US Presidential Panel: Halliburton Knew Cement Mixed For BP Blowout Well Was Unstable

And don’t forget to add this fact (!!!):

“Just eight days before the Gulf blow-out, Halliburton also announced that it had agreed to buy Boots & Coots for $240.4 million. Who are Boots & Coots?

The world’s largest oil-spill clean-up company which also deals with oil and gas well fires and blowouts.

What an incredibly fortunate coincidence. What a slice of luck.”

And to refresh your memory:

–  Gulf of Mexico Oil Spill: The Halliburton Connection:

The company acknowledged Friday that it had completed the final cementing of the oil well and pipe just 20 hours before the blowout…

And now Bloomberg has changed the beginning of the article below to:

“Halliburton Co. disputed a U.S. panel investigating BP Plc’s oil spill, saying the cement cited for flaws in February was different from the mixture used to plug the well two months later.

Conclusions by the National Commission on the BP Deepwater Horizon Oil Spill, released yesterday, failed to account for changes BP ordered to the cement just before the April 20 blast, the Houston-based company said in a statement. Halliburton rose in New York trading, after falling 8 percent yesterday spurred by concerns the report may subject the company to increased liability for the spill.”

That was fast!

Now here is the original article …

Halliburton Disputes U.S. on Cement Tests for BP Well

Oct. 29 (Bloomberg) — Halliburton Co. may face increased liability in the Gulf of Mexico oil spill after the staff of a U.S. presidential panel said the contractor knew cement it mixed for BP Plc’s well was unstable.

The staff of the National Commission on the BP Deepwater Horizon Oil Spill said documents provided by Halliburton showed at least three tests of the mixture, in February and April, found the recipe wasn’t stable. Halliburton disputed the findings, saying in a statement the formulas tested differed from the final recipe used in the doomed Macondo well. Halliburton declined for a second day in New York trading.

Halliburton, the world’s second-largest provider of oilfield services, has received less scrutiny from lawmakers and investigators than BP and Transocean Ltd., owner of the rig that blew up on April 20, killing 11 workers and setting off the biggest U.S. oil spill. The report increases Halliburton’s legal risks, said J. David Anderson, an oil-industry analyst with J.P. Morgan Securities LLC in New York.

Don’t miss: Marine Toxicologist Dr. Riki Ott: ‘People Now Dropping Dead’ In the Gulf

“Up to now, we didn’t see a significant liability to Halliburton with respect to the blowout, but that may change if the report has a widespread impact,” Anderson said in a note to investors yesterday calling the stock “overweight” based on the new information.

Halliburton fell $1.21, or 3.8 percent, to $30.47 at 9:34 a.m. in New York Stock Exchange composite trading after falling 8 percent yesterday.

‘Neither Acted’

The staff of the commission named by President Barack Obama to investigate the blowout and spill released a letter with preliminary conclusions based on a review of Halliburton’s documents.

“Halliburton and BP both had results in March showing that a very similar foam slurry design to the one actually pumped at the Macondo well would be unstable, but neither acted upon that data,” according to the letter sent to the commissioners from the panel’s chief counsel Fred Bartlit and other staff members.

Separate tests on the cement slurry by Chevron Corp., using material supplied by Houston-based Halliburton, couldn’t generate a stable mixture in a laboratory, according to the staff’s letter. Chevron had agreed to conduct the tests for the commission.

In a response to the commission’s letter, Halliburton said it got a stable test result on a recipe in April using a formula agreed upon with BP. Later, BP ordered Halliburton to add more of a chemical used to increase the time for cement to thicken before reaching the proper location in the well, Halliburton said. That formula, which wasn’t subjected to a foam stability test, was poured into the well.

‘Significant Differences’

“Halliburton believes that significant differences between its internal cement tests and the commission’s test results may be due to differences in the cement materials tested,” the company said in a statement.

The commission tested off-the-shelf cement and additives, whereas Halliburton tested the “unique blend” of cement and additives that existed on the rig at the time Halliburton’s tests were conducted, it said.

Halliburton has been unable to provide the commission with cement, additives and water from the rig because it is subject to a federal court preservation order. These materials will soon be released to the Marine Board of Investigation, the company said. “Halliburton believes further comment on Chevron’s tests is premature and should await careful study and understanding of the tests by Halliburton and other industry experts,” it said.

The evidence that Halliburton knew its cement showed instability before the blowout indicates multiple companies will be liable for damages, said Mike Stag, a New Orleans environmental lawyer suing BP, Halliburton and Transocean.

‘Gotcha Moment’

“This is one of those gotcha moments,” Stag said. “It’s the kind of evidence you hope will show that someone absolutely knew there was a significant problem.”

The evidence may also mean criminal fines for Halliburton if the U.S. Justice Department reaches the same conclusions, said David Uhlmann, former head of the department’s environmental crimes division.

“They don’t face the same level of fines as BP does,” Uhlmann said. “BP will likely pay billions in criminal penalties and billions more in civil penalties, while Halliburton’s penalties may run into hundreds of millions, at most $1 billion or $2 billion.”

Credit-default swaps on Halliburton climbed 8 basis points to 93 today in New York, according to data provider CMA. The cost to protect the company’s debt almost tripled in June, reaching as high as 219.4, CMA data show. Investors use credit- default swaps to protect from losses on corporate debt or to speculate on creditworthiness.

Well Design

Scott Dean, a spokesman for BP, said he couldn’t comment on the presidential commission’s findings. David Nicholas, a BP spokesman in London, also declined to comment.

Halliburton has said BP’s well design, rather than the composition of its cement, was at fault in the blowout that sank a $365 million vessel and spewed almost 5 million barrels of crude into the sea.

“The fact that BP and Halliburton knew this cement job could fail only solidifies their liability and responsibility for this disaster,” Representative Edward Markey, chairman of the House Energy and Commerce Committee’s Energy and Environment Subcommittee, said in a statement yesterday.

“This is like building a car when you know the brakes could fail, but you sell the cars anyway,” said Markey, a Massachusetts Democrat who asked BP’s new chief executive officer, Robert Dudley, to testify at a House hearing. Dudley has declined to appear.

November Hearings

The national commission is headed by former U.S. Senator Bob Graham, a Florida Democrat, and William Reilly, a former chief of the U.S. Environmental Protection Agency. The panel will hold hearings on the preliminary findings of its investigation in Washington Nov. 8 and Nov. 9.

Two tests Halliburton conducted in February using slightly different slurry recipes and a different well design showed the cement would be unstable, the commission staff said. While Halliburton provided data from one of these tests to BP in March, there’s “no indication that Halliburton highlighted to BP the significance of the foam stability data,” the staff said.

The company used slightly different lab protocols in a test seven days before the blowout and once again found it was unstable, the staff said.

A final test using a modified testing procedure showed the cement would be stable, the staff said. It’s not certain whether Halliburton discussed these results internally or whether any changes were made before the blowout, and BP didn’t have the findings before the evening of April 19, according to the letter.

April Tests

Halliburton has stated publicly that tests conducted on the Macondo well cement before pumping it on April 19 and April 20 indicated it would be stable, according to the letter.

Halliburton probably fulfilled its contractual duty by alerting BP that one of the tests failed, even if it withheld or neglected to mention the two other failures, said Jeffrey Spittel, an oil-industry analyst at Madison Williams and Co. in Houston. The finding may show BP acted carelessly by ignoring the bad test result the company did receive, Spittel said.

“It’s damning evidence regarding BP’s conduct,” Spittel said yesterday in a telephone interview. “It’s ultimately up to the operator to make the final go or no-go decision on the cement job.”

Gagliano Warning

Halliburton Technical Adviser Jesse Gagliano told a separate federal panel in August that he warned BP five days before the catastrophe that the London company’s design for the well was susceptible to a “severe” natural-gas surge before the well erupted.

Gagliano told a joint U.S. Coast Guard-Interior Department board that he urged BP engineers to assemble the well with 21 centralizers, devices that ensure the steel pipe lining the well can be properly secured to the rock with cement.

BP decided to use six centralizers instead, according to internal BP e-mails entered into evidence by the investigative panel. On April 20, as rig workers and BP managers put the finishing touches on the $154.5 million well, a burst of gas shot up the pipe linking the rig to the well, triggering explosions and the spill.

BP Probe

BP’s internal investigation of the disaster reached conclusions almost identical to yesterday’s report concerning the instability of Halliburton’s cement. In a Sept. 8 report on the probe, BP said tests conducted by CSI Technologies on a similar recipe found the cement “was likely unstable.”

The BP report criticized the company’s own engineers and managers for failing to properly test the cement after it was poured to ensure the well had been sealed off from surrounding oil-soaked rock.

Engineers from Halliburton and BP have testified to federal investigators that they agreed to use lightweight cement for Macondo because the rock formation was brittle and too weak to withstand a more robust mixture.

Halliburton is the second-largest oilfield-services company after Schlumberger Ltd.

By Jeff Plungis and Joe Carroll – Oct 29, 2010 3:38 PM GMT+0200

Source: Bloomberg

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