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6.06.2010

Drilling Process Attracts Scrutiny in Rig Explosion

An oil-drilling procedure called cementing is coming under scrutiny as a possible cause of the explosion on the Deepwater Horizon rig in the Gulf of Mexico that has led to one of the biggest oil spills in U.S. history, drilling experts said Thursday.

The process is supposed to prevent oil and natural gas from escaping by filling gaps between the outside of the well pipe and the inside of the hole bored into the ocean floor. Cement, pumped down the well from the drilling rig, is also used to plug wells after they have been abandoned or when drilling has finished but production hasn't begun.

In the case of the Deepwater Horizon, workers had finished pumping cement to fill the space between the pipe and the sides of the hole and had begun temporarily plugging the well with cement; it isn't known whether they had completed the plugging process before the blast.

British Petroleum's oil spill in the Gulf of Mexico is quickly devastating wildlife as some 955,000 liters per day is migrating toward coastlines

Regulators have previously identified problems in the cementing process as a leading cause of well blowouts, in which oil and natural gas surge out of a well with explosive force. When cement develops cracks or doesn't set properly, oil and gas can escape, ultimately flowing out of control. The gas is highly combustible and prone to ignite, as it appears to have done aboard the Deepwater Horizon, which was leased by BP PLC, the British oil giant.

Concerns about the cementing process—and about whether rigs have enough safeguards to prevent blowouts—raise questions about whether the industry can safely drill in deep water and whether regulators are up to the task of monitoring them.

The scrutiny on cementing will focus attention on Halliburton Co., the oilfield-services firm that was handling the cementing process on the rig, which burned and sank last week. The disaster, which killed 11, has left a gusher of oil streaming into the Gulf from a mile under the surface.

Federal officials declined to comment on their investigation, and Halliburton didn't respond to questions from The Wall Street Journal.

According to Transocean Ltd., the operator of the drilling rig, Halliburton had finished cementing the 18,000-foot well shortly before the explosion. Houston-based Halliburton is the largest company in the global cementing business, which accounted for $1.7 billion, or about 11%, of the company's revenue in 2009, according to consultant Spears & Associates.

Growing worries about potential lawsuits and other costs of the oil spill in the wake of its rapid spread led investors to clobber stocks of companies involved in the Deepwater Horizon well Thursday.

Halliburton fell 5.3% to $31.60 and Cameron International Corp., which built the blowout-prevention equipment that didn't stop the explosion, dropped 13% to $38.70, both at 4 p.m. in New York Stock Exchange composite trading.

The timing of the cementing in relation to the blast—and the procedure's history of causing problems—point to it as a possible culprit in the Deepwater Horizon disaster, experts said.

"The initial likely cause of gas coming to the surface had something to do with the cement," said Robert MacKenzie, managing director of energy and natural resources at FBR Capital Markets and a former cementing engineer in the oil industry.

Several other drilling experts agreed, though they cautioned that the investigation into what went wrong at the Deepwater Horizon site is still in its preliminary stages.

The problem could have been a faulty cement plug at the bottom of the well, he said. Another possibility would be that cement between the pipe and well walls didn't harden properly and allowed gas to pass through it.

A 2007 study by three U.S. Minerals Management Service officials found that cementing was a factor in 18 of 39 well blowouts in the Gulf of Mexico over a 14-year period. That was the single largest factor, ahead of equipment failure and pipe failure.

The Halliburton cementers would have sought approval for their plans—the type of cement and how much would be used—from a BP official on board the rig before carrying out their job. Scott Dean, a BP spokesman, said it was premature to speculate on the role cement might have played in the disaster.

Halliburton also was the cementer on a well that suffered a big blowout last August in the Timor Sea, off Australia. The rig there caught fire and a well leaked tens of thousands of barrels of oil over 10 weeks before it was shut down. The investigation is continuing; Halliburton declined to comment on it.

Elmer P. Danenberger, who had recently retired as head of regulatory affairs for the U.S. Minerals Management Service, told the Australian commission looking into the blowout that a poor cement job was probably the reason oil and natural gas gushed out of control.

Write to Russell Gold at russell.gold@wsj.com and Ben Casselman at ben.casselman@wsj.com



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