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What is Risk in Offshore Oil and Gas?

Evan H. Zimmerman
Director of Worldwide Technical Services
Delmar Systems Inc. and Delmar Systems Pty Ltd.

Loss of life, release of hydrocarbons into the environment and loss of assets have all been part of the aftermath of the 2010 Macondo well blowout and resulting oil spill in the Gulf of Mexico. Those consequences were all direct results of the event. Some of the alarming indirect outcomes included a prolonged halt to drilling activity, contract cancellations and a large reduction in domestic oil and gas development that will be felt in the U.S. economy for the next several decades.

The offshore oil and gas industry is not unlike other industries. It involves high-value assets, complex systems, the environment and people. Just as in industries such as commercial aviation and nuclear power generation, the oil and gas industry has a potential to generate high-consequence events if something goes wrong.

Offshore blowouts have been tracked in the U.S. for more than six decades. The consequences and causes involved in each blowout have been different, however, one could attribute the major contributing causes to design, procedure and human factors. Early on in the industry, the number of design- and procedure-related events were higher than they are today, while in the past two decades, events have been more related to human factors.

If these events are more related to human factors, perhaps the process by which the oil and gas industry operates needs to be adjusted, so the people involved have more redundancy or backup systems to prevent their mistakes from leading to large consequences. To explore this thought, let's look at similar industries.

Commercial aviation, for instance, does not stop when a plane crashes because the consequences must not be large enough. However, commercial aviation did stop in the wake of a plane crashing into the World Trade Center in 2001. But activity did resume once initial findings were collected, and measures were put in place to help prevent a similar consequence.

In another recent example, nuclear power generation did not stop after the Fukushima Dai-Ichi nuclear plant meltdown and release of nuclear materials following the Tohoku earthquake and tsunami. New standards for nuclear plants have been established as a result of Fukushima, and hopefully these will lower the probability of similar events occurring again or reduce the level of consequence.

What makes commercial aviation and nuclear power generation more resilient and quicker to return to operations than the offshore oil and gas industry? Could it be politics? One could argue that shutting down commercial aviation in this country for months would lead to extreme hardship on Americans and U.S. businesses, just as shutting down nuclear power generation would cause trouble for many Americans who would have to go without power. But shutting down offshore oil and gas exploration for months has similar, if not greater, impact.

I believe the reason offshore oil and gas works differently is because those directly affected by the halt in activity were, in the case of the oil spill, mostly localized to the Gulf Coast region. In contrast, commercial aviation directly affects any area in which there is a commercial airport. Nuclear power generation would affect many areas around the country, and having power supplied to your home is generally considered far more critical than the ability to travel by air. Offshore oil and gas activity is simply not directly linked on a short enough timescale to the general public for a halt in activity to cause alarm. Imported oil can fill the gap in domestic production, and every American can still fill up at the pump.

Nevertheless, the offshore oil and gas industry will recover from the halt in activity and get domestic production back to levels prior to the gulf blowout of 2010. It will come at the speed of the global market for the specialized rigs and professionals who enable safe exploration, and the government's ability to facilitate an increase in this activity.

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