UK Deepwater Drilling - Implications of the Gulf of Mexico Oil Spill - Energy and Climate Change Contents


On 20 April 2010, a blowout of BP's Macondo well in the Gulf of Mexico led to the deaths of 11 workers on Transocean's Deepwater Horizon drilling rig, and the release of an estimated 4.9 million barrels of oil. The wellhead was located in a depth of water over 1,500m. In the aftermath of this incident the United States observed a moratorium on deepwater drilling until 12 October 2010. Despite calls for a moratorium from the European Commission, the UK Government has decided that the UK regulatory regime is "fit for purpose". Even so, in the Annual Energy Statement to Parliament on 27 July 2010 the Secretary of State, Rt Hon Chris Huhne MP, announced that the UK would, "undertake a full review of the oil and gas environmental regulatory regime" following the outcome of investigations into the causes of the Gulf of Mexico incident.

We believe that the UK has high regulatory standards—as exemplified by the Safety Case Regime that was set up in response to the 1988 Piper Alpha tragedy—and the flexible, goal-setting approach adopted by the Health and Safety Executive's Offshore Safety Division is superior to the regulatory regime under which the Deepwater Horizon incident occurred. However, we welcome the Government's review. As demonstrated by BP's response to the blowout in the Gulf of Mexico, the offshore oil and gas industry was clearly not prepared for a sub-sea blowout of a well. The industry felt that it had mitigated away the risks associated with high-impact, low-probability events and so did not need to plan for them—it needs to revisit scenarios that it thought were too unlikely to occur. The Government needs to ensure that offshore oil and gas exploration companies have considered such outcomes as part of the process by which they obtain a licence to drill.

The blowout in the Gulf of Mexico could have been prevented if the last-line of defence—the blind shear ram on the blowout preventer, located at the well head on the ocean floor—had activated and crushed the drill pipe. Given the importance of this equipment, and the evident dangers of relying on a single device, we urge the HSE to consider prescribing specifically that blowout preventers on the UK Continental Shelf should have two blind shear rams. The blind shear ram on the Macondo Well appears to have failed in part due to the absence of simple checks—such as whether the batteries had sufficient charge. The UK's offshore inspection regime should never allow such simple, potential failures to go unchecked.

BP's internal investigation into the incident in the Gulf of Mexico—the "Bly Report"—contains controversial conclusions surrounding the design of the well. We recommend the Government consider the Bly Report's conclusions in parallel with the observations of other companies involved, and alongside recommendations of US agencies.

We believe that should an oil spill resulting from drilling activities occur in the UK, there needs to be absolute clarity as to the identity of the responsible party, and liability legislation needs to ensure that those affected are compensated as soon as possible. Given the high costs of the Gulf of Mexico incident, we believe that the Offshore Pollution Liability Association (OPOL) limit of $250 million is insufficient. We are also concerned that the voluntary requirement of OPOL membership—despite it being a pre-requisite of the licensing process—weakens any legal control over it, allowing polluters to claim that any damages to biodiversity and ecosystems are "indirect", and therefore do not qualify for compensation.

Oil spill response procedures in the UK are robust, rightly focussing on prevention, followed by containment and then clean-up. While we welcome the development of devices to respond to a deepwater blowout in the UK, we urge the Government to recognise that oil spill response equipment is not a substitute for a fully functioning blowout preventer. Furthermore, we are concerned about the ability of oil spill response equipment to function in the challenging environment found in the seas West of Shetland.

Given the evidence available to us, we conclude that there should not be a moratorium on deepwater drilling in the UK Continental Shelf. Such a moratorium would increase the UK's reliance on imports of oil and gas, potentially decreasing our security of supply. We conclude that any calls for increased oversight of the UK offshore industry by the European Commission should be rejected in favour of multilateral approaches to regulation and oil spill response amongst those countries with a coastline that could be affected by an oil spill.

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Prepared 6 January 2011