Despite tensions over Gulf spill, BP will be back

WASHINGTON Tue Apr 5, 2011 4:17am IST

A logo on a British Petroleum petrol station is seen in London April 30, 2010. REUTERS/Toby Melville/Files

A logo on a British Petroleum petrol station is seen in London April 30, 2010.

Credit: Reuters/Toby Melville/Files

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WASHINGTON (Reuters) - Sixteen days before the first anniversary of the worst oil spill in U.S. history, BP's efforts to resume drilling in the Gulf of Mexico have provoked

a predictably fierce response from Washington.

Give it another few months and experts say the British giant will likely once again be drilling in the deep waters offshore Louisiana and Texas, however.

Once public attention moves past the sensitive one-year anniversary of the Deepwater Horizon blast, which killed 11 workers and sent 4 million of barrels of oil gushing into the water, regulators are likely to have little choice but to grant

BP approval to press ahead in the Gulf, where it is still the biggest operator.

Weekend reports in the UK media that BP was seeking a "deal" to resume drilling sparked fierce denials from U.S. officials, as any perception that the government was paving the way for the British giant could be politically delicate.

A BP source later told Reuters that it had filed one drilling application and was going through the normal regulatory process. The BOEM has granted 11 deepwater permits to other companies since February.

"We've been talking to them just like the rest of industry has about what we need to do and what the criteria will be to get back to work. We're just following the process, there's nothing unusual," the company source said.

U.S. Interior Secretary Ken Salazar slammed the reports of a deal with BP, adding BP would need to go through the same review process as any other company to begin drilling.

"If they follow all the rules and they actually submit a development plan that is deemed safe and best practice, they're going to get issued a permit," said Ken Medlock, an energy fellow at the Baker Institute at Rice University in Houston.

GULF FUTURE

Indeed, while the prospect of BP drilling again in the Gulf may have caused some uproar, Charles Ebinger, director of Brookings Institution's energy security initiative said the United States needs oil from offshore rigs if President Barack Obama is to make good on a promise to cut oil imports by a third in 10 years.

"I think the administration's been a bit disingenuous with the American people not pointing out that about 40 percent of our oil comes from offshore in the Gulf," said Ebinger, who has analyzed energy policy for more than 35 years.

Last week, BP America CEO Lamar McKay said the company was "working constructively" with regulators to meet new rules.

"We are encouraged by both verbal and written messages we have gotten from regulators," McKay had said.

The region is key to the company's future growth. "The Gulf of Mexico is by value about 15 percent of the company at the moment so it's important that they drill there to replace reserves," Investec analyst Stuart Joyner said.

"If you look at the company's reputational issues, it's important that they're seen resuming business in the Gulf of Mexico alongside other participants. It's very much a

psychological issue," Joyner said.

BEYOND THE SPILL

Still, it will not be easy for BP, or any of the companies involved in the spill, to move forward quietly in the Gulf.

U.S. legal probes into the accident are ongoing, and a presidential commission earlier this year released a report blaming the disaster on systemic safety lapses and a series of mistakes made by BP and its contractors.

BP Plc has so far spent $19 billion on the spill and has taken a $41 billion charge to cover costs related to the accident.

There may be added focus on BP's applications because of the drilling disaster, said Bruce Bullock, director of the Maguire Energy Institute at the Southern Methodist University.

"It's conceivable they'll place some additional scrutiny and take a bit longer to look at that permit than some others given their history," Bullock said.

Two top Democratic lawmakers on Monday urged the government to examine what role worker fatigue at Transocean may have played in the spill.

Representatives Henry Waxman and Diana DeGette, leading Democrats on the House Energy and Commerce Committee, asked for an investigation of whether moving from 14-day to 21-day shifts on the rig may have helped to cause the massive spill.

Salazar, in Mexico with officials from the White House commission that investigated the BP oil spill to discuss offshore drilling in the Gulf, blasted safety bonuses provided by Transocean, which said last week that 2010 was its safest

year on record.

"In my own view, 2010 was probably the greatest year of pain in terms of oil and gas development in the deep water all across the world," Salazar said, telling reporters Transocean was "at some fault" for the spill.

The U.S. government has also been criticized for lax regulation and a cozy relationship with drillers, but has taken steps to correct that, said Marilyn Heiman, director of the Pew Charitable Trust's offshore energy campaign.

"It's really important now that Congress enact some of those reforms" to make them law, Heiman said.

(Additional reporting by Mica Rosenberg in Mexico City, Anna Driver and Kristen Hays in Houston, Sarah Young in London and Tom Doggett in Washington; editing by Alden Bentley and Sofina Mirza-Reid)

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