Memorandum submitted by Transocean Drilling
U.K. Limited
1. EXECUTIVE
SUMMARY
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.
2. BACKGROUND
AND EXPERIENCE
OF WITNESS
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. TRANSOCEAN'S
DEEPWATER ACTIVITIES
IN UK
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 (www.serpentproject.com). 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. THE MACONDO
WELL INCIDENT
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. COMPARING
US GOM AND UK NORTH
SEA OPERATIONS
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.
6. RECOMMENDATIONS
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.
7. CONCLUSION
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 http://www.iso.org/iso/iso_catalogue/management_standards/iso_9000_iso_14000/iso_14000_essentials.htm. Back
3
Additional information on these management standards is available
at http://www.iso.org/iso/iso_catalogue/management_standards/iso_9000_iso_14000/iso_9000_essentials.htm. Back
4
Photos and videos created through the SERPENT Project are available
at http://www.deepwater.com/fw/main/SERPENT-Project-340.html. Back
5
For a complete outline of initial federal efforts to respond to
the Macondo well incident, please see http://www.whitehouse.gov/blog/2010/05/05/ongoing-administration-wide-response-deepwater-bp-oil-spill. 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 http://www.doi.gov/deepwaterhorizon/loader.cfm?csModule=security/getfile&PageID=38390. Back
9
"White House May End Ban on Deepwater Drilling Early,"
The Washington Post, 3 August 2010. Back
10
H.R. 5626, at http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=111_cong_bills&docid=f:h5626ih.txt.pdf Back
11
H.R. 5503, available at http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=111_cong_bills&docid=f:h5503eh.txt.pdf Back
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