Exxon Leads Oil Companies to Design Spill Containment

Exxon Mobil Corp., Chevron Corp., ConocoPhillips and Royal Dutch Shell Plc are spending $1 billion to build a system designed to capture oil in the event of a future underwater well blowout.

The four companies will contribute $250 million each toward the creation of a non-profit organization, the Marine Well Containment Co., that will create and manage oil spill containment equipment and responses in the Gulf of Mexico. The system being designed will be similar to the containment cap BP Plc recently installed on its runaway Macondo well, which the company used to successfully seal the undersea gusher July 15.

“For an incident in deeper waters with higher production levels, the response capability of containment and spill response is proven by this incident to be inadequate,” Jim Mulva, chief executive officer of ConocoPhillips, said in a phone interview.

Early designs are for a container with a tight seal that will fit over the well near the seabed and channel oil and gas through pipes leading to vessels at the surface for storage, according to a fact sheet distributed by the new group.

The four companies have been working with the U.S. government for the past six weeks on the project, Mulva said.

Industry Controlled

The equipment would be designed and built over the next 12 to 18 months and the effort eventually would be run as a non-profit organization controlled by the industry. If another spill were to happen, the U.S. Coast Guard would be in charge of the response, Mulva said.

“Exxon Mobil is taking the lead on the engineering construction phase, but the plan is to set up a non-profit organization that will ultimately manage this,” said Alan Jeffers, an Exxon spokesman. “It’s still in the development stages, but we’re going to ask others to join and those who choose not to join can have access to the equipment via commercial arrangements.”

Oil companies may be trying to stave off punitive new government regulations by offering a voluntary solution, analysts at ClearView Energy Partners LLC, a Washington-based policy analysis firm, wrote in a note to clients. The industry has been criticized by lawmakers for not being prepared to deal with a spill at a deep-water well.

Standard Equipment

The new container system may become standard equipment for offshore drillers in the U.S., and probably would be adopted in other places around the world, wrote ClearView analysts Kevin Book, F. Chase Hutto and Amanda Fessenden. The equipment would add costs for the industry, but also provide potential new business for oil service companies, the analysts said.

BP, which has been struggling to contain its underwater oil gusher after a Gulf rig exploded in April, wasn’t listed as a participant.

“They’ve certainly been informed of what the four companies have been doing,” said Mulva. “When the Macondo incident is ultimately resolved and the well is killed we expect in due time that BP will join the effort.”

As part of the new Exxon-led initiative, equipment will be designed for several scenarios up to depths of 10,000 feet (3,048 meters) and specific to conditions in the Gulf. The system will be able to mobilize within 24 hours and have initial capacity to contain 100,000 barrels a day, according to an e-mailed statement from the oil companies.

Additional costs for equipment, contracts and new vessels may increase the $1 billion commitment, according to the statement. The companies said in the statement that they have reviewed the system with Congress.

“We are not looking for any incentives or funding support from the government,” Mulva said.

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