Oil spill report lays much blame on BP, who knew of Halliburton weaknesses

The chief counsel of the presidential oil spill commission has issued a final report laying considerable blame on BP for last year's disaster in the Gulf of Mexico. But he also points to flaws in Halliburton's work and errors by rig owner Transocean.

Fred H. Bartlit Jr., a prominent trial lawyer, said that for three years BP had been aware of problems with lab tests of Halliburton cement; that a reorganization of BP's engineering department resulted in delays; and that BP decided not to set a lockdown sleeve, an installation deep in the well, during its preparations for temporary abandonment in order to save 51/2 days and $2 million in costs.

He also said BP's well-site leader was not present, as he should have been, during a critical test known as a negative pressure test that indicated something was wrong.

Bartlit's report is the latest of a series from the National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling, which has already faulted a variety of factors, including decisions made by the well operator BP, rig owner Transocean, oil service provider Halliburton and federal regulators.

In a statement Thursday, BP did not dispute the report's specifics. The London-based oil giant said that it "has made every effort to understand the causes of the Deepwater Horizon accident to help prevent similar events from occurring in the future." BP said the presidential commission's findings - "particularly that the accident was the result of multiple causes, involving multiple parties - are largely consistent with those contained in the BP internal investigation report." It added that it is reorganizing its safety operations and reviewing its supervision of contractors.

Halliburton and Transocean did not issue comments.

Bartlit noted that in 2007, a consulting firm issued a quality-control report warning BP that Halliburton's lab technicians "do not have a lot of experience evaluating data" and that BP needed to improve communication with Halliburton "to avoid unnecessary delays or errors in the slurry design testing."

A cementing expert at BP described the "typical Halliburton profile" as "operationally competent and just good enough technically to get by." And BP's engineers said that the Halliburton engineer assigned to the doomed Macondo well was "not cutting it" and that he often waited too long to conduct critical tests. But, Bartlit added, the BP engineers neither reviewed his work at Macondo carefully nor checked to see that he conducted testing in a timely manner - even though they knew that their last-minute changes to the cement design test could cause problems and that using nitrogen-foamed cement could pose "significant stability challenges."

Bartlit also said the blowout preventer was not to blame for the explosion on the drilling rig, the Deepwater Horizon, that killed 11 workers April 20. The report says that by the time the rig crew tried to close the blowout preventer on the sea floor, deadly gas had already slipped into the riser pipe leading to the rig.

Although the route that gas took through the well when it blew out has been a matter of uncertainty, Bartlit's report says physical evidence taken from the well shows that oil and natural gas "almost certainly" came to the surface through a piece of equipment called the "shoe track" and up the production pipe. The report says cement in the shoe track should have blocked that flow, which it says further calls into question the quality of the cement job done by Halliburton.

Bartlit also faults Transocean, whose rig workers missed several signs of trouble in the well. Earlier alarm might have prompted them to close the blowout preventer earlier, avoiding catastrophe.


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Federal investigators again try to question BP spill witnesses

A federal investigative panel will begin its next round of hearings Monday into the Deepwater Horizon disaster and call witnesses who can address alleged shortcuts in the drilling of the BP oil well, problems with the failed blowout preventer and the confused scene after an explosion on the rig.

Whether all of those witnesses testify remains to be seen.

After challenges to the investigative board's authority and competence, the hearings are shaping up as a test of the panel as well as the parties under investigation.

At the previous round of hearings last month, some witnesses canceled at the last minute. One invoked his Fifth Amendment right to remain silent. Lawyers for other witnesses accused the board -- a joint panel of the U.S. Coast Guard and the Bureau of Ocean Energy Management, Regulation and Enforcement -- of ignoring their clients' legal rights and the rules governing the proceedings.

Toward the end of the last day of testimony, July 23, the Coast Guard officer presiding over the hearings, Capt. Hung Nguyen, implied that the board could put aside federal rules of evidence. The comment appeared to provide ammunition to the board's critics.

Referring to the federal rules of evidence, Nguyen said: "It's possible we can use it. It's possible we don't have to use it."

"It doesn't say you don't have to. It says they should be followed . . . . ," said Transocean lawyer Edward F. Kohnke IV.

"Should, not shall," Nguyen replied, according to recordings and a privately commissioned transcription.

But in the official transcript released by the panel, Nguyen's response is: "Sure. Sure."

A Coast Guard spokeswoman said that nothing in the transcript had been changed and that it is possible the person transcribing the hearing misheard the statement.

On Thursday, the Coast Guard and the Bureau of Ocean Energy Management added two legal professionals to what had been a six-member board, a move that followed complaints that the panel lacked legal expertise.

The new members are Wayne R. Andersen, a retired federal judge, and Capt. Mark R. Higgins, a Coast Guard staff judge advocate.


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Chinese oil company, Chesapeake Energy enter deal for shale project in Texas

The China National Offshore Oil Corp. will pay Chesapeake Energy $2.2 billion for a one-third interest in a South Texas oil and natural gas shale project and will pay billions of dollars more for its share of development costs over the next several years.

Chesapeake Energy, an Oklahoma City-based domestic exploration company, announced the deal Sunday night, saying it will help speed development of resources on 600,000 acres in the Eagle Ford shale play that could help keep natural gas prices low and boost production of unconventional U.S. oil resources.

"They're providing the capital and we're providing the expertise and assets, and the output will be the development of American assets, less U.S. dependence on foreign oil and the creation of 20,000 jobs and tax revenues for all levels of government," Aubrey K. McClendon, Chesapeake's chief executive, said in an interview.

The investment by CNOOC is one of the company's biggest. Other CNOOC investments around the world have been aimed in part at securing sources of oil for China's growing economy, but this investment will not result in any oil shipments to China. Chesapeake will sell the resources, almost certainly in the United States, and send CNOOC its share of the proceeds.

Chesapeake has been seeking to raise money to help develop its extensive inventory of oil and gas acreage. The company has also been trying to pare its debt, which peaked at about 60 percent of the company's book value and which on Sept. 30 stood at about 42 percent. McClendon said the company's target was in the 30s.

CNOOC will pay $1.1 billion now and another $1.1 billion over the next two years by covering 75 percent of Chesapeake's share of development costs. After that, CNOOC will pay a third of the cost of all wells, which run about $6 million each and could number 5,000 or more over the next few years as the region is developed, McClendon said.

Chesapeake said CNOOC's investment will enable Chesapeake to quadruple the number of rigs it has drilling in the region to about 40 by the end of 2012.

Given the cost of development, many independent companies such as Chesapeake have been looking overseas for investors. U.S.-based oil giants such as Exxon Mobil and Conoco Phillips already have stakes in the region. Last week, Statoil and Talisman bought about 100,000 acres from Denver-based Enduring Resources. They paid about the same price as CNOOC did for its interest.

China has some shale gas, but the deal with Chesapeake does not involve any technology transfer or future project in China, McClendon said. He said Chesapeake has its hands full trying to develop resources in the United States.

Unlike shale developments elsewhere in the United States, the Eagle Ford has greater potential to produce crude oil as well as natural gas, McClendon said. He estimated that the United States could ultimately produce half a million barrels a day from shale. The country consumes 19.5 million barrels of oil a day, most of it imported.

The development of oil and gas from shale has aroused controversy over questions of how it would affect water supplies. And so far, most shale developments in the United States recently have produced natural gas, much of it from Pennsylvania and other parts of the northeast.

"Chesapeake's embedded safety culture and integrated environmental protection strategies will be adopted to safeguard personnel and the surface and subsurface environment," Chesapeake said in its news release.


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