UK Deepwater Drilling - Implications of the Gulf of Mexico Oil Spill - Energy and Climate Change Contents

Memorandum submitted by Transocean Drilling U.K. Limited


  The Select Committee on Energy and Climate Change (Committee) has requested that Transocean Drilling U.K. Limited (this entity and the Transocean group of companies being referred to as "Transocean") offer comments regarding the recovery of oil and natural gas from the United Kingdom Continental Shelf (UKCS), particularly in the wake of the incident involving the Macondo well on 20 April 2010 in the US Gulf of Mexico (GOM). Transocean's comments regarding the events of 20 April are circumscribed by both pending and expected investigations and litigation arising from those events. However, Transocean is grateful for the opportunity to provide evidence to the Committee and offer its perspective as a major contractor involved in exploration and production operations on the UKCS and the US Outer Continental Shelf (OCS).

  This evidence briefly outlines Transocean's and its predecessor companies' long involvement in UK offshore operations, as well as comparing UK and US GOM regulatory and operational conditions. It also describes a number of US responses to the Macondo well incident. Finally, in response to the Committee's inquiry, Transocean respectfully submits its view that the offshore safety and environmental regulations regarding oil and natural gas production are "fit for purpose" and offers a number of recommendations for the Committee to take under advisement as this Inquiry continues.


  Paul King is the Managing Director for Transocean's North Sea Division, based in Aberdeen. This position requires the day to day management and direction of Transocean's UK operations. Mr. King's current position is the latest in a career with Transocean and predecessor companies stretching back some 35 years. After serving five years in offshore positions, Mr. King completed a further six years onshore, each in the discipline of electronics engineer. This was followed by a series of management positions, with increasing responsibility, over the next 24 years culminating in his current position. In these management positions, Mr. King spent significant time overseeing Transocean's operations in the UK (eight years), the US GOM (10 years) and Brazil (seven years), and served as Vice President of Operations in Houston, Texas for two years.


3.1  Role of Transocean in the UK's Offshore Industry

  Globally, the Transocean group of companies employs approximately 18,000 people in more than 30 countries. Operations in the UK represent a key part of Transocean's global business strategy and the company's roots in the UK stretch back some 40 years. Currently more than 400 employees at Transocean are based in the company's UK offices in Aberdeen, approximately 1,200 employees work on the UKCS, and more than 3000 UK nationals are members of Transocean's global workforce.

  Transocean currently has a fleet of 17 rigs in its UK business, 10 of which are operating currently on the UKCS.[1] Transocean is a member of a number of technical associations active in the UK offshore oil and gas industry, including Oil and Gas UK, Oil Spill Prevention and Response Advisory Group (OSPRAG), UK Step Change in Safety, the International Association of Drilling Contractors (IADC), and the British Rig Owners Association.

  Transocean has played a critical role in the development of the UK's offshore oil and gas exploration industry for decades. Most notably, the Transocean Explorer was the world's first offshore drilling installation to gain acceptance by the UK Health and Safety Executive (HSE) for its Safety Case.

  Transocean was also the first drilling contractor to establish a fleet-wide ISO 14001[2] approved environmental management system (EMS) in the UK. This UK approval was the template for the EMS currently in use across the company. Similarly, Transocean's management system approved under ISO 9001 was the first in the drilling industry and remains in place for all UK operations.[3]

3.2  Transocean—BP Relationship in the UK

  Transocean and BP have a longstanding and strong working relationship, particularly on the UKCS. BP is the designated Operator of one of Transocean's offshore rigs currently located on the UKCS, the Paul B Loyd Jr. The Loyd has worked under contract to BP continuously since 1994, the vast majority of its drilling undertaken west of Shetland.

  Transocean and BP also have worked together on environmental awareness projects, most notably the SERPENT Project ( SERPENT was the first program of its kind to marry the scientific and offshore industry communities with the express purpose of studying the ecosystem of the west of Shetland area. This program allows scientists to use Transocean's rigs in the west of Shetland area as bases of operations for the study of marine wildlife through the use of remote operated vehicles (ROVs). The program remains active to this day.[4]


4.1  Brief Description of Macondo Well Incident

  Between late January and 20 April 2010, the Transocean mobile offshore drilling unit ("MODU") Deepwater Horizon conducted drilling operations at the Macondo well in the US GOM for the operator, BP.

  On the evening of 20 April 2010, a well control event occurred at the Macondo well which led to an explosion and fire aboard the Deepwater Horizon. Tragically, the incident led to the death of 11 crew members, including nine Transocean employees. The loss of these colleagues has been painfully felt across Transocean, and underlines the necessity of our commitment to the safety of all our employees.

  At this time, the causes of the well control event and resulting sinking of the MODU remain under investigation and thus Transocean believes it is premature to speculate as to the cause or causes of this tragic event. Transocean has and will continue to fully assist all appropriate authorities in their investigations of the incident.

  As the investigations are ongoing and Transocean is involved in pending litigation regarding issues surrounding these events the company cannot comment further on those matters.

4.2  US Responses to the Incident

  Following the 20 April incident, numerous US federal and state agencies began to conduct response and recovery efforts at the direction of BP, the majority leaseholder and operator of the Macondo well. On 26 April, US Secretary of the Interior Ken Salazar directed that the US Minerals Management Service (MMS) conduct physical inspections of all deepwater drilling rigs within two weeks.[5] Since then, various agencies within the federal government also offered a number of policy responses.

4.2.1  Moratorium on Deepwater Drilling

  On 28 May 2010, the US Department of the Interior (DOI) issued an order suspending all new drilling operations in offshore waters deeper than 500 feet.[6] This significant policy shift required that offshore oil and natural gas lessees "cease drilling all new deepwater wells" and notified affected parties that MMS would not consider new drilling permits for covered activities for six months.[7]

  Following a US federal court decision striking down the initial drilling moratorium, the DOI initiated a second moratorium on deepwater drilling. This order suspends drilling operations for wells that use "subsea blowout preventers (BOPs) or surface BOPs on a floating facility."[8]

  Partly in response to significant opposition to the moratorium due to the expected negative economic impact on the Gulf coast region, some Obama Administration officials have suggested that this moratorium may not remain in place until its 30 November 2010 expiration date.[9]

4.2.2  BOP Act

  The Committee on Energy and Commerce for the US House of Representatives unanimously passed the Blowout Prevention Act in late July.[10] This legislation seeks to mandate well design and safety procedures in detail. The offshore oil and gas industry expressed significant concern over this legislation as several components of it could negatively impact the safe and reliable operation of well control equipment. As the full House sought to consolidate several pieces of spill-related legislation, some provisions of the Act were included in the consolidated bill that was passed on 30 July, including corporate certifications regarding proper functioning of all well control equipment. Similar legislation is pending before the US Senate.

4.2.3  Repeal of the Vessel Owner Liability Limitation Regime

  Finally, the US House of Representatives also has acted to radically shift the financial structure of the entire maritime industry, including offshore oil and gas operations, under US civil liability law. Civil liability for vessel owners for death or injuries on the high seas has been in place for more than 150 years and is fundamental within the US maritime insurance industry. In fact, US law is based on historical UK maritime liability regimes.

  In July, the US House of Representatives retroactively removed the liability limitation regime for vessel owners for all claims arising on or after 20 April 2010.[11] This action reverses decades of American jurisprudence on this issue. Without this limitation in place, the US would stand as the only major seafaring nation without a vessel owner limitation of liability regime. Similar legislation is pending before the US Senate.


5.1  General

  In the US GOM, a majority of Transocean's operations utilise dynamic positioning vessels in water depths up to 12,000 feet. There are fewer moored, semi-submersible rigs as compared to the UKCS and Transocean has no jack-up rigs in the US GOM.

  On the UKCS, Transocean's operations generally are conducted in shallower waters. Generally, UKCS drilling operations are not conducted beyond a depth of 3,000 feet. When drilling at depths of up to 2,500-3,000 feet, there are few differences in operations. Beyond approximately 3,000 feet water depths major consideration must be given to changes to well control systems and other operating issues.

  The UKCS is a harsher environment than the Gulf, particularly the northern North Sea and west of Shetland margins. Differences in conditions include lower water temperature, higher annual wave height and wind speed averages that create a dissimilar operating arena both technically and environmentally.

  Finally, operations on the UKCS occur a greater distance from shorelines than drilling in the US GOM. In some cases, drilling operations occur 150 miles offshore, and therefore the drilling operations have a reduced impact on coastal communities.

5.2  Regulatory

  The health and safety aspects of offshore drilling are considered one of the most highly controlled and regulated sectors of the UK offshore industry. After the 1988 Piper Alpha incident, the UK Government introduced the Safety Case regime. The Safety Case Regulations (SCR) with the supporting regulations (DCR, Prevention of Fire and Explosion and Emergency Response Regulations (PFEER) and Management and Administration Regulations (MAR)), provide a robust goal setting regime that requires all duty holders to consider the Major Accident Hazards that could occur on their installations and demonstrate how they can effectively prevent and mitigate against them. This goal setting regime ensures that constant improvements can be made in light of new technology or processes to improve safety and operations. The Safety Case is a living document that continues to evolve over the years as new information is available or elements of the rig operations change.

  The Safety Case is submitted by the "duty holder" to the Health and Safety Executive (HSE) who monitor regulatory compliance. In the case of MODUs, the duty holder is the drilling contractor. The Operator, as the Licence Holder, is subject to separate and additional verification requirements under the DCR in the form of well examinations, which are carried out by a suitably independent and competent person. The Operator is responsible for ensuring that all aspects of well design and well control (up to and including the BOP and well control equipment) are suitable and this is verified through the well examination scheme. The development of a well examination scheme is a continuing process and subject to ongoing monitoring and review by the Operator.

  The BOP and well control equipment are also included within the equipment maintained and operated by the duty holder for the MODU and are covered by the Written Scheme of Verification for safety-critical equipment under the SCR. Regulation of the BOP exists under both the US and UK regimes although, as mentioned, there is the additional cross-check in the UK under the Safety Case regime by the Operator via the independent well examination scheme.

  The Safety Cases produced for Transocean MODUs and the Written Schemes of Verification prepared for safety-critical equipment under the SCR complement Transocean's maintenance procedures and together provide the necessary focus and understanding with regard to equipment criticality when planning and implementing drilling operations.

  In addition to the health and safety legislation, there are specific environmental response requirements from DECC that provide a legislative framework under which cross industry response to major environmental incidents can be assured through the implementation of the SOSREP's powers.

  Finally, Transocean notes the important division of responsibility in the UK over the offshore oil and gas industry, with DECC having responsibility for licencing and environmental issues and HSE having authority over health and safety, including asset integrity, well integrity and systems and processes. In contrast, in the United States it was only in response to the 20 April incident and concerns over close relationships between the regulator and the regulated that a similar division of authorities is being established.


  Recognising the role of the Committee, Transocean offers the following brief recommendations as the Inquiry into deepwater drilling regulations continues.

6.1  The Government Should Allow the Investigations of the Macondo Well Incident to Conclude Before Acting

  There are several US federal investigations ongoing into the Deepwater Horizon incident, including a national commission created by President Obama and a formal hearing being conducted jointly by the Coast Guard and the BOEM. The US Congress has reacted to the tragic events at the Macondo well before all the facts are known and without thorough contemplation of the ramifications of changes to the offshore regime. Transocean respectfully requests the UK Government refrain from acting preemptively and await the findings of investigating authorities so any recommendations are considered, on point and proportionate.

6.2  The Government Should Not Impose a Moratorium on Deepwater Drilling on the UKCS, Particularly West of Shetland

  Operations in deep water on the UKCS west of Shetland have continued for 30 years with 400 wells being drilled without serious incident. As discussed above, Transocean employs state of the art safety and environmental protection technology aboard all its rigs operating around the world, including west of Shetland, and, at all times, does its utmost to comply, and where appropriate exceed, all UK regulations regarding offshore drilling operations. Regulations developed by the UK government in the wake of the Piper Alpha incident are thorough, appropriate and fit for purpose.

  Transocean welcomes the revised inspection schedule required by DECC but feels at this point no further regulatory action is necessary. The industry is continuously reviewing standards to ensure all operations and practices are as rigorous as possible to promote safe and secure drilling on the UKCS. To that end, OSPRAG, created by Oil and Gas UK with participation of the HSE, is working to "provide a focal point for the sector's review of the industry's practices in the UK, in advance of the conclusion of investigations into the Gulf of Mexico incident. " A moratorium on deepwater drilling in the UK would not result in safer offshore UKCS oil and gas operations, and ultimately would have negative consequences for the economy directly impacting tens of thousands of jobs.

  Arguably the risks of drilling in deep water are no greater than drilling anywhere in terms of the controls, vigilance and expertise required. Recovering from a serious loss of control or spill in deep water does have a greater degree of difficulty. In short, the prevention measures are the same irrespective of water depth.

6.3  The Government Should Not Create a De Facto Moratorium

  Actions taken by the Government which create an uncertain business climate for offshore exploration and production would impose a de facto moratorium severely limiting resource recovery from the UKCS. Transocean briefly outlines actions that, if taken by the Government, would dramatically limit oil and gas recovery from the UKCS.

6.3.1  The Government Should Not Take Action That Could Raise Insurance Requirements to Unsustainable Levels

  Were the UK Government to take any action that could raise insurance rates for offshore industry participants, the number of companies, particularly smaller independent oil companies, able to maintain their insurance could be significantly diminished. In turn, many of these smaller companies would be compelled to dramatically curtail or suspend altogether their operations on the UKCS. Losing these smaller companies, many of which are key components of the offshore industry, would cost well-paying jobs for the UK economy, particularly in the Aberdeen area.

6.3.2  The Government Should Continue to Permit International Flagging of Vessels

  On 30 July 2010, the US House of Representatives passed legislation imposing a requirement that all offshore drilling vessels operating on the OCS must be flagged in the US. If enacted into law, this requirement would cause significant disruption to operations on the OCS, weaken US energy security, and represent a shift in the global maritime industry.

  Importantly, a switch to local flagging would not create increased safety requirements or lead to a safer industry. Vessels are frequently flagged in a select few countries for purposes of logistical convenience, not for financial gain or reduced regulatory obligations. There is no material difference in safety or environmental protection between vessels flagged in these countries' ports and vessels flagged in the UK. Vessels flagged under these registries must undergo rigorous inspections before and during their operations within UK waters as required by HSE and MCA under the Written Scheme of Verification.

  Transocean's MODUs are inspected by Class Societies, including ABS or DNV, and the Class Society requirements would be the same irrespective of Flag State.

  Transocean respectfully recommends that international flagging for offshore drilling units and support vessels continue to be permitted.


  The tragic events surrounding the Macondo well incident of 20 April 2010 provide a sobering reminder of the difficult challenges in recovering natural resources in offshore areas. However, the safety record of the offshore industry in the UK over the 20 years since the Piper Alpha disaster demonstrates that with proper safety precautions and adequate training, drilling operations can be completed successfully and in a safe and environmentally responsible manner.

  Transocean appreciates the opportunity to offer this written evidence to the Committee and stands ready to assist the Committee as this Inquiry continues.

September 2010

1   The Sedco 711 rig is excluded from the operating rig count as it is operating West of Ireland, not on the UKCS. Back

2   Further information on these environmental standards is available at Back

3   Additional information on these management standards is available at Back

4   Photos and videos created through the SERPENT Project are available at Back

5   For a complete outline of initial federal efforts to respond to the Macondo well incident, please see Back

6   Minerals Management Service Notice to Lessees No. 2010-N04. Back

7   Id. Back

8   See Department of Interior, Decision Memorandum Regarding the Suspension of Certain Offshore Permitting and Drilling Activities on the Outer Continental Shelf (July 12, 2010), available at Back

9   "White House May End Ban on Deepwater Drilling Early," The Washington Post, 3 August 2010. Back

10   H.R. 5626, at Back

11   H.R. 5503, available at Back

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