The Obama administration wants to know when offshore companies will be ready to rein in runaway wells — a major hurdle it says is holding up new deep-water drilling in the Gulf of Mexico.
On Friday, it asked two companies — Houston-based Helix Energy Solutions Group and the Exxon Mobil-led Marine Well Containment Co. — for an update on their progress in developing equipment and vessels that could capture oil from underwater wells.
According to the Interior Department, oil companies so far have been unable to prove they can effectively trap and collect crude in case of a deep-water blowout, like the one at BP’s doomed Macondo well last year.
“The most critical missing piece in the process of approving applications for permits to drill in deep water is the demonstration of well control and subsea containment capability,” said Michael Bromwich, the director of the Bureau of Ocean Energy Management, Regulation and Enforcement.
Bromwich is fighting back against industry allegations that federal government foot-dragging is delaying approvals of deep-water drilling more than three months after the Obama administration lifted its ban on those projects. Instead, the administration casts the holdup as a problem with the industry’s readiness.
“These systems are critical to moving forward with safe and responsible deep-water drilling activities,” Bromwich said in a letter to the companies’ executives.
Before oil companies can get approval to drill new deep-water wells, they must satisfy a swath of new safety and environmental regulations imposed since the Gulf spill — including the mandate to swiftly contain out-of-control wells.
But some industry representatives say they have had trouble understanding how to satisfy the government’s requirement for subsea containment equipment that can be used against blowouts.
Regulators are poised to scrutinize companies’ containment strategies as part of their deep-water drilling applications and oil spill response plans. Bureau officials have not announced whether the Helix or MWCC system would satisfy the mandate.
Joe Hill, an analyst with the Houston-based investment bank Tudor Pickering Holt & Co., said the government’s judgments about the effectiveness of the containment systems will depend on the well conditions envisioned by federal regulators. The capping stack that ultimately worked to contain BP’s Macondo well last year might not work on a different kind of blowout, he said.
“I don’t think you can have a system that can deal with every potential scenario — at least not cost-effectively so that anyone can drill a well again,” Hill said. “What happens if the well blows out and the rig burns up and the chassis falls down on top of the wellhead? You can play games all day long figuring out stuff where nobody in their right mind could handle what happened.”
Bromwich and other administration officials have stressed they are regularly meeting with industry representatives to talk about new permitting requirements. And in his letter Friday, Bromwich noted that the BOEMRE has discussed the Helix and MWCC containment plans with the companies “over many months.”
Rachael Moore, a spokesman for Exxon Mobil, said the Marine Well Containment Company has been developing its system with guidance from the government. “We have been consulting with BOEMRE to ensure the systems are designed to meet the government’s requirements,” Moore said.
The MWCC aims to trap 100,000 barrels per day with a mix of equipment, including devices inspired by the technology BP developed in its battle against Macondo last year. BP is contributing equipment from last year’s spill response to the project.
Although it started out as a collaboration among Chevron, ConocoPhillips, Exxon Mobil and Shell, the MWCC’s membership is open to all oil and gas operators in the Gulf of Mexico.
The Helix containment system also relies on equipment — including three vessels — that responded to last year’s spill. At full capacity, the Helix Fast Response System is expected to be able to handle as much as 55,000 barrels of oil and 95 million cubic feet of gas per day from water depths of up to 8,000 feet.
Helix has contracted with the not-for-profit industry group Clean Gulf Associates to make the system available for its members. It also has inked separate agreements with 19 of the CGA member companies setting the daily price that would be charged if the system were called into action.
Lee Warren, a spokeswoman for Marathon Oil Corp., confirmed the firm had retained Helix and other groups focused on spill response and containment to ensure “that we have the required capabilities and equipment to gain permits under current regulatory conditions.”
A Helix representative said the company’s containment system is ready to be deployed when needed.
The MWCC, meanwhile, is working on two separate tracks, with a long-term containment system months away. But the MWCC has tapped Houston-based Trendsetter Engineering, Inc., to build an interim capping stack by mid February.
The MWCC “is working to finalize the interim response system and agreements with prospective members,” Moore said. “The interim system will be available while an expanded containment response system is being developed by Exxon Mobil, Chevron, ConocoPhillips and Shell on behalf of MWCC.”