Given what I endured last night, I’m in the mood for some disaster news.
As noted in this earlier post, BP Global had been going through a difficult stretch earlier this year when Hurricane Dennis (remember that one?) apparently caused the near total collapse of its huge $1 billion Thunder Horse Drilling Platform in the Gulf of Mexico.
Well, never mind about that hurricane excuse.
BP has announced that the collapse was the result of “human error” rather than damage from the hurricane:
“After a thorough investigation, we have concluded that it was not storm-related, but was caused by a design weakness in the ballast system,” Lord Browne of Madingley, BP’s chief executive, said.
Translation: “Attention insurers! Grab your wallets!”
Your final comment makes little sense. No matter what a lot of insurance is implicated. This is $250 million property damage loss plus probably a rather large business interruption claim.
Multiple layers of insurance, reinsurance, self insured retentions, indemnity agreements and contractual agreements are likely to be potentially applicable even if it is solely a first party property claim. A design defect issue may give rise some liability claims that may drag in some additional parties but it will almost certainly be in the context of a subrogation action between insurers (though BP and Exxon will also likely be players since they likely self insured a part of this risk.)
Antinome, I have no information on the insurance arrangements pertaining to Thunder Horse. But my sense is that BP and Exxon self-insure a good chunk of the platform and, as you point out, a design defect claim normally leads to claims against third parties who normally are not as stout as BP and Exxon in terms of self-insurance. Thus, the announcement appears to portend BP and Exxon bringing those other insurers into the claim process. Thanks for reading Clear Thinkers.
Tom, I’ve been investigating this quite a bit on my blog and I have already reported the actual sequence of events that lead to this. Recently (in the last week) I confirmed my conclusions after discussing the event with someone involved in the day to day operations on Thunderhorse. It boils down to not a design flaw, but a procedural problem. The ballast system has large hydraulically operated valves that open to the sea on the intakes. These valves are spring loaded to cause them to shut if hydaulic presure is lost. During the evac. preparations, the hydraulic power unit that supplied hydraulic pressure to those valves was shut off allowing the valves to close. One of two scenarios occurred: Scenario one.) There is a case drain that is connected to the HPU pump and drains into the HPU reservoir through a valve. That valve was closed trapping the pressurized fluid in the pump case. This trapped pressure over time bled back into the hydraulic system causing the valves to open partially over a period of 4-6 hours. Or Scenario 2.) Valves isolating hydraulic accululators from the Hydraulic system were leaky causing pressurized fluid to re-enter the hydraulic system over time. The leading scenario at this point from the information I have gleaned from industry insiders is scenario number one. This abandonment procedure had not been tested. Contributing factors were check valves in the system that had been installed in reverse at the shipyard in South Korea. Had the system been tested adequately during installation, these issues would have been identified. Again, BP failed to generate a proper procedure, test it, or execute it. BP and Exxon are self-insured for this platform. The hardware alone cost over $2 billion, total outlays over the project life up to now approach $15 billion. Had it sank, not only would $2 billion of hardware be lost, but there was a good chance that it would damage the subsea wellheads on the way down and make for a real mess to try to salvage them. Also two years worth of time would have been lost while a new platform was fabricated and the rest of the hardware was replaced, which equates to not a small sum of money in of itself.
BTW, on a different subject, inserting my email contact info or the URL of my blog, or using my typekey identity causes posting of comments to fail due to “objectional content”. Therefore I’m forced to post semi-anonymously.