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Transocean Says `Blowout' May Have Caused Rig Fire

Transocean Ltd. said a pressure surge violent enough to rupture pipes, known in the oil and natural-gas industry as a blowout, may have triggered the explosion and fire yesterday on a deepwater rig that injured 17 people and left 11 missing.

The assumption is based on the nature of the fire, which is burning from the top of the well, fed by escaping oil or gas, Adrian Rose, Transocean’s vice president for quality, health, safety and the environment, said at a New Orleans press conference today. The company has yet to board the rig or interview survivors.

The fire engulfed the Deepwater Horizon, a floating rig leased to BP Plc, at 10 p.m. local time as it was completing the concrete casing of a well drilled to a depth of 18,000 feet (5,486 meters), apparently with little or no warning, Rose said. The rig was 41 miles off the coast of Louisiana.

“There was undoubtedly some abnormal pressure buildup,” Rose said. “As oil or gas came up, it expanded rapidly and ignited. This is an assumption. We still don’t know exactly the cause.”

The U.S. Minerals Management Service, the U.S. agency that oversees offshore drilling and its parent, the Department of the Interior, and the Coast Guard will investigate the cause of the explosion, Deputy Interior Secretary David Hayes said at the press conference. Transocean, based in Geneva, and BP, based in London, also will investigate, Rose said.

Source: Transocean Ltd. via Bloomberg

The Transocean Ltd. Deepwater Horizon, a semi-submersible drilling unit, is seen in the Gulf of Mexico in this file photo. Close

The Transocean Ltd. Deepwater Horizon, a semi-submersible drilling unit, is seen in the... Read More

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Source: Transocean Ltd. via Bloomberg

The Transocean Ltd. Deepwater Horizon, a semi-submersible drilling unit, is seen in the Gulf of Mexico in this file photo.

Crew Fate Unknown

The fate of the 11 missing crew members is unknown after a search of the area that began shortly after the explosion and lasted all day, involving as many as four helicopters, a search plane and four ships, U.S. Coast Guard Rear Admiral Mary E. Landry said at the press conference.

The search will continue overnight using infrared and other sensors, Landry said. The missing people aren’t believed to be in a life boat, she said.

Transocean fell $1.66, or 1.8 percent, to $90.37 at 4:15 p.m. in New York Stock Exchange composite trading. BP dropped 7.2 pence to 648.2 pence.

BP mobilized seven large oil-spill cleanup vessels, although pollution has been “minimal” because flames are consuming the petroleum, David Rainey, BP’s vice president for Gulf of Mexico production, said at the press conference. An oil sheen is visible on the water, Landry said.

“The fire is still burning,” Rainey said. “It ebbs and flows, it goes up and down, it’s a hot fire. Our effort must be to put the fire out.”

Putting Out Fire

Crews will attempt to staunch the fuel to the fire using a remote-operated vehicle, Rainey said. Ships are pouring water on the blaze, hoping to cool the rig sufficiently for the robot to move in, he said.

It’s too soon to know if the rig is salvageable, Rose said. It’s reported listing, or riding askew in the water, from 3 degrees to 10 degrees, and is in no danger of capsizing, he said.

The Deepwater Horizon is a semi-submersible drilling unit that can drill in water up to 8,000 feet deep, according to Transocean’s Web site. The floating rig was built in 2001 and was designed to withstand rough waters.

Transocean said last year the ultra-deepwater rig drilled the deepest oil and gas well ever, more than 6 miles, while working for BP in the Gulf of Mexico.

All BP workers are safe and accounted for, David Nicholas, a spokesman for the company, said today in a statement.

Lease Extension

BP agreed in September to extend its lease on the Deepwater Horizon rig for three years and pay an additional $3.4 million a year in rent.

The company agreed to pay $544 million, or $496,800 a day, during the three-year period, Transocean said at the time. That was above the prior rent, which averaged about $487,500 a day.

The Deepwater Horizon accounts for about 34 cents of annual per-share earnings for Transocean, or about 4 percent of profit, Arun Jayaram, an analyst for Credit Suisse Holdings USA Inc. in New York, said today in an interview.

To contact the reporters on this story: Jim Polson in New York at jpolson@bloomberg.net; Jessica Resnick-Ault in New York at jresnickault@bloomberg.net

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