THE BLOG
03/28/2011 09:59 am ET | Updated May 28, 2011

Are the New Subsea Oilwell Containment Companies Ready? Maybe

The BP well blowout last April exposed one of the biggest weaknesses of drilling in the deepwater: the inability of the oil and gas industry to contain a well blowout once it occurred.  The industry was overly confident in advanced drilling and well control technology, and never contemplated that a well could blowout, burn down the rig, sink it, and then flow uncontrolled into the ocean environment for days, weeks, months as we so painfully witnessed on 24/7 television.  As memory of the ongoing catastrophe fades, here's a visual image to remind you of the depth of the crisis and magnitude of the damage:

And another:

The industry and the government agency charged with overseeing the offshore had never contemplated a blowout where every control and safety system failed, and the necessity for accessing a well without a floating rig over it.  It had never been anticipated that a failed blowout preventer (BOP) rendered useless by the blowout itself and a wrecked riser on top of the BOP, could thwart every attempt to get into the well.  It was a harsh lesson; one from which that I'm not sure we've learned much.  In the days since the blowout, the BOEMRE (the Minerals Management Service under a new name) has mandated new rules for offshore drilling, mostly centered around more training and more third party certifications, but not much in the way of actual fundamental change.  As we've already talked about, BOPs are still the same, with their built in failure rate.

One change mandated by the BOEMRE that has delayed the return to drilling the deepwater is the ability to contain subsea well blowouts.  To be clear, this order did not mandate BOP improvements.  It mandated an ability to contain oil after the BOP failed.  To respond to this order, a group of major oil companies announced the formation of the Marine Well Containment Company (MWCC).  The early members were Shell, Chevron, Conoco-Phillips, and Exxon Mobil.  Since then they have been joined by Anadarko, Apache, and... wait for it... BP.  Their goal was to pool resources to establish a fast deployment containment system, using primarily the equipment that BP had developed during the height of the crisis last summer.  They now claim to have an "interim system" in place and are constructing a larger, more permanent system through an effort led by Exxon Mobil. 

A competitor, Helix Energy Solutions, soon after the MWCC was established, announced the Helix Well Containment Group (HWGC), now made up of 22 smaller offshore operators and using, of course, Helix's own equipment, called the Helix Fast Response System, made up of several vessels with which we are already familiar, the Q4000, which eventually recovered the failed Macondo BOP, and the Helix Producer, a floating production facility which stood by, but was never used, during last summer's blowout.  One thing I noted on their new website was, even though Helix claims to be ready, they disclose that their capping stack "will be ROV operable"; not is... will be.  Helix has boasted that the first deepwater permit was issued to a member company, Noble Energy.

Besides the obvious weaknesses in subsea BOPs, and hence well control,  I am concerned about having competing groups doing subsea containment.  Helix setting up a for-profit company has already siphoned off independent operator's money, weakening both efforts, especially in research and development.  Has this happened before?  Sure it has, right after major oil companies formed the Marine Spill Response Corporation (MSRC) in response to spill cleanup requirements mandated in 1990's Oil Pollution Act, which was enacted after the Exxon Valdez disaster.  The non-profit consortium was established to improve oil clean up technology and capability.  In 1992, a for-profit competitor was formed called the National Response Corporation (NRC), which began cutting prices for oil spill cleanup.  The result? MSRC members were siphoned off to the NRC, weakening the MSRC.  Price competition was set up, and I'll give you one guess which service was cut to compete... yes, that's right, research and development.  That's how you get 1970's surface cleanup technology applied to a deepwater blowout in 2010, and the tragic results.

If we fail to learn from history, we are doomed to repeat it.  Having two well containment companies, one for the majors and one for the independents, weakens both efforts.  Since Helix is a for-profit corporation, it will compete on price to get more members.  If (when) one of those operators has a blowout and runs out of money (or hits their statutory $75 million liability cap for clean up), will the other companies step in?  Will the majors step in?  No one will know until it happens; once again, we have set up the same ad hoc environment that existed at the time of the BP blowout.

It seems that the industry and the government will never learn.

Bob Cavnar, a 30-year veteran of the oil and gas industry, is the author of Disaster on the Horizon: High Stakes, High Risks, and the Story Behind the Deepwater Well Blowout. He is CEO of Luca Technologies.