More drillers in risky business

Junior oil companies join the fray as search for oil and gas hots up.

The search for oil and gas is getting riskier as better and cheaper technology lures more companies to new frontiers. While BP's Gulf of Mexico oil spill shows even the biggest international oil firms can make huge mistakes, smaller and less experienced companies are also encountering serious problems while drilling under challenging conditions.

In May, a Kurdish village of about 100 people was evacuated for a month after a blowout in northern Iraq. WesternZagros Resources, a Canadian oil junior, lost control of a nearby exploration well after hitting a high-pressure pocket of sour gas about 4,000 metres underground. "The company initiated emergency response procedures," WesternZagros said in its second-quarter report. "The well was safely controlled with no injuries or atmospheric release of gas."

It was a near miss. An uncontrolled release of toxic hydrogen sulphide could have killed people. "There are other fields in the Kurdistan area of Iraq that are high [in hydrogen sulphide] but it's really unpredictable," Simon Hatfield, the chief executive of the company, told the Calgary Herald, a Canadian daily newspaper. "This was not predicted." But hydrogen sulphide is often found in the deep deposits that were formerly left to major oil companies.

The problem well has cost WesternZagros US$91 million (Dh334.2m), including a large bill from Boots & Coots International Well Control. An insurance claim covers about $35m of the expenses. Taqa North, a larger company controlled by the Abu Dhabi Government, had a similar problem last year in the Canadian province of Alberta. A blowout occurred during maintenance work on a well about 500 metres from a main road and 4km from the town of Crossfield, a prairie farming community.

The deadly gas in the well inherited by Taqa through a corporate takeover contained 42 per cent hydrogen sulphide. The hazard to passing traffic was sufficient for Taqa to ask local authorities to intercept school buses and send them on a wide detour. After implementing its emergency response plan and, a day later, plugging the well, Taqa investigated the incident. It found no hazard signs posted on pipes and valves and that workers had missed warnings of an impending problem. The company also said it had not supervised work performed by a contractor.

Regulators blamed the accident on "human error arising from a lack of oversight and supervision of maintenance crews". "The experience of external personnel contracted to perform tests on the Taqa well is of concern," the Energy Resources Conservation Board in Alberta wrote in a report, which nevertheless found Taqa had not contravened any regulatory requirements. Experience counts: "Almost all blowouts occur because of human error," Mike Miller, the chief executive of the Canadian well-control firm Safety Boss, told Canada's oilweek magazine last month. "It's almost always when there's a rig over the hole. ? That's where the human error takes place."

Taqa has agreed to work with the regulator on safety improvements. Leroy McKinnon, a Taqa North spokesman, said the company held an emergency-response training exercise at least once a year. Fortuitously, last year's exercise took place just a week before the blowout. "It taught us that the training does benefit the company because all our people were in place. We've got to be on top of things and be on our toes," he said.

Taqa North, a unit of Abu Dhabi National Energy Company, was formed just two years ago. But more experienced companies have also encountered problems recently while drilling in new situations. In Pennsylvania, EOG Resources had a blowout at a shale-gas well in June that the US state's environmental protection department said could have been "catastrophic". On June 3, the out-of-control well expelled gas and chemicals-laced water for 16 hours. The Houston-based EOG is a large independent oil and gas producer that has drilled hundreds of wells.

Last month, the department fined EOG $400,000 after experts blamed the blowout on human error and procedures that fell short of industry best practices. "This incident was preventable and should have never occurred," said John Hanger, the department's secretary. [e-mail]