No reports to date that this weekend’s solar storms disrupted drilling operations

Last year, there were reports that a level 3 geomagnetic solar storm rendered GPS signals unreliable and caused the brief suspension of at least one drilling operation in Canada (tweet below).

This weekend’s solar storms were level 5, the highest category (see chart below), but there have been no public reports to date of suspended drilling operations.

Wind energy rule codifies increased financial risk for taxpayers

Decommissioning Vindeby wind project, Denmark

BOEM’s “Rule to Streamline and Modernize Offshore Renewable Energy Development” is intended to “make offshore renewable energy development more efficient, [and] save billions of dollars. Unfortunately, the savings associated with relaxed decommissioning financial assurance requirements translates to increased risk for customers and taxpayers.

BOEM signaled their intentions on offshore wind (OSW) decommissioning three years ago when they granted a precedent setting financial assurance waiver to Vineyard Wind. Despite compelling concerns raised by commenters, the “streamlining” regulations have codified this decision.

Cape May County, New Jersey, was among the commenters objecting to BOEM’s departure from the prudent “pay as you build” financial assurance requirement. The County commented as follows (full comment letter attached):

“[e]nergy-utility projects are in essence traditional public-private partnerships where technical and financial risks are transferred to the private sector in exchange for the opportunity to generate revenues and profit. Under the proposed rule, the Federal government is instead transferring risks associated with decommissioning to the consumer rather than to the private sector.”

Cape May added:

“[w]hile BOEM believes that if a developer becomes insolvent during commercial activity that a solvent entity would assume or purchase control, the County believes this is a risky assumption as the most likely reason for default is that a constructed wind farm developer is unable to meet its contractual obligations set forth under a Power Purchase Agreement (PPA) because its energy production revenues are not in excess of its operating costs. A change of hands would not remove these circumstances or make the project profitable.”

Cape May and others also commented on the threat of premature decommissioning as a result of storm damage. In response, BOEM asserts that these risks have been addressed in the latest standard for North American offshore wind turbines (Offshore Compliance Recommended Practices: 2022 Edition (OCRP-1-2022)). However, design standards, particularly those for offshore facilities, are not static. The recommended practice for OSW is likely to change multiple times in the coming years as storm, operating, and turbine performance data are updated and analyzed. The design standard for Gulf of Mexico platforms has been repeatedly refined and improved and is now in its 22nd edition.

In their response to public comments on the decommissioning risks, BOEM repeatedly asserts that they can adjust the amount and timing of required financial assurance as they monitor a lessee’s financial health. Unfortunately, a company’s finances can change quickly and BOEM’s options will be limited when it does. Increasing the financial burden on a struggling company that is providing power to a regional power grid will not be a simple proposition.

Strong comments from Cape May County:

boem-2023-0005-0138_attachment_1Download

Safety Alert? 😀

BSEE has a very good Safety Alert program that merits close attention. However, this amusing entry doesn’t qualify. Perhaps this alert was issued in response to a government-wide anti-scamming directive.

Safety Alert No. 483 (plus a few comments in parentheses):

Scam Alert: Suspicious Requests for Payment
The Bureau of Safety and Environmental Enforcement (BSEE) is issuing this Safety Alert to inform users about possible scams requesting payment of fines for violations. Be aware the documents you receive may appear to be printed on official government letterhead and could be used to justify requests for payments or loans. BSEE does require payment of fines for certain violations, but BSEE will never:

• Request payment via phone or through any social media platforms.
• Require a payment from an individual to exit an offshore facility. (Huh? How would this work? Would a BSEE inspector stand at the helideck and require payment before a worker boarded the helicopter? Seriously?)
• Request any payment using a gift card. (“You violated an OCS safety regulation. Please make payment with a Target gift card.” 😀)
• Demand any payment without prior notification.
• Send letters containing spelling, grammar, and punctuation errors. (Yes, all regulations, notices, and other correspondence are in “plain English” and perfectly understandable. 😀 😀 😀)
• Should BSEE require a payment for a civil penalty or a fine, the fine will be paid by the operator, not by an individual. BSEE will always send an initial notice to the operator and provide them the opportunity to engage with the BSEE Civil Penalty team.

Stena DrillMAX update

According to rig locator data, the DrillMAX is moored in Bay Bulls, Newfoundland in preparation for transit to the site of Exxon’s high potential exploratory well in the Orphan Basin.

Safety standards, regulations, management, and culture: continuous improvement is the essential common denominator

JL Daeschler, pioneering subsea engineer and BOE contributor, recounted a frightening incident in 1976, a year after UK North Sea production began:

We found ourselves in a drastic situation. While working on a subsea well, the wireline retrievable tubing safety valve got tangled up in the tree area. We had an open well situation and couldn’t cut the wire in the subsea tree. Further, the weather was bad, and keeping on location was difficult. The riser hydraulic release was faulty, so there was an imminent high risk of a “jammed ” subsea tree, bent/damaged riser, and uncontrollable well flow.

We got through this, but recognized that improved well control capabilities were needed during workover operations. Management decided that any future workover operations on a subsea tree/well would require a small diameter workover BOP with shearing capability immediately above the Xmas tree. A year later, we had the hybrid kit pictured below (with JL). Note that the guide funnels are slim to run on guide lines and not overshoot the guide base posts.

JL’s story reminds us once again that safety achievement is dependent on continuous improvement driven by experience, research, and technological advances.

When I was a young engineer with the US Geological Survey, the OCS safety regulator at the time, my boss and mentor Richard Krahl (known as “Mr. OCS” for his commitment to offshore safety) slammed😀 a copy of the first edition of API RP 14C (Analysis, Design, Installation, and Testing of Safety Systems for Offshore Production Facilities) on my desk and told me to read it carefully. That pioneering process safety document has grown with the offshore industry and is now in its 8th edition.

Similarly, API RP 2A-WSD (Planning, Designing, and Constructing Fixed Offshore Platforms— Working Stress Design) is now in its 22nd edition and API STD 53 (Well Control Equipment Systems for Drilling Wells) is in its 5th edition. There are countless other examples of the progression in safety equipment and practices.

As individuals, companies, agencies, and collectively as an industry, there can be no standing still. Nothing is routine and the challenges continue to grow: deeper wells, more complex geology, higher temperature and pressure, deeper water, harsher environments, remote locations, new security risks, and more. We get better or we get worse, and the latter is not an option. Onward!

Energy Intelligence: “Exxon Pushes US to Allow ‘Conversion’ of Oil Leases for CCS”

“Exxon Mobil has led a persistent and apparently successful lobbying campaign behind the scenes to push the US federal government to adopt rules that would allow the conversion of existing oil and gas leases in the Gulf of Mexico into offshore carbon capture and storage (CCS) acreage, according to documents seen by Energy Intelligence and numerous interviews with industry players.” Energy Intelligence

The Energy Intelligence article documents the ongoing carbon disposal lobbying by Exxon and others. Those meetings are okay prior to publishing a Notice of Proposed Rulemaking (NPRM) for public comment. However, the article implies that the next step is a final rule: “Whether or not Exxon succeeds will become fully clear when the US issues final rules guiding CCS leasing, expected sometime this year.”

A final rule this year is unlikely, because an NPRM has to be published first for public comment. The only exception would be if BOEM was able to establish “good cause” criteria for a direct final or interim final rule in accordance with the Administrative Procedures Act. Such an attempt at corner cutting seems unlikely, especially in an election year when all regulatory actions are subject to additional scrutiny.

Exxon must have thought they had a clear path forward after 11th hour additions to the “Infrastructure Bill” authorized carbon disposal on the OCS, exempted such disposal from the Ocean Dumping Act, and provided $billions for CCS projects. Keep in mind that the Infrastructure Bill was signed just two days before OCS Oil and Gas Lease Sale 257, at which Exxon acquired 94 leases for carbon disposal purposes.

What the Infrastructure Bill did not provide is authority to acquire carbon disposal leases at an oil and gas lease sale. Now the lobbyists are apparently scrambling to overcome that obstacle administratively.

BOEM, which arguably made a mistake in accepting irregular carbon disposal bids at the last 3 oil and gas sales, should not amplify Exxon’s unfair advantage (also Repsol at Sale 261) by allowing the conversion of these leases (map below). This is not a small matter given that Exxon has publicly projected that carbon disposal is a $4 trillion market opportunity.

A single company or small group of companies should not be dictating the path forward for the Gulf of Mexico. Super-major Exxon is a relative minnow in the Gulf of Mexico OCS. They have not drilled an exploratory well since 2018, not drilled a development well since 2019, operate only one platform (Hoover, installed in 2000), ranked 11th in 2023 oil production, and ranked 29th in 2023 gas production.

Lastly, and most importantly, public comment on the myriad of technical, financial, and policy issues associated with GoM carbon disposal is imperative. That input is essential before final regulations are promulgated.

At Sale 261, Repsol was the sole bidder for 36 nearshore Texas tracts in the Mustang Island and Matagorda Island areas (red blocks at the western end of the map above). Exxon acquired 163 nearshore Texas tracts (blue in map above) at Sales 257 and 259.

Deepwater is back, baby! 😀

It’s OTC week and optimism abounds. “We are so back!”

Preachin’ to the choir:

• “Deepwater is back in vogue.” (Pablo Medina, Welligence)
• “Newer deepwater projects have the attributes oil and gas companies are looking for: longer-term production, lower breakeven costs, big resource potentials and lower carbon emissions.” (Medina)
• Capital spending on all-new deepwater drilling is poised to hit a 12-year high next year (Rystad)
• Investment in all-new and existing deepwater fields could hit $130.7 billion in 2027, a 30% jump over 2023 (Rystad)
• Deepwater resources offer lower carbon emissions intensity than shale and other tight oils, averaging 2kg of carbon dioxide per barrel less than shale. (Rystad)
• “The return of offshore and deepwater operations is going to be a big topic at OTC, and Namibia is going to be talk of the show.” (James West, Evercore)
• Enthusiasm for offshore has climbed with discoveries and technology breakthroughs. Namibia’s Mopane is forecast to hold as much as 10 billion barrels of oil. (Portuguese oil company Galp Energia)
• Rates for some rigs have surpassed $500,000 a day and contract durations are lengthening as supply dwindles.
• Deepwater development: simpler, safer, greener!
• Chevron is preparing to start ultra-high pressure production at their Anchor platform.

So as not to kill the buzz, I won’t mention the 5 Year (no)Leasing Plan and other troubling US matters, at least for one day.

Capping stack for Guyana – prudent requirement

The government’s decision to require that a capping stack be located in Guyana is prudent. Although the need for a capping stack is dependent on multiple barrier failures and is thus extremely low, the environmental and economic consequences of a prolonged well blowout warrant timely access to this tertiary well control option.

A capping stack must be properly maintained and deployable without delay. In that regard, BSEE has a good program for testing Gulf of Mexico capping stack readiness. Capping stack drills are an important post-Macondo addition to the unannounced oil spill response program that dates back to 1981.

The capping stack designed during the Macondo blowout shut-in the well on 15 July 2010. The decision process that allowed the well to remain shut-in was a bit perplexing, and we had a bizarre situation where the Federal Incident Commander threatened to require the resumption of the blowout. The same well integrity concerns had prematurely ended the “top kill” operation on 28 May, allowing the well to flow unnecessarily into the Gulf for an additional 48 days (5/28-7/15). (See this important paper by LSU Petroleum Engineering professor Dr. Mayank Tyagi et al: Analysis of Well Containment and Control Attempts in the Aftermath of the Deepwater Blowout in MC252)

“Troy Naquin, BSEE New Orleans District, observes as a capping stack is carefully lowered onto the deck of ship to be transported more than 100 miles offshore for a drill designed to test industry’s ability to successfully deploy it in case of an emergency, May 8, 2023.” BSEE photo/Bobby Nash

Stabroek is the prize …

Chevron wants in, Exxon and China want bigger pieces, and Venezuela claims it all.

Exxon CEO Darren Woods sums it up:“I believe Guyana will go down as one of the most successful deepwater developments in the history of the industry.”

Nice production growth and this is just the beginning:

OilNow Guyana

Havtil posted their 2023 risk trend report for Norwegian petroleum operations

As promised, the Norwegian petroleum safety regulator (Havtil) has posted their risk trend report (RNNP) for 2023 in English.

Havtil prioritizes risk assessment and publishes their comprehensive annual analysis of safety trends in a timely manner. The 2023 RNNP was posted in Norwegian earlier this year and the summary report is already available in English. RNNP reports are an important safety resource that should be reviewed and discussed wherever oil and gas operations are conducted.

As an example of the breadth of these reviews, the two sets of charts below convey data that are not typically documented by offshore safety regulators. The first set documents near-misses that did not result in injuries, but did expose workers to that risk.

The second set of charts is a summary of worker responses to a survey, a means of assessing the safety culture. The big jump in favorable responses to the HSE questions is encouraging. In particular, the report notes (p. 14) that responses to a question about being pressured not to report incidents has moved in a positive direction in the last two surveys. Hopefully, this is an industry-wide trend.