In the aftermath of the tragic Deepwater Horizon offshore rig explosion, and as efforts to halt the oil spill into the Gulf of Mexico continue to little avail, the issue of risk in the industry is once again brought into the spotlight.
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Costing 11 lives and millions, potentially billions, of pounds in clean-up operations, the BP-run, Transocean-owned deepwater rig disaster is being hailed as a turning point in offshore operations. Some say BP will bring its offshore operations in-house instead of relying on contractors to do the work. Talk of a BP-takeover, or merger, is rife. Federal fines and penalties for BP are likely, as is increased national scrutiny of the industry’s safety records. President Obama has already instigated a six month suspension on new deepwater drilling operations in the Gulf, and is expected to impose new rules for the way the Minerals Management Service (MMS) is run, to put greater distance between the regulator and the companies it regulates.
It is interesting to look at the ways in which risk is measured and swallowed up in dangerous industries such as ours. As David Leonhardt writes in his interesting article about risk for the New York Times, humans are apt to struggle with what he explains are “low-probability, high-cost events”.1 He argues, “when an event is difficult to imagine, we tend to underestimate its likelihood”. Deepwater Horizon had always operated normally, so an explosion was hard to imagine. Leonhardt makes comparisons to other difficult to imagine and therefore underestimated events – such as the subprime mortgage crisis (which the reckless traders did not foresee, possibly because there was no precedent).
The US NOAA has just released its hurricane predictions for the new season and the report predicts 14 storms this year, which is a high level of activity (2005 was the year of Katrina and experienced 15 storms). We can cope with the prospect of the hurricanes, as they happen every year, whether to a lesser degree or greater, and they can be predicted and tracked and evaluated. Pipeliners’ response to hurricanes is measured and practised: evacuate vulnerable offshore assets; instigate protection for existing and future lines; and continually develop rehabilitation methods for those pipelines that take a hit during the season. A known risk, especially one that appears in a predictable ‘window’ like the hurricane season, is quantifiable and therefore more manageable.
It is the ‘low probability, high cost’ events that can throw our reasoning. In the wake of such an event, Leonhardt explains, the possibility of such an event happening again appears more likely and the risk feels somehow greater.
Leonhardt says, “when an unlikely event is all too easy to imagine, we often go in the opposite direction and overestimate the odds”. He cites the case that, after the 9/11 attacks in the US, “Americans cancelled plane trips and took to the road instead. There were no terrorist attacks in the US in 2002, yet the additional driving apparently led to an increase in traffic fatalities”.
So, in the wake of the Deepwater Horizon disaster, when the public can easily imagine another, similar, offshore malfunction and subsequent disaster, we must be careful not to overestimate the odds. This is not to take away from the gravity of the situation, nor is it meant to devalue the importance of greater safety measures offshore and in deepwater in the future. But the focus must be on continued operations in a safer way – by all means reform the MMS and the way its regulators work (most believe that the divisions responsible for management, revenue and safety will be separated out to avoid any future conflict of interest) – but heaping more regulations on the industry may hamper the development of new technologies that will ensure safer operations in deepwater.
1. LEONHARDT, D., ‘Spillonomics: Underestimating Risk’, New York Times, 31st May 2010.