Total’s (NYSE: TOT) North Sea Gas Leak Could Turn Into Lengthy Problem

Tallahassee, Fl 3/27/12 (StreetBeat) -- The gas leak from French oil company Total’s (NYSE: TOT) Elgin oil field in the U.K. North Sea could turn into a lengthy problem for the company, not unlike the challenge BP faced shutting down its leaking well in the Gulf of Mexico two years ago.

The company has already said it could take “a couple of weeks” under the best-case scenario to halt the gas leak, which has prompted the evacuation of several offshore facilities and shut down around 130,000 barrels equivalent of oil and gas production. However, some of the fixes the company is discussing could take far longer.

The scale of the leak from the Total’s offshore field is nowhere near the severity of theDeepwater Horizon disaster, which killed 11 men and spilled tens of thousands of barrels of oil a day into the Gulf. No casualties have been reported arising from the gas leak on the Elgin platform and a six mile-long sheen of gas condensate has been reported on surface of the sea around the facility.

The gas is leaking from the Elgin platform itself, not bubbling up from the sea bed as some reports suggested, but the full evacuation of the facility will make fixing it challenging.

David Hainsworth, health, safety and environment manager for Total Exploration and Production in the U.K., told BBC News that one possibility is to pump heavy mud into the leaking well to rapidly stop the flow of gas.

But one of the options under consideration, drilling a new ‘relief well’ to intercept the original leaking borehole and pump it full of cement, could take much longer.

One precedent is BP’s Deepwater Horizon oil disaster two years ago. That drilling rig exploded on April 22 2010, triggering the largest offshore oil spill in U.S. history from the Macondo well. It was almost five months later that Macondo was permanently shut down, by drilling the relief well took around three months to complete.

A similar operation to shut down the Elgin leak could prove almost as technically difficult, because both reservoirs sit at the extreme end of the industry’s capability. Macondo was such a challenge to control because it was more than 5,000 meters deep, highly pressurized to 12,000 pounds per square inch and very hot at 115 degrees Celsius.

The Elgin reservoir is also more than 5,000 meters deep, is pressurized to almost 16,000 pounds per square inch and is at a temperature of 200 degrees Celsius.

To be sure, the two situations are not a direct analogue. Until the full facts of the incident are known, it’s difficult to say exactly how a solution to this problem will unfold.

One mitigating factor is that the Elgin field is in much shallower seas. Water depth is just 93 meters, compared with more than 1,500 meters for Macondo, making it considerably easier to access the well head at the sea bed.

However, as Total’s shares trade down more than 4%, there is good reason for investors to worry that a solution won’t happen quickly.

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