Tag: Deepwater Horizon

FT Energy Source

Sheila McNulty

An oil rig in the Gulf of MexicoWhat a difference a year makes. Or does it?

Activity in the Gulf of Mexico remains slow following the Macondo disaster – but it is moving again. And despite all the talk about how the US risked driving away the industry by tightening up processes and procedures, just about everyone is still here.

Seahawk Drilling was forced into bankruptcy and Plains Exploration & Production is moving to exit the deepwater, but, for the most part, it is the same people, working for the same companies (BP was even among the first companies to get permission to resume drilling in the deepwater), using the same technology. Even the much maligned blowout preventer that got jammed and failed in the Macondo disaster is still here as the last line of defence.

And the gulf coast economy has remained pretty resilient. Michael Hecht, chief executive of the Greater New Orleans economic development agency, said the local economy received a boost from BP’s spill response effort that gave work to fishermen and tour boat workers who had lost jobs with the spill. That false economy is only now ending in some places, leaving the real economic cost still to be seen.

Sheila McNulty

The oil and gas industry has been afraid there might be repercussions from the recent  investigation that found Macondo’s blowout preventer failed to close because a section of drill pipe had buckled during the accident and blocked efforts to seal it off.

Gary Luquette, Chevron’s president for North America exploration and production, said the industry would learn from the report. But he hopes it will not lead regulators to stop the permitting process just when companies have started to see progress. He explained:

The best way to deal with a blowout is never to have one. In this case, the pipe was blown up the hole because of a loss of control situation. If you have complete loss of control, you can’t imagine a BOP that can be designed for that.

Kiran Stacey

As the big guns of the oil industry gather in London this week for International Petroleum week, talk has been largely of two things: the effect of Middle East unrest on the oil price and how to improve its reputation, especially after Macondo.

I have just sat through a session entitled: “Restoring the industry’s licence to operate in the face of increasing public and political scrutiny”.

In it, Andrew Griffin, CEO of a PR company called Regester Larkin, explained how the Macondo spill showed that the oil industry needed to do more to explain its importance to the public. This, he said, would help protect companies’ reputations in the case of an accident or other negative event.

Kiran Stacey

In the last two days, we have had two new and similar accounts of the way in which BP’s corporate culture was to blame for the Gulf oil spill.

Following hard on the heels  In Too Deep: BP and the drilling race that took it down, a book by two Bloomberg reporters, which was launched last night, comes an in-depth report by Fortune magazine.

The Fortune piece finds much the same as the book (review to follow) – the focus on risky new discoveries coupled with corporate cost-cutting that characterised the company under both John Browne and Tony Hayward helped foster an environment where such an accident could happen.

The Fortune piece focuses on one thing in particular: the way in which company bosses focused on personal safety rules for staff at the expense of process rules for avoid major industrial accidents.

Kiran Stacey

Now we’ve all had a day to digest the 300+ pages of the National Commission’s report into the BP oil spill, it’s worth taking a look at what the reaction has been from the wise old heads of the print and online media.

First up, the FT’s Sylvia Pfeifer points out how badly US regulation compares to that in other countries:

One of the most damning conclusions of the national commission report was that other countries with strong offshore oil industries, including Britain and Norway, had better regulatory systems than the US.

Where the US Minerals Management Service was clearly not fit for purpose, other countries – often prompted by their own offshore disasters – have put in place regulations that seem to have been more effective at preventing fatal accidents.

Kiran Stacey

This may be merely coincidence, but it seems unlikely.

The best performing sector on the benchmark US share index, the S&P 500, is currently energy. Of that sector, it is the oil services companies that are doing best – the ones who might have been hit heaviest had stringent new regulations hampered the way they were able to run rigs.

As I write, the sector as a whole is up 1.5 per cent, with services companies rallying 2.6 per cent. Halliburton is up 3 per cent, while rivals Cameron International and Baker Hughes have risen 4.5 per cent and 3.3 per cent respectively.

Sheila McNulty

The US oil and gas industry feels slighted by the fact that the presidential oil commission’s report raises questions about the safety of deepwater drilling generally. Speaking for the industry is the American Petroleum Institute, which represents more than 400 oil and gas companies:

The industry has already taken significant action to futher improve safety in offshore operations, consistent with the recommendations of the presidential commission on last summer’s oil spill.

Kiran Stacey

As we saw from Ed’s list of the main recommendations from the National Commission into the BP oil spill, they were pretty much what we were expecting from the overnight reports. But a few interesting pieces of information arose from the press conference.

Here, in no particular order, is what we learned:

Ed Crooks

Here is the list of the National Commission’s main recommendations following the BP oil spill.

  • Offshore drilling can be done safely, and US oil reserves in deep water and the Arctic are vital resources that the country will need
  • A government safety agency should be set up to oversee offshore drilling
  • Offshore regulators including the Interior department and the coast guard should be given significantly increased funding
  • The oil industry should create a “self-policing entity” to establish and enforce safety standards
  • Companies should have to show they have the technology to control an underwater blow-out before they are given permission to drill
  • The government should develop the expertise needed to assess and supervise the control of blow-outs
  • The $75m cap on the liability faced by companies in the event of a spill (which has been voluntarily waived by BP) should be substantially increased.
  • 80 per cent of the penalties for the spill imposed under the Clean Water Act should go for long-term restoration of the Gulf of Mexico
  • The US should launch an immediate research program into the issues raised by possible  drilling in the Arctic, and begin talks with other countries such as Russia and Greenland that plan to develop Arctic reserves

Much of this was leaked this morning.

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