Gulf Oil Rig Explosion LInks

One of the Yelnick readers, nspolar, comes from the oil patch and shared some of the sources he is following on the disaster in the Gulf. I added to his, and note that the points of criticism are emerging even before we know what happened:

• A detail timeline comes from a social network for oil & gas professionals
• An oil pro who was on the rig tells of his experience and speculations
• A scathing criticism from the former NOAA head of Gulf response that the Feds failed to execute the pre-approved plan & made things worse
• Another scathing criticism over why shut down all the other rigs? 
• A milder criticism from the NYT of the slow response
• The WSJ focuses on the rig owner cutting corners, and shows the "fix" graphic below
• Most inexplicable is why send in the lawyers? To "keep the boot on their throat" as White House spokesman Gibbs oily spilled about BP? 
• Already a hoax has emerged of sabotage by a Cuban-launched North Korean mini-sub
• An Oil Slickonomics summary, with the bad, the worst and the ugly scenarios
• BP announced they have significantly cut the flow through the pipe
• Follow-up on the failure to pursue the pre-approved plan shows they failed to stock fire-booms

 

First we need to understand what happened and how to improve future drilling, then we can assess blame and politicize. Nspolar adds a number of insights below the fold, and this important cautionary note: 

In the end we do not know all the facts and at this point it is possible for events to have been misreported. The investigation as to determining the chain of events that led to the explosion and blow out will likely take weeks, before concluding.

There were a couple of things I read that seemed odd about all of this. 

Control of well bore pressure is all about understanding of pressures, hydrostatic heads and all that. If all the work is done correctly the blow-out preventer (BOP) never gets used. There seems to be a bit of confusion as all the articles I have read are not in complete sync, but it appears the well had just been plugged, with temporary cement plugs, as it was being readied for temporary abandonment. Nothing odd about this. 

The mud had been removed from the riser, and replaced with saltwater. Apparently the plugs failed and the hydrostatic head was now not enough to hold the pressure. A gas column then rose and engulfed the rig in heavier-than-air gas. It was likely a small miracle more did not perish. The initial explosion had to have been major.

Now why didn't the rig hands close the BOP from topside?  Why did they seemingly not see this coming? It takes time for this column to move a mile up the riser. They have state-of-the-art data. The best guess is they were no longer paying attention, as they thought the well was safe. Another comment I read is that because they were getting ready to pull away they may have started disconnect of the BOP (from topside).   

Once the explosion occurred, and after the rig went down, any number of things could prevent the BOP from closing. It could be damaged. It had to take some hellish moments due to twisting and buckling of the attached riser, as the rig went down.

One thing really seemed odd to me however. I read that the BOP still has drill tubing coming out of it. I do not know how they can tell if the riser is attached. Maybe the riser was punctured, but it did not say. But if there is drill tubing still in the hole, why would they remove the mud in the riser and replace it with seawater?

Nspolar also notes a speculation that the BOP was modified, and perhaps the modifications interfered with shutting it down:

These modifications were discovered by remote operated vehicles, whose pictures transmitted to engineers trying to establish why the BPO didn't activate, showed the part had been altered. 

The report on BP cutting back the flow suggests they closed the annular ram on the BOP:

If the annular ram works, one would suspect the rest of the BOP works.  I am not a BOP expert, I did read the BOP shear can not likely function correctly, if certain types of tools are still in the hole.

more as it comes in ...

Comments

[Don]

Hank, you were very emphatic last week that the market would tank. Was Friday's 150 point drop it?

[nspolar]

Yelnick thanks for the poke. I appreciate it.

I will keep following ... at this point I think it likely to be quite some time before we have 'the facts'.

I did come across something else that is interesting, and I agree likely. Yet I had not thought of it. All the data from this rig could have been transmitted in real time to a BP drilling center of sorts, that is until it stopped. The oil patch likes data and are into monitoring things big time, include remotely. If this true, in this case, it is likely BP has all the data and knows the exact or near exact chain of events that occurred.

This event is going to furnish opportunities for lots of lawyers.

ns

[nspolar]

BP is making quite a bit of progress, so it seems. Closed the annular ram on the BOP it appears, and leak has slowed. You traders might want to test the waters on BP?

http://blog.al.com/live/2010/05/bp_official_weve_significantly.html

If the annular ram works, one would suspect the rest of the BOP works. I am not a BOP expert, I did read the BOP shear can not likely function correctly, if certain types of tools are still in the hole.

ns

[Hank Wernicki]

40 points the last 2 trading days !

get the trades here : http://twitter.com/Frac_Man

Hank

[yelnick]

nspolar, I will keep adding to this post and might put it at the top of the blog for a while, so please add any insights or links you think relevant and I will put them into the top level post

[Don]

Hank, do you have a long-term track record you can post?

[nspolar]

W/r to the indices .....

I follow a bullish board. They have been quite ebulent, and all predicting new highs, as the markets melt on up. Likewise they have been poking fun of bears, to the extreme.

As most of us know w/r to the markets what goes around comes around, and vice versa. So it is often best not to poke to much fun at those in misery.

One of these bulls exclaimed the other day, 'I knew it, I knew it ... the old proverbial ED in progress'. Or something like that.

What he was referring to was a prediction from a bear board he was bashing about an ED in progress here. I believe the bear board probably had the count a bit wrong, in any case, but .....

But could an ED be in progress?

I am not a day trader so the SPX is not of great interest to me. I actually follow and chart the DOW more so than I do the SPX. But I usually look at the SPX.

Did the DOW and the SPX go into a 'vth' wave about the 23rd or 24th, and is that vth wave an ED? It is easier to see on hourly charts (which I do not have here).

If what comes around goes around or whatever, HW's big dump will start after we finish this wavelet up.

Will look more tonight on the hourlies.

ns

[Forcast]

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[Forcast]

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Excuse me for my English, I'm French speaking Belgium

[nspolar]

Yelnick, now read this.

http://www.reuters.com/article/idUSN0322568420100503?type=marketsNews

BP obviously is having some major internal communication issues. The right does not appear to know what the left is up to. Tony Hayward is probably fit to be tied.

Now one may begin to understand why/how human error often enters into the chain of events that causes these issues. It is often the case during oil field projects of major size that the right and the left are not in the same ball park.

Gotta head out for a while.

ns

[Hockthefarm]

Yelnick:

Great post. What a mess.

Here is a great one from Hussman on transversality violations:

http://www.hussman.net/wmc/wmc100503.htm

Dent sees potential for up til August, then lights out.

I'm not betting on that, but it does feel like we are heading for a real train wreck.
Hock

[yelnick]

Hoch, I can buy the Dent scenario. A B wave shortly, then a summer rally to around Sp1250-75, then the hard Sept drop

[Hockthefarm]

Y:

"Hock, I can buy the Dent scenario."

Yes, he thinks the financials may lead us down by a month or two.

In view of the Dent timing, any thoughts on where China fits in? Faber is talking crash in the next 9 to 12 months I believe.

If indeed Prechter/Dent have it right, I didn't think it would feel this way (calm before the storm I guess). One thing for sure though is that we have drifted a long way from our past. I'm watching the Election race over in England. Seems to me the best thing that could happen to the Conservatives is a hung parliament with the libs and stiffs forming a coalition. A year or 2 from now, it will be far easier to wave goodbye to the Great Society.
Hock

Hock

[yelnick]

Hock, I have been steadily preparing a China post, but have no firm view at the moment. As with the Olympics, they will try to make the Shanghai Expo work. I suspect China begins to fall when events overwhelm it, specifically, a rebirth of the financial crisis out of Europe.

[Canadian Money]

Is that a quasi Head and Shoulders Top on the SP500, one that predicts a drop to at least 1140? I classify it as quasi because the volume pattern is not ideal for this type of pattern. In addition, counting from the March 2009 low, one could argue that the rally is very close to the upper channel line of a possible five wave count.