Boots & Coots Buys Halliburton Business And News On Big Potential Contract

Furthermore Boots & Coots (WEL – $1.68) announced it acquired the external abrasive jet cutting systems from Halliburton Company.

The abrasive jet cutting system was developed by Halliburton in 1991 to assist firefighting crews in Kuwait battle more than seven hundred fires left after the Iraq invasion. The external abrasive jet cutter is designed to be easily positioned on a burning well; the system utilizes sand and water to abrade the wellhead or surface equipment thus allowing the well to flow in a vertical direction, making it possible to extinguish the fire with water. Once the fire is out the well can then be capped.

“The abrasive jet cutter is an important tool in our firefighting and blowout response business. We use it extensively as a method to cut damaged wellhead or pressure control equipment, decreasing the time personnel are in hazardous environments. The abrasive jet cutter is a time saving device that is safe to operate and brings significant value to customers by decreasing both the time to remove debris and the overall time to get the well back under control.”, said Jerry Winchester, chief executive officer of Boots & Coots. No financial details were mentioned.

Earlier in the week an article was published (see below) on a disaster at one of Oil and Natural Gas Corporation of India’s (ONGC) oil rigs. This is a potential $61.79 million contract for WEL. Because the company hasn’t issued a press release about this, we presume the deal hasn’t been finalized yet. Interesting news anyway.

Article Disaster at G-4-AF well-IV – September 13, 2009

An accident at the G-4-AF well in the Eastern Offshore has created a potentially explosive and high risk situation for Oil and Natural Gas Corporation of India (ONGC), which is now scrambling to secure the well and avert a blowout. The incident occurred earlier this year during production testing of the well by the Indian E&P major`s Sagar Vijay drilling rig. According to reports, on April 16, 2009, one of the secondary anchors fastening the vessel over the drilling site parted. The reason for the separation of the anchor from the vessel is unclear, but following the incident, ONGC had immediately pressed one of its anchor handling boats into action to fish out and relay the anchor.

But while the retrieval operation for the secondary anchor was underway, disaster struck twice on April 22, 2009, when the primary anchor keeping the vessel at the G-4-AF well site parted as well, resulting in the drilling rig drifting off location.

This was ill-timed, as the rig was carrying out pressure build-up studies before going off location. During testing of the well, oil was flowing at the rate of 240 bbls per day, while gas and water output was tested at 41,000+ m3/day. The last upper well blowout pressure (STHP) was recorded at 6,200 psi, while MDT sample tests at a depth of 4,155 metres had shown that formation pressure was 11,300 psi. Since at this depth the fluid type was gas and liquid, there were chances of encountering higher pressure inside tubing. This raised the spectre of the sub-sea package losing its integrity due to any delay in killing the well.

ONGC moved swiftly to close the well through the sub-sea test tree in order to avoid a major accident and loss of life, taking the following steps:

  • Sub-sea test tree ball valve closed at 9.10 am
  • Surface pressure was bled off
  • Formation fluid was circulated out of the landing string valve
  • The sub-sea test tree was unlatched at 9.20 am
  • The LPR was opened
  • The kill line fail safe valve was closed
  • This string was picked up by one single
  • The shear ram was closed
  • The annular-type well blowout preventer was unlatched from the well at 9.40 am

Subsequently, ONGC directed its anchor-handling tug to abandon efforts to recover the secondary anchor of rig Sagar Vijay and instead focus its energies on the hunt for the primary anchor. This was achieved on April 24, 2009, and the vessel has deposited the anchor with the shore authorities. But despite its quick actions, ONGC discovered that a lot of damage has been done at the G-4-AF well when a remote-operated vehicle was sent below the waves to assess the exact extent of the damage. During inspection of the BOP stack condition, it was found that the BOP stack has tilted about 30 degrees from the sea bed and part of the BOP stack was buried in the seabed.

ONGC has now called on the services of American well blowout control expert Boots & Coots to secure the G-4-AF well and salvage the BOP stack.

Shortly after the untoward incident at the G-4-AF well in the Eastern Offshore, ONGC had flown in two well control specialists from Boots & Coots Services Inc. of Houston for on-the-spot investigation and an assessment of the future plan of action to kill the volatile well and retrieve the blowout preventer stack of rig Sagar Vijay, which has become buried in the seabed. Readers will recall that ONGC has empanelled Boots & Coots as its well control expert and had most recently utilised its services to secure and salvage the G-1-DB well in the G-1 field of the Eastern Offshore.

Following the two-day inspection of the G-4-AF well on April 30 and May 1, 2009, Boots & Coots submitted a secure and salvage plan under which they proposed to carry out intervention operations at the well site. Due to the risk involved in successfully completing the intervention portion of the secure and salvage plan, Boots & Coots has proposed to commence with top intervention first, while also simultaneously carrying out relief well feasibility and front-end engineering studies in order to minimise the danger. The studies will be essential to affirm the techno-feasibility for establishing a relief well in the deepwater area to reduce the pressure in the G-4-AF well.

The well control expert has proposed to execute the project in three phases as follows:

  • Phase-I will comprise of gathering technical information from ONGC for formulating a firm plan to kill the G-4-AF well and salvage whatever equipment possible. This phase has already been completed and Boots & Coots has already submitted its plan of action to ONGC.
  • Phase-II will involve the award of a work order by ONGC to Boots & Coots, following which the contractor will mobilise a vessel and equipment to carry out the job. This phase will also be marked by the initiation of project management functions necessary to implement the scope of work, procurement of all material, services and supplies, logistics coordination and relief well planning. In addition, in case it is decided that a relief well is necessary within the scope of intervention operations, drilling of this well will also commence during this phase.
  • During Phase-III of the project, Boots & Coots will mobilise all of the personnel and equipment necessary to conduct intervention and recovery operations. Boots & Coots have suggested that the intervention operations should focus on gaining access to the annulus in order to kill the well. They have also indicated that gaining access to tubing may be possible for killing the well and they were exploring several different options to gain access to the tubing. The initial task will be for excavation to gain access to the BOP connections, following which the location and function of each hydraulic circuit will be identified. Subsequently, the pipe ram will be closed and valve and gauge assemblies will be installed on the choke line stab or kill line stab. Thereafter, two high-pressure strings will be run from the moon pool of the drillship carrying out salvage operations and will be attached to the choke and kill line after pressure testing. The kill and choke valves will then be operated using a ROV and pumping will be done through these lines to establish injectivity into the formation for well killing. After the desired rate of injectivity is achieved, cement will be pumped in to seal the formation and effectively kill the well.

The total number of days required to complete the intervention by securing the well and retrieving the sub-sea equipment has been estimated at 176 days by Boots & Coots, exclusive of the mobilisation and demobilisation time for vessels.

ONGC will have to pay a whopping Rs 303.71 crore ($61.79 million) to well control expert Boots & Coots Services Inc. (B&C) for securing and salvaging its G-4-AF well. This comprises the following cost elements:

  • Cost of vessel: $35.73 million
  • Cost of procurement items: $115,552.5
  • Cost of personnel: $5.37 million
  • Cost of rental equipment: $8.48 million
  • Total evaluated value, including 5% fees as per ONGC’s well control contract with B&C: $49.70 million
  • Fuel and lubes: $1.5 million
  • Corporate tax @ 11% of evaluated value: $5.46 million
  • Service tax @ 10.3% of evaluated value: $5.11 million
  • Total financial implication: $61.79 million (Rs 303.71 crore)

Notably, ONGC had made an internal provision of $53.61 million for securing and salvaging this well, exclusive of fuel and lube costs and corporate and service tax. Therefore, Boots & Coots quotation is well within ONGC’s budget for the job. But this is clearly far more expensive than the actual cost of drilling the G-4-AF well itself. Accordingly, ONGC did try to negotiate Boots & Coots rates downward. But the US company used its expertise as leverage to resist any major downward revision in its quotation, though it did make a few minor concessions. ONGC now has no choice than ratifying this extraneous expenditure of $61.79 million in the interest of ensuring safety in its offshore operations, as it would rather not risk a dangerous blowout.

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