New containment technologies jump-start industry but fail to quell spill concerns

First of two stories.

HOUSTON -- The device credited with reviving U.S. deepwater oil drilling is parked in a lot in northwest Houston.

Helix Well Containment Group's containment cap -- two-and-a-half stories tall and 74 tons -- is designed to close off a well during an oil spill and helped restart stalled deepwater drilling following an Obama administration moratorium on such projects in the Gulf of Mexico after last year's devastating blowout of BP PLC's Macondo well.

The Helix capping technology, which could be lowered onto a leaking wellbore, has been cited in six of the 11 new deepwater permits -- including the first three -- that the Interior Department has approved since the Deepwater Horizon drilling rig exploded and sank last April 20, killing 11 rig workers and launching the nation's worst oil spill.

The Helix group, a consortium of 24 energy companies, developed the technology in the wake of last summer's oil spill response when BP, its contractors and the federal government struggled for 87 long days to quell the Gulf gusher.

"For many, the most disturbing result was not that a spill could happen but that it could not be promptly contained," said Molly Macauley, a senior fellow and research director at Washington, D.C., think tank Resources for the Future, at a recent House hearing.

And so the industry has worked in the past nine or so months to show that it can contain a spill. In addition to the Helix technology, a group of larger oil companies has formed a separate company, the Marine Well Containment Co., to develop similar containment technology. MWCC's stacking cap sits at a separate north Houston site.

"I think what came out of Macondo is that prevention is not enough," said Owen Kratz, CEO of Helix Energy Solutions Group, the parent company of the Helix containment consortium, during a recent interview.

Complacency likely played a large role in the lack of industry focus on oil spill containment. Before last April, the United States had not seen a large non-hurricane-related spill since 1989's Exxon Valdez tanker spilled crude in Alaska's Prince William Sound. And the last time the Gulf of Mexico had seen a major spill while drilling was a decade earlier, the 1979 Ixtoc I spill in shallow Mexican waters. No major deepwater accidents had previously occurred in the Gulf of Mexico despite operators' having worked there for 25 years.

"Part of the reason for past underpreparedness to contain large spills like the Deepwater Horizon was a widespread belief that such spills were either extremely unlikely or impossible," Macauley said. "Yet that belief failed to take into account that deepwater drilling is more complex and riskier, and that risk assessments did not adequately account for these complications."

Kratz agreed, saying during the hearing that following the Exxon Valdez incident, much of the focus was on spill cleanup. "The missing link between the inevitable spill and the cleanup was sort of overlooked."


To be sure, the industry is now taking precautions to avoid such oversights. Doing so was required before the Obama administration would let it resume oil and gas exploration operations in the Gulf earlier this year.

Interior halted deepwater drilling in the early days of last year's spill response and has worked since then to bolster permitting and safety requirements. The department lifted its formal moratorium on drilling last October, but no new permits were issued for four months. The department said in a November 2010 memorandum to offshore operators that companies must demonstrate they could deploy enhanced containment systems before deepwater projects could resume.

"We're actually doing this because without an industry we don't have a company," said Kratz, whose company, Helix, specializes in construction, inspection, maintenance, repair and salvage services to the offshore industry.

And so Helix and MWCC accelerated their efforts to complete and earn Interior approval of their containment caps. The companies had worked for months with Interior engineers, and in February, Interior Secretary Ken Salazar and Bureau of Ocean Energy Management, Regulation and Enforcement Director Michael Bromwich traveled to the Houston sites to view the technologies. Their trip served as a type of final sign-off on containment. Interior approved the first new deepwater permit since the spill began just three days after their trip.

That permit, for Noble Energy to drill about 70 miles southeast of Venice, La., said Noble had contracted with the Helix group to use its containment technology in the case of a spill. MWCC's technology was first cited in the agency's fourth approved permit to Exxon Mobil Corp.

Two approaches

The two technologies tackle the containment problem in essentially the same way, just on a different scale and using a different philosophy.

The Helix group, which is composed of smaller, independent operators like Noble, Cobalt International Energy and Marathon Oil Co., is focused on containing spills at average-sized wells in the Gulf. They are doing so with previously developed technology and using equipment that is in constant operation.

"You have to come to the conclusion the technology does exist because we stopped" the BP well, Kratz said. "The question is: Can we do it faster?"

Helix says it can. The consortium's spill-response technology features two pieces.

The first component is the 25-foot, 74-ton capping stack that is sitting in the parking lot here of the contractor, Worldwide Oilfield Machine. Helix hired Worldwide to modify the cap. That cap is designed to completely shut in the well if a blowout preventer fails and reservoir conditions are correct.

Response time for complete deployment could take three to four days, Helix spokesman Cameron Wallace said, depending on the distance of the spill site from Helix's shore base in Ingleside, Texas. Eventually Helix will move the stack from Houston to the Ingleside facility, shaving off a day of truck-transport time from the response time. Noble's first approved permit, which cites the technology, says the stack is already positioned in Ingleside.

The current capping stack is capable of handling wells in up to 8,000 feet of water and 10,000 pounds per square inch of shut-in pressure. And the group is prepping another cap that could handle pressures up to 15,000 pounds per square inch, conditions Wallace said cover the "lion's share of wells in the Gulf of Mexico." That cap should be ready within a month.

A separate 57-ton intervention riser system could be attached to the top of the capping stack if pressures are too great to shut down the well using only the cap. The intervention riser system would funnel excess oil and gas to the surface to be collected by Helix's surface collection vessels, the Q4000 and Helix Producer I, which were instrumental in the BP spill response last summer. The intervention riser system equipment is permanently located on board the Q4000 and if needed, could be completely installed within 17 days, Wallace said. Currently, it could collect up to 55,000 barrels of oil a day, but plans are under way to increase that capacity to 105,000 barrels a day.

Helix's approach is not novel. The system uses existing equipment and procedures. For instance the current capping stack was built two years before the Macondo well exploded, Kratz said at the House hearing earlier this month. And the Q4000 and Helix Producer I earn their keep by operating on existing projects. The Helix Producer I, for instance, is currently producing oil and gas from Helix's Phoenix field.

"The technology is there. We do it every day. It's reliable," Kratz told the House Science panel. "It just happens that the same technologies very easily apply to blowout containment."

Helix tweaked the equipment to the tune of $25 million to better comply with containment operations. But the bulk of the group's efforts have been focused on preparedness "because it is a complicated operation and it takes an awful lot of people to be coordinated," Kratz said.

Wallace put it a different way: "This thing is only one part of the puzzle," he said, referring to the stacking cap.

Indeed, the group has held two tabletop drills, essentially mock responses that bring together engineers from all the member companies to work through a hypothetical spill response. And that is how a real spill response would work, Wallace said. Engineers from all the member companies would come together to help contain the well as quickly as possible.

"It's not like a spill happens and they ring a bell and Helix comes out and solves the problem," Wallace said. "Helix and all the other groups come together and do their part jointly."

The drills help the engineers and companies see where potential bottlenecks could occur during a spill response. "It's a terrific way to see what would happen during a spill without having to go in the water," Wallace said.

Participation in the group does not come cheap. Members pay a one-time fee to join the group and then a quarterly retainer to reserve the right to use the system. The company is not publicly releasing its business plan, but Kratz said the fees and retainers help reimburse Helix for the up-front $25 million investment Helix made in the equipment.

Effort by major oil companies

The Marine Well Containment Co., a consortium of 10 of the largest offshore operators and the companies they partner with often, is operating on a completely different scale.

The companies -- Exxon Mobil Corp., Royal Dutch Shell PLC, Chevron Corp. and BP, among others -- have pledged $1 billion to build a system from scratch that will eventually be able to contain wells in water up to 10,000 feet deep, with pressures of up to 15,000 pounds per square inch and collecting up to 100,000 barrels of oil and gas a day.

That system won't be ready until 2012, but an interim system is currently available that can accommodate 15,000-pound-per-square-inch wells in up to 8,000 feet of water and collecting up to 60,000 barrels a day.

"The Gulf of Mexico is now safeguarded with a system that is able to respond in the event an operator loses control and subsequent containment of a well," MWCC CEO Martin Massey said last week during a House Natural Resources Committee field hearing in Louisiana.

The premise behind the equipment is essentially the same as Helix's technology. Both involve a stacking cap that could completely shut in wells if pressure conditions are right. And the systems can collect excess oil and gas that escapes the caps.

"One of the system's most critical components is its subsea capping stack -- a piece of equipment that can shut in oil flow or, depending on conditions, divert it up to vessels waiting on the water's surface," Massey added.

A spokeswoman for the group said the company would "mobilize immediately" in the event of a spill and could be on site in "a matter of days."

But the MWCC is designed to contain larger wells than those that Helix's system would quell, a factor that could slow down its response time.

"They're designing the system for the big wells that by necessity means it's going to take longer to deploy," Helix's Kratz said. "We're designing for the smaller wells and faster deployment. Long term, you need both."

Does competition make sense?

But not everyone thinks having competing containment companies is a good idea.

"What's happening is that all the independents, all the small companies are going into the Helix system and all the majors, who really have all the knowledge, are going into Marine Well Containment," said Bob Cavnar, a 30-year oil industry veteran who is now CEO of Luca Technologies, which produces natural gas from depleted fields. "Since they're pooling their resources and they're much larger companies, they have a lot less risk to something going wrong if there's a problem versus the Helix group."

Cavnar's worst nightmare: A Macondo-sized spill happens at a well owned by one of the smaller operators, and the company goes bankrupt because of the costs of containing and cleaning up the disaster.

"Then is Helix actually going to provide that service and who's going to pay Helix to provide that service?" Cavnar asked. "In Marine Well Containment Co., with all the majors, the majors all support each other. Helix, it's all Helix equipment, and the smaller operators just pay Helix a fee to stand by.

"I think there's a disconnect between the two, and that's what I'm really concerned about."

Helix's Kratz does not think that scenario is plausible. "Look at the other side of the coin," he said. "That [smaller] company knows that they would be gone if they had an incident like [Macondo] so would they be as enticed to deviate from best practices as BP was?"

He added, "I think that they're more risk-averse because if they do have an incident, then they're out of business."

But the Helix system offers them -- and federal regulators -- peace of mind to continue drilling.

"You need a lower-end, cost-effective solution for the producers who don't drill those big wells. You also need a fast-response system that could then be backstopped with larger capacity," Kratz said. "So I don't think it's a matter of competing; I think it's a matter of figuring out how the two systems being different can complement each other to provide overall greater" good.

MWCC spokeswoman Rachael Moore offered a similar sentiment: "I think it's important that operators have a number of solutions for containment."

'Hope is no strategy'

But there are other concerns with the companies' and federal regulators' approach to containment.

For one, the systems have not been tested in the water yet. The companies say the equipment is designed to easily handle another Macondo-sized spill, but some observers are not so sure.

"We hope so," said Robert Bea, a civil engineering professor at the University of California, Berkeley. But "they have not run prototype testing. To this engineer, hope is no strategy."

Cavnar gave the companies the benefit of the doubt, saying, "To be fair, all of the technology that they're using is existing. None of this is new." But he, too, has concerns.

"The challenge is going to be, can they get on the well to actually deploy the devices and how effective is it going to be to contain the flow that's coming from that well?" Cavnar asked.

What if the next spill happened exactly like Macondo, Cavnar asked. During that disaster, the riser pipe connecting the drilling rig to the wellhead collapsed and bent over during the blowout, leaving a miles-long tangle of steel pipe that had to be cut away before engineers could attempt the first of their containment techniques.

"Macondo is the perfect example, when the Deepwater Horizon sank, because the emergency disconnect system did not work, that huge 5,000-foot riser sitting on top of the blowout preventer collapsed and bent over. With that riser there, there's no well containment system designed or contemplated that can get over that."

And like Macondo, while engineers scramble to remove that equipment, thousands of barrels of oil would be gushing into the ocean.

Regan Nelson, senior oceans advocate for the Natural Resources Defense Council, offered up another doomsday scenario. Some of the permits filed with Interior note that it could take up to three weeks for all the necessary ships and equipment to arrive on-scene. For the first permit issued to Noble, three weeks of gushing oil under the company's predicted worst-case scenario would amount to more than 1.4 million barrels of oil spilled.

"That's six Exxon Valdez oil spills," Nelson said. "That's huge."

Cavnar said such a scenario represents "closing the barn door after the horse gets out."

"That's a lot of oil in the water," he said. "Isn't it better to have a device that works in the first place?"

Cavnar said the current increased focus on containment is misguided and that additional steps should be taken to improve blowout preventers and other spill-prevention methods. He also raised questions about the limits built into the containment caps. Both companies say they will eventually have caps capable of shutting in wells up to 15,000 pounds per square inch, a condition that includes the vast majority of active wells in the Gulf of Mexico.

"But as we go deeper, you're going to see higher pressures," Cavnar said, citing a new blowout preventer under development that will be capable of withstanding pressures up to 20,000 pounds per square inch. "If they're selling 20,000-pound rams, certainly they're contemplating some wells out there that's going to take that kind of pressure."

Still, Cavnar is not without solutions about offshore drilling. He said the companies -- big and small, alike -- should pool their risk for operating offshore. Then if a disaster occurred, multiple companies would be prepared to step in and assist with containment and cleanup rather than the ad hoc scenario that accompanied Macondo.

Others have suggested that the current push to develop containment technologies designed to handle Macondo-type spills is also misguided. What if the next spill involves a sinking rig coming to rest on the wellhead, like the 1979 Ixtoc disaster, or a completely new scenario, such as multiple blowouts or a leaking well casing, the naysayers have asked.

But the industry says it will be prepared. "You can always paint a blue-sky scenario that you can't respond to," Kratz said. "I think part of this process is it has to be a living process and we'll have to keep assessing it and adding as technology allows."

Tomorrow: There are new rules and new tools for spill response, but researchers say they are designed for the last spill, not the next spill.

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