Knut Ørbeck-Nilssen, Executive Vice President OilTech Atyrau April 2011 Deepwater Horizon Update...

Knut Ørbeck-Nilssen, Executive Vice President OilTech Atyrau April 2011

Deepwater Horizon Update – The aftermath

Likely industry consequences and preliminary results

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OilTech Atyrau April 2011

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Presentation outline

The Deepwater Horizon, a

game-changer?

A new US regulatory

regime?

Industry changes?




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The Deepwater Horizon, a game-changer ?




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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




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The response effort:Containment and oil spill

(image © BP p.l.c.)




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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 ?????




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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




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A new US regulatory regime?




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US-Norway, share industry learning




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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.




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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 ?




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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




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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




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Investigation of BOP for US GovernmentReport available at www.dnv.com

Pho

to: B

P p

lc




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Industry changes?




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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




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Norway, Netherlands and UK:Reactions

? ?




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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




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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”.




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Oil Spill Containment System:“Design it, engineer it, and make sure it is never used!”




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Can we manage the cold risks?

SUMMING UP




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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




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Safeguarding life, property and the environment

www.dnv.com

Knut Ørbeck-Nilssen, Executive Vice President OilTech Atyrau April 2011 Deepwater Horizon Update...

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