Oil drilling returns to Gulf of Mexico

John Moylan goes behind the scenes at Perdido to see how Shell’s operation works

9 November 2011

It’s a one-and-a-half-hour flight by helicopter to the loneliest platform in the Gulf of Mexico.

Perdido lies 200 miles (322km) south of the coast of Texas. It’s just nine miles from the edge of US territorial waters.

The huge structure floats in more than 8,000ft (2,438m) of water, making it the deepest deep water drilling and production platform anywhere in the world.

It collects oil from wells at depths of more than 9,000ft.

When it started to pump oil to shore, back in March 2010, it had cost in excess of £2bn.

But within weeks, drilling on the brand new state-of-the-art platform had ground to a halt.

Deepwater Horizon

The reason was the Deepwater Horizon disaster. It left 11 people dead and resulted in the largest accidental offshore oil spill in US history. The Obama administration responded by imposing a deep water drilling moratorium. Across the Gulf, equipment worth billions stood idle.

“It’s had a big impact on our business,” says Marvin Odum, president of Shell Oil Company, the US division of oil major Royal Dutch Shell.

“We’ve lost hundreds of millions of dollars associated with not having that production.”

Shell had five other platforms drilling in the Gulf at the time. All were shut down.

The Gulf of Mexico has been a source of energy for the United States since the 1920s. Today it accounts for 30% of all the oil consumed there.

And according to Daniel Yergin, the bestselling author and authority on the industry, it supports about 400,000 jobs alone in the four Gulf states of Texas, Louisiana, Mississippi and Alabama.

“It wasn’t really recognised before how much of US oil production comes from the Gulf,” he says. “The employment impacts are much larger than people realised, it’s also quite an important source of government revenues.”

So in the months that followed the accident, as millions of barrels of oil polluted the Gulf’s clear blue waters and public opinion hardened, the Obama administration faced a dilemma – how and when to allow deep water drilling to resume.

Aftermath

The drilling moratorium was lifted in October 2010. But many complain that a “de facto” moratorium has existed ever since.

“It takes about 200 days now to get a drilling permit,” says Mr Odum. “That used to take about 50 days.”

A year on, drilling activity still hasn’t recovered. According to the oil services firm Baker Hughes, the number of drilling rigs in US waters fell from 46 in the first quarter of 2010 to just 12 rigs four months later in July. The numbers have since increased but averaged 34 in the most recent quarter.

By contrast, the number of oil rigs drilling across the United States recently hit a record high, a reflection of the soaring interest in unconventional so called “tight oil”.

There’s also a new offshore regulator and new rules covering deep water activity.

Back on Perdido that includes independent checks of the on-board Blow Out Preventer, the last line of defence against an uncontrollable well. It’s the vital piece of equipment which failed in the BP accident.

Mr Odum also points to the new Marine Well Containment System developed by the industry.

“One thing that was perfectly clear to us and to everyone else that was watching that incident unfold is that the ability to respond to oil in the water was not adequate. So we’ve built new systems now to do that.”

Uncertain future

Those systems would be stretched to the limit in the event of an accident at Perdido. It’s 60 miles from the nearest platform. Any rescue boats would be hours away.

It’s also drawing oil and gas from the deepest sub-sea well in the world. Capping a blow out could mean operating in 9,000ft of water, almost twice the depth of the Deepwater Horizon’s Macondo well.

But the rewards of operating in deep water are great.

Perdido is expected to keep oil and gas flowing for the next 20 years. At its peak it will produce 100,000 barrels of oil a day, which Shell says is enough to meet the energy needs of more than two million households.

But Bob Tippee, editor of the Houston-based Oil & Gas Journal, warns that a major deepwater incident can happen again. He’s been covering the industry for 34 years.

“We’re going to be drilling more wells. We’re going to have more industrial activity in deep water environments,” he says. “And where you have industrial activity anywhere, you are going to have accidents.

“The only way to have zero risk is to have zero activity, but then you have zero energy.”

SOURCE ARTICLE (WITH VIDEO CLIPS)

Marvin Odum, President of Shell Oil Company, on new safety measures brought in since the Deepwater Horizon accident

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