EcoRadio

Category: Energy Matters

  • Managing Offshore Oil Risks

     

    Managing Offshore Oil Risks

    Julia Aasberg, Allianz Global Corporate & Specialty (AGCS)

    “This will be a significant insurance loss of more than a billion dollars and our expectation is that rates and terms will harden” (Photo: Allianz)
     

     

    What caused the sinking of the Deepwater Horizon semi-submersible drilling unit?

    It’s too soon to tell. However, we know there was a fire and explosion following a control of well event and the exact sequence of events is under investigation. What is interesting is that they had already struck oil and were in the process of completing the well for later production.  This process is usually regarded as lower risk than when actually drilling 13,000 feet deep into the seabed.

     

    Do we know if the problem occurred on the platform or on the seabed?

    Something happened during the completion operation in the well bore. The drilling crew was installing a casing into the well to prepare it for oil and gas production. Customarily, a special mud is pumped down to create a hydrostatic pressure to counteract the pressure from the oil reservoir.

     

    Something upset this balance and it is believed that an uncontrolled flow of oil and gas rose up to the drilling rig, found a source of ignition, and caused the explosion that ultimately sank the rig.

     

    What happened after the explosion?

    Tragically, among the 126 people on board, 17 were injured and there were 11 fatalities. Two days after the explosion, the unit sank and since then the well has continued to leak.

     

    BP is the majority owner of the lease/well and Transocean was hired by BP to drill this and other wells under a long term contract. They will be working closely together to bring the well under control and, in addition, BP has the primary responsibility for cleaning the oil pollution. 

     

    Was this well known to be especially dangerous?

    When there is drilling into a rock formation that has been there for thousands of years with trapped oil and gas the expectation is that there will be pressure, evidenced by the surveys or other well data. BP will have performed extensive surveys and compared them to other well data to establish a design for the well. Based on the information currently available, we do not believe this presented an abnormal risk

     

    You are talking about one borehole, but apparently there are several leaks.

    Yes, after the unit sank it landed on the ocean floor some 500 meters away from the original well. The riser tube that connects the seabed equipment to the drilling rig was ruptured in two places when the drilling rig sank. We understand that oil is leaking from the riser tube and possibly the seabed equipment.

     

    BP is trying to install some sort of metal dome on the well to stop the flow of oil. How would that work?

    BP developed a giant dome to sit over the leaks to contain the oil allowing it to be siphoned up to a tanker rather than let it float to the surface.

     

    Another idea is to drill once again into the oil reservoir. What would that achieve?

    That’s happening right now. There is another oil rig already on site and they are drilling a relief well into the original well bore to attempt to stop the flow. This is achieved by pumping heavy drilling mud through the relief well into the original well bore to stop the uncontrolled flow of oil. This may take 2 to 3 months

  • UN considers review of alleged carbon offset abuses.

     

    The controversy surrounds companies which currently receive carbon credits for capturing and destroying the powerful greenhouse gas HFC-23 – a by product resulting from the production of the refrigerant gas HCFC-22.

    CDM Watch has alleged the way the CDM is structured means that chemical gas manufacturers based in China and India and South and Central America have been incentivised to increase the production of HCFC-22 and HFC-23 as they can then earn Certified Emissions Reductions (CERs) carbon credits, which can be sold into carbon markets such as the EU Emissions Trading Scheme.

    Lambert Schneider, a former member of the UN climate change secretariat’s Methodologies Panel and one of the original designers of the CDM system, has joined the ranks of its critics. “The amount of HCFC-22 production and HFC-23 generation appears to be mainly driven by the possibility to generate offset credits rather than other factors,” he said.

    Speaking to BusinesGreen.com, CDM Watch director Eva Filzmoser said the CDM iniative was creating perverse incentives that ran counter to its original goals of promoting more sustainable activities.

    “The essence of our complaint is that we accuse the CDM Project of massively inflating HCFC-22 production,” she said. “We would like to see the UN respond to this concern by amending the methodology that is in place at this stage.”

    According to Filzmoser the CDM is not the right place to deal with the destruction of HFC-23. “We think it should all be dealt with under the Montreal Protocol [covering ozone depleting gases],” she said. “Until this happens we think the CDM incentives need to be lowered as they are much too high at the moment.”

    The Montreal Protocol dates back to 1987 and aims to phase out the use of ozone depleting chemicals, including several groups of halogenated hydrocarbons.

    David Abbass, public information officer at the UN Framework Convention on Climate Change secretariat, told BusinessGreen.com that the UN is considering the evidence of abuse of the CDM system and will adjust its safeguards if necessary,

    “A request for revision of the methodology used in these projects is now with the CDM Executive Board’s Methodologies Panel,” he said.

    He added that there were already safeguards in the existing CDM project assessment methodology designed to prevent abuse of the system. “Specifically, no new plants can qualify to earn credits and the amounts that can qualify are pegged to historic production levels,” he said. “The question now is whether the safeguards need to be adjusted or added to. That’s what the Board will be looking at.”

    The CDM board is due to discuss the issue at its next meeting from the 26 to 30 July.

    However, CDM Watch maintains that the abuse of the system is widespread and endemic and will not be easy to correct. “There might be some projects out there that are not flawed but they are hardly even countable let’s say,” said Filzmoser. “If a rule incentivises abuse you are much more likely to see that abuse than if the framework tries to set in place measures that would avoid gaming the system. Unfortunately industry always wants to get more money.”

  • Nuclear Fusion Projects Worries EU

     

     

    At the centre of the issue are dreams of harnessing nuclear fusion, which releases vast amounts of energy in the core of a star, under huge gravitational forces and temperatures of around 10 million degrees Celsius.

     

    Scientists have shown the process can be recreated on Earth, combining simple hydrogen isotopes to release vast amounts of energy, but so far it has not been demonstrated on an industrial scale. Nor have previous experiments released more energy than they consume.

     

    In 2006, more than 30 countries signed a deal to build the ITER nuclear fusion reactor, under construction in Cadarache, southern France. At its core will be a 500-cubic-metre doughnut-shaped steel vessel in which a superheated stream of plasma circulates in a vacuum, held in place by superconducting magnets.

     

    If all goes well, from 2020 the project will be capable of generating around 500 megawatts of fusion energy – clean power with no climate-damaging emissions and little radioactive waste.But increasing complexity and rising prices for steel, concrete and copper have led to a tripling of construction costs since they were estimated in 2001.

     

  • The Money Gusher

     

    Pollution has been defined as a resource in the wrong place. That’s also a pretty good description of the company’s profits. The great plumes of money that have been bursting out of the company’s accounts every year are not BP’s to give away. They consist, in part or in whole, of the externalised costs the company has failed to pay, and which the rest of society must carry.

    Does this sound familiar? In the ten years preceding the crash, the banks posted and disposed of stupendous profits. When their risky ventures failed, they
    discovered that they hadn’t made sufficient provision against future costs, and had to go begging from the state. They had classified their annual surplus as profit and given it to their investors and staff long before it was safe to do so.

    Last week the British government bumped into another consequence of failing to take future costs into account. Chris Huhne, the new secretary of state for energy and climate change, revealed that nuclear decommissioning liabilities will cost the government £4bn more than it was expecting to pay over the next three years(4). This will cancel out two-thirds of the vicious cuts the government has announced and swallow most of his department’s budget. As Huhne pointed out, “It is a classic example of short-termism. I cannot think of a better example of a failure to take a decision in the short run costing the taxpayer a hell of a lot more in the long run.”(5)

    The decommissioning costs imposed on society by nuclear power will be dwarfed by those imposed by the fossil fuel industry. They include, but are not confined to, the money that will have to spent on adapting to climate change. The United Nations estimates this cost at $50–170 billion a year, but a report last year by British scientists suggested that this is around three times too low, as it counts only a small proportion of likely impacts(6).

    The UN has hired the consultancy Trucost to estimate the costs dumped on the environment by the world’s 3000 biggest public companies. It doesn’t report until October, but earlier this year the Guardian published the interim results(7). Trucost had estimated the damage these companies inflicted on the environment in 2008 at $2.2 trillion, equivalent to one third of their profits for that year. This too is likely to be an underestimate, as the draft report did not try to value the long-term costs of any issue except climate change. Nor did it count the wider social costs of environmental change.

    A paper by the New Economics Foundation in 2006 used government estimates of the cost of carbon emissions to calculate the liabilities of Shell and BP(8). It found that while the two companies had just posted profits of £25bn, they had incurred costs in the same year of £46.5bn. The oil leaking into the Gulf of Mexico from the Deepwater Horizon well is scarcely more damaging, and its eventual impacts scarcely more expensive, than the oil which is captured by neighbouring rigs then processed and burnt as intended.

    The full costs imposed by the oil companies, which include the loss of human lives and the extinction of species, cannot be accounted. But even if they could, you shouldn’t expect the companies to carry them. They might be incapable of capping their leaks; they are adept at capping their liabilities. The Deepwater Horizon rig, which is owned by Transocean, is registered in the Marshall Islands(9). Most oil companies pull the same trick: they register their rigs and ships in small countries with weak governments and no international reach. These nations are, in other words, incapable of regulating them.

    Flags of convenience signify more than the place of registration: they’re an unmistakable sign that responsibilities are being offloaded. If powerful governments were serious about tackling pollution, the first thing they would do would be to force oil companies to register their property in the places where their major interests lie.

    US lawyers are drooling over the prospect of what one of them called “the largest tort we’ve had in this country”(10). Some financial analysts are predicting the death of BP, as the fines and compensation it will have to pay outweigh its earnings. I don’t believe a word of it.

    ExxonMobil was initially fined $5bn for the Exxon Valdez disaster, in 1989. But its record-breaking profits allowed it pay record-breaking legal fees: after 19 years of argument it got the fine reduced to $507m(11). That’s equivalent to the profit it made every ten days last year. Yesterday, after 25 years of deliberations, an Indian court triumphantly convicted Union Carbide India Ltd of causing death by negligence through the Bhopal catastrophe(12). There was just one catch: Union Carbide India Ltd ceased to exist many years ago. It wound itself up to avoid this outcome, and its liabilities vanished in a puff of poisoned gas.

    BP’s insurers will take a hit, so will the pension funds which invested so heavily in it, but, though some people are proposing costs of $40 or even $60bn, I will bet the price of a barrel of crude that the company is still in business ten years from now. Everything else – the ecosystems it blights, the fishing and tourist industries, a habitable climate – might collapse around it, but BP, like the banks, will be deemed too big to fail. Other people will pick up the costs.

    There is an alternative, but it is unlikely to materialise. Just as Norway has treated its oil money not as profit but as provision against a tougher future(13), so the governments in whose territories oil companies work should force them to pay into a decommissioning fund. The levy should reflect the costs economists are able to calculate, plus a contingency for those we can’t yet foresee.

    This would outrage the oil firms, as it would render many of them unprofitable. But there’s a simple answer to that: the money currently defined as profit is nothing of the kind.

    www.monbiot.com

  • Waterspouts

    There seems to be some confusion over whether the
    Lennox Head event was a Tornado or waterspout.
     
    Wikipedia defines today’s event as a Tornadic waterspout.
     
    There are also non-tornadic waterspouts.
     
    See Wikipedia for full explanation of these events. They are very active around the
    Florida Keys area,which could cause problems in the oil-spill areas, though the oil
    slicks may inhibit this activity.
     
    Neville Gillmore.

    “Tornadic waterspouts”, also accurately referred to as “tornadoes over water”, are formed from mesocyclonic action in a manner essentially identical to traditional land-based tornadoes in connection with severe thunderstorms, but simply occurring over water.[7] A tornado which travels from land to a body of water would also be considered a tornadic waterspout.[8] Since the vast majority of mesocyclonic thunderstorms occur in land-locked areas of the United States, true tornadic waterspouts are correspondingly rarer than their fair-weather counterparts. However, in some areas, such as the Adriatic, Aegean and Ionian seas, tornadic waterspouts can make up half of the total number.[9]

     

     

     

  • Offshore energy report could dash defeatist arguments against the rocks

     

    I don’t know how to explain this unreasoning antagonism, but it casts an interesting light on the oft-repeated myth that it is environmentalists who are hostile to new technologies.

    But even the defeatists might be swayed by some of the findings of the Offshore Valuation report, just published by the Public Interest Research Centre (Pirc). It’s the first time anyone has tried to work out how much electricity could be produced by offshore renewables in the UK, and the results are fascinating.

    It examines only existing technologies – wind turbines with both fixed and floating foundations, wave machines, tidal range and tidal stream devices – and the contribution they can make by 2050.

    It accepts the usual constraints on offshore renewables: maximum water depths, the need to avoid dense shipping lanes and other obstacles, the various technical limits. Having applied these constraints, it finds that the practical resource for offshore renewables in the UK is 2,130 terawatt hours per year. This is six times our current electricity demand.

    Were we to use only 29% of the total resource, the UK would become a net electricity exporter. We would be generating energy equivalent to 1bn barrels of oil a year, which roughly corresponds to the average amount of North Sea oil and gas the UK has been producing over the past four decades.

    The report estimates that this industry would directly employ 145,000 people and produce annual revenues of £62bn. The construction effort would be roughly similar to building the North Sea oil and gas infrastructure: eminently plausible, in other words, if propelled by strong government policy.

    Were we to make use of 76% of the resource, the UK would become a net exporter of total energy. This is a tougher call, but not necessarily impossible: we’d be producing the equivalent of 150% of the energy output from UK’s peak production year for oil and gas (1999).

    It would mean building an average of 1,800 7.5 megawatt wind turbines every year. This is likely to stretch available manpower and construction capacity to the maximum, possibly beyond. But if enough investment is sunk into training, manufacturing and transport, the potential for creating both employment and income is enormous.

    The national grid, the report estimates, could accommodate about 50% variable renewables (power sources whose output depends on the weather) by 2050, as long as it had 34 gigawatts of backup capacity, energy storage and interconnectors linking it with the continent. This is both plausible and affordable. (Backup, to address another persistent myth, does not mean that the necessary thermal power plants are kept running all the time, just that they are available if needed.)

    There are some interesting implications. The UK could close its looming energy gap without using new sources of fossil fuels. It could do this without encountering the public hostility which often scuppers onshore windfarms.

    The best wind resources are mostly way out of the sight of land: the further out to sea you go, the stronger the wind becomes. A recent study shows that offshore windfarms can greatly increase the abundance of fish and crabs. (My hope is that the foundations could be connected by a web of steel cables, so the windfarms could function as marine reserves which never needed to be policed, as trawling through them would be impossible.)

    It also raises some important questions. If the offshore resource is so abundant and its deployment likely to cause hardly any political fuss, should we give up fighting for onshore windfarms? I don’t know, but I would appreciate your views.

    The report also makes me wonder whether, in the light of the damage they will do and of the far greater resources in the open sea, a Severn barrage and other tidal range devices are worth developing. The report suggests that the total practical resource for offshore wind is 1,939 terawatt hours per year, while the total tidal range resource is just 36 – and more expensive to deploy. Given the aggro tidal barrages will cause and the habitats they will destroy, are they worth developing?

    If any of this is to happen, the big decisions will need to be taken in the next year or so. So if ever you meet ministers or officials, ask them these questions. Have they read the report? What do they intend to do about it?

    monbiot.com