January 6, 2011 / 12:03 AM / 10 years ago

Panel doubts UK's North Sea oil spill readiness

* Spill response equipment may not be up to the job

* Taxpayers could end up paying for a North Sea spill

* Greenpeace slams recommendation for no drill ban

* BP seen to have cut corners on doomed well

By Tom Bergin

LONDON, Jan 6 (Reuters) - A parliamentary report warned that Britain is not ready to tackle an oil spill of the kind suffered by BP (BP.L) in the Gulf of Mexico last summer, and that if one occurred, taxpayers could end up paying the clean-up costs.

Thursday’s report supported the UK government’s decision not to impose a drilling ban, saying it would hurt the economy and jeopardise UK energy supplies — a recommendation which prompted a rebuke from environment campaigners.

It also concluded BP appeared to have “cut corners” when it drilled the Gulf of Mexico well which caused the United States’ worst ever spill.

The spill highlighted the fact the oil industry had not developed the technology to shut off a leaking oil well in deep water.

Even after BP devised a way to cap its well, the panel said risks remained.

“There are serious doubts about the ability of oil spill response equipment to function in the harsh environment of the open Atlantic in the West of Shetland,” the report said.

The panel added that legislation did not specify who was responsible for paying to make good the damage of an oil spill and had an excessively narrow definition of costs that could be recouped.

The North Sea is a mature province, offering increasingly small finds which had prompted a lessening of interest from larger international oil companies such as BP. The smaller companies which increasingly dominate UK production would find it hard to meet the costs of a big spill, the panel noted, suggesting they should be required to hold insurance.

The government could take account of the additional costs when deciding on oil taxes, the report added.

The BP oil spill highlighted shortcomings in U.S. oil industry regulation. It prompted a deepwater drilling ban and a restructuring of the main industry regulator.

Greenpeace said the parliamentary report supported its call for a judicial review of offshore drilling in the UK.

“This report lists all the reasons why a ban on deep sea drilling makes sense and then ignores its own findings. The oil companies have no idea how they would deal with a major spill off the coast of the UK,” the group said in a statement.

The report also criticised drilling rig operator Transocean RIGN.VX(RIG.N), the company which BP hired to drill its blown out Gulf of Mexico well, for failing to ensure it had adequate equipment to prevent a well blow out when it was drilling in the North Sea in 2009. (Editing by David Cowell)

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