Exxon execs warn on curbing on deepwater drilling

KUALA LUMPUR/BEIJING Mon Jun 7, 2010 5:24am EDT

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KUALA LUMPUR/BEIJING (Reuters) - ExxonMobil warned against quick reactive changes to deepwater drilling laws that damage long-term investment decisions and urged governments to take time to assess the reasons for the Gulf of Mexico oil spill.

Senior executives of oil major Exxon Mobil Corp also underscored the importance of production from deepwater drilling in meeting global energy demand.

"We need to guard against premature reactive changes to legislation that may not in the longer term be helpful but detrimental to the industry," ExxonMobil senior vice president Andrew Swiger said.

"It is too early to speculate on any changes to legislation until the investigation is complete," he told reporters at an industry conference in the Malaysian capital.

The Obama administration recently put on hold new deepwater exploratory drilling in the U.S. for six months pending the findings and recommendations of a presidential commission investigating the causes of the explosion in April that sank Transocean's Deepwater Horizon rig leased by BP Plc.

The review may lead to new laws on drilling.

Mark Albers, ExxonMobil's senior vice president told Reuters the impact of the moratorium on deepwater drilling in the Gulf would be much longer than the six-month ban Washington slapped, as it takes time to understand the effect of possible new regulations and bring the rigs back to work.

"It's important that in the next five years, deepwater will contribute 10 million barrels per day of oil (equivalent). That's equivalent to what Saudi Arabia is producing," Albers said in an interview in Beijing.

"It's a very important element of meeting the world's energy demand."

HIGHEST SAFETY STANDARDS CRUCIAL

Following the order to idle 33 deepwater rigs, Royal Dutch Shell, ExxonMobil, Chevron, Marathon and other firms have begun curbing Gulf operations, which some argue exacerbates the harm to a Gulf Coast economy already losing fishing and tourism business to the spill.

A lengthy deepwater drilling moratorium could also hit future U.S. oil and natural gas output. U.S. Gulf offshore oil operations produced 1.6 million barrels of oil per day in 2009, accounting for 8 percent of U.S. liquid fuel consumption, said the U.S. Energy Information Administration.

The Interior Department has also outlined a series of potentially costly new safety rules and standards that oil companies will have to contend with.

"There will be significant impact to the thousands and thousands of people who work not only in the industry but those who support the industry, from catering, to diving to inspections," Albers said.

The Louisiana Mid-Continent Oil and Gas Association estimates the moratorium could sideline up to 7,000 highly paid rig workers and cost four to five times as many support jobs at catering, service boat and drilling supply firms.

Swiger added that the U.S. oil giant has been providing assistance in response to the oil spill in the Gulf, which highlighted the importance of upholding the highest standards of safety.

"We stand ready to support efforts to determine how such an incident can be prevented from happening again," he said.

BP is facing another difficult week of tough questions from investors and U.S. lawmakers despite making progress in capturing an increasing amount of oil spewing from the ruptured well.

The major said on Sunday its containment cap had captured 10,500 barrels of oil (439,950 gallons/1.67 million liters) in 24 hours and a second system should be in place soon, enabling it to siphon the vast majority of oil spewing from the leak about a mile below the water's surface.

But the U.S. admiral leading the government relief effort said the coast will be under siege from the spill for many more months.

(Writing by Ramthan Hussain; Editing by Ed Lane)

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Comments (1)
Econova wrote:
It is unfortunate and counterproductive that oil majors are thinking a warning before they think of reassuring at a time when the magnitude of the damage caused by the oil spill may exceed the benefit from not one but multiple, if not all, golf wells. This attitude is further aggravated by the fact that the spill was not caused by an “unavoidable” natural disaster. Such ill timed and ill advised warning deserve to achieve the oposite of its intended effect.

Jun 07, 2010 9:06am EDT  --  Report as abuse
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