UK: No need to stop North Sea deepwater drilling

[January 06, 2011]  LONDON (AP) -- A major oil spill at a deepwater well in the North Sea would be more difficult to handle than the Gulf of Mexico disaster, but a moratorium on drilling isn't necessary because Britain already has tough safety standards, lawmakers said Thursday.

Saying any ban on deepwater drilling would leave the U.K. too reliant on imported energy, a committee of lawmakers backed the government's decision not to impose new restrictions on oil and gas rigs off the coast of Scotland.

After hearing months of testimony on the U.S. spill from regulators and oil executives -- including from BP's former CEO Tony Hayward -- Parliament's Energy and Climate Change Committee said it was satisfied Britain has a more stringent safety rules than were previously in the Gulf of Mexico.

The British legislators were reviewing the impact on the U.K. energy sector of the April 20 explosion at the BP-operated Deepwater Horizon drilling platform, which killed 11 people and sparked the biggest oil spill in U.S. history.

Environmental groups including Greenpeace had urged Britain's government to suspend deepwater extraction until the full implications of the explosion were understood. But committee chairman Tim Yeo, a Conservative Party lawmaker, said his panel had concluded that a moratorium "would undermine the U.K.'s energy security and isn't necessary."

However, his panel criticized the global energy industry for complacency in preparing for unlikely but potentially catastrophic events, and urged Britain's government not to rely on "controversial conclusions" in BP's internal report on the spill.

In the U.S., a 48-page excerpt of a presidential commission report into the Gulf disaster concluded that decisions to save time and money contributed to the Gulf spill. The passages of the U.S. report, published Wednesday ahead its full release Jan. 11, criticized both the offshore oil and gas industry and government regulators. It warned that without significant reforms, a similar incident could happen in the future.

Britain tightened regulation in the North Sea after the country's worst offshore accident, a 1988 explosion on the Occidental Oil-owned North Sea Piper Alpha rig that killed 167 workers. Since April, the U.K. government has increased the number of rig inspectors in the North Sea, where there are 24 drilling rigs and 280 oil and gas installations.

Yeo's panel said any North Sea oil spill would be more difficult than one in the Gulf, chiefly because the remote location means there are only a limited supply of rigs that could be deployed to drill relief wells. Lower sea surface temperatures also mean that natural evaporation of the spill would be slower in the North Sea.

"There are serious doubts about the ability of oil spill response equipment to function in the harsh environment of the open Atlantic in the west of Shetland," the committee's report said.

In his testimony in September, Hayward -- who has since been replaced by Bob Dudley -- told legislators that deepwater extraction would continue to be necessary to meet current energy demands. He also said BP was not solely to blame for the Gulf disaster.

Though pressed on BP's safety record, there was no repeat in Britain of the onslaught of criticism Hayward endured when he appeared before the U.S. House Energy and Commerce Committee in June.

Robert Smith, a lawmaker and member of the British committee, said the panel broadly agreed with Hayward's assessment on a universal ban. "It is important not to overreact," he said.

Ministers argue that Britain must exploit its domestic oil and gas reserves, particularly until the country is able to produce more energy from renewable sources.

"Oil and gas are set to remain a key part of our energy system for years to come and it is vital that we search for and produce the U.K.'s own resources as safely as possible," Energy Minister Charles Hendry said.

The U.K. government estimates there are still around 20 billion barrels of oil to be discovered and produced from British waters in the North Sea. But overall oil production is expected to drop to around 1 million barrels per day within five years, from 1.36 million barrels per day in the 2009-10 financial year.

The committee's report urged regulators to consider whether extra safety measures are required on deepwater rigs, including an additional fail-safe device to cut and seal pipes following any blowout.

Lawmakers also warned that current legislation could lead to confusion over who would pick up the bill following a major U.K. spill.

Energy companies presently have their liability limited to $250 million per incident, which lawmakers said is too little. It is also unclear whether they would need to pay compensation for damage to wildlife and habitats.

[Associated Press; By DAVID STRINGER]

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