UPDATE 1-Transocean should have done more before '10 Gulf spill-CEO

Tue Mar 19, 2013 5:05pm EDT

By Kathy Finn

NEW ORLEANS, March 19 (Reuters) - The chief executive of Transocean Ltd, owner of the rig destroyed after BP Plc's Macondo well blew out in 2010, testified on Tuesday that his workers made mistakes that day, but were not responsible for overall safety at the site.

Steven Newman, who had been CEO for less than two months when the blowout occurred, was emotional at times as he spoke of the company's responsibilities prior to the accident that killed 11 people and caused the worst U.S. offshore oil spill.

"We acknowledge that we should have done more," he said under questioning by a lawyer for Transocean, in the fourth week of a civil trial to determine blame for the spill.

Newman's voice shook as he spoke of the April 20, 1010 disaster on the Deepwater Horizon rig, but he denied that Transocean cut corners when it came to safety procedures.

The Justice Department, the U.S. Gulf states affected and other plaintiffs are suing BP, Transocean and other companies for economic and environmental damages related to the spill. BP accepts its role in the accident, but believes Transocean and well-cementing provider Halliburton Co share the blame.

Newman said Transocean was in charge of safely performing its own operations on the rig, but that overall responsibility for safety at the well site rested solely with BP.

In the same New Orleans federal court two weeks ago before U.S. District Judge Carl Barbier, a Transocean worker who was on the Deepwater Horizon during the blowout acknowledged there was a misinterpretation of trouble signs beforehand.

BIG KICK

Newman discussed how Transocean responds to potentially dangerous situations such as a "kick," which results when unexpected pressure forces fluids upward through the well. Company policy states a well should be shut in if a kick pushes as much as 20 barrels of hydrocarbons through the drill hole.

The kick size may be a key point in finger-pointing between Transocean and BP. In testimony on Monday, well control expert Calvin Barnwell, who reviewed the incident for Transocean, said about 39 barrels of fluid pushed up through the Macondo well in the early afternoon on the day of the explosion.

Asked by a BP lawyer if he agreed BP was "entitled to rely on Transocean" to shut in the well after the 39-barrel kick, Barnwell answered yes.

Transocean has pleaded guilty to federal charges connected with Clean Water Act violations and agreed to pay $1.4 billion in criminal and civil fines and penalties.

As for the civil case before Barbier, the companies must show any mistakes do not meet the legal definition of gross negligence required for the highest amount of damages. BP has already spent or committed $37 billion on cleanup, restoration, payouts, settlements and fines.

Barbier scheduled a hearing for April 5 to consider BP's objections to some of the "fictitious" and "absurd" oil spill compensation claims addressed through a claims facility set up last year.

On top of that, liabilities could stretch into the tens of billions of dollars if Barbier determines BP or other defendants were grossly negligent.

Establishing management responsibility could be important in proving gross negligence. Robert Cunningham, a lawyer for the plaintiffs, finished grilling of Newman by asking: "So you have identified no management failures that caused or contributed to the blowout?"

"No," Newman said.

Newman has been well compensated for Transocean's very public struggles over the past three years. According to a company filing on Monday, his total 2012 pay package of $14 million is more than double the level of 2010, lifted by stock and option awards and non-equity incentives.

Transocean shares, which traded in the $80 range prior to Macondo, hit a seven-year low of $38.22 in late 2011, and have staged a relatively dramatic recovery from that trough since then. The stock closed at $52.22 on Tuesday.

Newman was on the stand in New Orlesan a day after presenting at the Howard Weil energy conference across town, where much of the talk was about the dramatic post-Macondo revival of drilling in the deepest waters of the Gulf of Mexico - described as the world's fastest-growing deepwater market.

"If a typical deepwater well is like going to the moon, then the Gulf of Mexico ultra-deepwater frontier is like going to Mars," Martin Craighead, CEO of oilfield services company Baker Hughes Inc, said in a speech at the conference.

The court case is In re: Oil Spill by the Oil Rig "Deepwater Horizon" in the Gulf of Mexico, on April 20, 2010, No. 10-md-02179, in the U.S. District Court, Eastern District of Louisiana.

A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

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