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Knut Ørbeck-Nilssen, Executive Vice President OilTech Atyrau April 2011
Deepwater Horizon Update – The aftermath
Likely industry consequences and preliminary results
© Det Norske Veritas AS. All rights reserved.
Deepwater Horizon Update – The aftermath
OilTech Atyrau April 2011
2
Presentation outline
The Deepwater Horizon, a
game-changer?
A new US regulatory
regime?
Industry changes?
© Det Norske Veritas AS. All rights reserved.
Deepwater Horizon Update – The aftermath
OilTech Atyrau April 2011
3
The Deepwater Horizon, a game-changer ?
© Det Norske Veritas AS. All rights reserved.
Deepwater Horizon Update – The aftermath
OilTech Atyrau April 2011
4
About 21:40 local time, gas under high pressure flows uncontrolled up from the Macondo well onto DWH. The gas ignites resulting in fires and explosions. DWH is lost.
11 fatalities and 17 injured
Oil leakage:- From April 20 – July 15 (well capped)- US experts suggest initial rate was 63,000 b/d
declining to 53,000 b/d (4.9m bbls in total)
Larges oil spill event in US history
The event:April 20, 2010
© Det Norske Veritas AS. All rights reserved.
Deepwater Horizon Update – The aftermath
OilTech Atyrau April 2011
5
The response effort:Containment and oil spill
(image © BP p.l.c.)
© Det Norske Veritas AS. All rights reserved.
Deepwater Horizon Update – The aftermath
OilTech Atyrau April 2011
6
Major accidents have consequences on regulations- simplified historic overview
NEW REGULATORY REQUIREMENTS
Alexander Kielland – structural redundancy
Exxon Valdez – double hull tankers
Piper Alpha – “Safety Case” risk approach
MACONDO BLOWOUT ?????
© Det Norske Veritas AS. All rights reserved.
Deepwater Horizon Update – The aftermath
OilTech Atyrau April 2011
7
Is the Deepwater Horizon accident a game changer? Several severe accidents the last 2
years contribute- Montara blow-out in Australia
Why?- Scale – largest oil spill ever x 2 - Location – USA + elections + mass media- Company involved (BP, a major ’foreign’
IOC)
Deepwater Horizon is a game changer!
•we are facing a systematic shift with
significant reach
© Det Norske Veritas AS. All rights reserved.
Deepwater Horizon Update – The aftermath
OilTech Atyrau April 2011
8
A new US regulatory regime?
© Det Norske Veritas AS. All rights reserved.
Deepwater Horizon Update – The aftermath
OilTech Atyrau April 2011
9
US-Norway, share industry learning
© Det Norske Veritas AS. All rights reserved.
Deepwater Horizon Update – The aftermath
OilTech Atyrau April 2011
1010
Comparing the US and Norwegian offshore drilling regulations:Key regulatory regime differences
The Norwegian regulations are mainly performance-based
The U.S. regulations are primarily prescriptive
The intention with a performance-based regime is to make the operator regulate own activity when it comes to safety, health and environment (SHE)
The intention with prescriptive regulations is to prevent accidents by identifying specific technical requirements that the operator must comply with. The Authorities control the operator’s activity inter alia through approvals and inspections.
© Det Norske Veritas AS. All rights reserved.
Deepwater Horizon Update – The aftermath
OilTech Atyrau April 2011
1111
Comparing the US and Norwegian offshore drilling regulations: Key learning points
Mainly risk-based approach, systematically identify and mitigate risks.
Separate authorities for resource management and SHE management
Agency with coordinating role in the development and supervision of SHE regulations.
Establish barriers on technical, operational and organisational levels
Latest edition of applicable regulations and referred standards for mobile units
Two independent and tested well barriers in all drilling and well operations
Recertification of blow-out-preventer (BOP) every 5 years
AND one area where we are not so different
Validation of functionality and capacity of oil recovery equipment ?
© Det Norske Veritas AS. All rights reserved.
Deepwater Horizon Update – The aftermath
OilTech Atyrau April 2011
12
The response effort - Regulatory issues
There are 4 active investigations across the federal government
i. The Presidential Commission, lead by Department of Energy
ii. Joint Investigation, led by U.S. Coast Guard and the BOEMRE
iii. The Department of Justice Investigating
iv. National Academy of Engineering / National Research Council Committee
© Det Norske Veritas AS. All rights reserved.
Deepwater Horizon Update – The aftermath
OilTech Atyrau April 2011
13
Presidential Commission Report, Jan 11:Selected recommendations
http://www.oilspillcommission.gov/final-report
Tasked with providing recommendations on how we can prevent – and mitigate the impact of – any future spills that result from offshore drilling.
Significantly increase the liability cap
Establish independent offshore safety agency
Risk-based regulations similar to the “safety case” approach in the North Sea
Supplement with prescriptive safety and pollution-prevention standards
Industry “best practice” standards should be applied globally
Better oil spill response
Safer well design and improved equipment
© Det Norske Veritas AS. All rights reserved.
Deepwater Horizon Update – The aftermath
OilTech Atyrau April 2011
14
Investigation of BOP for US GovernmentReport available at www.dnv.com
Pho
to: B
P p
lc
© Det Norske Veritas AS. All rights reserved.
Deepwater Horizon Update – The aftermath
OilTech Atyrau April 2011
15
Industry changes?
© Det Norske Veritas AS. All rights reserved.
Deepwater Horizon Update – The aftermath
OilTech Atyrau April 2011
16
Consequences in the US Gulf of Mexico
The drilling moratorium was lifted on October 12, 2010
New regulations and standards- Environmental NTL (Notice to Lessees),
Compliance and Review NTL, Drilling Safety Rule and the Workplace Safety Rule.
13 companies may resume their drilling activities as of January 3, 2011
Some started
© Det Norske Veritas AS. All rights reserved.
Deepwater Horizon Update – The aftermath
OilTech Atyrau April 2011
17
Norway, Netherlands and UK:Reactions
? ?
© Det Norske Veritas AS. All rights reserved.
Deepwater Horizon Update – The aftermath
OilTech Atyrau April 2011
18
EU Reaction
European Parliament requests EU action Oct 6
• Potential spills with implication beyond single Member State coastlines
European Commission suggests Oct 13
• Apply “best practice” through EU-wide legislation and standards
• Extended environmental liability for offshore oil & gas
• Development of joint oil spill response and capability
• consider a “moratorium”
EU Council discuss the proposals Dec 3
• Some concern on EU legislation from authorities in UK and Norway
• Support secured to consider necessary concrete proposals
EU Commission process until summer 2011
• “Impact assessment” of proposals for safety/environmental response
• The US findings will influence how Europe will prioritise
New legislative proposals are unlikely before 2012
• Final decisions most probably by consensus
© Det Norske Veritas AS. All rights reserved.
Deepwater Horizon Update – The aftermath
OilTech Atyrau April 2011
19
Rest of the world’s reaction - examples
Awaiting outcome of the US investigations
(UK, Norway, Canada, Brazil)
Greenland required Cairn Energy to have a
second rig on standby to drill a relief well
Australia reviewing their national oil spill
plans, current plans are for a tanker
grounding and not a long term blow out
Gabon have cancelled offshore acreage bid
rounds until US investigations are complete
A lot of understandable “wait and see”.
© Det Norske Veritas AS. All rights reserved.
Deepwater Horizon Update – The aftermath
OilTech Atyrau April 2011
20
Oil Spill Containment System:“Design it, engineer it, and make sure it is never used!”
© Det Norske Veritas AS. All rights reserved.
Deepwater Horizon Update – The aftermath
OilTech Atyrau April 2011
21
Can we manage the cold risks?
SUMMING UP
© Det Norske Veritas AS. All rights reserved.
Deepwater Horizon Update – The aftermath
OilTech Atyrau April 2011
22
Key take away
The Deepwater Horizon is a game-changer
- we are facing a systematic shift with significant reach
A new US regulatory regime is in the making
- Risk-based regulations, most likely with international impact
Industry changes will be significant
- Increasing the focus on safety, environment and risk management
© Det Norske Veritas AS. All rights reserved.
Deepwater Horizon Update – The aftermath
OilTech Atyrau April 2011
23
Safeguarding life, property and the environment
www.dnv.com