Analyst view: White House panel seeks offshore drilling reform

(BestGrowthStock) – A White House oil spill commission, in its final report on BP’s U.S. Gulf drilling disaster, on Tuesday called for the creation of new government and industry agencies, as well as expanded drilling regulations, to help prevent a repeat of the deadly explosion and leak last year.

The commission is the first government-sanctioned group to wrap up its probe of the causes of the drilling disaster.

KEY FINDINGS FROM PANEL

* Oil industry should create self-regulating entity to help enforce offshore drilling standards

* $75 million liability cap for offshore oil accidents should be raised significantly

* U.S. Congress should create independent agency in Interior Department to oversee drilling safety

* U.S. oil drilling regulations should be expanded to be at least as stringent as rules in nations such as Norway, U.K.

ANALYST COMMENTS

STEPHEN JONES, VICE PRESIDENT, PURVIN & GERTZ,

INTERNATIONAL ENERGY CONSULTING FIRM:

“It’s hindsight. And it’s important. And it’s part of the process. The industry’s going to have to continue to live with the repercussions from this event and moving forward in shoring up management processes as well as technical aspects of drilling in the deepwater.”

MARK ROUTT, SENIOR STAFF CONSULTANT, KBC ADVANCED

TECHNOLOGY, HOUSTON:

“It probably is not going to have any effect on mechanical design or specification. I would guess these regulations are going to be more operational, that is, human work practices, rather than technical. It’s not like you’re going to redesign a new pump or new stress analysis on a seal for the platform. That will take time. Operational things should theoretically be able to be put into practice with minimal training in a much shorter time period.”

BRUCE BULLOCK, DIRECTOR OF THE MAGUIRE ENERGY INSTITUTE,

SOUTHERN METHODIST UNIVERSITY, DALLAS:

“I think the call for an independent regulatory authority is a good one. That’s kind of the North Sea model that has served the U.K and to some extent, the Norwegians. In terms of the systemic issues, I’m not sure I would paint as broad a brush as they did. I would not brand the whole industry. I think you have to look at each individual company’s operating practices and determine whether they have the same issues.”

CANDIDA SCOTT, IHS CERA IN HOUSTON:

“It is still not clear from the government report how liability will increase. There is uncertainty surrounding the onus and responsibility of the self-regulating entity, an independent agent, and the drilling companies themselves. The recommendations made in the report are welcome but these will be hard to transpose into specific tasks.

“There has been a lot of talk about the liability cap and no single number was given today. I think once we have a figure, whether it is the most commonly talked about $300 million cap or not, then we can translate this into how much upstream costs will be increase.”

PAUL SANKEY, MANAGING DIRECTOR, DEUTSCHE BANK OIL, EQUITY

RESEARCH:

“We think the level of (US offshore) activity is going to be by definition lower, and that you’ll never see the peak from before the accident. The broadness of these recommendations and lack of specifics will delay activity.”

AL TRONER, PRESIDENT, HOUSTON-BASED ASIA PACIFIC ENERGY

CONSULTING:

“I believe that the crux of the problem is to have the current offshore drilling oversight bodies do their job and oversee operations – they apparently have not been doing a good job at that, rather than adding more government agencies. There is no guarantee that another government agency would do any better than its predecessors – and of course the last thing we need now is another ineffective government agency. Why does the current government seem to believe that more government is better or more effective government?”

GREG PRIDDY, ANALYST, EURASIA GROUP IN WASHINGTON D.C.: “The most likely outcome of all this is that nothing happens and anything that does will be very limited. There doesn’t seem to be the impetus to do anything right now, regardless of the commission’s findings.

“No one is looking at a $5 billion liability cap anymore like some Democrats were discussing in the summer. I see no evidence the new Republican House leaders are going to have this high on their agenda.”

(Editing by Alden Bentley)