DEFINITION of ‘Control Of Well Insurance’
Insurance that provides coverage to companies operating a well in the case that the well suffers a blowout. Control of well insurance, also called well control insurance, covers some or all of the costs associated with regaining control of the well, cleaning up pollution caused by the blowout, and redrilling the well or restoring it to operation.
BREAKING DOWN ‘Control Of Well Insurance’
Oil and gas companies operate in complex environments, often searching for resources far under the ocean or deep underground, and often in difficult conditions. Extracting oil and gas is a complicated process, and circumstances may lead to the well becoming damaged or inoperable due to an explosion or other event. Because of the nature of extraction, it can be difficult to stop the flow of oil and natural gas immediately.
Regaining control of a well can be expensive, especially considering that wells are often drilled far under the ground or ocean, or are in a remote area. A large amount of oil or natural gas is likely to leak before the flow can be capped, and this material has to be cleaned up and kept from spreading. For example, the Deep Horizon oil spill in 2010 involved an estimated 5 million barrels of oil being spilled.
After control of a well has been regained, companies will likely want to bring the well back into operation. This requires restoring the existing well or redrilling the well to the same depth that it was operating at before.
Well control issues are often the result of human error or equipment failure. For example, an engineer may make adjustments that result in a loss of fluid or formation pressure around and inside the wellbore, with the result being damage to the well. Intense pressure may also cause steel pipes to burst. In some cases, human error may also be the result of ineffective or improper procedures and work practices relating to how the well should be operated.