2010 year to spend or save for sake of economy ( Linda and Tommy )

The Straits Times in July 2010 published an article by Linda Lim, a professor of strategy at the University of Michigan's Ross School of Business, arguing that Asian economies should save less and spend more. The article spawned an e-mail exchange between Professor Tommy Koh, chairman of the Centre for International Law at NUS. Straits Times edited excerpts of their exchange and I read it with interest and found it with interest and educational below :

From Tommy:

DEAR Linda,

It is with some trepidation, as I am not an economist, that I write to register my disagreement with several points in your essay.

First, you state 'Cheap money fuelled 'financial innovations' such as sub-prime mortgages and risky assets, which led to a crisis'. I beg to disagree. It is greed that led Wall Street to deceive investors with those unsound instruments.

Second, you quote United States Federal Reserve chairman Ben Bernanke as saying that a 'global savings glut' was the cause of these global macroeconomic imbalances.

Mr Bernanke's argument is self-serving and disingenuous. He is trying to blame America's creditors when the fundamental problem is America's unsustainable deficits.

Third, you argue that the reason why East Asians save so much is demographic. I do not agree. East Asians save because of our culture of thrift and out of prudence.

During the 1997-98 Asian financial crisis, if Hong Kong had not had very substantial reserves, speculators would have succeeded in bringing down the Hong Kong dollar and stock exchange.

Fourth, I agree that East Asia should spend more - but not in the way that US consumers spend.

East Asia should spend more of its savings on education and training, housing and health care, on alleviating poverty and ensuring that every Asian has access to safe drinking water, basic sanitation and a decent standard of living, on improving our environment and upgrading our infrastructure and cities.

DEAR Tommy,

Thanks as always for your careful reading of my article.

On cheap money: Its contribution to the financial crisis is not at all controversial, though both former Fed chairman Alan Greenspan and Mr Bernanke have indeed said self-servingly 'It wasn't us' - the title of an Economist magazine commentary on the tendency of central banks to deny that monetary policy had any role in the financial crisis, a patently absurd suggestion.

Greed, we have always had with us. But when interest rates are low, first, it is hard to make money via conventional means so the greedy look for extraordinary innovations; and second, the cost of capital is cheap, encouraging people to risk it playing for higher stakes.

Cheap money always leads to asset bubbles, everywhere. There was also the lack of regulation which permitted excessive risk-taking. Greed may be necessary but it is not sufficient to explain a financial crisis of such magnitude.

On the 'global savings glut': Mr Bernanke came out with this notion well before the crisis. It was an attempt to explain why the US current account and fiscal deficits - which should have been unsustainable long ago - did not prove to be so. Even today, savers around the world plough their money into US assets, which perpetuates the deficits. Why do they do this?

Because the money has to go somewhere. There is so much of it and in times of uncertainty, there is still a 'safe haven' preference for the US dollar.

On the demographic explanation for savings rates: It is uncontroversial, with a great deal of empirical research behind it.

Culture may have a marginal effect but so far this has not shown up in the research. It turns out that East Asian cultures (diverse among themselves) have savings rates that vary over time and are strongly correlated with demographic profiles and real interest rates. The same is true of other countries.

Culture is neither necessary nor sufficient as an explanation for high savings. When the Japanese and Germans age further, they will not be able to avoid drawing down on their savings to survive. The same will be true for Singaporeans.

On what Asians should spend more on: The bedrock of a market economy is consumer sovereignty, so Asians should spend on what they want. For some, it will be more food, clothing, a home of their own. For others it will be better services - health, education, etc.

Chinese economists have been arguing for some years that China should be investing its surpluses in health and education services, and not in manufacturing for export to rich foreigners or buying pieces of paper like US Treasuries or BlackRock shares. Unfortunately, since so much of China's savings is in the hands of state entities, this does not happen.

DEAR Linda,

I hope you will not be offended if I were to give a rejoinder to your reply.

First, it is wrong to blame so-called cheap money for the excesses and sheer dishonesty of Wall Street. What happened was a combination of greed and a lack of regulation.

Under the regime of former president George W. Bush and Mr Greenspan, 'regulation' became a dirty word and 'de-regulation' a good word. But as Mr Greenspan has recently confessed, he had been wrong to assume the market could always be relied upon to regulate itself.

Second, it is very convenient for Americans to blame others for their problems. It is intellectually dishonest of Mr Bernanke - and, I regret to say, many of my intellectual friends in Washington - to blame Asia for our high savings rate and for lending our savings to America.

If American intellectuals were more willing to confront the truth, they would acknowledge that the fundamental problem is their low saving and high spending habits and their indebtedness.

This is not a new point. Many years ago, economist Henry Kaufman wrote a book warning that American families, companies, cities, states, and the federal government itself, were in danger of drowning in a sea of debt.

It is morally absurd for the world's No. 1 debtor nation to blame its self-inflicted problems on its creditors.

Third, we Asians save because it is in our culture to do so. Thrift and saving are among the Asian values which my grandmother taught me. Saving is a virtue. Spending and living beyond one's means is not a virtue but a vice.

I think it is time for Asians like me to stand up and speak the truth (with love) to Americans. They should save more and spend less. They should live within their means. And, if they do not, please do not try to make saving into a vice and spending a virtue.

Fourth, let me raise the issue of the exchange rate of the Chinese currency. The US campaign against China on this issue reminds me of another recent period in American history.

During the mid-1980s, when America was gripped by economic nationalism and protectionism, to appease the protectionists, Washington targeted Japan and the four newly industrialised economies (NIEs) of East Asia - South Korea, Taiwan, Hong Kong and Singapore. Japan was pressured into signing the Plaza Accord which substantially revalued the yen by more than 50 per cent against the US dollar.

Washington also accused the four NIEs of currency manipulation as the justification to graduate us from trade preferences. The representatives of the other three NIEs in Washington kept silent, but I asked to debate the accusers at Peterson Institute.

What are the lessons learnt? The first lesson is that US trade policy is always driven by domestic politics. The second lesson is that though the yen was substantially revalued, Japan continued to enjoy (and still does) a trade surplus with the US.

It is not the exchange rate but the saving rate that is the root cause of America's current account deficit.

DEAR Tommy,

I don't disagree with you at all. But I think you are misunderstanding the thrust and context of my argument.

It was not about the causes of the financial crisis. These have been amply addressed by many, including myself and yourself. But the world has moved on, as it needs to, from the causes of the crisis to its policy solutions.

No one - including the Chinese government - disagrees that global macroeconomic rebalancing is required. Rebalancing is not the only solution to the crisis, but it is one solution - together with financial re-regulation, and international monetary policy and banking rules coordination.

The US must indeed save more and spend less; and China and other Asian countries must save less and spend more.

What I was doing in my article was actually challenging Washington pundits, who believe it's up to China and the rest of East Asia to change their macroeconomic behaviour. I tried to show them how difficult (and perhaps impossible) that change is: Asians will not grow old faster (and thus spend more) just because Washington wants them to; state-owned enterprises and export-oriented multinational corporations have no incentive to retain earnings and distribute them in the host country; and so on. In other words, there are structural and not just monetary-and-fiscal-policy reasons for these persistent global imbalances.

It is very Washington-centric to attribute the global macroeconomic re-balancing argument to Americans only. Many Chinese economists have said the same thing - and more.

I think we need to move beyond the notion that Americans have a monopoly of ideas. They do not - hence the increasing representation of Asian voices in debating such issues. Hope we can agree on that, even if you and I (both Asians) do not agree.

Finally, I think your comments are actually an expression of your frustration with your Washington friends rather than a disagreement with the theoretical and empirical reasoning underlying my article. Or at least I hope so, since I can't do anything to change the facts.

Work life crisis and the ups' and downs'

1. Got blasted out- The boss, the one whom you respected, dressed you down in one of project meeting and to make matters worse, he was not in the picture of the issue and wrongly point the finger at you. When he realized and found it a few days later, he apologized in front of the same group. That was the right thing for the boss to do and it taught us that humility is a good thing and important to upkeep oneself.

The recent issue in Leading Afghanistan: Lessons from a US Four-Star Resignation

From General McChrystal: the importance of accepting responsibility for our actions.

From President Obama: when a handpicked, high-profile, high-potential subordinate acts out of accordance with established rules of conduct, it's important to take the same actions we would with a more junior employee.

From these men, we can learn the value of humility. All modeled real humility in their responses — and that's a quality we can never see too much of in our leaders

2. Mediocre appraisal- When you received your yearly mediocre appraisal and inquired why, you were told that what you were working on wasn’t that impressive so nobody got excited when your name brought up. That’s when you have to learned to take chance and risk on high-visibility designated post and the major tasks you have assigned or task to. That will changed the entire trajectory of your future career and if you are NOT noticed at the top.

3. You are illiterate?  -- After reading your first ever attempt at writing a product specification or venture proposal, the manager-in-charge called you illiterate and asked how you ever graduated university. Sounds hurting and was he right? Nevermind whether right or wrong, as that’s when you learned the importance of writing be it in technical, service or in business field ? We all need to be able to write fluently and spell correctly and professionally. No "singlish" and better spell check before you press the "go" button if you are fond of writing long emails, trying to impress the readers. I find it amusing and shocking when a senior level manager has been expressing his email message with improper mixed of poor grammars, wrong choice of words, out-of-context and irrelevance subject content. End of the email, you got confuse and try to understand what is he trying say. Probably hear him out verbally will be easier.

4. Micromanager boss- You tried talking to him; that didn’t help. You tried talking to your management; that didn’t help. So you thought of leaving the company. You learned that the boss is always more important to the company than you are. It was also that important kick at the back that you needed to get out and try something new and hopefully for the better of your future.

5. Customer disaster-- You were relatively new to technical details when a manufacturing delay caused your biggest customer’s production line to be shut down. They weren’t pleased, to say the least. That’s when you realized this was the best opportunity to prove your value to the customer. You fought for them and did it with transparency. When your company delivered, you would have had a customer for life.

6. Getting laid off -- Yes, it might happened to anyone, you or me. Your first instinct might be to feel rejected and a pressing desire to lash out in anger. But all of us need to face such and fight it down and acted about as poised as we all could. It may turned out to be the right move and a blessing in disguise. That’s when you learned that everything happens for a reason and, when one door closes, another opens.

7. High-visibility crisis --  As head of a department for a company, you may experienced your first high-visibility product crisis - say a bug in one of your computer programme and that had already being used in tens of thousands of computers. That was the first of many experiences that would have taught you crisis management.

8. Abusive CEO--  Your boss and CEO ripped you apart a few times. But you were not alone and you may loved the company and your job, so you hung in there. Lo and behold, the board eventually fired him (him is the boss, for performance reasons, of course). For you, that proved an old Japanese proverb: “If you wait by the river long enough, you’ll see the body of your enemy float by.”

9. CEO called you out--- After a meeting where you blew a gasket, your CEO took you aside and explained that you had shot yourself in the foot and how it hurt your credibility. You were probably so impressed with his willingness to confront you that it got you thinking about your bullying ways and the merits of being straightforward with your own direct staff.

10. Branding disaster--- You have to put your neck on the line to deliver a complete rebranding of a company by a specific announcement date. But when one of the consultants let you down bigtime, you may have to dig in, 24×7, and make it happen. The lesson was stay on top of your vendors or competitors. Regardless of the relationship, they may not have the same skin in the game that you do.

In some ways, it might seem absurd to call Facebook a country and Mr Zuckerberg its President. It has no land to defend; no police to enforce law and order and compared with citizenship of a country, membership is easy to acquire and renounce. Nor do Facebook’s boss and his executives depend directly on the assent of an “electorate” that can unseat them. Technically, the only people they report to are the shareholders.  But many web-watchers do detect country-like features in Facebook. It is a device that allows people to get together and control their own destiny, much like a nation-state..

So if newspapers and tatty paperbacks can create new social and political units, for which people toil and die, perhaps the latest forms of communication can do likewise. To many, that forecast still smacks of cyber-fantasy. But the rise of Facebook at least gives pause for thought. If it were a physical nation, it would now be the third most populous on earth. Mr Zuckerberg is confident there will be a billion users in a few years. Facebook is unprecedented not only in its scale but also in its ability to blur boundaries between the real and virtual worlds. A few years ago, online communities evoked fantasy games played by small, geeky groups. But as technology made possible large virtual arenas like Second Life or World of Warcraft, an online game with millions of players, so the overlap between cyberspace and real human existence began to grow.

From the users’ viewpoint, Facebook can feel a bit like a liberal polity: a space in which people air opinions, rally support and right wrongs. What about the view from the top? Is Facebook a place that needs governing, just as a country does?

Facebook has certainly tried to guide the development of its online economy, almost in the way that governments seek to influence economic activity in the real world, through fiscal and monetary policy. Earlier this year the firm said it wanted applications running on its platform to accept its virtual currency, known as Facebook Credits. It argued that this was in the interests of Facebook users, who would no longer have to use different online currencies for different applications. But this infuriated some developers, who resent the fact that Facebook takes a 30% cut on every transaction involving credits.

Like any ruling elite that knows it relies on the consent from the ruled, Facebook seeks advice from its members on questions of governance. It allows users to vote on proposed changes to its terms of service, and it holds online forums to solicit views on future policies. And like any well-intentioned politico, Facebook makes blunders: its members were infuriated earlier this year by changes to its policy that made public some previously private information. If Mr Zuckerberg achieves his goal of creating the world’s favourite “social utility”, he may need to give users a more formal say—a bit like a constitution.

Experience shows that networks which neglect governance pay a price. Take MySpace, which was once much bigger than Facebook: its growth stalled a couple of years ago when its managers let the site become too disorderly. There is a thin line, it seems, between the freedom that spurs creativity and a free-for-all.

For now at least, real governments still have some aces; they can simply pull the plug on the service. Facebook is blocked in China. Perhaps Facebook is less a nation than a giant transnational movement—comparable to the Red Cross or the Catholic church—which has an overarching aim and can speak to governments on something like equal terms.

As Facebook’s masters present it, their mission is just to make the world more open and connected—and bring closer the “global village”. Facebook’s success raises a lot of issues, one of them is how much impact virtual economies and currencies will have on real world ones. The Chinese government has repeatedly curbed virtual currencies. Last year it banned their use to buy real-world goods and services, in part because of concerns about the impact on the yuan.

Would there be another social network site that could create a bigger impact on the virtual social network activity and able to swing the 500million users to leave away Facebook ? It would be something that needs to be very fresh with ideas and allow future users to behave in a different manner they wish to choose to show others on the virtual world.

BP oil spill mistake every CEO should learn...

Leaders and their public relations gurus are quick to provide public apologies. They expect those apologies to move people out of their anger, but often they lead to even more criticism and outrage. When you're the leader or chief excecutive of an organization that has made a terrible mistake in some way, people will automatically assume you're sorry, but they'll quickly conclude that you're sorry mainly for yourself, for having been caught in the situation.

Many leaders make matters worse by actually describing, as they apologize, how they themselves have been affected, as if that should somehow connect them with those suffering and create a bond. Instead it usually comes across as self-indulgent, self-serving and lacking in honesty about having been the cause of the situation.

BP chief apologized for having been oblivious to the safety risks of his organization's underwater drilling operations, but his apology was ineffective--not because it wasn't heartfelt but because he was oblivious to what people truly need from a leader, especially in times of crisis.

Why was the nation repeatedly outraged when BP chief went before cameras and then before Congress to utter his famous flat apologies? He and his media experts seemed surprised that his appearances backfired. Yet it was utterly predictable that the approach was doomed from the start. It clearly failed to do what was necessary to repair the relationship between the people and BP.

What do people truly need from their leaders in times of crisis? They need them to step up and answer some relevant simple questions. They must answer them consistently, repeatedly and in multiple ways to truly repair the situation. They must answer with words, actions, plans and follow-through, that follow-through coming from all the leaders of the organization. What people demand from a leader are basically :

1. Do you care about me? No, really. Do you see how this has affected me, my family and my community? Can you put it into words, into specific examples? Have you taken the time to personally witness it from my perspective? As a leader, even if you can't fix it, can you give words to it and be willing to listen while others vent, without explaining, justifying or making false promises? People want to feel heard. They want to be recognized for their suffering. They want to know that you, the leader, see them as individuals and real people. You will end in disaster if you make up story or try to cover up the real fact and that will definitely lead you to your grave.....

2. Can I trust you? Sugarcoating the current reality or painting an idyllic path to a better future does not build trust. People want to know that you are telling them the truth or factual. Will you honestly outline what you know and what you don't know? Speak from a place of pure accountability, and sort out the blame behind closed doors at a later time. A leader needs to fully account for where the situation is at present, how it got there and what the possibilities are for the future. Do not just give the most optimistic options; outline the complete range of potential developments and the plans you have to create results. Be up front about the risks involved, their likelihood and full potential effects and the contingency plans you have in case the worst does happen, as well as in case it doesn't.

3. Are you committed to excellence? Do you have the same standards of excellence as the people you are leading or attempting to serve? People will start questioning whether you are still capable in future to run the company with your handling of crisis or stress maangement. Will you be there for as long as it takes? What does success look like to you? Do you insist on excellence in your business practices? Do you use the best technology and top experts? And are you transparent, allowing access to the media, documenting both your progress and your setbacks? Excellence is not about perfection, it's about commitment to the best possible processes.

It will be hard to repair the cracks in your status should you try to have any cover up or avoid reporting the true fact of the situation. And important to get the correct datas from your team about the facts and figures as everyone will be putting their scope to check and see if the published figures are correctly reported. There are pros' and cons' to whether you should do what it takes and better consult your team of experts within the top management should you run out of options. Likely scenario is someone will be there to replace you when the situation is getting nowhere and the authorities and public are ponding and reporting on your company's credibility and everyday the newspaper is flashing reports of the site situation, hopefully the worst is over for you sooner than later.

25 July 2010 LONDON: British media are reporting that BP chief executive Tony Hayward is negotiating the terms of his departure ahead of the oil company's results announcement this week.

Citing unidentified sources, the BBC and Sunday Telegraph reported that detailed talks regarding Mr Hayward's future had taken place over the weekend. The BBC said a formal announcement on his exit is expected in the next 24 hours.

Asked about the reports, BP spokesman Toby Odone said yesterday that 'Tony Hayward remains BP's chief executive, and he has the confidence of the board and senior management'.

BP's board is scheduled to meet today in London ahead of the company's half-year results announcement tomorrow.

The BBC added that there was a 'strong likelihood' that Mr Hayward would be replaced by Mr Bob Dudley, who took over management of BP's response to the oil spill from Mr Hayward last month.

Mr Hayward has been under heavy criticism over his leadership during the Gulf of Mexico oil spill.

The Sunday Telegraph said there could be wrangling over Mr Hayward's severance package, under which he is likely to be paid a minimum figure of just over £1 million (S$2.1 million).


With events and errors ticked off day by day, hour by hour and then minute by minute as the implacable oil rises from below, the investigation report by BP released on September ( full report could be downloaded from BP website) makes eerie reading. Its tragedy unfolds in four acts, each containing a number of errors: the initial penetration of hydrocarbons into the well through cement seals and physical barriers meant to be impermeable; the subsequent failure to spot that the seals had not worked and that oil and gas were building up in the well as rig workers turned, unaware, to other tasks; the subsequent rig-wrecking explosions; and, at the sea floor, the failure of the blowout preventer to cut off the flow of oil as the rig toppled and its connection to the well below broke open, releasing oil into the Gulf for the next three months. All these findings could be shifting more of the blame to others and looks like BP could be washing it's hands away from some of the "oily" mess.

In the first act, the report claims that Halliburton supplied a cement slurry of its own devising which it should have recognised was not fit for the purpose. Subsequent testing showed that the cement produced by a similar slurry (Halliburton’s own was apparently not made available) would have been likely to break down. BP’s well team, the report goes on, failed to appreciate the challenges of the cementing, to assess the risks and to make sure it knew what was going on. Analysis by Halliburton suggested that extra “centralisers”, which keep the pipe that transports the oil in the right position, were needed. BP procured them but did not use them, its well team suspecting, wrongly, that they were the wrong sort. The report concludes that this error is unlikely to have been key to the cement failure, but it is a pretty striking mistake and others will likely differ on its significance. The team then failed to run a test, or log, to show that the cement seal was OK, a failure that has already been criticised by others.

In the second and third acts, after the hydrocarbons had got through valves at the bottom of the well, the focus shifts to Transocean, and at times to decisions made by people who died in the disaster. When the heavy drilling mud that provides the pressure needed to keep things from coming up the well was removed, first as a test, then as part of procedure for closing down the well and moving the rig, telltale signs that something was wrong were missed. When the oil and gas reached the rig, they were diverted not overboard, as might have been wiser, but to a system called the mud-gas separator which was overwhelmed and spewed gas back on to parts of the rig that did not have safeguards on their electronics to minimise the chance of ignition, as the systems on the drilling floor did.

Then there was the blowout preventer, a huge stack of valves on the sea floor. When one of its valves was activated, after people realised something was wrong and just before the explosion, it did not stop the flow. Nor did it shut off the flow when its connections to the rig were lost, as it should have. Nor when a remotely operated vehicle activated it later. Studies of the blowout preventer’s control pods suggest that a flattish battery and a dodgy valve meant that neither was in a fit state to close off the well automatically when they should have, which BP takes as evidence of poor maintenance by Transocean. This does not explain why the great valves failed even when they were activated by other means. More answers may be forthcoming now the blowout preventer has been raised from the sea floor; currently in the custody of the Department of Justice, it may be a forensic treasure.

Perhaps unsurprisingly, Transocean rejects the report as self-serving, and points to issues with the well’s design, as well as to the cement log, as deserving much more scrutiny. Other oil companies have also pointed to BP’s decision to run a single “long string” of production pipe from the top of the well to the bottom as a problem, claiming that an alternative approach which puts a physical barrier around the production pipe at an intermediate depth offers greater safety. The issue is clearly an important one, but it is not clear that in itself it made a crucial difference. If oil got into the production pipe from the bottom, then barriers that would have impeded its flow up the cavity around that pipe would have made little difference.


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Business Times Sept2010
Keppel built the 'right' rig in Gulf of Mexico


(SINGAPORE) Keppel Corporation did not build the oil rig that exploded, sank and caused a major oil spill in the Gulf of Mexico that damaged marine and wildlife habitats as well as the Gulf's fishing and tourism industries.

On the contrary, the Singapore yard provided the rig from which efforts to plug the spill were mounted.

Prime Minister Lee Hsien Loong was told of this by a Keppel executive in Houston recently - and he used the story last night in his National Day Rally speech to make a point: companies must find promising opportunities, develop expertise, create value and grow a competitive and profitable business.

It's one key role that they can play in Singapore's push for higher productivity growth.

Singapore rigbuilders have clearly carved a niche in the global business. Mr Lee pointed out that Keppel, along with Sembcorp Marine, another Singapore company, produces 70 per cent of the world's oil rigs.

And it's clear that Keppel is good at what it does.
Mr Lee employed diagrams to show how massive the operation is to plug the well from where the oil is spilt into the Gulf of Mexico.

'Keppel built the Q4000 platform, from which engineers carried out the 'top kill' operation,' he said.

SembMarine also played a role in the rescue. Mr Lee noted that there are two other platforms, one built by SembMarine and the other by Keppel, to drill relief wells to seal the well with concrete and achieve a 'bottom kill'.

'Not bad for a country with no oil, but we're there,' he said.

And it explains why Keppel and SembMarine have been paying good bonuses to workers - nine months' last year - and 'several hundred million dollars' in taxes to the government yearly.

'That's productivity,' Mr Lee said

Well control and completion

Drilling & Well Completion

Once the design well depth is reached, the formation must be tested and evaluated to determine whether the well will be completed for production, or plugged and abandoned.

To complete the well production, casing is installed and cemented and the drilling rig is dismantled and moved to the next site.

A service rig is brought in to perforate the production casing and run production tubing. If no further pre-production servicing is needed, the christmas tree is installed and production begins.

Well completion activities include:

Conducting Drill Stem Test

Setting Production Casing

Installing Production Tubing

Starting Production Flow

After production starts, the well may need further servicing.

If it's decided that the well will not be completed, then it will be plugged and abandoned.

Conducting drill stem test :

To determine the potential of a producing formation, the operator may order a drill stem test (DST). The DST crew makes up the test tool on the bottom of the drill stem, then lowers it to the bottom of the hole. Weight is applied to the tool to expand a hard rubber sealer called a packer. Opening the tool ports allows the formation pressure to be tested. This process enables workers to determine whether the well can be produced.

Potential Hazards:

Being pinched or struck by the drill stem test tools during floor operations.

Swabbing the hole on the way out with the test tool could cause a kick to occur, which could result in a blowout leading to injuries and deaths.

Being exposed to unexpected release of H2S or other gases or liquids.

A packer seat failure or fluid loss to an upper formation could cause a kick that might result in a blowout causing injuries and deaths.

Other hazards are similar to those encountered during trippingout/in.

Possible Solutions:

Wear appropriate PPE.

Instruct workers in handling and using the special tools required during drill stem testing.

Keep a method for filling the hole in place at all times. Before any test starts, the rig management must ensure that the blow-out prevention system includes a kill system that is capable of pumping fluid into the well below the annular preventer and at least on-set of pipe rams.

Run a pump-out-sub or downhole circulating device in the test string to to enable the system to be reversed.

Ensure all workers on the location understand the dangers before starting any drill stem test. They should be fully informed of and trained in appropriate safety procedures, including the use of safety equipment and breathing apparatus. If in an H2S area, post a sign indicating the test in full view for the general public to see. Post reliable people to stop them from coming to the location. Define a minimum of two muster points with all vehicles parked in an appointed area.

Setting Production Casing:

Production casing is the final casing in a well. It can be set from the bottom to the top. Sometimes a production liner is installed.

This casing is set the same as other casings, then cemented in place.

See Casing Operations and Cementing for more information on specific hazards and solutions.

Installing Production Tubing:
A well is usually produced through tubing inserted down the production casing. Oil and gas is produced more effectively through this smaller-diameter tubing than through the large-diameter production casing.


Joints of tubing are joined together with couplings to make up a tubing string. Tubing is run into the well much the same as casing, but tubing is smaller in diameter and is removable.

The steps for this activity are:

Tubing elevators are used to lift tubing from the rack to the rig floor.

The joint is stabbed into the string, which is suspended in the well, with air slips.
Power tongs are used to make-up tubing.
This process is repeated until tubing installation is complete.

The tubing hanger is installed at the wellhead.
New technology allows tubing to be manufactured in a continuous coil, without joints. Coiled tubing is inserted into the well down the production casing without the need for tongs, slips, or elevators, which takes considerably less time to run

More about subsea BOP controls :

What Should Happen during a blowout and steps to shut the well after you fail to "kill" it :

In a blowout, a rig worker presses an emergency button. A signal is sent from the rig down an electrical line to one of the control pods.  The BOP is a subsea blowout preventer which could be anything more than few thousands feet below sea level.

The control pod directs hydraulic fluid from the rig and from a bank of pressurized canisters, called accumulators … … through a valve, called a shuttle valve, and into the blind shear ram. Some blowout preventers have a separate emergency system with its own shuttle valve.

The blind shear ram under high hydraulic pressure cuts or shear through the drill pipe and seals the well, preventing oil from gushing out.