February 2005 – A giant in the oil industry sets out to drill what is, at the time, the deepest oil well in the world, a staggering 32,000 feet below the sea bed. The oil field, just 28 miles from the Louisiana coast, is estimated to contain up to a billion barrels of oil. The success of this well could launch a new era of offshore drilling and revolutionize an industry. And then, after 18 months and $180 million dollars, just 2,000 feet from their target, ExxonMobil halts their drill, declares Blackbeard West unsafe, and walks away.
Barely 5 years later, a similar well, deep and deeply unsafe, would suffer a catastrophic blowout, pumping millions of barrels of crude into the Gulf of Mexico. The resulting investigation revealed a history of unacceptable risk and a blasé attitude towards safety on the part of BP. While the BP blowout at the Macondo well was a disaster on a global scale, Blackbeard West was a disaster deferred. How could these two incidents, both created by nearly the same conditions, have had such dramatically different consequences? What can we learn about the culture of oil exploration and the true cost of a crude economy from Blackbeard West?
By all accounts, Blackbeard West had the potential to be one of the richest oil prospects in the Gulf. Initial estimates suggested that the well contained at least 500 million barrels of oil and possibly upwards of several billion barrels. For comparison, the Macondo prospect, which was the site of the Deepwater Horizon disaster, held only about 50 million barrels.
The oil at Blackbeard West would not be easy to access. Though the water depth at the site was only 70 feet below sea level, the oil was locked away at an unimaginable 32,000 feet below the seabed. Over the next 18 months, ExxonMobil drilled an impressive 30,000 feet deep, investing over $180 million into the project. Were it to reach completion, it would have been the deepest oil well ever drilled.
Then came the rumble. The increasing pressure strained the drilling equipment, and sent tremors through the rig. Worried that the well would be unstable and the pressure would be to great to control, ExxonMobil halted drilling. Although ExxonMobil has been tight-lipped about the reason for closing the well, insiders report that the final straw was a natural gas ‘kick’ that shook the rig – that should sound familiar to readers who followed the Deepwater Horizon disaster.
According to Sutton Technical Books, which compiles incident reports for industrial safety training:
[Well] conditions were “hellish” – the drillers were experiencing very high temperatures and pressures (more than 29,000 psi). Indeed, the well had already experienced a kick. They were concerned that a blowout could exceed the capacity of the system’s blowout preventer.
There are some major differences between the Macondo and Blackbeard oil prospects. While Macondo was in 5,000 ft of water, required expensive and complex offshore drilling equipment, Blackbeard was only in 70 ft, which allows for more conventional drilling tools. The Macondo well was a measly 18,000 ft below the seabed, barely more than half the depth of Blackbeard. At 32,000 ft, the pressure exerted on drilling equipment was measured at more than 28,000 psi.
Perhaps the biggest difference between the two prospects is their companies’ relative commitment to safety. While BP has a long and shocking history of poor safety, Exxon, post-Valdez could be described as skittish when it comes to taking risks, at least compared to other oil companies.
ExxonMobil was heavily criticized for abandoning the Blackbeard prospect. In a 2008 article entitled Exxon: Juggernaut or Dinosaur? one oil industry analyst reported “Exxon could have finished the well. They would have done fine. They just didn’t have the guts.” That same article criticizes ExxonMobil’s “aversion to risk” – a weasel’s way of saying commitment to safety.
What we have is an culture of oil exploration and exploitation that incentivizes risk and penalizes caution. Exxon’s safety record didn’t protect it from the massive plummet in oil stocks following the Deepwater Horizon, it suffered as much, if not more than BP – which still posted record profits for 2010. Oil companies that play it safe are still at the mercy of oil companies that take unacceptable risk. If safety is more expensive and less profitable, than decisions like the ones made at Blackbeard West don’t make economic sense.
All is not quiet with Blackbeard, either. Following Exxon’s decision to pull out, another oil company, McMoRan, took over the well and continued to dig. Current estimates put the Blackbeard prospect at nearly 4 billion barrels. McMoRan has drilled exploratory holes down to 35,000 feet . Their exploration report for Q1 2011 reveals a menagerie of deep wells in the Gulf Coast, and reports mechanical problems at their Blackbeard East well. [Update] A McMoRan insider has informed me that the Blackbeard West well has been temporarily abandoned and suspension of operations will continue until at least May 31, 2011. [/Update]
The dialog surrounding the Gulf of Mexico Oil Spill focuses on ways to improve the safety of offshore drilling, on new technologies that could be put in place, and on better government oversight. But the real lesson of Blackbeard and ExxonMobil is that the system and culture that could have (and indeed probably did) prevent blowouts like the one that rocked the Deepwater Horizon exist. The Deepwater Horizon disaster wasn’t a failure of technology, it was a failure of economy. There are no incentives for the oil industry to minimize risk. A strong commitment to safety doesn’t prove any economic benefit. Despite the fact that the Blackbeard incident revealed:
…how a company culture can change. In the case of the Exxon company, the Valdez event led to management instituting a safety culture that is among the best in industry.
Today, Exxon stands out among its peers for its obsessive attention to safety, according to analysts and industry insiders.
The company clearly understood the hazards that they faced were they to continue drilling, and the risks associated with an environmental catastrophe such as the Valdez spill.
The oil industry continues to foster a culture of risk that is clearly no longer acceptable. Beyond that, we need to focus not just on the tragedies and failures, but also meditate on the moments when systems work and establish incentives that propagate those successes.