Below is a Q and A Interview with Frank Verrastro, senior vice president and director of the Energy and National Security Program at the Center for Strategic and International Studies (CSIS) here in Washington, D.C.
Frank discusses the latest issues BP is having with capping the well, potential policy implications for the industry in general and scalable alternatives of renewable energy technologies.
Q1: What is the status of BP's latest attempt to cap the Gulf oil well?
A1: After pumping a total of over 30,000 barrels of heavy muds (achieving rates of up to 80,000 barrels of fluid/minute), BP abandoned its "Top Kill" effort to attempt to stem the flow from the spewing Macondo well and decided to pursue other options. BP had initiated the Top Kill operation last Wednesday (May 26) by pumping large volumes of specially formulated drill muds into the well in order to exert enough pressure/weight in the column to offset the pressure coming from the upflow of fluids within the pipe.
Early indications had appeared promising as the downhole pressure was being lowered, but large volumes of the injected drill muds were also found to be escaping through leaks in the pipe and blowout preventer (BOP), so efforts were also undertaken to attempt to seal those holes. If/once the weight of the injected drill muds had been sufficient to overcome the internal pressure of the oil and gas upflow and the pipe was stabilized, BP had then planned to cement and plug the hole. Unfortunately, the pressure of the oil and gas escaping from the well was simply too powerful to overcome.
BP is now preparing to deploy a Lower Marine Riser Package (LMRP) cap containment system, a process that essentially involves severing the damaged riser from the top of the existing BOP, installing a containment cap, and connecting the new riser to the Discoverer Enterprise drillship in order to capture the escaping oil and gas. The LMRP cap is already on site and installation is expected to take three to four days.
Of critical concern, however, are issues relating to the ability of the installation to actually seat the cap atop the spewing pipe and to what extent the cap seal will actually be able to contain and capture the rising fluids. Concurrent with the installation, BP will need to plug leaks in the damaged BOP to minimize escaping discharges. BP is also considering the installation of a second BOP to sit atop the current blowout preventer unit.
Concurrent with the installation of the LMRP, the drilling of two relief wells continues. The first well began drilling on May 2 and the second on May 16. The relief wells were reported to have reached depths of over 12,000 and 8,500 feet, respectively, but are still above the target depth for intersecting the well. Once that occurs, (recall that they have to hit a target about the size of a dinner plate) the intent would be for fluids and muds to be pumped into the hole, achieving the same objective as the Top Kill approach.
That said, completion of the relief wells is still several weeks off (most probably early August), and with the Hurricane season set to begin, the prospect of having to evacuate the drillships could further delay completion of the relief effort.
Q2: In the wake of the Gulf spill, President Obama recently announced a series of actions aimed at restricting new drilling activity in the Gulf, offshore Alaska, and off the Atlantic coast. What is the impact of those announcements on U.S. oil and gas production and won't that lead to increased oil import dependence?
A2: Last Thursday (May 27), the president announced a series of measures affecting offshore drilling, including the cancellation of upcoming lease sales in the western Gulf of Mexico (GOM) and offshore Virginia, a delay in exploration activity offshore Alaska (affecting projects that had already been permitted), a six-month extension of the ban on permits for new drilling in deep water in the GOM (note: the president referred to drilling in depths of 1,000 feet or more, but later "clarifications" from the Interior Department indicated the ban would apply to "floating" rigs in 500 or more feet of water), and the suspension of exploratory drilling activity for 33 currently permitted deepwater wells in the GOM.
The announcements largely tracked recommendations made by the Department of the Interior (DOI) as part of the 30-day review undertaken at the president's directive on April 30. In addition to the suspension-of-activity recommendations, the DOI report also outlined a series of prescriptive actions governing enhanced inspection, testing and reporting of safety equipment, operational guidelines, and enhanced deepwater well control procedures. (See the DOI Web site for the report: "Increased Safety Measures for Energy Development on the Outer Continental Shelf," May 27, 2010.)
In terms of production volumes, the near-term impact of the announcements appears to be limited. The suspensions do not affect projects in the shallow waters of the Gulf, and since all of the currently operating deepwater rigs with BOP stacks have already undergone inspections, production operations should not be materially impacted. Under the suspension, however, any new drilling appears to be prohibited—although in the past month, DOI has issued a number of waivers and permits even as the investigation into the Deepwater Horizon accident was ongoing, so it remains to be seen how DOI will proceed as we enter this new phase.
Production from the GOM represents roughly 30 percent of U.S. oil output, with deep water volumes accounting for about 80 percent of that amount, or some 1.4 million barrels per day (mb/d). A handful of new projects were expected to come online later this year, so those volumes will necessarily be delayed into 2011. Estimates by Wood Mac, Deutsche Bank, PIRA, and others suggest that 2011 output could be reduced by between 80,000 and 200,000 barrels per days, assuming the moratorium does not extend beyond the current six-month horizon.
At $75/barrel, replacing 200 mb/d would increase our oil imports bill by some $2.7 billion.
Of greater concern, however, is the prospect for further delays or extensions of the drilling moratoria. Early last week, the president signed an executive order creating a special commission to investigate the causes of the Deepwater Horizon accident and to recommend actions to ensure enhanced safety and improved environmental controls for offshore drilling activity. The two co-chairs for the commission—former Florida Senator Bob Graham and former EPA director Bill Reilly—were named last week, but to date no other commissioners have been identified. Assuming the commission would complete its work within the six-month horizon gets somewhat more problematic without the panel being fully formed and underway.
In the meantime, suspension of industry activity will undoubtedly pose financial hardships for producers, rig crews, service companies, equipment suppliers, and contractors, many of whom operate out of the Gulf, so further unemployment and lost revenues will only exacerbate the financial difficulties already facing the region.
The tragedy of the loss of the Deepwater Horizon, the deaths of 11 workers, and the catastrophic impacts of an enormous oil spill unquestionably require a thorough examination of the causes; a reevaluation (and marked improvement) of spill prevention, containment, and cleanup capabilities, as well as a vigorous review of applicable regulations; and a recommitment to sound practices, procedures, equipment, and safety requirements.
The industry's track record with respect to oil spills from production platforms over the past 20 years has been nothing short of outstanding, but neither they nor the nation can afford a second Deepwater Horizon disaster, so caution must be taken that all appropriate measures are put in place to minimize any chance of a repeat occurrence of a spill of this magnitude.
Q3: Critics of continued fossil fuel use increasingly point to the recent mining disaster and the Gulf oil spill as ample evidence that we should be transitioning to cleaner, alternative fuels more quickly. How soon can we expect an overhaul of our energy system to take hold?
A3: For a variety of reasons (economic, environmental, geopolitical, investment, national security, etc.), there is increasing recognition that continuation of the current energy system is unsustainable and in many ways that transformation is already underway. That said, given current technology limitations, the need for massive new investment and infrastructure, turnover timelines of capital stock and deployment lags (even if we had all the right answers today), it will be decades before we can transition to a low-carbon or emission-free economy.
Consequently, even as we push research and accelerate the deployment of renewable energy forms, we need to ensure that the conventional fuels system remains robust—and that includes, as the president has repeatedly stated, the production and use of petroleum and natural gas (albeit cleaner) if for no other reason than there simply are no scalable alternatives available today.
Frank A. Verrastro is senior vice president and director of the Energy and National Security Program at the Center for Strategic and International Studies (CSIS) in Washington, D.C.
© 2010 by the Center for Strategic and International Studies. All rights reserved.