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Macondo lawsuits (Deepwater Horizon liability)

Friday, Sep 02 2011 by
15

On the Sep 1 2011, Halliburton filed a claim against BP for "for negligent misrepresentation, business disparagement and defamation" according to this press release on Halliburton's website.

The remarkably short release goes on to say that

"Halliburton has learned that BP provided Halliburton inaccurate information about the actual location of hydrocarbon zones in the Macondo well. The actual location of the hydrocarbon zones is critical information required prior to performing cementing services and is necessary to achieve desired cement placement."

and

Halliburton remains confident that all the work it performed with respect to the Macondo well was completed in accordance with BP’s specifications for its well construction plan and instructions, and that Halliburton is fully indemnified under the contract. 

What is Halliburton's case?

To me, Halliburton's case seems to be:

  1. BP knew where the hydrocarbon zones were
  2. They didn't tell us
  3. We went ahead and cemented based only on what BP told us
  4. Because we did exactly what we were told (and asked no questions) we're in the clear
  5. We're really miffed they told everyone we might have screwed up - and that's defamation in  our book.

Who knew where the hydrocarbon zones were?

Which all seems a bit odd. Because by the time the cementing job came around, I'd imagine that the actual location of hydrocarbon zones in the Macondo well would have been known (to within a metre or so) by:

  1. the BP Petroleum Engineer
  2. the Well Engineer
  3. the Company Man;
  4. the Offshore Installation Manager;
  5. the mudlogging crew;
  6. the wireline crew;
  7. the Logging-Whilst-Drilling crew;
  8. the casing crew;
  9. the driller (and one or two vaguely-interested roughnecks);
  10. Anyone given a three-minute squint at any form of electric log; and

well, I'm tempted to add cementing crew to my list, but Halliburton's lawsuit makes it clear that wasn't the case.

So, how come Halliburton didn't know?

Based on Halliburton's claim; the first possibility is that they went ahead and designed and ran a cement job without any information about the actual location of hydrocarbon zones at all. In other words, they simply followed a BP-designed programme, no questions asked. But that possibility is just so outlandishly mad and unlikely that I'll dismiss it straight away - companies like Halliburton are paid for their expertise, not simply for machine-hours and slurry.

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So the second possibility is that BP provided the wrong depths. Well, OK, if they were scribbled on a Post-It note then perhaps someone transcribed a number wrongly - or maybe they use a 7 which looks a lot like a 1 (top tip: however you write your 1s, always use the continental-style 7, friends). But I can't for a single second believe that in this day-and-age Halliburton would have received the depths in anything other than a digital format.

Not only that, I'd be prepared to bet quite a lot of money that the Halliburton engineer did see the electric logs. Why? Because they include the one measure that cementers love: the caliper. The caliper curve is an easy-to-decipher electric log which shows a two-dimensional profile of the borehole, enabling the cementer to see where any washouts or 'caves' may be - and even giving a wet-finger estimate of borehole volume, which comes in handy if you're the person charged with calculating how much gunge to pump downhole.

The presidential commission blamed faulty cement

Remember that the presidential commission concluded that a faulty cement mix contributed to the disaster. Halliburton don't seem to be contesting that point. What they do seem to be saying is that they were simply following orders. Which throws into doubt many of the competences they pride - and sell themselves on.

What is Halliburton's business?

Halliburton's tagline is "Solving Challenges." The marketing material for their cementing boasts

the industry's most robust engineering design tool for assessing and monitoring specific well variables before, during, and after a cement job.

That didn't happen here. What are Halliburton doing? Remodelling their cementing division along the lines of a machine-rental business, perhaps?

SW10


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27 Posts on this Thread show/hide all

kenobi 6th Sep '11 8 of 27

I don't know if you're misreading the haliburton statement, perhaps I am, but,

The point of their defense is, He wasn't uncomfortable with the course of action, so he didn't need to do anything.
BUT
he was only comfortable with it because he had been misinformed. Had he been given accurate information he wouldn't have gone along with it.

so now you prove what he knew or should have known, and the other chap will say what he knew and why he believed it and didn't investigate further.

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emptyend 6th Sep '11 9 of 27
1

In reply to kenobi, post #8

Whatever the precise details of the issue at dispute, there will be a trail of documentation showing the information provided. If  BP said the hydrocarbon zone was at X metres - but it turned outto be at X+2 metres, then that would be clear. It is also likely to be clear whether or not the Halliburton chap had access to the source information that BP were basing their opinion on - and whether or not his expertise would have enabled him to form his own judgement.

It won't be one person's word against the other - both parties will have very clear procedures for documenting these matters.

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kenobi 6th Sep '11 10 of 27
1


ok, the central point in the case remains,

were haliburton given the wrong information ? was the cement job suitable for that wrong information,

and was the cement job incorrect for the correct information ?.

if it's not one mans word against another, then we have to presume that haliburton have the documentation showing they were told that reservoir was in a different location. If not then the case would get laughed out of court.

If they do have this, then the argument is really was their job suitable for the info they were given ??

I suspect BP will struggle if the answer is "yes, but the accurate info meant that the job wasn't suitable"
if the answer can be proven to be no, the cement was not suitable for the well given the info they were given, then clearly BP have a strong case, re, why didn't you query it ?

only time will tell, but as my friend said when I picked up the my winnings from him after OJ walked free, but we both know he was responsible don't we ?
yes, but that wasn't the bet was it ?

K




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alano20 6th Sep '11 11 of 27

In reply to emptyend, post #9

there will be a trail of documentation - Yes maybe, but how much was burnt/went down with the rig?

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emptyend 6th Sep '11 12 of 27

In reply to alano20, post #11

Good question - though it would be surprising if a fair chunk wasn't being emailed back to HQ

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alano20 6th Sep '11 13 of 27

In reply to emptyend, post #12

Yes, but senior staff were on board to make a presentation that day, and those that could be spared were at it, and not sening regular emails - "tomorrow mornig will do". And emails don't have signatures: I wonder whether Haliburton are partly relying on this.

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SW10Chap 6th Sep '11 14 of 27
3

ok, the central point in the case remains,

were haliburton given the wrong information ?

As I said in my original post;

So the second possibility is that BP provided the wrong depths. Well, OK, if they were scribbled on a Post-It note then perhaps someone transcribed a number wrongly... But I can't for a single second believe that in this day-and-age Halliburton would have received the depths in anything other than a digital format.

The digital information would have come direct from the electric logs and will have been used for all decision-making regarding the well. The possibility that the Halliburton engineer had information which differed from everyone else is vanishingly small.

It's next to impossible that Halliburton had different information.

That raises the possibility that everyone's information was wrong. That is also an incredibly-small likelihood -- and if it is the case, then Schlumberger are the next witnesses in the dock.

there will be a trail of documentation - Yes maybe, but how much was burnt/went down with the rig?

All the digital information will have reached the beach long beforehand - and not by email! The only document that might have been burned would be the Post-It note... but I'll bet that figment of my imagination didn't ever exist.

you can bet Haliburton have very expensive advice telling them that they have a case

I'm sure you're right! But what is it?

SW10

PS. Does passinthru still hang about these parts? He'll have an interesting view.

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kenobi 6th Sep '11 15 of 27

It's next to impossible that Halliburton had different information.

>> and yet that seems to be the central thrust of their defence,

K

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djpreston 6th Sep '11 16 of 27
2

K,

As I said earlier in the thread, its a "Hail Mary" defence. You wouldn't expect them to just roll over and ask the court/BP to be gentle now would you?

Their lawyers will be all too happy to provide whatever "advice" they can that shows they've (Halliburton) got a good case. That's what lawyers do. Pay them enough and they'll put together a case that backs up your defence.

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kenobi 6th Sep '11 17 of 27

Perhaps, seems odd to me though to have a central argument,

ie you gave us the wrong info,

as the central argument of the case, when presumably that can be easily proven one way or another.

As an aside, and I don't put a huge store by it, a "friend" on facebook, who I've never met, friend of friend type thing, who in in the oil biz, and has friends in the GOM, was pretty convinced that BP would take the rap for this.

I throw that in as an aside, I can't vouch for this person so it's probably worthless, but I have to say, the bullish belief that this is the legal equivelent of hitting and hoping, doesn't ring true to me. More likely it's the OJ defence. As in, he did it, you know he did it, we know he did it, but I've got a video of the policeman saying racist things, and lets see what the jury says !

Still time will tell, I would be surprised if it went to court, more likely some deal be done before then, but would be interesting to know what you guys think,

K

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djpreston 6th Sep '11 18 of 27
3

Oh, don't get me wrong K, there's every chance that BP will be hung drawn and quartered. After all, it will be a US case in front of a US jury and "poor, little Halliburton, a valiant US company, is being picked on by bad old BRITISH Petroleum". If BP gets hit, all to the good, it means a Good Ole American company gets away with it.

Fund Management: European Wealth
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passinthru 11th Sep '11 19 of 27
22

Interesting thread. No access to broadband hence delay in commenting.

Yes, nice one Halliburton. Bit upset about BP comments are we. Well lets be quite candid. Halliburton would not place the sort of comment referred to above , in the public domain, if the legal team did not have something to hang on BP shoulders. Having said that, Halliburton are a respected service company who provide cementing services to a high standard and have a professional duty to find out exactly where zones are. BP can mess up their communication. It does happen.

So let us put some meat on the possibilities. This type of complicated cement operation is designed, tested and approved in town and NOT on the rig. Well site cementing engineers might not specifically know where the hydrocarbon zones are. They actually do not need to know. They need to know that a cement system that has been designed by a technical engineer in town and tested in the laboratory and approved by the BP drilling engineer at the operation office will meet all the requirements for a successful and safe cementing operation that will cover all the zones of interest, whatever the depths.

If this was a production operation, drilling a series of wells (a bit like Soco have just completed) then the cementing operation might well be performed by a cementing equipment operator and not a well-site engineer. Operators are cheaper than engineers and the client is usually of the opinion that the cementing operation is a more straight forward operation.

Not in this case. The Macondo well was a deep water well with some difficult down hole conditions and a well site engineer would be contracted to be on-board for the whole duration of the well from spud to plug or temporary completion. This engineer might be involved with some sort of cementing design, but more often that not he will have more experience in anticipating the type of cementing that the program will next call for and liaise with his operations manager at base to supply the rig with the tools and products for the next series of jobs. He might even have a portable laboratory on the rig whereby he could run a simple cement test for something like say a cement plug. This is what Halliburton refer to as design at the well site. BP at the well site will be very aware that only limited design work is carried out on location. Its very much a shore based operation these days.

A technical specialist from Halliburton would be assigned to the BP operation. In some cases they even have an office in the clients office. Probably not in this case. Although BP have a big GOM operation, their exploration office tends to be lightly manned by up and coming staff and given some flexibility in operating detached from the usual machinations of other production operations. Even though they might share the same offices..

The drilling department of BP if not meeting daily with Halliburton will certainly be in daily contact and Halliburton will be receiving the daily drilling reports. From this report the cementing technical engineer at Halliburton will be in contact with his offshore engineer to discuss the next cement job and to send in representative samples of rig water and dry cement for Halliburton to carry out possible designs based on the anticipated downhole conditions and obligatory requirements to meet safety and operational standards. For the last casing cement job, a design and test will have been run a few hundred meters before TD was reached. If all goes to plan, just some minor tweaking is all that is needed to carry on with cementing. By doing this a few days ahead it gives the cementing engineer enough time to make some perfunctory calculations to work out if he has enough materials on-board.

Now most of the time everything goes swimmingly. Then all of a sudden the conditions become a bit trying and some creative thinking is needed. This is beyond the well-site engineer (and definitely beyond the BP company man, who, wisely these days keep away from these technicalities). Halliburton can afford some clever people and their regional offices will be manned with individuals with access to a design centre and laboratory with some powerful number crunching. This was required in this instance because we know a difficult foam cement job was called for. The foam was probably generated by a nitrogen unit sent to the rig at the last minute (think of a conventional cement that has nitrogen injected into the high pressure lines as the cement travels into the well) and would explain the four man Halliburton crew on-board.

By the way, I notice that Transocean reported that they contracted a third party laboratory to duplicate the cement job performed by Halliburton to demonstrate that the system failed. This is almost farcical and if ever gets to hard detailed examination by Halliburtons legal team in an official enquiry will almost have Transocean hoping they had never gone down that route. Transocean will not have had exact samples, nor the additives, nor access to the propriatory Halliburton cement design software. Chevron seem to say that the Halliburton did not supply them with the correct foam cement! I might have been inclined to drive up to their office with a massive nitrogen generator and tell them to go for it.

Its here that BP might fall a little short in their communication. I have spent many a day and night in the hectic atmosphere of a exploration office when the well starts to lose circulation and the next thing the massive well design programme needs reworking and strings of casing that were not planned for have to be procured, and people sourced and programmes run. The poor BP drilling manager and engineer are suddenly working more hours than is good for them. It is at this stage that good service contractors anticipate and are ready to step in and help. But. Sometimes the client can be a bit difficult and does not think the contractor should be telling the oil company their business. Its called communication and relationship building and it can be difficult in the fast moving environment of a exploration office with the well behaving badly. Its probably somewhere in this confusion and change of plan that communications got mixed and Halliburton are saying that they were misinformed. I can happen but I do not think that a contractor of this standing can be absent of blame. Unless, Halliburton recommended a design based on parameters and BP made changes without telling Halliburton and the offshore engineer was none the wiser.

At the time that the decision to run a long drilling string and not a liner, then we can assume the well was fairly stable and a series of well logs were run and mud conditioned etc. At this time the Halliburton laboratory would be working around the clock running test after test to try to facilitate a fluid that would meet all the differing chemistry of the conditions down hole, to provide a barrier to isolate the hydrocarbon zones (without breaking down the lost circulation barriers put in place) and not least be able to be pumped in a flow regime to provide cleaning for good bonding properties prior to setting at several thousand pounds per square inch. I would guess three cement systems were ran for this casing. A lead system to facilitate mud clean up to enhance cement to casing and cement to rock formation bonding. A middle system with foam. A tail system for the cement shoe. All preceded by spacers or washes.

All these systems will have been tested rigorously in the Halliburton lab (and re-tested as the down-hole parameters changed) and would meet the requirements as requested (often this service is provided free of charge if the contractor is supplying services and materials). This design would be sent to the rig-site by BP and the BP well-site engineer and Halliburton engineer would look at the wire-line calliper logs to work out volumes and procedures for the cementing operation. Transocean drilling manager and the BP company man would duplicate these calculations so that there is no mistake in volumes.

The cementing operation will be captured in real time by the Halliburton engineer who will capture pressure, density, rates, volumes etc. This is either sent of carried back to the Halliburton office by the cementing engineer. Because of the finger pointing going on I doubt that BP or others have had access to this information yet. Halliburton will be keeping it for there own defence.

Halliburton found themselves blamed for failed cement job on the the PTTEP blow-out in Australia a couple of years ago. However, after some examination of actual detailed sequence of events the Report of the Montara Commission of Enquiry found Halliburton cementing design and execution without fault. That the cementing shoe failed was due to subsequent operations. Its easy to blame a cement failure and the company in question when actually other factors beyond that companies control hinder the objective of the barrier of cementing. I do wonder whether time will tell a different tune to the USA presidential commission conclusion on the GOM accident once a thorough investigation along the lines of the exemplary forensic examination performed by the Australian Montara Commission.

Where fault does lie in my opinion is in communication by Halliburton and BP.

passinthru

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djpreston 14th Sep '11 20 of 27
4

Seems as if the US Govt report blames BP, Transocean and Halliburton

http://www.marketwatch.com/story/report-spreads-oil-spill-blame-on-bp-rig-hal-2011-09-14?siteid=

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Fangorn 14th Sep '11 22 of 27
4

Interested to hear what people's thoughts are regarding the report. Having skim read the report, it's quite a lengthy and detailed document it would seem that the prime blame rests with BP,on a number of fronts.

From what I've read, the findings seem to be:

Macondo the result of a series of decisions that increased the risk and a number of actions that failed to fully
consider or mitigate those risks. Increased vigilance by BP, Transocean and Halliburton at critical junctures would have reduced likelihood of blowout.

The central cause of blowout was the failure of the cement barrier in the production casing......arising, they conclude, because of a series of decisions by BP which complicated the operation.

-Use of only one cement barrier
-Location of production casing(in a position that created additional risk of hydrocarbon influx)
-Installation of lock down sleeve as part of temporary abandonment procedure
-Production casing cement job(BP failed to do it in accordance with industry accepted recommendations)

Additionally, BP apparently failed to communicate these decisions to Transocean


Then we come to the "Weaknesses in the cement modelling"

"Incorrect assumptions in OptiChem model. Pore pressure of 13.97ppg for hydrocarbon zone at 18,2000
feet.Inconsistent wit the measured pore presure value of this zone, which was 12.5 to 12.6ppg.

Halliburton report also used incorrect centraliser data. Model used a nominal diameter of 8.622inches, but the installed centralisers had an actual diameter of 10.5inches.Model also spaced the centralisers 45 feet apart instead of the actual, variable centraliser spacing BP specified to Halliburton."

Interested to see how this conclusion feeds through to BP being able or not to get some recompense out of Halliburton.


"BP & Transocean failed to conduct an accurate negative test to assess integrity of casing cement job"

"Deepwater crew missed signs of the Kick,(Transocean crew missed exactly this before did they not?)"

"BOP stack was outside of its 3 to 5 year major inspection requirement.(Transocean)"


Hardly clearing Transocean of blame - perhaps they will face some liability after all regardless of their dodgy 18th century get out clause limiting their exposure to a nominal sum.


All in all, pretty damning of the whole operation,and all the involved parties. I'm sure there are many that can comment in much more detail on how they see liability falling and pretty sure I've missed some things out too boot.

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ignatius 15th Sep '11 23 of 27
3

In reply to djpreston, post #21

Well, I thought the report was very strangely phrased throughout and far too heavy on 'personality' issues relating to the BP team.

On the face of it the root cause of the blowout appears to be the 'fault' of BP and Haliburton for poor well design and excecution but the lack of operational monitoring is also absolutely crucial and all three parties are seemingly accountable for this failure. The loss of the rig and the loss of life was 100% the fault of Transocean. There is absolutely no question about that now.

The disappointing thing, for me, is that the way this has been presented as it seems the investigation was limited to a trawl through contract documents, emails and whatever could be gleaned from individual testimony. I'd have expected the final report to be a good deal bigger with a lot more proper references. I think I can remember about half a dozen technical documents that were little more than alluded to.

Just my take. Still very long BP. Good value, as it has been for a year and a half.

Cheers,
ignatius

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emptyend 17th Oct '11 24 of 27
2

BP have settled with Anadarko:

Anadarko will pay BP $4 billion in a single cash payment...... Anadarko will also transfer all of its 25 per cent interest in the MC252 lease to BP.

 

In addition, Anadarko will no longer pursue its allegations of gross negligence with respect to BP. Anadarko and BP have agreed to work cooperatively with respect to indemnified claims, and Anadarko has the opportunity for a 12.5 per cent participation in future recoveries from third parties or insurance proceeds cumulatively exceeding $1.5 billion, up to a total cap of $1 billion. 

Finally, the parties have also agreed to mutual releases of claims against each other. BP has agreed to indemnify Anadarko for certain claims arising from the accident.  However, BP's indemnity excludes civil, criminal or administrative fines and penalties, claims for punitive damages, and certain other claims. 

"This settlement represents a positive resolution of a significant uncertainty and it resolves the issues among all the leaseholders of the Macondo well," said Bob Dudley, BP group chief executive. "There is clear progress with parties stepping forward to meet their obligations and help fund the economic and environmental restoration of the Gulf. It's time for the contractors, including Transocean and Halliburton, to do the same."

An interesting development - and good to see both BP and Anadarko moving on!

ee

 

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Fangorn 17th Oct '11 25 of 27

Indeed.Interesting to see Anadarko giving BP it's 25% stake in Macondo as well as the settlement payment.

Wonder how far discussions with Halliburton and Transocean are down them line on that front. Will they settle - the pressure must be increasing on them to do so, given that both Anadarko/Mitsui now have,and the recent US government report clearly implicated those two contractors as being at fault.

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tournesol 17th Oct '11 26 of 27
1

Anyone got a handle on valuaton of the 25% Macondo stake?

Anyone succeeded in getting their head around the detailed terms which would see BP paying something back to Anadarko subject to various conditions?

T

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Fangorn 27th Jan '12 27 of 27
2

Couple of news items pertaining to BP and Transocean overnight and this morning. A mixed bag for both of them imv. Whilst Transocean will get some indemnity, they wont get away scott free as they were intending.

http://www.moneyam.com/action/news/showArticle?id=4298356
BP not responsible for all of Transocean's spill liabilities

http://www.telegraph.co.uk/finance/newsbysector/energy/9043251/BP-contract-shields-Transocean-from-some-Gulf-spill-claims-judge-rules.html

Definitely time for Transocean to put its hands in its pockets and pay up.

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