Halliburton and the Gulf Oil Spill: Maybe Faulty Cement Is the Smoking Gun

Halliburton cement used to seal BP's Gulf oil well was unstable, but used anyway despite multiple failed tests leading up to the Deepwater Horizon disaster, the presidential oil spill commission has discovered. That means BP's rather dim liability picture just got a little brighter, since for the first time in months it gets to share the criticism spotlight with another company.

Halliburton (HAL), the oilfield services company, was hired by BP to seal the bottom of its deepwater well with cement. (The failure of that well that spewed 4.9 million barrels of oil into the Gulf. ) We've known for some time that the cement used at the bottom of BP's Macondo well must have failed in some manner, as the commission noted in a letter released Thursday. Exactly how serious that failure was, though, wasn't clear because Halliburton wouldn't share the formula it used in its cement slurry.

The commission reviewed both internal Halliburton data and convinced the company to reveal the recipe it used to make the foam cement slurry. Chevron (CVX) volunteered to test the cement slurry at its lab in Houston, but was unable to generate stable foam cement in the lab using the materials provided by Halliburton. And this wasn't just one test. The mixture failed nine different stability tests. All of this suggests that the foam cement used at Macondo was unstable and may have contributed to the blowout, which ignited Transocean's Deepwater Horizon rig and killed 11 workers.

Legally, of course, BP isn't in the clear. While the commission's finding was pretty damning for Halliburton, there is lots of legal wiggle room. For example, and as I note in the bulleted out findings below, Halliburton sent a report to BP including technical data that showed one of its tests on the cement foam slurry found it unstable. BP simply overlooked the data. Fred Bartlit, the commission's chief counsel, also emphasized that the quality of the cement job wasn't the sole factor behind the blowout. And in fact, his final statement jabs back at BP and Transocean.

Cementing wells is a complex endeavor and industry experts inform us that cementing failures are not uncommon even in the best of circumstances. Because it may be anticipated that a particular cement job may be faulty, the oil industry has developed test, such as the negative pressure test and cement evaluation logs, to identify cementing failures. It has also developed methods to remedy deficient cement jobs.

BP and/or Transocean personnel misinterpreted or chose not to conduct such tests at the Macondo well.

• Halliburton conducted at least four foam stability tests on the Macondo cement slurry.
• The first two tests were in February 2010 using different well design parameters and a slightly different slurry recipe. Both tests indicated the foam slurry was unstable.
• Halliburton sent data from one of the February tests to BP in a March email, but it was a technical report. There is no indication that Halliburton highlighted the significance of the foam stability data or that BP staff had any questions.
• Two other stability tests were conducted in April using the actual recipe and design poured at the well. One of the first of these, conducted about seven days before the blowout, the foam slurry was unstable. The results were reported internally within Halliburton by at least April 17. There's no indication that Halliburton shared this with BP.
• Halliburton modified the testing procedure in the final test and this time -- for the first time -- the foam slurry design was stable.
• The commission isn't sure when Halliburton reported data from the final successful test or whether the test was even complete prior to the time the cement job was poured.

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