Thursday, August 12, 2010

Fixing Oil Wells: The Price of Staying in the Game

Via The Economist -

With 500 barrels of hard-set cement now gumming up the Macondo well, a number of inquiries are looking back at the loss of the Deepwater Horizon rig and the subsequent spilling of 5m barrels of oil. How much of the fault is found to lie with the well’s design, how much with the way the design was implemented and how much with the way the rig was run will determine how such ventures will be regulated from now on. It will also settle whether BP, the well’s operator, was grossly negligent—a finding that could be worth well over $10 billion in fines and liabilities.

Meanwhile, the oil industry is already getting to grips with the question of what to do if such a thing should happen again. This is in part prudent politics: credible assurances that a future blowout could be better dealt with will be vital to restoring the industry’s fortunes in the Gulf of Mexico. It is also a matter of economic self-interest. The costs facing BP would have been far smaller if it had been possible to shut the well down a lot quicker.

The position taken by ExxonMobil, Chevron, ConocoPhillips and Shell, which are clubbing together to put $1 billion into creating and equipping a new not-for-profit firm, the Marine Well Containment Company, is that the capability to do much better than at Macondo depends on having hardware designed for the job and available from day one. The companies outlined their plans at a public meeting held in New Orleans on August 4th by the Bureau of Ocean Energy Management.


If this equipment had all been available in April, its proponents say it might have capped Macondo in weeks. The companies also say the system should never be needed if wells are properly designed and operated, and that they hope their billion-dollar backstop will never have to be used. The various reports into the Deepwater Horizon disaster will doubtless say the same, while endorsing the newly planned capabilities, or some variant thereof, and making some further drilling conditional on having them in place.

Perhaps it is not too much to hope, though, that some of those reports might shed light on two deeper questions: why did such a technologically astute industry not see fit to develop such useful equipment before it was needed, rather than after? And how might that underlying and disastrous lack of foresight be corrected?

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