Against backdrop of gulf spill, other nations move forward with deep-water drilling

By Juliet Eilperin and Steven Mufson
Washington Post Staff Writers
Tuesday, July 20, 2010; 12:27 PM

NY-ALESUND, NORWAY -- Few if any nations have paid as much attention to the safety of offshore drilling as this one, surrounded as it is by oil-rich seas on all but its eastern border.

In 40 years of offshore energy exploration, Norway has suffered just four spills -- none of the magnitude of the one in the Gulf of Mexico and none reaching the country's pristine tundra shores. Its government has made efforts to avoid the kinds of conflicts that have bedeviled the U.S. regulatory process by splitting off safety and environmental oversight duties from the Ministry of Petroleum and Energy. Perhaps most significantly, the country has a separate Climate and Pollution Agency that weighs in on every decision about whether to open up new areas to offshore drilling and has inspectors who examine rigs once they're operating.

But even as the ongoing underwater drama in the Gulf of Mexico reveals the oil industry's shortcomings when it comes to preventing or stopping the flow of an underwater geyser, Norway is pushing ahead with offshore drilling plans, including the kind of deep-water drilling that the Obama administration has suspended in the United States.

"Easy oil is running out," said Hege Marie Norheim, head of Statoil's Strategic Agenda of Arctic and Subarctic Business Development Activities. "We've been exploring for oil and gas where it lies."

That has risky implications if an accident does happen, as the BP spill highlights: "No company in Norway would have a better strategy to stop the spill," said Frederic Hauge, president of the Norwegian environmental group Bellona.

The strategy of continuing to exploit the economic opportunities of deep-water wells even as the hazards they represent becomes clearer is being pursued the world over. Other countries -- including Brazil, Canada, Nigeria and Angola -- are also moving forward with drilling, lured by oil reservoirs they are discovering that are two to six times as big as the average Gulf of Mexico reservoir and taking advantage of new opportunities offered by the U.S. moratorium.

"For places like Angola, Nigeria and Brazil, most of their production comes from the deep water," said Leta Smith, director of exploration and production trends at Cambridge Energy Research Associates. "It's a big piece of their revenue stream."

Some of those countries stand to gain from the uncertainties in the United States prompted by the disaster in the gulf. This month, Diamond Offshore Drilling announced that it is sending one of its deep-water drilling rigs from the Gulf of Mexico to Egypt. The rig, which can work in water up to 10,000 feet deep, has a new contract running at least through June 2011. On Monday, Diamond said another Gulf of Mexico rig called the Ocean Confidence would depart for Congo.

Diamond said it might move more of its three remaining Gulf of Mexico rigs to foreign countries. While apologizing for the loss of jobs in the United States, Diamond chief executive Larry Dickerson said, "We are actively seeking international opportunities to keep our rigs fully employed."

There are many such opportunities. Brazil, already home to much of the world's deep-water drilling fleet, is signing up more rigs. It is drilling wells nearly five miles underwater -- five times deeper than BP's Macondo well -- and nearly 200 miles offshore, at the edge of its national waters. The political debate over the area known as the "pre-salt" province has focused on how to divvy up the royalties from such lucrative wells, not whether to curtail exploration and development.

Libya also said last month that it would continue its offshore drilling program and gave BP a green light to go ahead with new exploration wells. BP spokesman Andrew Gowers said that the Libyan government "would have had the opportunity to put [BP offshore exploration plans] on hold, and they decided to proceed and were very public about it."

Countries are making long-term plans as well. Last week, Canada invited new bids on nine-year leases off the coast of Newfoundland and Labrador.

Nonetheless, in light of the gulf spill, many nations are struggling with how to reconcile the desire to exploit their offshore resources with renewed concerns about safety and environmental protection.

Canada has begun a comparison of its regulations with U.S. rules, and Brazil' s national petroleum regulatory agency has asked firms drilling in its waters to reassess the chances of an accident taking place off its shores. In Nigeria, President Goodluck Jonathan, a former environmental official in the strife-torn, oil-rich Niger Delta, is looking for lessons from the United States. Oronto Douglas, a lawyer and adviser to the president, said he hoped that the $20 billion escrow fund established by BP to deal with Gulf of Mexico claims could be a model for foreign oil companies dealing with Niger Delta claims.

"Whatever we do in this country will set the global scale," said Fadel Gheit, an oil analyst at Oppenheimer & Co. "No one is going to build to two standards, just like the bumper in Japan cannot be lower than a bumper in the U.S."

Since the BP spill, Canada has focused on one specific drilling issue: whether to require companies operating in the Beaufort Sea to drill a relief well at the same time they start an exploratory wells, to have a quick way of killing the well if needed. Its National Energy Board cancelled a May 11 hearing on the issue and announced it would begin a broad review of safety measures for energy exploration in the Arctic.

But a different regulatory authority, the Canada-Newfoundland and Labrador Offshore Petroleum Board, has already rejected the idea of drilling a relief well at the same time as an exploration well. Sean Kelly, the board's spokesman, explained in an e-mail: "The reason is because such a requirement would result in an increase in risk. A blowout can occur in a relief well, and companies need to take the same precautions drilling this well as they do for an exploration well. Our job at the board is to see that risks are being reduced to as low as reasonably practicable."

Norway is doing more to study lessons from the gulf than many other nations. The Norwegian Petroleum Safety Authority has assembled an 11-person team that is studying the federal inquiries into the BP spill and has begun analyzing the report issued May 27 by the Interior Department's Outer Continental Shelf Safety Board.

"This is a serious reminder we must work to keep up the safety work as best we can," said Jan-Erik Stostad, who as Norwegian Labor Ministry state secretary oversees its Petroleum Safety Authority.

Independent experts agree. In February, the Office of the Auditor General of Norway, or Riksrevisjonen, issued a report suggesting that environmental and fishery concerns sometimes come second to financial ones in drilling decisions and that the government should consider putting regulators in a "job quarantine" after serving in government and taking jobs in the oil industry.

As director general of Norway's Climate and Pollution Agency, Ellen Hambro takes pride in the fact that her deputies report any drilling violations to the police, but notes that her petroleum unit has fewer than two dozen people and cannot compete with salaries offered by the private sector. "We are loaded with work, trying to keep the piles down," she said.

She also devotes times to a careful assessment of every recommendation to open new areas to offshore drilling.

But when the Norwegian government announced last month which new oil and gas prospects would be leased in the Barents, North and Norwegian seas, it included seven blocks that Hambro's agency said should be kept off-limits.

"Sometimes they listen to our advice, and sometimes they don't," said Hambro.

Hambro said it is hard to predict whether the BP spill will reshape the world's approach to taking oil and gas from the ocean's depths.

"The worst case has just happened," she said. "We don't know yet the consequences, environmental or political."

Mufson reported from Washington.

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