CHICAGO -- Deep-water oil exploration has been disrupted from the Gulf of Mexico to Brazil by the discovery of faulty bolts used in safety equipment less than three years after the worst-ever U.S. maritime crude spill.
Energy explorers such as Chevron Corp., Royal Dutch Shell Plc and Transocean Ltd. said they have been directed by U.S. regulators to suspend work aboard rigs that employ General Electric Co. devices connecting drilling tubes to safety gear and the seafloor. The equipment must be retrieved so defective bolts can be replaced, the U.S. Bureau of Safety and Environmental Enforcement said in an alert issued Jan. 29.
Installing new bolts and resuming drilling may take as long as three weeks for each rig, Credit Suisse Group AG said. For oil companies paying upwards of $600,000 a day to rent the most-sophisticated deep-water vessels and another $500,000 a day to staff and supply each of them, the delays may be significant, said Craig Pirrong, director of the University of Houston's Global Energy Management Institute.
"This certainly will be costly for the industry," Mr. Pirrong said in a phone interview Wednesday. "This is a result of increasing government scrutiny of deep-water activities. The question is, will the increased costs be so onerous that they discourage some companies" from searching the deep oceans for crude.
Lower earnings from the Gulf may be a consequence for service firms, due to potential for longer downtime than expected, Bill Herbert, an analyst at Simmons & Co. in Houston, wrote in a note to investors Thursday. "GE bolt revelations yesterday galvanized the market as Macondo scar-tissue sensitivity remains acute," he wrote, referring to BP's April 2010 Deepwater Horizon spill. "Think of this as a modest tropical storm, albeit in January."
The defect was discovered last month after a leak of drilling fluid was linked to bolts that failed because of stress corrosion, according to the Jan. 29 alert. The regulator didn't identify the rig owner or which oil company was leasing it. GE declined to identify the bolts' manufacturer.
Nations with active offshore crude exploration have been alerted to the bolt defects, said Sean Gannon, a spokesman for Fairfield, Conn.-based GE. In the Gulf of Mexico, 24 of the 83 rigs actively drilling wells at the time of the alert carried connectors that may have flawed bolts, the bureau said. Of those, six rigs have so far been cleared to return to drilling operations.
"Everyone in the industry is aware of it," Mr. Gannon said in an interview Wednesday. About 30 to 40 GE customers are potentially affected, he said in an email.
Anadarko Petroleum Corp., the second-largest U.S. independent oil and natural gas producer by market value, said it will be swapping out bolts at its Phobos well and a Caesar/Tonga development well. "We will be able to replace the bolts at the next available stopping point with minimal downtime and no impacts on production," spokesman John Christiansen said in an email Thursday.
Deep-water oil exploration involves extending steel tubes from floating rigs more than a mile to the seafloor and inserting a drill bit through the tube to carve a hole in the Earth. Five-story stacks of valves and pressure-control gear known as blowout preventers, or BOPs, are planted atop the well to snuff out unpredictable surges of gas and crude that pose a danger to rig crews on the surface.
It was just such a surge that exploded onto the deck of Transocean's Deepwater Horizon rig, killing 11 workers, injuring 17 and triggering an 87-day oil spill that fouled thousands of square miles and shut much of the Gulf to fishing and exploration for months. The $365 million rig that sank during the disaster still rests on the seafloor.
"We expect rig downtime to be 2-3 weeks," including time to bring equipment up, replace the bolts and return to the seafloor, Gregory Lewis, a New York-based analyst for Credit Suisse, said in a note to clients Wednesday. While the order affects only drilling in the U.S. Gulf, "discussions with one driller lead us to believe it will be up to each operator whether to pull the BOP and replace the bolt outside the U.S. Gulf," he wrote.
Oil production from wells in federal waters of the Gulf accounted for 20 percent of total U.S. crude output as of the end of November, according to the Energy Information Administration. The region produced about 7 percent of the nation's gas.