May 27, 2010 / 1:51 PM / 7 years ago

BP deepwater spill to have permanent impact

LONDON (Reuters) - BP's (BP.L) deepwater spill in the U.S. Gulf will change the way the industry operates for ever, just as the Piper Alpha rig fire two decades ago rewrote the rule book, oil executives told the Reuters Global Energy Summit.

After a fatal explosion last month, the Deepwater Horizon rig, leased by the British oil major, is still pumping crude into the water in one of the worst spills in U.S. history.

In response, the United States is expected to issue new safety rules on Thursday [ID:nN26238003] and other governments have also taken swift action.

The industry says preventing further accidents is crucial, but it also says regulations will drive up costs and slow down future exploration, with knock-on effects for the oil price.

"We are concerned about future underwater oil drilling. That may have implications for slower or less drilling offshore. Regulation is necessary, but that should not hamper the long-term offshore drilling," said Nobuo Tanaka, executive director of the International Energy Agency, which advises industrialized nations.

Addressing the Reuters summit, he said the IEA expected in response to adjust its future supply expectations in its medium-term outlook.

The Deepwater Horizon explosion, which left 11 dead, has revived painful memories of the Piper Alpha oil platform explosion and fire in the British North Sea, which killed nearly 170 people in 1988, making it the world's worst offshore oil disaster.

"I think Piper Alpha had a permanent impact. It changed how platforms were designed," said Brian O'Cathain, chief executive of Irish oil and gas services company Petroceltic PCI.I. "I think this will change how people do deep water operations."

Costs Already Rising

African independent oil and gas company Afren said it had already experienced a 7-8 percent increase in costs for a project in Ghana following the safety response of Ghanian authorities.

"They have imposed some regulations and they are sensible," Osman Shahenshah, chief executive of Afren AFRE.L, told the Reuters energy summit.

He predicted deepwater exploration, which is extensive off western Africa, would be slowed "a little bit," but the industry was more than ready to regulate.

"I think the industry will do it voluntarily, even it is not imposed," he said. "Nobody wants to go through what BP is going through."

Oil executives were equally sure that whatever the difficulties, deepwater exploration would continue because of the need for oil and the limited opportunities for conventional exploration.

"I am sure that there is going to be continued investment in deep offshore," Ayman Asfari, the chief executive of UK services company Petrofac, said. (PFC.L)

"The world can't afford not to do that, but I think it may slow down until there are new regulations."

Any slow-down leads oil executives to the possibility of future supply crunches and rising prices once energy demand recovers from economic crisis.

"I'm not an economist, but I can tell you what's absolutely sure is that all the delays that have happened, all the delays that could potentially happen in the Gulf of Mexico, we're going to pay one day," said Thierry Pilenko, the chief executive of oil services company Technip TECF.PA.

"I don't know whether it's in 18 months or in two years, but at some stage everybody will be screaming for resources."

Editing by William Hardy

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