Deepwater Horizon/Macondo well disaster developments
On 7th December, the US Bureau of Safety and Environmental Enforcement (BSEE) issued a second set of regulatory violations arising from operations conducted in connection with the Macondo well. The violations were issued as Incidents of Non-Compliance (INC). A total of five INCs were issued to BP; four of the INCs were violations of one regulation in different sections of the well.
The Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE)/US Coast Guard Joint Investigation Team, released its final investigative report on the 20th April 2010 Deepwater Horizon explosion, loss of life, and resulting oil spill on 14th September 2011. Volume II, covering the areas of the investigation under BOEMRE (now BSEE) jurisdiction, includes findings on the direct and contributing causes of the Macondo blowout and the resulting explosion and fire aboard the Deepwater Horizon. The JIT found evidence that BP, Transocean and Halliburton’s conduct in connection with the operations at the Macondo well, violated a number of federal offshore safety regulations under BOEMRE’s jurisdiction.
In a separate development, on 7th December, Halliburton responded to court filings by BP saying: “BP recently filed a motion for sanctions against Halliburton alleging that Halliburton destroyed evidence relating to post-incident testing of the foam cement slurry. BP has been aware of post-incident tests for some time, but has chosen this late date in the litigation to mischaracterize the results of such tests.
Contrary to BP’s assertions, the post-incident testing referred to in its motion was not conducted on rig samples or in a manner approved by Halliburton. Rather, the informal testing BP refers to used off-the-shelf materials that yielded results which Halliburton believes have little or no relevance to the case, particularly when pre-incident testing using rig samples and formal lab processes showed that the cement slurry was designed to be stable. In September 2011, the U.S. Department of Interior reported testing done on the actual Deepwater Horizon rig sample, confirming Halliburton's position that the slurry was designed to be stable. The Department further concluded that the cement likely did not fail in the annulus part of the well.
For over 60 years, Halliburton has led the industry in developing cementing solutions for oil and gas operators around the world. BP is attempting to divert attention from its poor decisions and practices by criticizing the work and reputation of Halliburton.”
On 16th December, BP announced that it had reached an agreement with Cameron International Corporation, the designer and manufacturer of the Deepwater Horizon blowout preventer, to settle all claims between the companies related to the accident and spill. BP and Cameron have concluded that the settlement is in their mutual best interests, and the agreement is not an admission of liability by either party. Cameron will pay BP USD250m cash, which BP will apply to the USD20bn trust it established to meet individual, business and government claims, as well as the cost of the natural resource damages.
BP and Cameron agreed to mutual releases of potential claims against each other, and BP agreed to indemnify Cameron for compensatory claims resulting from the accident, including claims brought relating to pollution damage stemming from the accident or any damage to natural resources. BP’s indemnity excludes civil, criminal or administrative fines and penalties, claims for punitive damages, and certain other claims. BP and Cameron will discontinue claims against each other in the Multi-District Litigation 2179 pending in New Orleans, Louisiana.
The deal follows settlements by BP with MOEX and Anadarko, BP’s partners in the Macondo well, and Weatherford, the maker of the float collar used at the well.
BACK TO TOP
Fourteen killed in chemical plant explosion in east China
According to a report from Chinese news agency Xinhua, at around 0200hrs local time on 19th November, an explosion occurred at a chemical plant in the eastern province of Shandong, resulting in the deaths of fourteen workers and injuries to five others.
The explosion was at a melamine production facility of Shandong Liaherd Chemical Industry Co. Ltd. in the city of Xintai, reportedly when workers were maintaining and repairing a condenser.
Four workers were killed and a further fifteen injured at the scene. Ten of the injured died later that day in hospital. The remaining five injured were said to be in a stable condition, according to the statement.
An investigation into the cause of the accident has commenced.
BACK TO TOP
Oil seepage from Frade field well offshore Brazil
In our last edition, we reported initial information concerning an oil seepage associated with an appraisal well being drilled in the vicinity of the Chevron Corporation-operated deepwater Frade field in the Campos Basin, offshore Brazil. Since then there have been several notable developments relating to the well, which is located some 370km north-east of Rio de Janeiro in water depths of approximately 1,200 metres.
On 17th November, Chevron confirmed that cementing operations were taking place as part of its well plugging activities on the appraisal well, and also confirmed that there had never been any oil flow from the wellhead and monitoring indicated oil from nearby seep lines on the ocean floor had reduced to infrequent droplets. Chevron continued to work with its drilling contractor, Transocean, on well plugging operations. All development well drilling in the field continued to be suspended and Chevron continued to monitor the oil sheen, which it said had substantially dissipated. The sheen was located about 120km offshore and continued to move in a south-easterly direction away from the Brazilian coast. Chevron had been scheduling a fleet of up to 18 vessels on a rotational basis, weather permitting, to control and monitor the sheen.
Full production activities had been maintained at Frade throughout the incident. Production operations were being monitored continuously to ensure that those facilities were not contributing to the oil sheen. Daily production volumes are approximately 79,000boe.
On 21st November, Chevron reported that its subsidiary, Chevron Brasil Upstream Frade Ltda., continued to work in partnership with Brazilian government agencies to contain, reduce and eliminate the remaining oil sheen in the vicinity of its Frade field. The sheen was located about 120km offshore Brazil and continued to move away from the coast.
Chevron took full responsibility for this incident, and Chevron Brazil country manager George Buck, said Chevron was committed to deploying resources until the sheen could no longer be detected.
Chevron was analysing data to estimate the total volume of oil released from the incident. Brazil’s National Petroleum Agency (ANP) had estimated the total volume of oil released at approximately 5,000 to 8,000 barrels.
Buck said, “Our emergency response teams are trained and prepared to address a potential spill incident. The moment the seeps were first identified, we immediately activated our emergency response plan and began dispatching necessary resources to safely manage the situation. We moved quickly to begin plugging and cementing procedures to seal the source. Our combined efforts greatly diminished the size of the sheen and stopped the source of the seep flow within only four days of first detection. We believe no new oil is seeping from the reservoir. Seep lines continue to drain in the form of droplets.”
Regarding Chevron’s preliminary assessment of the incident, Buck said, “We were drilling toward a targeted reservoir and encountered an unexpected pressure spike or kick. We believe the kick caused fluid to move into the wellbore and increased pressure opened a segment of the wellbore. Fluid then escaped to reach thin fissures and migrate to the ocean floor. The well was safely shut in, following standard operating procedures. All equipment performed as expected. A complete investigation is underway to understand the cause of the incident. Findings will be shared with Brazilian government agencies and Chevron’s global operations to prevent this from happening again.”
Chevron noted that ANP was informed of the company’s well plan before drilling commenced. The plan included targeted depths and the targeted reservoir.
On 22nd November, Chevron Corporation reported that its subsidiary, Chevron Brasil Upstream Frade Ltda., now believed that approximately 2,400 barrels of oil had been emitted since seeps were first detected on 9th November. Chevron noted that this estimate was within the current range of 1,600 to 2,640 barrels provided by the ANP.
Also on 22nd November, the work of the monitoring group - formed by members of the Brazilian national agency of petroleum, natural gas and biofuels ANP, the Brazilian Institute of Environment and Renewable Natural Resources (IBAMA), and the Navy of Brazil - continued. The group was formed to supervise the measures being taken by Chevron Oil Brazil Ltda. to contain the oil leak and mitigate its consequences.
On 21st November, the Brazilian Institute of Environment and Renewable Natural Resources (IBAMA), fined Chevron Brazil BRL50mn (some USD28mn), based on oil law number 9,966/2000, by virtue of the leak occurring. Furthermore, the ANP issued two notices of infraction to Chevron, reportedly firstly for the non-performance of the abandonment plan submitted by Chevron to the Agency, and secondly concerning the adulteration of video information addressing monitoring of the seabed. The values of the fines are set at the end of the administrative procedure. However, it is reported that each could result in fines of BRL50m. ANP Director Magda Chambriard is reported to have said during a press conference in Brasilia that Chevron "acted in complete violation of its concession contract and Brazilian law.”
Since the start of the incident regular over-flights have been conducted and Brazilian authorities said that a helicopter over-flight on 21st November, with technicians from IBAMA, noted a further decrease of the sheen, which continued moving away from the coast. From visual observation it was estimated that it was 6km long and about 2km² in area. It was also said that the final well cementing work was underway, under the supervision of the ANP's technicians who are deployed on the SEDCO 706.
On 23rd November, Chevron reported that while Chevron Brasil had not received formal notice from the ANP suspending its drilling licence, the company had voluntarily suspended its current and future drilling operations, offshore Brazil. The voluntary suspension includes the company's permitted pre-salt wells in the Frade field, with the exception of current plug and abandonment activities. The suspension is indefinite. Chevron acknowledged, however, that ANP had posted a notice of suspension to its website (this notice stated that the Board of ANP, at its meeting on 23rd November, ordered the suspension of drilling activities in the Frade field and that the resolution suspended all Chevron's drilling activity in Brazilian national territory. The ANP also said that in the same decision it refused Chevron's request to drill a new well in the field with the aim of reaching the pre-salt. ANP said that the decision was based on its technical observations and analyses, which showed negligence on the part of Chevron in certain respects).
Chevron also reported that the volume of oil currently contained in the sheen on the ocean's surface had been further reduced to about one barrel through cleaning and dispersion methods approved by Brazilian authorities. Chevron reiterated that it adheres to all the rules and regulation of the Government of Brazil and its agencies.
On 14th December, Chevron Corporation said a Brazilian federal district prosecutor had told reporters that he will file a civil lawsuit against Chevron and other companies seeking a reported BRL20bn (USD10.7bn) in damages, and an injunction stopping Chevron’s activities in Brazil. Chevron had not received any formal notice of this action.
Chevron also had not received any instruction from the regulatory agencies with oversight responsibility for its activities in Brazil regarding suspension of its operations.
Chevron said that from the outset it had responded responsibly to the incident at its Frade Field, and had dealt transparently with all Brazilian authorities. The flow of oil from the source was stopped within four days and the company continues to make significant progress in containing any residual oil. Chevron had also continued to address the surface sheen, which is now less than a single barrel. There have been no coastal or wildlife impacts.
On 21st December, it became known that Brazilian Federal Police authorities were considering criminal charges against Chevron and Transocean employees. A Chevron spokesperson has been quoted as saying, “The federal police have recommended indictments against our employees, which we believe are without merit. We will vigorously defend the company and its employees. Chevron is confident that once all the facts are fully examined, they will demonstrate that Chevron responded appropriately and responsibly to the incident.”
In a separate development, on 23rd December, drilling contractor Transocean issued a statement concerning the incident, noting that on or around 7th November, a hydrocarbon release occurred in the vicinity of a development well being drilled by Chevron off the coast of Rio de Janeiro in the Frade field with a semisubmersible drilling rig, the SEDCO 706, owned by a subsidiary of Transocean Ltd. The incident involved the release of hydrocarbons from fissures in the seabed. The development well was killed and the oil spill, estimated by Chevron to be approximately 2,400 barrels, was being contained by Chevron. Noting that there were no reports of the oil spill reaching the shoreline, Transocean said that the oil spill had given rise to investigations and a civil lawsuit by a federal prosecutor against Chevron and Transocean. The lawsuit, filed on 14th December in the federal court in Campos, Brazil, seeks damages from both companies and suspension of their activities in Brazil. Transocean has not been served with this action.
Transocean said that on 21st December, a Brazilian federal police marshal issued a report to the federal prosecutor in Rio de Janeiro, Brazil, in connection with the release, recommending the indictment of a Brazilian subsidiary of Transocean and five of its employees along with a Brazilian subsidiary of Chevron Corporation and several of its employees.
Furthermore, the driller noted that Transocean’s drilling services contract with Chevron for the SEDCO 706 requires Chevron, among other things, to indemnify Transocean for pollution or contamination based claims arising below the surface of the water.
An article which appeared in Law-Now (CMS Cameron McKenna's free online information service), on 1st December, considered the impact of the leak, noting that it had provoked a great debate in Brazil and among environmental groups, international oil and gas companies and the general public. Law-Now observed that the debate is focused on two issues: “First, whether the country has the technical skills to deal with incidents arising from its rapidly expanding oil and gas activities. Second, whether Brazilian regulators tend to act with a certain level of bias against international oil companies.”
The ramifications of this relatively small escape of oil are likely to continue for some while.
BACK TO TOP
Three workers killed in an attack on TransAtlantic Petroleum Turkey operations
TransAtlantic Petroleum Ltd. has reported that at approximately 2230hrs local time on 23rd November, one or more armed individual/s attacked workers at the company's Selmo field operations in south-eastern Turkey. TransAtlantic said the attack appeared to be an isolated event and was working with local authorities to investigate the incident and provide additional security for its operations in the vicinity. TransAtlantic said it mourns the loss of its fellow employees and contractors and expressed its deepest sympathies to their family members and friends.
TransAtlantic Petroleum is an international oil and natural gas company engaged in the acquisition, development, exploration and production of oil and natural gas. The company holds interests in developed and undeveloped oil and gas properties in Turkey, Bulgaria, Morocco and Romania.
BACK TO TOP
Gales hit Banff oil field FPSO and FSO in North Sea
Gale force winds during 8th/9th December, caused significant difficulties for a FPSO and FSO in the Banff oil field in the North Sea. At 1930hrs on 9th December, the following statement was made by Mr Hugh Shaw, the Secretary of State’s Representative for Maritime Salvage and Intervention, appointed by the UK Government to oversee the operation.
“I have been notified by DECC of problems with two linked vessels, the Petrojarl Banff (Floating Production Storage and Offloading vessel) and the Apollo Spirit (Floating Storage and Offtake vessel) located 190km East of the Aberdeen coast resulting from last night’s severe weather. The two vessels are operated by Teekay Petrojarl on behalf of the licence holder CNR International.
All 67 persons on board the two vessels have been accounted for and are safe.
The Apollo Spirit, which is storing 96,300 tonnes of oil, has lost tension in one of its eight anchors but remains securely in position. The Banff, which has 4,400 tonnes of crude oil on board, had lost tension in five of its ten anchors. At the height of the storm the vessel moved up to 250 metres from its operational position. The vessel is now stable approximately 70 metres from its original position. The subsea isolation valves have been closed and secured, the maximum volume of the pipelines from the vessel to the isolation valves is approximately 120 tonnes, this includes the export line between the vessels.
There has been no report of pollution and the risk of any spillage at this time is very low. However we are closely monitoring the situation.
An anchor handling vessel is on site and lending support to both vessels. CNR International has mobilised four additional anchor handling tugs to provide further assistance.
DECC has initiated its incident response procedures and is working with all relevant agencies.”
Within a few days it became apparent that the incident would give rise to another significant property and business interruption loss, although not on the scale of the loss following the February 2011 damage to the Gryphon FPSO vessel and field installation.
The FPSO Petrojarl Banff and FSO Apollo Spirit are operated by Teekay Petrojarl on behalf of the licence holder CNR International. Initial indications are that, during the adverse conditions, risers and umbilicals may have been significantly damaged when the FPSO moved some 250 metres off station, having lost tension in five of its ten anchors.
Several elements of the international energy and marine insurance markets have potential loss/damage exposures, including the Norwegian Hull Club and co-insurers of the FPSO, Bermuda-based Oil Insurance Ltd. (CNR being an OIL member) and various London and international energy insurers of field partners’ operational packages; the latter in some cases also facing potential business interruption losses.
On 16th December, Mr Hugh Shaw made the following further statement regarding the Banff oil field installations:
“This is an update regarding an issue with two linked vessels, the Petrojarl Banff (Floating Production Storage and Offloading vessel) and the Apollo Spirit (Floating Storage and Offtake vessel) located 190km East of the Aberdeen coast, which resulted following last week’s severe weather. The two vessels are operated by Teekay Petrojarl on behalf of the licence holder CNR International.
Although adverse weather has had an impact on the response, the Apollo Spirit has now been secured on all eight of its anchors and the vessel is now stable. I can confirm it was storing 79,900 tonnes of crude oil, which has all been transferred to the tanker Nancy Knutsen and is being shipped to port.
The Petrojarl Banff, which contains a confirmed 3,616 tonnes of crude oil, is also now stable with the use of its five operational anchors and three thrusters, with an additional line attached to the anchor handling tug, the Skandi Saigon.
The subsea isolation valves were closed at the time of the incident and are secure. An approved operation is ongoing to conduct a controlled flush of the risers and remove the estimated 12 tonnes of oil they contain back to the Petrojarl Banff. Upon completion of the riser flushing, operations will commence to disconnect the Petrojarl Banff from the risers. In the worst case scenario, it is possible that up to 1.8 tonnes of crude oil could be released to sea during this disconnection process. If this occurs, the oil will cause minimal environmental impact and be dispersed naturally at sea.
All persons on the vessels are safe and there were no other reports of oil release during the operation.
I will continue to approve and monitor the ongoing plans of CNR International and Teekay Petrojarl to disconnect the two vessels from the subsea infrastructure and relocate both to a place of refuge.
No further statements to this are expected to be issued.”
It is now expected that fuller inspections of the damaged facilities will take place, which will enable those concerned to estimate the likely insurance claims.
BACK TO TOP
Fire at Pasadena refinery
At around 1930hrs local time on 10th December, an explosion, or possibly two, occurred at the refinery of Pasadena Refining System, Inc, near the Houston Ship Channel. The company is owned by a US affiliate of Brazilian state energy company Petroleo Brasileiro SA. A fire in the facility’s coker unit was reported. One person was reported to have been taken to a local hospital with non-life threatening injuries. The cause of the incident is presently unknown. The refinery experienced a fire on 30th September 2011, in the area of the crude unit.
Gas leak at Mobil Melbourne refinery
Reportedly on 11th December, after an accidental over-pressurisation of a tank containing a product including propane and butane, there was a leak of gas from Mobil’s Altona refinery to the west of Melbourne, Australia, which took fire crews some 11 hours to contain. The Melbourne Metropolitan Fire Brigade dispersed the gas vapours with water jets and established an exclusion zone around the leak. Flaring of gas continued. One report said that the leak occurred when the product became over-pressurised, causing it to backfill into a tank not designed to hold it.
Fire at NuStar Energy San Antonio refinery
On 30th November, a fire occurred at the San Antonio, Texas, refinery of NuStar Energy LLP, reportedly when a contractor at the circa 14,500bopd capacity plant dislodged a valve in the crude unit, which allowed kerosene to spray. The kerosene vaporised and ignited after the crude unit was shut down. No significant damage was reported at the plant which NuStar Energy acquired earlier in the year from AGE Refining and which was expected to restart production on 7th December.
BACK TO TOP
Fire at Arkansas refinery
A 5th December fire at the Lion Oil refinery of Delek USA in El Dorado, Arkansas, was reported to have caused no significant damage with the unit expected to restart on 7th December.
Fire at Bakersfield refinery
On 30th November, a fire occurred at the Bakersfield, California, refinery of Alon USA Energy, apparently when an unused storage tank was being cleaned and vapours ignited; the tank possibly rupturing. The local fire department extinguished the blaze. No injuries were reported.
Spill from Ecopetrol-operated Cano Limon Covenas oil pipeline
On 11th December, Ecopetrol detected a rupture in the Cano Limon Covenas oil pipeline in north-eastern Colombia, South America, subsequently determined to have been caused by a mudslide following heavy rains.
Local media reports say that, as a result of the contamination of the Pamplonita River, the town and municipality of Chinácota in the Department of Norte de Santander could be reliant on rationed drinking water for at least 15 days as the river supplies the local aqueduct, which is therefore affected as well as crops and property. Ecopetrol is engaged in a clean-up programme in and around the river involving almost 600 workers. Reportedly, as a preventative measure to avoid further contamination, Ecopetrol interrupted two water pipelines that serve communities in the valley of Cucuta, which is about 540km north-east of Bogota near the Venezuelan border. Ecopetrol has sent out dozens of trucks to provide portable water for the area’s needs. The volume of oil split is unclear, although one local paper claims it was some 3,200 barrels.
BACK TO TOP
Russian-owned jack-up sinks off Sakhalin with heavy loss of life
The Russian-owned jack-up Kolskaya sank around 1400 local time on 18th December, in the Sea of Okhotsk whilst under tow from the Russian eastern peninsula of Kamchatka to Sakhalin Island. The accident happened in storm conditions, with high winds and seas and a reported air temperature of circa -17°C, some 125 miles off the coast of Sakhalin. The jack-up is owned by Murmansk-based OJSC Arktikmorneftegazrazvedka.
A report indicates that during the tow, high waves damaged the unit, allowing the ingress of water which onboard pumps could not cope with. The tow line was damaged or parted. An SOS was sent when the MODU was some 145 miles north-east of Sakhalin, according to the Russian State Marine Rescue Centre. One report indicates that the crew had been waiting to be evacuated by helicopter but the unit capsized and sank before they could reach their rescue rafts. Two of the four life rafts were said to have been found empty.
Sixty-seven persons were said to be on the MODU, and reports indicate that seventeen people were known to have died and thirty-six remain missing. The fourteen people rescued were picked up by the icebreaker Magadan (GRT 5,342, owned by the Fesco Transport Group) and Anchor Handling Tug/Supply vessel Neftegaz-55 (7,200 HP, built 1987 in Szczecin, Poland), owned by OJSC Arktikmorneftegazrazvedka. The Neftegaz-55 had been towing the Kolskaya.
Two helicopters of the Aviashelf Company, the rescue vessel Atlas of the Sakhalin rescue authority and the M/S Yuri Tarakurov were also involved in the search and rescue operation. Active search efforts were halted on 22nd December.
The unit’s hull & machinery is understood to have been insured for USD100mn (plus an additionally smaller limit for P&I cover), with Russian insurers, and partly reinsured in London and other international markets. One of the leading firms of London-based energy loss adjusters has been instructed by re/insurers.
On 18th December, the Russian federal agency Ministry of Civil Defence, Emergencies and Disaster Relief said an investigative committee had commenced an enquiry into the accident.
The MODU is understood to be classified by DNV and Russian Maritime Register of Shipping. Built in 1985 by Rauma Repola Oy in Finland to a Gusto Engineering BV, Schiedam, the Nederland/ Triangular design, the independent leg cantilever jack-up was rated to work in a maximum water depth of 328ft and to drill to a depth of 21,325ft.
OJSC Arktikmorneftegazrazvedka was established in 1979 for the exploration and development of oil and gas fields on the Russian Arctic Seas shelf.
In the face of criticism, the rig owners strongly defended the safety record of the MODU, commenting that it was “in good technical condition” and had undergone renovation work in 2011 under the supervision of classification societies DNV of Norway and the Russian Register of Shipping. Furthermore, the owners said that the unit had all the required permits, instruction manuals, and appropriate drills had previously been conducted.
BACK TO TOP
Statoil responds to PSA following May 2010 Gullfaks C well control incident
Statoil, Norway, has announced that broad efforts have been made to identify the direct and underlying causes of the Gullfaks C well control event on 19th May 2010. On 19th December, operator Statoil had responded to the most recent post-incident orders from the Petroleum Safety Authority Norway (PSA).
As required by the PSA, risk assessment and work processes in the drilling and well area at Statoil have been evaluated and improved. Statoil said that this has contributed to safer drilling processes and closer collaboration between the group’s operational teams and technical specialists. Work has also been carried out to identify improvement areas in the group which can help to ensure better learning from incidents. The International Research Institute of Stavanger (Iris) had conducted an external study into why measures adopted after earlier incidents with similar causes had failed to produce the desired effect on Gullfaks. Union-management action teams have also worked in parallel on the same issue to assess whether the main findings of this work are also valid for other parts of the organisation.
Seven areas of improvement have been identified on the basis of the Iris report and Statoil’s own work.
“A major and important effort has been made to ensure that we’ll learn from the Gullfaks incident,” said Øystein Michelsen, Executive Vice President for Development and Production Norway. “Through good collaboration with the employee representatives, we’ve jointly laid the basis for stronger learning and improvement work.”
Statoil will be simplifying its management system and reducing bureaucracy, as well as making managers better able to take responsibility and use the authority they are given. At the same time, it will be strengthening its values base by working for a more open and reflective corporate culture.
The group also intends to continue developing investigations of incidents into an even more important tool for learning from such events. A major accident forum will be established to focus attention on events which have a potential for developing into incidents of this kind, and to draw lessons from these.
Another move involves further developing and strengthening knowledge-sharing in the group through more systematic training of its employees and closer collaboration with its contractors. The union-management action teams in Statoil have worked to develop good measures based on the Iris report and their own data gathering. Management and union officials are collectively committed to the improvement areas and the goal of creating an even safer workplace in order to become an industry leader for HSE.
“All experience shows that we must work long-term and systematically to reach our HSE goals,” said Tove Stuhr Sjøblom, Executive Vice President for corporate staffs and services. “We’ve learnt a lot after the well control incident on Gullfaks in 2010. The measures we’re adopting will strengthen us as an organisation.”
“The proposed improvement areas represent a long-term change of direction which the unions are very confident will strengthen Statoil’s ability to achieve continuous improvement,” said the employee representatives. “We’re keeping a close eye on developments, and want to contribute to the success of Statoil through a constructive and effective collaboration with management.”
BACK TO TOP
Leak in riser of Deepwater Nautilus while drilling in GoM
On 18th December, Transocean’s semi-submersible MODU Deepwater Nautilus was drilling a sidetrack at Shell’s Appomattox No. 5 well in Mississippi Canyon Block 348, some 116km off the Louisiana coast, when a leak in the boost line of one of the risers leading to the unit resulted in an escape of some 319 barrels of drilling mud and water. According to a Shell spokesperson the leak was isolated, stopped and remedial action had been approved by BSEE (the US Bureau of Safety and Environmental Enforcement), which includes temporarily abandoning the well, pulling the riser and making appropriate repairs. Drilling was not expected to resume for some weeks until Shell and the BSEE and any other relevant governmental agencies were confident that the necessary repairs had been made and the operations could continue safely. Operator Shell has an 80% interest with the 20% balance held by Nexen Inc., Canada.
BACK TO TOP
Leak in subsea gas pipeline offshore China
On 19th December, China National Offshore Oil Corporation, CNOOC Limited, announced that its subsidiary Zhuhai Hengqin gas processing terminal received notification from Zhuhai Maritime Safety Administration that a leakage was found in the nearby subsea gas pipeline of the Zhuhai Terminal. After the incident occurred, CNOOC Limited Shenzhen Branch immediately launched the subsea pipeline leakage emergency plan and shut down the production of relevant platforms of PY30-1 and HZ21-1 fields. At the time, the terminal was under an accelerated depressurisation process. This incident neither caused any injuries nor environmental pollution, and the situation is under control.
To deal with this incident, CNOOC had endeavoured to release the natural gas remaining in the pipeline, to monitor the situation closely, and to set up an alert zone around the area where the incident took place, as well as to seek other preventative measures. The company had already, through the Zhuhai MSA, emitted the navigation warnings, evacuated adjacent vessels, and through the local government notified the nearby residents that might be affected. Due to this incident the company's net production was affected by approximately 160mcf per day (around 26,700boe per day).
The cause of the incident is still under investigation. The company said it will actively study and develop solutions to repair the pipeline, in order to resume the operation of the Zhuhai Terminal as soon as possible. Zhuhai Terminal, located in Hengqin island of Zhuhai city, is the gas processing terminal for the joint development gas project of PY30-1 gas field and HZ oil field. On 20th December, CNOOC said that the gas leak may be due to "external factors", which triggered the pipeline damage. Chu Kong Petroleum and Natural Gas Steel Pipe Holdings Ltd., which supplied the pipeline to CNOOC, is reported as saying that the leak was due to human error; specifically claiming that the leak was caused by the construction work of a third party near the region, which accidentally damaged the pipes. It is not yet clear how long it will take to repair the pipeline.
BACK TO TOP
Isfahan, Iran, refinery incident
According to a 20th December news agency report, an incident at the Isfahan refinery in Iran apparently caused a leakage of cooling water from generators, resulting in a power outage and a state of emergency was declared. One person was reportedly injured and taken to hospital. Flames and thick smoke were said to have covered the area.
BACK TO TOP
Oil leak from Bonga FPSO offshore Nigeria
On 20th December, a leak occurred during a transfer of crude oil from the Shell Nigeria Exploration and Production Company (SNEPCo)-operated 200,000bpd capacity Bonga floating production, storage and off-loading vessel approximately 120km off the Nigeria coast. The leak resulted from the partial rupture of an export line which was subsequently closed and depressurised, halting the flow of oil. The cause was confirmed through an inspection by a Remotely Operated Vehicle (ROV).
SNEPCo said that the leak occurred during a routine operation to transfer crude oil from the FPSO to a waiting oil tanker. Indications were that in total approaching 40,000 barrels of oil leaked.
Nigeria’s Department of Petroleum Resources and the National Oil Spill Detection and Response Agency were notified of the incident and SNEPCo’s Oil Spill Response Procedure and Emergency Response Team were activated to manage the situation.
On 22nd December, SNEPCo said that its analysis indicated that the leak from the Bonga offshore facility remained offshore and was thinning and breaking up, based on a combination of satellite pictures, photos from aerial surveillance, infrared cameras and direct observations from vessels.
However, the head of Nigeria’s National Oil Spill Detection and Response Agency reportedly said the slick was expected to reach beaches by the afternoon of 22nd December, likely impacting on birds, fish and other wildlife. Furthermore, it was said that the Bonga spill was the largest oil spill offshore Nigeria since 1998.
Five ships were deployed by SNEPCo to apply dispersant and maintain constant surveillance, and were supported by two aircraft. Other equipment and vessels were mobilised and additional oil spill response experts and marine life experts were brought in to assist in the overall effort.
SNEPCo said on 23rd December, that the leaked oil continued to thin as a result of the effective use of dispersants by seaborne vessels and aircraft. Surveillance and aerial photos were said to show the spill was breaking up into patches surrounded by clear water; the spill remaining offshore. On 24th December, SNEPCo said it continued to apply dispersants and had begun skimming operations to further reduce remnants of the oil leak. Estimates based on over-flights indicated less than 10,000 barrels of oil remained on the surface of the water. Although oil from the Bonga leak had not reached the shore, the company continued shoreline preparations in cooperation with the community. SNEPCo said that by the evening of 25th December the oil leak had largely dispersed.
On 26th December, SNEPCo said a group of international and Nigerian journalists would fly to an area off the coast of Nigeria, that day, to see how the leaked oil had largely dispersed. Additionally the journalists were to be taken by helicopter to see where third party oil, believed to have been spilled from another vessel in the area, had hampered SNEPCo’s efforts to tackle the leak from Bonga. This oil had washed ashore on short areas of coastline. SNEPCo said it would clean up this oil, both on and offshore. There was an over-flight by Nigeria’s Minister for the Environment and the Director General of NOSDRA on 24th December.
BACK TO TOP
Eleven killed and many injured in pipeline explosion in Colombia
On 23rd December, a fuel pipeline exploded in the town of Dosquebradas, Colombia, causing the deaths of at least eleven people and injuring more than seventy others, some suffering serious injuries. Reports suggested the explosion resulted from attempts to penetrate the pipeline to steal fuel. Dosquebradas is located in the department of Risaralda in the western central region of the country.
BACK TO TOP
ConocoPhillips provides further details on Bohai Bay funds
On 21st December, ConocoPhillips provided further details about the compensation and environmental funds that had been established in response to two separate accidents in Bohai Bay, China. ConocoPhillips said that the funds, first announced in September, “recognize the company’s responsibility for the accidents and demonstrate its commitment to the people and government of China.”
"ConocoPhillips takes responsibility for the two incidents in June," said Jim Mulva, ConocoPhillips Chairman and CEO. "These funds can help address the challenges of those who have been affected and promote the environmental sustainability of Bohai Bay."
Since ConocoPhillips announced the Bohai Bay Compensation Fund on 6th September and an environmental fund on 18th September, the company has worked to design both funds to meet the long-term needs of communities in the Bohai Bay region. The Bohai Bay Compensation Fund will provide reasonable compensation for any damages caused by the June 2011 accidents that occurred at the Peng Lai 19-3 field in Bohai Bay. The fund will be independently administered and will provide compensation to affected people, communities and industries near Bohai Bay.
The separate environmental fund will support research, restoration and other initiatives that enhance the marine environment and bring long-term benefits to the bay environment and its nearby communities. The environmental fund could support projects such as wetlands preservation, water quality improvement, fishery resources, marine ecosystems and risk management. ConocoPhillips is identifying leading independent experts who will provide guidance for the selection process and subsequent monitoring of the projects.
The Bohai Bay Compensation Fund and the environmental fund will function in accordance with applicable laws and regulations of the People’s Republic of China and international standards. Periodic updates on the progress of the Bohai Bay Compensation Fund and environmental fund will be provided.
BACK TO TOP
One dead in accident during crew transfer to Petrobras rig offshore Brazil
Petroleo Brasileiro SA, Brazil has reported that during the night of 26th December a 49-year old worker died and two other men were injured in an accident on its PUB-03 oil rig in offshore waters in Rio Grande do Norte state, north-east Brazil. Reportedly, the three men fell to the deck while being transferred from a crew boat.
Petrobras established a technical committee to investigate the cause of the accident and has informed the civil police and ANP, the National Petroleum Agency, and the country’s oil industry regulator.
BACK TO TOP
Thailand floods - Insurance Impact
On 8th December, Munich Re, Germany, said it expected losses from the floods in Thailand to total around €500m. The reinsurers noted that the widespread floods in Thailand, which reached their highest point in October and November, were the costliest natural catastrophe in the country's history. The economic losses are huge, since key industries are concentrated in the region north of the capital, Bangkok, and its environs. The consequences of the floods clearly show that prevention measures need to be strengthened in view of the country's high natural catastrophe exposure.
The claims burden for Munich Re is expected to be in the range of €500m net before tax. This estimate is still subject to uncertainty as the water is draining away very slowly and has still not fully receded in some areas. It therefore remains difficult to estimate losses in the worst affected industrial areas around Bangkok. The consequence of the floods includes not only damage to buildings but also, and more importantly, to the often expensive production facilities housed in them.
The floods claimed the lives of some 600 people. Not only were hundreds of thousands of houses and vast expanses of farmland flooded, but also seven major industrial areas with production facilities belonging mainly to Japanese groups. A large number of electronic key component manufacturers were affected, leading to production delays and disruptions at client businesses. Munich Re said that approximately 25% of the world's supply of components for computer hard drives is manufactured in Thailand and was thus directly impacted by the floods.
The events demonstrate once again how vulnerable the networked world economy is. "It is in the interests of companies to secure alternative key suppliers they can resort to in order to maintain the production process when extreme cases arise. As reinsurers, we will take this risk management aspect even more into account in our pricing of contingent business interruption covers in future,” said Board member Torsten Jeworrek. The share of these CBI covers in the loss amount in Thailand is not yet clear.
Munich Re said that given its low elevation above sea level, the plain of central Thailand - where the capital Bangkok is also situated - is prone to flooding throughout the rainy season from mid-May to October. The cause of this year's floods, which the authorities have classified as the worst in 50 years, was exceptionally heavy rainfall before and particularly during the rainy season. It is presumed that the La Niña natural climate phenomenon was a contributory factor, since the rainy season is often stronger during La Niña phases. The floods also submerged large parts of Bangkok.
The floods seem to have been ‘the last straw’ for Singapore-based Lloyd’s Syndicate 1965, which is no longer accepting new business. The Syndicate operated exclusively in Asia.
On 9th December, Kiln made a statement concerning Tokio Marine Kiln Lloyd’s Syndicate 1880 Thai flood claims, saying that on 18th November, Tokio Marine Holdings announced that it had incurred estimated net claims of USD1.3bn following the recent floods in Thailand. The Thai operations are reinsured on a proportional basis, with a significant share being retained through intra-group reinsurance arrangements, the balance being placed in the open market. The retained share of the proportional treaty (being approximately 50% of the Group's estimated net claims), is reinsured with Tokio Marine Kiln Syndicate 1880 as part of a programme of intra-group reinsurances. Syndicate 1880’s share of these claims is currently estimated to be USD700m. The Syndicate 1880 claims have been fully funded in cash by Tokio Marine. Syndicate 1880 is wholly capitalised by Tokio Marine and has no third party names. In fulfilling its role as a retention centre for the international operations of Kiln’s parent, Tokio Marine & Nichido Fire Insurance Company Limited, the Syndicate reinsures many of the international subsidiaries of the Tokio Marine Group. Syndicate 1880 has a full parental guarantee which supports its funds at Lloyd’s. Syndicates 510, 557 and 807 have no exposure to Tokio Marine’s Thai treaties.
Hardy Underwriting Bermuda Limited, which is undertaking a strategic review which could lead to a sale, has said that, combined with a provisional loss estimate for Hardy's other exposures in Thailand, the net loss after reinsurance for the Thai floods is estimated to be in the range of GBP10mn to GBP25mn.
Swiss Re said on 6th December, that it estimates its claims costs from the flooding in Thailand at USD600mn and that Aon Benfield has said that industry estimates suggest that insured losses may exceed USD10bn.
Asia Capital Reinsurance Group expects USD55mn in losses, net of reinsurance and reinstatement premiums and before tax.
On 16th December, SCOR, France, said that it estimates its losses from the floods in Thailand at €140mn net before tax. SCOR noted that, in view of the marginal penetration of flood insurance for residential properties in Thailand, the losses caused by this event will come almost entirely from manufacturing and supply chains. SCOR said that its estimates for the floods currently concur with an insurance market loss range of USD9bn to USD11bn, with the following assumed distribution: domestic market: 10% to 15%; Japanese joint ventures or local subsidiaries and parent company branches in Thailand: 65% to 70%; and regional operations of international insurers: up to 20%.
On 22nd December, Everest Re Group, Ltd., Bermuda, announced that it expects to incur net losses of between USD100mn and USD125mn, after reinstatement premiums and taxes, for claims arising from the floods. This range of estimates is predicated on an industry loss estimate of between USD10bn and USD15bn. Everest said that its view of its estimate of losses from this event remains preliminary and is subject to considerable uncertainty. The company expects it will be several months before relative clarity emerges with respect to its ceding companies’ underlying losses.
BACK TO TOP
Swiss Re: 2011 highest catastrophe-related economic losses ever
On 15th December, Swiss Re said that according to preliminary estimates from its sigma team, total insured losses for the global insurance industry from natural catastrophes and man-made disasters reached USD108bn in 2011. This is more than double the figure of USD48bn in 2010. Claims from natural catastrophes alone reached USD103bn in 2011, compared to only USD43b in 2010.
In 2011, total economic losses to society (both insured and uninsured) due to disasters, reached an estimated USD350bn, compared to USD226bn in 2010. The earthquake in Japan accounts for most of this year’s economic losses. More than 30,000 people lost their lives due to catastrophes in the first eleven months of the year, most of them in Japan.
With approximately USD108bn in insured catastrophe losses, 2011 ranks as nearly the most expensive year for the insurance industry according to sigma records, second only to 2005 (USD123bn). Moderate hurricane losses have kept costs lower than in 2005, the year when hurricanes Katrina, Wilma and Rita alone caused claims of over USD100bn.
Swiss Re said that if Japan had been as well insured as other countries with a high seismic risk, such as New Zealand, the overall industry tally would have been much higher. Even so, in terms of catastrophe claims, 2011 ranks as the second costliest year in history for the insurance industry. Additional claims from the ongoing massive floods in Thailand or from winter storms which may yet hit Europe, have the potential to bring figures for the full year even closer to the record claims of USD123bn experienced in 2005.
In addition to the earthquakes in Japan and New Zealand, severe flooding in Thailand and Australia triggered above USD10bn in insurance claims. Two massive tornado events in the US caused nearly USD14bn in claims and the loss of more than 400 lives. Hurricane Irene cost the industry nearly USD5bn in property damage.
At more than USD47bn, earthquake-insured claims for 2011 are the highest ever recorded. Japan’s earthquake was the largest known - in terms of magnitude - to have ever hit the country, costing the insurance industry an estimated USD35bn. However, the insured losses were only a fraction of the total losses. Estimated to be at least USD210bn, the total economic losses are likely to be much higher once damage to nuclear facilities and disruption to worldwide supply chains are included. By way of comparison, the earthquake which hit New Zealand in February caused economic losses of USD15bn. However, thanks to high earthquake insurance penetration rates, particularly in residential properties, the insurance industry will pay most of the losses.
The comprehensive sigma study “Natural and man-made catastrophes in 2011” will be published in spring 2012.
BACK TO TOP