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Posts Tagged ‘INCs’

More on 2021 compliance (US offshore oil and gas operations)

Posted in Alaska, California, Gulf of Mexico, Offshore Energy - General, Regulation, tagged , , , , , , , , , , , , , , , on January 20, 2022| Leave a Comment »

While the Fieldwood Energy violations drove up the number of Incidents of Non-Compliance (INCs) in the Gulf of Mexico in 2021, most operating companies appear to have had good compliance records. Among companies that were subjected to at least 10 facility inspection and drilled at least one well, BHP Billiton, Eni US, and Murphy (listed alphabetically) had the most impressive compliance records. These three operators were cited for 7 or fewer INCs, none of which required a facility to be shut-in. Other operators that exceeded those activity thresholds and had excellent compliance records were (listed alphabetically) Anadarko, ANKOR Energy, Chevron, EnVen, Shell, and Walter Oil and Gas.

In the Pacific Region, Beta Operating Co., Chevron (now overseeing the former Signal Hill properties), and Exxon had excellent compliance records, although none of these facilities produced for the full year. In Alaska, Hillcorp had an excellent record at the Northstar Unit. (This is a gravel island facility in the State waters of the Beaufort Sea, but some of the wells produce from portions of the reservoir that are in the Federal sector).

Unfortunately, only summary inspection data are posted online. Without knowing the specific violations and circumstances, it’s not possible to fully assess the risk exposure. These oil and gas operations are conducted on public lands and are monitored by Federal employees. Inspection data and reports should be publicly accessible without having to submit Freedom of Information Act requests.

As has previously been discussed, incident updates should also be posted in a timely manner. Reference is made to this important recommendation in the 2016 National Academies report entitled Strengthening the Safety Culture of the Offshore Oil and Gas Industry:

Recommendation 4.2.2: Because accident, incident, and inspection data all are needed to identify and understand safety risks and corrective actions, the committee recommends full transparency such that regulators make all these data readily available to the public in a timely way, taking into consideration applicable confidentiality requirements.

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Gulf of Mexico violations surged in 2021; one company is largely responsible

Posted in accidents, Gulf of Mexico, Offshore Energy - General, Regulation, tagged , , , , , on January 20, 2022| Leave a Comment »

Per BSEE’s Incidents of Non-Compliance (INC) data base, the number of violations surged in 2021, both in terms of the total number of INCs and the INCs/inspection ratio (see chart below). Remarkably, a single company – Fieldwood Energy – was responsible for 845 INCs or 44% of the total number issued. Normalizing for the number of inspections, Fieldwood facilities were cited for 1.46 INCs/inspection versus 0.46 INCs/inspection for all other companies. An unprecedented 61 of Fieldwood’s 2021 INCs called for facility shut-ins, many times more than any other operator. Through the first 17 days of 2022, Fieldwood has already been cited for 21 INCs, 5 of which required facilities to be shut-in.

Fieldwood and its affiliates have experienced multiple bankruptcies and the company has once again been reorganized with the blessing of the courts. Chevron’s comprehensive objection to the reorganization plan asserted that Fieldwood has $9 billion in current and anticipated decommissioning obligations. These enormous decommissioning liabilities and their implications for predecessor lessees (former facility owners) and the Federal government were the main issue in these proceedings, and the bankruptcy plan includes settlements with predecessor companies and the government.

Even more significant than the financial matters and INCs are the following:

While BSEE regulations provide for the removal of operating rights for poor safety performance, companies can reorganize and problem managers can reappear elsewhere. As a result, marginally financed and ineffective operating companies are a major challenge for BSEE as evidenced by the INCs, civil penalties, and investigations. (See the related saga of Platforms Hogan and Houchin in the Pacific Region.)

Poor safety performers drag down the entire industry. The costs of mega-disasters like the Santa Barbara and Macondo blowouts have been widely discussed. However, chronic poor performance and the associated incidents also weaken the industry and damage the integrity of the offshore oil and gas program. These performance issues can’t be left entirely to BSEE and the Coast Guard to resolve. The industry needs to do a better job of self-evaluation, calling out poor performers, and exercising judgement in the assignment of offshore properties.

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