The sealing of the MC252 Project management Success through Project Management Failure

Thomas Garry University of Salford December 9, 2010

Abstract: This paper researches the role that crucial project management played within the capping of the MC252 well in The Gulf of Mexico, its perceived successes and failures, the events leading up to the explosion on the Deepwater Horizon Drilling Rig. The new barriers that project managers then faced with regards to the sealing of the well against aggressive timelines costing BP (British Petroleum) billions of pounds and the increased risk factors surrounding the sealing of the well. This paper analyses the direct impact to the stakeholders not only of BP but also the environment surrounding the leak and those involved. Most importantly I aim to scrutinize the managing of a project that was already deemed an utter failure before it had even begun and the circumstances surrounding the failure.

(http://www.nowpublic.com/environment/what-caused-bp-oil-spill-2010-halliburtoncementing-issue-2612965.html) 2

On 20th April 2010 the Transocean Deepwater Horizon drilling rig leased to British Petroleum in the Gulf of Mexico sustained an enormous explosion on board, killing 11 people and injuring 17 others (ref.8) causing wide spread pollution across the coast. 2 days later the Deepwater Horizon sank to the bottom of the sea bed and in its wake a 600 mile wide area of crude oil equivalent to 4.1 million barrels. An increase of pressure and gasses within the well is thought to have led to the accident. This until proven can only be assumed to be educated speculation, however, the devastation that ensued was a very BP (British Problem) BP which was recognized as the number 2 oil company in the world behind ExxonMobil, acquired the lease to the MC252 (Mississippi Canyon Block 252)(See map below. Ref.11).

The lease was purchased at the Minerals management Service lease sale 206. (Page 15, Section 2. The Mocando Well. Lease and Permits). This was a ten year joint exploration

lease made by BP(65%), Anadarko Petroleum(25%), and MOEX Offshore(10%) all with shared ownership, with BP acting as the principal lease operator. Despite this shared ownership and the crucial fact that the rig was leased from Transocean and all crew members on board at the time of the explosion were Transocean, the blame was focused on BP. The worlds media, but in particular US media, homed in on the fact that the fault lay with BP, now referred to in all media relations as British Petroleum. A tag line that has not been attached to the company for many years. Ironic as 39% of BP is owned by US shareholders. As John Collins Rudolph (Ref.9) identifies, Six Americans- half the total, sit on its board of directors and in addition, the companys single largest shareholder is the sprawling asset management firm BlackRock, based in New York City. This media thrashing in turn had a direct impact on the companies market share with an estimated 55bn being wiped from the companies value since the spill began. (Ref.10)

http://chart.finance.yahoo.com/c/1y/b//bp.l

(This image shows the plummeting of BPs market share as investors sell there stocks and the companies value plummets as news of the spill and the devastation take effect.) Along with rising clean up costs and compensation to be paid to stakeholders affected, this estimate is more than certain to rise further. This incident was now not only a British problem but also came to have huge political significance with the US-UK relations being tested to breaking point. To some this seemed all to convenient at a critical time in Barack Obamas time in office, the President was due to increase the funding for independent US oil company exploration in an effort to reduce the dependency of foreign imports of fossil fuels. At the same time the US Senate published a bill setting out new safeguards on deepwater drilling, in the mean time suspending all offshore drilling off the Gulf of Mexico for 6 months. Meanwhile in England, the economy is going through its toughest recovery to date and the newly elected David Cameron and his joint cabinet are making drastic budget cuts in an effort to pay off the countrys deficit. However both the US and UK came to understand the dynamics of the oil industry given the potentially competing pressures in other various sectors of the economy. Given this, these allied countries had a vast difference in perspective on the situation but both had the same common goal. An independent investigation by BP has found that there was no single factor that attributed to the well tragedy, but rather a sequence of events and negligence involving several different parties The project management failure is apparent from the very first instance when subcontractor Haliburton were hired to cement the walls of the well, concerns were raised about the integrity of the cementing oil rigs by the US Minerals Management Service (MMS). (Ref.12)

A 2007 MMS study found that although blowouts with offshore drilling operation were becoming less frequent, less deadly, and less polluting, cementing-associated troubles persisted. Cementing Problems were associated with 18 of 39 blowouts between 1992 and 2006, and 18 of 70 from 1971 to 1991. If the wells are not completely secured then that allows for a build up of high pressure hydrocarbons and i=oil beneath the well surface, which if not identified can enter the well and cause an explosion similar to the Montara oil spill, August 21, 2009. (See Ref.13 for more detailed notes) In these circumstances a Blow Out Preventer (BOP) is usually used to cut the flow of oil. These are large valves fitted to the top of the well to shut off oil flow in the event of high-pressure build up BP/Transocean were drilling in extreme conditions. In waters 2 miles deep and drilling 6.5 miles below the seabed surface, drilling this deep was relatively new territory for oil companies and BP were seen as a pioneer in deepwater drilling. BOP failure is highly un-common but is a main contributor to the overall failure of shutting off the well.(Ref.14) Page 48 of the Deepwater Horizon Accident Investigation
Report shows that the BOP maintenance records were not accurately reported in the maintenance management system and indentified a lack of a robust Transocean maintenance management system for Deepwater Horizon. (Ref.5) The US Oil Industry regulator the Minerals Management Service had also failed to require the installation of a back up shutdown system, hardly surprising given that BP has a track record of cutting corners on risk to save money. (See Ref.7 for more detail) Up until this incident there was no certified and tested containment strategy in place for capping a well in such dangerous circumstances. Although surprising that engineers have not already worked on solutions to such eventualities, this now gave an aggressive timeline for everyone to meet. Engineers were collating there ideas and presenting solutions that have worked on previous situations, but given the

complexity, this gave a whole new scope to the containment as there were no guarantees, it was simple a case of try it and hope it works. Engineers tried several different tactics to control the well, some of which included lowering a containment dome onto the well know as a cofferdam (Ref.15, Explanation) A junkshot which is a combination of human hair, shredded rubber tires and golf balls which are then blasted into the well to block it (Similar to how hair can block a bath plug) These methods failed, so BP launched its Static Kill Operation (Ref.6), remote control vessels were directed to the seabed surface to cap it manually. An experimental procedure, BP commented it to be a significant milestone successfully plugging the leaking well. This was achieved by pumping heavy mud into the opening for 8 hours to prevent the flow of oil and gas, allowing for work to be carried out for the permanent sealing of the well which is still pending. In conclusion the scope of this project was adapted and broadened to such an extent it resulted in the original project taking on whole new characteristics. With the original drilling project failing, the actual capping/sealing of the well despite other factors was a success. It is imperative that BP and other oil exploration/drilling companies learn from this incident and implement correct system maintenance and safety standards. (Ref.16) Robert Frese says that Good Project Management is a process of continuous improvement The incident should be critically analyzed by project managers in this field to help eliminate future risk factors otherwise next time the world may be even less forgiving.

The devastation of this tragedy was recognized all around the world and to identify each of the stakeholders affected by this incident would be as big a task as the clean up itself. I am now going to analyze the major stakeholders (Primary and Secondary) of the MC252 well. It is perceived that a projects success and failures can be measured and assessed by the stakeholder benefits or lack of in this case. However despite compensation contingencies being put in place to those affected, peoples attitudes and beliefs change over the life cycle of a projects development, through various influences such as media ( identified earlier), and increased concentration on the negativities surrounding the project. Primary Stakeholders: Directors, Management and Employees of BP, Transocean, Haliburton Shareholders Pension Fund Managers Suppliers Contractors The surrounding communities and immediate family of those involved.

Secondary Stakeholders: Government Sectors Watchdogs/Regulators Seafood Industry Environmentally Campaigners Media Tourism Industry Wildlife/Activists Beaches/ Coastal Management

BP as a public company had and still has a moral and ethical responsibility to fulfill before, during, and after the spill.

Primarily BP should have monitored its risk calculation and safety measures and procedures stringently, especially with the company identified as cost cutting driven. This lack of efficiency proves that BP is already paying absolute disregard to both stakeholder sectors by putting lives at risk as well as many other factors with the aim to increase profits. The question we should be asking is Would the stakeholders still be in support of BP had the drill been successful and dividends were paid, but the element of risk factors were identified? Would the stakeholders morally object to the way in which BP conducts its practice or is it the media that have influenced that standpoint and opinion? BP neglected its stakeholders importance and relevance from the onset, this was much more apparent in BPs Lack of transparency in public relations and the information they were releasing to the stakeholders. This was seen as a bid to protect the company image and reduce the perception of the severity of the accident, in a bundled last ditch attempt for BP to ensure stakeholders that they had everything under control. This could not have been further from the truth, however due to other internal/external mitigating factors, the company had to not only co-ordinate a clean up operation, they had to develop a resolution strategy to ensure the long term satisfaction of the stakeholders involved. BP realized the importance of honesty and transparency with the stakeholders and has put several initiatives in place; there response efforts have rocketed from 2,000 people at the beginning of the spill to over 45,000 at its peak in July according to BP. BP assure they have coordinated strategic deployment of people and resources from command centers at 17 staging areas across 4 states, Louisiana, Mississippi, Alabama, Florida.

BP is fully dedicated to correcting its mistakes and shoreline clean up. BP has launched a major program to rehabilitate the wildlife affected, and also dedicated vast sums into environmental restoration and economic investment to understand the full impact of the spill. (Current Figures below courtesy of BP)(Ref.17)
Mobilization and Deployment
5,991 people 445 vessels 11 aircrafts 3,256,547 feet of cumulative boom deployed

Payments 1
$20 billion claims escrow fund $100 million unemployed rig workers' fund $500 million establishing Gulf Coast Research Initiative
1

Claims information

Containment
827,046 barrels of oily liquid skimmed 265,450 barrels in controlled surface burns

Only time will tell if BP have learnt from there negligence, it would be a shame and a profound display of disrespect to those who lost their lives if safety measures do not change within the BP working environment. It has been an expensive project, which will take some time to realize its success and to recover from, but the importance and project success ultimately lies within the recovery of the environment, and the company recovery to regain stakeholder confidence and trust. The scope of this project increased so much BP have to rethink there image and perception and realize that without the consumer confidence backing them then it is no matter how much money is spent a project waiting to fail.

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References:
1) BP rushes to contain Deepwater oil-spill Ellie Zolfagharifard, 28 April 2010 http://www.theengineer.co.uk/news/news-analysis/bp-rushes-to-contain-deepwater-oilspill/1001989.article 2) Gulf oil leak from rig explosion puts more than 400 species in potential harm's way Bob Marshall, April 28, 2010 http://www.nola.com/news/index.ssf/2010/04/more_than_400_species_in_poten.html

3) Simon Boxall from the National Oceanography Centre at Southampton University believes that a
crisis such as this was inevitable. BP are in the unfortunate position of having to pioneer ways of dealing with it that are new and untested, and this will take weeks, if not months, he said. http://www.theengineer.co.uk/news/news-analysis/spill-exposes-unpreparedindustry/1002143.article#ixzz17MyCujVj 4) BP pledges Gulf of Mexico oil fields to spill fund Sarah Young, Oct 1, 2010 http://www.reuters.com/article/idUSTRE6901OZ20101001 Deepwater disaster demands slick thinking Jon Excell, May 12, 2010 http://www.theengineer.co.uk/opinion/comment/deepwater-disaster-demands-slickthinking/1002336.article#ixzz17Qxx1RCy 5) The aim of these procedures is to assist with the strategy to kill and isolate the well, and will complement the upcoming relief well operation, which will continue as per plan.A relief well remains the ultimate solution to kill and permanently cement the well. Coastguard admiral Thad Allen, leader of the governments response team, said: The static kill will increase the probability that the relief well will work. But the whole thing will not be done until the relief well is completed. The static kill is not the end all be all. It is a diagnostic test that will tell us a lot about the integrity of the casing and the wellbore. The Engineer, August 4, 2010 http://www.theengineer.co.uk/bp-hails-static-kill-operation/1004134.article#ixzz17R0mgioO

6) Within a few months in 2005, BP suffered an explosion at its Texas City refinery that killed 15,
resulting in identification of over 300 safety violations and $21 million in fines, and a BP megarig, the Thunder Horse, almost toppled over in a Gulf of Mexico storm. Jeremy Kinsman, Barack Obama, Too big to fail http://www.irpp.org/po/archive/oct10/kinsman.pdf BP sells Pan American Energy stake for $7bn

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November 29, 2010 http://www.bbc.co.uk/news/business-11862948 7) How British Is BP? HEATHER HORN | June 18, 2010 http://www.theatlanticwire.com/opinions/view/opinion/How-British-Is-BP-4042 Oil spill: BP shares slide as crisis continues http://www.bbc.co.uk/news/10281079 8) Bathmetry Map MC252 http://www.neurosoftware.ro/finance/tag/mississippi-canyon/ Cementing' of rig's well eyed as possible culprit in blowout ERIC NALDER HOUSTON CHRONICLE April 29, 2010 Montara Oil Spill: "A failure of sensible oilfield practice" The Blowout was not a reflection of one unfortunate incident, or of bad luck. What happened with the H1 Well was an accident waiting to happen; the companys systems and processes were so deficient and its key personnel so lacking in basic competence, that the Blowout can properly be said to have been an event waiting to occur. Indeed, during the course of its public hearing, the Inquiry discovered that not one of the five Montara wells currently complies with the companys Well Construction Standards. Indeed, so poor has PTTEPAAs performance been on the Montara Oilfield, the Inquiry considers it is imperative that remedial action be instituted. Phil Hart December 8, 2010 http://www.theoildrum.com/node/7193 9) Deepwater Horizon Accident Investigation Report (Page 48) BOP Maintenance and Testing http://www.bp.com/liveassets/bp_internet/globalbp/globalbp_uk_english/incident_response/STAG ING/local_assets/downloads_pdfs/Deepwater_Horizon_Accident_Investigation_Report.pdf

10) A cofferdam is a type of watertight construction designed to facilitate construction projects in

areas which are normally submerged, such as bridges and piers. A cofferdam is installed in the work area and water is pumped out to expose the bed of the body of water so that workers can construct structural supports, enact repairs, or perform other types of work in a dry environment S.E. Smith Edited by Bronwyn Harris September 8, 2010

11) Project Success and Failure

Robert Frese, December 16,2003

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12) Mobilization and Deployment 5,991 people 445 vessels 11 aircrafts 3,256,547 feet of cumulative boom deployed Payments 1 $20 billion claims escrow fund $100 million unemployed rig workers' fund $500 million establishing Gulf Coast Research Initiative 1 Claims information Containment 827,046 barrels of oily liquid skimmed 265,450 barrels in controlled surface burns http://www.bp.com/extendedsectiongenericarticle.do?categoryId=9034427&contentId=7063885

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