Codes of practice crucial to monitoring oil drilling

Finally, the BP oil leaking well in the Gulf of Mexico was plugged after nearly four months of anxiety.

The heat of the moment has now dissipated which means level-headed review of what actually happened and what next, can now take place.

The report by the official investigating commission when published will of course come up with details of ‘how and why’ of the whole episode.

The scars of the spill on the US coastline will definitely linger on for years, but economic life must resume and carry on.

Out of any major catastrophe arises an opportunity to revolutionise methods of performing activities so as to ensure that never again do such catastrophes recur.

There is value in lessons learnt from any disaster.

I was a director of logistics in the Exxon affiliate in Kenya in 1989 when the infamous Exxon Valdez oil spill off the Alaskan coastline revolutionised the entire industry way of managing safety and environment.

It involved a new corporate mental re-alignment of ways employees and contractors handled their day-to-day oil operations.

It also involved new policies, systems, procedures and technologies.

This mental re-orientation resulting from Exxon Valdez experience has persisted in me to this day.

The BP Gulf Of Mexico, like Exxon Valdez will definitely change how oil exploration and production are conducted all over the world.

Immediately the incident happened, the oil industry went hyper in seeking new solutions in technologies and procedures in oil and gas exploration.

Governments and regulatory agencies across the world started reviewing the adequacy of their regulatory provisions.

The UK oil industry and related service providers have already in response to the Gulf of Mexico incident initiated an engineering study to develop new designs and concepts for capping wells that have run amok, including better methods for containment of spilled oil.

Response agencies

Research into better oil spill equipment and metho`ds is most likely already commissioned by response agencies and companies.

The EU Energy Commission called for a temporary ban on new oil drilling in the North Sea until the causes of the BP accident are known and safety procedures have been reviewed.

In the US, the Obama administration is still legally struggling to re-impose the moratorium on deep sea drilling, and the Congressional Committee on natural resources is planning to ban any company with poor safety records from new offshore oil drilling.

Once the oil industry has re-assured governments and regulators that the best endeavours have been taken to prevent recurrences, and once the governments have strengthened regulatory provisions, then it will be back to business of searching for and developing new oil that is needed to balance global supply and demand.

Deep sea drilling is key to ensure that the world is saved from an early “peak oil” syndrome as older sources of oil continue to deplete.

If deep sea drilling is not emphasized there is the big risk of over-relying on OPEC reserves for future incremental supply, as this will strengthen their stranglehold on supply and demand which they usually manipulate to gain leverage on price setting.

The Middle Eastern OPEC holds most of the global known onshore proven reserves.

Currently, OPEC are on a self imposed production ration to stem price drop and are currently producing about 33 million barrels per day, against a global output of about 80 million barrel per day .

The production control by OPEC has the objective of maintaining oil prices in the range of $70-80 per barrel in the near and mid-term.

If deep sea production is interrupted by any governmental action anywhere in the world, then we may find prices escalating way above $80 per barrel on average.

However, offshore production must be safe and devoid of operational gaffes.

Going forward, however, there is need to develop an international convention to develop and monitor codes of practice for offshore oil drilling.

Off shore drilling most of the times will have environmental impacts that could cut across national boundaries, and absence of internationally accepted standards and codes of practice could hamper oil clean up activity.

Fewer resources

A lot of deep sea drilling is already happening in developing countries with little or no environmental regulatory capacity, and these countries need to be safeguarded by an international convention.

Also we have increasingly more of the smaller independent oil and gas companies with fewer resources than the likes of BP engaging in offshore drilling.

It becomes inconceivable how the less capitalised independents would have fared in the event of a spill the magnitude of the Gulf of Mexico.

It is not only in the deep seas that environmental violations are happening.

We have seen environmental degradation in the Niger Delta which must be a shame to the Big Oil ( Exxon, Shel, Chevron etc ) operating in Nigeria.

Excuses will be given to shift blame, but this is not like the Big Oil which we have known for long.

The Big Oil guiding business principle has for many years been that it matters how and where they do business, and that environmental and safety compliance comes ahead of profits.

If the Big Oil cannot influence the destiny of spills in the Niger Delta they will eventually lose a lot in brand value.

Mozambique has made the first offshore oil discovery on the eastern coastline of Africa which has been prone to natural gas presence.

It is, however, not yet established if the Mozambican oil finds are of commercial quantities.

wachira@petroleumfocus.com