Author Archives: Jared Wade

About Jared Wade

Jared Wade is a freelance writer and former editor of the Risk Management Monitor and senior editor of Risk Management magazine. You can find more of his writing at JaredWade.com.

When the Fail-Safe Fails

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The New York Times today published the best, most comprehensive, most anger-inducing piece I have seen detailing the collective risk management failings that led to the Gulf oil spill. Clocking in at around 6,500 words, this thing is a doozy. But it is a report that everyone who wants to understand how this disaster really came to be needs to read.

The article focuses mainly on the failure of “blowout preventer,” a device attached to every well drilled in order to, you guessed it, prevent blowouts. While immensely complex and huge — it’s five stories tall and weighs hundreds of thousands of pounds — its purpose is to provide a shut-off method in case something goes wrong with the well.

Even more specifically, we get a wonderful lesson into the ultimate fail-safe: the “blind shear ram.” There are many components within the blowout preventer that must operate properly to shut off a well, but the blind shear ram is the final device that ultimately seals the thing. If it fails, the whole thing fails.

And all evidence is pointing to the fact that, on the Deepwater Horizon, it failed.

The process to activate the blind shear ram and seal the pipe is complex, but according to this article, the risks associated with that complexity were well known by all the players in the drilling industry. And on the Deepwater rig, no one did all that much to mitigate that risk. In contrast, in other instances, other companies and other rigs adopted redundancy as a way to ensure that a well shut-off would not be compromised.

These kinds of weaknesses were understood inside the oil industry, documents and interviews show. And given the critical importance of the blind shear ram, offshore drillers began adding a layer of redundancy by equipping their blowout preventers with two blind shear rams.
By 2001, when Transocean, now the world’s largest offshore drilling contractor, acquired the Deepwater Horizon, it had already begun equipping its new rigs with blowout preventers that could easily accommodate two blind shear rams.
Today, Transocean says 11 of its 14 rigs in the gulf have two blind shear rams. The company said the three rigs that do not were built before the Deepwater Horizon.
Likewise, every rig currently under contract with BP, which had been renting the Deepwater Horizon, comes with blowout preventers equipped with two blind shear rams, according to BP. While no guarantee against disaster, drilling experts said, two blind shear rams give an extra measure of reliability, especially if one shear ram hits on a joint connecting two drill pipes.
“It’s kind of like a parachute — it’s nice to have a backup,” said Dan Albers, a drilling engineer who is part of an independent investigation of the disaster.

Weaknesses were understood inside the oil industry, documents and interviews show. And given the critical importance of the blind shear ram, offshore drillers began adding a layer of redundancy by equipping their blowout preventers with two blind shear rams.

By 2001, when Transocean, now the world’s largest offshore drilling contractor, acquired the Deepwater Horizon, it had already begun equipping its new rigs with blowout preventers that could easily accommodate two blind shear rams.

Today, Transocean says 11 of its 14 rigs in the gulf have two blind shear rams. The company said the three rigs that do not were built before the Deepwater Horizon.

Likewise, every rig currently under contract with BP, which had been renting the Deepwater Horizon, comes with blowout preventers equipped with two blind shear rams, according to BP. While no guarantee against disaster, drilling experts said, two blind shear rams give an extra measure of reliability, especially if one shear ram hits on a joint connecting two drill pipes.

“It’s kind of like a parachute — it’s nice to have a backup,” said Dan Albers, a drilling engineer who is part of an independent investigation of the disaster.

In short, there were known issues with the ultimate, industry-standard fail-safe measure to prevent this type of spill. And in many cases — even most of those cases involving rigs constructed by Transocean and operated by BP — those issues were recognized and managed. But on the Deepwater Horizon, the most common method of managing that risk (redundancy) was not implemented.

Read into that whatever you like.

In fairness to BP and Transocean (something that’s hard to even try to provide anymore if I’m being honest), there is much, much, much, much, much more to all this. For example, the federal offshore drilling regulatory agency, the Minerals Management Service, knew all about these very same risks and never adequately ensured that any company do anything about them.

The federal agency charged with regulating offshore drilling, the Minerals Management Service, repeatedly declined to act on advice from its own experts on how it could minimize the risk of a blind shear ram failure…Even in one significant instance where the Minerals Management Service did act, it appears to have neglected to enforce a rule that required oil companies to submit proof that their blind shear rams would in fact work.

There is also ton of evidence that blowout preventers and blind shear rams — inherently — aren’t that great at stopping a well on an industrywide basis.

Using the world’s most authoritative database of oil rig accidents, a Norwegian company, Det Norske Veritas, focused on some 15,000 wells drilled off North America and in the North Sea from 1980 to 2006. It found 11 cases where crews on deepwater rigs had lost control of their wells and then activated blowout preventers to prevent a spill. In only six of those cases were the wells brought under control, leading the researchers to conclude that in actual practice, blowout preventers used by deepwater rigs had a “failure” rate of 45 percent.

Plus, there’s this:

More than three decades ago, the failure of a shear ram was partly to blame for one of the largest oil spills on record, a blowout at the Ixtoc 1 well off the Yucatan Peninsula in Mexico. Descriptions of the accident at the time detailed problems both with the shear ram’s ability to cut through thick pipe and with a burst line carrying hydraulic fluids to the blowout preventer.

In 1990, a blind shear ram could not snuff out a major blowout on a rig off Texas. It cut the pipe, but investigators found that the sealing mechanism was damaged. And in 1997, a blind shear ram was unable to slice through a thick joint connecting two sections of drill pipe during a blowout of a deep oil and gas well off the Louisiana coast.

Honestly, I could excerpt this whole article. It details so many instances where so many industry players did so little to solve the so very well known risks of drilling.

So infuriating.

So … really, you should just go read it in full. Additionally, here is the accompanying Times video that helps explain what exactly a blind shear ram is and how it works — in theory, of course.

Safeguarding the World Cup

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world cup cape town

For 10 days, the World Cup has been captivating the globe. Widely considered the greatest event in sports, fans have been riveted by the daily matches from South Africa featuring soccer legends like Lionel Messi from Argentina, Cristiano Ronaldo of Portugal and Wayne Rooney of England. But while the players make the “Beautiful Game” look effortless, the preparation to ready the country for this tournament of 32 nations was anything but.

Building stadiums, improving transportation infrastructure and ensuring security took a Herculean effort in a country that escaped Apartheid just 16 years ago and, even today, struggles to overcome societal ills including a 25% unemployment rate, some 50 murders per day and a population where 11% of South Africa’s nearly 50 million citizens live with HIV.

Munich Re, for example, was brought in to aid construction of a new high-speed rail project.

The rail link was planned and approved long before South Africa was awarded the World Cup. However, there is no doubt that the World Cup speeded up the construction project, which was started in 2006.

Munich Re was also involved in the mammoth upgrade of “Soccer City,” the Johannesburg stadium that is the nation’s crown jewel for this year’s World Cup. (See video below for more on the renovation.)

February 2007 saw the beginning of stadium renovation, which was covered by way of a CAR policy. The stadium, renovated at a cost of 300 million pounds and ten million working hours, will host the opening ceremony, the opening game and the tournament final. Its new design takes its inspiration from traditional African pottery and resembles a calabash. The renovation work, completed in October 2009, increased Soccer City’s capacity from 80,000 to 94,000, making it the biggest stadium in Africa.

Additionally, Munich Re insured the construction of at least two other stadiums that were built from the ground up for the World Cup.

Then, of course, comes coverage for the games themselves. In all, some $9 billion in insurance was taken out before the games, most of which covered property, game cancellation, broadcast failure and liability issues.

That’s just for the games themselves. Lloyd’s turned to Chris Nash, an underwriter at Sportscover, for some additional input on the “vast range of potential coverage.” He rattled off a list that includes competitions, offers, prizes, sponsorships, and broadcast rights. “It’s impossible to know how many there are, but all companies with these financial implications need coverage,” he explained. “When you take this into account along with the number of broadcasters around the world airing the games, I’d probably estimate the whole thing at around £3 billion [$4.33 billion].”

What it all comes down to is that, for all companies involved in this year’s World Cup, there is a lot more than goals, trophies and international bragging rights on the line. They stand to make — or lose — millions depending on how the tournament plays out.

The last time the World Cup was canceled was World War II. These days, the business of sports is much bigger, and so are the potential losses.

Between the opening ceremony for the 2010 World Cup on June 11 and the presentation of the trophy a month later, almost 100 hours of live soccer is being broadcast around the world. Soccer federation FIFA earned $2.7 billion in total from the broadcast rights at the 2002 and 2006 World Cups, according to FIFA’s figures.

FIFA said it took out an insurance policy to provide coverage of $650 million in the event of the postponement or relocation of the games. This policy covered acts of terrorism, natural disaster, epidemics, war and accidents. Munich Re’s share of this policy is the largest at $350 million.

And while South Africa, the first country on the continent to host the World Cup, struggles with its reputation as a crime hot spot, crime doesn’t directly affect contingency and liability insurance for the World Cup. Instead, it would have been a concern for fans insuring their trip, according to Emily Hughes, a spokeswoman at Lloyds.
The last time the World Cup was canceled was World War II. These days, the business of sports is much bigger, and so are the potential losses.
Between the opening ceremony for the 2010 World Cup on June 11 and the presentation of the trophy a month later, almost 100 hours of live soccer is being broadcast around the world. Soccer federation FIFA earned $2.7 billion in total from the broadcast rights at the 2002 and 2006 World Cups, according to FIFA’s figures.
FIFA said it took out an insurance policy to provide coverage of $650 million in the event of the postponement or relocation of the games. This policy covered acts of terrorism, natural disaster, epidemics, war and accidents. Munich Re’s share of this policy is the largest at $350 million.

Though the worst threats have been avoided so far, the very first week did provide cause for concern, as striking employees from a private security firm hired to protect a stadium in Cape Town clashed with local law enforcement on June 17.

Police in Cape Town fired a stun grenade and rubber bullets to break up a protest Thursday of more than a hundred private guards who had been hired to provide security at a World Cup soccer stadium.

The clash was the latest incident involving employees of Stallion Security Consortium, whose employees were replaced by police officers at four stadiums around the country after the workers walked off the job in a pay dispute with their employer.

Although the labor dispute hasn’t affected the World Cup games, the incidents highlight simmering tensions in a country where many workers remain poorly paid and unemployment is about 25%. State power company Eskom is in the midst of negotiations to avoid a pay strike that could disrupt electricity supplies. A three-week strike over wages last month paralyzed the country’s ports and freight rail.

Fortunately, security has still largely been maintained throughout the country since the tournament began and the worst fears of many have not been realized, despite this first scare. Let’s hope it is also the last.

A video showing the transformation of Soccer City in Johannesburg into the largest, most iconic stadium in Africa.

The Seven Strangest Man-Made Disasters

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Yesterday, Emily did a post recounting Aon’s list of the top five global hotspots for earthquakes. Given the seemingly relentless seismic activity and destruction wrought by shifting tectonic plates just in 2010 alone, such natural disasters should be high on everyone’s watch list.

But as we are seeing right now in the Gulf, man-made disasters can present enormous perils of their own. And it just so happens that I came across Spike’s list of “The Top Seven Most Bizarre Man-Made Disasters” today.

You can head over there for a full rundown of all the incidents (including Bhopal, the Texas City devastation and the new-to-me Boston “Molassacre”), but these are the three I find most interesting.

3. The Gates of Hell

This pit of fire that has been burning for 40 years looks more like something out or Mordor than Turkmenistan. But the burning crater of natural gas began shortly after a Russian drilling rig collapsed into the Underworld and no one knew what to do.

Having opened this huge poisonous gas cavern up, the atmosphere and the nearby residents in the village of Derweze decided the next logical move would be to set this huge crater on fire, and it has been burning ever since.

Sure, light it on fire. Why not? What could go wrong? Seems logical enough.

Here’s video of some tourists enjoying the incredible, football-field-wide hole to hell (not literally).

Yikes.

2. The Centralia Underground Coal Fire

Our former publisher and Pennsylvanian Bill Coffin used to talk about this one all the time, so I have been familiar with its existence for some time. Nevertheless, it’s completely nuts. Like the Gates of Hell, it has been burning for decades — since 1962 in fact. But unlike the Turkmenistan fire, its genesis is not so clear.

It is suspected to be a blunder by the local fire department in 1962 which had been tasked with cleaning up the local landfill, which itself sat on top of an abandoned strip mine. To accomplish this, they set the landfill on fire, apparently not an unheard of method at the time. However, the theory goes that the fire was not put out properly, and heated up veins of coal underneath the landfill, which began to smolder over time.

Eventually the reaction lit an underground fire which continued to burn, which caused little concern from local authorities until almost two decades later when in 1981, a 12-year-old boy fell into a 150-foot sinkhole which suddenly opened up in the backyard underneath his feet.

“Blunder” seems to be putting it lightly. A “blunder” is forgetting to send out an email before you leave work for the night. A “blunder” is perhaps running into a parked car while trying to do a u-turn. Or a “blunder” may even be leaving the iron on when you run out the door on the way to brunch. Accidentally igniting a 1,200-degree coal fire that has burned for a half century — and is expected to continue burning until around 2260 — is more than a “blunder.”

I think we can all agree that it should at least be considered a “my bad.”

Centralia Pennsylvania Sign

An actual sign in Centralia, PA.

1. The Great Pacific Garbage Patch

This is one of the neatest, worst things I have ever found out about. Discovered by chance by Captain Charles Moore some 12 years ago, the Great Pacific Garbage Patch is an unfathomably immense, floating, amorphous collection of trash in the middle of the planet’s largest ocean. It is located between Hawaii and California due to the fact that that is where multiple sea currents meet — and there the (mostly) plastic mass churns in the water at twice the size of Texas.

Pretty cool, huh? But sorry, folks, it’s not all beautiful pollution.

There is also a downside.

Over the decades the garbage patch has been developing, much of the debris has been broken down into smaller and smaller particles, comprised largely of various kinds of plastics, which is then mistaken for food by the marine life, which in turn contaminates the ecosystem all way up the food chain.

Since the area is so massive in scale (both in terms of width and depth underwater), many scientists believe it is nearly impossible to cleanup the contamination at sea, and that it would likely do even more damage to the surrounding sea life in the process. When people talk about our need to recycle plastics, this is why.

All cavalierness aside, this is obviously a terrible problem and represents one of the unforeseen — and, until relatively recently, unknown — risks of our modern society. What can be done? Who knows. Perhaps nothing. But it’s just another lesson for all of us about what types of unexpected disasters can compile — little by little, day by day — when you’re no one is paying attention.

Below, Cpt. Moore speaks about the problem with Stephen Colbert.

Stephen speaks much truthiness.

Arkansas Flash Flood Kills at Least 19

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Last Friday, America received yet another tragic lesson that Mother Nature’s wrath is unpredictable and unstoppable. At least 19 were killed by a flash flood at an Arkansas campground that hit while most of the campers were asleep with no way to escape the rush of water, mud and debris.

CNN is reporting a first-hand account from one of the flood survivors.

Survivor Terri Rhoeder, who lost her mother, brother and sister-in-law in the tragedy, described for CNN’s “American Morning” how quickly the water rose. She had been sleeping outside on an air mattress when she awoke and realized she was floating on the water.

“When I stood up from my bed, it was at my knees,” Rhoeder said. “By the time I could contemplate what was going on, its at my waist. And I was being swept out with it at my shoulders. As campers, we are used to nature. Not this extreme.”

The water rose from the normal level of four feet to 23 feet within a short period, Beebe said

Fortunately, her niece did survive — by grabbing a tree branch and hanging on for three hours waiting for a rescue team, which continued its efforts to locate as many people as possible in the immediate aftermath, eventually growing to some 100 rescuers as it continued to search throughout the Ouachita National Forest in western Arkansas.

Even with the tragedy so recent, it is — as always — important for those responsible for disaster response to evaluate what could have been done better. In this case, officials will look at the flash flood warning system.

The warning system intended to notify campers on federal land about potentially devastating weather will be re-examined in Arkansas and throughout the nation, U.S. Agriculture Secretary Tom Vilsack said Saturday.

You can hear about the disaster in the video below.