Oil in the Arctic

 
Picture a vast gray ocean that dissolves into gray sky pregnant with heavy dark clouds, and a gray flat sandy shore that slowly oozes up from the Chukchi Sea.  This is what our Ocean Energy Advisory Committee saw from the Coast Guard C130 plane, chartered by BSEE's Director, Admiral James Watson.

Click on this image to see it in full resolution and hit Esc to go back. This gray vastness is surrounding our C-130 plane, flying the BSEE Advisory Committee to the Burger Prospect in the Chukchi Sea and to Point Barrow in Alaska.

In summer, the Arctic ocean is dotted with white ice floes. In winter all is frozen.

Our incredibly young and competent Coast Guard pilots are gradually descending to 500 ft above water.

On August 30, 2012, we flew close to the Burger Prospect at 500 ft above the sea level.  This is the area where one day Shell will drill their first wells.  The sea was dotted with ice floes, some very large.  Similar floes stopped all arctic drilling by Shell in late October 2012.

A Shell support barge that was to be used by Shell to drill the first well.

This vast empty space is the neighborhood of Point Barrow, the settlement closest to the Burger Prospect in the Chukchi Sea. Here, Shell will attempt again to drill their first wells in 2013.  Despite Shell's valiant efforts in 2012, and hundreds of millions of dollars spent on preparations, not a single well was drilled and completed.

Point Barrow emerges from the sea.  This is the entire onshore infrastructure in the radius of over 100 miles.  There are no roads and only a tiny airport links this settlement with the outside world.

We have landed in Point Barrow.  Our plane also brought extra gasoline supplies to be used by the Coast Guard crew stationed at Point Barrow. Gasoline is very expensive in Point Barrow.

This Coast Guard crew stayed at Point Barrow for three weeks.  They fly search-and-rescue helicopters, help with teaching Inupiat children, and are a part of the command-and-control network established by the Coast Guard to oversee the vast offshore areas.  We are standing on permafrost.  The back-wall of this hangar is not properly insulated and is buckling into the slowly melting soil.

An impromptu gathering with the local officials.  Admiral James Watson is standing on the right, and Don Jacobsen, who will be running Shell's drilling operations in Alaska in 2013,  on the left. The North Slope Borough Mayor, Charlotte Brower, is standing next to Admiral Watson.  It was refreshing for me to hear the local people praising the Coast Guard and Federal Government for providing help and protection.

Alaska with some of the offshore oil and gas prospects.  Point Barrow is the most northward settlement in the United States.  The Shell Burger prospect is in the Chukchi Sea, 140 miles NW from Point Barrow.  No roads leave Point Barrow because  it is in the middle of a vast nowhere.  To link the Burger Prospect with the Trans-Alaska pipeline, would take roughly 150 miles of sub-seafloor pipeline to shore, and another 200-250 miles of a new pipeline east to Prudhoe Bay.

Here are some of the difficulties with drilling and operating offshore oil and gas wells in the Arctic, west and north of Alaska: 

1. Gas vs. oil. Natural gas is not oil.  Gas price and remoteness of the Arctic make offshore gas production and transport unprofitable. Let's hope that most of the hydrocarbons discovered in the Arctic are oil, not natural gas.
2. Long distances and no infrastructure.  Literally everything one needs to drill, complete and produce a well must be brought from Portland, Seattle, or Vancouver.  This means that dozens of extra supply and support ships and barges must be deployed in the Arctic.  Because of the long distances, weather, and lack of airport and storage infrastructure, little or nothing can be flown to drill ships on helicopters.
3. Fragility of supply chains. Long and complicated supply chains are costly to maintain and vulnerable to extreme weather and physical failure. When a few elements in a long chain fail, they cannot be repaired quickly and easily.  Germans discovered this fact by 1942, when their invasion of the Soviet Union started to falter not because of lack of military superiority, but because of difficulties with supplies during the long and cold Russian winters. Americans have discovered similar problems with military supplies in Afghanistan.
4. Ice at water surface and on seafloor. The Arctic wells will be drilled in relatively shallow water, 150 ft or so.  Sea water can freeze all the way to the bottom through the sinking of very salty, cold brine that forms the downward racing "brinicles." This BBC documentary shows sea water freezing rather nicely.  Therefore, wellheads, BOPs, pipes and other seafloor infrastructure must all be dug into the seafloor and hidden from ice scraping it from above. They still may be enveloped in ice generated by the cold brine raining down from the surface ice cover. Wellheads and BOPs in pits may make it difficult or impossible to access them with ROVs and capping stacks if something goes wrong.
5. Oil transport. When the offshore wells are successfully completed and produce oil through the sufficiently sturdy production platforms that can withstand waves, wind and ice floes year around, how will the produced oil be exported year-around?  (Actually, in 180 ft of water, all production facilities would have to be sub-seafloor, or in heavy bunkers on seafloor. Only very shallow water will allow for gravel islands.) Transport by tanker will be difficult, and probably impossible through winter, late fall, and early spring.  Laying 150 miles of pipeline beneath the sea bottom, followed by another 200 plus miles of pipeline onshore to attach to the trans-Alaska pipeline will be exceedingly costly and difficult.
6. Cost and time. Since 2008, Shell has spent nearly US $3.5 billion dollars on plans to explore for oil in the Beaufort and Chukchi Seas on three proposed drill sites: three blocks in the Burger prospect, and one block each in the Crackerjack and the Shoebill prospects. In the four years that ensued, no wells were drilled (only two topholes were spudded) and no permanent infrastructure was built.  Shell probably pays 1/4 of a billion dollars per year to maintain its ability to operate in the Arctic. Some 30 offshore wells were drilled in the U.S. part of the Beaufort Sea in the 1980s and early '90s, and five in the Chukchi.  None of the wells previously drilled far from the coast produced oil or gas, because there was no cheap way to maintain and export their production. 
7. Environmental risks. The Arctic Ocean is no Gulf of Mexico with its strong loop current dispersing spills and lots of active bacteria eating hydrocarbons year-around.  The delicate Arctic Ocean is home to about 240 fish species. There are 12 species of marine mammals that inhabit the Arctic: 4 species of whales, the polar bear, the walrus, and 6 species of ice-associated seals. Several additional species (e.g. Sperm Whales, Blue Whales, Fin Whales, Humpback Whales, Killer Whales, and Harbor Porpoise) are spotted either occasionally or regularly within marginal waters of the Arctic. There are 64 species of seabirds that breed in the Arctic. About 50 million seabirds nest on Alaska's coast each summer, nesting in more than 1600 seabird colonies along the coast. 
8. Accidents. If a serious well-control accident occurs in September, oil may continue spilling into the ocean for another 8 months, endangering most of sea life within the spill domain. In bad weather and rough sea, ships can break down, collide, sink, or run ashore.  The more support ships are involved, the higher the risk.  Probability of a serious ship mishap is much higher than that of a drilling accident. Please remember that historically most of the largest marine spills have been caused by ship accidents, not by drilling.
9. Repairs and spare parts. The Arctic supply chains will have to make provisions for all key spare parts to be stored on support barges next to drill sites. Otherwise, these parts would be unavailable for prolonged periods of time, stopping all work. One could introduce multiple redundancies of all important systems.  For example, one could have "two of each," thus doubling or tripling operational costs and increasing risks of ship breakdowns and collisions. "Two of each" would require 2 times more people for 24/7 operations in 12-hour shifts. If, because of exposure, shifts are shorter, the number of personnel will increase correspondingly.  Locals do not work shifts longer than 8 hours.
10. Lack of appropriate people.  There are about 4700 native inhabitants of the North Slope Borough, including women, children, and elders. They cannot all work on offshore drilling and production. Many lack sufficient technical skills. New workers, imported from the south, are likely to be unprepared for the severe conditions in the Arctic. Also, most older experienced people of all ranks have retired by now from the oil industry. Their replacements of sufficient quality simply do not exist in necessary quantity. For example, at Shell, who will replace Charlie Williams or Ken Arnold or Richard Sears? Or so many experienced technicians and deck hands?

The Noble Discoverer operating in the Chukchi Sea in the summer of 2012.  Image source: Shell.

In summary, drilling for oil, and producing and transporting oil in the Arctic require a complex system with the compounding fragilities of many elements of the system. Such compounded fragility makes this system unstable to disturbances. Some of the disturbances can be relatively small, but still can cause large disruptions. For example, an electrical system failure on just one support barge can cause all drilling work to stop.

We, engineers, have dealt with complex, fragile systems for decades, but - I submit - the Arctic drilling/production/transportation system presents qualitatively new challenges, because of its finely interlocked elements. At best, most small failures of parts of this complex system will grind the whole operation to a halt. At worst, corners will be cut and accidents will happen.

As Mr. Taleb has taught us, a small disturbance in a fragile, complex system may result in a catastrophic loss of integrity of that system.  Such catastrophic events will have frequencies that are much higher than those predicted with standard risk management tools.  We used to call these events "Black Swans," but today we know better.  The highly disruptive catastrophic events are one of the basic features of every fragile complex system.

Are we ready to proceed in the Arctic with this knowledge? 

P.S.  Here are the cumulative reports on offshore projects.

P.S.P.S.  Here is a 12/27/2012, LA Times article about safety issues with the Noble Discoverer drilling ship.

On 12/30/2012, as if to illustrate my Points 8 and 9, this report appeared:

A Coast Guard HC-130 Hercules aircraft from Air Station Kodiak overflies the tugs Aiviq and Nanuq tandem towing the mobile drilling unit Kulluk 116 miles southwest of Kodiak City, Alaska, Sunday, Dec. 30, 2012. The tug Alert from Prince William Sound and the Coast Guard Cutter Alex Haley from Kodiak are en route to assist.

On 12/31/2012:

Anchorage, Alaska – The Unified Command reports that Kulluk grounded at approximately 9 p.m., Alaska time on the southeast side of Sitkalidak Island. The crew of the tug Alert was ordered to separate from the Kulluk at 8:15 p.m. to maintain the safety of the nine crew members aboard the vessel. “The extreme weather conditions and high seas continue to be a challenge. We have more than 250 people actively involved in the response efforts,” said Susan Childs, Incident Commander, Shell. “Our priority right now is maintaining the safety of our response personnel and evaluating next steps.”

There were no personnel aboard the Kulluk at the time of grounding, and no injuries have been reported. There is reportedly up to 150,000 gallons of ultra-low sulpher diesel on board the Kulluk and roughly 12,000 gallons of combined lube oil and hydraulic fluid. The condition of the vessel has not yet been confirmed and overflights are scheduled pending weather conditions. Unified Command, using a U.S. Coast Guard aircraft, plans to conduct a survey to assess the situation at first light. A response team will be deployed when it is safe to do so.

Now, please reread this blog written over Christmas, and published on 12/29/2012.