Rig owner Transocean's safety record in question after BP spill

QUESTIONS over the safety record of Transocean, the owner of the Deepwater Horizon drilling rig that exploded in the Gulf of Mexico, came to light yesterday as initial efforts to cap the oil spill at the weekend failed.

An analysis of federal data by the Wall Street Journal has revealed that nearly three-quarters of incidents that triggered investigations into safety and other problems on deep water drilling rigs in the Gulf of Mexico since 2008 have been on rigs operated by Transocean.

The WSJ report also found that, following Transocean's 2007 takeover of rival GlobalSantaFe in an $18 billion deal, its share of incidents in deep water investigated by the regulator has risen, even after accounting for its increased size.

In response, Transocean said it stood by its overall safety record, and said it was committed to safety.

In an ironic twist, Deepwater Horizon was hosting a VIP reception celebrating seven years of being free from serious accidents the day of the explosion.

Today and tomorrow, representatives of the firms involved with the oil spill face the grilling of a Congressional hearing, the first of many investigations into the incident.

Until now BP, as majority owner of the well that is spewing an estimated 5,000 barrels of oil a day into the Gulf, has attracted much of the attention. But increasingly the role of the contractors and the co-owners are in the frame.

Transocean, which has a long-standing relationship with BP, owned and manned the rig. Halliburton, the global oil and gas services firm, was responsible for cementing the pipeline seal that is believed to have played a major role in the explosion. Another firm, Cameron International, designed and developed the blowout preventer – the last line of defence in a subsea well – which failed.

Yesterday, BP confirmed it has spent $350m on the incident so far and Tony Hayward, BP's chief executive, estimated the incident is costing the firm $10m a day.

Adding to the firm's woes, on Friday a BP shareholder filed a lawsuit in the federal court in New Orleans accusing Hayward and other BP executives of ignoring safety issues on rigs. It is one of thousands of claims expected to be made against the firm.

Yet the disaster has not yet hit the bottom line of Transocean. Today, the Deepwater Horizon lies upside down at the bottom of the Gulf under one mile of seawater.

As a result, the firm has made a $270m profit from insurance already paid out, following a cash payment of $401m on a $560m insurance policy.

Although BP has lost more than 20bn from its market capitalisation since the blast in April, not all observers are dismal on its future.

Analysts for JP Morgan Cazenove yesterday went against the flow to call BP a "buy". The brokerage firm argues that the $50bn loss in value shared among all the companies involved, including fellow well-owners Andarko and Mitsui, and contractors Transocean, Halliburton and Cameron, is way beyond what repairs, lawsuits and clean-up will cost. And, it points out, demand for oil will hardly stop as a result of the disaster.

Transocean is the undisputed world leader in offshore drilling. The firm is headquartered in landlocked Zug, Switzerland, a fact believed by many to be for tax purposes.

Its history is rooted in Louisiana, where the firm's antecedent, Danciger Oil & Refining Company, bought its first drilling rig in 1919. In the UK, Transocean has come under the scrutiny of the Health and Safety Executive. In 2006, the HSE issued Transocean with an improvement notice, criticising the testing of a blow-out preventer.

A spokesman for Transocean said the matters highlighted in the HSE notices were addressed and rectified within a short time.