Monthly Archives: June 2010

Obama tours Florida's Pensacola beach

Update 2: Obama’s final stop on his two-day tour of the Gulf Coast was to Pensacola Naval Air Station where he told a cheering crowd of naval airmen and Marines that the oil spill in the Gulf is “an assault on our shores, and we’re going to fight back with everything we’ve got.” At just […]  More »

Republican demands that BP's McKay resign

Republican Rep. Cliff Stearns today insisted that BP America Chairman Lamar McKay should resign, amid what Stearns said was the company’s bungled descriptions of the amount of oil gushing from its leaking Gulf of Mexico well. Stearns, a seven-term congressman from Florida, zeroed in on the initial flow rate estimates that were delivered by federal […]  More »

Mitsui will forego its Macondo oil revenue, too

Rep. Nick Rahall, D-W.V. has convinced one of the minority partners in the gushing Macondo well to give up its rights to any money that comes from selling the oil. MOEX Offshore, a division of the Japanese mega corporation, said it would join BP in donating the revenue from any oil captured from the well […]  More »

Fitch Ratings threatens its own 'junk' shot on BP

Credit rating agency Fitch slashed BP’s ratings by six places today — to just two notches above junk status — but not because the company has suddenly become financially ustable. Rather it’s because lawmakers seem intent on making the company unstable. Earlier this month Fitch (and the other rating agencies) dropped BP down a notch. […]  More »

Updated: Lawmakers mull new drilling requirements

Today’s congressional hearing with the executives of the nation’s five biggest oil companies is offering a glimpse at some of the stiffened rules and regulations that could be enacted in the wake of the oil spill. The Interior Department has already rolled out new safety rules — including mandates for new equipment testing — and […]  More »

Will oil execs throw BP under the bus?

As congressional testimony from oil industry executives gets underway in Washington, there’s some indication that other majors will break ranks and separate themselves from BP.

It’s a surprising move, given the insular nature of the oil business. Few companies openly criticize each other because they all partner with each other at some point. For weeks, people in the industry have been privately grumbling that BP is dragging the entire industry down with its Gulf of Mexico disaster.

Now, it seems, some execs may voice their concerns publicly. In testimony obtained by Reuters, Exxon Mobil CEO Rex Tillerson will tell lawmakers:

This incident represents a dramatic departure from the industry norm in deepwater drilling.

Incidents like BP’s blowout “should not occur” if companies properly design offshore wells, inspect the equipment and embrace safety, Tillerson’s testimony says.

Meanwhile, yesterday Chevron Chairman John Watson also hinted in comments to the Wall Street Journal that the disaster is the result of BP’s mistakes, not an industry failing. He called the accident “preventable” and said Chevron’s own procedures might have avoided a similar blowout.

Watson, like Tillerson, didn’t directly criticize BP, but neither CEO seems to be adhering to the united front that the industry typically presents. Watson called the six-month moratorium on new drilling unnecessary but said he favors new safety recommendations drawn up since the accident.

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Lawmakers rap oil companies for relying on 'cookie cutter' spill response plans

Congressional Democrats today excoriated energy companies for relying on nearly identical “cookie cutter” plans to stop underwater oil spills, and said that is evidence the firms are as “unprepared” as BP to deal with another out-of-control well. Rep. Ed Markey, D-Mass., said the “virtually identical” response plans “tout ineffective equipment,” use nearly verbatim “assurances” of […]  More »

Lawmakers set to grill oil CEOs

The CEOs of America’s top five oil companies are testifying today on Capitol Hill, where they face tough questions about the spill in the Gulf of Mexico, the risks of offshore drilling and the industry’s commitment to renewable energy. The hearing by a House Energy and Commerce subcommittee is nominally on “America’s energy future,” with […]  More »

Oil CEOs stress drilling safety

Oil company CEOs will stress the safety of deep-water drilling — and try to distance themselves from the environmental catastrophe in the Gulf of Mexico — during a high-profile congressional hearing this morning. Rex Tillerson, the CEO of Exxon Mobil Corp., insisted in prepared testimony that the April 20 blowout at BP’s Macondo well is […]  More »

BP's latest TV ad has no Hayward

Despite criticism from President Barack Obama, BP has rolled out its newest television spot in what is to be a series of ads that many see as a bid to salvage the company’s public image. The first ad released early this month featured CEO Tony Hayward saying: “We will make this right.” The new ad, […]  More »

BP says it will collect more oil sooner

BP pledged Monday to speed up efforts to collect more oil from its gushing Macondo well as Washington continued to turn up the heat on the British oil giant and the company’s board met to consider options for paying for the widening disaster.

Under a new plan, which BP had been given a two-day federal deadline to submit, the company said it will have the capacity to collect more than 50,000 barrels of leaking oil per day by the end of June — two weeks earlier than it had previously suggested.

The company submitted its plan as its executives head into what is likely to be a week of tough questioning in Washington – first by President Barack Obama on Wednesday and then by a congressional panel Thursday – about its response to the April 20 deep-water well blowout that killed 11 drilling rig workers and launched the worst oil spill in U.S. history.

Address tonight

On Monday, Obama began his fourth trip to the Gulf Coast region and prepared to deliver his first Oval Office address this evening to discuss the catastrophe.

On Sunday, administration officials gave a preview of one key part of the speech: plans to require that BP create an escrow account to compensate businesses and individuals racking up losses due to the oil spill.

Although officials declined to say how much they had in mind, other than “billions of dollars,” coastal senators, including Sen. Bill Nelson, D-Fla., have insisted that BP needs to set aside at least $20 billion “as an act of good faith.”

Speaking in Gulfport, Miss., on Monday, Obama said his administration is having “preliminary conversations about how do we structure a mechanism so that the legitimate claims that are going to be presented – not just tomorrow, not just next week, but over the coming months – are dealt with justly, fairly, promptly.”

Board weighs options

BP has faced sharp criticism for planning to pay shareholders a quarterly dividend while fishermen, oil workers and small business owners on the Gulf are struggling. On Monday, BP’s board was expected to weigh several options for the dividend, including temporarily suspending it. But company spokesman Andrew Gowers declined to comment on the board discussions or make executives available to speak.

Since June 4, BP has been collecting up to 15,000 barrels of oil per day from the blown-out well using a device that siphons oil through a pipe to a drill ship a mile above on the Gulf’s surface. A second specialized vessel, the Q4000, will collect up to 10,000 additional barrels a day and should be operational Tuesday, BP spokesman Mark Proegler said.

But with subsea video showing large quantities of oil still shooting out, the government insisted over the weekend that BP do more, sooner.

In its revised plan, BP said it will bring in a vessel called a floating production storage and offloading unit that has the capacity to collect at least 25,000 barrels a day. It also will add equipment to back up existing collection methods in hurricanes and other unforseen circumstances.

Last week, a government panel of scientists doubled a previous estimate for the volume of oil shooting from the well, to a range of 20,000 to 40,000 barrels a day. Engineers now are installing a sensor to gauge the flow at the source on the sea floor, which may provide a more precise measurement of the flow.

Washington Bureau reporter Jennifer Dlouhy contributed to this story.

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Congressmen suggest BP cost cuts increased blowout risk

BP may have cut corners to save money on an oil well one engineer called a “nightmare” and another called “crazy,” according to congressional investigators who released dozens of internal company documents on Monday.

In a letter to BP CEO Tony Hayward, the chairmen of the House Energy and Commerce Committee and its investigative subcommittee said their investigation raised “serious questions” about decisions made in the weeks before the deadly April 20 blowout on the drilling rig Deepwater Horizon.

These include decisions on the design of the well, failure to conduct a full battery of tests on the well’s cement job and the failure to lock down the wellhead.

The decisions came amid mechanical and geological challenges that put the well behind schedule and over budget.

“Time after time, it appears that BP made decisions that increased the risk of a blowout to save the company time or expense,” Committee Chairman Henry Waxman, D-Calif., and investigative subcommittee Chairman Bart Stupak, D-Mich., wrote to Hayward.

“If this is what happened, BP’s carelessness and complacency have inflicted a heavy toll on the Gulf, its inhabitants, and the workers on the rig.”

The letter may foreshadow the tough questions Hayward will face when he appears before the committee on Thursday. A BP spokesman said it would be inappropriate to comment on the issues in the letter prior to Hayward’s testimony. “No doubt they will be raised during the hearing,” he said.

Some of the issues were the subjects of previous Houston Chronicle stories about decisions in the days before the disaster.

E-mails cited risks

BP ran a single string of steel pipe from the top of the well just below the sea floor all the way to the oil reservoir more than 13,000 feet below. Called the production casing, this eventually would have carried oil and gas from the reservoir to pipes connecting the wellhead with a production platform.

The very bottom of the production casing was cemented in place, but the design left an unobstructed pathway to the wellhead should the cement fail to block hydrocarbons in the formation, the Chronicle reported earlier.

According to internal e-mails, BP engineers were aware of this risk.

An undated PowerPoint presentation released by the committee said the cement job was “unlikely to be successful” and could thus allow hydrocarbons to reach the wellhead uncontrolled.

But an April 15 document changed the prediction for the cement job, saying it would succeed. It also noted the other method would have added $7 million to $10 million to the cost of completing the well.

Worries about the well

The e-mails also detail engineers’ worries about the well.

“This has been a nightmare well which has everyone all over the place,” BP engineer Brian Morel wrote to colleagues discussing possible well design changes.

“This has been a crazy well for sure,” agreed BP engineer Mark Hafle in another message.

The committee’s letter also questioned BP’s decision, detailed in a previous Chronicle story, to use just six devices to center the production casing in the center of the wellbore, instead of the 21 that cementing contractor Halliburton recommended.

Keeping the pipe centered ensures that cement is distributed evenly all around and isn’t thinner on one side. The rig only carried six centralizers, and 15 more flown in turned out to be the wrong design.

One engineer noted in an April 15 e-mail that installing the additional centralizers would add 10 hours to the project. Rather than wait for the right type of centralizers, the decision was made to use just the six on hand.

A day later an e-mail from another engineer concluded the lack of centralizers might be a concern: “But, who cares, it’s done, end of story, will probably be fine and we’ll get a good cement job,” the engineer wrote.

BP also decided not to run a final, time-consuming test called a cement bond log in which a device lowered into the well uses sonic signals to determine how well cement has adhered to the pipe.

Oil field services firm Schlumberger had been hired to run such tests but was told early on the morning of the explosion that the test, which would have cost $128,000, wouldn’t be needed. The Schlumberger crew left the rig on the next scheduled helicopter flight.

Two other issues

The other two issues committee investigators mentioned were decisions not to remove potentially troublesome drilling debris from the well by circulating drilling mud through it, and not to use a lockdown sleeve earlier in the well completion process to secure the wellhead — the device placed at the top of the well where the production casing meets the seafloor.

Well experts have told the Chronicle that if a well head is not locked down it is more vulnerable to pressure of gas rising up from below.

“The common feature of these five decisions is that they posed a trade-off between cost and well safety.” the committee said in its letter to Hayward.

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