7/16/2010
By Conley Turner, Research Analyst

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There is currently a beehive of activity occurring at the site of BP's now infamous Macondo well and the loss of the semisubmersible Deepwater Horizon. The plight to stop the intransigent well from spilling millions of gallons of oil into the Gulf has been epic.  On the surface of the ocean is a floating an industrial complex that rivals many land based operations.  Two giant rigs and scores of other vessels are assembled with the focused objective of stopping the leak. In the frigid and foreboding darkness a mile below the surface are the Remote Operated Vehicles (ROVs). With ocean pressure as much as 2,300 pounds per square inch at these depths; this environment is the domain of ROVs.  They are currently at the tip of the spear in this epic battle.

ROV technology has been in existence since the 1960s.  The Navy used the technology to perform inspections on the outside of submarines. The earliest versions were also used in the petroleum industry to perform tasks at depths of up to 1,000 feet for long durations. Since then, the technology has evolved exponentially with primary application in deepwater offshore oil and gas drilling and scientific exploration.

Modern ROVs can reach depths of up to 10,000 feet below the ocean surface.  Their features include among other things, sophisticated hydraulic arms and video capability and other cutting edge electronics to convey data to surface operators.  Though they can never be as efficient as a human diver, at these extreme depths they are a viable proxy.  They are designed to withstand operating in debris filled environments with some even having a lifting capability of over 1,000 pounds.

The increased sophistication of deepwater offshore exploration has been the catalyst for the development of a new generation of ROVs.  While the current generation of vehicles is typically tethered to a surface vessel, the newer versions are autonomous.  These Autonomous Underwater Vehicles (AUV) as they are called, also operate independent of direct human control. These kinds of AUVs are likely to be engaged in mapping out the topography of the seabed and analyzing proposed oil and natural gas offshore infrastructure. 

With the expectation for an increase in activity in offshore drilling, there is a significant amount of visibility for the usage of ROVs and the companies that employ the technology.  The key player is Oceaneering (OII) which provides products and services to the offshore drilling industry.  The vast majority of the company's revenues are generated from the operation of ROVs in deepwater. 

In fact, it is Oceaneering that is presently being used by BP to cap the Macondo well.  It is important to note the ROVs, though state of the art, have not been used in the current crisis in a manner consistent with their intended purpose.  Their designs were for more of a supportive role in deepwater offshore drilling.   In this case, they are being used to do all the actual repair work in the unprecedented well blowout. Now that a temporary cap have been successfully deployed, these ROVs with be monitoring the situation and standing by to intercede should any difficulty arise.

Conley Turner
Wall Street Strategies