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| Name: |
MAJ USA RET
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| Subject: |
Rambling on Risk
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Date:
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5/26/2010 9:30:07 AM
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Drilling for oil is a risky and dangerous endeavor. In seconds, what is grueling… becomes deadly. Disasters are not slow in coming on. Engineers remotely monitor progress and conditions at drill bits which are miles away and operating at mind-boggling temperatures, pressures, and stresses. These engineers evaluate a myriad of unexpected conditions DAILY. This bind… or that unexpected reverse torque… or this decrease in mud pressure (etc) all pass their eyes and minds 24 expensive hours a day. The engineers are under intense stress themselves to “pass” anything which does not exceed their collective risk threshold. And then… do all this at the sea bottom!
So… BP tells us they knew something unusual was happening down there. It didn’t… like all the decisions… exceed their risk threshold. They chose to watch it either develop or, like so many “conditions” before, pass. In a blink of an eye… they were wrong.
If I were there… I would have been wrong. What if YOU were there? Maybe you don’t have the courage to take risks. The oil companies are not hiring couch potatoes or quaking Lizzies.
How much is at risk drilling for oil? To pull the drill string… how much do you think that costs? START at $5,000,000… ON LAND.
We do not live in a risk free environment. Every time you do ANYTHING you are at risk (despite the feelings of the ACLU, Green Peace, Al Gore, et al [SIC]).
And sometimes… you lose!
But, all in all, we live a better, healthier, happier life. If you do not see my point in your hot steaming cup of morning coffee… then, you don’t understand how risk and pleasure are inextricably intertwined. How much risk was taken to get that coffee to your lips? You cannot list them.
And sometimes… like a chain reaction wreck on a foggy interstate…, the innocent get caught up in a failed risky undertaking.
If you cannot stand the burden of risk, give up coffee. No... you just need to give up!
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| Name: |
MartiniMan
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| Subject: |
Rambling on Risk
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Date:
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5/26/2010 11:17:49 AM
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The key here is risk management and if you think of the thousands of off-shore drill rigs operating worldwide it is still a remarkable safety record. There is no doubt this is risky business. When I worked in the oil industry the running joke was to hold up your hand with only three fingers showing and ask what it was. Answer: a roughneck ordering five beers.
One thing we know for sure, this accident will be examined 500 ways from Sunday. My only advice is when reported in the government media, believe none of what you hear and only half of what you see. And with the politicians believe none of what you hear or see. In our work for one of the responsible parties we have already seen a lot of inaccurate reporting and downright incompetence. The real story will get out but it will take years and the lawyers will make multiple millions.....
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| Name: |
lakngulf
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| Subject: |
Rambling on Risk
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Date:
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5/26/2010 11:19:16 AM
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I am basically with you on all of this. But, of course, there is a butT. The mighty dollar, whether the profit to be made and therefore to raise the risk level, or profit to be skimmed, as in politicians and agencies looking the other way, can get in the way of our cost/benefit ratio. This happens in housing market lending, job offers to effect elections, money to appoint senators, mining shaft condions, military bases and spending, offshore drilling, and etc and etc and etc.
Boils down to whom do you trust? That is not an easy question to answer.
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| Name: |
MartiniMan
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| Subject: |
Rambling on Risk
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Date:
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5/26/2010 11:44:04 AM
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There is no doubt that economics played a role in some decision making but I am firmly, 100% convinced that no one making these decisions did so knowing this disaster would result. There are tens of thousands of decisions made on every rig during the course of its operation that take into account any number of criteria, including economics. That all but one or two did not result in an accident can't be ignored. That the one or two that caused this to happen did can also not be ignored and we have to learn from this mistake.
What is interesting to me is that the entire arena of flight is rued by reactive changes. Almost every procedure, both big and small, came from an incident or an accident. The most recent one is the Buffalo crash where they are proposing to increase the number of hours required before you can crew a commercial aircraft. I could go on and on with examples specific to certain accidents. And those familiar with aircraft systems could go on for hours about modifications and additions tied to specific accidents. I wonder how uncomfortable the average passenger would be to know that factoid?
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| Name: |
GoneFishin
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| Subject: |
Rambling on Risk
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Date:
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5/26/2010 1:31:32 PM
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BP elected not to insure the project. When we speak of risk, I wonder if anything would have been handled differently if an insurer was involved from the beginning of the project? Would they have required specific processes to be in place and adhered to? Would they have had engineers on the rig 24/7?
When one speaks of risk, we all establish our degree of risk taking and insure against them. An insurer will take the risk if they feel there is a decent chance they can make money. If you were the President of an insurer, would you put your money on the line and insure a deep water well for 75million or more unless you could have your engineers on the rig? I do wonder if things would have turned out differenty.
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| Name: |
MartiniMan
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| Subject: |
Insurance is not the answer
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Date:
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5/26/2010 1:52:39 PM
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I am not sure what insurance you would expect BP to purchase. Transocean had the rig insured and have already gotten $561M from the insurer for the lost rig. The only insurance BP could have considered would be what is called PLL (Pollution Legal Liability) and why would they? BP is bigger than any of the insurers they would buy from and in my experience collecting on PLL is no easy task.
So far they have spent over $700M on the response which is less than 12% of their first quarter 2010 profit of $6B. If they spend the entire $6B it would only be one quarter of their profit. Money is not the issue and an insurance company would not have the qualifications nor the personnel to do anything more than a cursory audit of the rig and would not have prevented this from happening. Our company does these audits for several large insurers and I can tell you we do not get into the nuts and bolts of the business practices because we are not nearly as qualified as the operators are. The audit would have focused on general safety practices, etc.
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| Name: |
GoneFishin
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| Subject: |
Insurance is not the answer
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Date:
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5/26/2010 3:04:41 PM
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This is an interesting article on the Lloyds syndicate insurance on the rig from the UK.
URL: http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article7136623.ece
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| Name: |
MartiniMan
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| Subject: |
Insurance is not the answer
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Date:
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5/26/2010 3:16:29 PM
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That's what I mean about collecting on insurance though I doubt BP has a valid claim on the Transocean policy you can't blame them for trying.
I wonder what Transocean's limits were on their policy with the syndicates. It gets very complicated because of all the primary parties involved in these policies and then all the reinsurance markets where the primary market lays off a lot of their exposure.
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| Name: |
MAJ USA RET
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| Subject: |
Insurance is not the answer
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Date:
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5/26/2010 6:07:06 PM
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Where is the negligence? I don't think BP is negligent unless they did or didn't do something that was outside the standards of practice or would have obviously been done differently by another driller. Remember, the rumblings coming up the drill string and data from the bit are usually neither consistent nor constant and much of the decision making is intuitive. Something at the bit could have stopped the drill string which, weighing hundreds of tons, does NOT come to a stop. If it snapped at the interface between ocean floor and ocean water, It could easily have destroyed the blow-out preventer. Perhaps the string was at its elastic limit when they stuck the mother of all gas pockets.
Suppose there were a momentary glitch in the GPS system and the platform could not stay auto-positioned over the hole. Whose fault is that?
In the military we have a phrase for what happened to BP: OBE - Overcome By Events.
Whatever - the government needs to stay the hail out of the way! Leave the mother-of-all-undersea-blow-outs to the professionals.
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| Name: |
MartiniMan
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| Subject: |
Insurance is not the answer
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Date:
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5/26/2010 6:52:12 PM
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Time will tell whether someone made a bad decision that lead to the blowout and explosion or it was just bad luck. This will be litigated for years and studied to death so I am confident we will get some sort of post mortem. Without going into any details I can tell you there was a heated debate between the BP rep and the operator right before the blowout where the operator did as he was forced to by the client and kaboom. Whether these are related or not only time will tell.
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| Name: |
MAJ USA RET
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| Subject: |
Insurance is not the answer
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Date:
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5/26/2010 7:28:23 PM
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Oooo! I bet there were competing priorities: Protecting profit vs protecting investment. I'm sure these arguments are common.
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| Name: |
GoneFishin
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| Subject: |
Insurance is not the answer
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Date:
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5/26/2010 9:58:33 PM
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"Whatever - the government needs to stay the hail out of the way! Leave the mother-of-all-undersea-blow-outs to the professionals."
That is an interesting comment comsidering so many are comparing Obama's response to Bush and Katrina. I happen to agree with you on this one.
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| Name: |
MartiniMan
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| Subject: |
Insurance is not the answer
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Date:
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5/26/2010 10:06:57 PM
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What I think would be a proper role would be for the government to offer whatever help BP thinks it can provide. I know that sounds crazy but it took us 2 weeks to arrange a boat and get Coast Guard approval to go into the Gulf. Maybe this delay could be short circuited with gov't help. The fact is the government doesn't have the skills or knowledge to take this over. This is something the administration in certain parts have said and they are right.
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