Macondo casts a giant shadow

March 2, 2011

The Macondo well disaster and its ramifications were never far from the surface during the recent GE Oil & Gas annual meeting in Florence, where business leaders gathered in large numbers to discuss the technological and regulatory challenges facing the industry as it adjusts to a reset global economy. Meg Chesshyre reports.

Our industry was turned upside down by BP's Macondo incident,' Sam Aquillano, GE vice president, drilling & production, said in an interview during the two-day GE Oil & Gas annual meeting in Florence, now in its twealth year. ‘A lot of permitting was delayed as everyone was working on new regulations and being cautious.'

Aquillano pointed out that only one deepwater permit has been released in the Gulf of Mexico since the accident, and that was to Chevron for a water injection well. Even in shallow water, about 12 permits a month used to be released before 20 April 2010. There have only been just over a dozen to date since the disaster

‘A big piece of our world changed last year and we saw a lot of projects move to the right. The whole dynamics of the industry changed, probably forever.' He said GE was working on improving the human interface for its control systems. ‘We think we have the capability to provide more fail-safe procedures and equipment. We've also increased the shearing capacity of our BOPs. We're up to 15,000lbs from 10,000lbs.'

Despite the post-Macondo situation, however, Aquillano anticipates that total E&P spending across the world is going to be up 11% this year, getting back up to 2008 levels. There was also a fair amount of activity associated with rig newbuilds. In 4Q 2010, GE landed its fifth order from drilling contractor Pride International for its Spider automated riser hook-up system, which takes people out of harm's way from the drilling deck.

Aquillano confirmed that GE Oil & Gas was close to completing the purchase of flexible pipeline manufacturer Wellstream – GE's fourth major addition to its drilling & production segment in as many years following the acquisition of Vetco Gray and Sondex in 2007 and Hydril Pressure Control in 2008. ‘We are the only company in the world that has the topsides and the subsea, but we're further integrating in that value chain by connecting that equipment through the flexible risers,' he said. For instance, for a current OGX project offshore Brazil, Wellstream has the flowline contract, and GE is supplying the trees and the topsides, ‘so that is going to be a marriage of three elements of our value chain'. GE, which has invested heavily in both its Brazilian Jandira manufacturing plant and its service facility in Macae, also has a good relationship with Petrobras with repeat orders throughout 2010, said Aquillano.

Things were also going very well in Western Australia, where GE business units have a major involvement in Chevron's Gorgon gas project. From a standing start 18 months ago, the GE presence there is now almost up to 300 people and a new state-of-the-art facility is being built in Perth to accommodate them. ‘We believe that we could even provide flat pack trees there for some of the new gas projects in the future,' Aquillano noted, adding that GE is already carrying out FEED studies for Chevron's proposed Wheatstone development. There are also plans to build a learning centre in Houston, which will probably be operating next year.

Upcoming product launches include the Drilling iBox, currently being developed in combination with GE Intelligent Solutions, which will enable GE technicians to monitor and diagnose problems at the customer's site and provide a preliminary recommendation. The company is also putting a lot of money into its ‘frac opportunity', said Aquillano. The goal is to build more robust and sand tolerant frac equipment, thereby improving reliability and utilisation.

The ‘solutions fair' at this year's Florence meeting – which drew over 1000 attendees from operators, contractors and service companies worldwide – showcased a number of GE technological innovations including the Blue-C subsea compressor. Designed for unattended operation in water depths to around 3000ft and to provide up to 15MW of power, the Blue-C completed successful testing between March and October last year. In December, the first unit was shipped to Aker Solutions' Egersund yard in Norway for system integration testing later this year in preparation for deployment in the Ormen Lange project (OE January 2010).

Among the latest contract awards announced by GE Oil & Gas during the meeting were $50 million worth of orders from Brazil's Petrobras to supply a total of 171 subsea wellhead and installation tooling systems for deployment in the Campos and Santos basins.

Maersk Oil & Gas ordered seven subsea tree and wellhead systems, using the VetcoGray MHXT tree and VetcoGray SG-5 wellhead system, for deployment in the UK North Sea. These deliveries, with an anticipated total value of about $20 million, will be made under a five-year frame agreement covering subsea wellheads, trees and tubular products signed recently with Maersk Oil. The trees will be manufactured at the GE Oil & Gas plant in Aberdeen and the SG-5 wellhead systems will also be manufactured in Scotland, at the company's Montrose service facility. These systems are set for a phased delivery from September.

GE's planned acquisition of Wood Group's well support division in a $2.8 billion transaction (see ‘Firms') will add electrical submersible pumps (ESPs) to the growing GE Oil & Gas portfolio of drilling and production technologies. With the oil industry accent very firmly on enhanced recovery these days, continued rapid growth in ESP deployment is anticipated globally.

GE also believes the Wood Group pressure control platform will complement its own wellhead and flow control offerings, while at the same time increasing its capabilities in the rapidly growing unconventional oil and gas segment, and expects Wood's wireline logging business to benefit from improving North and South American activity levels.

Additionally, the two groups have agreed to 90-day negotiation period to seek a potential commercial arrangement relating to turbo machinery servicing. OE


Conference jottings
Macondo and Montara were two incidents that had nothing to do with Chevron, he added. ‘We didn't make a single mistake, but they have had a dramatic impact on our ability to operate our business in Australia and the Gulf of Mexico. Both of these incidents provided us with an opportunity to review our internal processes and we closed some gaps. The question is whether we as an industry will do the same thing on a broader scale and how we are going to do it.'
Payne added: ‘We as engineers need to focus on simplicity and standardisation. Even when the solution is complex, ensuring a simple operator interface is critical. We have yet to design any process in our business that does not rely on a human interface for successful operation. We need to spend as much time engineering simple interfaces as we do designing the equipment itself.'
The American Petroleum Institute was a recognised repository of recognised standards, but often these were not given the level of importance that they deserved, said Payne. ‘We have difficulty standardising in our own companies, let alone across the industry.' He cited one example of a single project with four manifolds, all of which were dramatically different.
‘We as an industry need to find a way visibly to raise standards across the board. We are doing a lot of good work but there is no expectation of consistency across company boundaries. That lack of consistency has put us all temporarily out of business in the Gulf of Mexico.'
* Brazilian E&P company OGX's rapid climb to prominence was outlined by the company's drilling executive manager Ricardo Juiniti. Founded in July 2007, the company has already drilled 32 wells and has seven rigs drilling simultaneously. The original business plan had been 51 wells by 2013, but this target has now grown to 87, he said. The drilling arm's efforts are supported by OSX, set up by parent company EBX with an eye to the Brazilian government's tightening local content requirements. A new shipyard facility being established in Brazil by OSX in partnership with Hyundai (its first such venture outside Korea) plans to build, lease and operate FPSOs and wellhead platforms.
* Woodside's key focus is currently on Australian oil and gas production including LNG, according to Vince Santostefano, the company's EVP production. The Pluto LNG project, due onstream this year, will have taken just six years from discovery to production, he noted, and there are plans for further LNG trains. Meanwhile, the FEED for the Browse project – which includes a central processing complex and two TLPs offshore, three LNG trains and a combined steam and heat plant – is expected to begin early 2011.
* Offering a drilling contractor's perspective on equipment reliability, Maersk Drilling chief operating officer Jorn Peter Madsen pointed out that his company has renewed its fleet over the past five years with 11 new rigs, mostly deepwater semis and jackups with some very advanced equipment. The new deepwater semis have 22 different pieces of equipment on the drill floor, he told the conference. ‘From the rigs we built in the 1980s to the rigs we build today there is about 250% more equipment and 700% more control units.'
The company experienced 15% downtime in the first year of operation of its three deepwater rigs, he added. Most of that downtime was not operationally linked but attributable to equipment reliability issues. The downtime jeopardised Maersk's ability to enter into new contracts with customers, he said, and halved the company's profit in this segment.
As equipment became more specialised people had to be retrained each time they moved. ‘We really need those people of 20-25 that are really good at the computer joysticks, and we would really also like them to have 20-25 years experience, so that they can detect a well control situation, if and when it should occur,' declared Madsen.


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