Offshore Safety Unit Weighed by U.S. Oil Industry, Reilly Says

The U.S. oil industry is giving serious consideration to creating a safety group to prevent catastrophes similar to BP Plc’s oil spill, said William Reilly, co-chairman of a U.S. panel that studied the disaster.

BP, Exxon Mobil Corp., the world’s largest energy company, and Royal Dutch Shell Plc, the biggest oil producer in Europe, were among 60 companies whose representatives met Reilly in Houston this month after the National Commission on the BP Deepwater Horizon Oil Spill released its report. The discussions focused on costs and design of the industry-run office that would adopt and enforce standards for offshore drilling operations, he said.

“There is very serious attention given to it,” Reilly said yesterday in a phone interview in Washington. “The industry is very seriously considering the possibility, even to a point of design options.”

A safety institute that would be set up by the industry to oversee deep-water exploratory wells may cost $100 million a year, Dave Cohen, a commission spokesman, said in an e-mail.

The April explosion at BP’s Macondo well in the Gulf of Mexico was caused by systemic management failures by the company and its main contractors, the commission said. Drillers need an entity that would work with the government, define best practices and audit exploration operations, according to the panel’s Jan. 11 recommendations.

Reilly has cited the Institute of Nuclear Power Operations, established by the energy industry after the Three Mile Island nuclear-power plant accident in 1979, as a model that could be adopted by the energy industry.

Self-Policing Organization

“The oil and gas industry possesses the financial means to fund a very healthy and effective self-policing organization” such as the nuclear oversight body, the commission said in the report presented to President Barack Obama. “No one, in industry or in government, can afford a repeat of the Macondo explosion and spill.”

BP’s Macondo well blowout killed 11 people, destroyed a $365 million rig, and spewed crude for 87 days, closing a third of the Gulf to commercial fishing.

Reilly is scheduled to speak about the spill and offshore drilling during the National Conference on Science, Policy, and the Environment in Washington today.

To contact the reporter on this story: Katarzyna Klimasinska in Washington at kklimasinska@bloomberg.net;

To contact the editor responsible for this story: Larry Liebert at lliebert@bloomberg.net.

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