Weeks of Downtime
Deep-water oil exploration involves extending steel tubes from floating rigs more than a mile to the seafloor and inserting a drill bit through the tube to carve a hole in the Earth. Five-story stacks of valves and pressure-control gear known as blowout preventers, or BOPs, are planted atop the well to snuff out unpredictable surges of gas and crude that pose a danger to rig crews on the surface.
It was just such a surge that exploded onto the deck of Transocean’s Deepwater Horizon rig in April 2010, killing 11 workers, injuring 17 and triggering an 87-day oil spill that fouled thousands of square miles and shut much of the Gulf to fishing and exploration for months. The $365 million rig that sank during the disaster still rests on the seafloor.
“We expect rig downtime to be 2-3 weeks” including time to bring equipment up, replace the bolts and return to the seafloor, Gregory Lewis, a New York-based analyst for Credit Suisse, said in a note to clients yesterday. While the government order affects only drilling in the U.S. Gulf, “discussions with one driller lead us to believe it will be up to each operator whether to pull the BOP and replace the bolt outside the U.S. Gulf,” he wrote.
Oil production from wells in federal waters of the Gulf accounted for 20 percent of total U.S. crude output as of the end of November, according to the Energy Information Administration. The region produced about 7 percent of the nation’s gas.
The defective bolts are part of a GE product known as an H-4 Connector, an 18.75-inch (47.62 centimeters) clamp that attaches blowout preventers to the well below it and to the pipes that lead to the rig on the surface.
GE rose 0.2 percent to $22.48 at the close in New York. Transocean Ltd., the world’s largest offshore rig operator, fell 0.5 percent to $56.23. Transocean said it doesn’t expect the issue to have “significant impact” on its business.
Transocean has the greatest exposure, with 55 of its rigs around the world outfitted with GE’s connectors, including a dozen in the Gulf of Mexico, Luke Lemoine and Joseph Gibney, analysts at Capital One Southcoast in New Orleans, wrote today in a note to investors.
The Deepwater Horizon catastrophe prompted U.S. regulators to increase scrutiny and testing of subsea equipment and call for upgrades. BOPs cost about $45 million and weigh as much as 400 tons. Some rig operators have begun using multiple BOPs at a drilling site to speed the inspection process and bolster safety.
Statoil ASA delayed the plugging and abandonment of its Krakatoa well in the Gulf by one week to allow new bolts to be installed, Ola Morten Aanestad, a company spokesman, said in a phone interview yesterday. Transocean owned the rig in use at the site.
Aanestad declined to say if there was any added cost to Statoil due to the delay. In general, downtime because of an issue that’s a rig owner’s responsibility, such as one related to a blowout preventer, would mean that an operator isn’t required to pay the day rate, he said.
Shell is assessing whether the bolt corrosion matter is applicable to two of its rigs in the Gulf and found it doesn’t apply to a third rig, Kelly Op De Weegh, a spokeswoman for The Hague-based company, said yesterday in an e-mail.