Transocean Ltd

Updated: July 22, 2010

Transocean LTD., a Swiss-based company, is the world’s largest offshore drilling contractor, renting floating mobile drill rigs along with equipment and personnel for operations, to oil and gas companies.

On April 20, 2010, an explosion and fire killed 11 crew members and destroyed a Transocean-owned semisubmersible drilling rig called Deepwater Horizon, positioned about 50 miles southeast of Venice, La., in water nearly 5,000 feet deep. The rig, one of the largest and most sophisticated in the world, had been under contract to BP, the London-based oil giant, since September 2007. The Deepwater Horizon accident spewed thousands of barrels of oil a day into the Gulf of Mexico, becinubg the largest accidental oil spill in history.

BP, which is responsible for the cleanup, has pointed out repeatedly that Transocean had been operating the rig and was the owner of the "blowout valve” that was designed to cut off leaking oil but which had proved impossible to activate.

Transocean’s corporate motto is "We’re never out of our depth." But that assertion has been increasingly called into question since the spill began.

Throughout its history, Transocean has been known for pushing the envelope. The company, the leading player in offshore oil drilling, proudly breaks records for drilling the deepest wells, while finding ways to keep oil and gas flowing under the most extreme pressures and temperatures. On the financial side, the company has pursued aggressive tax strategies and bought up competitors.

Although unknown to Americans before the Gulf accident, Transocean is well known in a number of other countries for testing local laws and regulations. Human rights activists have complained about its dealings in Myanmar. Norway is investigating Transocean for possible tax fraud.

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Safety Concerns Voiced Before the Disaster

A confidential survey of workers on the Deepwater Horizon in the weeks before the oil rig exploded, commissioned by Transocean, showed that many of them were concerned about safety practices and feared reprisals if they reported mistakes or other problems.

In the survey workers said that company plans were not carried out properly and that they "often saw unsafe behaviors on the rig."

Some workers also voiced concerns about poor equipment reliability, "which they believed was as a result of drilling priorities taking precedence over planned maintenance," according to the survey.

"At nine years old, Deepwater Horizon has never been in dry dock," one worker told investigators. "We can only work around so much."

"Run it, break it, fix it," another worker said. "That’s how they work."

According to a separate 112-page equipment assessment also commissioned by Transocean, many key components — including the blowout preventer rams and failsafe valves — had not been fully inspected since 2000, even though guidelines require inspection of the preventer every three to five years.

The report cited at least 26 components and systems on the rig that were in "bad" or "poor" condition. The mechanical problems discovered by investigators found problems with the rig’s ballast system that they said could directly affect the stability of the platform. They also concluded that at least one of the rig’s mud pumps was in "bad condition."

The report also cited the rig’s malfunctioning pressure gauge and leaking parts and faulted the decision by workers to use a type of sealant "proven to be a major cause of pump bearing failure."

Federal investigators have been focusing on the role that inadequate mud weight played in the blowout. Shortly before the explosion, workers on the rig replaced the heavy drilling mud with a lighter seawater. Drilling experts have speculated that having chosen a better mud weight could have prevented the disaster.

Transocean’s equipment report also may shed new light on why the blowout preventer failed to stop the surging well, which is one of the biggest remaining mysteries of the disaster.

The two Transocean-commissioned reports echoed the findings of a maintenance audit conducted by BP in September 2009. But the Transocean-commissioned reports indicate that maintenance concerns existed just days before the explosion and the rig owner was aware of them.

World’s Biggest Deep-Sea Driller

The sinking of the Deepwater Horizon platform and the widening oil spill from the underwater well has damaged the company’s image of discipline and technological know-how. It has also dragged the secretive company and its chief executive, Steven L. Newman, uncomfortably into the public eye.

Transocean’s evolution into the world’s biggest deep-sea driller follows a decade-long acquisition and merger spree.

It began in 1996 when a Texas-based company called Sonat OffshoreDrilling acquired Transocean ASA, then Norway’s largest offshore driller. Three years later, the company, now known as Transocean, shifted its headquarters for tax purposes to the Cayman Islands from Houston, though a vast majority of its executives still work in Houston. In subsequent years, it acquired or merged with other drillers including R&B Falcon, the drilling unit of Schlumberger and GlobalSantaFe. Then, in 2008, for tax purposes, it moved its headquarters again, this time to Switzerland from the Cayman Islands.

Transocean, which employs more than 18,000 people, operates a fleet of 139 offshore rigs and drill vessels in 30 countries. It owns nearly half of the 50 or so deepwater platforms in the world.

A predecessor company was the first to deploy jack-up drilling rigs that could stand on the ocean floor. Transocean was the first company to drill year-round in the frigid North Sea, and it was the first to run a drill ship capable of working in 10,000 feet of water. In September, the company claimed the record for the deepest offshore well after it finished one for BP in the Gulf of Mexico that was 35,050 feet in vertical depth.

An examination by The New York Times of Transocean’s pollution and accident record showed that it had performed on a par with other companies working in the gulf. Before the Deepwater Horizon accident, Transocean’s current drilling vessels had accounted for about 15 percent of 777,000 gallons of chemicals and petroleum spills in the last decade in the gulf, based on a review of completed investigations by the United States Coast Guard.

Still, the company’s board suspended executive bonuses for 2009 after four workers died in separate incidents on separate rigs in different countries.

Investigations and Controversies

Human rights advocates have called for an investigation into Transocean’s recent dealings in Myanmar. They cite its involvement in a drilling project that apparently included a company that is suspected of having ties to two men accused of laundering money for Myanmar’s repressive government, which is under United States trade sanctions.

The company has disclosed in Securities and Exchange Commission filings that its drilling equipment was shipped by a forwarder through Iran and that until 2009 it held a stake in a company that did business in Syria. The State Department says Syria and Iran sponsor terrorism.

In Norway, Transocean is the subject of a criminal investigation into possible tax fraud. The company has said in S.E.C. filings that Norwegian officials could assess it about $840 million in taxes and penalties. The filings also said that a final ruling against Transocean could have a "material impact" on the company, which has suffered a drop in its stock price of more than 40 percent since the Gulf of Mexico incident.

And in the United States, a federal bankruptcy judge recently found that one of Transocean’s merger partners had repeatedly abused the legal system to try to avoid potential liability in a pollution case in Louisiana. Transocean is also the target of tax inquiries in the United States and Brazil.

Transocean declined though an outside spokesman to make company officials available for comment. The company said in a statement that it had always acted appropriately and believed that it would prevail in any investigations.

It is not unusual for large multinational companies like Transocean to find themselves in legal or tax controversies around the world, and Transocean has noted the issues that face it in public filings. The company’s most significant safety problem overseas involved a 2007 episode in which eight people died off the coast of Scotland when a support vessel capsized while towing a huge chain used to position a Transocean rig. A Norwegian board of inquiry found that missteps by several parties, including Transocean and the support vessel’s owner, had contributed to the incident.


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