Big Oil plans rapid response to future spills

July 21, 2010 4:27:34 PM PDT
Big Oil is trying to assure Washington it's prepared for the next big oil spill.

ExxonMobil, Chevron Corp., Conoco Phillips and Shell Oil said Wednesday they've agreed to pool $1 billion to form a new company that would respond to offshore oil spills at up to 10,000 feet underwater. The system would deploy equipment that could arrive at a spill within days and be fully operational within weeks, the companies said.

Members of Congress investigating the explosion of the Deepwater Horizon oil rig have criticized the oil industry for being ill-prepared for a major oil spill, and regulators want the industry to develop a thorough spill containment plan. Meanwhile, the White House has imposed a moratorium on deepwater drilling, and oil company share prices have plunged. Stricter regulations are also likely on the way for offshore drillers.

Michael Bromwich, director of the Bureau of Ocean Energy Management, the federal agency that oversees offshore drilling, said the announcement was encouraging.

"Ultimately we are exploring the changes and reforms that need to be made in deepwater safety standards, spill response and containment," Bromwich said in a statement. "But steps like these move in the right direction."

BP, whose blown-out well has leaked as much as 180 million gallons of oil into the Gulf, was informed of the venture but it hasn't joined, a spokesperson for Exxon said. BP didn't answer calls to comment about the new response system.

The British oil giant struggled for nearly three months to plug the well. It tried dropping a metal containment box over the gusher and shooting garbage down the drill hole to block the oil from seeping out. Neither attempt worked. After three months, a second containment cap now seems to be working after a smaller cap only captured some of the oil.

All these attempts were introduced with the caution that they'd never been tried a mile underwater, where BP's well was gushing oil. Exxon and the other companies on Wednesday promised their equipment will be tested beforehand.

The new system draws on lessons learned from BP's efforts and uses some similar equipment. The companies say the equipment shouldn't break down under extreme pressures and depths.

The response system will include an array of underwater equipment designed to create a permanent connection and seal over a busted well. It will separate oil from gas and bring it to the surface where the gas can be burned off and the oil can be stored on tankers.

The companies say the system could capture up to 100,000 barrels -- 4.2 million gallons -- of oil in depths of up to 10,000 feet, twice as deep as the waters BP was operating in. The four were not involved in the Gulf oil spill, but each rely on offshore drilling to generate significant revenue. Shell and Chevron have prominent drilling operations in the Gulf.

The system's similarities to what BP has used concerns U.S. Rep. Edward Markey, D-Mass., one of the harshest critics of the industry's disaster planning.

While the new system could be deployed rapidly, "the oil companies must do better than BP's current apparatus with a fresh coat of paint," he said.

He said the announcement of the containment system could be a positive step, "but it cannot be the industry's last," adding that what's needed are technologies "that will prevent fatal blowouts in the first place."

Rex Tillerson, chairman and chief executive officer of ExxonMobil, who has been critical of BP's handling of the well prior to the explosion, echoed that sentiment in a statement announcing the new system.

"If we all do our jobs properly, this system will never be used," he said.

"The extensive experience of industry shows that when the focus remains on safe operations and risk management, tragic incidents like the one we are witnessing in the Gulf of Mexico today should not occur," Tillerson said.

After numerous hearings on the safety of offshore drilling, the House passed legislation Wednesday that more than doubles the federal money for research in new cleanup methods and technologies. Lawmakers passed a second bill that promotes research on devices like blowout preventers that can prevent accidents.

All deepwater exploration has come to a halt in the Gulf following the April 20 rig explosion. The Obama administration has banned deepwater drilling until more research can be done on whether its safe for the environment.

The industry has warned of an exodus of rigs out of the Gulf, but so far that hasn't happened. Only two rigs, both owned by Diamond Offshore, have been moved to foreign waters.

"It's not so simple moving a rig. It takes a lot of time and money," Argus Research analyst Phil Weiss said. At the same time, once a rig does move from the Gulf it isn't likely to make a quick return, he said.

According to their joint statement, the four companies will create a nonprofit organization called the Marine Well Containment Company to operate and maintain the response system. ExxonMobil will lead the effort and other companies will be invited to participate.

ExxonMobil spokeswoman Karen Matusic said oil executives have been meeting over the past weeks to devise ways to handle another spill. About 40 engineers from the four companies have been working in Houston on this solution.

Exxon and its engineers have worked with BP on its spill response, but the British company wasn't invited to join the new venture. But the system would benefit if BP joined, Matusic said.

"Certainly BP can lend their expertise on what they're discovering now as they're containing the spill," she said. "We certainly want to bring them in."

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