Guest post by David Middleton

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The movie Deepwater Horizon is probably the only movie ever made that actually tried to realistically depict oil drilling operations.  While it didn’t get every detail right, it was compellingly realistic (too realistic for me watching it on IMAX) and told the story of how ordinary people, just doing their jobs, can become heroes when everything goes wrong.  I won’t go into detail about everything that went wrong leading up to the terrible disaster on April 20, 2010.  BP’s Deepwater Horizon Accident Investigation Report is fairly comprehensive.  Ultimately it boiled down to the normalization of deviance.  The 1986 Challenger space shuttle disaster has also been attributed to the normalization of deviance.  When dangerous jobs become routine, corners get cut, people become complacent and a sense of impunity sets in.  The safety director for my first employer, Enserch Exploration used to start almost every safety meeting with this question and answer:

What kills the most people in industrial accidents?  Impunity.

The Deepwater Horizon disaster caused the entire industry recommit itself to rigorous adherence to safety procedures… Because no one wants go to work and not come home.

Deepwater Horizon Myths

BP’s prospect was located in Mississippi Canyon Block 252 (MC 252).  It was called “Macondo.” At the time of the blowout and efforts to regain control of the well, a lot of myths were propagated.  People said things like, “The well encountered the highest pressures ever recorded”… “Macondo was the largest oil discovery in the world”… “BP was keeping the geological data secret – Not even revealing it to the government.”  In reality, there was nothing particularly anomalous about Macondo.

Macondo was estimated by BP to be a 50 million barrel discovery.  Kind of small by major oil company standards… A “home run” by smaller independent oil company standards.

One blogger actually wrote this in June 2010:

“No one outside of BP knows the details of the geology under the well site because BP did the geological survey and refuses to release the information – classifying it as proprietary trade secrets.”

BP’s partners (Anadarko and Mitsui) knew exactly what BP did about the geology. The Minerals Management Service (MMS) had all of the data that BP had. Operators had to provide all data to the MMS (now BOEM) – even on “tite holes” and proprietary geophysical surveys.  All of the companies that bid against BP in OCS 206 on March 19, 2008 knew at least as much about the geology as BP did. BP’s high bid barely beat out smaller independent oil company LLOG Exploration…

1. BP Exploration & Production Inc. $34,003,428.00
2. LLOG Exploration Offshore, Inc. $33,625,000.00
3. Noble Energy, Inc. $17,225,650.00
4. Red Willow Offshore, LLC $14,075,000.00
5. Eni Petroleum US LLC $4,577,115.00
6. Anadarko E&P Company LP $2,145,950.00

Only one of BP’s competitors for the lease, Eni, was a major oil company. The rest were small, mid-sized and large independents. All of those companies knew enough about the geology to bid on the lease. I don’t work that particular area, but I knew enough about the geology to know the approximate size of the reservoir, thickness of the sands and that the sands are Middle Miocene age and trapped against a Cretaceous unconformity. Any company that is a member of the Offshore Oil Scouts Association (OOSA) also knew a great deal about the drilling procedures and hole conditions.

From April through July 2010, the blowout spilled an estimate 4.9 million barrels of oil into the Gulf of Mexico.  By mid-July, the well was capped.  By August, most of the oil was gone… Either recovered by clean up procedures, evaporated, burned and/or consumed by microbes.

Deepwater Horizon Perspective

Just prior to the Macondo blowout, this was on the MMS (now BOEM) website:

Since 1980, OCS operators have produced 4.7 billion barrels (bbl) of oil and spilled only 0.001 percent of this oil, or 1 bbl for every 81,000 bbl produced. In the last 15 years, there have been no spills greater than 1,000 bbl from an OCS platform or drilling rig. The spill risk related to a diesel spill from drilling operations is even less. During the 10-year period (1976-1985) in which data were collected, there were 80 reported diesel spills greater than one barrel associated with drilling activities, compared with 11,944 wells drilled, or a 0.7 percent probability of occurrence. For diesel spills greater than 50 bbls, only 15 spills have occurred, or a 0.1 percent probability.

Natural seepage of oil in the Gulf of Mexico (unrelated to natural gas and oil industry operations) is far more extensive. Researchers have estimated a natural seepage rate of about 120,000 bbl per year from one area (23,000 square kilometers) offshore of Louisiana.

U.S. Minerals Management Service ca July 2010

This passage disappeared from the website shortly after the blowout.

Of the nearly 53,000 wells drilled in the Federal waters of the Gulf of Mexico since 1947, there has been one Macondo.

Relative to the number of wells drilled and volume of hydrocarbons produced, the volume of oil spilled in the history of oil & gas drilling operations in the Gulf of Mexico has been minuscule.

Having trouble seeing the spills?  Here’s a plot of just the spills and natural seepage estimate:

Putting Macondo into perspective is in no way meant to diminish this terrible tragedy.  Eleven men died in this disaster.  However, our government’s reaction to it was, in itself, a disaster.  Thirty three rigs that were drilling in deepwater were forced to shut down and temporarily abandon the wells they were drilling.  This created an even greater accident risk than allowing them to complete the wells they were drilling.  The Obama administration’s unlawful drilling moratorium and subsequent “permitorium,” led to the loss of over 200,000 bbl/day of oil production from 2010-2015:

Deepwater Horizon EpiLOGG

Did you ever wonder if anyone ever went back in and re-drilled Macondo?

10/12: LLOG Exploration is making waves in the Gulf

DAVID JACOBS
APRIL 22, 2015 | BUSINESS

When the Obama administration announced a moratorium on deepwater drilling in the Gulf of Mexico in 2010, politicians and industry spokespeople howled. The explosion on the Deepwater Horizon rig at the Macondo well was tragic, some said, but there was no reason to shut down an entire industry sector that otherwise was following the rules and operating safely.

Conspiracy theories that President Barack Obama would try to kill the industry with onerous new regulations proliferated in some circles. Even if the moratorium eventually was lifted, the naysayers said, companies might take their rigs, jobs and tax money to new locales and not come back for many years.

But at LLOG Exploration, it was no time to panic.

[…]

THE RIGHT PLAY

LLOG was founded in 1977, primarily to develop prospects in south Louisiana. As the company grew, its focus expanded to include the depths of the Gulf of Mexico.

In 2004, LLOG purchased seismic data covering a portion of the Gulf known to the offshore industry as the Mississippi Canyon.

[…]

LLOG Exploration at a glance

• Founded: 1977 in Metairie
• President and CEO: Scott Gutterman, who joined the company in 1993 and became CEO in 2007
• Headquartered in Covington, with offices in Scott and Houston
• 170 employees
• Ranked in 2014 as the top privately owned liquid producer in the United States
• One of the top 20 exploration and production companies in the Gulf of Mexico, public or private
• Has drilled more than 350 wells in the Gulf of Mexico and the Texas/Louisiana Gulf Coast since 2001
• 2014 net production: 26,000 BOE (barrels of oil equivalent) per day
  Source: LLOG

This article was originally published in the Spring 2015 issue of 10/12 Industry Report.

Greater Baton Rouge Business Report

LLOG Exploration was the second-highest bidder on MC 252.  In the wake of Macondo, LLOG was able to purchase the lease from BP and put together a strong lease position in the area.

Drilling To Start at Macondo Reservoir

by The Associated Press|Cain Burdeau|Wednesday, May 13, 2015

NEW ORLEANS (AP) — Deep-water drilling is set to resume near the site of the catastrophic BP PLC well blowout that killed 11 workers and caused the largest U.S. offshore oil spill five years ago off the coast of Louisiana.

A Louisiana-based oil company, LLOG Exploration Offshore LLC, plans to drill into the Macondo reservoir, according to federal records reviewed by The Associated Press.

[…]

Richard Charter, a senior fellow with the Ocean Foundation and a longtime industry watchdog, said drilling into that reservoir has proved very dangerous and highly technical, and it raises questions about whether a small company like LLOG has the financial means to respond to a blowout similar to BP’s.

Eric Smith, associate director of the Tulane University Energy Institute in New Orleans, dismissed those concerns. He called LLOG “an extremely well-financed and well-organized” company.

“If I were to pick anyone to go into that field after so many problems, I would pick LLOG,” Smith said. “They have demonstrated their ability to drill in the area.”

Since 2010, LLOG has drilled eight wells in the area in “analogous reservoirs at similar depths and pressures,” Fowler said. The company has drilled more than 50 wells in the Gulf since 2002, he said.

He said the company has studied the investigations into the Macondo disaster and “ensured the lessons from those reports are accounted for in our design and well procedures.”

[…]

RigZone

LLOG Exploration renamed the prospect “Niedermeyer”… part of an Animal House theme (we named our deepwater prospects after Caddyshack characters).

Niedermeyer was a nice discovery.

• Four wells on MC 208, 209, 252 and 253.  Feb. 2015 through July 2017.
• 21.7 million barrels of oil (mmbo) and 57.5 billion cubic feet (bcf) of natural gas.
• MC 252 SS-1 Well:  6.1 mmbo & 15.6 bcf.  Oct. 2015 through July 2017.  Avg. 9,600 barrels of oil per day (BOPD) and 24 million cubic feet of natural gas per day (mmcf/d).

The Niedermeyer, Marmalarde and Son of Bluto 2 fields were completed as subsea tiebacks to LLOG’s “Delta House” floating production system (FPS) on MC 254.

LLOG began drilling the Delta House prospects in 2011 and by 2015 had the Delta House FPS completed and commenced production.

LLOG eyes 2015 Delta House startup

06/06/2013

Strategic partnership lets Louisiana operator ramp up deepwater E&P

Russell McCulley
Senior Technical Editor

Louisiana independent LLOG Exploration Co. is gearing up for an ambitious deepwater Gulf of Mexico drilling campaign at the Delta House project, scheduled for first oil in 2015. As of April 2013, the company had drilled two successful wells: one at the Son of Bluto 2 prospect, in Mississippi Canyon 387, and another at Marmalard, in MC 300, and had the Ensco 8502 semisubmersible drilling a third Delta House well at the Marmalard prospect. The three wells will supply initial production to the Delta House platform, to be moored in 4,500 ft (1,372 m) of water in MC 254.

Early this year, LLOG lined up two newbuild DP drilling rigs to carry out work at Delta House and the company’s other central Gulf prospects. A cylindrical Sevan Drilling rig under construction at Cosco Quidong shipyard in China, to be dubbed Sevan Louisiana, will start a three-year, $550-million charter with LLOG in January, 2014. In 3Q 2014, Seadrill’s West Neptune is scheduled to arrive at the Delta House complex to begin an initial three-year, $662-million term. The dual BOP drillship is under construction at Samsung Heavy Industries in South Korea.

[…]

Offshore Magazine

In less than five years, the Delta House development went from spudding the first well to 80,000 bbl/d of oil production.

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LLOG Exploration is just one of many, efficient and highly competent independent oil companies, that most people have never heard of, developing deepwater prospects in the Gulf of Mexico and around the world.

Oil’s well that end’s well!