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

1  Introduction

1. On 20 April 2010 an explosion on the Deepwater Horizon drilling rig—operated by Transocean in the Gulf of Mexico, under contract to BP—led to the deaths of 11 workers and an oil leak at an unprecedented depth. The full extent of the environmental impact and the effect on communities is not yet known. In light of the incident, the Department of Energy and Climate Change (DECC) conducted a review of the existing safety and environmental regulatory regimes in the UK and found them to be "fit for purpose". However, it announced that annual inspections of drilling rigs were to double and insurance requirements were to be reviewed. The US suspended all deepwater drilling in the aftermath of the incident, and the European Commissioner for Energy, Günther Oettinger, urged EU national governments to ban any new deepwater drilling temporarily. The UK did not impose any such ban. In the light of these events, we decided to examine the safety and environmental regulations of oil and gas operations on the UK Continental Shelf (UKCS)—especially in the deepwater to be found in the region West of Shetland—and the potential positive and negative impacts of a moratorium on deepwater drilling.

2. We announced our inquiry on 20 July 2010 and sought evidence on:

  • the implications of the Gulf of Mexico oil spill for deepwater drilling in the UK;
  • the extent to which the existing UK safety and environmental regulatory regime is fit for purpose;
  • the hazards and risks of drilling in the deeper waters West of Shetland;
  • the necessity of deepwater oil and gas production during the UK's transition to a low-carbon economy; and
  • the extent to which deepwater oil and gas resources will contribute to the UK's security of supply.

We are very grateful to all those who have assisted us during the inquiry.

3. We believe that the offshore industry needs to revisit scenarios that they previously thought were too extreme and unlikely to occur. As demonstrated by BP's response in the Gulf of Mexico, the industry was not prepared for a sub-sea blowout. They incorrectly believed that they had mitigated away the risks associated with high-consequence, low-probability events, and failed to plan for them. We conclude that BP appears to have cut corners during its operations to make the Macondo well ready for production. We are concerned that the poor decisions made in the run up to the blowout—that led to loss of 11 lives and 4.9 million barrels of oil being released into the Gulf of Mexico—could have been driven by commercial pressures. At Annex 1, we describe the chronology that we believe led to the Deepwater Horizon incident. In this report we now go on to examine the implications of the incident for offshore oil and gas exploration in the UK.

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Prepared 6 January 2011