Posted on Thu, May. 06, 2010
last updated: March 15, 2013 11:58:39 AM
The chief executive of Transocean Ltd., whose drilling rig exploded last month in the Gulf of Mexico and triggered the largest oil spill in North American history, on Thursday defended the company's safety policies.
Steven Newman, Transocean's president and chief executive, told industry analysts during a conference call on the company's quarterly earnings that it would be "premature'' and "inappropriate'' to speculate on what caused the April 20 blast that sank the $600 million rig and left 11 crew members missing and presumed dead.
Newman also questioned whether a device called an "îacoustic switch'' would have helped crews seal a gusher spewing an estimated 5,000 barrels of oil daily a mile below the Gulf. The Wall Street Journal last week reported that the switch, which can allow a crew to remotely trigger a valve called a blowout preventer, is mandated in Norway and Brazil but not required under federal regulators. A congressional committee followed up the report with letters to the company and British Petroleum, which had leased the rig from Transocean, asking for company documents about the switches.
Newman said there were already backup systems built into the blowout preventer and the switch would simply add another "redundancy.'' He said he would await the results of a federal investigation before considering whether the incident suggests the industry, which has moved into deeper and deeper water, needs additional safeguards.
He said the company was proud of its safety record and had reiterated its "not-one-incident'' ethic to rig and ship crews.
Transocean and BP are working with federal agencies to determine why the blast occurred on a newly drilled well that had been plugged with concrete the day before until it could be tapped later. A third company, Halliburton, did the cement work.
In addition to losing the Deepwater Horizon rig, the company said it had also lost $130 million this year in future contracts for the floating driller. In addition, company executives estimated increased insurance deductibles and premiums, as well as legal costs, could cost it an estimated $200 million. Under the leasing contract, he said, BP would be responsible for all cleanup costs.
Transocean also stands to collect $560 million in insurance on the sunken rig and BP was paying full daily rates for using two other rigs in trying to contain the disastrous spill in the Gulf. Similar rigs lease for $250,000 to more than $400,000 a day.
The 835-foot Discoverer Enterprise, a drill ship that can be positionally controlled, will likely tackle the critical task of lowering a 78-ton metal dome a mile to the sea floor over the leaking well — the best hope of a fast fix for the spill. Another Transocean rig is drilling a relief well to pump heavy material into the leak and permanently seal it, a process that could take three months.
Transocean's shares have taken a beating since the accident, dropping by more than 20 percent, but Newman and company executives remained upbeat about future prospects. Ultra-deep zones, a depth the Deepwater Horizon was working in, was the strongest sector globally, they said.
Asked by analysts if the accident would hammer efforts to expand drilling in the Gulf, Newman said energy industry fees to the U.S. Minerals Management Service constitute the federal government's second-largest revenue stream behind income taxes.
"It is difficult to overemphasize the importance of the industry to the U.S. economy'' he said.