The Gulf of Mexico Revival

The revival of the U.S. Gulf of Mexico is, in reality, part of the continuous circle of learning. This includes mastering new technology, developing emergency procedures, putting rigorous operating procedures in place, involving the organization and engaging people in offshore production and safety. We need to understand what we had, what we learned and what we need to go forward – and risk is the common thread woven throughout that entire timeline. If the question is what is essential for the Gulf revival, I say that is all about how we manage the risks.

The Macondo well blowout catapulted the industry into a full-blown crisis situation. The response was a complex operation with thousands of people involved, and which involved a large number of vessels, many tasked with handling equipment and tasks for which they were not designed to do. In a crisis state, time is precious and many operations that would normally require days, weeks or even months to assess had to be decided and executed within very short time frames and often in parallel.

In a crisis situation, every minute counts, every action matters and every decision is significant. Risk management was a key component of the emergency response to ensure that all response actions were performed safely, and that they would not make the situation worse. The industry’s challenges were extraordinary. Vessel modifications required new safety studies. Containment structures, marine risers and subsea equipment were designed at an incredibly rapid pace. Then, as the equipment was manufactured or modified, fabrication surveys, on a priority basis, were required. Since many of the response vessels would be called to flare gas and burn oil, operations which they were never designed to do, flaring studies had to be done. Also, more than that 200 newly developed response procedures could not be approved until hazard identification (HAZID) and operations (HAZOP) reviews were completed. DNV was one of the contributors to ensure actions and operations were safely implemented and executed throughout the crises period. Three months after the Macondo well blowout, the well was successfully capped.

But longer term, for a complete revival of the Gulf of Mexico, there was still much to do.

Early on, DNV recognized the Macondo Well blowout may be a significant game-changer for the oil and gas industry, and saw the longer term need to consider the elements for an effective safety regime. Based on DNV’s collective knowledge of regulatory regimes and global operations in different industries, DNV produced a position paper, “Key Aspects for an Effective U.S. Offshore Safety Regime.”

The key characteristics in DNV’s position paper includes:
• Performance-based regulations, supplemented by prescriptive regulations
• Equal consideration of technology, the company organization and the people
• Clear roles and responsibilities for owners, operators and regulators alike
• Enforced identification, reduction and control of risks
• Shared performance monitoring
• Practical and economic feasibility
• Balance between risk, control and condition

The position paper, which has been widely presented, is available at:
www.dnv.com/resources/ position_papers/us_offshore_safety_regime.asp

DNV was asked to produce an independent assessment for comparing drilling safety regulations between U.S. and Norway by the Norwegian Oil Industry Association (OLF). The study was neither a subjective evaluation of which regime is better, nor did it evaluate how effectively each regime was implemented. Mainly, the U.S. is mostly a prescriptive approach, specifying the means for the minimum compliance, while Norwegian regulations are mainly performance-based, allowing for different approaches to achieve safety targets. Additionally, Norway includes systematic risk management practices.

Until April 19, many felt that the industry had mastered the best practices and achieved the highest levels of safety. Even more felt that if a disaster did occur that we had adequate emergency and response procedures to mitigate the damages and return to normal operations. Unfortunately, we now see that there were weaknesses in our safety regime, and emergency and response procedures. The weak spot in our traditional risk management methods is that they place little attention to those few risks with a very high-loss potential and a very low probability of happening.

BOEMRE and Congress knew that confidence in the offshore safety system was severely shaken. BOEMRE quickly completed a 30-day safety review while Congress began numerous committee hearings, and debated hundreds of new legislative proposals. Even though the legislative and regulatory processes are not concluded, BOEMRE did issue a number of new safety requirements. Indeed, until many of these new safety requirements could be implemented and verified, the U.S. offshore industry was effectively shut down.

One of the new safety measures was to ensure that blowout preventers would meet their original functional requirements throughout their operational lifetime. DNV rapidly developed the Recommended Practice RP E-102, Recertification of Blowout Preventers to address the new U.S. requirements. And the industry had the guidance and certainty necessary to meet this new requirement.

The industry then shifted its attention to the structural integrity of drilling and well control systems. Years earlier, however, DNV had started a study of the structural integrity of drilling and well control systems. This has now become an important Joint Industry Project (JIP). Today, several global oil and gas operators are active members, participants and contributors to this JIP.

Additionally, DNV was awarded the contract from the JIT to conduct the forensic investigation of the BOP. From NASA’s secure facility in Michoud, Louisiana, DNV’s failure and forensic specialists and subsea experts carried out the investigation. The investigation was completed and the report was issued on March 20, 2011. It is available online at: www. deepwaterinvestigations.com

The Macondo well blowout, the explosion and loss of 11 lives on the Deepwater Horizon were not unimaginable; they were just highly improbable. Now, the purpose of risk management is not to eliminate risk, but to fully understand it, so that you can take advantage of the upside and minimize the downside. This requires clarity on what risks we are prepared to take, how much, and what processes can be used to manage these risks.

In concluding, I am proud of DNV’s contributions to the Gulf of Mexico revival. I am proud that DNV offered the U.S. proposals for the best regulatory regime in the world, and that we initiated serious discussions on “what could be” for offshore safety in the U.S.

Now, I want to revisit my statement that revival is about how we manage the risks. We know that risk is a major consideration for new technology, more challenging projects, operating and emergency procedures, and that risk permeates all organizational functions, especially human factors and capabilities. To the extent we can control and minimize risks, we can greatly reduce finding ourselves in a revival or survival predicament. It is now time for us to focus our attention, technical skill, and research and development on the low probability, high- consequence events. It is all about risk.

Elisabeth Torstad is the Chief Operating Officer of Division Americas and Sub-Saharan Africa