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Permalink Reply by Skip Peel - Mineral Consultant on July 8, 2016 at 2:13

Underwater Oil-Well Bolts Are Failing, Causing Alarm

Massive bolts used to secure gear deep in the Gulf of Mexico have corroded and sometimes snapped

wsj.com  By Ted Mann  July 8, 2016 5:30 a.m. ET

General Electric Co., oil drillers and U.S. regulators are scrambling to determine why massive bolts used to connect subsea oil equipment keep failing, prompting costly shutdowns and raising safety concerns about hundreds of wells in the Gulf of Mexico.

Safety regulators at the Department of the Interior began investigating the matter in 2013, officials said in an interview, after a GE oil-exploration equipment business issued a global recall for faulty bolts on one of its components. The bolts have corroded and sometimes snapped, raising the possibility of a major oil leak.

But the U.S. investigation and two recent bolt failures convinced regulators and industry officials that the problem goes beyond GE and its blowout preventers—safety gear used to halt oil-and-gas flow during a well emergency.

Flaws also have been found in bolts made by GE’s two main competitors for blowout preventers— National Oilwell Varco Inc. and the Cameron unit of Schlumberger Ltd.—and in bolts used in other areas on subsea wells, said Interior Department officials.

 “This is what we view as a very critical safety issue,” said Allyson Anderson Book, associate director of the Bureau of Safety and Environmental Enforcement at the Interior Department. “If your smallest component fails, you can’t expect a sophisticated many-million-dollar piece of equipment” to hold fast and prevent a leak.

The failures haven’t resulted in any oil leaks, the regulators said.

Like other equipment companies, GE said its bolts have come from subcontractors, which it hasn’t publicly identified. The company said the components are subject to rigorous safety testing before being delivered to customers.

A spokeswoman for Fairfield, Conn.,-based GE said the company is working with the Interior Department to address the problems and has supplied replacement parts to customers who have requested them, declining to further elaborate. Representatives for National Oilwell Varco and Schlumberger weren’t available to comment.

The review has found bolt failures stretching back at least to 2003, regulators said. “This is a systematic industry problem that requires immediate attention,” the chief of the BSEE wrote to the head of the American Petroleum Institute, the industry trade group, in a Jan. 22 letter.

Regulators say they are working with drilling companies, manufacturers, and the API to craft new standards for minimum hardness and coating of subsea equipment bolts, as well as guidelines for assembly and installation.

The BSEE wants companies to replace existing equipment as soon as possible. The API proposes replacing by the end of 2017 any critical bolts that don’t meet the coming hardness standard. An API spokesman said the industry is “working diligently with BSEE and other stakeholders to enhance operations as necessary.”

The bolt issue could affect more than 2,400 platforms and oil rigs in the Gulf of Mexico, as well as 23 off the coast of California, and one active rig on the outer continental shelf in Alaska, a BSEE spokesman said.

One reason the scope of the issue remains murky: oil-lease holders aren’t required under current rules to report equipment failures to the enforcement bureau when they are discovered, except if certain conditions are met, such as when oil leaks into the water.

That will change on July 28, when new rules crafted in the years since the 2010 Deepwater Horizon spill go into effect, regulators said. Those regulations will require greater reporting of breakdowns, including bolt failures discovered during regular maintenance, and will require information sharing among competitors about equipment failures.

Companies already have begun the process of finding and replacing corroded bolts. The repairs are pinching drillers and U.S. producers, who have been hard hit by the prolonged slump in oil prices.

Marc Edwards, chief executive of Diamond Offshore Drilling Co., which has a fleet of 30 rigs, told investors in June that the company had four unplanned “stack pulls” in the second quarter, where the expensive equipment that sits atop a subsea well must be raised to the surface and repaired. Three of those repairs involved failed bolts, Diamond said.

Mr. Edwards estimates that his customers lose between $600,000 and $800,000 a day in energy production during such repairs, and his own firm’s revenue drops to zero from a project during the two to three weeks that production is halted and equipment repairs made.

The interruption likely will affect second-quarter results. “Is that material for me? Yes, it is,” Mr. Edwards said.

GE is affected, too, because Diamond recently switched to a service agreement where it rents its blowout preventers from GE and pays based on the amount of time the equipment is in working condition, Mr. Edwards said.

Manufacturers and regulators say multiple factors could be driving the bolt failures. A working group is studying metallurgical data to determine if the alloys used in the heavy steel bolts are hard enough to survive in the harsh underwater environment, and whether coatings used on the bolts are appropriate.

They also are examining whether “over-torquing,” or excessive tightening of the fasteners, by subcontractors who assemble the stacks of equipment has caused them to weaken. GE has said that over-torquing likely is a factor in its bolt failures.

 

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