Sheila McNulty Spill means oil companies are judged as one

The oil spill in the Gulf of Mexico had until now only impacted the industry’s overall reputation. Now it is starting to hit the bottom lines of companies with major investments in the deep waters of the Gulf, as  the administration’s decision to continue for six months a moratorium on new drilling in the Gulf will put off production planned for next year.

Many people agree with that decision, given that the industry has been working with BP to stop and contain the spill and yet has been unable to do either.

Amy Myers Jaffe, energy expert at Rice University, said in an interview:

What this event shows is that nobody really has a solution, and that is a frightening prospect. If around the world the only way to stop a major  spill from a blowout is to drill a relief well, and that could take up to four months, waiting four months to close down this kind of catastrophic spill is too long. It raises the question of whether we can permit offshore drilling unless we have the technology to close down a blowout in a matter of days, not a matter of months.

Jaffe noted that some companies are saying behind closed doors that they would not have had this kind of accident to begin with, but she says there is always the chance of human error:

That’s not good enough. We cannot have the consequences of human error be that we destroy a section of the coast line. No matter how good their safety practices, companies now realise they can be judged by weakest practices of the industry. Not to say BP’s practice’s are the weakest, because that is not so, but the BP spill makes it crystal clear that the industry as a whole, starting now, is going to be judged by problems of individual companies.

While other companies and oil and gas groups issued their own objections to the moratorium, Royal Dutch Shell has gone the furthest in offering actual specifics about why it should be allowed to continue drilling in a statement delivered after the Department of Interior delivered its safety report last week:

After reviewing the Department of Interior’s Safety Report, we see recommendations that are much like our global offshore drilling standards.  We remain confident in our drilling expertise and company standards, which are built upon a foundation of redundant safety systems to closely monitor pressure within the wellbore.  We require a multiple layer barrier system in our well designs, which greatly minimizes offshore drilling risks.  The report also addresses blowout preventer capabilities and maintenance; at Shell, blowout preventers undergo internal testing requirements, in addition to those currently imposed by regulation.  We also utilize a set of practices, collectively called a Safety Case, which is also recommended in the DOI’s report.  Shell’s Safety Case is a process drawn from decades of exceptional offshore performance, state-of-the-art technology, people expertise, and addresses the inherent risks in offshore exploration and production.

Even then, Shell will likely need to offer still more to convince the American people and their leaders that it has the technology, expertise and culture to be allowed back out into the deep waters of the Gulf and the Arctic, where its planned summertime drilling also has been put on hold. Other companies will need to follow suit.

As of now, 33 companies drilling new wells in the deep water have been told to stop those operations. This has impacted everyone from Chevron, which had been in the process of drilling one well and had planned to drill three more this year, to Statoil, which is in the process of shutting down drilling operations on two wells. To ensure that the impacts do not continue past six months, the majors should come armed with more than objections when they appear at the  Congressional hearings at which the chief executives of the top five oil companies have been called to testify in the coming weeks.