Deepwater Horizon: Production Rewarded, Safety Ignored

Oct. 10, 2011
The Deepwater Horizon Joint Investigation Team concludes BP, Transocean and Halliburton violated federal safety regulations and compensated employees based on how quickly – not how safely – they could bring in a well.

The federal investigative team reviewing the April 20, 2010 Deepwater Horizon explosion that killed 11 workers, injured 16 and resulted in a catastrophic 87-day oil spill that dumped millions of barrels of oil into the Gulf of Mexico has laid most of the blame for the tragedy on BP, but the news isn’t good for Deepwater Horizon owner Transocean or cement contractor Halliburton, either.

The Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE)/U.S. Coast Guard Joint Investigation Team (JIT) was formed on April 27, 2010, by a convening order of the Departments of the Interior and Homeland Security to investigate the causes of the Deepwater Horizon explosion, loss of life and resulting oil spill, and to make recommendations for safe operations of future oil and gas activities on the U.S. Outer Continental Shelf (OCS). The JIT held seven sessions of public hearings, received testimony from more than 80 witnesses and experts and reviewed a large number of documents and exhibits pertaining to all aspects of the investigation.

During its investigation, the JIT found evidence that BP, and in some instances its contractors, violated the following federal regulations in effect at the time of the blowout:

➤ 30 CFR § 250.107 – BP failed to protect health, safety, property, and the environment. BP and Transocean did not: (1) perform all operations in a safe and workmanlike manner; or (2) maintain all equipment and work areas in a safe condition.

➤ 30 CFR § 250.300 – BP, Transocean and Halliburton (Sperry Sun) did not prevent conditions that posed unreasonable risk to public health, life, property, aquatic life, wildlife, recreation, navigation, commercial fishing or other uses of the ocean.

➤ 30 CFR § 250.401 – BP, Transocean and Halliburton (Sperry Sun) failed to take necessary precautions to keep the well under control at all times.

➤ 30 CFR § 250.446(a) – BP and Transocean failed to maintain the blowout preventer (BOP) system in accordance to API RP 53 section 18.10 and 18.11.

➤ 30 CFR § 250.420(a)(1) and (2) – BP and Halliburton did not cement the well in a manner that would properly control formation pressures and fluids; and prevent the direct or indirect release of fluids from any stratum through the wellbore into offshore waters.

➤ 30 CFR § 250.427(a) – BP failed to use pressure integrity test and related hole-behavior observations, such as pore pressure test results, gas-cut drilling fluid and well kicks to adjust the drilling fluid program and the setting depth of the next casing string.

Investigators noted that Transocean’s leaders’ failure to commit to compliance with the International Safety Management Code created a safety culture throughout its fleet that could be described as: “running it until it breaks,” “only if it’s convenient” and “going through the motions.”

Among other findings, the report states, “The panel found evidence that BP personnel were compensated and their performance reviewed, at least in part, based upon their abilities to control or reduce costs. At some point in 2008, BP implemented an ‘every dollar counts’ program that was focused on reducing costs by improving the efficiency of drilling operations.”

Safety Takes a Back Seat

According to testimony from BP employees, their performance evaluations were based on how quickly they could deliver a well and whether or not the project came in under budget.

As noted in the report: “Performance evaluations reflected this cost-cutting focus. An ‘operational’ performance measure for BP drilling personnel was delivering a well with costs under the authorized expenditure amount. There was no comparable performance measure for occupational safety achievements.”

The investigative team said that in the weeks leading up to April 20, the BP Macondo team made a series of operational decisions that “reduced costs and increased risks.” For example, when considering the lockdown sleeve installation on the Macondo well in January 2010, Mark Hafle, a BP drilling engineer, and Merrick Kelley, BP’s subsea wells team leader, reviewed the $2.2 million of incremental cost benefit to BP.

According to the report, Hafle discussed this further with Drilling Team Leader David Sims, and they “agreed that BP should move forward with the lockdown sleeve installation after setting the surface cement plug and prior to the departure of the Deepwater Horizon from the Macondo well. This decision affected the procedure for the setting of the surface plug, the displacement and the negative test sequence.”

On the day of the blowout, BP contractor Ross Skidmore suggested conducting a standard procedure that would increase the likelihood of a successful lockdown sleeve installation. John Guide, BP wells team leader, responded by saying, “[W]e will never know if your million dollar flush run was needed. How does this get us to sector leadership?”

In fact, at the time of the blowout, BP had exceeded its original budget for the Macondo well by $58.34 million, and testimony from Guide suggests that his success at reducing costs was part of his performance evaluation.

BP’s Contributions to the Blowout

Specifically, the report states that BP (and its contractors) made a series of decisions that contributed to the Macondo blowout, including:

➤ BP, Transocean and Halliburton each had “stop work” programs, but the panel found no evidence to suggest that the rig crew members were aware of the multiple anomalies that occurred on April 19-20. The failure of the rig crew to stop work on the Deepwater Horizon after encountering multiple hazards and warnings was a contributing cause of the Macondo blowout.

➤ The panel found no evidence that BP performed a formal risk assessment of critical operational decisions made in the days leading up to the blowout.

Many of the decisions made leading up the Deepwater Horizon blowout – including the timing of the installation of the lock-down sleeve, the conducting of multiple operations during mud displacement and the use of lost circulation material pills as spacer lowered the costs of the well and increased operating risks. These decisions were not subjected to a formal risk assessment.

➤ Multiple decisions (the number of centralizers run, the decision not to run a cement evaluation, the decision not to circulate a full bottoms-up and others) were in direct contradiction with the DWOP guidance to keep risk as low as reasonably practical.

BP company records and testimony from rig personnel establish that at least three well control events and multiple kicks occurred during drilling and temporary abandonment operations at the Macondo well. The first well control event occurred on Oct. 26, 2009, when the well was being drilled by Transocean’s Marianas rig. The second well control event occurred on March 8, 2010, after the Deepwater Horizon had replaced the Marianas and resulted in a stuck drill pipe.

It took the crew at least 30 minutes to detect the March 8 issue. According to investigators, this delay raised significant concerns among BP personnel overseeing the operation about the ability of the crew on the Deepwater Horizon to promptly detect issues and take appropriate well control actions.

In a post-blowout interview, Guide stated that at the time (March 2010), he was concerned that the Deepwater Horizon team had become “too comfortable” with itself because of its good track record for successfully drilling difficult wells, and that they missed potential indications of problems during the March 8 event that they should have caught.


In the wake of the Deepwater Horizon tragedy, BOEMRE launched the most aggressive and comprehensive reforms to offshore oil and gas regulation and oversight in U.S. history.

“As we continue to encourage balanced and responsible oil and gas development on the OCS, we must remain fully focused on continually strengthening safety standards to protect workers and to reduce the risk of accidents and spills,” said Interior Secretary Ken Salazar. “Our goal is to ensure that safety is front and center every day, for every worker, on every project.”

The reforms strengthen requirements for everything from well design and workplace safety to corporate accountability. An additional rule incorporates additional safety requirements that are related to the findings of the investigation. Among the reforms:

➤ Operators must demonstrate that they are prepared to deal with the potential for a blowout and worst-case discharge per NTL-06.

➤ Permit applications for drilling projects must meet new standards for well-design, casing and cementing, and be independently certified by a professional engineer per the new Drilling Safety Rule. We are strengthening drilling standards in the exploration and development stages, for equipment, safety practices, environmental safeguards, and oversight.

➤ New guidance, through NTL-10, requires a corporate compliance statement and review of subsea blowout containment resources for deepwater drilling, a key lesson of the Deepwater Horizon oil spill.

BOEMRE recently announced that the bureau will begin to use multiple-person inspection teams for offshore oil and gas inspections. This internal process improvement should improve oversight and help ensure that offshore operations proceed safely and responsibly. The new process will allow teams to inspect multiple operations simultaneously and thoroughly, and enhance the quality of inspections on larger facilities.

BOEMRE imposed, for the first time, requirements that offshore operators maintain comprehensive safety and environmental management systems (SEMS). This includes performance-based standards for offshore drilling and production operations, including equipment, safety practices, environmental safeguards and management oversight of operations and contractors. Companies will now have to develop and maintain a Safety and Environmental Management System (SEMS) per the new Workplace Safety Rule.

“This proposed rule is the latest regulatory reform we have undertaken to enhance the safety of offshore energy operations,” said BOEMRE Director Michael R. Bromwich. “The protection of human life and the environment are top priorities for BOEMRE. Implementing a comprehensive program with these additional features will further our goal of avoiding accidents that may result in injuries, fatalities and serious environmental damage.”

Salazar and Bromwich also established the Ocean Energy Safety Advisory Committee, a permanent advisory body of the nation’s leading scientific, engineering and technical experts who provide critical guidance on improving offshore drilling safety, well containment and spill response.

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