Wednesday, March 6, 2013 Houston, TX. 2:30 4:00 p.m. CLOSING SESSION BLOWOUT! A NIGHTMARE IN THE OIL PATCH

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1 Wednesday, March 6, 2013 Houston, TX 2:30 4:00 p.m. CLOSING SESSION BLOWOUT! A NIGHTMARE IN THE OIL PATCH Presented by Bill Mahler Executive Vice President and General Manager Wild Well Control What could be a worse nightmare than the vision of a wild well burning out of control? In the concluding conference session, we will look the nightmare in the eye and learn how to defeat it. Through actual case studies, we will learn how control of wells may be lost and what must be done to regain control. Copyright 2013 International Risk Management Institute, Inc. 1

2 Today s energy industry demands a risk management partner who thinks two steps ahead in every area of your business. As a sophisticated global risk management partner, Gallagher Energy provides a broad range of products & services beyond the traditional brokering of insurance transactions. Our industry leading advice and expertise, team-oriented approach, and award-winning service combine to provide tailored solutions for your unique business needs. In-Depth Risk Review Enterprise Risk Management Programs Comprehensive Risk Analysis Detailed Risk Mapping Gallagher ranked #1 in overall client satisfaction among the five largest brokers in Greenwich Associates 2012 Large Corporate Insurance Survey. Gallagher was also named one of the Most Ethical Companies for 2012 by The Ethisphere Institute. Bill Farnan Managing Director, Gallagher Energy William_Farnan@ajg.com West Loop South Suite 1600 Houston, TX 77027

3 Bill Mahler Executive Vice President & General Manager Wild Well Control, Inc. Mr. Mahler is the executive vice president and general manager for Wild Well Control, Inc., a Houston, Texas-based company specializing in worldwide firefighting, well control, and related engineering, marine engineering, and training services. He has over 33 years in the oilfield service industry. His experience encompasses operations, business development, sales and marketing, strategic planning, market analysis, and acquisitions. Mr. Mahler s experience has been in the oilfield service industry, specifically the rental tool and down hole service sector, with a direct focus on providing support services to the hydraulic work over (snubbing), coiled tubing, and well control operations. Mr. Mahler received his B.B.A. in finance from Texas A&M University. He is also a member of SPE, IADC, and AADE. 3

4 Notes This file is set up for duplexed printing. Therefore, there are pages that are intentionally left blank. If you print this file, we suggest that you set your printer to duplex. 4

5 BLOWOUT! A Nightmare in the Oil Patch IRMI Energy Risk and Insurance Conference Houston, Texas March 6,

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7 Well Control Event The most catastrophic event during a drilling or workover operation is a blow out, or an uncontrolled flow of oil / gas from the wellbore. What is the cause of a blow out? An unrecognized or uncontrolled kick. 5 5 Blowouts Do Not Just Happen Documented facts show that over 80% of major catastrophes involve a chain of 7-11 separate contributing factors (or warning signs) before a catastrophe occurs. Blowouts Are NO Different! Listen and watch the well it is speaking to you at all times

8 Statistically During the 1990 s and 2000 s, the Rule of Thumb for the number of onshore well control events was - 1 Blowout per 1,000 Wells Drilled During the previous five years, with the emphasis on the development of shale gas, and now the oil associated with the various shale plays, we have seen the occurrence of blowouts diminish to Less than 1 Blowout per 1,000 Wells Drilled Based on the estimated 45,439 wells to be drilled in 2013, we can expect, statistically, approximately 38 Blowouts in 2013 in the US onshore and offshore

9 WELL CONTROL RISKS 8 8 Leading Causes of Well Control Incidents Kicks Not Being Properly Identified and Managed Failure of Rig / Surface BOP Equipment Poor Drilling Practices 9 9 9

10 Kicks A Kick occurs when the formation pore pressure is greater than the pressure exerted by the column of fluid in the well. The most common causes of kicks are: Insufficient Fluid Density Failure to Keep the Hole Properly Filled Swabbing & Surging Lost Circulation Failure of Rig / Surface BOP Equipment Some blowouts have occurred as a result of rig/surface BOP equipment failure. Equipment improperly rated. Equipment not properly maintained and tested. And, possibly, lack of the proper equipment even being rigged up

11 Equipment Failure Compounds Proper Handling of Kick Poor Drilling Practices Poor drilling practices are another leading cause of well control incidents. These may include: Improper Tripping of Pipe Insufficient Waiting on Cement Lack of Drills Poor drilling practices can be attributed to Inexperience Complacency Being Rushed

12 Poor Drilling Practices Lead to Blowout 14 i.e. Speed 14 Common Mistakes Made Failure to Stop and Check/Verify Well Flow Then, Once Flow is Recognized Attempting to Out-Pump the Flow Failure to Shut the Well In In A Timely Manner Improper Management of Shut In Well Reluctance to Call Office / Seek Assistance once well is Shut In Not Being Prepared to Respond in Timely Manner

13 Critical Operations Change in Crews lack of communication, hurried change out Tripping Operations Underbalanced Drilling Operations Cementing Operations Drilling into formations which are abnormally charged Stuck Pipe Fishing Operations Lost Circulation Frac Operations Well Testing Red Flags for Drilling Operations Sour (H2S) service. Poor well design. Adjacent population. Known area for shallow gas. No drilling experience in area. Environmentally sensitive areas. No experience with drilling contractor. No Emergency Response Plan in place

14 More Red Flags Inexperienced drilling crew. High turnover rates. Little experience working as a team. Worn out drilling rig/equipment. Majority of equipment is 10+ years old. Scavenger hunt to put rigs together. Poor performance/safety records. High demand for any rig. Drugs and alcohol. Language barriers at rig site. 18 Consequences of a Well Control Event There are serious consequences of well control events. These can include loss of: Human life. Rig equipment. Natural resources. Environment due to pollution

15 Analysis of Risks / Consequences Those risks usually associated with Control of Well have not generally changed. However, the Consequences of a well control event occurring have increased significantly. It is most important to analyze the Consequences correctly when conducting the analysis A Blow Out Occurs What Happens Next? 21 15

16 General Overview Of A Well Control Operation Set Up Equipment Staging Area Establish Water Source Clear Rig / Debris From Wellhead Prepare the Location Establish Vertical Flow From Well Prepare / Replace Wellhead Cap Well Well Recovery Operation Site Operations Team Primary Duties Secure the incident site and determine status of all personnel Make initial assessment of the emergency situation Notify WCERT and Rig Contractor Management Mobilize locally available resources as required Identify other resources and expertise that may be required. Establish on-site operations, site safety, communications and medical facilities. Implementation of intervention and pollution control measures Provide regular updates to WCERT Provide well and engineering data to WCERT Initiate Project files, document control, and record keeping Provide / assist with on-site well control engineering

17 Well Control Emergency Response Team Primary Duties Implement the Well Control Emergency Response Organization Staff the Emergency Response Room Establish communications with incident Site Mobilize Well Control Specialists Wild Well Control Identify and initiate any follow-up actions required Keep WCERT Incident Commander and Management updated Facilitate approval of expenditures as required Identify other outside expertise that may be required Authorize the mobilization of resources Provide assistance with offsite engineering resources Interface with the Population and Media Well Control Emergency Response Organization INCIDENT COMMANDER Drilling Manager DEPUTY INCIDENT COMMANDER Drilling Engineer Duty Logistics Rep Duty Medical Rep Duty Safety/HSE Rep Duty Drilling Rep Duty Production Ops Rep Duty Personnel Rep Duty Public Relations Rep Duty Recorder Duty Regulatory Rep ON SCENE COMMANDER SITE SAFETY OFFICER ENVIRONMENTAL OFFICER WELL CONTROL OPS TEAM LEADER Well Control Team Leader SUPPORT CONTRACTORS 25 17

18 Upon Arrival of Well Control Specialists Assessment of Well Conditions Made Development of Site Safety Plan Completed Development of Forward Action Plan and Presented to Operator for Approval Upon Approval, Other Resources Additional Well Control Personnel and Firefighting / Well Control Equipment are Mobilized to the Well Site 26 18

19 Site Assessment Decision Tree

20 Operator Issues / Concerns Ongoing Operations Cash Flow Regulatory Requirements (OSHA) Media Population To be Evacuated? Pollution Air and Ground Water Sourcing Broaching of Surface 28 20

21 RELIEF WELLS Relief Well Selected for Well Intervention When? Surface intervention impractical 30 21

22 Relief Well Selected for Well Intervention When? Unacceptably high risks 31 Relief Well Selected for Well Intervention When? Dual Strategy 32 22

23 Dual Strategy Relief Well vs Surface Intervention Relief Well Event Occurs Well Killed Surface Intervention 33 Planning The Relief Well Four Interconnected Teams: Hazard Assessment Team Drilling Engineering / Planning Team Directional Drilling / Intercept Team Well Kill / Plug & Abandonment Team 34 23

24 Hazard Assessment Team 24 Abnormal Charging Surface Hazards Shallow Gas Assessment Simultaneous Operations Planning Oil Slick, Gas Dispersion Information to Directional Drilling Team Use to Determine Surface Location 35

25 Drilling Engineering & Planning Team 25 Casing Design Cementing Mud Program Mud Logging Rig Selection Logistics 36

26 26 Directional Drilling & Intercept Team Surface Location Information From Hazard Assessment Team Trajectory Proximity / Ranging Tools Directional Drilling Tools / Services Intercept Method Intercept Point Wellbore Survey Uncertainty 37

27 Well Kill / Plug & Abandonment Team Kill Modeling Rates Fluid Properties Volumes Contingency Planning Well Kill Planning Coordination Testing Implementation Diagnostics Plug & Abandonment Planning 38 Critical Success Factors Pre-Planning (Part of Drilling Program) Meticulous Planning Intercept and Kill Strategy Thorough Risk Assessment Decisive Execution of Plan 39 27

28 RELIEF WELL CASE HISTORY 40 Relief Well Commences Relief Well Rig Set Position Surveyed Drilling Commences 18-5/8 Casing Set 41 28

29 After Setting 18-5/8 KOP at 2,200 Drilled to 4,075 Set 13-3/8 Casing Continued Directional Drilling Relief Well 42 Drilling Continues Pass By Target Well at approximately 7,600 Initial Proximity Log Ran Target Well Location Confirmed Relative Distance Established 43 29

30 Drill Path Dropped to Vertical Target Well Tracked Alignment Confirmed w/proximity Logs Baker INTEQ NaviGator Geo-Steering Directional Assembly Utilized Drilled to Point of Intercept 44 At Point of Intercept Approx 9,300 Feet Alignment and Angle of Incidence Confirmed 9-5/8 Casing Set NOTE: Angle of Intercept less than 3º at Point of Intercept

31 After Drilling Through Shoe Pumping High Volume Special Window Mill Assembly Made Up 20 Window Milled in BO Well s 7 Casing 46 Special Mill Designed for Milling Through Casing OD Making Up Finishing Mill Above Special Window Mill 47 31

32 After Window Milled /8 Tubing Conveyed Through Window Cement Plug Set to Isolate Perforations 48 After Setting Cement Plug Immediate Decrease in Pressure on BO Well Relief Well Remained on Standby and BO Well Monitored 49 32

33 P & A Operations Commence conventional P & A Operation on blow out well. Relief Well P & A d. 50 In Conclusion Relief Wells Are A Viable Alternative to Surface Intervention Methods That Have Unacceptable High Risks Associated New Technology in Directional / Proximity Tools Enhances Probability of Success in Direct Intercept Ops 51 33

34 Critical Success Factors Pre-Planning (Part of Drilling Program) Meticulous Planning Intercept and Kill Strategy Thorough Risk Management Decisive Execution of Plan 52 34

35 Growing Areas Of Concern Multi-Well Pads

36 High Density Multi-Well Pads Simultaneous Ops Drilling and Completion Ongoing

37 Deteriorated Wellhead Equipment Deteriorated Wellhead Equipment

38 Corroded Casing Failures High Pressure Frac Jobs

39 Drilling in Suburban / Populated Areas Unprotected Well Heads

40 ARE THERE ANY QUESTIONS? 63 Blowouts! Blowouts are prevented by well trained and knowledgeable crews that are Prepared Properly rated, working and tested well control and kick detection equipment Practice effective drills for kick response Alert Key warning signs for kicks Report any warning signs observed Aware of Ongoing Operations at ALL Times Communicate amongst all crew members

41 PREVENTION IS THE PRIORITY Start thinking about well control and its risks during the planning of the well. Work closely with Drilling Contractor to minimize risks while drilling. This includes well control training. Conduct regular Training through Drills at the Well Site. When a Well Control Incident begins and conventional well control methods do not work, ask for assistance PREPAREDNESS IS A NECCESITY Develop a comprehensive Well Control Emergency Response Plan (WCERP) & train DO NOT HESITATE to activate the Well Control Emergency Response Plan. Establish relationship with Well Control Contractor Be Proactive. Communicate with the First Responders and Community

42 Protect the Public BE PREPARED! Protect the Environment A QUICK RESPONSE IS MOST IMPORTANT Are There Any Questions?

43 Experience Makes The Difference T F A SUPERIOR ENERGY SERVICES COMPANY 43

44 Notes This file is set up for duplexed printing. Therefore, there are pages that are intentionally left blank. If you print this file, we suggest that you set your printer to duplex. 44