3 Offshore Regulation
16. In the Annual Energy Statement to Parliament
on 27 July 2010, Rt Hon Chris Huhne MP, DECC's Secretary of State,
announced that the UK would, "undertake a full review of
the oil and gas environmental regulatory regime" following
the outcome of investigations into the causes of the Gulf of Mexico
incident.[18] This was
a re-announcement of plans released originally on 8 June 2010,
by which date a review by DECC officials had already found the
UK's existing regulatory regime "fit for purpose".[19]
Mr Webb, of the industry-body Oil and Gas UK, told us: "possible
[regulatory] enhancements are relatively marginal in nature",[20]
and "[UK regulations mitigate] strongly against the likelihood
of anything like Macondo ever happening here".[21]
UK Offshore Regulatory Regime
17. Charles Hendry MP, Minister of State for DECC,
told us: "the regime we have in place in the North Sea is
one of the most robust in the world".[22]
The offshore safety regime was revised following the Cullen Inquiry
into the 1988 Piper Alpha disaster, leading to a tripartite arrangement
for offshore regulation. Mr King, Managing Director of Transocean's
North Sea Division, told us: "If I look at the conditions
I worked under offshore in 1975 and compare that to the way we
operate today [since the Cullen Inquiry], there is no comparison
whatsoever".[23]
Total's Mr Festor added: "I came back [after] 30 years [...]
and I discovered that here in the UKCSbefore Piper Alpha
and after Piper Alphait's another world".[24]
18. Mr Webb told us: "[The Cullen Report into
Piper Alpha] called for the revision of responsibilities between
the licensing regulation and safety regulation, and it was from
that that the whole concept of the safety case came and the whole
concept of independent verification and inspection".[25]
The Health and Safety Executive (HSE), an executive non-departmental
public body of the Department for Work and Pensions, has responsibility
for assessing and regulating the integrity and safety of
offshore installations in the UK. DECC's Energy Development Unit
is responsible for licensing and regulating UK oil and gas activities,
including environmental regulation, and the approval of Oil Pollution
Emergency Plans (OPEPs).[26]
The Maritime and Coastguard Agency (MCA), an executive agency
of the Department for Transport, is responsible for deploying
counter pollution measures during an oil spill. The US Minerals
Management Service (MMS) that oversaw both regulation and licensing
of offshore drilling during the Deepwater Horizon incident has
since been split into separate agencies, reflecting the changes
that took place in the UK after the Piper Alpha incident.[27]
19. The HSE requires that all operations have detailed
safety cases on potential dangers, their consequences, and the
methods of controlling any risks. The overall responsibility for
safety on an installation falls to the Safety Case Duty Holder
who appoints an Offshore Installations Manager (OIM) to discharge
this responsibility. In the case of mobile drilling rigs, the
duty holder is the drilling contractor (for example, Transocean
in the Deepwater Horizon incident). Mr Walker, Head of the HSE's
Offshore Safety Division, told us: "Before an operator brings
a drilling rig into the UK or operates a fixed platform, they
have to prepare a safety case for the Health and Safety Executive
to approve".[28]
20. The Operator, or Licence Holder (for example,
BP in the Deepwater Horizon incident), is subject to separate
and additional verification requirements under the Design and
Construction Regulations in the form of well examinations carried
out by an independent and competent person (ICP). All parties
involved have legal duties to cooperate with both the OIM and
the well Operator when the well is under construction. The Safety
Case Duty Holder and the well Operator must demonstrate how their
safety management systems will operate together, who has primacy
in an emergency, and who has overall responsibility.
21. The UK's goal-setting safety regulations allow
a flexible approach in the choice of technology and systems to
meet safety standards. Oil and Gas UK, the industry association,
described the goal-setting regime to us:
The UK's goal-setting safety regime requires a systematic
approach to the identification of hazards and through the application
of quality engineered solutions and systems ensures that risks
are reduced to as low as reasonably practicable (ALARP).[29]
This is in contrast to the prescriptive regulatory
regime that the Deepwater Horizon operated under in the United
States.[30] A prescriptive
regime has specific obligations on the types of equipment required
and the degree to which a risk has to be mitigated.
22. In
the light of recent drilling activity in the waters around the
Falkland Islands, we asked witnesses from OSPRAG and Oil and Gas
UK whether the UK regulatory regime applied to drilling in that
area. There was a lack of clarity over responsibility for drilling
and oil response in the Falkland Islands. We recommend that the
Government clarify what regulatory regimes apply to drilling and
oil spill response in the Falkland Islands and who is responsible
for enforcing them.
US and UK Offshore Regulations
23. The industry association Oil and Gas UK pointed
out the different basin characteristics between the Gulf of Mexico
and the UK Continental Shelf, and the way in which the UK regulatory
safety case regime is more advanced than in the US. They also
highlighted the following differences in regulation between the
US and the UK:
- in the UK the safety and licensing
aspects are handled by two separate regulatory bodies, the HSE
and DECC respectivelyby contrast, until the Deepwater Horizon
incident, both safety and licensing fell under the remit of the
US Minerals Management Service, MMS;
- design of all UKCS wells requires clearance by
an independent competent person (ICP) who is contracted and paid
for by the oil and gas exploration company; and
- the safety caserequired for all UK installations
and introduced following the recommendations of the Cullen Report
into the 1998 Piper Alpha disaster.
24. DECC gave evidence that since drilling began
on the UKCS in 1964, over 10,000 wells have been drilled, and
"although there have been a small number of incidents [...]
there has not been an oil blow-out [as opposed to a gas-blowout]
or any significant spillage of oil directly resulting from drilling
operations".[31]
25. Mr Steve Walker, Head of HSE's Offshore Safety
Division (OSD), told us: "we have a more sophisticated inspection
regime [compared to the US] because we have a performance-based
legislation [...] we have a different safety culture compared
to the safety culture that applied in the Gulf of Mexico".[32]
Environmental Regulation and Inspection
26. DECC's Energy Development Unit is responsible
for licensing and regulating UK oil and gas activities, developing
the environmental regulatory framework for the UK Continental
Shelf (UKCS), and for administering and ensuring compliance with
that regime in relation to offshore oil and gas exploration and
production and decommissioning, including the approval of facility-specific
Oil Pollution Emergency Plans (OPEPs). The Minister told us: "[DECC
inspectors] are looking at the environmental implications [...]
during the drilling process [whereas] The HSE are responsible
for every aspect of safety on those operations for the whole of
their lifetime".[33]
27. Among the interim steps taken in the UK since
the Deepwater Horizon incident, DECC doubled the number of annual
environmental inspections to drilling rigs, and recruited three
additional inspectors. This brought the total number of inspectors
to ten (including one senior inspector). Given DECC's less extensive
areas of responsibility compared to the HSE, it and its predecessor
Departments have all operated with fewer inspectors than the HSEthe
HSE Offshore Division has 114.5 specialist inspectors, while DECC
has ten environmental inspectors.[34]
DECC inspectors visit offshore installations and onshore offices
to inspect records and management systems, as well as interviewing
people and observing site conditions, standards and practices.
DECC told us that the increased number of inspectors will allow
"DECC to double the number of environmental inspections carried
out on mobile drilling rigs in the UKCS from an average of eight
to at least sixteen on annual basis with immediate effect".[35]
The Minister referred to the movement of inspectors between the
public and private sectors.[36]
This may make it difficult for DECC to recruit and maintain high-quality
inspectors in the future.
28. DECC's Offshore Inspectorate describe their environmental
inspection strategy as "risk based".[37]
Of the rigs currently undertaking drilling activities (approximately
24 according to DECC), about 20% are on gas reservoirs, which
DECC say "inherently pose less of a potential risk to the
environment compared with those working on oil reservoirs".[38]
Taking this into account, along with the location of the rig and
the nature of the well, DECC targets inspections on rigs undertaking
drilling activity on specific oil reservoirs.
29. We heard from oil and gas industry representatives
that they were not aware of anyone on their boards who had a background
in environmental consultancy.[39]
Given the potential environmental impactsand the large
associated coststhat we have seen in the Gulf of Mexico
as a result of an offshore incident, we are surprised that companies
have not seen fit to include such expertise on their boards.
30. Oil company
boards lack members with environmental experience. The industry
should take steps to remedy this and the Government should encourage
them to do so.
EMERGENCY RESPONSE
31. Oil Pollution Emergency Plans (OPEPs) set out
the arrangements for responding to oil spill incidents that have
the potential to cause marine pollution. They aim to prevent such
pollution and reduce or minimise its effects should it occur.
OPEPs are risk assessments that are relevant to a specific field
or installation. The plans focus on the worst-case scenario; following
the Gulf of Mexico incident, UK operators are now required to
carry out additional modelling for deepwater drilling installations,
including an extended assessment of oil spill beaching predictions.
The plans are also reviewed by Maritime Coastguard Agency and
relevant consultees, such as the Marine Management Organisation
(or relevant devolved authority), the Joint Nature Conservation
Committee and the relevant inshore statutory body.
Changes since Macondo
32. We asked witnesses how they had changed their
methods of operation in UK deepwaters since the incident in the
Gulf of Mexico. Mr Cohagan of Chevron told us: "I don't believe
that we have fundamentally changed in any way [since the Deepwater
Horizon incident]".[40]
This was owing to the strong regulatory regime that was a legacy
of the Cullen Inquiry into the Piper Alpha incident. With regard
to making any regulatory changes in response to the Deepwater
Horizon tragedy Mr Webb was wary of "making global and universal
changes that may not be appropriate from situation to situation
[...] the kernel of what we have in the safety case regime, is,
on a case-by-case basis, the expertise within the industry [...]
the independent verifier, and then [...] the regulator".[41]
33. There is a sense that the industry seems to be
responding to disasters after they have happened rather than anticipating
and planning for high-consequence, low probability events. Dr
Hayward agreed that "there is no doubt that the inability
of BP and the industry to intervene because it wasn't properly
prepared was unacceptable".[42]
He went on to observe that "the occurrence of black swans
[high-impact, low-probability events] seems to be more often than
not these days".[43]
Mr McAllister admitted that "as an industry, if we can do
something better, it is to make sure that we do not take maybe
such an introverted view of our operations".[44]
34. We conclude
that the UK has high offshore regulatory standards, as exemplified
by the Safety Case Regime that was set up in response to the Piper
Alpha tragedy in 1998. The UK regulatory framework is based on
flexible, goal-setting principles that are superior to those under
which the Deepwater Horizon operated.
35. Nevertheless,
despite the high regulatory standards in the UK we are concerned
that the offshore oil and gas industry is responding to disasters,
rather than anticipating worst-case scenarios and planning for
high-consequence, low-probability events.
AUTHORITY TO STOP OPERATIONS OFFSHORE
36. We were told from both the regulator and industry
that there were people on offshore installations whoat
all timeshave the authority to close off the well.[45]
Mr Walker told us: "there will be a bridging document between
the rig owner's systems and the well operator's systems to make
sure that issues such as who has the final say [...] [are] well
and truly agreed before you start the operation".[46]
The HSE told us that there will always be one person who is ultimately
responsible for safety on the rig, and that is the Offshore Installations
Manager (OIM), who is usually the drilling contractor.
37. There are enormous financial costs of halting
or delaying drilling operations, even for short periods. In the
case of the Deepwater Horizon, BP aimed for the drilling of the
Macondo well to take 51 days, at an estimated cost of $96 million.
It was expected that the drilling platform would be leaving as
early as 8 March 2010, but the Macondo well took longer to complete
than anticipated. By 20 Aprilthe day of the blowout that
killed 11 workersthe rig was 43 days late, which would
have cost an extra $21 million in lease fees alone.[47]
There is a risk that those responsible for taking decisions to
halt operations could feel commercial pressure not to do so if
at all possible.
38. It is imperative
that there is someone offshore who has the authority to bring
a halt to drilling operations at any time, without recourse to
onshore management. We urge the Government to seek assurances
from industry that the prime duty of the people with whom this
responsibility rests is the safety of personnel and the protection
of the environment.
CATASTROPHIC FAILURE OF THE BOP
39. The last line of defence against a blowout of
the Macondo well was a device called the "blind shear ram",
part of the blowout prevent (BOP) stack located on top of the
wellhead, over a mile below the surface on the ocean floor. If
the upward pressure from the oil and gas in the reservoir overcame
the downward pressure of the heavy drilling fluid - and all other
recourses to control the well failed - the blind shear ram's two
blades, or "pinchers" as they are sometimes referred
to, were supposed to slice through the drill pipe and seal the
well. The importance of the BOP was highlighted by Dr Hayward
who told us "If it [the BOP] had functioned as designed,
there would not have been the [Deepwater Horizon] accident".[48]
40. The blind shear ram is described as the "ultimate
fail-safe device". The Deepwater Horizon had a single blind
shear ram located inside the 15.5m tall BOP stack at the wellhead
on the seafloor. An April 2000 report Risk Assessment of the
Deepwater Horizon BOP Control System carried out by EQE International
for Cameron Controls Corporation (the manufacturer of the BOP
for Transocean, owner of the rig) concluded that:
The major contributor to the failure likelihood associated
with the BOP control system results from the selected stack configuration.
With only one shear ram capable of sealing the well in, it is
extremely difficult to remove all the single failure points from
the control system. The final shuttle valve, which supplies the
hydraulics to the blind shear ram, represents such a single point
failure [...] and accounts for 56% of the failure likelihood of
the system to perform an EDS (Emergency Disconnect Sequence).[49]
41. A further concern is that with a single blind
shear ram, there is a risk it could close on one of the extremely
strong joints that connect the sections of drilling pipe, and
be unable to collapse it. Such a risk is mitigated by the use
of two blind shear rams. Deepwater Horizon's single blind shear
ram malfunctioned and never fully closed.
42. Despite the fact that the BOP on the Deepwater
Horizon had only a single blind shear ram, Dr Hayward told us
that: "The blowout preventer that you are referring to was
fully compliant with the [US] regulatory regime and it should
have functioned".[50]
Mr Bernard Looney of BP North Sea told us: "We operate at
the moment two mobile drilling units in the North Sea. They have
one blind shear ram".[51]
However, Mr Looney went on to explain that as a result of the
Macondo incident they were now bringing an independent third party
on to each rig to ensure that the BOP had not been compromised
and was operating as it was designed to.[52]
43. In the UK, the BOP has to be tested every 14
days.[53] As to whether
a drilling rig in the UK could operate with the same BOP setup
as the Deepwater Horizon, Mr Walker, head of the HSE Offshore
Safety Division, told us "we would have asked the well operator
[...] 'why have you chosen that design? Why have you chosen, say,
only one [blind shear] ram or two rams' [...] we would then assess
their answers".[54]
44. Mr Cohagan, Managing Director of Chevron UK,
told us that adding an extra blind shear ram to existing BOPs
would be a difficult job, as they can be up to three storeys tall
and extremely heavy.[55]
Mr Cheshire added "if it's not the appropriate piece of equipment
for the specific well [...] you are taking more [health and safety]
risks with individuals handling these at the surface".[56]
45. Given that
the failure of the single blind-shear ram to fire on the Deepwater
Horizon's blowout preventer seems to have been one of the main
causes of the blowout of the Macondo well, we recommend that the
Health and Safety Executive specifically examine the case for
prescribing that blowout preventers on the UK Continental Shelf
are equipped with two blind shear rams.
46. At an advanced stage in the inquiry it came to
our attention that an incident had occurred on a Transocean platform
on 23 December 2009. The Sedco 711 platform was being operated
for Shell in the North Sea Bardolino Field. According to Tom Fielden
of the BBC:
[...] key indicators that something was going badly
wrong were either misinterpreted or discounted [...] A major spill
was averted only when the BOP, or blowout preventer, was activated
capping-off the well on the sea floor.[57]
47. Once this incident was brought to the public
attention, Shell issued a statement on the incident that had been
updated from 18 August 2010. Shell said, "the well was successfully
closed using the BOP [...] Three barrels of oil-based drilling
mud were released into the sea, no people were injured and there
was no loss of asset integrity".[58]
Shell pointed out that the well involved "differs from the
Gulf of Mexico in that it is not in deepwater and it is not a
high pressure well".[59]
In evidence originally submitted to us by Transocean, the only
reference to the Sedco platform was that it was now operating
West of Ireland rather than on the UKCS.[60]
48. We asked Transocean and the HSE to provide further
information on the nature of the incident that took place on 23
December 2009. Transocean noted that the Sedco 711 incident was
a "matter of public record" and that they had "reported
the incident to the HSE [...] on 24 December".[61]
Regarding reports that there was "not enough heavy mud available
to pump back down into the well" to control it,[62]
Transocean explained that:
The mud displaced from the hole after the blowout
preventer was closed was contaminated with hydrocarbons [oil and
gas] and not suitable to pump back in the hole. As a result, good
mud needed to be brought back onboard from a supply vessel.[63]
49. However, given that there will always be a risk
that drilling mud could become contaminated with hydrocarbons
during a loss-of-well-control event, it is not clear why Transocean
did not have sufficient ingredients for kill-weight mud on the
platform. According to the oilfield services provider Schlumberger:
"Kill-weight mud, when needed, must be available quickly
to avoid loss of control of the well or a blowout".[64]
We see this as yet another example of the offshore industry not
planning for high-impact, low probability events. The HSE told
us:
There is no specific prescriptive requirement to
have mud of the required density that could kill the well onboard
a drilling installation at all times [...] It is therefore good
industry practice to have sufficient weighting agents onboard
the installation that can raise the mud's density to kill the
well if required.[65]
50. However, the HSE stated that the "performance
of the crew prior to the incident was not satisfactory" and
"problems caused by not having sufficient mud at the correct
mud weight available should have been foreseeable, planned for
and dealt with better by the offshore and onshore management".[66]
In light of the Sedco 711 event Shell and Transocean implemented
"corrective actions" that the HSE told us "addressed
the shortcomings that led to this incident".[67]
51. The UK's goal-setting safety regulations allow
a flexible approach in the choice of technology and systems to
meet safety standards. However, evidence to us from the Institute
of Mechanical Engineers told us: "the safety regimes have
focused heavily on mitigating and managing consequences rather
than fundamental integrity assurances in equipment and systems",[68]
a call that was echoed by the Marine Conservation Society for
the HSE to provide "more guidance and possibly regulation
with regard to the best available technology".[69]
Mr Walker of the HSE argued: "performance-setting legislation
[...] [is] more challenging for the industry [than prescriptive
regulation]".[70]
52. While the
flexibility of the UK safety regulation regime appears to have
worked well, we recommend that for fail-safe devices such as the
blowout preventer the Government should adopt minimum, prescriptive
safety standards or demonstrate that these would not be a cost-effective,
last-resort against disasters.
THE IMPORTANCE OF SIMPLE CHECKS
53. An examination of the two control pods on Deepwater
Horizon's BOP following the accident revealed that there was a
fault in a critical valve in one of the control pods, and that
the other control pod had insufficient charge on its batteries;
these faults probably existed at the time of the incident.[71]
At least one operational control pod was required to operate the
Automatic Mode Function (AMF) which would have closed the BOP.
The AMF function should have happened automatically, without intervention,
when the electric cables and hydraulic line were damaged during
the explosion on the rig. The AMF is a critical backup system,
also known as the "deadman".
54. We are concerned that such simple failures were
not spotted during inspection. Dr Hayward told us: "we have
implemented across our global drilling operation a programme to
ensure that the equipment will do what it is designed to do [...]
the second thing we have done [...] is significantly enhance the
testing protocols of blowout preventers, including ensuring that
the backup systems work and are tested in the course of drilling
a well".[72] Although
the new regime is welcomed, this is another example of the industry
responding to a disaster rather than anticipating a potential
problem.
55. We believe
that the Government must ensure that the UK offshore inspection
regime could not allow simple failuressuch as a battery
with insufficient chargeto go unchecked.
INDEPENDENCE OF ICPS
56. Unlike the US regulations under which the Deepwater
Horizon operated, design of all wells on the UK Continental Shelf
(UKCS) requires clearance by an independent competent person (ICP).
UK companies are also required by law to ensure that their well
is managed in such a way that there can be no unplanned escape
of oil or gas (or any other well fluids) and that risks to people
and the environment are as low as reasonably practicable. This
requirement is set out in the Offshore Installations and Wells
(Design and Construction, etc) Regulations 1996 (DCR), covering
all stages of a well's life including design modification, commission,
construction (drilling), operation, maintenance, suspension of
activities and abandonment.[73]
The DCR regulations require that:
- the conditions below ground
are properly assessed beforehand;
- the materials used for all parts of a well are
suitable for the task;
- the well control equipment is installed to protect
against blowouts; and
- the well is operated by appropriately qualified
people.
57. A key component of the regulations is the requirement
for a formal well examination scheme and the appointment of an
independent well examiner who must verify the design, construction
and maintenance of a well. An operator must have arrangements
in place for a well examination scheme by such an ICP before starting
on a new well design. The ICP monitors all stages of the well's
life from planning through to execution and operation. It is also
the ICP's role to examine how the operator controls the pressure
in the well, and to ensure that the pressure containment equipment
that forms part of the well is suitable for this purpose.
58. A well's ICP is normally employed by a separate
specialist company, and must be sufficiently knowledgeable and
separate from the immediate line management of the well operations.
These details must be available for inspection by HSE. Well designs
are usually peer-reviewed by in-house and external bodies at each
stage. Chevron state that their well design process is now subject
to an additional peer review by "experienced drilling staff
from our Gulf of Mexico Deep Water business unit".[74]
The final well design is presented to and examined by the independent
Well Examiner and the HSE.
59. Mr McAllister of OSPRAG told us: "the independent
company [...] is populated by seasoned drilling professionals,
who've got no commercial interest in the well".[75]
He added: "they [...] may have worked in oil companies in
their past".[76]
Mr Toole of DECC told us that if his organisation felt the degree
of independence between the ICP and the operator was insufficient
they would do something about it.[77]
Even so, Ms Susie Wilks, Biodiversity Lawyer for ClientEarth argued
that "the legal requirement[s] for independence are not tough
enough".[78]
60. Whilst there
is a risk of conflicts of interests affecting the judgement of
independent competent persons who assess the design of wells we
have had no evidence of such conflicts presented to us.
PROTECTION OF WHISTLE-BLOWERS
61. Due to the enormous commercial pressures to keep
a drilling rig operating, we are concerned that employees who
try to draw attention to safety problems may beor feelintimidated
by their managers. Dr Jonathan Wills, Independent Councillor for
Lerwick South and freelance environmental consultant told us that
"whistle-blowers are not able to call a halt to things and
the managers are obviously trying to make money for the company
[...] They're not there to protect the environment".[79]
However, Mr Webb of Oil and Gas UK tried to assure us that the
offshore workforce are "free and able to intervene on issues
of safety, and without fear of retribution".[80]
This assurance was repeated to us by other members of the industry.[81]
62. However, the HSE Offshore Division's Specialist
Inspection Report for 2009 indicated that Transocean rig staff
were subject to "bullying, aggression, harassment, humiliation
and intimidation" from offshore management.[82]
When we asked Paul KingManaging Director of Transocean's
North Sea Divisionabout these claims, he told us:
[...] the report needs to be viewed in its entirety
[...] We have several alternative ways for people to get [...]
[safety concerns to us including] via an ombudsman line, which
is manned by a third-party company. Anybody who has anything that
they are concerned about can, in complete confidence, talk to
someone and report it, and move on from there.[83]
63. Mr Cohagan of Chevron UK described to us a "stop
work authority card" that are handed out offshore.[84]
These cards have Mr Cohagan's signature on, and he told us: "it
says 'Not only do you have the duty but you have the responsibility,
if you see anything wrong, to stop the work.'" When we raised
concerns with the Minister about intimidation of whistle-blowers,
he told us: "The crime is not reporting [health and safety
concerns]".[85]
64. We asked the oil and gas industry about a policy
known as "not required back". This was the process by
which an Offshore Installations Manager (OIM) could have contractor
personnel permanently removed from a rig. Oil and Gas UK, the
industry-body, highlighted concerns in trade unions and the industry
that the "lack of a clear and transparent process could potentially
prevent individuals from raising safety concerns".[86]
Oil and Gas UK worked with trade unions to introduce new guidelines
to ensure that "where removal [of personnel from a rig] is
deemed an appropriate course of action [...] this is done in a
fair and transparent way".[87]
Mr Looney, of BP North Sea, told us: "We are fully compliant
with the [not required back] agreement that Oil and Gas UK as
a trade association has with the unions and the workforce and
we have no issues with that policy".[88]
65. At an advanced stage in the inquiry we received
evidence from the National Union of Rail, Maritime and Transport
Workers (RMT) regarding the need for offshore safety representatives
to have greater powers. The RMT told us that they "want to
see more specialised training become a statutory entitlement [...]
Safety Reps should have the statutory power to insist on more
training".[89] The
RMT are of the opinion that the existing "five-day basic
safety rep course" is insufficient, and the following specialised
training should become a regulatory requirement:
- principles of Risk Assessment;
- root Cause Analysisaccident/incident investigation;
- major hazard awareness;
- development of safety auditing/inspection skills;
and
- communication skillspresentation, negotiation,
interpersonal, and meeting organisation.
66. We
find some conflict in the reports from the HSE about bullying
and harassment on rigs and the assurances of the industry that
sincere whistleblowers will be heard and protected. We recommend
that the Government should discuss with the industry and unions
what further steps are needed to prevent safety representatives
from being or feeling intimidated into not reporting a hazard,
potential or otherwise.
CONTRACTOR OVERSIGHT
67. BP's Bly Report emphasises that the failures
that led to the Deepwater Horizon incident involved a number of
companies as well as themselves. Dr Hayward told us: "in
our report we talk about [the need for] 'significantly greater
oversight [of principal contractors]'".[90]
Dr Hayward went on to tell us that they had identified "a
lack of rigour and quality of oversight" of contractors as
one of the factors leading to the incident.[91]
68. It is important
and necessary that the offshore safety culture is cascaded throughout
the supply chain, from existing contractors at all levels, through
to new-entrants on to the UK Continental Shelf.
OPERATING IN DIFFERENT REGULATORY
REGIMES
69. The oil and gas industry operates under many
different regulatory regimes around the world. BP North Sea's
Mr Looney told us "We apply the same standards [worldwide].
They are clearly influenced by variations in regulatory regime".
Dr Hayward added that: "this does not imply a difference
in the level of standard but there are different requirements".[92]
70. To demonstrate operating at the same standard,
but under different regulatory requirements, Mr Festor of Total
described to us the assumptions that were made when designing
the well-casing under different regulatory regimes.[93]
These assumptions define the load that will be applied on the
casings. In the US, the sealed well is assumed to be half full
of liquid, and half full of gas. In the UK it is assumed to be
full of gas. The UK assumption is more conservative, leading to
the casing being able to withstand a greater load, as under the
US assumption the liquid offsets a greater proportion of the upward
pressure from the oil and gas in the reservoir.
71. We received evidence from the industry, regulators
and other stakeholders, that the UK offshore regime changed dramatically
for the better after the Cullen Inquiry into the 1988 Piper Alpha
tragedy. A comparable change in regulatory regime is expected
in the US as a result of the incident in the Gulf of Mexico. Already
in the US, the responsibilities for licensing, safety and promotion
of the oil and gas industry have split into three separate agencies.[94]
Under the regime that the Deepwater Horizon operated in the Gulf
of Mexico, these issues were all the responsibility of the US
Minerals Management Service (MMS). In the UK, promotion of the
oil and gas industrynamely, identification of investment
opportunities and liaising with new entrantsremains within
DECC (under the Energy Development Unit) along with licensing.
Platform, the social and ecological justice campaigners, argued
that "close links between the [...] industry and the government
[...] undermine public confidence in the ability to regulate and
legislate effectively".[95]
The Minister told us: "It's the industry's own job to promote
itself"[96] and
that if "[other countries] decide to go beyond [...] [the
level of UK regulation] we would need to [...] respond to that".[97]
72. There is
both risk and the advantage of competition where global oil and
gas companies operate to different standards when working in different
regulatory regimes. We recommend that the Government monitor any
changes in the US regulatory regime to see ifin the light
of the response to the Deepwater Horizon incidentthe US
establishes a new gold-standard of regulation, as the UK and Norway
did after the Piper Alpha tragedy. We would urge the Government
to work with regulators in other offshore oil and gas provinces
to ensure that the highest standards of safety can be achieved
globally through an exchange of best practice lessons.
Licensing
73. Before a drilling programme is approved, the
HSE needs to be satisfied that well design and construction are
satisfactory and DECC needs to be satisfied that emergency plans
for all wells represent best practice. We were told that, "for
deepwater drilling, operators are being required to demonstrate
that the factors identified in the BP report have been satisfactorily
addressed".[98]
On 27 October 2010 it was announced by DECC that 144 licences
to extract oil and gas from UK waters were offered in the 26th
licensing round.[99]
CONTROVERSY OVER THE BLY REPORT
74. In a press release on 8 June 2010, the Secretary
of State said that the Deepwater Horizon incident gave the Government,
"pause for thought [...] given the beginning of exploration
in the deeper waters West of Shetland".[100]
DECC claims that the process of approving new licences for deepwater
wells "now includes rigorous testing against the findings
of BP's report into the causes of the Deepwater Horizon accident".[101]
But we note that BP's internal investigationthe Bly Reportinto
the Gulf of Mexico incident implied that, while BP was partially
responsible for the disaster on Transocean's Deepwater Horizon
drilling rig, decisions made by "multiple companies and work
teams" contributed to the incident.[102]
Dr Hayward said, "to put it simply, there was a bad cement
job [...] based on the report, it would appear unlikely that the
well design contributed to the incident":[103]
a claim he reiterated when giving evidence to us.[104]
If the Macondo Well design were found to be seriously flawed,
BP would be liable for an additional fine of $15 billion under
the US Clean Water Act.[105]
75. Transocean, who owned the Deepwater Horizon and
operated it on behalf of BP, claimed that BP's well design was
"fatally flawed", while BP's cement contractor Halliburton
said that it found a number of omissions and inaccuracies in the
Bly Report and, "contractors do not specify well design [...]
that responsibility lies with the well owner".[106]
British Gas (BG Group) told us that in their view "it appears
that the Macondo blowout was significantly attributable to a flawed
well design".[107]
76. It is argued that the Bly Report does not represent
a "root-cause analysis" into the Macondo incident.[108]
Its author, BP's Head of Safety and Operations, told us that "We
were trying to understand what were the chain of events that happened
and what the immediate causes were so that we could get some insights
as quickly as possible".[109]
Mr Cohagan argued that "If you really want to do a root cause
analysis, it is a very time-consuming process".[110]
77. We asked the Minister on the influence of the
Bly Report on the safety regime in the UK. He told us that they
had taken account of the recommendations in the Bly report,
[111] but it
was "not the building block of [licence granting]"
[112] and DECC
were "now waiting for the further US investigations to decide
whether there are any recommendations [...] we should take into
account".[113]
We were assured when the Minister told us: "if there is further
evidence that comes through that requires any greater tightening
of those [licensing conditions] then we will take account of that".[114]
78. The Bly
ReportBP's internal investigation into the Deepwater Horizon
incidentdoes not contain a root-cause analysis of the events
that led to the blowout of the Macondo well, the loss of 11 men
on the Deepwater Horizon, and the release of 4.9 million barrels
of oil into the Gulf of Mexico. We
urge the Government not to rely extensively on the Bly Report,
given the controversy surrounding the responsibility for the incident
and the design of the Macondo well, but rather to consider its
conclusions in parallel with the observations of other companies
involved with the incident, and with the recommendations of US
agencies investigating the incident.
79. We believe
that the environmental impacts of a sub-sea well blowout need
to be understood and taken into account when a drilling licence
is issued in the UK. We urge the Government to ensure that the
licensing regime takes full account of high consequence, low probability
events.
80. We observed throughout
the inquiry that the offshore oil and gas industry believed they
had mitigated away the risks associated with high-consequence,
low probability events. The Minister told us: "as part of
changes that we've made, [operators] have to look at worst case
scenarios".[115]
81. We recommend
that as part of the drilling-licence process, the Government require
companies to consider their responses to high-consequences, low-probability
eventssuch as a blowout. The Government should not automatically
accept claims that companies have mitigated away the risk of such
worst-case scenarios. We urge the Government to introduce this
requirement as drilling ventures into increasingly extreme environments.
18 HC Deb, 27 July 2010, col 867 Back
19
"UK increases North Sea rig inspections", DECC Press
Release, 8 June 2010 Back
20
Q 1 Back
21
Q 1 Back
22
Q 271 Back
23
Q 36 Back
24
Q 234 (Festor) Back
25
Q 85 Back
26
Ev 596 Back
27
"Salazar Divides MMSs Three Conflicting Missions",
US Department of the Interior press release, 19 May
2010 Back
28
Q 189 Back
29
Ev 63 Back
30
Q 11 Back
31
Ev 596 Back
32
Q 189 Back
33
Q 287 Back
34
Ev 596 Back
35
Ev 596 Back
36
Q 288 Back
37
Ev 596 Back
38
Ev 596 Back
39
Qq 247-249 Back
40
Q 229 Back
41
Q 52 (Webb) Back
42
Q 158 Back
43
Q 127 Back
44
Q 87 Back
45
Qq 242, 286 Back
46
Q 200 (Walker) Back
47
Fleet Status Report, Transocean, 13 April 2010, www.deepwater.com Back
48
Q 181 Back
49
Risk Assessment of the Deepwater Horizon Blowout Preventer
(BOP) Control System, EQE Holdings, April 2000, http://documents.nytimes.com/documents-on-the-oil-spill#document/p2 Back
50
Q 91 Back
51
Q 155 Back
52
Q 156 Back
53
Qq 44, 258 Back
54
Q 190 Back
55
Q 258 [Cohagan] Back
56
Q 258 [Cheshire] Back
57
BBC News Blog, Tom Fielden, 7 December 2010, www.bbc.co.uk/blogs Back
58
Response Statement on Bardolino "Kick", Shell,
18 August 2010-updated 7 December 2010 Back
59
Response Statement on Bardolino "Kick", Shell,
18 August 2010-updated 7 December 2010 Back
60
Ev 59 Back
61
Ev 133 Back
62
BBC News Blog, Tom Fielden, 7 December 2010, www.bbc.co.uk/blogs Back
63
Ev 133 Back
64
"Kill-weight fluid", Oil Field Glossary, Schlumberger,
www.glossary.oilfield.slb.com Back
65
Ev 635 Back
66
Ev 635 Back
67
Ev 635 Back
68
Ev w1 Back
69
Ev 630 Back
70
Q 192 Back
71
Deepwater Horizon-Accident Investigation Report, BP, 8
September 2010, www.bp.com Back
72
Q 107 Back
73
Offshore Installations and Wells (Design and Construction, etc)
Regulations 1996 (SI 1996/913) Back
74
Ev 591 Back
75
Q 29 Back
76
Q 30 Back
77
Q276 Back
78
Q 211 (Wilks) Back
79
Q 210 Back
80
Q 41 (Webb) Back
81
Qq 34, 41, 124, 234. Back
82
HSE Offshore Division Human and Organisational Factors Team, Specialist
Inspection Report-Transocean Offshore (North Sea) Ltd, (from
inspections undertaken in 2009) Back
83
Q 34 Back
84
Q 234 Back
85
Q 316 (Hendry) Back
86
"New Oil & gas UK Guidelines Lift Shadow of NRB",
25 February 2009, Oil and Gas UK Press Release Back
87
"New Oil & gas UK Guidelines Lift Shadow of NRB",
25 February 2009, Oil and Gas UK Press Release Back
88
Q 132 Back
89
Ev 634 Back
90
Q 112 Back
91
Q 121 Back
92
Q 102 Back
93
Q 262 (Festor) Back
94
"Salazar Divides MMSs Three Conflicting Missions",
US Department of the Interior press release, 19 May
2010 Back
95
Ev 598 Back
96
Q 300 Back
97
Q 322 Back
98
Ev 596 Back
99
"Blocks away-excellent results for latest offshore oil and
gas licensing round", DECC Press Release, 27 October 2010
Back
100
"UK increases North Sea rig inspections", DECC Press
Release, 8 June 2010 Back
101
Ev 596 Back
102
Deepwater Horizon-Accident Investigation Report, BP,
8 September 2010, www.bp.com Back
103
BP Releases Report on Causes of Gulf of Mexico Tragedy,
BP Press Notice, 8 September 2010, www.bp.com Back
104
Q 160 Back
105
BBC News Blog, Robert Peston, 8 September 2010, www.bbc.co.uk/blogs Back
106
"BP Oil Disaster Report Paves Way for Bitter Legal Battle",
The Telegraph, 9 September 2010 Back
107
Ev 592 Back
108
Root-cause analysis (RCA) is a process of determining the root
cause of a problem with the aim preventing a reoccurrence of the
problem. Back
109
Q 119 Back
110
Q 241 Back
111
Q 250 Back
112
Q 305 Back
113
Q 269 Back
114
Q 297 (Hendry) Back
115
Q 286 (Hendry) Back
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