Oil Industry Plans Disaster Response System for Future Spills

Published on July 21, 2010

The Wall Street journal has reported that Exxon Mobil, Chevron, Royal Dutch Shell, and ConocoPhillips are planning to announce the formation of a joint venture to design, build, and operate a rapid response system to address the impact of a future oil spill in the Gulf of Mexico.  The move by the oil majors is an attempt to structure a private sector plan that will mitigate concerns regarding lax safety standards that may have contributed to the Deepwater Horizon disaster.

According to The Wall Street Journal, the system will incorporate several elements of the ad-hoc response plan that BP developed through trial and error over the past three months.  The system will be designed to capture and contain up to 100,000 barrels of oil flowing 10,000 feet below the surface.

A non-profit venture will initially be funded with $1 billion but the costs of operating such a system over time will be much higher.  BP is notable in its absence from the consortium which is probably a wise move to avoid controversy.  According to Rex Tillerson, CEO of Exxon Mobil, prevention will remain the main focus:

“We’re going to build this and my view is, we’ve never going to use it,” Mr. Tillerson said. But “it’s fair for the American people and it’s fair for the regulator to expect us to have some mechanical capability to deal with an event in the future that is more readily available for deployment,” as opposed to having to improvise a response, he said.

Impact on Moratorium

It is doubtful that this move by industry will persuade the federal government to drop the deepwater drilling moratorium that is currently in place.  There is too much cynicism, some of which is deserved, regarding the ability of oil companies to operate safely and to deal with the aftermath of a disaster should one occur.  Prior to the Deepwater Horizon incident, BP claimed to have recovery procedures in place but fell far short of promised collection volumes over the past three months.

While the private consortium may not immediately end the moratorium or even accelerate the date of its removal, it is likely that the government will require this type of disaster management plan once drilling resumes.  By taking actions now before the government requires specific remediation, the companies may be hoping to influence the final outcome or at least have a say in how disaster recovery should be structured.

Click on this link to read The Wall Street Journal coverage of this story

Disclosure:  The author owns shares of companies involved in offshore oil and gas exploration.

Oil Industry Plans Disaster Response System for Future Spills
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