By Ted Mann
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.
Write to Ted Mann at ted.mann@wsj.com
(END) Dow Jones Newswires
July 08, 2016 05:58 ET (09:58 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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