The Macondo explosion and oil spill occurred 5 years ago this month, freezing activity in the US Gulf of Mexico and putting the industry in a negative spotlight for weeks. But, in addition to drawn-out legal consequences, the accident spawned new technology, improved safety practices, and better operations awareness. Some of the improvements are still a work in progress.
On 20 April 2010, a blowout and explosion on the Deepwater Horizon rig on the Macondo prospect in the deepwater US Gulf of Mexico killed 11 crewmen. On 22 April, the rig sank, leaving the well gushing and causing the largest oil spill in US waters. The spill continued until 15 July when it was finally capped, and relief wells permanently sealed the well.
Five years later, the impact of the disaster is clearer. Despite fears from some in the oil and gas industry, the accident and resulting regulation did not greatly harm US offshore oil output. The government temporarily stopped drilling in the US Gulf but operators were able to obtain new drilling permits within a year. Now, several large new oil projects are on the horizon, including ones by Shell, ExxonMobil, Hess, and Chevron. The new projects, with a potential to produce close to 1 million B/D, promise to return the Gulf into a major source of US production, although the greatest threat now is not regulation stemming from the oil spill but from the recent steep drop in oil prices. In 2001, the Gulf of Mexico accounted for a fourth of US oil output, but production has dropped since then because of well decline and the drop in permits issued after Macondo. With the recent dramatic rise in onshore unconventional output in the US, the Gulf now accounts for only about 10% of US oil production.
But Macondo did hurt the industry’s reputation—the oil spill dominated news headlines for weeks. The recent concern about the safety of hydraulic fracturing operations and crude oil transport by pipeline or railcar stem in part from the fallout of the Macondo disaster. All of this plays into the industry’s “license to operate” in communities around the globe. Any dramatic, high news impact industry incident—upstream or downstream—heightens public awareness about industry operations and their potential impact.
The industry has, in fact, improved operations since Macondo: new technologies have been developed to prevent and arrest blowouts and spills, and the industry has improved engagement with the public. The Macondo incident has also transformed risk management in offshore operations, although there is still work to be done, according to DNV GL. The consultancy maintains that there are still lessons to be learned from Macondo; for one thing, companies are tempted to skirt long-term management of risk for shorter-term decisions about profitability. The worry is that sharply lower oil prices will lead to cost cutting and neglecting safety ideas, which will make the industry even more vulnerable when the next Macondo comes around.
