April 22nd, 2010

Explosion and Fire at Offshore Oil Rig, Gulf of Mexico

Posted at 8:58 AM ET

oil-rig-gulf-of-mexico-smallAn explosion and large fire on an oil rig in the Gulf of Mexico left 11 workers missing and 17 others injured on April 20. The blaze on the Deepwater Horizon drilling rig, which broke out around 22:00 local time (03:00 UTC on April 21), sent flames and smoke high into the sky about 40 miles off the coast of Louisiana. Seventeen workers were injured, three critically, and rescuers are still searching for 11 missing people. It was not known whether the missing workers were able to make it to one of the rig’s lifeboats. Reports said the rig, which is owned by Transocean Ltd, was under contract to the oil giant BP at a cost of USD533,000 (EUR 395,000) a day and doing exploratory drilling. The rig is listing badly and threatening to topple over, the US Coast Guard said. Reports said the rig, which was built in 2001 in South Korea at a cost of about USD350 million, has a replacement value of up to USD700 million today. Transocean said the 400-by-250-foot (120-by-80 meter) rig is located approximately 42 miles offshore Venice, Louisiana, on Mississippi Canyon block 252.

According to sources quoted by Platts Commodity News, Transocean carries “standard insurance coverage” on the Deepwater Horizon rig, with a deductible of USD125 million per occurrence on hull and machinery, subject to an aggregate deductible of USD250 million. Transocean’s filings also indicate a USD10 million deductible on crew injury liability and a USD5 million deductible on third-party non-crew claims, the report says.

oil-rig-gulf-of-mexico-big

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A total of 126 workers were on the rig at the time of the blast, according to officials. Seventy-nine were Transocean workers, six were BP employees and 41 were contracted. Reports said some workers jumped at least 75 feet (23 meters) into the water to escape the fire. The Coast Guard said the 17 taken by air or sea to hospitals suffered burns, broken legs and smoke inhalation. The remaining 98 were later rescued by boat. A BP spokesman said that all six BP workers on board are safe and accounted for. Transocean said there had been no signs of trouble before the explosion and the rig had been drilling at the time but was not in production. The rig remains ablaze and fire boats are still battling the blaze. BP also said work has begun to shut off the oil flow that is feeding the fire. BP said underwater vehicles have been deployed to perform the task but the company did not know how long the operation would take.

Although the cause of the blast has yet to be determined, Transocean said the explosion appeared to be a blow-out, in which natural gas or oil forces its way up a well pipe. Transocean said a full investigation into the cause of the blast would begin after all the missing had been accounted for. The Coast Guard said it would conduct a joint investigation with the U.S. Interior Department’s Minerals Management Service (MMS) and BP. Coast Guard environmental teams are also on standby. Although there have been reports of oil on the surface of the water near the rig, BP said there was no evidence of a significant oil spill.

According to Transocean, the Deepwater Horizon rig was built in 2001 in South Korea and is designed to operate in water up to 8,000 feet (2,400 meters) deep, drill 5.5 miles (8 kilometers) down and accommodate a crew of 130 workers. It floats on pontoons and is moored to the sea floor by several large anchors. There have been at least three rig fires in the Gulf this year before the Horizon incident and 14 last year, including several that forced crew members to evacuate, according to data from the MMS. The MMS added that there have been 69 offshore deaths, 1,349 injuries and 858 fires and explosions in the Gulf since 2001.

Sources: CNN News, Associated Press, Reuters News, Agence France Presse, BBC News, Dow Jones, British Business Monitor, Wall Street Journal, Platts Commodity News

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