Deepwater Horizon: The $65 Billion Oil Disaster
Some chapters in this book are about money. Some are about greed. This one is about what happens when you mix both with a deadline and a drill hole four kilometers under the ocean. Chapter 36 of Torsten Dennin’s “From Tulips to Bitcoins” (ISBN: 978-1-63299-227-7) tells the story of the Deepwater Horizon disaster. The biggest oil spill in American history. Eleven dead. 780 million liters of crude in the Gulf of Mexico. And a final bill of $65 billion.
The Rig
The Deepwater Horizon was one of the most advanced drilling platforms in the world. Installed in 2001, it was 121 meters long, 78 meters wide, and 23 meters tall. It cost $350 million to build. This was not some rusty old platform. It was a floating city of technology sitting on the ocean.
In April 2010, the rig was positioned about 40 miles off the coast of Louisiana. It was drilling into something called the Macondo reservoir, roughly 4,000 meters below sea level. BP was the client paying for the operation. Transocean owned and operated the platform. Halliburton was doing the cement work to seal the drill hole.
Three companies. Three sets of priorities. One very deep hole in the ocean floor.
Behind Schedule
BP was already 43 days behind schedule on this project. That meant over $20 million in extra costs. When you are burning that kind of money every day you are late, the pressure to cut corners gets heavy.
On April 20, 2010, the drill hole was almost done. BP managers flew in by helicopter. The plan was to finish up and move on.
Halliburton had cemented the drill hole. The next step should have been to test the cement job to make sure it was holding. BP had flown in a team from Schlumberger specifically for this. But before they could run the tests, BP sent them back to shore. No testing.
Then BP pushed to replace the heavy drilling mud inside the well with lighter seawater. Drilling mud is what keeps the pressure down in the well. It is heavy on purpose. It pushes back against the oil and gas trying to come up from below. Replacing it with seawater saves time because it is one less step before you can move the rig. But it removes the weight that keeps everything sealed.
Transocean managers objected. They did not want to swap the mud for seawater. BP pushed ahead anyway.
The Explosion
The well had a leak. Mud and gas started coming up through the drill hole. Methane gas hit the drilling deck and ignited. The explosion was enormous. Four workers on the drilling deck were killed immediately.
Here is a detail from Dennin that is hard to process. The alarm sensors on the rig had been turned off. Someone had disabled them to avoid false alarms disturbing workers during the night. So when gas was flooding the platform, the system that was supposed to warn everyone stayed silent.
Workers who survived the blast had to jump off the burning platform into the ocean. The water itself had oil on it, and parts of it were on fire. The supply ship Damon B. Bankston, which was nearby, rescued survivors from the water.
Eleven people died. The platform burned for two days and then sank.
The Blowout Preventer That Did Not Prevent
Every deepwater drilling operation has a last line of defense called a blowout preventer, or BOP. It sits on the ocean floor at the top of the well. If something goes wrong, the BOP is supposed to clamp shut and seal the well. It is the emergency brake.
An engineer pressed the BOP emergency button. Nothing happened.
It turned out the blowout preventer was poorly maintained. BP had previously reported over 400 defects on the Deepwater Horizon to Transocean. More than 26 systems on the rig were listed as being in poor condition. The one piece of equipment that absolutely had to work when everything else failed did not work.
The Spill
With the platform gone and the BOP useless, crude oil was now flowing freely from the Macondo reservoir into the Gulf of Mexico. The initial oil slick measured about 1.5 kilometers by 8 kilometers. It grew fast.
Between 5 and 10 million liters of oil were flowing out every day. To put that in perspective, every 8 to 10 days the well was leaking the equivalent of the entire Exxon Valdez spill.
Dennin mentions the Exxon Valdez as a comparison point. In 1989, the Exxon Valdez tanker ran aground in Alaska and spilled about 40,000 tons of crude oil. The captain had been drinking. It was considered a massive environmental catastrophe. And Deepwater Horizon was producing that amount of damage every week and a half.
BP estimated that the Macondo reservoir contained about 7 billion liters of crude oil. The well was essentially an open pipe into one of the largest oil deposits in the Gulf, and nobody could close it.
Five Months to Stop It
The oil slick eventually grew to more than 10,000 square kilometers. Stopping the leak turned out to be incredibly difficult at that depth.
The most reliable method, drilling relief wells to intersect the original well and seal it from the bottom, would take about three months. In the meantime, BP tried everything.
They tried putting a steel dome over the leak to capture the oil. It failed.
In May, they tried a “top-kill” method, pumping heavy fluid into the well from above. That failed too.
In mid-July, a new sealing cap managed to reduce the flow. On August 6, a “static-kill” method finally sealed the well. And on September 19, 2010, the well was declared “officially dead.”
Five months. From the day the platform sank to the day the well was sealed, crude oil poured into the Gulf of Mexico for five months.
The total amount leaked was approximately 5 million barrels. That is about 780 million liters.
The Price
BP’s stock lost half its value. The company set up a $20 billion trust fund for damages. But the real number kept growing. By 2018, the total estimated cost of the Deepwater Horizon disaster had reached $65 billion.
Sixty-five billion dollars. From one well. Because someone sent the testers home, swapped mud for seawater, and ignored a broken blowout preventer.
The US government responded by passing a moratorium on deep-sea drilling. President Obama fired the head of the Minerals Management Service, the agency that was supposed to regulate offshore drilling. The entire regulatory framework for deep-sea oil exploration got rewritten.
And BP’s CEO Tony Hayward gave one of the most tone-deaf public statements in corporate history. While oil was still gushing into the Gulf and communities along the coast were watching their livelihoods get destroyed, Hayward told reporters: “I would like my life back.”
Eleven families who lost someone on that rig would have liked their people back.
What Stays With Me
This is the darkest chapter in the book so far. Other chapters involve financial losses, market manipulation, crashed prices. This one has dead people and a poisoned ocean.
What gets me is how many safety layers had to fail for this to happen. The cement job was not tested. The drilling mud was replaced with seawater against the advice of the people operating the rig. The alarm system was disabled on purpose. And the blowout preventer, the one thing that exists specifically for this scenario, was broken.
Each of those was a decision someone made. Send the testers home. Swap the mud. Turn off the alarms. Ignore the maintenance reports. No single person woke up that morning and decided to cause the worst oil spill in American history. But a long chain of small decisions, each one shaving off a bit of time or cost, added up to a catastrophe.
The $65 billion number is staggering. But the thing that hits harder is the 11 workers who died and the five months where millions of liters of oil poured into the Gulf every single day. Money can be repaid. Stock prices recover. Ecosystems and human lives do not work on the same timeline.
Dennin tells this story as part of a commodity book. And it fits, because crude oil is a commodity. But this chapter is really about what happens when the pressure to finish on time overrides every safety protocol that exists. The $20 million BP was trying to save by staying on schedule ended up costing them $65 billion. And it cost the Gulf of Mexico something that no trust fund can fix.
Based on Chapter 36 of “From Tulips to Bitcoins” by Torsten Dennin (ISBN: 978-1-63299-227-7, River Grove Books, 2019).
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