statement challenging the real effect of the ban’s removal.
“While we are pleased today that Secretary Salazar has opted to end the job-killing moratorium on deepwater drilling in the Gulf of Mexico,” Luthi said, “our companies remain doubtful that this announcement is anything more than symbolic, until permits are actually issued for new drilling.”
“Slowing or stopping the actual issuance of permits is not the only threat posed by the Administration’s handling of this issue,” Luthi notes. “The Interior Department referred to the ‘dynamic’ nature of future regulations in an effort to show they would adapt as circumstances warrant. That sounds good. In reality, however, it introduces another level of uncertainty to a regulatory process that has come to be less predictable than in many under-developed nations around the globe. When billions of dollars of investment are at stake, a ‘dynamic’ regulatory process could be as dangerous to future offshore energy development as an outright ban.”
Get ready for safety cases
For an idea of what the Interior Department may be thinking when they speak of a “dynamic” nature for regulations, take a peek at the Australian Offshore Petroleum and Greenhouse Gas Storage Act 2006 (OPGGSA), the primary legislation that governs offshore petroleum operations beyond designated state and territory coastal waters.
The OPGGSA and the Offshore Petroleum and Greenhouse Gas Storage (Safety Levies) Act 2003 provide a regulatory framework consisting of legislation and associated regulations to require the preparation and submission of asafety case (emphasis added) for every offshore petroleum facility, underpinned by provisions for penalties and enforcement measures to ensure compliance.
The emphasis is on “safety cases” – planned responses to any emergency situation, which must not only be provided before operations begin, but which must also be updated to reflect any change in the operating environment.
Word is that Interior is looking at “the Australian model” for future regulations.
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