Halliburton 2011 Annual Report Download - page 106

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The BOEMRE Report also stated, among other things, that BP failed to properly communicate
well design and cementing decisions and risks to Transocean, that BP and Transocean failed to correctly
interpret the negative-pressure test, and that we, BP, and Transocean failed to detect the influx of
hydrocarbons into the well. According to the BOEMRE Report, the panel found evidence that we, among
others, violated federal regulations relating to the failure to take measures to prevent the unauthorized
release of hydrocarbons, the failure to take precautions to keep the well under control, and the failure to
cement the well in a manner that would, among other things, prevent the release of fluids into the Gulf of
Mexico. In October 2011, the BSEE issued a notification of Incidents of Noncompliance (INCs) to us for
violating those regulations and a federal regulation relating to the failure to protect health, safety, property,
and the environment as a result of a failure to perform operations in a safe and workmanlike manner.
According to the BSEE’ s notice, we did not ensure an adequate barrier to hydrocarbon flow after
cementing the production casing and did not detect the influx of hydrocarbons until they were above the
blowout preventer stack. We understand that the regulations in effect at the time of the alleged violations
provide for fines of up to $35,000 per day per violation. We have appealed the INCs to, and the appeal was
accepted by, the Interior Board of Land Appeals (IBLA). In January 2012, the IBLA, in response to our and
the BSEE’ s joint request, has suspended the appeal and has ordered us and the BSEE to file notice within
15 days after the conclusion of the MDL and, within 60 days after the MDL court issues a final decision, to
file a proposal for further action in the appeal. The BSEE has announced that the INCs will be reviewed for
possible imposition of civil penalties once the appeal has ended. The BSEE has stated that this is the first
time the Department of the Interior has issued INCs directly to a contractor that was not the well’ s operator.
We have not accrued any amounts related to the INCs.
In December 2011, the National Academy of Sciences released a pre-publication copy of its report
examining the causes of the Macondo well incident and identifying measures for preventing similar
incidents in the future (NAS Report). The NAS Report noted that it does not attempt to assign
responsibility to specific individuals or entities or determine the extent that the parties involved complied
with applicable regulations.
According to the NAS Report, the flow of hydrocarbons that led to the blowout began when
drilling mud was displaced by seawater during the temporary abandonment process, which was
commenced by the drilling team despite a failure to demonstrate the integrity of the cement job after
multiple negative pressure tests and after incorrectly deciding that a negative pressure test indicated that the
cement barriers were effective. In addition, the NAS Report found, among other things, that: the approach
chosen for well completion failed to provide adequate safety margins considering the reservoir formation;
the loss of well control was not noted until more than 50 minutes after hydrocarbon flow from the
formation had started; the blowout preventer was not designed or tested for the dynamic conditions that
most likely existed at the time attempts were made to recapture well control; and the entities involved did
not provide an effective systems safety approach commensurate with the risks of the Macondo well.
According to the NAS Report, a number of key decisions related to the design, construction, and testing of
the barriers critical to the temporary abandonment process were flawed.
The NAS Report also found, among other things, that the heavier “tail” cement slurry, intended
for placement in the Macondo well shoe track, was “gravitationally unstable” on top of the lighter foam
cement slurry and that the heavier tail cement slurry probably fell into or perhaps through the lighter foam
cement slurry during pumping into the well, which would have left a tail slurry containing foam cement in
the shoe track. The NAS Report also found, among other things, that foam cement that may have been
inadvertently left in the shoe track likely would not have had the strength to resist crushing when
experiencing the differential pressures exerted on the cement during the negative pressure test. In addition,
the NAS Report found, among other things, that evidence available before the blowout indicated that the
flapper valves in the float collar probably failed to seal, but the evidence was not acted upon and, due to
BP’ s choice of a long-string production casing and the lack of minimum circulation of the well prior to the
cement job, the possibility of mud-filled channels or poor cement bonding existed.