Drilling for Oil:

Offshore Rigs and Production Platforms The personnel involved and the risk they face

A Berkshire Hathaway Company

Introduction
Off-shore oil drilling is a complex industry, largely unknown to many Life underwriters. In this article we examine the personnel involved and the risks they face. We also provide a comprehensive questionnaire and underwriting guideline to more accurately calculate the risk. Petroleum (or oil) and natural gas are two of the most valuable natural resources in the world. Society and industry cannot operate without them hence the need to discover and exploit new sources. Many of these sources are found beneath the sea. While offshore drilling and production can be done in other bodies of water (e.g. lake, bays, swamps) most is conducted in seas the North Sea, the Arabian Gulf, the Gulf of Mexico, and off the coast of Angola. These operations can be very dangerous. Offshore production currently can be carried out in water approximately 1,750m deep, but the industry hopes to drill and produce in even deeper water. Most experts believe that the remaining undiscovered elephant fields (oil or gas fields containing a billion or more barrels of oil) are located in such waters. An operating company will build a steel, concrete or tension leg platform designed specifically for a particular off-shore site. A typical production platform takes several years to build and is very costly (several hundred million to over a billion dollars) depending on its size, design and complexity. In the 1970s and early 1980s, production platforms were usually built with all components (e.g. production equipment, crew quarters) on a single structure. The largest production platforms can be immense structures capable of supporting thousands of tons of equipment and accommodating hundreds of workers. Today, however, many operating companies build several interconnected platforms, each dedicated to a specific purpose (e.g. gas compression, crew quarters). In the event of a catastrophe, the potential for total or near-total loss decreases if the entire production is not located on a single structure. Such secondary platforms are usually much less complex structures than fully-equipped production platforms.

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Types of Rigs
Offshore drilling rigs are little different from an onshore rig, except that offshore rigs are designed to withstand a marine environment and can be towed from site to site. Permanently fixed exploratory rigs are uneconomical and are no longer used. Depending on the water depth at the drill site, offshore drilling contractors will use one of four basic types of mobile drilling rigs. These are: Submersibles Jackups Semisubmersibles Drill ships A submersible rig floats on pontoons or other buoyant chambers and must be towed to the drilling site. Upon arriving, the pontoons are flooded and the rig sinks to the seabed. The drilling deck is built on long steel stilts which extend upward from the pontoons and keep the drilling deck above water. When drilling is completed, the rig is refloated by pumping the water from the pontoons, and it is towed to its next location. A jackup rig is the most common kind of mobile offshore drilling rig. Its steel body is designed to float. Three to five legs made of steel trusses or hollow tubes are fitted on the outer edge of the rig. Once towed to the drill site, the rigs legs are cranked down to the seabed and the rig is subsequently jacked up on the rig legs, raising it above the waters surface. Jackup rigs work in water up to 400m deep and are very stable. Like a submersible rig, a semisubmersible rig rests on a set of pontoons and is towed to the drilling site. Once there, the specially designed pontoons are partially flooded so that the rig floats slightly below the surface. The drilling deck is designed to remain above the water. The rig is moored to the sea-floor and provides excellent stability in turbulent deep water. Drill ships are the most mobile, self-sufficient and durable kind of mobile exploratory rig, designed to drill in very deep water. They are easily moved by wind and waves, which puts excessive fatigue on the drilling equipment. A system known as dynamic positioning is the most common technique used to combat excessive movement but is expensive to install and operate, 30% to 40% higher than for a moored rig. Dynamic positioning is sometimes used to position semisubmersible rigs.

Off-shore Drilling Crews

A production platform may have over 150 crew members, most of whom operate and monitor the equipment that extracts oil and gas from the seabed and pipes it ashore. There will also be a drilling crew aboard to drill a number of production wells from the platform. Drilling rigs normally have fewer workers than a production platform. Most rigs consist of two or more drilling crews and support personnel. Specific positions on a rig or platform include a foreman (supervisor), equipment operators and roustabouts (manual laborers). A typical drilling crew will have 6 to 10 members, consisting of rotary drillers, rotary engine operators, derrick operators, rotary driller floor hands and roustabouts. Rotary drillers supervise the crew and operate the drilling machinery. Rotary-engine operators work with the engines that supply the rigs power for drilling and hoisting. Derrick operators work at the top of the derrick and assist in adding drill stem segments to the drill stem. Rotary-driller floor hands (also called roughnecks) help guide the lower end of the pipe into the well bore and connect pipe joints and drill bits. Roustabouts are general labourers who perform maintenance and construction work on the rig. In addition to drilling crews and production personnel, numerous other workers comprise a platforms support operations. Service personnel (who inspect and repair the facility) and a catering staff usually are hired on a contract basis and will reside on the facility. Service personnel include mechanics, sandblasters (who remove corrosion on the underside and legs of the facility) and painters (who repaint the fresh sandblasted surfaces of the facility to give it added protection against salt water and air). Drilling rigs and production platforms operate 24 hours a day, seven days a week. The average day is broken into two or three shifts. Drilling crews will work a week-long tour and then have a few days or a week off. Drilling rig and production platform crews work on alternate weeks to keep the facility constantly active. Production personnel who inspect, service and monitor the production equipment will sometimes work for several weeks before rotation to the shore.

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Risks
Explosions The large amounts of oil and gas present on a production platform at any given time will expose workers to potential explosions within the production area. Platform explosions are often devastating and will kill any workers within the immediate blast area. Because production platforms are designed compactly, the entire facility is likely to be affected by an explosion. On many platforms, the crew quarters are near production facilities a dangerous practice. In the industrys worst accident, 166 crew members died in a production platform explosion, primarily because the living quarters were adjacent to the production area where the blast occurred. Companies now place crew quarters on miniature platforms which stand alone in the water and are attached by a bridge to the main platform. Such arrangements will likely minimise fatalities in the event of an explosion. Drilling companies should have an active, comprehensive safety training programme in place, and each employee should be trained properly in an overview of the installations, scope of operations and in his specific operating procedures and professional duties. Training should emphasize safety and health hazards, a prestart review of all newly installed or modified equipment, and emergency operations including emergency shutdowns, and safe work practices. Toxic Gas Hydrogen sulfide is a toxic gas often found in petroleum deposits. It is not detected easily, and drilling crews release the trapped gas by accident. Exposure to the gas may cause irritation of eyes, nose and throat, headaches, dizziness, nausea and vomiting, disorientation, convulsions and coma. Breathing high concentrations can cause sudden death. Exposure to drowning Deck workers are exposed to death by drowning. Workers who fall into very cold water without wearing exposure suits can freeze to death in a matter of minutes. Diving Risks Specialised saturation divers are often hired for difficult underwater work. They work from 50 to 400 meters below the waters surface and inspect, service and install subsurface equipment and sections of the rig or platform (e.g. support legs, pipelines, templates, manifolds, subsurface well heads). Because saturation divers work at depths to which the human body has difficulty adjusting, they live in pressurized cabins located at the base of the rig or platform

throughout their 30-day work tours. The divers breathe a mixture of helium and oxygen, sometimes called heliox which prevents nitrogen narcosis (raptures of the deep), an altered mental state similar to alcohol intoxication which affects divers who breathe compressed air while at great depths. If the pressure in the saturation divers cabin changes radically, he or she will be killed instantly. Saturation divers are therefore constantly monitored from the surface by subsurface cameras so that any accidents or emergencies can be handled quickly. Physical Risks and Accidents Much of the physical labour involved with exploratory drilling (e.g. adding and removing drill stem segments) is strenuous and may cause back and other physical injuries. Drilling equipment produces a great deal of noise and vibration and may cause deafness. Burns may occur. Although smoking is usually forbidden in the process area it may nevertheless take place and could ignite even small amounts of flammable vapors and cause a fire. Aviation Risks Helicopters normally are used to ferry deck workers, company executives, authorised visitors, safety and environmental inspectors and service personnel to rigs and platforms. They face the risk of injury, including the possibility of being permanently disabled or killed in a crash or explosion. Other exposures will include technical problems with the helicopter itself, or inexperienced pilots landing on a rig or platform requires an aviational skill. Weather Conditions Offshore rigs and platforms are exposed to a variety of severe weather conditions which can cause considerable damage and injury. Severe squalls, in particular, can shake apart a rig or accelerate the natural aging of the structure. However, modern rigs and platforms are designed to withstand severe weather. In 1991, for example, several production platforms hit directly by Hurricane Andrew sustained only minor damage, whereas older platforms (built in 1970s) hit by the same storm suffered severe damage or were destroyed. Drilling rigs and production platforms operating in arctic conditions eg Alaska will face a number of unique exposures due to the severe weather of the region. Icebergs and pack ice may form near or around the facility; such ice bodies, when moved by wind currents, can exert immense physical strain on the facility and can cause structural damage or even collapse. Arctic operations experience periodic snowstorms which can last for weeks, creating a 100% loss of visibility (known as a whiteout). Earthquakes and tsunamis, while rare, do occur.

Drilling for Oil: Offshore Rigs and Production Platforms 3

Rating guidelines Drilling Platform 3 Production Platform 2 Integrated Industries 3

Type of work Admin Staff Catering Staff Chef Control Room Operator Radio operator Medical Staff Storeman Safety Officer (not dwelling on rig) Safety Officer (dwelling on rig) Maintenance man Sandblaster Cementer Painter Scaffolder Labourer/Manuel Worker Crane Operator Engineer Mechanic Electrician Laboratory Technician Machine Operator Tool Pusher Welder (no diving) Rotary Drillers Rotary-engine operators Derrick operators Rotary-driller floor hands (roughnecks) Roustabouts Supervisor/Foreman (Rig superintendent) Rigger (Driller) Diver (<50m) Saturation Diver (400m) (sleep in compression chambers Valveman Watchstander Pumpman Topman Well Inspectors Life +0 +0 +0 +0 +0 +0 +0 +0 2 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 2 1 1 1 2 IC 2 2 1 1 2 DD +50 +50 +50 +50 +50 +50 +50 +100 D +100 +100 +100 +100 +100 +100 +100 +100 +100 +100 +100 +100 +100 +100 +100 +100 +100 +100 +100 +100 +100 +100 D +100 +100 +100 +100 D TPD O/PHI D D D D D D D D D D D D D D D D D D D D D D D D D D D D D D D D D D D D D TPD ADB OS/Any +50 +50 +50 +50 +50 +50 +50 +100 D +100 +100 +100 +100 D IC D IC +100 +100 +50 IC D D D D D D D +100 D D D D D D D D +50 +50 +50 +50 +50 +50 +50 +150 D +150 +150 +150 +150 D IC D IC +150 +150 +50 IC D D D D D D D +150 D D D D D D D D

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Other risk factors

Type of exposure Toxic Gas North Sea (arctic conditions) Other weather hazards (Hurricane/cyclone) Life 1 1 1 DD D D D TPD O/PHI D D D TPD ADB OS/Any D D D D D D

Notes IC* Individual Consideration Example 1: Employed on Drilling Platform as a maintenance man Occupational extra (R3,00 + R1,00 = R4,00*) Example 2: Employed on Production Platform as storeman Occupational extra R2,00* Example 3: Employed on Drilling Rig (North Sea) as a Roughneck Occupational extra (R3,00 + R2,00 + R1,00 = R6,00*)

Drilling for Oil: Offshore Rigs and Production Platforms 5

Oil Rig questionnaire

1 Where are you employed? i.e area of activity: Exploration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Installation .................................................................

Drilling/Mining . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other (please give details) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2 Are you employed on a Drilling Rig or Production Platform? ...........................................................................

3 Company name: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Where are your activities carried out? Onshore Offshore ................................................................... ...................................................................

4 Please give details of weather conditions of surrounding waters (e.g. gusty winds, hurricane, cyclone) ...........................................................................

5 Please give details of specific occupation (e.g. rotary driller/ engine-operator/ floor hands, derrick operators, roustabouts ) ...........................................................................

6 What shifts do you work? ...........................................................................

7 Other contract work? (e.g. catering personnel, nurse, doctor, safety inspector) ...........................................................................

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8 Please give details of mode of transport to and from the Rig/Platform ...........................................................................

9 If you are a diver on an oil rig, please provide adequate details: Max depth of dives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Number of dives per week/month . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Are you based on the Rig/Platform? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Do you sleep in compression chambers? .........................................

10 Is there an active, comprehensive safety-training program in place? ...........................................................................

11 Do you participate in all standard safety drills? ...........................................................................

12 Are you trained in ocean survival skills? ...........................................................................

13 When appropriate, are you supplied with safety gear (e.g. exposure suits, life jackets, hard hats and steel-toed footwear, protective gloves etc) If yes, do you wear these ...........................................................................

Drilling for Oil: Offshore Rigs and Production Platforms 7

The Drilling Rig and Production Platform

1 Are there emergency medical services on board (nurse, doctor, dispensary? ...........................................................................

2 Is the fire detection, suppression and emergency shutdown equipment checked and serviced regularly? ........................................................................... ...........................................................................

3 What are the type and condition of all emergency evacuation craft, and blow out preventers? ............................................................................ ...........................................................................

4 How often are pipelines, production units and storage tanks checked for deterioration and potential leaks? ............................................................................

Other comments ........................................................................... ...........................................................................

I declare that the answers I have given are, to the best of my knowledge, true and that I have not withheld any material information that may influence the assessment of acceptance of this proposal. I agree that this form will constitute part of my proposal for life assurance and that failure to disclose any material fact known to me may invalidate the contract.

Signed ____________________________________

Date __________________________

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General Reinsurance Africa Ltd. 4th Floor, 23 Melrose Boulevard Melrose Arch, Melrose North 2076 Fax +27 11 684 0351 www.genre.com Contact: Veronica Govendar Tel. +27 11 684 0335, vgovend@genre.com Sources: Bests Underwriting Guide, Electronic Version 2005 AM Bests Underwriting Guide for Commercial Lines copyright 1994 (hard copy) Photo: adpic Bildagentur, Bornheim, Germany General Reinsurance Africa Ltd. 2005
All the information which is contained here has been very carefully researched and compiled to the best of our knowledge. Nevertheless, no responsibility is accepted for accuracy, completeness or up-to-dateness. In particular, this information does not constitute legal advice and cannot serve as a substitute for such advice.