Project Failure: Deepwater Horizon and the Bp Oil Spill

Introduction The Deepwater Horizon rig sank on April 22, 2010, two days after the Macondo well blowout and explosion that killed 11 workers. The Deepwater Horizon accident, also known as the BP Oil Spill, was a project failure of immense proportions.

It went from an oil exploration “project” to a massive program with portfolios of projects related to dealing with the families of those killed on the oil rig, stopping the oil leak, capturing the oil (from the well and from the ocean), cleaning the environment (seashores, wetlands, Gulf of Mexico), saving and cleaning wildlife (underwater and on shores), responding to human needs (fishermen, economically impacted families), dealing with the public (PR campaigns), dealing with shareholders and employees, and dealing with governments(state and federal).

The mission and scope changed and grew significantly over night.

It changed from a $500 million oil prospect development project to over a $100 billion program with global reach and hundreds of projects. In addition, the inability of BP to stop the flow in a timely manner, communication problems by BP management, and long lasting negative media coverage of the slow reaction to the spill have resulted in serious negative consequences for BP, subcontractors on the project and the oil exploration industry as a whole.

Additionally, the US federal government responded to the accident with poor organization and leadership.

Analyzing the chain of events, some of the lessons from the failure become very apparent including the facts that BP and Transocean risk management plans were inadequate, BP was not prepared for the accident (or any accident for the most part), project management mistakes were made during drilling of the well, communication blunders were made by BP executives following the accident, the impact on the environment and stakeholders were underestimated, and the future of a company can be at risk from a critical failure of this magnitude.

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The DeepWater incident was largely a result of poor initial project planning, inadequate project risk management, poor project management execution including decision making and communication, and unprepared crisis management on the part of BP and the US government in the event of project failure. This paper will analyze the series of events leading up to the April 20, 2011, disaster, the decisions and lack of actions which compounded the possibility and severity of project failure and the mishandling of the crisis that ensued after the failure of the well. Background

On March 19, 2008, BP acquired the federal lease for Mississippi Canyon Block 252, located in 4,992 feet of water 50 miles southeast of Venice, Louisiana for just over $34 Million from the Minerals Management Service (MMS). BP was highly confident in the seismic data and the presence of oil that the company proceeded to implement the project of drilling a $100 Million well named, Macondo. BP hired Transocean to supply the crew and the oil drilling rig to drill the well. On October 7, 2009, drilling began on the Macondo well using Transocean’s Marianas semisubmersible oil rig.

The Marianas operated to a depth of 4,023 feet below the mudline, or 9,000 feet below sea level before it was damaged on November 9, 2009, by Hurricane Ida. Work on the Macondo well was suspended until January 31, 2010, when the Deepwater Horizon rig was delivered to the site. The Deepwater Horizon was a 33,000 ton semisubmersible oil rig which was controlled by a satellite guided dynamic positioning system and had a series of thrusters to keep it afloat. The Deepwater rig was extremely technologically advanced and viewed by many in the oil industry as having superior technology that was foolproof to error.

On February 8, 2010, the Deepwater crew placed a blowout preventer on the well in 5,067 feet of water and used remotely operated vehicles to guide the preventer to the latching collet on the well head using video feeds. Once the preventer was latched up, the riser was hung in the tensioning system, the other necessary lines were hung, and the drilling commenced on the well. Research now shows that over the ensuing next three months, the Macondo well had multiple incidents of trouble which continued until the disastrous day when the well blew out and went out of control.

During the early drilling in shallow depths, the crew experienced multiple well problems, gas kicks, and dangerous lost circulation zones-sometimes all at once. On four occasions prior to the blowout, the crew experienced well-control events. During one of the well-control problems, a drill pipe became stuck and could not move in or out of the hole. A stuck pipe can be very dangerous and is indicative of poor well hole conditions. After fighting the stuck pipe for a week, the crew separated the pipe from the assembly and placed a cement cap plug on it and continued to drill a sidetrack hole at 17,500 feet.

As the days wore on, the crew became wary after experiencing multiple kicks, lost circulation, and stuck pipe to the point that Mike Williams testified to the Joint Investigation Committee in July 2010 that the crew had been calling it the “Well from Hell”. (In Too Deep pg25) After weeks of battling the well, the well reached its total depth of over 18,200 feet and the engineers ran measurements to analyze the subsurface intervals, their content, and their pressures. These measurements were used to make the decision to run pipe to the bottom of the well and to prepare the well for temporary abandonment prior to production.

At this point, the engineers may have made a mistake which contributed to the well blow out. BP engineers decided to run one long string of casing from the bottom of the well all the way to the wellhead. This decision resulted in the only protection provided for the flow of oil and gas in to the wellbore was the cement that would be pumped down the casing and capped with a seal assembly at the well head. If the cement failed, the oil and gas could travel up the pipe to the well head and escape uncontrolled.

BP chose a cementing design which had one avenue of protection through a single cap as opposed to other designs that had multiple layers cementing and caps which provided additional protection in case of well failure. By choosing this single cap well design, the BP engineers knowingly chose a less safe design and their managers willingly approved the decision. Haliburton was the cementing servicing company hired by BP to cement the well and attach the seal assembly to cap off the well until a new rig was connected to initial actual oil production.

Haliburton supplied the cement used in the sealing of the well which is now known to have been of inferior quality. According to the BP team’s plan, if the cementing went smoothly, Haliburton could skip a scheduled cement evaluation. Planning The project plan for the Macondo well should have been one unique to the well itself. The research of the Deepwater incident indicates that the plan for the well was changed on multiple occasions and management seemed to be influencing decisions based on financial and schedule implications rather that the risk implications the decisions might present.

Additionally, the lack of a clear project plan resulted in a poor organizational structure and accountability of the multiple subcontractors involved with the project. There were numerous occasions in which the crew of the Deepwater which was comprised of employees from BP, Transocean and Haliburton were unsure of which company was in charge at different points of the project. The lack of planning was even more evident within the issues of the inadequate risk planning and the execution problems that contributed to the failure of the project.

As a result of the failure, a disaster comprised of death and monumental environmental damage was poorly addressed in that crisis management planning had not been addressed in the planning for the project as well. The crisis to contain the well itself would have been more readily addressed by BP had the company anticipated a blowout as a possible risk and therefore had a crisis management plan which had been communicated to all of its crew members.

Instead the crisis itself is a First, on April 20, the oil and gas industry was unprepared to respond to a deepwater blowout, and the federal government was similarly unprepared to provide meaningful supervision. Second, in a compressed timeframe, BP was able to design, build, and use new containment technologies, while the federal government was able to develop effective oversight capacity. Both industry and government must build on knowledge acquired during the Deepwater Horizon spill to ensure that such a failure of planning does not recur Planning is even more important during a crisis.

Such projects can be described as turnaround projects, where every minute is critical. Turnaround projects are often planned for months in advance, scheduled in minutes, with a well defined set of actions which are constantly monitored, and everyone prepared in advance for everything they need to do. BP and its subcontractors did not use their initial planning to develop disaster response or recovery plans. Without this type of planning built into the initial framework, time and lives can be lost when a company is forced to react to a disaster such as the Deepwater. ttp://www. oilspillcommission. gov/sites/default/files/documents/C21462-408_CCR_for_web_0. pdf Execution Failure The lack of a clear, unique plan for the Macondo project exacerbated the likelihood of problems during the execution of the drilling of the well. Additionally, Deepwater rig had several players involved with the project which resulted in a complex interrelationship among several companies all of whom had different roles and conflicting interpretations of their accountability and responsibilities. Transocean was the owner and responsible for running the rig.

Haliburton was a servicing subcontractor who was responsible for cementing the well. BP was lease owner and operator of the Macondo well and in that capacity had both the overall responsibility for everything that went on including promoting a culture of safety on the rig. BP’s safety culture failed on the night of April 20, 2010, as reflected in the actions of BP personnel on- and offshore and in the actions of BP’s contractors Research prior to April 20 shows that most crew members felt that safety was not a priority for BP or any of the other contractors on the rig.

A survey during the second week of March showed that 46 percent of crew members surveyed felt that crewmembers feared reprisals for reporting unsafe situations and 15 percent felt that there were not always enough people available to carry out work safely. This extensive involvement of these contractors underscored the compelling need for BP to properly communicate a clear decision making process as well as emphasize safety.

This poor safety culture was also evident in the meeting the day before the Deepwater accident in which the Transocean managers discussed with their BP counterparts the backlog of rig maintenance. A September 2009 BP safety audit had produced a 30-page list of 390 items requiring 3,545 man-hours of work. The lack of a safety culture may have contributed to the fact that BP, Halliburton, and Transocean did not adequately identify or address risks of an accident—not in the well design, cementing, or temporary abandonment procedures.

Their management systems were marked by poor communications among BP, Transocean, and Halliburton employees regarding the risks associated with decisions being made. The decision making process on the rig was excessively compartmentalized, so individuals on the rig frequently made critical decisions without fully appreciating just how essential the decisions were to well safety—singly and in combination. As a result, officials made a series of decisions that saved BP, Halliburton, and Transocean time and money—but without full appreciation of the associated risks.

There were several causes for execution failure that were identified after the accident. First, the cement that BP and Halliburton pumped into to the bottom of the well did not seal off hydrocarbons in the well. This was caused by the engineers changing the plans for the cement job during the effort due to drilling complications that were encountered. As a result, the engineers approved a lower volume of cement to be used in the process. This lower amount of cement resulted in the well not being sealed with a proper amount of cement weight.

Second, the cement slurry used in the sealing of the well was poorly designed. Halliburton’s own internal tests showed that the cement mixture was unstable but the company still used the mixture on the Deepwater well. Lastly, the temporary abandonment procedures for the well were finalized at the last minute by BP and required the crew to severely underbalance the well before installing any additional barriers to back up the cement job. Risk Management BP failed to analyze the risk possibilities and plan risk mitigation strategies for the Macondo project.

This lack of risk planning and mitigation can be attributed to several factors including: a bias in the oil industry itself which dismissed the possibility of a disaster as monumental as the Deepwater Horizon, a BP management culture which stressed cost savings and time savings in decision making, and a lack of a detailed crisis management plan in an industry whose failures can be monumental. Risk Management and the Oil Industry Bias The Deepwater incident has resulted in a dramatic reassessment of the risks associated with offshore drilling.

Before April 20, many in the oil industry felt that drilling was safer in deep than in shallow waters. Since deepwater rigs worked farther off the coast, it would take longer for spilt oil to reach shore, giving more time for intervention to protect the coast. Also, the companies working in the deeper waters were typically the “big guys” of the oil industry who could afford to utilize more advanced technologies than the smaller firms working near the coast. Therefore, many believed that these companies were more adept at handling challenging conditions with the more technologically advanced equipment.

Additionally, there had been no major well blowouts in federal offshore waters since 1970, which made the chances of another one seem remote. Another problem for appropriate risk assessment was the failure to adequately consider published data on recurring problems in offshore drilling. This included powerful “kicks” of unexpected pressures that sometimes led to a loss of well control, failing blowout preventer systems, and the drilling of relief wells. These problems occurred rarely and were of minor consequence relative to the number of wells in the world.

However, these issues demonstrated that wells do not perform in a flawless manner and must be assessed for in risk planning. Additionally, working in the deeper depths of the ocean posed a numerous problems after a loss of well control or a blow out due to failure of the blow out preventer. Before the Deepwater accident, little attention was devoted to containment of a blown out well in the deepwater, largely because its occurrence was considered so unlikely. Therefore, many of the same technologies used for the blow out preventers in shallow water drilling were used in deepwater drilling with little innovation.

That is despite the fact that containment problems become much more challenging and real-time decisions become more difficult when working in extreme depths of the ocean. Connecting and maintaining blowout preventers thousands of feet beneath the surface can only be performed by remote-operating vehicles. “A 2007 article in Drilling Contractor described how blowout preventer requirements got tougher as drilling went deeper, because of low temperatures and high pressures at the ocean bottom.

The author discussed taking advantage of advances in metallurgy to use higher-strength materials in the blowout preventers’ ram connecting rods or ram-shafts. More generally, he suggested “some fundamental paradigm shifts” were needed across a broad range of blowout-preventer technologies to deal with deepwater conditions. ” Page 51 pres book All things considered, the oil industry itself was overconfident and somewhat negligent in assessing the need for comprehensive and detailed risk management planning that addressed all facets of possibilities of failure within an oil well.

Instead, the industry disregarded many of the possibilities as impossibilities despite the contrary research. This widespread view among the oil industry was reflected in the culture of the BP management and may have influenced some of appeasement with the lack of planning on the Macondo project. Risk Management and Decision Making BP had a tarnished reputation for safety. Among other BP accidents, 15 workers died in a 2005 explosion at its Texas City, Texas, refinery. In 2006, there was a major oil spill from a badly corroded BP pipeline in Alaska.

As of April 20, BP and the Macondo well were almost six weeks behind schedule and more than $58 million over budget. BP did not adequately identify or address risks created by last-minute changes to well design and procedures. BP changed its plans repeatedly and up to the very last minute, sometimes causing confusion and frustration among BP employees and rig personnel. ? When BP did send instructions and procedures to rig personnel, it often provided inadequate detail and guidance. ? It is common in the offshore oil industry to focus on increasing efficiency to save rig time and associated costs.

But management processes must ensure that measures taken to save time and reduce costs do not adversely affect overall risk. BP‘s management processes did not do so. ? Halliburton appears to have done little to supervise the work of its key cementing personnel and does not appear to have meaningfully reviewed data that should have prompted it to redesign the Macondo cement slurry. ? Transocean did not adequately train its employees in emergency procedures and kick detection, and did not inform them of crucial lessons learned from a similar and recent near-miss drilling incident

When the BP engineers were faced with making a decision on the well design, they chose a design with one preventative layer. If the engineers would have put more credence into the high risks associated with deep well drilling, they may have picked a design which encompassed risk mitigation of several layers which prepared for failure. Additionally, by not really putting credence into the possibility of a well blowout, the engineers and BP management negated risk planning for the possibility of the environmental amage which could be caused by such a sizeable well having a blowout. In a case of an uncontrolled blowout, large volumes of oil and gas would be uncontrollably spewed into the environment. Transocean, for instance, was a major contractor for the Macondo well and is the world’s largest operator of offshore oil rigs, including the Deepwater Horizon; Transocean personnel made up the largest number of crew members on the rig at the time of the accident, and 9 of the 11 men who died on April 20 worked for the company. number of the mistakes made on the rig can be directly traced to Transocean personnel, including inadequate monitoring of the Macondo well for problems during the temporary abandonment procedures and failure to divert the mud and gas away from the rig during the first few minutes of the blowout. Project Crisis Management The effort and resources needed to contain and control the blowout of the Macondo well were unprecedented.

From April 20, 2010, the day the well blew out, until September 19, 2010, when the government finally declared it dead, BP expended enormous resources to develop and deploy new technologies that eventually captured a substantial amount of oil at the wellhead and, after 87 days, stopped the flow of oil into the Gulf of Mexico. The government organized a team of scientists and engineers, who took a crash course in petroleum engineering and, over time, were able to provide oversight of BP, in combination with the Coast Guard and the Minerals Management Service (MMS).

BP had to construct novel devices, and the government had to mobilize personnel on the fly, because neither was ready for a disaster of this nature in such ocean depths. BP initially underestimated the scale of the disaster and overestimated their ability to address it. Therefore, there was little action in the days following the accident that resembled crisis management. Two days after the explosion, BP had mobilized a mere 32 vessels and 4 aircraft. To be in full response capacity, BP needed 205 times the number of vessels and 32 times the number of aircraft initially deployed.

It took until nearly Day 80 before BP was a full response capacity. http://strategicppm. wordpress. com/2010/08/03/bps-project-management-of-the-deepwater-disaster/ This understated reaction was driven by the belief that the well was only leaking 5,000 barrels a day. In reality, the well was leaking ten times that amount. At day 31, the government established a public underwater feed and panel of experts to analyze the flow rate. This resulted in all parties becoming fully aware as of the amount of oil leaking from the well and the response effort of BP and the US government continued to increase.

BP immediately focused on repairing the failed the blowout preventer for the first ten days after the explosion. BP did not have planned alternatives to address the incident of a blown out well. Therefore, when the blowout preventer could not be repaired, BP had to develop alternate solutions. These solutions were explored sequentially, rather than in parallel, which caused further delay. The exception to that was the digging of relief wells which take several months to complete.

BP did not have any alternate solutions prepared and developed in advance to be deployed immediately during a time of crisis. The facts indicate that BP didn’t understand (or didn’t want to understand) the scale of the project it was involved in. Government Response Failure The failure of the US federal government to react to the Deepwater disaster is comprised of two components- pre-disaster regulatory efforts and post disaster readiness and response preparedness. First, the government organizations which were tasked to regulate the oil industry for safety compliance were not doing their jobs.

The Minerals Management Service (MMS) was responsible for approving the disaster plans of the oil companies as well as regulating their actions in the environment with the Environmental Protection Agency. It is now evident that MMS failed miserably in the oversight of the offshore oil industry. The agency’s resources did not keep pace with the oil industry’s expansion into deeper waters and reliance on more demanding technologies. As a result, MMS was not familiar with many of the technologies presented by oil companies and as a result it frequently relented to a lower number of required tests including testing on blow out preventers.

Ironically, BP did have an Oil Spill Response Plan for the Gulf of Mexico applicable to the Macondo well in the MMSfiles. The plan identified three different worst-case scenarios that ranged from 28,033 to 250,000 barrels of oil discharge and used identical language to analyze the shoreline impacts under each scenario. Five of the pages were copied from material on NOAA websites and as a result were not specific to the Gulf of Mexico region. As a result, the BP Oil Spill Response Plan described biological resources nonexistent in the Gulf—including sea lions, sea otters, and walruses.

Even more troubling, the MMS Gulf of Mexico Regional Office approved the BP plan without additional analysis. There is little evidence that MMS or BP gave any scrutiny to the contents of the Oil Spill Response Plan submitted. However, the MMS Regional Office did adhere to the timeline to review and approve oil-spill response plans within 30 days of their receipt. This lack of emphasis on the content of the response plan surely contributed to the lack of planning on both the part of the government and BP.

As a result, when the disaster struck the MMS and the US federal government reacted slowly to the event. For the first couple of weeks the government barely reacted as it thought BP was more prepared and capable to deal with the spill. When it became evident that BP was coming up with solutions on a day to day basis, the government became more involved with the process. MMS was disbanded 19 days into the disaster. The government continued to work with BP and the other parties to find solutions to killing the well as well as manage the economic impact the disaster was having on the Gulf states.

All in all it can be assessed that the US federal government was even less prepared than BP itself. Conclusion Based on the mindset and common practices, it was only a matter of time for this kind of accident to occur within the oil industry. An accident, and certainly any disaster, can be considered as a disruptive event. After a disruptive event, anything and everything can change, with serious repercussions. Many disruptive events can be both predicted and planned for. This should be a major element of the risk planning associated with major programs and projects.

And disruptive events can have unexpected and significant consequences – in this case, enormous impact on the environment, BP market valuation, BP’s public image and credibility, many other BP projects and people, public perception of both BP and the oil industry itself, and possibly BP survival. The lessons learned from the Deepwater Horizon project disaster and the BP Oil Spill will continue to influence the regulation of the oil industry into the future. BP learned that adequate project planning and risk management analysis is essential in the event of a project failure.

Additionally, a crisis management plan for an unplanned disaster should always be in place prior to any possibility of occurrence. BP’s $500 million oil prospect development project became a crisis management project which has cost over $100 billion to date. BP will continue to struggle with its public relations image as well as continue to deal with endless lawsuits and environmental and economic claims into the future. BP’s lack of planning, lack of risk management analysis and lack of a crisis management plan in the face of project failure could have resulted in the demise of the company altogether.

The Deepwater incident will continue to serve as an example to project managers everywhere that the basic concepts of project management should never be neglected, even when you are one of the largest companies in the world. ————————————————- Bibliography “BP’s Project Management of the Deepwater Disaster” StrategicPPM. com. 3 August 2010. 28 May 2011 http://strategicppm. wordpress. com/2010/08/03/bps-project-management-of-the-deepwater-disaster/ Cavnar, Bob. Disaster on the Horizon: High Stakes, High Risks, and the Story Behind the Deepwater Well Blowout. Vermont: Chelsea Green Publishing Company, 2010.

Kuzmeski, Maribeth. “Pinpointing BP’s Pitfalls: Eight Ways to Reconnect After a Disaster” PM World Today, Vol. XII Issue VII – July 2010. 28 May 2011 <http://www. pmworldtoday. net/tips/2010/july/Pinpointing-BP-Pitfalls. html> Lepsinger, Rick. “Execution Meltdown: Four Key Failures That Sank BP. ” . ” PM World Today, Vol. XII Issue VIII – August 2010. 28 May 2011 <http://www. pmworldtoday. net/tips/2010/aug/Execution-Meltdown. html> Maltzman, Rich, et al. “Green Project Management and the BP Deepwater Horizon Spill. ” PM World Today, Vol. XII Issue IX- September 2010. 28 May