Taken before the Energy and Climate Change Committee on Tuesday 7 September 2010
Witnesses: Paul King, Managing Director North Sea Division, Transocean, Malcolm Webb, Chief Executive, Oil & Gas UK, and Mark McAllister, Chair, Oil Spill Prevention, Response and Advisory Group (OSPRAG).
Q1 Chair: Good morning and welcome to this first public evidence session that this Committee has held during this Parliament. So we are very pleased to see you and we have chosen to address what we believe is a very topical issue. Can I say right at the outset that our concerns are as indicated in the terms of reference for the inquiry? They extend to safety, including of course particularly the safety of people and also to the environment, and the consequences of deepwater drilling for the environment. I believe you would like to make a short opening statement.
Malcolm Webb: If that’s possible, Mr Chairman, I would, and I think Mr King would as well.
Chair: The benefit of it will vary inversely with its length.
Malcolm Webb: Thank you. I take that on board. I will be brief. The Macondo well incident was a dreadful event and first and foremost we think of the 11 men who lost their lives, and the others who were injured, some of them seriously, as a result of that catastrophic incident. That blowout and the sustained flow of oil which resulted from it was truly shocking and rightly caused the offshore and the gas industry and its regulators around the world to reflect upon the implications of this incident for their own operations.
The UK was no exception and, without prompting, the industry, together with its regulators and trade unions, quickly came together to take stock of our position and without seeking to pre-empt or prejudge the lessons to be learned from Macondo set about a thorough review of our practices and procedures, and looking to see what enhancements could be made.
One result of this review is that we continue to have faith in our regulatory systems and industry practices and, surprisingly, we believe we have found opportunities for improvement and are moving to implement these. However, these possible enhancements are relatively marginal in nature and do not cause us to lose faith in the strength and integrity of the regime we work in, in all parts of the United Kingdom Continental Shelf (UKCS).
Much has been made of the fact that the Macondo well was drilled in deep water and indeed some Governments have imposed moratoriums on drilling in deeper waters. The UK Government have so far,
Christopher Pincher Laura Sandys Sir Robert Smith Dr Alan Whitehead
and in our view quite rightly, resisted the notion of a drilling moratorium. Furthermore, most of these calls for drilling moratoriums tend to focus on deeper water areas. In truth, there is no reason for this concentration on deeper water save that this recent and awful Macondo incident just happened to occur in deeper waters.
The depth of water is not the critical element here.
Rather, what is critical are the practices and procedures employed to drill the well and to regulate those who are doing that drilling. In that regard policy and practice in the UK are substantially different to those employed in the US Gulf of Mexico and there is, in our opinion, no cause for public concern that the industry standards and regulatory practices and procedures employed in the UK are not fully fit for purpose. They are and they militate strongly against the likelihood of anything like Macondo ever happening here.
Q2 Chair: Right. Does anyone else want to say anything at the start?
Paul King: Yes, Mr Chairman, if it’s all right. Thank you for inviting me here today to represent Transocean and to assist the Committee in understanding the readiness of the UKCS to handle any situations that occur that are similar to the Macondo incident that happened in the Gulf of Mexico. My name is Paul King. I am the Managing Director for Transocean Drilling UK and I have been working for that company for 35 years. I started out in the North Sea as a rig electronic technician and am currently today responsible for the day-to-day business of Transocean in the North Sea. Now, we at Transocean continue to feel deeply the loss of the 11 industry colleagues who lost their lives in Macondo, nine of whom were part of the Transocean family, and I personally knew one of those who lost his life there having worked with him in the Gulf of Mexico many years ago. I would just like to point out at this time that Transocean continues to look for the answers, along with the rest of the industry, and we fully support Oil & Gas UK and the OSPRAG committees in getting to the bottom of the issues that we are
facing today and in ensuring that the UKCS is safe to continue drilling.
Q3 Chair: Right. Thank you very much. Just picking up something that was said just now, you said the depth is not critical but it is the case, is it not, that if you are drilling in very deep waters then it is more difficult and the hazards are greater? I appreciate it depends on the procedures but the problems are more challenging the deeper you are.
Malcolm Webb: You are right, Mr Chairman. Water is a hazard that you have to plan for and deep water brings some particular risks with it.
Q4 Chair: There is a definition in America of
“deepwater” and what they call “ultra-deepwater”.
Does that definition apply in the UK as well?
Malcolm Webb: No, I do not think it does, really. I don’t think there is an agreed industry definition of what constitutes deepwater; indeed, I think it is something of a moving feast. When we started in the North Sea over 40 years ago, depths of 100 or 200 feet would have been regarded as deepwater, and as our abilities and technologies have moved forward so the definition of what is “deep” has moved with it.
Q5 Chair: As a matter of practice have we been drilling in UK waters at anything like the depths that this was taking place in the Gulf?
Malcolm Webb: Yes, Sir, we have in water depths. I think the deepest well so far drilled in the UK Continental Shelf was at 6,000 feet of water, and that was drilled some years ago.
Q6 Chair: Right, and are there current plans to go on drilling at comparable depths to the Deepwater Horizon?
Malcolm Webb: I am not aware of all companies’
plans but I think we can anticipate that wells will be drilled at that depth in the UK Continental Shelf, yes.
Chair: Okay.
Q7 Albert Owen: Just to get my head around this, are we talking about actual exploration or are we talking about drilling that has been capped and left for a while and then you return to it? Have those sorts of exploratory drilling been done in the past and you return into it to get the oil out?
Malcolm Webb: You can cap wells and go back into them at a later time; that is called suspending the wells. That does happen. And the thing—
Q8 Albert Owen: And has that happened in the UK around the Celtic Sea and in the North Sea?
Malcolm Webb: It can happen. There are suspended wells around the United Kingdom Continental Shelf, yes, but I think in the Macondo incident it was not a question of a re-entry into a suspended well; it was the drilling of an exploration well.
Q9 Dr Lee: You mentioned other countries that felt the need to issue moratoriums on deepwater drilling.
Norway is one of them.
Malcolm Webb: I don’t think so, Sir.
Dr Lee: It has suspended until 2011.
Malcolm Webb: I do not think it has called a moratorium on drilling, Sir. I think what it has done is that it has suspended the granting of new licences in northern deeper areas but that does not mean that it has stopped deepwater drilling.
Q10 Dr Lee: Well, it implies that it is awaiting developments and finding out what happened in the Gulf of Mexico. My understanding is that they are predominantly gas fields in Norway, yes? If that is the case, why would it suspend issuing licences more than, say, the UK where we are talking about oil? Why do you think it has made that decision?
Malcolm Webb: I don’t know. I am afraid you would have to ask them. My view would be that there is no case, given the strength of the regulatory regime that we have in here and the fact that we know the risks that are involved in the drilling of these wells and have engineering practices that can deal with them, that we should impose any blanket moratorium on the drilling of wells in the UK Continental Shelf.
Q11 Dr Lee: Do they have, like, different procedures about assessment of oil spill plans?
Malcolm Webb: I do not believe so. I am afraid I am not an expert on the Norwegian regime but I think it has a number of elements that are similar to our regime, to be distinguished from, for example, the more prescriptive American regime.
Dr Lee: Okay.
Q12 Sir Robert Smith: I should declare my interest to the Committee as a shareholder in Shell and also as a vice-chair of the all-party group on the offshore oil and gas industry. First of all in terms of depth, at what depth does the intervention in the well at the seafloor switch from divers to ROVs?
Malcolm Webb: Well, others might be able to comment but I believe that is round about 500 feet, something like that.
Q13 Sir Robert Smith: Because that seems to be more of a transition, in a way, in terms of operating differently, than the American definition.
Malcolm Webb: It brings in the need for a whole new range of technologies and approaches; that is true, yes.
Q14 Sir Robert Smith: You have already touched on the fact that you don’t think that there should be a moratorium. Can you understand how, to the layman, it seems that when a disaster happens, you stop, obviously, and then wait for the lessons?
Malcolm Webb: Yes, I can, but just because an event has happened in another part of the world doesn’t mean to say that in a regime such as ours, because that has happened, we should automatically stop doing what we are doing, I believe, in an entirely safe and proper way.
Q15 Sir Robert Smith: Yes, we will be touching more on how the regime works here in the UK in more detail with other questions. Obviously, having a constituency in the North East of Scotland, I am very aware of the jobs and the revenue and the impact of the industry, but I just wondered what would be the
consequences on that side for the community in terms of investment in the industry and continuing production?
Malcolm Webb: I think it would send a very negative message. I think it could be quite serious. There is a need for substantial continued investment in UK offshore areas. If we are to achieve what we need to achieve to allow this country to keep a measure of energy security, my industry is going to have to invest something like £60 billion over the next 10 years or so. Those investment sums will be prejudiced if people see that the UK regime is a stop/go, switch on/
switch off type of regime, particularly if there is no good reason for that switching off and on.
Sir Robert Smith: Thanks.
Q16 Albert Owen: You mentioned that depth wasn’t an issue but regulation was. Do you think it is time—
the EU is calling for it—that we regulate the regulators, that we do have a level playing field across the world?
Malcolm Webb: I find that a very strange concept—
that we should put over the level of our very expert professional regulators that we have here, who have hard-won experience from the North Sea, what I would have thought was bound to be a relatively less expert EU umbrella. I have heard it said from the EU that we need to control the controllers. Frankly, I think I am at a loss to understand what added value there would be with a European level of regulation.
Q17 Albert Owen: But what I find difficult is that we are talking about here an accident that occurred predominantly in the Gulf of Mexico. Experienced companies are drilling there. We are not talking about a new country developing this now. We have got Norway wanting a moratorium, and again it is an experienced country. So why does Britain feel it has to be out of sync or worried about increased regulations?
Malcolm Webb: I am sorry, you may say I am picking on this, but I still do not believe that Norway has called for a moratorium.
Albert Owen: No, I am asking a question.
Malcolm Webb: I think it has put a limitation, it has slowed down the granting of new licences but I do not think it has imposed a moratorium.
Q18 Albert Owen: I understand the technical difference but it has done it for a reason, hasn’t it?
You know, it is a first-rate country when it comes to oil production.
Malcolm Webb: Yes. Well, you would have to ask the Norwegian authorities why they have decided to limit their licences. I am not aware of it.
Q19 Albert Owen: It is our near neighbour. I am finding this difficult to understand. It is our near neighbour and we work in co-operation with it in the North Sea, I assume?
Malcolm Webb: Yes, we do.
Q20 Albert Owen: And it’s taken this radical step to limit licences.
Malcolm Webb: I am not sure how radical the step is, Sir, and, I repeat, I do not believe it has imposed a
moratorium. I come back to the point that I do not think there is a case for a moratorium to be imposed in this country bearing in mind the regulatory regime and the industry practices that we adopt here, and there are critically important differences, I believe, between the US system of administration, for example, and the UK administration.
Q21 Albert Owen: Okay, but talking about Europe, and that was the premise of my question, surely we can contribute to the European level of regulation.
You know, the expertise that you talk about—over 40 years of proven experience—could actually enhance the European level.
Malcolm Webb: Well, to be quite frank, the last thing I would wish to see is any diminution in the resources available to the regulators here to support a pan-European initiative. I would rather they were kept here in the UK, continuing to do the excellent job they do here in the UK.
Q22 Albert Owen: Well, I am not suggesting that they go overseas. What I am suggesting is that they share their expertise.
Malcolm Webb: They could do.
Q23 Albert Owen: Okay. With regards to the oil spill regulations at a European level, that is mostly for shipping and tankers. Do you think there is a scope to extend this to drilling?
Malcolm Webb: There is clearly the scope to extend it to drilling. I think it does not extend that far at the moment, but as far as the industry is concerned that would not be an issue of primary concern for us because as an industry we take the greatest steps to ensure that if there is any spill of oil from any of our operations the industry deals with that—deals with the clean-up, and deals with the compensation for that—
and the industry has an excellent track record on that, and has furthermore set up bodies to support it in that on a mutual co-operative basis here in the UK. So, it is an interesting question but in some ways somewhat academic as to the way that the industry does approach those issues here in the UK.
Q24 Albert Owen: I did not mean to be too academic. I meant, you know, to try and direct the answer. What concerns me is that if there is a spillage—we have seen spillages in the past—it does affect innocent countries that, you know, are not involved in the actual drilling.
Malcolm Webb: Yes.
Albert Owen: I am talking about Europe now. If there is something on this scale that does happen in Europe, it’s not going to stop at international boundaries.
Malcolm Webb: No.
Albert Owen: So, that is why I am asking whether the present regulation shouldn’t go beyond shipping, which is a moving object, to deal specifically now with the experience in the Gulf of Mexico—to deal with drilling and exploration.
Malcolm Webb: I think that is something that could be looked at but I think the other point you make is a very important point too. It is important that the nations in Europe, and particularly those around the
North Sea, collaborate and co-operate together, and again there is a good track record and good history on that in the UK.
Q25 Albert Owen: I think you are moving towards what I asked in the first place, and perhaps there is a move towards that. Do you feel that the environmental liability directive would hold operators liable for the damage they do in terms of biodiversity?
Malcolm Webb: I am not sure, actually. I am not sure that I am expert on that. I think our view is that it probably—it does not at the moment, no.
Q26 Laura Sandys: This just really follows on from my colleague’s questions about this international regulation. I mean, it is an international business. We are seeing now that rigs are being moved from the Gulf of Mexico to the Congo, to Egypt. When you start to look at some sort of international framework, would that not then offer in many ways a much stronger level playing field across the world and ensure that there is some consistency? I mean, in the documents that we have there is a very clear message from you that the regulatory structure in the UK is excellent; it affects all aspects of safety. Would we not see that as a benchmark to raise everyone else’s up to that level, rather than you saying in many ways that by us spreading our expertise we are going to diminish our capability? I just see that it is a global business, and that there are global standards on environmental protection, and I wonder whether we should use ourselves as a stronger model for that international framework.
Malcolm Webb: I would hope that other people can
Malcolm Webb: I would hope that other people can