Obama Talks Tough on Macondo Hearings

Although I was quite pleased to see Barack Obama win the US presidential election in 2008, him being the better candidate and my being of the opinion that it was hugely significant for the US to elect a black man to the highest office in the land, like many others I thought he seemed a man of many words and little action.  His time in office has done little to convince me I was wrong in this judgement and his recent outburst regarding the Macondo oil spill suggests that he doesn’t do a lot of thinking either.  From Upstream Online:

Obama said the executives were “falling over each other to point the finger of blame at somebody else.”

“The American people could not have been impressed with that display and I certainly wasn’t,” he said today at a press conference at the White House.

At the hearings in front of both the House and Senate earlier this week BP was represented by the head of its Americas unit Lamar McKay; Transocean was represented by boss Steven Newman and Halliburton by its safety head Tim Probert.

“I will not tolerate more finger-pointing or irresponsibility,” Obama said.

Firstly, let’s be clear about something: despite claims from US politicians, BP’s response to this disaster has been pretty good.  They dispatched a flotilla of 32 cleanup vessels within 2 days of the initial blowout; by 26th April they had 1,000 personnel working on containing the spill; by 29th April there were 69 vessels on the scene, a number which had risen to 260 by 7th May, 530 by 10th May, 650 by 17th May, 750 by 18th May, and 930 by 20th May; they have released $25m block grants to each of the states of Louisiana, Alabama, Mississippi and Florida to help accelerate the containment and cleanup activities; they have been doing their damndest to stop the flow of oil using  a variety of techniques; they have given $25 million to Florida and $15 million each to Alabama, Mississippi and Louisiana to compensate for reduced tourism in the affected areas; 19,000 personnel are involved in the cleanup, excluding volunteers; they have pledged full support for and cooperation with the US government investigation into the disaster; by 18th May they had spent $650m on the containment and cleanup which is in line with a pledge they made on 2nd May that they would pay “all necessary and appropriate clean-up costs”.

This does not look to me like a company which is dragging its feet and ducking its responsibilities.

Now, putting things simply, there are several facts to consider:

1. BP is the operator of the license block and the Macondo Prospect which was being drilled at the time of the incident.

2. The drilling was being carried out by Transocean, who owned and operated the drillship Deepwater Horizon which was lost during the incident.

3. The safety device called a Blowout Preventer (BOP), which has several built-in redundancies which allow it to operate even in the most dire of circumstances, failed to function.  The BOP was manufactured by Cameron, but was owned by Transocean.

4. The well was cemented and cased shut by Halliburton.

5. Despite the cement and the casing, the well blew out, the BOP failed to do its job, and an explosion occurred.

As of now, and the time of the hearings which upset Obama so much, nobody knows exactly what occurred never mind why they occurred.  Nobody knows why the BOP failed and nobody knows why the cement or well casing failed as it did.  Without knowing exactly what happened and the mechanisms for failure (of which there are likely to be 3 or 4 in sequence), it is pretty hard for anybody to stand up and take full responsibility for every aspect of the disaster.  Yes, BP should – and in my opinion has – taken responsibility for the disaster overall, but this is not the same as admitting sole responsibility for everything that happened (or did not happen) when so much of the detail is not yet known.

The transcripts of the testimonies from the senior representatives of the four companies involved are available for download here, and I have read all of them.  In summary, relevant to what we’re talking about here:

1. BP pointed out that Transocean’s BOP failed.

2. Transocean made the point that all activities were carried out in compliance with BP’s operating procedures and specfications, which they have no choice but to follow.

3. Halliburton also made the point that it is “contractually bound to comply with the well owner’s instructions on all matters relating to the performance of all work‐related activities”, the well owner being BP in this case, and that “the cementing work on the … well was completed in accordance with the requirements of the well owner’s well construction plan”.

4. Cameron said “it is far too early to draw conclusions about how the incident occurred.”

Which is all perfectly true and is no more than can be expected.  Something has gone wrong, nobody is sure what.  BP points out the bleeding obvious, which is about all they can say without veering off into the realms of unhelpful speculation.  The rest of them say to the best of their knowledge they were doing everything properly, i.e. following BP’s procedures.  Either BP’s procedures are inadequate or somebody has not been following them, but until they can figure out what happened nobody is in any position to make a call one way or the other.

Personally, I’m struggling to see what Obama’s problem is other than perhaps he is trying to show he is a man of action and not just pretty words by sounding tough on people who genuinely don’t have the answers to the questions everyone is asking.  What does he expect them to do, admit responsibility for something they don’t even know for sure has happened?

Contrast this with an aeroplane crash.  An investigation gets launched, the airline is expected to take a prominent role and assume certain responsibilities, but nobody expects the carrier to assume full responsibility for all aspects of the crash before the investigation is complete.  If there was speculation that the engines had failed, one would expect the engine manufacturer to be allowed to state their position based on what is actually known, and the carrier to refer to the role of the engines in the disaster, without the country’s president berating them both for not, well, who knows what?  Making stuff up?

As Upstream Online sensibly put it:

We will not pass judgment at this stage on the cause of the accident and whether that could have or should have been prevented. Facts are simply too scarce at this stage.

It’s a shame President Obama couldn’t avoid making populist speeches aimed at shoring up his collapsing approval ratings and wait for the facts to emerge.  He would also do well to acknowledge that BP have responded to the incident in a manner which is much less deserving of the criticism it is getting from some quarters.

Incidentally, in all the media reports I’ve read on the incident, Upstream Online were alone in being gracious enough to note:

However, one immediate observation is that once the initial explosion and fire had occurred, the speed and professionalism of the evacuation, rescue operation and emergency response seem to have been top notch. The response, it would seem, was instrumental in preventing more lives from being lost.

Indeed.  Eleven men have been tragically killed, but a lot more were saved.  Gratitude is owed to those who made it so.

Australian Projects: The Time is Now

From the ever-informative Upstream Online we get this report of the potential problems the planned Australian LNG projects are likely to face:

“Securing access to resources necessary to develop Australia’s growing LNG industry will not be easy,” Reuters quoted Adi Karev, global leader of oil and gas at consultancy Deloitte Touche Tomahtsu, telling an industry conference in Brisbane.

“Competition for engineers, project managers will be heightened and project finance and raw materials will be strained given the competition for other LNG and large-scale infrastructure projects.”

According to a forecast by the Chamber of Minerals & Energy of Western Australia, even under its most pessimistic forecast, the state needs to recruit some 10,000 extra workers through 2011, rising to 37,000 by 2012 when LNG construction reaches it peak.

“With a skills shortage widely recognised throughout the industry, LNG projects that come in at a later date risk facing much higher costs,” Karev said.

I have long maintained, uncontroversially I might add, that the greatest restrictions to oil and gas developments are not technological or geological but political.  The Australian projects are no different, and there have long been complaints about Australia’s lethargy in getting its projects going forward in the face of umpteen, ever-changing environmental issues, indigenous claims, and daft political ideas like slapping a 40% tax on coalbed methane projects at the 11th hour.

And I fear it is politics which is standing in the way of owners of Australian projects addressing the enormous manpower shortages they will certainly face, as highlighted in the quoted article above.  As somebody unemployed in the oil and gas job market, naturally I have considered Australia as a good place to look what with several huge LNG projects on the horizon, and indeed there are hundreds of jobs being offered across dozens of positions.  However, following several applications, I have had a number of phone calls from recruiters in Australia all asking much the same question:

“I don’t suppose you have residency rights in Australia, do you?”

To which the answer is no, I don’t.  But I am perfectly willing to relocate and become a full tax-paying resident of Australia if a company is willing to sponsor me (actually, I’m contemplating going unsponsored, but that’s another story).  Unfortunately, all the recruiters give the same response: they are not yet allowed to sponsor foreigners to come and work; they have been told to recruit only those who already have working rights in Australia.

On the face of it, this might sound sensible: give jobs to the unemployed in Australia first and then bring in foreigners to fill the positions that are left.  However, on deeper inspection this policy is pretty damned stupid.  Firstly, from what the recruiters are telling me, they do not have enough suitable Australians to fill these positions right now, which is why they are calling me up in the vain hope I’ve negelected to mention I have Australian work rights.  Secondly, unemployment in Australia appears to be regional, mainly because people from Sydney or Melbourne are generally not prepared to up and move to the barren coasts of Western Australia.  The oil towns themselves have very little unemployment, and those that are unemployed in such places, as in Sakhalin, are usually in that predicament for good reason.  What the projects are facing is not a shortage of people in Australia, but a shortage of suitable people who are willing to relocate to Perth or one of the remote oil towns.  Thirdly, oil and gas requires not just anybody but people with certain skills and experience.  It is all very well pointing to the unemployed of Sydney or Melbourne, but unless they have the necessary skills and experience to get stuck into an oil and gas project, they are not much use unless as an apprentice somewhere.  And it is this third problem which is the biggest that Australia faces: even if all their expatriate workers came home and started happily paying tax as Australian residents, they would still be facing massive shortages in a year’s time.  Australia does not have a big population anyway, and they simply do not have the numbers to man up the projects without bringing in foreigners.

Now, all the recruiters recognise that at some point the Australian government is going to have to relent and let the project operators sponsor foreign workers, and I’m sure that will happen in a year or so.  But the Australians are going to make the same mistake almost all the oil industry does with tedious, cyclical regularity: wait until the market is booming and the very last minute before launching and all-out, desperate, recruitment drive in order to get the project staffed properly.  The likely result?  Twice the price for the wrong people who stick around only half as long.  With the way the oil price is going, and with other large projects creeping into view, conditions in the job market are improving rapidly, and within a year or two there are likely to be good times again, especially once the numbers of those retiring or already retired are properly felt in the market.

Currently, most people in the oil and gas business are employed in one way or another, albeit often with shoddy outfits. People who lost their jobs during the last oil price crash and found themselves working in companies like this are often far from happy and would leap at the chance to move to a more competent outfit with brighter prospects and not managed by somebody who, for instance, probably should have stayed playing Hooray-Henry in the officers’ mess.

Now is the time for Australian operators to recruit the extra bodies they will need to man their projects, while rates are relatively low, availability is relatively high, and they are in the position to offer longevity and stability to potential employees.  By the time they relax the laws to allow foreigners in they might find the overseas labour market a very different place, and it won’t have changed in their favour.

Shell Steps Up on HSE

Desperate to avoid a similar fate to that of their rivals BP, Royal Dutch Shell has embarked on a fierce campaign to improve HSE across all their operations.  In a press release issued last week, Shell’s CEO Peter Voser said:

“Safe operations have always been the first priority at Shell, and we pride ourselves on having a safety and environmental record which is a true reflection of the hard work and dedication of the individuals who make up the company.  However, we feel that HSE is an ongoing process through which we look to continually improve, and we have embarked on a campaign to ensure all operations meet the highest health, safety, and environmental standards.  A key element of this initiative is the secondment of a safety specialist in every department with more than 15 personnel company wide, who will assess HSE performance in the immediate term and will be integral to all decision making within those departments until further notice.”

An anonymous source within Shell leaked this picture of one of the safety specialists as he prepared to chair a meeting on the importance of five-legged tables in improving office safety.

Initial reports on the effectiveness of the secondments have been positive, with some insiders claiming productivity in HSE meetings has risen as much as 200% as a result of the initiative.  On condition of anonymity, one Shell employee working in the North Sea told us:

“Finally, we have somebody in HSE who speaks our language.  Until now, much of what we were told went straight over our heads and we all had to try to figure out what the hell we were supposed to do.  But now we have somebody we can all relate to and doesn’t try to outsmart us by speaking Dutch halfway through a meeting.”