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BP oil spill report: Oil firms face big bills to raise safety standards

Safety standards in the global oil industry are “compromised” by political lobbying and sweeping reforms must follow BP’s Gulf of Mexico spill, the official US report has concluded.

BP oil spill report: Oil firms face big bills to raise safety standards

Rowena Mason

By Rowena Mason, Energy Correspondent 8:57PM GMT 11 Jan 2011

Companies from oil majors like BP and Exxon to minnow explorers will all have to pay more for insurance, spill prevention, better equipment and more thorough safety standards under new recommendations by the Oil Spill Commission. For example, they will need to demonstrate they have the technology to control an underwater blow-out before being given permits to drill

The report also strongly criticised the powerful American Petroleum Institute (API) – an industry-funded body responsible for setting standards for equipment across the world, not just the US – saying its expert advice was biased.

“It is clear that API’s ability to serve as a reliable standard-setter for drilling safety is compromised by its role as the industry’s principal lobbyist and public policy advocate,” the report said. “Because they would make oil and gas industry operations potentially more costly, API regularly resists agency rulemakings that government regulators believe would make those operations safer.”

Investigators had already released a chapter of the report blaming BP, Transocean and Halliburton for a series of “management failures” leading up to the explosion on April 20. It also found the companies cut costs and corners in their operations.

On Tuesday, the full inquiry warned the entire industry that it would have to improve its standards. The panel in particular recommended that regulations from the North Sea in the UK and Norway should be adopted in America and as a global benchmark.

William Reilly, co-chair of the panel, cautioned that a second accident like the Deepwater Horizon explosion could end offshore drilling for good.

“We recognize that the improvements we advocate all come with costs and all will take time to implement,” he said. But inaction runs the risk of real costs too – in more lost lives… and in further tens of billions of dollars of avoidable clean-up costs. If the clear challenges are not addressed and another disaster happens, the entire offshore energy enterprise is threatened.”

BP’s share price rose 3pc to 500p on relief that the report did not contain worse criticisms of the oil company. The report acknowledges any legal findings of gross negligence could increase fines on BP to $21bn, but does not accuse the oil company of such a charge – which it strongly denies.

However, it did find that out of nine key decisions that increased risk, BP was responsible for seven, Halliburton for one and Transocean for another. Seven of those decisions saved time and money.

A spokesman for BP said: “Given the emerging consensus that the Deepwater Horizon accident was the result of multiple causes involving multiple parties, we support the commission’s efforts to strengthen industry-wide safety practices.”

However, the API and other oil companies were less sympathetic to the findings.

“This does a great disservice to the thousands of men and women who work in the industry and have the highest personal and professional commitment to safety,” said Erik Milito, an API director. “We hope that the administration recognizes the work already done and the need to rapidly restore vibrancy to the nation’s offshore oil and gas production programme.”



Gulf of Mexico oil spill: timeline: 11 Jan 2011

Oil spill commission urges dramatic overhaul: 11 Jan 2011

North Sea oil safety report: main points: 11 Jan 2011

US oil spill panel finds BP guilty of mistakes: 11 Jan 2011

Obama oil spill commission’s final report blames disaster on cost-cutting by BP and partners: 11 Jan 2011

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