Tags: BP, Drilling Ban, Energy, Europe

BP's Offshore Plans Spark Talk of Drilling Ban Among Concerned European Nations

By , Associate Editor, Money Morning •

BP PLC's (NYSE ADR: BP) plans to drill for oil and gas off the coast of Libya within weeks has caused nearby European countries like Italy to sound the alarm for a drilling ban until they ensure the safety of surrounding waters.

Italy's Environment Minister Stefania Prestigiacomo was the first European Union official to suggest a drilling ban to give nations around the Mediterranean Sea time to coordinate a drilling policy.

"A moratorium could be a right approach for potentially dangerous drilling...to give Europe time to define a new and specific strategy for the Mediterranean especially in light of the risk exposed by the Deepwater Horizon spill," Prestigiacomo wrote to the Financial Times.

BP has a rig in Libya's Gulf of Sirte, about 500 kilometers from Italian and Maltese territory. The first of five planned wells will be about 200 meters deeper than the Macondo well that spewed as much as 184 million gallons of oil into the Gulf of Mexico for almost three months.

European Union Energy Commissioner Günther Oettinger has also voiced drilling concerns and suggested to the European Parliament to consider a "de facto moratorium on new drills until the causes of the accident are known and corrective measures are taken for such frontier operations as the ones carried out by the Deepwater Horizon."

The Mediterranean states lack a united voice to make decisions on such issues as deepwater drilling. Individual states permit drilling projects on their own, and this decentralized policy could hinder decision making on a drilling ban.

A BP spokesman pointed out the lack of unity when asked if the company was concerned about a European drilling ban: "And who is the authority for the Med?"

Countries are afraid Mediterranean states couldn't handle a spill the size of BP's Gulf of Mexico catastrophe. The Regional Marine Pollution Emergency Response Centre for the Mediterranean Sea (REMPEC) is in charge of Mediterranean maritime pollution and does not currently have a spill-response plan in place - but is said to be working on one.

Libya and BP assert that they have proper contingency plans in place should a spill occur, but the danger to surrounding waters is leaving governments worried.

The Maltese government said it would be "up to Libya" to guarantee the safety and cleanup response to a spill, but environmentalists claim that the Mediterranean Sea's calm waters would not disperse or dilute oil nearly as much as in the Gulf of Mexico, making a spill in its waters more damaging than the Macondo well accident.

Norway, which is not part of the European Union, is the only nearby country to have enforced a drilling ban in new areas until more information is discovered on the Gulf of Mexico spill.

"What is good for Norway should be good for E.U. member states as well," Oettinger said at a meeting with oil industry representatives.

On July 21, the United Kingdom announced a government inquiry into oil and gas drilling in the North Sea, which was welcomed by the oil industry's representative group Oil & Gas UK.

"The industry is pleased that the Energy and Climate Change Committee is taking a detailed look at the way in which oil and gas drilling takes place in the UK," said Oil & Gas UK Chief Executive Officer Malcolm Webb. "It presents an excellent opportunity for us to respond to and correct the ill-informed comment and opinion emanating from numerous sources about our industry."

The UK's Energy and Climate Change Committee would not make a decision on the safety of offshore deepwater drilling until the end of year at the earliest.

The United States has already taken preliminary steps to consider a ban on BP drilling. Energy legislation passed by the House of Representatives Friday, known as the Consolidated Land, Energy and Aquatic Resources Act (Clear Act), includes an amendment blocking future drilling permits for BP.

The Senate is not considering the same restrictions for BP, although stricter regulations for the company could be included when the legislation eventually goes to final negotiations.

BP Takes Step Closer to Final Plug

BP is slated to start its static kill process as early as Monday night, where it injects mud into the Macondo well to permanently plug the leak. The mud will overpower pressure coming up from the oil and gas reservoir that Macondo drilled into, and then BP will use cement to plug the well from the top.

The process will finish later this month with the plugging of a relief well. BP has started installing steel casing in that well to prepare it for the injection of mud and cement.

The U.S. government is also investigating BP's use of toxic chemical dispersants to break up the oil and contain the spill. Chairman of the House Energy and Environment Subcommittee Rep. Edward J. Markey, D-MA, accused BP of using more chemicals than the Coast Guard approved, though BP denies any wrongdoing.

"We have always worked hand-in-hand with the Coast Guard," BP spokesman Daren Beaudo said in an e-mailed statement to Bloomberg.

New CEO Robert Dudley, announced last week as Tony Hayward's successor, will have his hands full in the coming months to persuade U.S. officials that BP should be allowed to continue planned drilling projects in the Gulf of Mexico, which it has targeted for 25 of its 40 future production operations over the next five years.

While Dudley's appointment pleased Hayward critics, Money Morning contributor and energy expert Dr. Kent Moors informed readers of Dudley's roadblocks to success - based on personal experience meeting with Dudley.

"He delegates excessively, [and is] not a particularly good administrator or executive on details," said Moors. "He is primarily a strategist. Has little field experience - he looks at matters with the view of a director, not a program manager. He sees the big picture, but is lost in the details. Problems, of course, arise from the details - not the overall strategic policy."

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