Dangers of the deep

The US oil disaster has laid bare the ugly side of offshore drilling. As China steps up its extraction capabilities, it is hoping to avoid America’s mistakes, say Li Yi and Feng Jie.

In the early weeks of the BP oil spill, the company’s chief executive, Tony Hayward, responded to the growing tide of criticism with the following words: “The Gulf of Mexico is a very big ocean. The amount of volume of oil and dispersant we are putting into it is tiny in relation to the total water volume.” The environmental impact of the disaster, went his argument, would therefore be extremely limited.

It sounded familiar. After an explosion at a Jilin petrochemical plant polluted the Songjiang River in 2005, a company official simply said: “A gas explosion only creates carbon dioxide and water. There won’t be any pollution.”

Despite Hayward’s claims, Doug Helton, incident operations coordinator at the US National Oceanic and Atmospheric Administration’s Office of Response and Restoration told Southern Weekend in July that the oil off the Louisiana coast could harm fish, turtles, whales, dolphins and coastal habitats, and that “Research into the environmental effects of the disaster will continue for years.”

The fact is that the areas marked out for deep-sea oil extraction – the ocean off Brazil, the Australian continental shelf, the west coast of Africa, the Arctic and the Caspian Sea – are all, ecologically, extremely fragile.

But the risks will not stop the major oil multinationals from pursuing deep-sea exploration, according to well-known oil expert Michael Economides. “Remember, offshore fields account for about half of US domestic oil production, so you can imagine what impact halting that production would have on US oil supply,” he told Southern Weekend.

Despite the world’s hunger for energy, deep-sea oil resources remain virtually untouched. The industry defines depths of up to 500 metres as shallow water, 500 metres to 1,500 metres as deep water, and anything beyond that as ultra-deep. Over the last decade or more, 60% to 70% percent of major oil discoveries have been found offshore, with 45% to 50% of those in deep water, making deep-water fields crucial for continued oil supply. Deep-sea oil and gas reserves alone are calculated at 200 billion tonnes, with oil accounting for about 60% to 70% of that supply, and natural gas 10% to 20%.

These figures are no doubt good news for a world that is increasingly fretful about its energy security. But the technological challenges of deep-sea exploration and extraction are stretching human knowledge to its limits. Chevron spokesperson Mickey Driver has described the endeavour as being on a par with the moon landings.

Deep-sea engineering relies on underwater robots connecting oil and gas pipes and electric cables together into something resembling an umbilical cord, several kilometres under water. Every aspect of the operation requires cutting-edge technology. A statement from China’s State Energy Bureau on the lessons to be learned from the Gulf of Mexico disaster points out that “Although deep-sea drilling technology is now mature and accidents are extremely rare, the conditions mean that, when they do occur, prompt and efficient handling is problematic.”

According to Zhou Shouwei, vice-president of China National Offshore Oil Corporation (CNOOC), foreign firms have already drilled at depths of up to 3,052 metres below the water, while Chinese equipment can only achieve depths of 505 metres. And these foreign companies can actually extract oil and gas from fields at depths of 2,438 metres – compared to 333 metres for their Chinese counterparts. But recent developments in China’s deep-water drilling sector, such as CNOOC’s investment in the Ocean Oil 981 platform, are beginning to address the imbalance.

“There are huge reserves in a lot of undeveloped deep-water fields, and technology is making it feasible to extract those. But if current practices and regulation are not sufficiently safe, then improvements will need to be made,” said Wayne D Pennington, department chair and professor of geophysical engineering at Michigan Technological University, in reply to a message from Southern Weekend.

Oil firms worry about balancing the costs and profits of deep-sea oil extraction. Developing shallow-water oil fields costs five to 10 times as much as the onshore equivalent – and deep water extraction costs five to 10 times as much again. For example, developing a medium-sized deep-sea oil field in the South China Sea would require between US$300 million and US$600 million (2 billion yuan to 4.1 billion yuan) of investment; for a large oil field, it could be as much as US$2 billion to US$3 billion (13.5 billion yuan to 20.3 billion yuan).

An ocean-exploration official with CNOOC explained: “The market won’t pay higher prices just because your costs are greater. If you want to make a profit, you need to use technology to find the fields and then minimise the costs of extracting every barrel of oil and every square metre of gas.”

Maintaining the highest technological standards while minimising costs in order to ensure profits is a major challenge for oil companies. One industry expert said he used to think that US offshore oil extraction followed rigorous standards, with full safety and environmental mechanisms in place. But when he started working with an American firm, he learned that the thousands of small oil companies around the Gulf of Mexico were almost running wild – everything, from barriers to market entry to safety standards on oil field service vessels, was lax, he said. 

The safety standards followed by oil-field service vessels are set by the US Coastguard and are the equivalent of the standards laid down by China’s Maritime Safety Administration. But, according to the same expert, the US protocol was the product of a struggle between the government and powerful oil firms, with the latter keeping safety standards for service vessels as weak as possible in order to cut costs and increase competitiveness.

These regulations do not meet the relevant standards of the American Bureau of Shipping, a non-governmental body that promotes safety in the US shipping industry, and are even lower than China’s. The tugs and multifunctional vessels operating in the Gulf of Mexico would not be allowed to work in China’s waters. “And after the leak, the oil companies united in opposition to the US government’s proposed ban on oil extraction,” said the same expert.

“The Gulf of Mexico leak was a wake-up call,” said Zhang Zhaokang, senior technical consultant with CNOOC’s environmental protection arm. Currently CNOOC is assessing risk factors in the Bohai Gulf, the east and west regions of the South China Sea, and the East China Sea. CNOOC has expanded its plans for research into deep and underwater equipment, in order to increase its ability to work and respond to incidents in deep water.

Figures show that, by the end of 2010, China will have some 46 oil or gas fields operating in coastal waters – 23 run by Chinese firms and another 23 by joint ventures between Chinese and foreign firms, mostly situated in the four regions mentioned above. “Usually deep-sea drilling doesn’t create any impact on the marine environment, if the company deals with waste such as slurry, drill shafts and contaminated water strictly in line with standards. But if there is a blowout or a leak, you get a tragedy like that in the Gulf of Mexico,” said He Guifang, a researcher with the South China Sea Environmental Monitoring Centre at the State Oceanic Administration.

An executive with CNOOC told Southern Weekend that the company’s short history in this field means there is a lack of experience in dealing with accidents. The relevant standards and mechanisms have taken shape as the sector has developed, meaning that the emergency-response plans are useless when it comes to incidents not yet experienced.

According to the State Oceanic Administration, China is in the process of revising regulations on offshore-oil extraction in order to strengthen environmental-impact assessments and provide stronger government oversight of environmental equipment and the management of oil and gas pipes. It is also seeking to put in place standards for oil companies’ emergency-response plans.

Li Yi is special contributor to Southern Weekend and Feng Jie is a reporter. This article first appeared in Southern Weekend on July 8, 2010.

Homepage image by US Coast Guard