An out-of-control rig fire off off the coast of Western Australia could prove a clarion call for the hazards of deep-sea drilling. Since Monday, a fire emanating from an oil and gas wellhead in the Montara Field has engulfed a drilling rig called West Atlas being used by Thai company PTTEP Australasia, according to industry publication Upstream Online. "The measures which we have been able to take so far can only mitigate the fire. They will not stop it," said executive Jose Martin of PTTEP Australasia, which owns the actual well.

The towering inferno is only the latest twist in an ongoing aquatic nightmare unfolding in the Timor Sea, an area rich in oil and gas between Australia and Indonesia. The well in question had also been responsible for a large oil spill in deep water. The well was drilled by the West Atlas rig in efforts to locate high-priced light-grade crude more than a mile beneath the waves.
The broken well began to leak oil to the surface in late August and has since created a slick that is over 100 miles wide. Environmental groups have claimed that the Australian government has consistently low-balled estimates on the severity of the spill, which is coming from a ruptured well more than a mile below the surface.

PTTEP Australasia has failed in repeated attempts to plug the leak and has, oddly, refused offers of assistance from another drilling company operating nearby. The renowned oil well disaster recovery company, Boots and Coots (WEL) -- made famous by former oil firefighter Red Adair -- has been contracted to help PTTEP figure out how to staunch the flow. But after another attempt was made to shut down spewing crude, the West Atlas drilling rig caught fire.

According to reports, PTTEP was able to inject so-called "drilling muds" into the well, a key step to shutting down the flow of oil. But the subsequent fire, which continues to burn, implies that the mud was not completely successful at stopping the movement of crude and natural gas from the subsurface to the surface.

When the leak will be finally and completely shut off is, at this point anyone's guess. PTTEP claims that it appears the oil has stopped flowing to the surface, but those claims have not been corroborated by government officials. And the Montara Disaster, as the incident is coming to be called by environmentalists, could become a signature cautionary tale for oil companies and governments alike as they race to cash in on the latest crop of deep-water energy discoveries and drill where no rig has gone before in order to squeeze more money from the deep.

'Marine Superhighway' threatened

The Montara well fire and spill is taking place off the Kimberley Coast, several hundred miles north of the city of Darwin. Scientists are concerned that, although the oil spilled is not the thick by petroleum standards, it has landed in an area described by some environmentalists as a "marine superhighway" regularly traversed by whales, endangered turtles and other forms of wildlife. Flyovers by the World Wildlife Fund found dolphins and other marine mammals swimming in the oil slick. Researchers had to curtail efforts to catalog the damage when they were overcome by noxious fumes from the spill, the World Wildlife Foundation reported.

Australia's Resources and Energy Minister, Martin Ferguson, told the Australian Broadcasting Corp. that the leak was all but contained and that remediation undertaken by the government had mopped up 70 percent to 80 percent of the oil. A team of 300 emergency responders working in boats and flying large cargo jets had dumped tons of dispersion agents into the slick to prevent the sort of clumping and broad ocean coverage that appears to have occurred. For his part, Ferguson further noted that this was the first major well disaster among the 1,500 offshore wells drilled off the Australian Coast since 1984.

Deep-sea drilling companies have long been aware of the risks of these types of activities and have built out extensive testing equipment and systems to prevent precisely this sort of catastrophe. However, as oil exploration in deep-water locations ramps up, the risk of more Montara-like situations increases, commensurately. And while most exploration companies have safety plans for well blowouts in the deep ocean, few have experienced it live and could claim to have real expertise in shutting down the type of problem now taking place in the Timor Sea.

The price tag for the disaster will likely run north of $500 million, if not up to $1 billion. The flaming $200 million rig, owned by Bermuda-based Seadrill, is likely a total loss. PTTEP has already spent $160 million on recovery efforts and will likely have to spend more. Insurance companies will pick up the tab for the drillers and the rig owners. The dolphins, whales, fish and birds that could be harmed or killed by the slick have no such luck.


Alex Salkever is Senior Writer at AOL Daily Finance covering technology and greentech. Follow him on twitter @alexsalkever, read his articles, or email him at alex@dailyfinance.com.

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