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

Memorandum submitted by TOTAL E&P UK LIMITED


  Major incidents offshore are, thankfully, rare. However, they are a stark reminder to the industry that a combination of poor planning, decisions or competences can combine with disastrous results. Following the Macondo blow-out in the Gulf of Mexico, TOTAL E&P UK, like many others, has looked closely at its own procedures, both within the company and in collaboration with regional and national regulatory authorities. Audits of safety, environmental and operating processes, competences and regulatory requirements have been carried out. There is no doubt that the whole industry has been severely challenged by the Macondo incident.

  TOTAL E&P UK's corporate technical and management procedures and the UKCS regulatory regime are robust for both exploration and production operations, across all water depths of the UKCS. Around the world drilling is now carried out in water depths of up to 3,000 metres whilst, in the UKCS, water depths do not come close to these levels. In addition, it should be noted that water depth was not the determining factor in the causes of the Macondo incident and that water depth is not considered the most significant element in designing and drilling a subsea well.


  TOTAL E&P UK is one of the largest operators on the UK Continental Shelf in terms of production and reserves, with daily operated production in the region of 270,000 barrels of oil equivalent per day. Some 70% of this production is gas.

  TOTAL E&P UK owns and operates the Alwyn North, Dunbar, Ellon, Grant, Nuggets, Forvie, Jura and Otter fields in the Northern North Sea. Along with its partners, it also owns and operates the Elgin, Franklin, West Franklin and Glenelg Fields in the Central Graben Area of the Central North Sea.

  In March 2010, TOTAL E&P UK received final sanction to develop its Laggan and Tormore gas fields in the region West of the Shetlands (WoS), in which the company has an 80% interest (DONG Energy has 20%). Developing those fields and the associated infrastructure will open up the whole of the WoS region and unlock the UK's gas reserves currently stranded there. The development of the fields has started with the construction of a new gas plant in Sullom Voe on the Shetland Island, with offshore drilling of the gas wells being planned for mid 2012 in a water depth of 630 metres.

  Onshore, TOTAL E&P UK also operates the St Fergus Gas Terminal on the northeast coast of Scotland, which receives and processes up to 20% of the UK's natural gas requirements from over 20 fields in the UK and Norway. In 2014 the gas production coming from WoS will also be processed in the St Fergus terminal.


Q1  What are the implications of the Gulf of Mexico oil spill for deep water drilling in the UK?

  1.1  A major offshore incident in the oil and gas industry, whilst rare, is a reminder of the inherent risks and the need to be totally rigorous in identifying potential dangers and taking appropriate steps to eliminate or minimise risks to staff and the environment. Twenty years ago exploration drilling in up to 300m water depth was considered to be deep water. Global experience acquired during those intervening years, plus very significant advances in technology, now enable drilling to take place in 3,000m of water whilst, in the UK, wells have been drilled in water depths up to 1,800m. For this reason, drilling rigs are designed and constructed specifically for the local environment, with the appropriate technology and safety equipment to suit these conditions (eg water depth, meteorological and oceanographic conditions), in which they are expected to operate. The industry, however, which has operated successfully for so many years in the UK, is now challenged by the magnitude of the Macondo incident. Although UK operators have built up a unique range of experience by working in difficult conditions around the UKCS, the implications of the Macondo incident are numerous.

  1.2  For an operator like Total what are the implications?

  First, we immediately asked ourselves the question, "Could this happen to us?" The answer to that is that the risk is very low but it is not impossible. Despite our confidence we have therefore taken immediate action to ensure this risk remains As Low As Reasonably Practicable ("ALARP") across our operations worldwide and particularly in the UK.

  To this extent we have launched several actions covering procedures, competence and emergency response:

(a)  Immediate actions taken internally by Total

  We immediately launched an audit on current drilling operations with most emphasis on:

    — The design and architecture of the wells—this is key;

    — The BOP equipment, its configuration, maintenance and function tests;

    — Well control training and exercises;

    — Review of the functioning of our organization; and

    — Approval of, and thereafter adherence to, the drilling programme.

(b)  Longer term actions

  In parallel, but with a deadline before the end of 2010, various internal work groups have been set up in Total's headquarters with focus on the following subjects:

    — Re-evaluation of our drilling procedures, of BOP equipment and training of personnel;

    — Study and design of capture/containment techniques in subsea wells;

    — Re-evaluation of safety barriers in place on our deepwater production installations; and

    — Re-analysis of the methods and techniques of anti-pollution treatment and control.

  All this work will take into account the lessons from the Macondo incident, its causes and also the measures taken by BP to make good the damage.

(c)  Follow up and active participation in industry activities

  In addition, TOTAL is actively participating in industry-wide work on the same subjects within the framework of national and international associations (OSPRAG, OGP, IPIECA, API) as well as with the regulatory authorities of Norway and the Netherlands. In particular, it should be mentioned that TOTAL E&P UK is directly involved with our drilling experts in the technical work groups of OSPRAG, which includes UK regulators, and OGP in Europe.

  It should be noted that the implications of the Macondo incident are not limited to deep water activities. All subsea operations require to be reviewed, both in light of the information becoming available from the Gulf of Mexico and from all the investigations being carried out in the industry. Regarding TOTAL, our procedures are based on worldwide experience, are under permanent review and are adjusted or modified as necessary in light of new experiences and technologies. The TOTAL organisation is relatively centralised; this not only encourages the growth and sharing of knowledge but also a control of its global activities to ensure that worldwide experience is incorporated in all operational areas.

  1.3  An important implication of the incident is the necessity to reassess the competence of staff and contractors and especially those holding key positions on drilling rigs. All TOTAL's operational staff benefit from extensive training, certified by independent organisations, including regular assessments on the subject of well control. The performance of our subcontractors, the principal drilling contractor and associated service companies, are the subject of formal reviews. In addition to comprehensive training programmes already in place, we are now in the process of reinforcing our Competence Assessment Management System for specific roles.

  Before commitment, any drilling rig is fully inspected and the main components, including safety equipment, are tested. We ensure that staff and contractors are fully aware of the importance of the strict rules and procedures and that the supervisory staff and managers implement these strict processes.

  1.4  Emergency response plans are an essential element of every drilling or production programme. These are subject to the same rigorous and detailed in-house analysis, as well design and construction, and are fully exposed to regulatory inspection. The Gulf of Mexico incident is a stark reminder of the need to keep these plans updated as circumstances change, and keep staff fully aware and prepared. In all cases a blow-out contingency plan is developed and plans for emergency relief wells are defined before drilling commences. However, improvements must be made regarding well-capping methodology and equipment availability. Within OSPRAG, with Oil Spill Response Ltd and the Maritime & Coastguard Agency, we are reassessing how the existing responses to pollution can be improved but it must be recognised this is a difficult problem in the environmental conditions of the North Sea. However, Environmental Statements remain vital to demonstrate all risks are assessed and control plans are in place. In the UK these are placed before the regulators and the public for scrutiny.

  1.5  The points raised in the answers above frequently refer to staff competence and awareness. This cannot be over-emphasised since no amount of excellent procedures and processes, top-rated equipment and safety systems, environmental analysis and controls can be sufficient if they are not correctly implemented. In TOTAL E&P UK any initiative targeting cost-savings by shortcutting procedures is prohibited. This is clearly the policy of most operators. In TOTAL, senior management regularly visit all operational sites and offshore facilities to remind staff and contractors of our policy and that their "going home safe and well" at the end of a tour of duty is paramount. Individual responsibility must be a habit and remains critical to the ultimate success of any activity.

Q2  To what extent is the existing UK safety and environmental regulatory regime fit for purpose?

  2.1  The UK regulatory regime takes a risk-based approach and is considered fully fit for purpose. It requires that, prior to any activity, all elements of the work are reviewed and every possible risk evaluated for potential impact with a full programme of risk avoidance or reduction put in place. The UK regulatory regime is one of the, if not the most, robust and rigorous regimes in the world with a very positive dialogue and level of challenge from the regulators and other organisations, which adds considerably to the final operational programme placed before the regulator for approval.

  2.2  UK regulators have the benefit of experience from every operator in the UKCS and so have a broad range of knowledge to draw upon when assessing both Operational Plans, Safety Cases and Environmental Statements. In addition to this robust process, TOTAL is part of one of the largest, integrated oil and gas companies in the world with significant experience of High Pressure High Temperature and Deepwater Drilling Operations. Our own corporate review procedures, before any application is made to the UK regulator, require that the full technical work programme is thoroughly vetted and passes the strict level of review, based on our global experience and procedures.

  2.3  As already pointed out to Lord Marland as part of TOTAL E&P UK's response to the question of red tape in DECC regulation, one concern is the significant pressure on a small number of highly professional DECC staff. Already we have seen slow responses on items of high importance and any reduction in the existing staff or loss of expertise would, we believe, result in inefficient operations and potential for error. We strongly support the DECC units regulating oil and gas activities and would be very concerned if there were any degradation in numbers or experience.

Q3  What are the hazards and risks of deepwater drilling to the West of Shetland?

  3.1  The West of Shetland area is not considered to be an especially deepwater area by global oil and gas operational standards. Around 300 exploration and appraisal wells have already been drilled in the area with no major problems. Hazards especially associated with West of Shetland drilling relate primarily to meteorological and oceanographic conditions. Wind, waves and currents are more severe and often less predictable than encountered during normal Gulf of Mexico activity and require a range of operational decisions to be made regarding the drilling unit contracted. If operations were to continue all year a Harsh Environment Unit might be needed. This would include the option of both moored and dynamic positioning systems. Due to significant water currents at different depths, more care must be taken with riser design, wellhead fatigue analysis and general load distribution. These and many other aspects are major considerations in selecting a suitable rig to operate WoS and are often more demanding criteria than applied to normal UKCS activities. However, all of these elements form part of the strict in-house planning process which takes place prior to putting a programme to the regulator. The number of wells drilled clearly demonstrates that the industry does have the skills and technology required to operate safely WoS.

  3.2  The Macondo well was being drilled into an overpressured reservoir in the Gulf of Mexico. In some parts of the world, TOTAL conducts such High Pressure High Temperature (HPHT) operations in relatively deep water. In the UK, TOTAL E&P UK has extensive and successful HPHT operational experience from the Elgin/Franklin and associated fields in the Central North Sea, with wells drilled on dedicated fixed platforms. However, the geological conditions WoS are very different and no significant overpressure has been encountered by TOTAL E&P UK to date in this part of the UKCS.

  3.4  Some of the technical differences noted between TOTAL E&P UK's WoS operations and that of BP in the Gulf of Mexico include the following:

    (1) Tormore and Laggan have hydrostatic pressure;

    (2) We use conventional cement slurries;

    (3) We centralise our casings properly;

    (4) We perform cement bond logs;

    (5) The wellhead system incorporates locking mechanisms as standard;

    (6) A detailed well control audit is performed;

    (7) The secondary Blow-Out Preventer shut-off mechanism is routinely tested; and

    (8) We do not use auto-fill float equipment.

  3.5  BP has already developed several oil fields in the WoS region, including Foinaven and Schiehalion with floating units and more recently the Clair Field in shallower waters with a fixed platform. TOTAL E&P UK is in the process of developing the Laggan and Tormore fields. These fields, located in 630m water depth are gas fields and the drilling of 7 gas wells is planned to be carried out from mid 2012. Laggan and Tormore are very conventional gas reservoirs with no particular technical difficulty anticipated.

Q4  Is deepwater oil and gas production necessary during the UK's transition to a low carbon economy?

  4.1  DECC figures show that 70% of primary energy supply in 2020 will come from oil and gas.

  4.2  TOTAL E&P UK have production profiles for existing fields and current developments to at least 2030 on the UKCS. With additional exploration, particularly WoS where new pipeline infrastructure offers a new incentive to exploration drilling, this date could be pushed further out.

  4.3  Maximising recovery from the UKCS reduces our dependence on imports, which DECC's own publications confirm will be scarcer but in demand beyond 2050 and consequently more expensive. The UK cannot afford to waste a valuable resource that can mitigate against delays in development of alternative energy strategies. It can be assumed, from recent experience, that imports of hydrocarbons will be both expensive and at the mercy of overseas suppliers. Political and economic pressures on import prices are unpredictable but can be avoided for as long as possible by maximising indigenous hydrocarbon supplies, much of which will come from the as yet undeveloped WoS area.

  4.4  While oil is primarily for transport, chemicals and special products, gas plays and will continue to play a vital role in electricity and heat production for decades. TOTAL E&P UK is already working to develop gas fields that will produce approximately 1 trillion cubic feet of gas, and has a range of additional exploration and appraisal plans for further work over the next few years. The WoS area is crucial to maintain gas supplies to the UK.

  4.5  Maximising UKCS production through the WoS exploration and developments also provides a major investment opportunity for UK businesses, will maintain large numbers of jobs with highly exportable skills, significant revenues for the Treasury and ensures security of supply for the country.

Q5  To what extent would deepwater oil and gas resources contribute to the UK's security of supply?

  5.1  Production from the North Sea is in decline. Significant discoveries will no doubt still be found but these will be very much smaller than the billion-barrel fields of the 1970s. The average size of UKCS discoveries in the last 10 years is only around 20 million barrels of oil equivalent and many of them are gas discoveries. Despite this, the decline of the UK gas production has been much quicker than the oil production, and the UK "has moved from being a country self-sufficient in gas to one increasingly dependent on supplies from elsewhere in the world" (cf Jonathan Roger, Centrica—Profile; Press & Journal). It should be remembered that the UK is the biggest gas consumer in Europe. As a result, imports have reached more than 50% of the country's needs, gas being imported through pipelines from Europe or as liquefied natural gas by tankers from the Middle East or elsewhere. The same scenario will soon happen for oil. It is therefore now a vital political decision to let dependency from foreign imports increase, or maximize domestic production to reinforce security of supply. In that respect it is relevant to remind that "the past winter was the harshest for more than 30 years and gas demand reached record highs" creating a situation of shortfalls.

  5.2  The Southern, Central and Northern North Sea areas make a vital contribution to the UK's hydrocarbon production. All these areas are in water depths of less than 200m. Although water depths are greater WoS, this is a very large area and with developing technologies and rising product prices combining to encourage drilling, more discoveries have been made and prospects identified. As part of the current development of the Laggan-Tormore area by TOTAL E&P UK, a new gas pipeline system is being built that will connect these WoS discoveries to the UK mainland. This new system has been oversized in the expectation that further exploration and development will look to use the pipeline for decades to come, including accumulations that in themselves could never justify the cost of this new-build infrastructure.

  5.3  Discoveries such as Tobermory, to the north of Laggan-Tormore, hold the hope of further gas field developments and new infrastructure, which could again open up new areas for TOTAL E&P UK and third parties, which would further protect the UK's security of supply.

  5.4  Although there are various ranges published, DECC estimates there could be as much as 36 billion barrels of oil equivalent still recoverable from the UKCS, compared with about 40 billion barrels oil equivalent already produced. This estimate reflects the possibilities in new areas and new technologies. Seventeen percent (17%) of the proven and probable reserves are estimated to lie to the West of Shetland but, as shown above, the availability of new gas-gathering pipelines is anticipated to offer a significant incentive to further exploration and the discovery of new reserves in the coming years, which are not included in proven and probable reserve estimates.

September 2010

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