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Vol. 12, No. 24 Week of June 17, 2007
Providing coverage of Alaska and northern Canada's oil and gas industry

BP making changes

Brock gives Alaska legislators answers about what went wrong at Prudhoe

Kristen Nelson

Petroleum News

The reality of the past and the hope of the future collided June 7 when Tony Brock, head of BP Exploration (Alaska)’s new technical directorate, talked to the House Resources Committee about how BP is moving ahead to fix corrosion problems at Prudhoe Bay, both with a new oil transit line system and with organizational changes.

A number of the committee members, as well as other legislators who sat in, were more interested in some three dozen documents, including internal BP memos dating back a number of years, which focused on cost-cutting issues at the Prudhoe Bay field.

Brock, who arrived in Alaska in August to head up the technical directorate, answered some questions on terminology used in the documents, but said he was not in a position to comment on what went on in the past.

The committee’s concern was two-pronged: was cost cutting in the past responsible for the corrosion discovered last year which resulted in the shutdown of half of Prudhoe Bay for several months and how would the replacement oil transit lines BP is in the process of building impact state revenues under the new Petroleum Profits Tax, which passed the Legislature just as the second Prudhoe Bay leak of the year was being discovered and BP was announcing a field shutdown.

Referring to presentation materials which Brock had brought, House Resources Co-Chair Carl Gatto, R-Palmer, said it was a wonderful-looking brochure, “but these e-mails are the thing that really captures my attention.”

Gatto said he hoped Brock would convey to BP management the frustration of legislators that the brochure won’t “satisfy the difficulties we’re seeing with the record.”

Brock: actions BP has taken

Brock told Gatto he would take the message back to BP.

He agreed that “words are words; presentations are presentations. They actually don’t mean anything unless you take action.”

BP has taken action, Brock said.

Setting up the technical directorate which he heads is one step. The directorate is “an independent body,” he said. “So these types of inquiries and queries (represented by the e-mails) actually have a functional oversight rather than being buried within the line organization.”

The technical directorate, he said, has “independence when it comes to issues of safety or integrity of our facilities. We have an independent body now that has oversight on the decision-making process.”

The corrosion group was formerly “imbedded in the Greater Prudhoe Bay organization,” Brock said, but now reports directly to him and he, in turn, reports directly to Doug Suttles, the president of BP Exploration (Alaska). Brock said that means greater transparency, and issues such as those raised in the e-mails about the impact of cost cutting on corrosion “aren’t left buried in the organization itself.”

The company has also reassessed its understanding of risk, he said.

An analysis done for BP by Booz Allen indicated that cost cutting wasn’t the issue, but rather BP’s awareness of risk. In response, BP has put in place a rigorous risk review process. “And that process is being imbedded at the field level; it’s being imbedded at the technician level; (and) at the operator level” and is being “managed up through the field line to the senior members” of BP’s management team in Alaska.

That system will be reviewed on a regular basis, Brock said. “It’s my role to present that to Doug Suttles, the president of BP Alaska, and to ensure that we take proper action on these types of issues so they get resolved.

“Overall we’re focused on reducing risk within our fields.”

Frustration disappointing

Asked by Rep. Paul Seaton, R-Homer, about a 2003 e-mail which talked about risk impacts related to budget cuts, Brock said employees were obviously frustrated in “trying to get the balance right between what’s the right amount of expenditure to ensure that our systems are integrally safe and that we have a viable system.” Budget concerns are part of running any business he said, but “certainly the people were frustrated and they felt they were compromised in some of their choices.”

The company is making changes, he said.

The technical directorate currently has more than 150 technical experts. “That is different,” Brock said.

The corrosion management team reports to Brock. “If they have concerns about compromising the program then I will address them. And I will address them independently of the line (organization) whether it relates to production or to costs. My primary concern is about the integrity and the safety of our operations.”

The management team is “committed to changing some of the processes that we use to manage and make decisions,” he said and is also working on open communications. If “our employees have concerns, we want them to be able to communicate them to senior leadership without fear or concern.” Brock said BP is encouraging people “to raise these issues so they can be addressed.”

BP has a new leadership team in place and is starting to address “the systemic culture” and what that culture needs to be so that it can be “a leading operator in Alaska for the next 30 years.”

New pipelines smaller

In reviewing the replacement oil transit line system BP is now putting in place, Brock said the existing system was made for four times the capacity needed now and in looking at lessons learned from the corrosion found in 2006 BP determined it needed to redesign the system for the right level for the next 50 years, with smaller diameter oil transit lines. The new system will be sized right so that velocities in the lines prevent the leak-causing corrosion that occurred in 2006.

There will also be permanent pig launching and receiving facilities which can be accessed and used year round.

The work will include 20 new modules and skids.

Resources Co-Chair Craig Johnson, R-Anchorage, said he was concerned about the new system because of the way the state’s Petroleum Profits Tax is structured. “You’re responsible to your shareholders (and) we’re responsible to ours,” Johnson said.

Brock said BP believes a new system is necessary for the continued operation of Prudhoe Bay over the next 30 years. New facilities are necessary because more and more water is now produced with the oil. Viscous oil is being developed from the western side of the field, which requires modifying the pipeline system to handle that oil. Putting more viscous oil into the exiting lines would “actually further reduce the velocity,” he said. Reduced velocity is one of the factors identified as causing corrosion in the oil transit lines.

BP also has to address “integrity and standards issues” put in place by the U.S. Department of Transportation and the Alaska Department of Environmental Conservation, and now by the Petroleum Safety and Integrity Office.

Those standards are higher, he said, and meeting them with the current pipeline system would be a struggle going forward.

New leak detection system

BP is also trying a new leak detection system.

The Leos system “is sensitive to very small leaks,” Brock said. The existing system did not detect pinhole leaks where drops of oil were coming through.

The Leos system hasn’t been applied aboveground in the Arctic before. “We have a similar system on our Northstar transit line but that’s buried in the seabed,” Brock said.

Using the system above ground exposes it to a much harsher climate and “much greater swings in temperature.”

It will take a couple of years, through summer and winter operation, to prove up the system.

Two sections of the replacement oil transit line were constructed this winter, he said. “It has not been put in service yet; it needs modules to be constructed to allow us to do that.”

Overall replacement of 16 miles of the oil transit lines are expected to be commissioned in the fourth quarter of 2008, he said.

Extensive tests and inspections are being carried out on the existing system, Brock said, “to ensure the integrity of that system.”

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Slemons: changing direction a challenge

Jonne Slemons, coordinator of the State of Alaska’s new Petroleum Systems Integrity Office, updated House Resources June 7 on some of the regulatory issues related to oil transit lines and other oil and gas facilities.

Prior to 2006, she said, there was “general ignorance of the fact that there was a regulatory gap” for the oil transit lines, lines which take sales-ready oil from production centers to the trans-Alaska oil pipeline.

The Office of Pipeline Safety in the U.S. Department of Transportation typically regulates such lines, but North Slope lines were not covered because “there were some exemptions within the federal regulations … (for) lines that were in remote areas of very low population.”

That gap was filled by Congress in late 2006 when it expanded the authority of the Office of Pipeline Safety, Slemons said.

And the Alaska Department of Environmental Conservation was in the process — even before the March 2006 spill — of expanding its regulatory authority to cover flow lines, those lines that run between the wellhead and the production centers.

“In terms of pipelines, I believe that regulatory gaps have been addressed,” Slemons said in response to a question from Rep. Max Gruenberg, D-Anchorage.

One of the primary tasks of PSIO, she said, is to do a statutory and regulatory gap analysis “to ensure that any gaps remaining anywhere on state lands, regarding oil and gas, are discovered. And we are in the process of performing that gap analysis now.”

Rep. Paul Seaton, R-Homer, asked Slemons if she was comfortable with changes BP is making as operator.

“BP is implementing significant, very broad, very deep and far-ranging changes to their organization,” Slemons said, most of which are “in response to requirements placed upon them by the Office of Pipeline Safety through various consent orders that have come down.”

She said it is her impression that BP is “sincere in wanting to fix the problems that have been discovered and to mend their ways, if you will. My own personal concern is that a ship the size of BP doesn’t turn on a dime. And changing organizational culture is a very difficult thing to do.”

Slemons said BP has been responsive to the PSIO and she understands it has also been responsive to the Office of Pipeline Safety.

Asked by Seaton about the extent of PSIO authority, Slemons said facilities “such as production centers, modules, gas processing facilities, those kinds of things” have largely escaped regulatory oversight, other than labor, OSHA and fire detection.

“It is one of the missions of the PSIO to fill those gaps and we will be looking at facilities, not just pipelines, in the system integrity plans that we will be requiring from the unit operators.”

Slemons said PSIO will be assessing the technical sufficiency of the plans and will be performing on-site assessments to ensure the operators comply with the plans that are established.

—Kristen Nelson