On Monday 16 January at 4.30 to 5am, Chevron's KS Endeavour drilling rig burst into flames, approximately 6 miles off the coast of Nigeria. Two workers are reported missing. The gas rig is still said to be burning for the second day running and is reported to have partially collapsed into the ocean. The cause is as yet unconfirmed, but early reports indicate that the explosion was partly the result of a failed blow out preventer (BOP), with parallels being drawn to the Deepwater Horizon disaster. The Nigerian state oil company, NNPC, speculated that Chevron's drillers lost control of gas pressure when equipment failure led to a "gas-kick".
Chevron has been criticised for its lack of transparency over the incident. Locals have been kept in the dark about Chevron's emergency response plan, the risk to the local population and any information about efforts to control the fire and limit the environmental damage. Chevron has also been silent about what the worst case scenario and what this means for its stakeholders.
Reuters reports that:
Local people reported a loud explosion on the rig early on Monday. "I heard a really loud bang and there was a fire," local village chief Young Fabby, 55, said by telephone.
A statement from civil society groups, NAGCOND (National Coalition on Gas Flaring and Oil Spills in the Niger Delta), demanded greater transparency from Chevron and an immediate response from the Nigerian government:
NACGOND is shocked by the news of the blowout and fire on the KV Endeavour, and is worried by the sheer frequency of these incidents within the oil industry in the Niger Delta. We extend our condolences to the colleagues and family members of those injured or missing.
We are aware that this is already a major incident with potential for disastrous impacts on the local environment, ecology and livelihoods of communities in the region.
We call on Chevron to immediately release all information that it has on the present situation and likely developments in coming days.
We call on the Federal Government to make an immediate assessment of the situation, and to mount a vigorous response to attenuate the consequences of the fire. If the situation is as grave as we fear it is, then we ask that government should work with both Chevron and, if necessary, the international community to mobilize an effective response.
We urge both Chevron and the FG to immediately inform communities living in close proximity to the site, and in the region of the actual situation and also afford them a realistic assessment of the risk that this incident poses moving forward.
The incident is just the latest in a long run of major offshore oil spills in Nigeria by Shell, Chevron and Exxon Mobil. Last month, a ruptured pipeline at Shell's Bonga platform spilled an estimated 40,000 barrels into the sea and threatened the livelihoods of dozens of local fishing communities. Oil companies have a legacy of over 55 years of environmental devastation onshore in the Niger Delta. Chevron is one the largest oil operators in Nigeria, producing an estimated 524,000 barrels per day in 2010, second only to Shell.
Chevron is also facing a $10 billion lawsuit for a recent pollution incident in Brazil, Bloomberg reports. On 7 November 2011, Chevron spilled 3,000 barrels of oil 230 miles off the coast of Rio de Janeiro after subcontractor Transocean's drilling caused cracks in the sea floor.
Brazilian authorities have said they may prosecute employees, shut operations and exact more than $10 billion in fines after the leaks at the Frade field.
Brazil has imposed multi-million dollar penalties on both companies for their inadequate responses to the spill, and suspended their operating licences.Some governments are taking a more robust approach to offshore regulation since BP's Gulf of Mexico disaster. For an industry that has remained conveniently out of sight for decades, the political pressure comes as an unwelcome surprise. Nansen Saleri of Quantum Reservoir Impact LLC, told Bloomberg:
“Those countries who choose to go on a very punitive path at the end will suffer the negative consequences themselves,”
With respect to Saleri, who incidentally worked for Chevron (1974-1992), and has been involved in drilling projects in the Gulf of Mexico and West Africa, it is unlikely that investors will be walking away from an estimated 5 to 8 billion barrels of oil in Brazil's newly discovered Tepi field, in the so-called "pre-salt" oil basin. The Brazilian government is right to require higher environmental and safety standards and to punish those companies in breach. A $10 billion fine is probably one of the most effective means of ensuring that the highest standards are met and deepwater disasters are prevented from happening again.
Will Nigerian regulators do the same? As I've argued elsewhere, the token penalties currently imposed by the Nigerian government have little or no impact on multinationals with notoriously low standards. Companies have exploited lax regulations for decades, and local communities have suffered the consequences. Serious penalties that are properly enforced could stem the tide of daily oil spills, regular accidents and safety breaches. Multinationals and their subcontractors should be made to bear the cost of their own mistakes. Ultimately, regulation could also save lives.