The spill report—2

Jan. 24, 2011
Two important facts will shape offshore safety regulation after the Macondo tragedy of April 2010: US regulation will change, and offshore work conducted under different types of regulation appears, by some metrics, to be safer.

Two important facts will shape offshore safety regulation after the Macondo tragedy of April 2010: US regulation will change, and offshore work conducted under different types of regulation appears, by some metrics, to be safer. The US industry and government should consider a new approach.

The contrast between US and European safety regulation becomes clear in the new report to President Barack Obama of the National Commission on the BP Deepwater Horizon Oil Spill and Offshore Safety. So does the contrast between results.

Regional disparity

A chart in the report's eighth chapter plots fatalities per 100 million man-hours worked from three data sources. By that standard, according to the International Association of Drilling Contractors, work off Europe was five times safer than work off the US in 2004-09. Data from the International Association of Oil & Gas Producers show European work during 2004-09 to have been nearly four times safer than North American work. And the International Regulators' Forum showed the US fatality rate during 2007-09 to have been eight times that of Europe.

Differences in work environments off Europe and the US distort comparisons. Offshore installations are more numerous and smaller in the Gulf of Mexico than in the North Sea. Personnel transfers are many times more frequent in the gulf. Boat traffic is heavier. And the fatality rate is just one, however important, measure of safety.

Still, the regional disparity is striking. It provides excellent reason for producers and government officials to look closely at European regulation.

The European approach evolved from disasters—the March 1980 sinking of the Alexander Kielland floating accommodation unit on Ekofisk oil field off Norway and the July 1988 sinking of the Piper Alpha production platform off Aberdeen, Scotland. Norway and the UK responded to the catastrophes by moving toward regulatory systems that move away from prescription by governments toward demonstration by operators.

The report to Obama describes the change in Norway like this: "Under the new regime, rather than relying solely on prescribed operational and safety standards, the government required the industry to demonstrate thorough consideration of all risks associated with the structures and operations for a drilling or production plan. The regulator no longer 'approved' operations. Shifting the burden of demonstrating safety to the operator, the regulator would instead now 'consent' to development activity proceeding only upon the operator's demonstration that sufficient safety and risk management systems were in place." The UK adopted a similar system, which it calls safety cases. "The previous prescriptive regulatory approach evolved into one where regulations were supplemented with a requirement for companies to demonstrate to the regulator that they had undertaken a thorough assessment of risks associated with an activity and they had adequate safety and risk management systems to address those risks," the report says.

In the US, offshore safety regulation has continued to be based on prescription and inspection, complemented by voluntary safety practices originating within the industry. The Macondo blowout and spill showed the degree to which the existing system has come under strain as drilling and production increased in technical complexity and moved into deeper water, farther from shore. They also raised political pressure on the government to toughen regulation of an industry that the presidential report portrays as plagued by "systemic" lapses. Change is inevitable.

Restricting activity

In the post-Macondo political climate, a toughening of the prescriptive approach might simply restrict offshore activity without improving the safety of operations. Government officials won't trust industry advice about regulations and will err on the side of caution. When hiring inspectors, they'll treat industry expertise suspiciously. Permitting disputes and administrative bottlenecks will choke activity. Changes of this type would coalesce into an institutional bias against work.

For that reason alone, operators should welcome consideration of a different approach. If further analysis shows that adaption of the European system indeed would yield superior results across a range of safety measures, they should move beyond consideration and embrace change.

More Oil & Gas Journal Current Issue Articles
More Oil & Gas Journal Archives Issue Articles
View Oil and Gas Articles on