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US Offshore Chief Endorses Helix's Spill-Containment Proposal

Published Thursday, 9th December 2010 08:13 am - © 2010 Dow Jones

By Ryan Dezember and Leslie Eaton

NEW ORLEANS -(Dow Jones)- The U.S. government's offshore-energy chief said Wednesday that regulators welcome a new oil-spill-containment system being developed by Helix Energy Solutions Group Inc. (HLX) for the Gulf of Mexico.

Speaking to energy-industry lawyers, Bureau of Ocean Energy Management, Regulation and Enforcement Director Michael R. Bromwich said the Helix initiative involves more than 20 smaller energy companies, and supplements a response effort developed by four major oil companies. Houston-based Helix helped rein in BP PLC's (BP, BP.LN) runaway Macondo well after it exploded in April.

The agency's increased confidence that the energy industry is developing programs to respond quickly to out-of-control wells helped prompt his agency to lift a five-month moratorium on deepwater drilling this fall sooner than expected, Bromwich said. The federal government banned drilling in waters deeper than 500 feet in response to BP's deadly Deepwater Horizon accident and the subsequent 4.9-million-barrel spill.

The moratorium was lifted in October ahead of its original November expiration, though no new deepwater drilling permits have been issued as regulators and companies grapple with increased safety measures.

Stephen Powers, director of finance and investors relations for Houston-based Helix, said the company has simply stockpiled the equipment that it found most useful in battling BP's gusher and is offering oil and gas producers its immediate use, most likely in exchange for a retainer fee.

Helix plans to reveal more details about the financial structure of the system once agreements are finalized with the oil companies, Powers said.

The yet-to-be-named system centers on three boats--the Helix Producer 1, the Q4000 and the Express deepwater construction vessel--that each played a role in the Macondo response and are continually working in the Gulf, Powers said.

Together, the ships and related equipment can handle up to 55,000 barrels of oil a day, 70,000 barrels of liquid natural gas and 95 million cubic feet of natural gas at depths up to 8,000 feet, Helix says.

The BP spill leaked up 60,000 barrels of oil a day about 5,000 feet below the surface.

In July Exxon Mobil Corp. (XOM), Chevron Corp. (CVX), Royal Dutch Shell PLC (RDSA, RDSA.LN) and ConocoPhillips (COP) said they would each invest $250 million in a nonprofit effort to design, build and operate a spill-response system capable of capturing up to 100,000 barrels of oil a day. Dubbed the Marine Well Containment Co., that system is expected to be ready by the end of 2011 when it could be mobilized within 24 hours of a spill.

"The primary difference between their system and ours is ours actually exists, nothing needs to be built, it's ready to go," Powers said. "And it's been used, it's been field tested, unfortunately."

During a presentation to investors in New York on Wednesday, Apache Corp. (APA) Co-Chief Operating Officer John A. Crum said that the oil and gas producer would ensure that it has access to the majors' response system in addition to joining the coalition Helix is assembling.

"I think we have to be," said Crum, who is also head of Apache's North American operations. "We have to have access to that equipment if anything ever happened."

-By Ryan Dezember, Dow Jones Newswires; 713-547-9208;

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