March 27, 2012 § 1 Comment
The Economist recently had a piece which stated that the President could lose the election due to high gasoline prices. Apparently a high majority of the populace believes that the President has the power to fix it, even if he did not cause it. About all he really can do is to release oil from the Strategic Petroleum Reserve, and this ought to have an effect for a while. The last couple of times it made money for the Treasury.
The President did not help himself with the non-decision on the KeystoneXL pipeline. The primary purpose of this line is to bring heavy Canadian crude down to refineries in the US. But a key segment would transport oil from the booming Bakken play primarily in North Dakota to Cushing, Oklahoma. Another portion then takes it down to the refineries in Texas and Louisiana. Absent this last bit there is a glut of light sweet oil in Cushing. Incidentally, refiners love light oil unless they have expensive equipment called cokers to process heavy crude. The reason they love it is because the starting oil has properties closer to that of gasoline and so it is cheaper to refine. Because of the difficulty in refining heavy oil always sells at a discount and there is more profit in that if you already have the right process equipment. So the folks with that capability really don’t want the light sweet oil; it costs more and idles some capacity they already paid for. In this paradoxical situation the “better” oil is less desirable. This is an overarching theme in refining: the available oil has to fit the blend suited to a given refinery. We will face this when we reduce imports. They are not all the same. Since the new domestic sources are light sweet crude, it makes sense for the first imports to target for reduction to be from Saudi Arabia or Nigeria, both sources of light oil. Of course, politics could intervene.
The oil stuck in the northern reaches is largely carried by truck and train, an expensive proposition limited by capacity. This has created a bonanza for refiners in the Mid West. Since this fluid is sort of stranded, it is not getting the world price, or not even the Gulf of Mexico price. But the refined product is getting a world price, minus the transport cost of course. This means the refiners there are getting a low cost feed stock and full market price for the gasoline. This has created an interesting anomaly that you might have read about. The US is now a major exporter of gasoline while at the same time importing nearly half of its crude oil requirement. The folks in Wyoming do not pay less for their gasoline just because their crude is priced low. So, locally cheap crude is not responsible for variability in gasoline price. More on the real reasons below. Also, one could not help ponder that the exports are keeping domestic supply low enough as to keep prices up
It appears that no special permission is required to export refined product. On the other hand light sweet oil from the Eagle Ford field is currently experiencing a challenging situation. The refineries are designed for a heavier mix and so this good stuff is not moving at the world price for light oil. They would be better off exporting it and being in South Texas they are well positioned. In fact with Mexico’s Cantarell field in heavy decline, that country is looking for light oil to import even as it is exporting the heavy stuff to us. But, as I understand it, this requires Executive approval. Interesting that gasoline export does not or that it was granted earlier.
Professor James Hamilton of UC San Diego has an interesting blog on energy related topics. His latest one deals with this issue of extreme variability in gasoline prices at the pump. Hamilton is regarded as one of the foremost resource economists. We have referred to him before in connection with his correlations of recessions with spikes in the price of oil.
He places the blame on the variability squarely on state taxes on the fuel. He shows a map of the US charting the tax in each state and it is instructive. Those of us driving up Interstate 85 from the south have noted the considerable increase in gasoline price upon crossing the state line from South Carolina. That is all about taxes, as it is for cigarettes for those inclined to inhale. California additionally has special requirements on the fuel, which further increases the cost. The price of crude local to a refinery will also be a factor. But as discussed earlier, the export market diminishes the chances of truly lower gasoline prices near cheap production. Also the local price of crude oil is low only until the pipeline infrastructure is in place.
One last point: increased domestic production will not drive down gasoline prices. We cannot drill our way to lower prices at the pump. Oil is sold on the world market and except for issues of access and transportation cost, there truly is a world price. If the US increases production OPEC could reduce theirs and cause price not to be affected. Similarly gasoline has a world price. Nobody is suggesting it, but I suspect limiting gasoline export could push prices down domestically. Ultimately oil prices will come down when transport fuel substitutes are a significant force and in true competition with oil derived gasoline. Then gasoline prices will also come down to a new equillibrium with alternatives.
November 13, 2011 § Leave a comment
Few will dispute that shale gas has changed the very make up of the petroleum industry. At every twist and turn new resource estimates appear, each vastly greater than the previous. The estimate in 2008 exceeded the one from 2006 by 38%. As with all resource estimates, be they for rare earth metals or gas, disputes abound. But through all the murk is the inescapable fact: there certainly is a lot of the stuff. How could this suddenly be so? The last such momentous fossil fuel find in North America was the discovery of Alaskan oil. But a discovery out in the nether regions is understandable. In this case we were asked to believe that all this was happening literally in our backyard.
To appreciate what happened we first need to understand how oil and gas is formed and recovered. Millions of years ago marine organisms perished in layers of sediment comprising largely silt and clay. Over time additional layers were deposited and the organic matter comprising the animals and vegetation was subjected to heat and pressure. This converted the matter into immature oil known as kerogen. Further burial continued the transformation to oil and the most mature final form would be methane. By and large the only real difference between oil and gas is the size of the molecule. Methane is the smallest with just one carbon atom. One of the lightest oil components, gasoline, averages about eight carbon atoms. Diesel averages about twelve. So, although we refer to them as oil and gas, chemically they are part of a continuum. So, it is easy to understand that they could come from a single source.
The key word is source. The rock in which the oil or gas originally formed is known as source rock. The figure shows a schematic representation of the location of one such source rock. This is almost always shale, which we told you was some mixture of silt and clay and sometimes some carbonates. Conventionally, the fluid in this rock will migrate to a more porous body.
This is depicted as the sandstone shown, which is predominantly silica, an oxide of silicon. It may also be a carbonate, predominantly calcium carbonate. These two minerals are host to just about every conventional reservoir fluid in the world. The fluid (and by the way gas is a fluid, although not a liquid) migrates “updip” as shown to the upper right. This is because the hydrocarbon is less dense than the water saturated rock and essentially floats up, not unlike oily sheens on your cup of coffee.* This migration continues until stopped by a layer of rock through which fluid does not easily permeate. This is known as a seal, and more colloquially, a cap rock. Ironically this is most usually a shale, not unlike where the fluid originated. The trapped fluid is then tapped for production.
The trap is often a dome as shown in the upper left. It can also be a fault. This is when earth movements cause a portion of the formation to break away and either rise or fall relative to the mating part it just separated from. In some instances a porous fluid filled rock will now butt up against an impermeable one, and a seal is formed laterally.
In the schematic shown the yellow zone would be the sandstone, and the updip fluid shown in red now finds itself abutting an impermeable zone shown in green.
In the early days of prospecting they looked for surface topography indicative of a dome type trap below. These days sound waves reflected back produce excellent images of the subsurface.
Unconventional Gas: We have described how conventional gas, and oil for that matter, are found and produced. The current flurry of activity in shale gas is concerned with going directly to the source. This was previously considered impractical, primarily because the rock has very poor permeability, which is the ease with which fluid will flow in the rock. The permeability of shale is about a million times worse than conventional gas reservoir rock. In fact, as we observed earlier, shale acts as a seal for conventional reservoirs. The breakthrough was the use of hydraulic fracturing. Water is pumped at high pressures, causing a system of fractures. These are then propped open with some ceramic material to hold the cracks open. Without this the sheer weight of the thousands of feet of rock above would close the cracks. The propped open fractures now comprise a network of artificially induced permeability, allowing the gas to be produced. This is akin to pillars and beams used in underground mines.
The sheer ability to extract gas from source rock is now well understood as feasible. But some still doubt the magnitude of the estimated resource. Here is the explanation of why one would expect this resource to be plentiful. Consider that for a conventional reservoir to be formed one needed a confluence of two events. First there needed to be a proximal porous and permeable rock and second, a trap mechanism had to exist. So it would be easy to believe that more source rock did not have these conditions than did. In other words the probability of source rock without a release mechanism was greater than with. This is why it is reasonable to conjecture that the total resource trapped in source rock is greater than the resource that escaped into permeable trapped rock. Further adding to the potential is that this is fresh territory, relatively unexploited. Decades of exploitation have denuded conventional reserves, while the source rock remains relatively untapped.
A word on the nomenclature of resource estimation. A resource estimate indicates the quantity of estimated hydrocarbon accumulation, whether economically recoverable or not. A subset of that is a reserves estimate. Reserves are the portion of the resource that one could recover economically and bring to market. Typically in a new play one would expect reserves to keep getting revised upwards. This is because every new well put on production increases the certainty of the extent and quality of the reservoir, and the reserves can confidently be increased. In reading the popular literature it would be well to keep the distinctions in mind; they are often confused.
*Darker roasts produce more oil. One way to minimize oily sheen is to brew with cold water; also results in a “sweeter” coffee. This is analogous to “sun tea”.
April 10, 2011 § 1 Comment
High oil/gas price ratios will transform the petroleum derivatives industry
The recent unrest in the Middle East has caused a spike in the price of oil, with immediate impact on gasoline price, while the price of natural gas has remained stable. This underlines the principal difference in these two essential fuels. Oil is a world commodity while gas is regional. They also serve largely different segments of end use. Consequently, the fact that today’s gas is one-fourth the price of oil in terms of energy content has little relevance in the main. However, if the energy industry believes that this differential will hold for a long time, technology enabled switching will occur. In this blog post, we will predict a shale gas enabled future of gas at low to moderate price for a long time. At the same time, we subscribe to the view of an upcoming plateau in oil production, which will drive oil prices higher. These two trends taken together assure a high oil/gas price ratio. This will cause systematic switching where possible. We discuss two essential areas where this is likely: transport fuels and propylene, the latter being the precursor to many important industrial goods, principally polypropylene.
Why natural gas price will stay low to moderate: Shale gas has unique economic characteristics when compared with conventional gas. It is located on land and at relatively shallow depths. The exploitation of the resource does have environmental hurdles, but with the proper combination of technology, transparency and regulatory oversight, these can be traversed.
If allowed to be accessed, shale gas offers the promise of cheap gas for decades. If demand drives up price, this resource can be accessed within 90 days of the decision to do so, provided access and delivery infrastructure are available. This single fact will keep a lid on the price and discourage speculators. To give a frame of reference, conventional offshore gas has a lead time of at least four years. That is the sort of lead time this industry is accustomed to. So a fast response lid on prices is a new phenomenon, driven by this unusual new resource.
Natural gas prices can be expected to stay in a tight band between $4 and $6.50 per million BTU, with excursions to $8. The floor will be driven by demand and the ceiling by the aforementioned fast response to new production. At least two oil companies operating in the Marcellus in Pennsylvania have stated that at $4, they have strong profits. Newer technologies and further experience will continue to drive down production costs. One example is refracturing of existing wells after initial production tails off. A unique feature of this type of reservoir is that a properly designed refrac will deliver new gas approaching initial production numbers. This would be at a fraction of the original cost because the well already exists. This and other technological advances will, in most instances, more than offset the costs of better environmentally driven practices.
Impact of predictably low gas prices: High oil/gas price ratios will drive oil substitution. Here we will discuss just two areas of impact. The obvious high volume one is a replacement of the oil derivatives for transport. Technology exists today to convert natural gas to gasoline, diesel or jet fuel. Predictably low cost natural gas will spur further improvements regarding the economics of these processes. Also, Liquefied Natural Gas (LNG) for long haul transport and Compressed Natural Gas (CNG) for buses, taxis and even cars will be strongly enabled.
An interesting analysis is the impact on petrochemicals such as propylene. One of the derivatives, polypropylene, is ubiquitous in our lives: roofing, carpets, bottles and bendable plastics, to name a few. For years when oil and gas pricing was in greater parity, propylene was a bi-product of ethylene production in oil refineries. It is also produced by tweaking the catalytic cracking process, at the cost of a smaller gasoline fraction. A refinery can change the mix essentially at will, presumably based on the relative profit potential.
But with a worsening oil/gas price ratio, ethylene production increasingly switched to a gas feed stock. Unfortunately, this process produces very little propylene as a bi-product. So, as reported recently in the Economist, in the last two years propylene price has gone up 150%.
A predictably low price for gas will allow for plants dedicated to propylene production from gas. At least three companies, Lurgi, Total and UOP, have the technology at an advanced state. This would make the greatest sense for gas that is otherwise stranded – Prudhoe Bay gas comes to mind. The gas pipeline from Alaska is no longer viable if shale gas production in the US and Canada continues apace. Produced gas continues to be reinjected. The real price for this gas is well below the price in the Lower 48. The economics of conversion to transport fuel or plastics feed stock is compelling.
Sustained high oil/gas price ratios are predicted. This will drive a secular shift from oil to gas.
April 7, 2011 § 2 Comments
This is loosely based on February’s Breakfast Forum topic
The International Energy Association (IEA, not to be confused with the domestic version EIA) defines energy security as “uninterrupted physical availability of energy at affordable prices, while respecting environmental concerns.” To most, this is not the only aspect. A straw poll of the general populace would likely find that it is more concerned with energy independence. In this context, energy equates almost singularly to oil, since it is reliant on imports while other forms of energy are largely generated domestically.
Reduced reliance on imported oil resonates on many levels. Increased domestic production helps, but not as much as substitution of conventional transport fuels. Both measures serve to create jobs and help the balance of payments. We consume roughly 18 million barrels of oil daily, as compared to about 21 million a scant two years ago. Of this, about 60% is imported. At $100 per barrel, that represents about $400 billion payments out of this country, creating jobs elsewhere. Compared to Europe, our taxes on gasoline are relatively low, so conservation is not hugely advantageous. This is why electric cars will have better breakevens in Europe than the U.S. But legislation to improve gas mileage does improve efficiency, even though feature creep has cut into that gain. Cars today have more power hungry devices than they did 25 years ago, and much larger as well. The Toyota Corolla of yesteryear is a mere shadow of its current self.
Climate change arguments are steadily losing traction in Washington, D.C. Energy security on the other hand is in play. There is also something about the word “security” that gives comfort. Witness the clever coining of the Homeland Security name, invoking visions of a warm fireplace and apple pie aromas. Then the naming folks lost their way with the Bureau of Ocean Energy Management and Regulation replacing the simple Minerals and Management Service. MMS was replaced by BOEMR, which unfortunately comes out sounding like ”bummer” – but enough with the digression. Energy security objectives could result in low carbon solutions. Certainly, natural gas replacing diesel will reduce net emissions, as well as biofuels. Electric cars achieve this objective by shifting the emissions away from the tailpipe to a more tractable location, the power plant. They also are about 50% more efficient than conventional engines on a “well to wheel” basis. So you simply consume less energy per mile no matter what the emissions.
Economic security was the basis for the IEA definition. Since energy is central to our economic being, secure affordable access is a must. James Hamilton at UC San Diego has a somewhat controversial position that essentially states that the last recession was largely driven by oil price shocks. In his previous work, Hamilton has demonstrated at least a temporal correlation between recessions and oil shocks. The importance of this observation is that we have previously subscribed to the position that an upcoming plateau in oil production will lead to a serious supply imbalance unless we move immediately to oil substitution. Consequently, oil substitution may no longer be a choice, purely from an economic security standpoint. The climate change positives will simply be lagniappe (meaning “gravy” in Cajun vocabulary).
Military security is a factor as well, although seemingly in an indirect fashion. Military measures to keep the oil shipping lanes open have other defense and foreign policy purposes too. Many still believe that the Iraq war was about access to oil. If so, the return on investment will certainly not be high. Even the business developed due to oil revival in Iraq has not benefitted domestic firms any more than it has European or Russian for that matter. But there is strong precedence for wars being fought, and questionable governments being supported in the pursuit of energy access. Finally, any military effort relies on secure access to transportation fuels. The Germans realized this in the build up to WWII. They refined the Fischer-Tropsch technology invented in the late twenties. The entire war effort was fueled by transport fuel from coal.
November 4, 2010 § Leave a comment
A recent article in the Economist describes an important new direction for biofuels, namely the pursuit of drop-in fuels. These are synthesized hydrocarbons and can be used directly in any proportion for engines running on gasoline, diesel or jet fuel. The last two cannot be served by ethanol.
As we have discussed in the past, ethanol has about 33% less energy than the same quantity of gasoline. This calorific penalty decreases as we move to higher alcohols. The article discusses ongoing work on the production of butanol. It has 4 carbons compared to 2 in ethanol, so it has more calories. It is very similar to gasoline in calorific content and less corrosive and water absorbent than ethanol, and so a better substitute.
Most of the story is directed to the production of alkanes from sugar. These are straight chain compounds with the formula CnH2n+2. Conventional oil derived fuels have this formula as well. The number n is about 7 to 9 for gasoline and about 12 to 16 for diesel and a bit higher for jet fuel. So, alkanes with the right number are for all practical purposes direct drop-ins for these conventional fuels.
Herein lies the attraction. Also, being tailored, often through genetic engineering, the composition will be predictably uniform. This is not the case for the input to refineries from a variety of crude oil sources. In fact oil refineries today are forced to be very picky about the mix of crude they will accept. Seed based oils also suffer from this variability.
The reliance on sugar as feed stock is of note. Today, Brazil is the only source for economical sugar for this purpose. Tariffs apply only for ethanol; at least for now. So the long term potential for this feed stock can be debated.
One company is even reported to be using sugar to grow algae for diesel. This is quite a departure from the original allure of algal diesel. It was seen as using sunlight and waste carbon dioxide, a sustainability home run of sorts. Now we see folks going to the dark side of algae, literally. These algae are grown in the dark! The photosynthetic part is transferred to the growing of sugar. So we still have the sunlight and carbon dioxide (from the air in this case) put to use.
An interesting twist is the use of existing ethanol plants by some of these companies. This is a good trend, to deploy assets created by a flawed national policy and subsequently idled by realities.
So, what of corn and cellulose? Both are challenged by the fact that the chemical structure renders them more difficult to convert to alkanes. Of the two, corn, while simpler to react, is the worse in part because of water usage. Cellulosic materials such as grasses offer the promise of draught resistance. Price of Brazilian sugar over the long haul will be a determinant.
An interesting avenue for biomass in general is pyrolysis such as practiced by RTI International under DOE funding. This produces a liquid akin to crude oil. Close enough to merit inclusion as a portion of the feed to a refinery. This is the pre-refinery analog to a post-refinery drop-in fuel. Requiring no modification to current practices. A chemical plug and play, as it were.
Finally, the Economist story discusses the place of electric cars in this context. They opine that while alcohol will get trampled, drop-in fuels will survive. In the next thirty years, gasoline will continue to be used to a significant degree. So, ethanol will continue to be used as a means of assuring complete burn of the fuel. This use as an oxygenate came about from the outlawing of MTBE, but is only needed at the 6% or so level. Beyond that, ethanol is a liability on many grounds and will probably fade away.
But drop-ins will hang around a lot longer. The Beyond Ethanol story will feature electric cars but drop-ins will get serious second billing.
July 24, 2010 § 4 Comments
Basking in a Bangalore breeze, with a mango tree swaying outside the window, I am reminded of a fairly recent article concerning liquefied natural gas (LNG) imports into India. This story discussed a plan to import LNG from Qatar. There were a couple of points of note that are grist for this particular posting mill. First was the contemplated price of about $13 per mmBTU and the second was the mechanism for arriving at that price.
But first some background relative to Qatari motivation for long term deals such as this. The abundance of shale gas in the US has essentially taken that country out of the running as a Qatari LNG destination. Europe continues to be a valid target, but shale gas will likely be a factor there as well. Russia could well react to domestic shale gas in Poland and elsewhere with price drops. LNG may face lower prices but unlikely to see a US type debacle. Relatively close markets such as India shave 50 cents or more off a US delivered price. So, India could be important.
The truly curious aspect to the story cited is that the landed price is tagged to a Japanese crude oil basket price. For a few years now there has been a disconnect between oil and gas prices based on calorific value. Curiously, the more environmentally challenged one, oil, is currently priced at roughly three times gas price. That is commodity pricing. The disparity is even greater when one factors in refining costs. Transportation is something of a wash, although gas is cheaper to move than crude oil or refined products, at least on land. All of this is singularly premised upon the internal combustion engine being the workhorse of transportation.
Natural gas pricing is regional, largely due to the high cost of ocean transport. If local gas price is low, it is difficult for LNG to compete, which is why the US will be off limits unless demand takes a huge jump. Even then the abundance of the shale gas will likely keep the status quo. Local gas price in India was under $3 per mmBTU until recently. It is now $4.20, close to current prices in the US. That is the controlled price paid to domestic producers of gas. So, to contemplate imported gas at three times the price is the sort of action possible only in settings such as these: government control on commodity pricing. But pegging the price to an oil market basket, a Japanese one no less, is where logic takes flight.
Oil prices in coming years are likely to see sustained increases. Natural gas, on the other hand, will see a moderation in the US due to shale gas. If shale gas resources are found in other countries, one could expect similar pricing behavior. So, pegging any natural gas price, LNG or otherwise, to oil prices will result in a windfall for the producer and one that is not justified by supply and demand arguments.
Consequently, the main problem with the contemplated Qatari deal is not even the current high price. It is the possibility of up to a doubling in ten years. At anything close to that the incentive to use natural gas evaporates. Entire industries will shift offshore. It will be cheaper to make fertilizer, polypropylene and the like abroad and import the finished product. This will have a lasting negative impact on domestic jobs and the balance of trade.
An interesting subplot in the Qatari deal is the statement by them that they supplied cheap gas in India’s hour of need a few years ago. It was landed at $2.53 and has crept up to around $7 more recently based on whatever oil linked formula was used. The implication is that they should be rewarded now with a better deal. A fairly high fixed price would fit that scenario while still being unfair to domestic production. Pegging to oil defies logic and is simply bad business. The story is now four months old. Perhaps sanity prevailed. It nevertheless gave us an opportunity to discuss the underlying fallacies.
June 23, 2010 § Leave a comment
On June 21, 2010, coincident with the longest day of the year was the longest page 1 investigative report I have ever seen in the New York Times or any other prominent newspaper for that matter. I refer to the story entitled Regulators Failed to Address Risks in Oil Rig Fail-Safe Device, nearly three pages long and entirely devoted to the esoterica surrounding blow-out preventers. This is good because prior to this I would not have dared post a piece discussing blow-out preventers, not to mention blind rams. It is quite well written relative to the operational detail. But there are minutiae that would leave most fatigued. So, here is the short explanation together with some commentary.
The last line of defense against blow-outs is a system of machinery aptly known as blow-out preventers or BOP’s. Multiple other lines need to be breached prior to these being in play. In keeping with the Times authors, we will not discuss these except to point out that nobody really wants to resort to the last line. Some of the reporting has attributed sentiments to personnel to the effect that “that’s why we have the BOP’s” as an explanation for risk taking. If true this is not usual. To use a soccer World Cup analogy (it is the season), full backs who espouse such a belief with respect to their goalkeepers have short careers.
There are three types of BOP’s. The most benign, and this one is used for pressure testing as well, is the Annular Preventer. This is composed of elastomeric elements that can seal off the pipe on the outside or seal the hole when no pipe is present. This is a fully reversible action and the Preventer with the least deleterious consequences of use. According to the Times, there were two of these on this rig. A 60 Minutes segment had reported a worker observing chunks of “rubber” several days prior to the accident, which he conjectured to imply failure of the Annular Preventer sealing elements. Congressional testimony indicates reports of pressure integrity tests which showed anomalies that appear to have been discounted by the decision makers. These test the competence of the completion. These could not have been conducted if the Annular Preventer was not sealing. So, one of them was likely functioning at least at the time of the tests, which was not long before the event. So, it is plausible that this line of defense was functional close to the time.
The next line is the Casing Shear Ram. These are essentially irreversible if there is pipe in the hole. They are shear devices that can cut through the casing but they are not designed to seal the flow. They are primarily used to permit emergency disconnect of the vessel. No real data are reported on whether the Casing Rams were functional.
Then we have the centerpiece of the Times story, the final line of defense, the Blind Shear Rams (is it not odd that all the words could apply to sightless sheep; memo to animal activists: the rams are not being killed, they are doing the killing). These are the most sophisticated of the three types and are designed to cut through the pipe and seal firmly in place. The well pressure is designed to help augment the closure mechanism and hold it in place. The reporters make much of there being a single point of possible failure of the hydraulic system and the reports of unreliability. I assume they did their homework here, but have no other insight. But very interesting is their observation that this rig had only one of these. This is surprising for a deep water rig. Here’s why. The pipe it is designed to cut through is not a continuous cylinder. At intervals of 40 feet, sometimes 30 feet, there are joints. The blind shear rams cannot penetrate the joints. So if by bad luck a joint is in its path, the mechanism will not succeed. This is why a second one is important to have, and at a distance no less than 4 feet from the first, but not much further such that there is no likelihood of another joint being encountered.
The story also noted that gamma ray testing had shown that at least one side of the blind shear ram had deployed (the other side could not be imaged) but stopped short of cutting. The evidence shows that at least one of the Annular Preventers was functional at the start. We know nothing conclusive about the Casing Shear Rams. Somehow, these lines of defense crumbled. Unfortunately, the key data indicating hydraulic and other health of these devices did not survive the explosion. Apparently these data are not shipped to shore. Virtually all data related to drilling and completions are streamed to shore. So, where do we go from here?
In keeping with past disasters, such as that of the Space Shuttle Challenger, one can expect a careful examination of each failure point and the production of engineered solutions and associated management of human behavior to minimize the probability of each of the events. The list of suggested remedies should include certain legislation and increased enforcement authority. Certainly on that list ought to be:
- Requirement for two or more Blind Shear Rams on every deepwater rig
- Requirement for an expert level of shore support for all key well control decisions, including involvement of the appropriate federal agency, which should be staffed at an expert level. Through the use of real time support centers covering a number of wells each, the federal agency cost need not be high.
- All key data upon which well control decisions are made should be stored in a Black Box. Ideally, they are already on shore and stored as part of the expert review process mentioned above.
Finally, taking measures such as those above will achieve important results such as avoiding costly near misses, but in the end likely will not avoid the occasional blow-out, in part because other factors may come into play. But, we can be in a state of readiness to dramatically reduce the collateral damage to the environment by minimizing the size of the spill. We urge a joint industry action to study the best form of defense beyond BOP’s. This should be clean page look at all alternatives and should be led by a non-aligned person. Then the industry should agree collectively to have such a system built and ready for deployment at the shortest possible notice.