BP leak just a bump in road for oil industry

For BP, the crisis has been shattering, putting the future of the company in jeopardy.

For the global oil industry, it looks like being no more than a bump in the road towards further exploitation of deepwater oil reserves, even in the Gulf of Mexico.

Oil companies worldwide have reviewed their practices following the spill, but have generally insisted that their systems remain safe and robust, and that no fundamental changes are needed.

After the big flaws in the US offshore regulatory system exposed by the Deepwater Horizon disaster, the regulation of the Gulf of Mexico will inevitably become tighter, but industry executives believe the US will not be willing to shut off such an important source of future domestic oil production.

Christophe de Margerie, the chief executive of Total of France, one of the ­western world’s five biggest oil groups, said last week that oil exploration in the Gulf of Mexico was likely to take 20 per cent longer and cost 20 per cent more as a result of new US regulations, but that the development of the deepwater reserves of the region would continue.

Globally, countries such as Libya, Greenland, Ghana and the UK have all said that they plan to press ahead with the exploitation of their own deepwater resources.

A typical view was set out last week by Khalid al-Falih, the chief executive of Saudi Aramco, in an interview with the Financial Times.

The company, the world’s biggest oil producer, has looked at the lessons it can learn from BP, but concluded that there is no reason to delay or modify its plans to drill for gas and oil in the deep waters of the Red Sea in 2012.

At last week’s World Energy Congress in Montreal, some executives called for new global safety standards for the industry in order to restore public confidence.

Miguel Martínez, chief operating officer of Repsol YPF, the Spanish oil group that is an important player in the development of Brazil’s deepwater reserves, suggested the leading companies might be able to agree such new standards between themselves.

One area in which companies have already begun to make progress is in developing systems for responding to a spill, which were shown to be manifestly inadequate for BP and the industry as a whole in the Gulf of Mexico.

Tony Hayward, BP’s chief executive, admitted in June that the company did not have all the tools available to stop a blow-out on the seabed in 5,000 feet of water.

Four of the world’s biggest oil companies, pointedly excluding BP, in July announced a plan to set up a new $1bn joint venture to develop a new oil spill response and containment system for the Gulf of Mexico, and the industry is likely to be asked to put similar arrangements in place in other countries as well. Again, however, these new precautions are unlikely to hold back deepwater old production for long.

The greatest test of the longer-term impact of the spill may be in the US Congress, where it will become clear whether or not the disaster has assisted the passage of new legislation aimed at supporting renewable energy.

Financial Times