1

National Commission on the BP Deepwater Horizon Oil Spill

and Offshore Drilling

---Draft---

Staff Working Paper No. 11

A Brief History of Offshore Oil Drilling

The BP Deepwater Horizon explosion in April 2010 occurred after a dramatic, 

three-decade-long reconfiguration of how the United States and several other 

nations drill for oil. Technology, law, and geology pushed oil exploration farther 

from U.S. shores, as land-based exploration became less fruitful, and the global 

demand for energy ramped up. Oil production off American coasts began well 

over a century ago, but the move into deepwater and ultra-deepwater is a 

relatively recent phenomenon.

Developing the Shallow Waters

Offshore drilling for oil began off the coast of Summerfield, California, just south 

of Santa Barbara, in 1896. Closely resembling boardwalks in appearance, rows of 

narrow wooden piers extended up to 1,350 feet from the shoreline, their piles 

reaching 35 feet to the floor of the Pacific. Using the same techniques as then 

used on land, steel pipes were pounded 455 feet below the seabed. The hunt for 

oil ultimately produced only a modest yield. The field’s production peaked in 

1902, and the wells were abandoned several years later. The project left behind a 

beach blackened by oil and marred by rotting piers and derricks, the latter 

 

1

 Staff Working Papers are written by the staff of the BP Deep Horizon Oil Spill Commission for the 

use of the members of the Commission. They are prepared before the conclusion of the 

Commission’s work and are subject to further refinement and updating.
2

providing ugly reminders of the pioneering effort that stood until a strong tidal 

wave wiped out the remaining structures in 1942. 

Another offshore milestone was achieved in 1947, when Kerr-McGee Oil 

Industries drilled the first productive well beyond the sight of land, located 10.5 

miles off the Louisiana coast, but still in water depths of only about 18 feet. By 

that time, drilling technology had advanced far beyond the methods used to dig 

the first wells in Summerfield. Sophisticated rotary rigs had replaced

unidirectional pile drivers. Increasingly, firms chose steel over wooden drilling

structures, recognizing the metal’s greater structural integrity for rigs and its 

lower costs over the life of the well. Offshore operators, such as Texaco and Shell, 

had recently pioneered “barge drilling,” the practice of towing small mobile 

platforms to new locations at the end of drilling jobs.

2

As the oil companies grew 

more comfortable operating in the offshore environment, they adapted landdrilling methods – especially in the uniquely shallow continental shelf in the Gulf 

of Mexico.

Just as advances in technology opened up large swathes of the offshore to the 

possibility of drilling, a legal impasse of major proportions brought exploration 

and development to a virtual halt in 1950. Leases for subsea drilling were being 

offered by the States of California, Texas, and Louisiana, yet President Harry 

Truman had asserted exclusive federal jurisdiction over the entire continental 

shelf in 1945. The U.S. Supreme Court in 1947 and 1950 subsequently upheld 

Truman’s claim.3 But because no then-existing federal law conferred authority on 

the Department of Interior to issue offshore leases, neither the federal 

government nor the states possessed power to authorize offshore drilling. When 

Congress proved unable to resolve the matter with new legislation, leasing on the 

continental shelf came to a virtual halt by the end of 1950.4

 

2

Tyler Priest, The Offshore Imperative: Shell Oil’s Search for Petroleum in Postwar America (Texas 

A&M Press, 2007), 34. A good survey of the early history of offshore drilling can be found in Leffler, 

Pattarozzi, and Sterling, Deepwater Petroleum Exploration & Production: A Nontechnical Guide 

(Tulsa, Oklahoma: PennWell Corporation, 2003), pp. 1-8. 

3

See United States v. California, 332 U.S. (1947); United States v. Texas, 339 U.S. 707 (1950); 

United States v. Louisiana, 339 U.S. (1950).

4

John Whitaker, Striking a Balance: Environment and Natural Resources Policy in the Nixon-Ford 

Years (American Enterprise Institute/Hoover Institution Policy Studies, 1976), p. 260. 
3

This so-called “Tidelands dispute” over who should control offshore drilling 

became an issue in the 1952 presidential election, when General Dwight

Eisenhower pledged to restore the leasing authority coastal states had lost in the 

courts. His election led to the passage of the Submerged Lands Act of 1953, which 

gave states the right to lease up to three nautical miles from the coast. Some 

states could lease up to nine nautical miles, if justified by the boundaries

documented when states entered the union or by a subsequent action by 

Congress. After lengthy battles in the courts, only Florida and Texas won the right 

to the nine-mile limit. 

Eisenhower’s elevation to the presidency also helped facilitate the passage of the

Outer Continental Shelf Lands Act (OCSLA) of 1953, which gave the federal 

government (Department of Interior) the authority to issue leases in coastal areas 

beyond state jurisdiction. The federally administrated area became known as the 

Outer Continental Shelf, or OCS – a legal designation more reflective of legislative 

negotiations, than the actual geology of the seafloor. After the implementation of 

the OCSLA, leasing activity on federal submerged lands began in 1954.

Offshore production of oil in 1954 stood at only 133,000 barrels of oil a day (2 

percent of total U.S. production at that time).5 With legal disputes mostly 

resolved, offshore production rose steadily to reach 1.7 million barrels a day, 

roughly 20 percent of U.S. production, in 1971, when the industry was still 

recovering from a watershed event.

Two years earlier (Jan. 28, 1969), a blowout at a Union Oil Company well located 

in the Santa Barbara Channel had resulted in an 800-square-mile slick of oil that 

blackened an estimated 30 miles of Southern California beaches and soaked a 

substantial number of sea birds in the gooey mess. The blowout lasted 11 days 

and ultimately released approximately 80,000 barrels of oil. Before the BP 

Deepwater Horizon blowout, Santa Barbara stood as the greatest offshore drilling 

accident in American waters. Although Santa Barbara is often remembered as an 

isolated incident, the next two years saw three more blowouts and one major fire 

on rigs off American shores. Though each individual incident was smaller than 

 

5

One barrel equals 42 gallons. Basic energy data taken from Energy Information Administration, 

U.S. Department of Energy.
4

Santa Barbara, one blowout could not be contained for more than four and a half

months, and the cumulative loss of oil – as reported by the oil companies – was 

greater than Santa Barbara.6 

The Santa Barbara incident had a rapid impact on federal environmental and 

regulatory policy. Ten days after the accident, Secretary of the Interior Walter 

Hickel, with the support of President Richard Nixon, issued a moratorium on all 

drilling and production on offshore rigs in California waters. On February 11, 

1969, Nixon directed his Presidential Science Advisor, Dr. Lee A. DuBridge, a 

physicist, to assemble an advisory team and recommend measures to restore the 

affected beaches and waters. Nixon also requested that DuBridge “determine the 

adequacy of existing regulations for all wells licensed in past years now operating 

off the coast of the United States [and] to produce far more stringent and 

effective regulations that will give us better assurance than the Nation now has, 

that crises of this kind will not recur.” With DuBridge at his side, Nixon remarked 

three months later, when unveiling his new Environmental Quality Council that 

“The deterioration of the environment is in large measure the result of our 

inability to keep pace with progress. We have become victims of our own 

technological genius.”7

In April, Hickel completed a preliminary assessment of the leases affected by the 

moratorium and allowed five of the seventy-two lessees to resume drilling or 

production. By the late summer, the Department of Interior issued completely 

new regulations on OCS leasing and operations – the first update since the 

program’s start fifteen years earlier. These were the first rules in which the 

Department claimed authority to prohibit leasing in areas of the continental shelf 

where environmental risks were too high. Although a small amount of drilling 

continued off the coast of California, the Santa Barbara accident furthered an 

existing trend of almost exclusive reliance on the Gulf of Mexico for U.S. offshore 

oil production.

 

6 Whitaker, pp. 264-66. There is some expert opinion that oil companies greatly underestimated 

the volumes of these spills, and the leaked oil may have been much greater than reported. See 

Steve Mufson, “Federal Records Show Steady Stream of Oil Spills in Gulf since 1964,” Washington 

Post, July 24, 2010.

7

All Presidential statements can be found at John T. Woolley and Gerhard Peters, The American 

Presidency Project [online], Santa Barbara, CA, available at http://www.presidency.ucsb.edu/.
5

After U.S. domestic oil production peaked in 1970, making the nation increasingly 

dependent on imported oil, the Organization of Arab Petroleum Exporting 

Countries’ embargo of 1973-1974 escalated fears of dependence on foreign oil.8 

Public interest in development of OCS oil and gas resources grew accordingly. 

Presidents Nixon, Ford, and Carter advocated the expansion of offshore drilling, 

while also emphasizing the need for environmental safeguards, but the results 

were meager. The Santa Barbara blowout and the transformed regulatory 

environment had little immediate effect on offshore production, but they did have 

a lagged impact. By 1981, offshore production levels had dropped to two-thirds of 

its peak production, just ten years before. 

Although no other blowout in American waters reached the scale of the Santa 

Barbara incident, accidents at rigs in other counties reached magnitudes far 

surpassing the volumes of oil released at Santa Barbara. These occurred in the 

Persian Gulf and the Niger Delta in 1980, and the North Sea and the Mexican 

waters of the Gulf of Mexico in 1979. The Ixtoc I blowout off Mexico’s Bay of

Campeche took nine months to cap and released an estimated 3.5 million barrels

of oil. The Hasbah platform blowout in the Persian Gulf killed 19 workers on the 

rig.

In 1982, President Ronald Reagan’s Interior Secretary James Watt issued a fiveyear leasing plan for federal waters that greatly expanded the area available for 

leasing and quickened the pace of sales. Watt called the Outer Continental Shelf 

“America’s great hope of reducing our dependency on foreign sources” of

petroleum. The revised leasing plan projected estimated incomes of $40 billion to 

$80 billion for the federal government – revenues needed to offset an ambitious 

series of tax cuts passed by the Congress. Watt maintained that except for the 

Santa Barbara blowout, offshore drilling had been conducted with little 

environmental damage.9 The new plan, known as “area-wide leasing,” brought a 

 

8

In the early months of the embargo, some non-Arab members of OPEC increased production in 

response to the shortage. By the end of 1973, however, there was broader OPEC support for 

higher prices resulting from production cuts by the Arab members. See Jay Hakes, A Declaration of 

Energy Independence (Wiley and Sons, 2008), pp. 24-35.

9

Congress and the Nation 1981-1984 (Congressional Quarterly, 1985), pp. 347-48.
6

renewed burst of activity. One sale in the Central Gulf of Mexico reaped a record 

bid of $4.5 billion.

The expanded program for OCS leasing drew sharp criticism from environmental 

groups, officials from some coastal states, and others who argued the value of the 

tracts would be diluted if so many were on the market at the same time. In 

response, Congress began writing provisions into the yearly appropriations bills to 

place limits on drilling off the shores of California, New Jersey, Florida, and 

Massachusetts. After Watt left Interior in October of 1983, his successor, William 

Clark, scaled back the 1982 leasing plan.

During the same period, coastal states made a hard push for a share of OCS 

revenues. The Mineral Leasing Act of 1920 granted states 50 percent of Interior 

mineral leasing revenues from onshore federal lands within their borders, but the 

OCSLA of 1953 made no provision for sharing revenues with states adjacent to oil 

and gas production in federal offshore waters. The idea went as far as a HouseSenate conference committee, but stalled because of concerns with revenue 

sharing’s potential adverse impact on the federal budget deficit and the threat of 

a presidential veto. States received another setback in 1984, when the Supreme 

Court rejected California’s argument that Interior decisions to lease OCS tracts 

could be blocked if inconsistent with state coastal zone management plans.10

A collapse in world oil prices in the mid-1980s stalled the expansion of onshore 

and offshore drilling and struck a devastating blow to the economies of Louisiana 

and Texas. By 1990, offshore production stood at only 1.1 million barrels a day –

just 5 percent more than a decade earlier.

The safety record in American waters improved during the decade, but in 1988, 

offshore drilling suffered another major calamity, this time in the North Sea. The 

Piper Alpha – a platform about 110 miles north-east of Aberdeen, Scotland,

 

10 C&N, pp. 350, 358-59. The federal Coastal Zone Management Act (CZMA) provides that each 

federal agency shall conduct its activities “directly affecting the coastal zone in a manner which is, 

to the maximum extent practicable, consistent with approved state managements plan. See 16 

U.S.C. § 1456(c) (1). . In Secretary of Interior v. California, 464 U.S. 312 (1984), the U.S. Supreme 

Court held that OCS leasing falls outside the CZMA’s consistency requirement because OCS leasing 

does not “directly affect” the coastal zone within the meaning o f the CZMA. 
7

producing oil and gas -- suffered two fires and an explosion leading to the death of 

167 workers. It was the deadliest accident in oil rig history and, at the time, the 

insurance industry’s costliest man-made catastrophe. 

The Move into Deepwater

The relatively stable levels of offshore production in the 1980s masked a major 

shift occurring in the Gulf of Mexico. Production in shallow waters rose and fell in 

tandem with boom and bust cycles in the broader oil and gas industry. There 

were some highly prospective plays in shallow water but they proved too 

challenging given the seismic limitations. The shelf was heavily gas prone so the 

economics were more difficult for small pockets. Those two factors led to the 

greater exploration for larger fields in deeper waters. 

The first discovery in deepwater (depths of 1,000 feet or more, though definitions 

vary) came at Shell Oil Company’s Cognac field in 1975. Technology had yet to 

evolve from shallow to deepwater, just as it took a while to develop from land to 

sea. Cognac adapted the fixed platform technology from shallow water, which 

proved economically impractical for moving much further from the coast.

 

Nonetheless, with the emergence of new technologies, the 1980s witnessed 

several pioneering discoveries. Shell’s parallel deepwater work on its Augur

(1987) and other sites discovered in the 1980s advanced the potential of 

deepwater more than Cognac. Augur used a tension leg (non-fixed) platform, 

which was better suited to deepwater conditions than fixed platforms. More 

importantly, geologists working on these sites came to better understand the 

deposition of the turbidite sands and the complex relationships to subsea salt. 

Turbid (i.e. murky) currents had washed away the finer grains of sand in the 

sandstone, making them more porous and permeable – in the words of Leffler, 

“qualities high on a reservoir engineer’s wish list.”11 The deepwater turbidite 

reservoirs turned out to be even better than imagined. 

While good wells on the shelf produced a few thousand barrels of oil a day, 

deepwater fields were developed with flow rates commonly exceeding 10,000 

 

11 Leffler, p. 33.
8

barrels per day. The Auger platform was originally designed with an estimated

production capacity of 40,000 barrels per day. Once the well reached full 

production, its capacity grew beyond 100,000 barrels per day. The Auger field was 

developed with fewer than half the number of wells originally envisioned, which 

reduced capital costs. “High rate-high ultimate” wells became the standard for 

deepwater developments and one of the most critical factors for deepwater 

project success. Shell’s MENSA field, completed in1986, was located in depths of 

more than 5,000 feet, a threshold often defined as “ultra-deepwater”.

12

 

Shell was not alone in making significant discoveries in the deepwater Gulf of 

Mexico in the 1980s. Conoco (later merged with Phillips), British Petroleum (later 

BP), Mobil (later merged with Exxon), Amoco (later merged with BP), Oryx (later 

merged with Kerr McGee), and Exxon moved further offshore to find new oil and 

gas. Petrobas – founded by the government of Brazil in 1953 – was moving into 

deepwater off the coast of Brazil.

Advances in exploring the deepwater of the Gulf of Mexico relied in large part on 

improvements in seismic technology. As a result of these advances, the 

percentage of wells drilled in the Gulf where 3-D seismic technology was 

employed increased from 5 percent in 1989 to 80 percent in 1996. The success 

rate of exploratory offshore wells shot up once 3-D seismology and other 

improvements became common. Between 1985 and 1997, the offshore 

exploratory success rate for the major U.S. companies increased from 36 percent 

to 51 percent.13 

Propelled by advances in rig technology and seismology and a better 

understanding of the potential of turbidite reservoirs, offshore production in 1991

started a string of thirteen consecutive years of increased production, which by 

2002 topped 2 million barrels per day. Since onshore production continued to 

decline during this period, the share of offshore in total domestic supply took on 

increasing importance. (See Fig. 1 below.)

 

12 The story of Shell’s role in these developments can be found in Tyler Priest, The Offshore 

Imperative.

13 U.S. Energy Information Administration, 

http://www.eia.doe.gov/emeu/finance/usi&to/upstream/index.html#n9
9

Fig. 1.

Attention quickly shifted to offshore assets, as discoveries in deepwater in the 

1980s developed into producing wells in the 1990s. By the end of the decade, 

production in deepwater – a minor factor just ten years earlier – surpassed that in 

shallow water for the first time. Just five years later, deepwater was producing 

twice as much as shallow water. An increasing amount of oil was coming from

ultra-deepwater (5,000 feet and deeper). (See Fig. 2 below.)

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

1981 1984 1987 1990 1993 1996 1999 2002 2005 2008

Thousand Barrels Per Day

Year

U.S. Crude Oil Production, 1981-2009

Total U.S. Crude Oil Production

Offshore U.S. Crude Oil Production

Source: Commission staff, adapted from U.S. Energy Information Administration
10

Fig. 2.

The move to deepwater was not gradual, as companies quickly leapfrogged each 

other to go deeper and deeper for new oil and gas. (See Fig. 3 below.) The move 

into the deepwater was a rare, dramatic era in American energy history, 

comparable in some ways to the early emergence of civilian nuclear power and

the opening of drilling in Prudhoe Bay Alaska and subsequent rapid construction 

of a 600-mile pipeline through permafrost.

14

 

14 The first civilian nuclear plant began operation in 1957; by 1967, most orders for new plants 

were nuclear. Legislation authorizing the Alaska oil pipeline passed late in 1973; oil began reaching 

Valdez in the summer of 1977, and the pipeline was delivering well over a million barrels a day by 

the following year. 

0

100

200

300

400

500

600

700

19901991199219931994199519961997199819992000200120022003200420052006200720082009

Million Barrels of Oil

Year

Federal Offshore Oil Production in the Gulf of Mexico

Ultra-Deep (5,000+ ft)

Deep (1,000-4,999 ft)

Shallow (0-999 ft)

Source: Commission staff, adapted from U.S. Energy Information Administration
11

Fig. 3. 

The Outer Continental Shelf Deep Water Royalty Relief Act of 1995 provided 

additional impetus to accelerated drilling in the Gulf. Up to specified volumes 

(which were larger for greater depths), the Act eliminated royalty payments on 

new deepwater leases issued from 1996 to 2000 and allowed different levels of 

relief for leases issued before and after these dates. The Administration took the 

position: “Even the largest energy companies are often unable to make substantial 

investments in long-term, high-risk R&D, which is why the government supports 

energy industries through appropriate tax treatment and invests at all stages of 

technological development to ensure that Americans will have clean and 

affordable energy in the future.”15 Critics in Congress countered that royalty relief 

was unnecessary because “improved economics, better technology, and growing 

experience have already facilitated development of productive areas in the Gulf of 

Mexico without the industry first winning forgiveness of royalties, which are an 

important source of revenue for the Treasury.”16

 

15 Hazel O’Leary, “Unlocking Energy, Not ‘Corporate Welfare,’” Washington Post, Nov. 25, 1995. 

16 George Miller, “No Royalty Relief for Oil Companies,” Washington Post, April 24, 1995. 
12

Hurricanes and the cycles of the oil and gas industry led to a 30 percent drop in 

offshore oil production from 2003 to 2008, to approximately 1.4 million barrels a 

day. Within the industry, however, this drop was viewed as a pause rather than a 

new trend. In 2008 alone, exploration efforts resulted in fifteen new discoveries. 

In 2008-2009, new lease sales opened up areas that had been closed to drilling for 

twenty years.17 To find new resources, drillers continued to go further and further 

offshore. (See Fig. 4 below.)

Fig. 4.

Deepwater Discoveries by Year

 Source: Minerals Management Service, Deepwater Gulf of Mexico 2009: Interim Report of 2008 Highlights

As of last year, there were fifteen new mobile offshore drilling units being built 

and contracted for use in the ultra-deepwater Gulf of Mexico, all of which are

scheduled for operation over the next two to three years. They will be capable of 

operating in water depths up to 12,000 feet and drilling an additional 28,000 feet 

below the seabed. All modern rigs are highly sophisticated and powerful, capable 

of lifting one million pounds or more, a substantial advance on the original 

offshore operation in Summerfield. Some new deepwater projects cost 

 

17 Mineral Management Service, Deepwater Gulf of Mexico 2009: Interim Report of 2008 

Highlights, p. 3-5.
13

approximately $4 billion dollars. Despite high initial costs, these projects can pay 

off in several years, or even months, due to flow rates exceeding 200,000 barrels 

per day of oil plus associated gas. 

Investments in offshore drilling have contributed to the reversal of a long-term 

drop in U.S. oil production. Total U.S. oil production recorded year-on-year 

growth in 2009 for the first time since 1991, and the U.S. Energy Information 

Administration has projected additional increases in the coming years. 

(See Fig. 5 below.)

Fig. 5.

The boom in offshore drilling has produced considerable revenue for the federal 

government, most coming from the Gulf of Mexico. In recent years, the leasing 

and royalty programs have yielded about $6 billion to $18 billion a year, the 

higher-end figures coming at the time of big lucrative lease sales. (See Fig. 6 

below.)

0

1

2

3

4

5

6

7

8

1990 2000 2008 2015 2025 2035

Million Barrels Per Day

Year

Domestic Crude Oil Production by Source, 1990-2035

Alaska Offshore Lower 48 Onshore Lower 48

Source: Commission staff, adapted from U.S. Energy Information Administration
14

Fig. 6.

Compensation to coastal states revived as an issue during the George W. Bush 

presidency. The Energy Policy Act of 2005 established the Coastal Impact 

Assistance Fund. Under this program, the Minerals Management Service within 

the Department of Interior awarded funds to OCS oil and gas producing states to 

offset the impacts of energy development. A total of $250 million was to be split 

among Alabama, Alaska, California, Louisiana, Mississippi, Texas, and the states’ 

coastal counties each year.

Nonetheless, some coastal states wanted a greater share of Gulf of Mexico oil and 

gas revenue and more authority over how to spend it. In 2006 – the year following 

Hurricane Katrina – new legislation allotted Texas, Louisiana, Mississippi, and 

Alabama a 37.5 percent share of the revenues derived from leasing activity in the 

so-called 181 South area off the coast of Alabama. For Phase 2 beginning in 2017, 

the bill expands the areas from which the four states receive their 37.5 per cent 

share. Subject to a cap, the states will divide the revenue based on individual 

$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

$100

$110

$120

$0

$2

$4

$6

$8

$10

$12

$14

$16

$18

$20

Dollars per 

Barrel

Billion Dollars

Year

Total Federal Offshore Revenues Collected

by MMS/BOEMRE, by Fiscal Year

Lease Acquisitions

Oil and Gas Royalties

Cushing, OK WTI Spot Price FOB (Dollars per Barrel)

Source: Commission staff, adapted from Bureau of Ocean Energy Management, Regulation and Enforcement
15

distance from each lease.18 In Fiscal Year 2009, Alabama, Louisiana, Mississippi, 

and Texas and their eligible local governments received a total of $25 million 

dollars. 

Deepwater as the New Frontier

The share of deepwater production in the current U.S. and world energy mix 

understates its importance for the future, at least as it was understood before the 

BP Deepwater Horizon accident. With high per-capita energy demands in the 

developed economies and dramatically rising levels of consumption in emerging 

economies, most experts project the world’s appetite for oil and other fuels to 

grow for the foreseeable future. The role of deepwater oil and gas in providing 

that energy is also likely to grow. 

According to a recent report by IHS-CERA , global deepwater production capacity

has more than tripled since 2000. Ten years ago, capacity stood at 1.5 million 

barrels per day in water depths over 2,000 feet. By 2009 it had risen to over 5 

million barrels per day. Deepwater discoveries also comprise a significant portion 

of new finds. In 2008 total oil and gas discovered in deep water globally exceeded 

the volume found onshore and in shallow water combined.19

The Gulf of Mexico has been only a part of the global offshore boom. Substantial 

exploration and development has also taken place off the coasts of Brazil and the 

West Africa. Interest in other, more challenging areas has been growing. Oil 

companies are looking to expand American production into new offshore areas, 

particularly Alaska and Virginia. Russian oil and gas companies are reviewing plans

to develop areas in the Arctic, while Norway and Canada are assessing similar 

projects. 

There are two key hurdles to new ultra-deepwater drilling. First, oil companies 

must be willing to invest substantial amounts of capital on generally challenging 

projects. Second, they must identify sites with significant resources and very high 

 

18 http://www.boemre.gov/offshore/GOMESARevenueSharing.htm

19 James Burkhard, Peter Stark, and Leta Smith, “Oil Well Blowout and the Future of Deepwater E & 

P,” IHS CERA, May 2010.
16

potential flow rates to justify such large capital expenditures. However, 

companies have had great success finding such sites. According IHS-CERA, the 

average size of a new deepwater discovery in 2009 was about 150 million barrels 

of oil equivalent compared with an onshore average of only 25 million barrels.

Risks in Offshore Drilling

The BP Deepwater Horizon oil spill is appropriately requiring a dramatic 

reassessment of the risks associated with offshore drilling. Before April 20, many 

believed that drilling might be safer in deep than in shallow waters. Since 

deepwater rigs worked farther off the coast, it would take longer for spilt oil to 

reach shore, giving more time for intervention to protect the coast. Moreover, 

the companies working in the deeper waters were seen as the “big guys” who 

utilized more advanced technologies than the smaller firms working near the 

coast, which presumably made them more adept at handling challenging 

conditions.

Even the severe hurricanes of the previous decade seemed, on balance, to provide 

validation that offshore facilities were safe. Substantial damage did occur, but 

caused less serious problems than might have been expected. The companies and 

the Minerals Management Service embarked on projects to make damage less 

likely during violent weather.

Any offshore drilling had the added advantage of displacing foreign oil which 

(except for Canada) arrived by tanker. Many of the visible damages from oil spills 

over the years came from tanker accidents, most notably the collision of the Exxon 

Valdez that led to between 260,000 and 750,000 barrels of oil leaking out and 

wreaking havoc on Alaska’s coastline. If offshore drilling reduced the use of 

tankers, that seemed like a good thing.20 

The dominant image of Exxon Valdez became itself a problem in assessing the 

risks of a major accident in the deepwater and the requirements for robust 

contingency plans. Because the tanker accident in Alaska was the largest oil spill 

in history and received heavy American media coverage, it became the picture of 

a worst case scenario for planning purposes. From that perspective, the worst 

 

20 Some oil from offshore is transferred to shore by tanker, but most arrives via pipeline.
17

case, if it occurred in the Gulf of Mexico, seemed far more manageable because 

the oil from such a spill would naturally be dispersed over a much wider area. Yet 

there was no logical reason that the accident in Prince William Sound should have 

been considered the worst case scenario. The blowout at the Ixtoc I well had 

produced a spill much larger than Exxon Valdez, a precedent that should have 

signaled a potential danger from an offshore well for a spill much greater than 

Exxon Valdez. Still there had been no major blowouts (greater than 1,000 barrels)

in federal offshore waters since 1970, which made the chances of another one 

seem remote.

Another problem for appropriate risk assessment was the failure to adequately 

consider published data on recurring problems in offshore drilling. These included

powerful “kicks” of unexpected pressures that sometimes led to a loss of well 

control, failing blowout preventer systems, and the drilling of relief wells -- the last 

lines of defense for a troublesome well. These problems were not great 

considering the large number of wells around the world and were usually more 

minor as threats than they sounded. However, these issues, known to petroleum 

engineers, did demonstrate that wells do not perform in a flawless manner.

Loss of well control, blowout preventer failure, or the need for relief wells can also 

occur in shallow water or on shore. Are some risks greater in the deep water? 

Both the velocity and irregularity of underwater currents as well as extreme 

pressures and temperatures put extra stress on subsea equipment in the deep. 

Pressure control becomes more difficult as the drill bit descends because of the 

greater likelihood of encountering abnormal geopressures.21 

In the deeper water, sophisticated robotics increasingly substituted for human 

inspections and other tasks. According to Leffler (2007), “Because the subsea 

elements are way down there and hard to get to, designers and builders 

emphasize redundancy and reliability – not unlike the space industry.” But items 

do fail, he noted, which is why extensive robot-friendly connections and contact 

points are installed to make robotic intervention as simple and straightforward as 

possible.22

 

21 Leffler et al, pp. 59, 66-68.

22 Leffler, p. 119.
18

It was also recognized within the petroleum industry that deepwater conditions 

create special challenges for critical equipment, including the blowout preventer. 

In a 2007 article in Drilling Contractor, Melvyn Whitby of Cameron’s Drilling 

System Group described how blowout preventer (BOP) requirements got tougher 

as drilling went deeper. “Today,” he said, “a subsea BOP can be required to 

operate in water depths of greater than 10,000 ft, at pressures of up to 15,000 psi 

and even 25,000 psi, with internal wellbore fluid temperatures up to 400° F and 

external immersed temperatures coming close to freezing (34° F).” One possible 

enhancement he discussed involved taking advantage of advances in metallurgy to 

use higher-strength materials in ram connecting rods or ram-shafts in the BOP. He 

suggested that “some fundamental paradigm shifts” were needed across a broad 

range of BOP technologies to deal with deepwater conditions.23

Working further below the surface of the ocean creates myriad problems after a 

loss of well control or a blow out. Containment problems become much more 

challenging and real-time decisions become more difficult when so little is known 

about the deep ocean. Up to the BP Deepwater Horizon accident, little attention 

was devoted to containment of a blown out well in the deepwater, largely 

because its occurrence was considered so unlikely.

Perhaps the greatest risk factor was the very feature that made the deepwater 

boom so big in the first place. The prodigious flow rates in the deepwater help 

create “elephants,” industry slang for wells whose production is considered 

especially high by historic standards. Such fields have very high daily output and 

good overall economics. But in cases of an uncontrolled blowout, high flow rate 

becomes the enemy as great volumes of oil and gas are spewed into the 

environment. This special risk of the turbidite reservoirs was both obvious and 

largely ignored in public discussions before April 2010.

 

23 Melvyn Whitby, “Design Evolution of a Subsea BOP: Blowout Preventer Requirements Get 

Tougher as Drilling Goes Ever Deeper,” Drilling Contractor (May, 2007).