The rush to dump coal…
Oil prices spiked on Monday…
Just three years after the events of the Macondo well oil spill befell the Gulf of Mexico, many rigs have once again been asked to cease all operations; this time due to the discovery of faulty bolts used in safety equipment.
The US Bureau of Safety and Environmental Enforcement have ordered energy companies working in the Gulf, such as Chevron, Royal Dutch Shell, and Transocean, to suspend all work upon any rig that uses General Electric devices to connect drilling tubes and safety equipment to the sea floor.
The bolts were found to be faulty last month after a drilling fluid leak was found to have been caused by bolts which had failed due to stress corrosion.
Related article: Why has US Oil Consumption Steadily Fallen since 2004?
Replacing all of the bolts with new, faultless models will take an estimated three weeks per rig. With daily rental charges for sophisticated deep water drilling equipment around $600,000, and daily pay for rig workers to be around $500,000, waiting three weeks to replace bolts on each rig could turn into a rather costly affair.
Craig Pirrong, the director of the University of Houston’s Global Energy Management Institute, admitted to Bloomberg that “this certainly will be costly for the industry,” but also suggested that it “is a result of increasing government scrutiny of deep-water activities. The question is, will the increased costs be so onerous that they discourage some companies.”
Sean Gannon, a spokesman for GE, confirmed that “everyone in the industry is aware of it. We’ve contacted every customer and global regulator. There’s a whole overlapping set of layers where active drilling rigs in particular have been apprised and they’re on top of it.”
By. Joao Peixe of Oilprice.com
Joao is a writer for Oilprice.com