Well, well, well, this (from the WSJ) could set the cat amongst the pigeons:

By BEN CASSELMAN And RUSSELL GOLD

BP PLC came within 1.4 inches or less of preventing the worst offshore oil spill in U.S. history, say engineers studying the safety device that failed in last year's Gulf of Mexico disaster.

The device, known as a blowout preventer, was a massive set of valves that sat on the sea floor nearly a mile beneath the Deepwater Horizon drilling rig, which floated on the surface. It was equipped with powerful shears designed to cut through pipe and seal off the well in an emergency. Why the device failed has been one of the central mysteries of last year's disaster.

In a report released Wednesday, engineers hired by U.S. investigators say they have solved it: The force of the blowout bent the drill pipe, knocking it off-center and jamming the shears. Rather than seal the well, the blades got stuck 1.4 inches or less apart, leaving plenty of space for 4.9 million barrels of oil to leak out.

The investigators concluded the blowout preventer failed as a result of a design flaw, not because of misuse by BP or any of the other companies involved, and not because of poor maintenance. The fail-safe device, the last line of defense against a disaster, wasn't designed to handle a real-world blowout, according to investigators, who called for further study of the devices.

"They have to rethink the whole design," said Elmer P. Danenberger III, who is not involved in the investigation, but oversaw U.S. offshore drilling rules until he retired in December 2009...

Mark

Hehe I can hazard a guess as to the individual - more a case of personal vendetta than probably disagreeing with my comments. I have posted similar to your comments on PMG being overvalued and why on earth would Knoc take such expensive paper with no asset backing which seemed to garner 3 negative recs!

Agree some people really are pathetic ( and in some cases I'd go as far as to wager that those consistently giving such negative recs for a select group of posters are the first to bandy about being on the receiving end of cyber bullying! Like dishing it out but can't take it. I find it highly amusing that whatever I post I'm guaranteed to get a negative rec)

Fanghorn - Wonder who gave you the red thumb for that comment. Really some people!

Yeah am a bit disappointed with Soco , still can't win them all. Just have to make sure that the winners are larger than the losers!

2011 is going to be a very interesting year.

Well done Fang - wish I had stuck with it instead of being tempted out and into Soco pre-TGD drill. At the time though Soco looked a better bet to me. C'est la vie!

It's looking more and more likely that BP wont be subject to gross negligence, in which case they only face a fine of $4.5bn rather than something far higher. Fingers crossed this likelihood arises....

http://www.iii.co.uk/articles/13787/bp-set-avoid-harshest-gulf-mexico-fine?

Still fully invested myself.Although with the stock over 500p am tempted to take a slice off the table I'm instead going to wait until something is decided on the divi.Which should be due in the not too distant future.

One of the few no brain trades of 2010 imv.

Good to hear. Personally I'd rather the move had come from Obama, to show some contrition for his sole focus on BP, but it's welcome news nonetheless.

Oh yes, a more balanced view is nice that's for sure, unlike the "it's all BP's fault" cries from some throughout the whole tragedy. And no, my argument at the time was not that BP was being punished solely because it was British (although it was an influencing factor that's for sure and it was notable American companies were largely ignored)

300p was a great point for increasing one's holding, as was averaging down after the initial large fall.Which of course was what I did because you know my views throughout the whole crisis as we disagreed on who was to blame so vehemently.

Still, it's nice to blame being apportioned more equitably (and also involving Transocean and Halliburton) as I suspected it would.

Whatever happened to Transocean's $1bn dividend payment btw. Did it get stopped as a result of Obama's intervention?

Don Boesch, a member of the investigating commission, told the BBC's World Today programme they had identified "a whole sequence of poor decisions with unfortunate consequences when put together".

He said that not all the faults lay with BP, although the company did have overall responsibility.

.....

BP's "fundamental mistake", the panel wrote, was failing to exercise proper caution over the job of sealing the well with cement.

"Based on evidence currently available, there is nothing to suggest that BP's engineering team conducted a formal, disciplined analysis of the combined impact of these risk factors on the prospects for a successful cement job," the report reads.

The conclusions run counter to industry efforts to portray the Deepwater Horizon disaster as a rare occurrence, as oil companies prod the US government to open greater areas of the US coast to oil exploration.

"The blowout was not the product of a series of aberrational decisions made by rogue industry or government officials that could not have been anticipated or expected to occur again," the report read.

"Rather, the root causes are systemic and, absent significant reform in both industry practices and government policies, might well recur."

Despite some endless posting by some about the only reason that BP was being being punished was because it was British - we can now see a rather more balanced if concerning view.

From an investiing (rather than ideological point scoring) PoV it was worth noting that it was a BP well and thus BP was financially likely to suffer the major financial consequences of the disaster.

Having recognised this - the price at around 300p ($60b loss in market cap IIRC) seemed to cover it nicely on a balance of probabilities and was a great entry point when the well was capped.

B.

I closed my trading position in BP way too early and would have made a lot more money if I had given it a little more time. I made a few bob but nothing like what I would have done if I'd stayed long. One has to accept though that oil at $95/barrel will have helped BP's recovery a lot too. Also it does seem that its sale of assets have all been quite high above book value and so the TNAV of the company was probably estimated as being quite low in the first place. This probably reflects well on other integrated oilies too like Shell.

Unfrotunately I closed most of my long to buy more Soco before the TGD result - oops - never mind one has to play it as one sees it.

Log

" All three main contractors in the BP oil spill took decisions that cut costs but increased the risk of a catastrophic blow-out at the well-head, the final report of the White House panel concluded last night. In a scathing indictment of safety standards across the industry, the report said the worst oil spill in US history was the preventable result of a failure of management by BP, Halliburton and Transocean, the Times reports. "

As expected, despite the protestations of some with blatantly obvious anti BP agendas during the whole disaster, it is looking increasingly likely that the blame WILL not rest solely with BP. As I for one argued throughout the discussions.

This and the news from the compensation fund administrator that he sees it unlikely that the whole $20bn will be utilised has seen a nice up tick in BP over recent weeks, finally breaking the 500p level.

Good news for BP shareholders, pensioners, and hopefully a resumption of the Divi asap.

Royal Dutch Shell eyed a move for BP after oil spill


Royal Dutch Shell weighed an opportunistic takeover bid for crisis-torn BP during the Gulf of Mexico oil spill, according to sources close to the Anglo-Dutch giant.

The Shell board pulled back from making a rescue offer for its longstanding rival on fears that the uncapped legal liabilities could blow a huge hole in BP's future prospects.

But it is understood Shell remains interested in a merger with BP.




Read more: http://www.dailymail.co.uk/money/article-1343795/Shell-eyed-BP-oil-spill.html#ixzz1A10uWPLZ

Deepwater Horizon’s Final Hours

Investigators have dissected BP’s well design and Halliburton’s cementing work, uncovering problem after problem.

But this was a disaster with two distinct parts — first a blowout, then the destruction of the Horizon. The second part, which killed 11 people and injured dozens, has escaped intense scrutiny, as if it were an inevitable casualty of the blowout.

It was not.

http://www.nytimes.com/2010/12/26/us/26spill.html?pagewanted=1&_r=1

If this is the standard that is practised today in the GOM then I am glad I do not have to make rig visits there. So much room for improvement that you hardly know where to start. Note. Lengthy article.

passinthru

The well had already blown out before anyone tried to use the BOP. If the inflow test was no good but the drilling supervisor decided to carry on and remove drilling mud then that would result in a well-control failure however good the rig equipment was. Well control is what they are trained for and it is the main reason they are on board.

If other companies failings contributed to the incident then I agree they should pay their share, but as a Drilling Supervisor myself I am dismayed by some of the decisions apparently taken by BP.

(btw - I have bought back in, at 3.28 as I felt that the worst case was priced in, but I will still criticise them for professional misjudgements.)

Surely the integrity of the rig and its adequate maintenance, as is the maintenance of the BOP(Transocean responsibility?) paramount to understanding why the well behaved as it did?

You seem intent on blaming BP lock stock. Or that is my impression. You talk about big bucks but what of the far larger fees paid by BP to "lease" TRANSOCEAN'S RIG with the expectation that not only would it be fit for the purpose but that it had received adequate maintenance over the years. The lack of the latter is not peculiar to this particular rig at the well in question but seems to be a widespread company policy - there was information posted earlier that some rigs/bops had had no maintenance in 10 years! And you dont feel this would as serious an issue? Faulty unmaintained equipment always leads to trouble - not a matter of IF but when.

I still keep thinking they should never had got into that position. All the training, the drills and the technology should have been enough to tell them the well was not behaving. And I know they will still try to share out the blame but the guys responsible for interpretation of the inflow test were the BP Drilling Supervisor and the BP Drilling Engineers in town. They were the ones qualified, they were in charge of well operations, and that's what they were getting the big bucks for.

http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=a0YGr_zK9Fow

Welcome back SW10, Where have you been? :-D

Have'nt seen you post in a while, thanks for the above. Useful.

Hi mark

I definitely do not qualify as someone who knows what they are talking about, but I'll still chip in my two pennorth

Could there have been an explosion that occurred without the BOP being triggered. such an explosion might propel the drill pipe back up into the BOP where it might perhaps deform under the shock/pressure and then snap. The lower section would then keep coming up parallel to the first section - which is what is described above. A smaller fragment would surely be more likely to be rotated across the direction of the tube rather than remain aligned with it.

If this surmise is correct it does not follow that the BOP was triggered.

Back to BP and Macondo.

I know the news has moved on a bit, but perhaps worth posting these links.

OK, last post on this until something more concrete is released.

I've got into the ShipAIS forums where some are speculating that the Esperanza is on its way to the Schiehallion Field where BP is the operator of the Schiehallion FPSO.

http://www.bpnsi.com/index.asp?id=7369643D312669643D313838

In April 1996, the UK government gave approval for a combined Schiehallion/Loyal development plan. The Schiehallion field co-venturers comprise: BP, Shell, Amerada Hess, Murphy Petroleum, Statoil and OMV; the Loyal field co-venturers are BP and Shell. Both fields produce to the Schiehallion floating production, storage and offloading (FPSO) vessel, owned on a divided rights basis, hence any available capacity in the vessel is owned separately by the vessel owners, through their interests in the two fields.  To assist in any enquiries, BP (as FPSO operator) would be pleased to receive any service request in the first instance.

Could get interesting! Do the Danes have Special Forces?

http://uk.news.yahoo.com/4/20100815/tuk-special-forces-sent-to-confront-prot-dba1618.html

And typical of the age, you can follow the progress of the Esperanza on its Twitter page:

http://twitter.com/gp_espy

2 days ago the Esperanza was just north of Peterhead.

http://www.shipais.com/showship.php?mmsi=244690000

Is it breaching maritime rules by not submitting further positions?

Already spud

http://www.scandoil.com/moxie-bm2/news/faroe-petroleum-spuds-anne-marie-prospect.shtml

And I note the next one is BP operated, not sure if it's the same rig or if BP is mobilising another?

“This is the first of three 2010 exploration wells to be drilled in the deep water Atlantic margin, all of which are targeting substantial oil prospects. The second and third wells, operated by BP and Chevron respectively, will be in UK waters, targeting the North Uist/Cardhu and Lagavulin prospects.”

They have arrived WOS, not sure who is all drilling out there at the moment - but I assume BP is? Perhaps needs it's own thread if things escalate but no time at the mo............

What evidence is there that Greenpeace has provided false or misleading information?

My faith in Greenpeace was first damaged when they fought a very hard campaign - on grounds that they later had to acknowledge as inaccurate (IIRC) - to prevent a redundant oil rig being towed out to sea and sunk in deep water.  That was many years ago, but I have watched them since and find their arguments one sided and rather 'religious'.  For example, their stance on nuclear energy, whales and the like.    (All just my opinion, of course.)

I suspect most of us have a 'green' side, but I do not trust Greenpeace to present an accurate picture - they have as much of an axe to grind as the oil companies.   

AA

Some harsh comments about Greenpeace on here, presumably from people with some kind of vested interest in the oil industry. Its obvious that oil companies might choose to keep quiet about any pollution they cause, and Government scientists could be pressurized into keeping quiet as well. So who's left to expose the truth?

What evidence is there that Greenpeace has provided false or misleading information?

I think such independent organisations fulfill a necessary role, even though I'm a shareholder in a few oil companies.

This article claims that Transocean has a bulletproof indemnity clause in its contract ("without limit and without regard to the cause or causes" ), no matter what happens they are not liable:

http://www.istockanalyst.com/article/viewarticle/articleid/4397825

Publicity is oxygen for Green'peace', attracting the $700,000 a day they need to survive.

http://bishophill.squarespace.com/blog/2010/8/10/could-greenpeace-go-bust.html

Bunch of self righteous hypocrites imv.

And bloody awful 'scientists' as well.

AA

Wonder how much pollution the Esperanza is putting out - if Greenpeace felt that strongly they'd go out in sail boats not petrol chugging ones. Bunch of self righteous hypocrites imv.

Using the GOM disaster for propaganda, Greenpeace have set sail to target one of their 'top ten' at risk deepwater drilling locations. Final destination yet to be revealed.

Suspect it could be the WOS Atlantic margin, but we'll see.........

http://www.pressandjournal.co.uk/Article.aspx/1869125?UserKey=

http://www.shetlandmarine.com/2010/05%20Oil%20&%20Renewables/Greenpeace%20on%20collision%20course%20over%20oil.htm

http://www.greenpeace.org.uk/files/gobeyondoil/index.html

Hi guys,

The Deepwater Horizon sank because there was a blowout, an explosion and an uncontrolled fire with an infinite fuel supply. As I said a long way back in this thread, the rig will have had a 'burn-down' policy embedded in the safety case. Nothing to do with ballast systems I'm afraid.

As Mark says, the failure of the well control operations combined with the failure of the BOP is what caused the whole event. If these two things don't work as intended then the destruction of the rig is all but assured. Transocean (and BP) will have pieces of paper which 'prove' that this could only have occurred once in 1000 years or something.

The technical / legal argument will rely almost exclusively on the low probability of failure of the BOP, and that will ultimately hinge on the maintenance of the BOP itself and the statistics used to make the low probability of failure argument. One missed test is enough to sink the ship for Transocean (and BP et al) if you'll forgive the analogy. To reitterate, I don't mean a failed test, I mean a skipped test.

For some very decent background information have a look at this link from Velosi Ltd (LON:VELO)
http://www.velosi.com/services/47/1.php

Cheers,
ignatius

The frequently repeated claims that there were dozens of safety problems on the rig which went ignored rather reminds me of the full structural survey report I received when I bought my house.

There was a list of problems which filled about 20 pages. One or two of the points raised were modestly significant but none of them were really material and the vast majority were utterly trivial - for example every cracked tile was itemised and described. I remember that the surveyor described the two chimney stacks as in urgent need of repointing to ensure no material deterioration.

That was 26 years ago and those chimneys have never been repointed. And no bad consequences have ever arisen from those or any other of the long list of "problems and concerns" raised by teh surveyor..

The fact is that if you ask a safety expert (or a surveyor) to give you a report he/she is going to include every trivial detail simply to cover his behind. Most of what gets identified will be trivial. Having had a quick look at the regulators retrospective report after the BP refinery explosion I certainly get the feeling that the filter of common sense has not been applied in their exercise to shut that stable door after the horse has been shot. I suspect the same is happening here.

So, rather than being a British petroleum issue, as Obama and his democratic cohorts made it out as being, it is indeed an "All American" inspired problem(American rig owner staffed by american employees, BP America(Amoco/Arco staffed by American employees) for which British pensioners were made to pay.

Where's that rebate cheque Mr Obama?

Why did the rig sink?

The new documents also shed light on one of the lingering mysteries of the disaster: why the rig sank. They indicate that there were problems with the Deepwater Horizon’s ballast system that was responsible for keeping the rig afloat and stable. If the rig had not sunk, the leak might not have occurred. Federal investigators have questioned whether deferred maintenance and other factors had played a role in the sinking of the rig.

A previous set of worker-safety reports provided to The Times were specific to the Deepwater Horizon. The new documents draw from analyses of three other rigs in the gulf and attempt to provide an overview for the entire North American division of the Transocean fleet.

The safety concerns cited in the company’s assessment of its North American division are supplemented by newly released internal reports concerning the Deepwater Horizon’s equipment. These equipment reports identify dozens of deficiencies, including some relating to the rig’s blowout preventer, and some that are categorized as “critical equipment items that may lead to loss of life, serious injury or environmental damage as a result of inadequate use and/or failure of equipment.”

......

This is not the first report of the Deepwater Horizon experiencing problems with its ballast system. In May 2008, Transocean was forced to evacuate more than 70 workers after problems with the ballast system flooded part of the rig, causing it to list to its side, federal records show.

http://www.nytimes.com/2010/08/05/us/05transocean.html?th&emc=th

Quite a nice article here on some REALLY wild claims that Simmons made during the crisis.......

Conclusion

Those who suggest that Simmons might be right, based on some new information that arises or some misinformation supplied by BP, should identify which parts of his story are right: the gravity-defying lake of oil? Flying BOPs? Methane death clouds?

In addition, for those who ask the question "what if Simmons is right?", the answer would be that all textbooks on basic physics, chemistry, and toxicology would have to be rewritten to handle the discrepancies between what is currently believed vs. what Simmons suggests has occurred.

In conclusion, the claims made by Simmons and documented in this essay are not credible. Some - such as the idea that methane is toxic - are factual errors. Other claims, such as an open gusher that BP is covering up, defy logic. How Simmons will respond if no evidence of his claims emerges remains to be seen.

;-)

I guess this is one of the problems of being a rentaquote for a witch-hunting media?

ee

FT reporting Hayward being sent to Siberia... ;-)


Breaking News
"Tony Hayward to stand down as BP CEO but to get new role with Russian JV"

Hi peterg,

Point re earnings noted.......and to the extent that people have under-reported their earnings in the past, for whatever reason, they'll have less to claim.....

I believe that when BCCI (Bank of Credit and Commerce Int'l - run by a Pakistani mafia out of London) went bust, about 40% of its deposits were never claimed, for one reason or another.

What goes around tends to come around !

Hi folks,

I've been away lately starting a new job in the UAE. Now happily settled in the office and working the weekend to get on top of things. Just a couple of points for consideration;

1. The NY Times reporting of the investigations has been absolutely world class. It's almost as if they were gunning for a Pulitzer from the start; one couldn't grudge them it. The journalism has been apolitical and fact driven - always serious but never judgemental or damning.

2. Away from the TV cameras the courts seem to be throwing a lot more light on the state of events on the Deepwater Horizon rig and, at last, I feel like we're getting closer to the truth. There's still a long way to go and it would be better if more of the 'confidential' documents were made public but, presumably, the judges are waiting for a criminal investigation to be launched and a jury appointed before the documentation is fully disclosed. I'm now a lot more confident that the American legal system will arrive at a just conclusion than I was at the height of the Obama induced hysteria. Happily, it also seems that things are moving towards the reading of events I, and others, formed at the outset.

3. Regarding BP it seems to me that the wind is now blowing the right way and I certainly doubt that the share price will drop below 350p again, regardless of relief well activities and delays. One never knows, of course, but I can't see a level of hysteria returning that would shake out holders at those low levels. Surely everyone who wanted to get out has now done so? For what little it's worth I'm well in profit at current levels and if I had some cash spare I'd probably be a buyer rather than a holder. Personally, the $7bn disposal to Apache was very encouraging as it seems like they managed to wrangle a 'fair' market price for the assets from the industry, regardless of the obvious difficulty and absolute need to raise cash.

4. Big oil, small oil, medium sized oil - it's very cheap really isn't it?

Cheers,
ignatius

Some very damning reports now starting to emerge about the state of the rig, SW10 should have a field day with some of them:

The emergency alarm on the Deepwater Horizon was not fully activated the day the oil rig caught fire and exploded, killing 11 people and setting off the massive spill in the Gulf of Mexico, a rig worker on Friday told a government panel investigating the accident.

The rig’s history of mechanical errors was documented in a confidential audit conducted by BP seven months before the explosion and reviewed by The New York Times. According to the September 2009 document, four BP officials discovered that Transocean, the rig’s owner, had left 390 repairs undone, including many that were “high priority,” and would require a total of more than 3,500 hours of labor.

During Friday’s hearing, witnesses addressed the role that shortcuts and mistakes played in compounding the rig’s troubles.

An engineering expert told investigators that the crew members had incorrectly performed a critical test of emergency equipment and did not detect a dangerous “kick” of gas roughly an hour before the explosion......

....another Transocean official had turned a critical system for removing dangerous gas from the drilling shack to “bypass mode.”

When Mr. Williams questioned that decision, he said he was reprimanded.

“No, the damn thing’s been in bypass for five years,” he recalled being told by Mark Hay, the subsea supervisor. “Why’d you even mess with it?”

Mr. Williams recalled that Mr. Hay added, “The entire fleet runs them in ‘bypass.’ ”........

.....Unsafe working conditions include rig areas covered in a “thick film of drilling mud,” supposedly watertight equipment that actually leaked and safety equipment that was past its inspection date. The recording of maintenance issues was “substandard with missing information and poor quality reports that lacked sufficient detail to convince the reader that the task had actually been performed in accordance with the procedure.”

Perhaps this will go quite a way towards the finger of blame shifting onto others?

ee

Another no-show:

http://www.businessweek.com/news/2010-07-19/bp-well-boss-won-t-shed-light-on-cause-of-oil-spill.html

Advantage of having a cap on the BOP

As the relief well approaches a point where it just might come in useful, it might be worth looking at why the people designing the 'kill' operation will be monitoring the pressure build up/leaks/seepage/pressure stability at the well head with much interest.

The initial attempt some weeks ago to pump mud in at the through outlets in the side of the existing BOP and try and 'bullhead' the oil and gas back down the casing/annulus and kill the well this way was not successful. This might seem an obvious thing to say, but, the operation had the effect along with most other operations in building up some picture of what is happening inside and below the blowout. All this information is invaluable.

Unfortunately, its also very time consuming. BP and contractors have done some monumental things over the last few months and regardless of the blame game/legal ramifications if I was a Gulf resident I would be topping up my auto at the closest BP gas station for the rest of my driving days in respect.

The two stimulation vessels that were used in the top kill operation will also be used (or their equivalent) for the bottom kill. That they are using fracture vessels and not rig pumps is quite telling. The leader of this operation and often the designer of the kill will have substantial fracture work knowledge and a big interest in the rock mechanics. Particularly at the point of drill interception by the relief well and the existing hole. By controlling the pumping operation from a vessel alongside the drill rig has the benefit of minimum communication and maximum control of the pumps. Fracturing the existing rock might take place if a well kill on the outside of the existing pipe and up the annular space takes precedent. For this reason having the well capped at the surface might give an indicator to the channels of communication now in place if pressure is communicated from the relief well.

The media and to some extent BP have given the impression that the kill procedure is a 'given' within a short period of time. Yes, they might get lucky. SW10, and a big dose of it might be more appropriate.

Recall working nine months on killing a well in Indonesia and this was only in a few metres of water. Mind you the French were in charge so you need to make allowances :)

passinthru

A couple of updates from BP

http://bp.concerts.com/gom/sealingcapinstallationoverviewwithkentwells070910.htm

http://bp.concerts.com/gom/sealingcapinstallationanimationwithkentwells070910.htm

I watched the bolts for the top flange being removed in readiness for fitting the new stack. Very impressive. You may think its a tough job getting corroded wheel nuts off when changing a flat by the A66. It would be good if BP did some sort of commentary, perhaps as in picture text, of the tasks being undertaken, and the tools employed.

The first Kent Wells update talked of checking the well integrity with a view to possibly shutting the well in, so it looks a possibility that the casing/cementing is OK.

Meanwhile, Max Keiser's meds clearly arent cutting it:

http://www.youtube.com/watch?v=CQQAS1ahndA&feature=player_embedded

Thanks Mark - it is a pity in a way they didn't update us on the horizontal distance they think they are away from the well not just the vertical distance. In a previous update they gave the horizontal distance and the angle of intercept. It would be nice to know this too to give us some idea how quickly they are converging on the well.

Seems like not a lot of progress has been made while Alex was hanging around.

I don't think they will try to put the new cap on if we are just a couple of weeks away from killing the well from the bottom. Although I belive it will help with regulating the mud pressure if they have some control from the top also.

I guess it would also be nice to have a more accurate flow rate and they won't know this unless they capture more of the O&G.

Let's all hope for a speedy resolution.

Log

Did Kent Wells mention when/if they will put in the new riser? I think that is due this week some time?

Log

I made a few notes while listening:

planned intercept ca 17.758k feet down
1-2 days to withdraw and run ranging (each time?)
well is 55ft away @ 16degrees
(but they have to drill down further before intercepting)
drill 125 feet down (and any across?) then range again
score 40/40 relief wells drilled so far

Anybody care to give a summary of the Kent Wells pressentation today? Unfortuantely, I couldn't get sound only slides for the presentation. Looked a bit like yesterdays video. Would be interested to know at what stage they are at with the relief kill well.

Chers

Log

http://bp.concerts.com/gom/kwellsreliefwells062710.htm

Worth looking at. 55ft away now from last ranging - I guess they have probably got a bit further now too as this was at least 24hours ago. Probably the most expensive (if you count cleanup costs and fines) 55ft of drilling any Oil company will ever drill!

Log

Thanks Mark I was aware of that but still a long time to move them to safe waters and back. Do you know what wind speeds stop relief well drilling ?

Technical Briefing on Relief Wells and Status Update on Subsea Containment
Efforts with BP Senior Vice President Kent Wells

When: Monday, June 28th. 9.30am CDT, 3.30pm BST

Dial in details:
US/Canada: 877- 341- 5824
International callers: +1 706- 758- 0885
Conference ID: 84918888

This briefing will be available via live meeting, to participate:

Copy this address and paste it into your web browser:
https://www.livemeeting.com/cc/bpamericas/join
Copy and paste the required information:
Meeting ID: WQST5K
Entry Code: K2Bb)[g

I just read this on Yahoo News:

Every time a relief well misses, its crew must back up the drill bit and try again. Last year, a relief well aimed at capping a blowout in the Timor Sea off Australia missed its target four times before connecting. Each new effort took an average of another week of drilling, for a total delay of 27 days after the drillers began closing on their target.

A bit worrying that too! Perhaps SW10 can comment but I heard they were on their third ranging run already which would suggest that it isn't taking a week for each one. Perahps I'm confused though as perhaps the ranging is taking place before they actually try to "go for it" which is what they mean by missing it four times.

Hope I'm confused!

Log

Having just read the statement from Admaral Allen here http://www.deepwaterhorizonresponse.com/go/doc/2931/714075/ I was pretty horrified at how slow it is to disconnect and reconnect the capture systems. 14 days is a long time! Also they seem to have to pack up if the storm "might" come over within 120hours or so.

I didn't comprehend how much disruption there would be to relief well drilling in these cases. I'm hoping much less! ISTM that there is therefore a pretty high chance that they will have to pack up shop at some point as we get into hurricane/storm season.

The press will absolutely love this if it happens. The headlines will be something like "BP beaten by weather as oil spill spews 80K barrels a day into GoM"

Oh well what can you do!

Log

I calculated the daily oil collection rate from BP's figures and estimated the fraction of oil that has been collected so far

Isaac doesn't appear to understand the usefulness of estimation as he claims I've made it up.

In truth it's a very useful and basic engineering skill which can be used for judging the accuracy of statements by other people.

Davjo thinks that I shouldn't criticise BP because noone could have done better. This is irrelevant.


I can't see what your points are at all except as a kind of dimissive put-down to a valid attempt to question the public face of BP and intelligently think about the numbers.

Bugs

What I commented on is BP's attempt to collect oil which in the scheme of things is woeful at around 15%

The response has scientists and engineers who have solid industry experience working on this and have access to all the technical data but still cannot quantify what the flow rate is. You talk as if you have some idea of what the actual flow of the Oil is from sitting in front of your computer.

Both you and Mark conveniently ignore a simple back-of-the envelope calculation. And I refute that it shows a complete lack of understanding.  There's not a lot to understand - oil is gushing out and BP can barely control it. Fact.

Why do you think that you can do a simple calculation to derive conclusions? Do you think your the only one to have come across these thoughts and the Scientists/Engineers are a bunch of morons who can't figure it out?

At least Mark acknowledges he was wrong to believe BP's initial "estimates" of 1000 and then 5000 kbpd despite I think it was he, seriously questioning others who suggested it was a great deal higher.

Why do I have to even write that I acknowledge their initial estimates were wrong? I follow the updates at 3pm and 12 am daily. I can see the flow they are capturing, is above their intiial estimates Therefore it is pretty obvious their intial estimates were wrong and does'nt need to be publicly acknowledged!.

I like to work from fundamental principles - not believe other people's spin.

Perhaps you should consider doing more reading? Your thoughts are ill founded.

I used BPs own figures to calculate the average recovery which is about 16kpd since the beginning of June or 5.5 kbpd since the accident.

No. What you have done is taken a number, thrown a load of assumptions at it and derived certain conclusions.

I'm afraid I'm significantly less credulous than you and at the moment BP is in a huge mess with no clear end in sight and all I'm doing is highlighting that.

Well I've lost patience to explain what is already in the public domain. All it takes is a bit of effort to read and understand. I don't think I can make it any clearer then what BP has said on their website so I'm not going to try.

Isaac,

I'm glad you feel so positive about Marben.  He certainly posts relevant and interesting material.  I'm sure your praise will not go unnoticed.   Feel free to "Concur"

However what I wrote is not pure dribble as you put it, but my opinion and reasonablely well informed as it happens and I have been following with a great deal of interest.

What I commented on is BP's attempt to collect oil which in the scheme of things is woeful at around 15%. That is what I called pathetic i.e. seriously inadequate.  A word chosen deliberately.  And I would hazard a guess that it's causing a huge level of anxiety within BP's management and those people working to try and deal with it at all levels down.

Both you and Mark conveniently ignore a simple back-of-the envelope calculation. And I refute that it shows a complete lack of understanding.  There's not a lot to understand - oil is gushing out and BP can barely control it. Fact.

Just because Mark believes that no other company could do better - it's untestable and irrelevant.

At least Mark acknowledges he was wrong to believe BP's initial "estimates" of 1000 and then 5000 kbpd despite I think it was he, seriously questioning others who suggested it was a great deal higher.

I like to work from fundamental principles - not believe other people's spin.

I used BPs own figures to calculate the average recovery which is about 16kpd since the beginning of June or 5.5 kbpd since the accident.

I'm afraid I'm significantly less credulous than you and at the moment BP is in a huge mess with no clear end in sight and all I'm doing is highlighting that.

B.

Mark,

I have to say your level of research is excellent, the level of detail you look at and the level of understanding you have is fanstastic.

 As an Investor IMO your as good as the likes of WShak, emptyend and DJPreston. I don't say those things lightly either!

Your response to Bugs, Your "pathetic" comment suggests a complete lack of understanding of the engineering situation.

I concur! Anyone that has been following the situation, made an effort to read what is out there and have watched the ROV data will know that this is just pure dribble...

Let's not try and pretend that BP has done anything very much except spectacularly fail to deal with this and appear to hide how much is escaping and what is actually going on. 

I don't believe for a moment they can't work out how much is leaking to within a 10% accuracy - it's quite easy really to estimate using several methods I can think of. It's a pretty basic engineering problem.

The explosion occured on April 20 - so we've had about 66 days of leak at somewhere around 40,000 barrels per day or 2.5 millon barrels (plus or minus 1 million probably). Of which they directly captured about 15% so far. It's pathetic honestly.

Bugs - Have a read of this article...It is pretty good : http://www.theoildrum.com/node/6660

Then go onto the BP website and read Kent Wells updates.

Mark - BP expect to improve that over the next few weeks with the measures described in the last technical update from Kent Wells - and has been significantly increasing its capture rate week by week.

To be precise according to Kent Wells audio update and slide pack, they intend to capture an additional 20-25,000 bopd next week using the Helix producer via a Free standing riser. This would bring the total  containment capacity to about 50,000 bopd.

Then in 3 weeks time, Mid July they will have the Clear Leader collecting 10-15 mbopd and the Toisa Pisces connected to the Evi Knutsen collecting an addition 20-25 mbopd. Total containment will be up to 80 mbopd.

If BP are lucky they may even be able to contain all of the Oil by next week when 50,000 bopd containment is possible. It all depends on the flow which no one seems to be able to accurately predict.

I am hopeful the Hurricane disappears, at the moment it is not likely to hit the containment region.

Moneyweek 18h June 2010;

Did Cameron do enough to support BP?

..... there is “a bewildering array of potential bad guys to blame” Of the 126 people working on the rig, only 8 were BP employees.

FWIW, MadDutch.

Actually I don't think so - I mean there's no reason to expect that they can't drill another well. Whhoopi-doo-da thinks the market with a lot of scepticism.

The other info is negative in the short-term. No immediate solution with the possibility of more problems with oil recovery.

When they've actually completed the relief well, not had another blow out and managed to kill the leak - then we'll see.

B.

Bugs
You missed out the most important bit of the RNS

The well reached a depth of 16,275 feet on June 23 before the drillstring was removed from the well to carry out the first 'ranging' run using wireline. During the ranging run, the MC252 well was successfully detected. Subsequent ranging runs will be needed to more precisely locate the well. Drilling and ranging operations will continue over the next few weeks towards the target intercept depth of approximately 18,000 feet, when 'kill' operations are expected to begin.

This is seriously good news.

Update of gulf spill

http://www.investegate.co.uk/Article.aspx?id=201006250700102368O

= Slow Progress. Relief wells to take 3 months. LMPR Cap etc - cannot be assured but capturing 16k barrels at present

A further capture system to be deployed in July

FWIW I read this and to me it seems negative at least in the short term.

Strewth! Is 62 a normal age for offshore rig workers (albeit senior managers)? Doesn't sound like the type of job I'd want to be doing at that age (without wishing to be ageist).

Any of you drilling pros know the guy named here as the BP company man on the rig?:

http://www.upstreamonline.com/live/article218593.ece

Not a comfortable place to be by any measure!!!

From video feeds here http://www.freesharedata.com/bp-spill-cams it looks like they are trying to put the new containment cap on. Very interesting stuff.

Log

Is it me or does the flow rate look a lot less on the spill cams here http://www.freesharedata.com/bp-spill-cams particularly camera D3 ?

Log

David Shukman does his David Attenborough act (thereby proving indirectly that the Brits do irony?) in BP's 'crisis centre' in Texas:

http://news.bbc.co.uk/1/hi/world/us_and_canada/10372364.stm

Mark

on this subject I think RIG have released some documents to suggest the BOP had been tested shortly before the accident and that test didn't show up anything. This seems to counter the argument above that it was "leaking". Also I'm not sure what "leaking" means in this context? Was it leaking oil and gas in which case this suggests a bad cement job perhaps or was it leaking hydraulic fluid and loosing pressure in which case it is likely to close. As I understand it the BOP will fail-safe e.g. close if there is a leak or problem.

Furthermore, I think at some point the "pod" or control pod has already been removed and taken to the surface early on when BP tried to restart the BOP. BP would probably know at this point if there was a problem and there have been some reports about a dead battery. Again all hard to say what is going on right now. It could be the case that BP have in their posesion now clear evidence that RIG did not maintain the BOP's pod but have chosen not to disclose this yet.

I don't think there is that much to suggest any of these claims are much more than hearsay at this point.

 

Oil services companies went to court on Monday seeking to overturn President Barack Obama's six-month ban on deepwater drilling in the Gulf of Mexico after the worst oil spill in U.S. history.

U.S. District Court Judge Martin Feldman said he would decide by Wednesday whether to temporarily lift the ban while the case is heard. More than a dozen companies involved in offshore drilling operations filed the lawsuit, calling the ban "arbitrary and capricious."

"The government's unchecked authority has shut down this entire industry," argued lawyer Carl Rosenblum, representing the oil industry.

The lawsuit is the first seeking to reverse Obama's May 28 moratorium, which the companies say will force job cuts in the labour force needed to service offshore oil platforms. The ban has caused the shutdown of 33 deepwater drilling rigs.

Obama imposed the ban after an explosion aboard an oil rig in the Gulf of Mexico on April 20 killed 11 workers and ruptured a well owned by BP Plc, unleashing millions of gallons of crude into the ocean.

The Obama administration argues that the moratorium is necessary to prevent further accidents while a presidential commission investigates the cause of the BP spill.

Louisiana Governor Bobby Jindal, a Republican critic of the Obama administration's handling of the spill, has sided with the companies in the case.

http://uk.news.yahoo.com/22/20100621/tsc-uk-oil-spill-011ccfa.html

This could prove embarrasing for Obama....

The kinks above are from the 18th so 3 days old useful though. I'm very surprised at the relief well progress. Also interesting that they may soon be able to capture all the flow.

Transcript of technical briefing on containment efforts just issued:

Accompanying slides

Audio

Log - Obv the main uncertainties relate to the size of the clean up costs.

Apc has the recourse to law and the JoA to obviate the penalties element associated with the spill. Also any success by BP in terms of laying off the cost to contractors.

I think what BP is heroic in terms of saying that they will step up and not hide behind existing laws maximising the clean up costs. However, APC didnt agree to such a move. Nor did they agree with the screwed you account being set up, nor the compensation for workers affected by the knee jerk moratorium.

As for upside. All the valuations Ive seen for APc seem to have a target int he region of $75 - $85 per share at the moment. Thats 100% upside. Your figures also neglect the impact on cashflow for APC from their ongoing developments. Over the next few years, cashflow will rise dramatically - even more so if the POO starts to rise towards $100. All APC need to do is lawyer up and fight it out over years with BP as to their eventual costs and it will be years before enough is known as to where liability lies.

On the downside risk of BP relative to APC let's look at some numbers. If no gross negligence then we are looking at costs for APC to be about 1/3 of that of BP for cleanup and fines etc. e.g. 65% vs 25%.

First of all lets look at cashflow from operating activities, assets minus liabilities and finaly  cash and credit lines of BP vs APC. All figures in $Bn (rounded).

So supposing a cleanup cost of 20Bn in total and APC on the hook for 25% then we are looking at APC on the hook for 5Bn vs BP of 13Bn.  As long as neither company have to take the hit up front one would expect that both will survive (BP better prepared than APC) without having to raise much additional money and they are both in a similar position.

However for me the the biggest positive of BP over APC is their level of gearing. APC have 13Bn of long term debt on the balance sheet. They have also suffered a downgrade so raising more debt is going to be painful for them (as it will with BP).

I think it makes sense for both parties to come to some sort of settlement and the current attack on BP from APC and BP's counter claim seem to be an opening shot. I doubt this will be a quick resolution but there seems little point two wounded animals fighting more fronts than they need to.

On balance though I would say that if APC end up paying 25% then they are now in a position where they are fighting for their lives. However it would seem BP are in a much more stable position especially given how much cashflow they can generate if oil gets over the $90 mark over 2011-13.

Bottom line BP on the hook for 3x the costs but is surely much mroe than 3 times stronger. If APC can avoid costs then BP is on the hook for a lot more but should still survive. APC upside even if they avoid costs totally looks only to be about 30-40% from here but their downside looks to be zero (espcially given their gearing). BP downside from here looks to be another 20-40% (unless total armegeddon) with an upside of 100% to me.

Log

Long worrying report in NY Times on BOPs and especially on its last resort, the Blind sheer ram.  Sample quotes:

They wondered if the blades had by chance closed uselessly on one of the nearly indestructible joints that connect drilling pipe — a significant bit of misfortune, given a decision years before to outfit the Deepwater Horizon’s blowout preventer with just one blind shear ram when other rigs were already beginning to use two of them to guard against just this possibility. ----

Last year, Transocean commissioned a “strictly confidential” study of the reliability of blowout preventers used by deepwater rigs.
Using the world’s most authoritative database of oil rig accidents, a Norwegian company, Det Norske Veritas, focused on some 15,000 wells drilled off North America and in the North Sea from 1980 to 2006.
It found 11 cases where crews on deepwater rigs had lost control of their wells and then activated blowout preventers to prevent a spill. In only six of those cases were the wells brought under control, leading the researchers to conclude that in actual practice, blowout preventers used by deepwater rigs had a “failure” rate of 45 percent.
….
Last August, during a conference call with investment analysts, Steven L. Newman, the chief executive of Transocean, was asked why his deepwater fleet had been paid for fewer days of drilling compared with earlier in the year.
Mr. Newman said the fleet had experienced a “handful of B.O.P. problems.”
But he assured the analysts that the problems were not systemic. “They were anomalies,” he said. “I would just leave it at that.”
…..

Yet when the team examined the performance of blind shear rams in blowout preventers on 14 new rigs, it found that seven had never been checked to see if their shear rams would work in deep water. Of the remaining seven, only three “were found able to shear pipe at their maximum rated water depths.”

http://www.nytimes.com/2010/06/21/us/21blowout.html?pagewanted=1&th&emc=th

I'm with you Log. There is far too much downside risk for all the other parties at the moment, except perhaps Cameron who are probably blameless. How much downside is there left for BP at these prices? Not much I'd venture.

BP will survive and in 10 years it'll be long forgotten, much like Valdez is to Exxon. I'm buying and holding but, like you, I am down about 10-15% at present.

Cheers,
ignatius

I can't help but think that almost all of this blame game stuff is just noise at this point. It makes for good press stories but not much else. It may push the share prices of the various parties around a bit but I can't see it doing much else at this point.

The BOP is currently a mile underwater with thousands of gallons of sandy oil gushing through it wareing it down. It is pretty hard to tell what went wrong with it at this point and even when back on the surface it will be too. Who is to blame will be decided in court and will take place after a lot of evidence is collected no doubt due to the gravity of the situation - loss of life and financial cost.

So from an investment perspective I still think BP is the way to go. They have lost the same market cap in percentage terms as others but are much much larger so in absolute terms they are down the most. They may well have the biggest share and as operators potentially have to make the biggest payment but a lot of this is in the price. They have been responding well in terms of cleanup and paying costs up to now and will be able to take the moral high ground later. Put another way APC/RIG seem to have a lot to loose if BP can prove it was not grossly negligent.

On the spill/cleanup side BP are about 10 days away from target depth now with the first relief well. They will take a bit longer to locate/plug it but this is not a huge timescale. They are capturing and skimming probably more oil now than is being released. The latest flow numbers are probably incorrect. Oil has not as yet really taken hold on the coastline. The dispercants are working well. We could get to a tipping point soon where the situation starts to improve rapidly in my view and the parties involved start to talk about a settlement of some sort. They will all have to work together in the future there is no doubt on that.

I've been too optomistic on this one so far and have lost money (up to now) but at some point things may well improve.

Log

Panorama tonight: http://www.bbc.co.uk/programmes/b00sz12p

According to snippet on Today programme this morning, there will be an interview with a guy from the rig who reported BOP fault weeks before the disaster. No link at present but it will probably be inserted in this page : http://news.bbc.co.uk/today/hi/listen_again/default.stm

db

Oh dear ....

Now a flow rate of 100,000 bpd appears to be the worst-case scenario, according to this story in the Daily Telegraph

http://www.telegraph.co.uk/finance/newsbysector/energy/oilandgas/7842322/BP-oil-spill-could-be-nearly-double-original-estimates-internal-document-shows.html

I think SW10 referred to a similar incident on an Ekofisk platform. The hydrocarbons did not ignite and the well was controlled. Perhaps those killed could have pumped enough mud into the well had there been no explosion. My impression was that flow rates have been climbing as restrictions are eroded. I dont think it immediately started chucking out 20K BOPD plus associated gas. SW10 appears to be the only contributor to have been sat on a floating rig when it took a kick, I defer to his opinion.

Knowing what we do about the circumstances of the blowout, would any pro out there care to speculate how differently things may have turned out had there not been an explosion which ultimately destroyed the rig? A stable platform would obviously have made it easier to deal with the situation but is there any certaintly that the outcome would have been significantly better in terms of killing the well and reducing the spillage?

Thing to remember here is that TH really could not win if he attempts to argue with the people questioning him. To argue back and fight his corner risks the public thinking he is not showing any remorce. He needed to just think "teflon" and let it all slide off him.

It wasn't an inquiry it was an inquisition. If he floats he's a witch if he sinks he's not but dead anyway. You can't win with these clowns they just want to throw mud and look good to the crowds. Apart from anything else the subject matter is rather technical and so hard to really get anywhere without people glazing over.

One point he did make was regarding the "plumes". He pretty much said that concentrations were 0.5ppm of oil in the water and some of that was from other oil. The senators just wanted to bang on about "evil plumes" anthing hidden and dark and mysterious has to be bad right. TH tried to argue that this was just mumbo jumbo using scientific explanation but he was just shot down and told basically that the plumes did exist.

You can't win with this sort of setup so it is best really to look remorceful and say you are sorry and let the time slide by. Get out and then get on with the job of doing something meaningful.

I think he did that well and kept his cool so good on him.

Log

I thought it an extremely weak performance.

Why did it take him so long to point out that the blow out protector needed to be raised from the seafloor and examined before conclusions could be drawn by any inquiry? He seemed very evasive continually stating that he needed to wait for the inquiries to come to conclusions. If he early explained why the enquiries didn't yet have all the evidence and wouldn't until the spill has stopped and all that gear examined then he might not have generated so much illwill.

I was also struck by how few facts and figures he had at his fingertips..."How many deep sea rigs does BP currently have drilling" ...I don't know...in the order of 15
" how many producing wells does BP have in the gulf of Mexico "...I don't know
Etc etc

I did enjoy his obvious disdain for the proceedings and most of those questioning him. It seemed to me that he was much more forthcoming when the questioner seemed to be making an earnest inquiry rather than playing to the gallery.
That however isn't a good stategy as using up the questioners time with long winded answers would have given them less time for sound bites.

DJ I'm guessing that most on that blog were shareholders in BP or at least understood that side of it. It is very easy to bash somthing that you have no economic interest in and defend something you do. Something I try to overcome in investing and usually fail miserably.

Still not a bad performance and could have been a lot worse. Next step stop the flow IMHO that will do more for "hearts and minds" than any of this show boating.

Log

What did they achieve?

Easy. The only purpose was to make the slack jawed congressmen look good to their voters "hey, look at me, aren't we doing a fine job beating up BP. See, we are doing stuff. Honest".

Its a show that's all - pantomime really. Something TH seemed to almost enjoy given the odd wry smile or slight shake of the head (incredulity) when asked the same question for the hundredth time.

Not quite up there with George Galloway but then again TH had to be much more careful given that he was acting for BP.

I was chatting on a US blog site during the speech and the amount of hostility was hard to believe. Hostility mostly directed at the pantomime and the Congressmen, not TH. Many commented on how bad this makes the US system look to the watching world.

Watching the show trial theatre on TV, I really wondered why they bother with it. Everyone knows that lawsuits will be flying for years, so its in Tony Hayward's best interest to be as vague and noncommital as possible. He's hardly likely to throw his hands up and say, "ok, its a fair cop" is he? It was the same with the Goldman Sachs hearings. Just what did they achieve?

Centralisers (or lack of) and Tony Hayward appearance at the congress sub-committee.

A bit of a red herring this. Never mind how many times you run a casing stand off programme it always calls for more centralisers. Funny enough the programmes developed by those selling the centralisers usually call for more to be run:)

A decision for the drilling engineer is to not run so many in a 'problem' well. Centralisers are springy things and quite strong (think of leaf springs on older cars). This may cause the casing to get stuck in unconsolidated sand and then develop into areas that might even end up with cementing casing at depths not originally planned for.

In a horizontal hole the casing stand off is of course critical. In BP case for this well. Running half a dozen centralisers was probably par for the course. Not a big deal.

"Halliburton and Transocean said a cement bond log was not required."

Sorry Tony. That's a porky. Cementing crews and drilling contractors do not make that call. This was a nitrogen assisted cement job. Schlumberger was on the rig to perform this CBL for the reason that a CBL had been called for and planned in advance. This well had previous formation losses and the cement placement was considered very tricky. BP made the call not to CBL.

I think TH performance was about as balanced as he could make it. He needs a lot of luck now to capture as much as this oil as possible while trying to intercept and kill from the bottom up. In his words "the only way now." 

passinthru

Bp dividend suspended for the rest of the Year. The BBC reports, 20bn will be paid in stages which makes cashflow more manageable.

Bp Shares up 3% in the US on the news.

There is no cap on the $20bn. $100m will be paid to workers laid off from moratorium.

PIMCO's Gross says bought $100 million of BP debt

NEW YORK (Reuters) - Bill Gross, the co-chief investment officer of PIMCO, said on Wednesday that he recently bought $100 million of short-maturing BP Plc (BP.N) (BP.L) notes and some Anadarko Petroleum (APC.N) paper.

Hot Stocks

Gross told Reuters via email that he purchased BP paper and "some Anadarko, which is a 20 percent owner." He earlier told CNBC television: "At this point, if you can get 10 percent on one-year paper on BP, we think it's closer to double-A than triple-C. That's a significant (thing). We started to buy some."

Gross helps oversee more than $1 trillion in assets at PIMCO.

http://www.reuters.com/article/idUSTRE65F56120100616

Going through the information in BP's presentation and the letter from Waxman to Hayward, a possible explanation is starting to emerge:

1. The cement job around the 7" casing was compromised by poor centralisation and failure to circulate and condition mud prior to cementing. Both of these are required as good oilfield practise, especially since the cement job was over a short interval which included a high-pressure gas-bearing reservoir.
2. After the cement job was completed the casing seal assembly was set (this seals the annulus behind the casing at the wellhead at sea level). The seal was pressure tested and held pressure. The casing was then pressure tested and held pressure. At this point everything appeared normal. However the cement job had probably failed to isolate the reservoir, allowing gas to migrate through the cement up the annulus behind the 9 5/8" x 7" casing. As gas is very light it means that reservoir pressure would then be transmitted up the annulus to the level of the wellhead (less a small proportion due to the hydrostatic head of gas).
3. The contents of the riser were then displaced from drilling mud to seawater in preparation for suspending the well. This reduced the hydrostatic head at the wellhead. As there was no casing lockdown ring installed the differential pressure across the casing hanger was enough to unseat the seal assembly and lift the casing into the BOP stack (above the seal assembly was only seawater pressure, below the seal assembly was virtually reservoir pressure).
4. Once the seal assembly was unseated and the casing lifted the gas behind the casing then entered the riser.
5. Once clean seawater was observed coming from the riser the returns from the well were directed overboard, so it was not possible to measure the volume returned, and there would have been no indication that gas was rapidly expanding up the riser.
6. At 21:30 the pump was shut down due to high pump pressure and observation of mud. Within 5 minutes there was an explosion - the gas would have hit the rig with violent force (the volume of gas would have multiplied around 800 times its original volume).
7. The EDS button was pushed but failed to seal the well. If the 9 5/8" casing hanger was across the BOPs then this would explain it. Likewise the AMF (Automatic Mode Function) could not close the shear rams after power was lost. With the casing hanger sitting inside the BOPs they would not be able to shear anything and it was impossible to stop the flow.

A lot of this is speculation and grossly simplified, but it does fit the facts reported and is logical. If this is what happened the guys on the rig floor never stood a chance. It also makes the comments about BP's recklessness justified and clears Halliburton and Cameron of any blame. The only question remaining is the source of ignition, but considering the volume of gas at the rig it would have taken only a small spark to cause an explosion, and I don't really see this as absolving BP of any responsibility.

hi mark

(back home again after a very late night courtesy of EJ Abz)

re your point in connection with the pros and cons of permanently P&A'ing successful wells vs suspending them for possible future use as producers....

about 20 years ago I was involved in a major cost reduction exercise for the upstream side of a major integrated oil co. At that time their normal practice was to do "temporary" closures on successful(ish) wells so that they could be re-entered as producers if subsequent analysis so decided. Typically a decision about re-entry would not be made for a long time - often several years. Problem was that after such an interval it was a non-trivial exercise just to relocate the temporary well-head In many places the sea-bed is not static and layers of silt and sand get deposited over the top of the temporary closure making it difficult to locate and re-enter.

The key point was that if you decided NOT to re-enter and re-use for production, you still had to go back and do stuff to the temporary closure to upgrade it to a permanent closure.

We looked at the percentages and concluded that it would save money if every explo well were permanently sealed as a matter of routine. Sure some wells would then end up getting re-drilled but taking the costs of the whole thing into account it was actually cheaper to seal everything permanently and accept a small amount of redrilling, rather than messing around having to go back to every temporarily sealed well years later.

So, what you said, basically, except that it might even save money...

Thanks for posting the articles, davjo. Very interesting, though heavy going for the non-expert.

Concerning "lessons to be learnt", I observe that Macondo was originally an explo well. On success, BP decided to suspend the well as a possible future producer. I note from comments on other threads that more and more companies are reaching the conclusion that it is more cost-effective to re-drill offshore production wells & P&A the explo wells (e.g. Soco's next TDG well), rather than trying to re-enter at a later date.

I wonder whether attempting to suspend an explo well for later re-entry adds an extra dimension of risk? I guess that the design & drilling plan for a production well would be somewhat different from that for an explo well. A key point being that the downhole conditions for an explo well are  unknown & hence, I presume, compromises must be made to deal with a variety of possible outcomes, whereas previous drilling would identify the conditions a development well was likely to encounter, so the latter well type can be designed to cater specifically for those conditions, with a good margin of safety.

The bottom line is, would it be sensible to prohibit the use of offshore explo wells for production purposes and require development wells to be drilled separately? Also, from previous comments from experts, I gather this might not add as much to costs as one might first think, if anything. Surely it is simpler to plan a well that you know is going to be P&Ad, where the only priorities are 1. safety and 2. data gathering, without having the added complexity of 3. making the well suitable for production?

Regards,

Mark

Ignore - just double posted the Transocean update report  - see Davjo's post above.

Very interesting article davjo. Suggests maybe the Transocean guys were not following the drill plan proposed by BP perhaps? T

here are so many factors and parties involved here it is very hard to see what is going on. Many of the big five points raised by the senate enquiry seem to be mitigated by the fact that the MMS signed off on them beforehand for example. It seems it will be a long time before some kind of conclusion is reached in this regard.

Log

Just to tag onto the above.....memo from the Committee commenting on BP's presentation :-

http://energycommerce.house.gov/documents/20100525/Memo.BP.Internal.Investigation.pdf

Four hours before the explosion, during efforts to begin negative pressure testing, the system gained 15 barrels of liquid instead of the 5 barrels that were expected, leading to the possibility that there was an “influx from the well.” A cementer witness stated that the “well continued to flow and spurted.” Having received an unacceptable result from conducting the negative pressure test through the drill pipe, the pressure test was then moved to the kill line where a volume of fluid came out when the line was opened. The kill line was then closed and the procedure was discussed; during this time, pressure began to build in the system to 1400 psi. At this point, the line was opened and pressure on the kill line was bled to 0 psi, while pressure on the drill pipe remained at 1400 psi. BP’s investigator indicated that a “fundamental mistake” may have been made here because this was an “indicator of a very large abnormality.”

I don't think this has been posted before. Fascinating interim report issued by BP providing lots of technical detail about events over the final days, hours and minutes. It would be great if our resident pros can glean something useful from this. One thing I did note, the blind shear ram in the BOP was apparently working on the morning of the fateful day, since they closed it during one of the operations. I also note the well started flowing 51 minutes before the explosion, so wonder whether any mistakes were made during that period which may have contributed to the outcome?

Deepwater-Horizon Interim Incident lnvestigation - May 24th
http://energycommerce.house.gov/documents/20100527/BP.Presentation.pdf

There's also a presentation on the incident from Transocean dated 8 June :-
http://tinyurl.com/2wgtt44

I think I'm right in saying if BP are found to have been grossly negligent then there is quite a bit of wiggle room for the other partners. The recent whitehouse five point attack on BP looks to point that way but BP have yet to tell their side of the story.

Anyone know if the flow rate team are including gas flow yet?

Also I'd like to get some idea of how much oil will have evaporated by now to put in my model (I think they will still be fined for that but worth knowing). Should be quite a bit I think but I don't know how to measure this.

Log

From what Obama is saying this $20bn slush fund is to be solely funded by BP as it is only BP he is focusing on!

Which is ridiculous given the involvement of all the other parties and shows how little interest he actually has, despite his protestations to the contrary to Cameron, that he is playing with a straight bat on this - absolutely no mention of all the American companies involved in this - Transocean, Andarko, etc

Very telling imv. Obama simply isn't to be trusted to be objective, and there's absolutely no way I'd want his biased mitts controlling the compensation fund.

If a USD20 billion slush fund is to be formally set up - does this mean that 35% of the 20 billion will be contributed by the partners? If so does Anadarko have a couple of billion available?

Great piece of work Log. Thanks for that.

I think what most people seem to be forgetting, and this is as a direct result of Obama's partisan rhetoric, is that not only is BP only a 65% owner(Andarko & Mitsui own the other 35% so surely will be footing some of the bill!), but Transocean, as owner and operator of the destroyed rig, itself with a patchy safety record, will also be faced with costs, surely.

Why is it that no one in the press seems to have adequately researched this - Transocean is at the centre of this whole sorry episode yet they seem immune to any White House criticism whatsoever.

Whilst the costs will be high for BP, I doubt they will have to foot 100% (and frankly I'd consider it criminalm if they had to) when there are so many other players involved in this sorry episode, and those that are due will be payable over several years. Obama's demand for $20bn upfront now seems to smack of little more than wanting to bankrupt BP by imposing ridiculous short term liquidity pressures on a sound asset backed behemoth. It's just a pity the majority of the American populace are so misguided as to have fallen for his blatant biased spin.

Value will out eventually but this looks like being a long term game.

I've done a bit of work trying to work out the size of the total spill and how (in)effective the efforts to contain it have been and I've come up with a basic model. I've done three scenarios one (best case) where the flow rate is 35,000/day and used a modest fine of $1,000/barrel spilt (assuming non gross negligence). Another worst case 60,000/day and $4,300/barrel fine and lastly mid-case 35,000 flow and $4,300. I've taken into account captured oil so far and also an increased capture rate (starting today) of 28,000/day. I've also taken into account burns/skims so far and assumed the same going forwards is achieved.

Clearly the worst case might also mean none of the liabilities are shared with other partners so that would be terrible indeed. The other two cases if no gross negligence is found would be further reduced by 35% and so don't seem particularly terrible.

Interestingly if I've got my numbers right the burn/skim process is pretty effective (I've assumed 20%/80% oil/water in the skim). They actually capture 6K/day+ in oil.

Also something I'm not sure about is if these flow rates from the flow rate estimate team include gas or are just oil. If anyone knows the answer to this it would be most useful.

Even if you add in $20Bn for other claims from affected industry and take worst case we are only up to $40bn which over five years and reduced by tax is horrific but it should not mark the demise of BP.

Best case:

Mid case:

Worse case:

LONDON (SHARECAST) - From his desk in the Oval Office, President Obama demanded last night that BP hand over control of compensation payments for the Gulf Coast oil spill and challenged America to break a century of addiction to fossil fuels to ensure that such a disaster never happens again.

Personally I'd rather BP kept hold of control over compensation as there's no telling how lax Obama would be in making payouts(without due diligence) to those claiming to be affected - there's nothing like being generous with other people's money! And as a Democrat, a notably left leaning one, with important elections coming up I'm sure he'd be unable to resist handing compensation out willy nilly.

Lots of focus here on the drill string/casings/cement job. However let's not forget this is a contributing factor. Other factors include failed BOP and ingnition on the rig itself possibly by poorly maintained engines.

It seems to me that there are a lot of conspiring factors which all resulted in this terrible disaster. I would hope that a balanced enquiry will not show that any of these particular steps alone caused the problem and thus hopefully BP will not be found grossly negligent.

I guess it will take a long time to play out though and BP will be under a clound for some time to come.

Log