Gulf of Mexico: Oil Spill

Baroness Falkner of Margravine Excerpts

Thursday 16th December 2010 Lords Chamber

[Baroness Falkner of Margravine]

My Lords, the BP oil spill in the Gulf of Mexico was the biggest oil catastrophe in American history and possibly in peacetime history overall. Eleven people died; numerous others suffered injuries as a result of the explosion on the Deepwater Horizon platform; an estimated 5 million barrels of oil escaped into the sea; and we will never know how much oil ended up in the deeper ocean. There was considerable damage to people’s livelihoods, and to marine and wildlife, as well as to the reputation of a distinguished multinational connected to this country.

While my noble friend Lord Moynihan and the noble Lord, Lord Grantchester, have greater expertise on the technical aspects of this catastrophe and what it means for safety regulation for oil rigs in the deep seas, I shall concentrate on the unsustainable and insatiable American appetite, and that of the developed world, for fossil fuel in non-renewables. The implications for the UK are equally profound.

I merely note that the debate about the technical failures of BP and the other companies involved is of great significance because we must learn the lessons from it. As a recent report on the “Today” programme revealed, a Shell platform only narrowly avoided a similar incident in December 2007. The safety review discovered a series of misinterpretations and mistakes by the crew operating the platform, which was very similar to what happened in the BP case. Fortunately, as the noble Lord, Lord Grantchester, said, the blow-out preventer worked and a major oil catastrophe was averted in the North Sea. While the risks of deep-sea drilling are thus evident and widespread, I want to focus on some of the bigger lessons on which we need to draw for a British policy on energy and oil, and on climate change and the environment.

The BP oil spill is not an isolated case with tragic outcomes. It is in fact symptomatic of the larger risks that we are forced to take as the world reaches the point where our demand for petroleum outstrips our capacity to find and produce it. It is a simple geological truth that the world’s oil reserves are limited. What is not known is the amount of oil that is still available to us for commercial exploitation. For decades, the international oil companies and the Governments in oil-rich countries have assured us that there was no danger that we would soon come close to exhausting world oil reserves. They told us that the doomsday scenario of a so-called “peak oil” was misguided. This optimistic outlook seemed justified over the past several decades as new oilfields were discovered and technological innovation allowed us to dig for ever more remote reserves. But in recent years peak oil theory has gained traction in international energy debates and can no longer be dismissed as scaremongering or out of hand.

In 2009, the UK Energy Research Council carried out a major review of about 500 studies of future oil reserves. It concluded that,

“a peak in conventional oil production before 2030 appears likely and there is a significant risk of a peak before 2020”.

Other bodies, such as the respected International Energy Agency, have also begun to change their forecasts for oil reserves. In 2007, the US Department of Energy warned that,

“peak oil presents the world with a significant risk management problem of tremendous complexity”.

We in the UK should be particularly receptive to these warnings, for our own experience with oil production provides a classic illustration of what an oil peak looks like, albeit in a regional context. Oil production in the North Sea peaked in 1999 and is now on a declining path. Britain has been a net importer of oil since 2005—something we did not anticipate and plan for quite well enough.

As other oilfields are becoming unavailable, either because they have reached the end of their lifetime or because they are in the hands of state oil companies, we need to search for oil in ever more inaccessible parts of the world. As the BP oil spill demonstrated, the scramble for unconventional oil comes with growing safety and environmental risks. They are also likely to lead us into civil war and conflict—not least if you look at countries as far apart as Equatorial Guinea, Nigeria or Saudi—to doing business with those we may not wish to be so dependent on.

What are the answers? A tightening of safety standards and regulatory oversight of the oil industry will be an important answer to the BP issue. But if we focus solely on this aspect, then we miss the bigger threat of our continued dependence on oil, which is fuelling the search for unconventional oil reserves deeper and deeper in inhospitable waters, literally. In fact, given current trends in road and air transport in the UK, our oil dependence is set to grow even more. We may be able to replace coal and oil-based energy production with renewable energy sources and nuclear energy, but oil remains an irreplaceable fuel for the transport sector. Although households and industry have been able to reduce their dependence on oil since the 1970s oil crisis, the transport sector’s share of oil consumption has steadily risen. Cars, trucks and airplanes now consume about 50 per cent of oil in the United Kingdom.

There are compelling reasons for reducing our dependence on oil. The fight against climate change requires us to reduce greenhouse gas emissions, chiefly those from the burning of fossil fuels. A shift away from oil would also be beneficial for the UK’s foreign policy, which I have already touched on. As more and more oil reserves are controlled by Governments that are neither liberal nor democratic, we would do well to reduce our addiction to oil and our dependence on the good will and co-operation of often unpalatable and unpredictable regimes in oil-rich regions.

The BP oil catastrophe should thus be seen as a wake-up call. It brought to light extraordinary failings in safety procedures and management structures by, as I have said, a proud international oil company. It is also shone a light on how our dangerous dependence on oil is forcing us into ever riskier forms of oil exploration. We cannot address the former problem without dealing with the latter as well. It is for these sound environmental reasons that this Government have embarked on a radical overhaul, and we will hear today about the electricity market reforms. We look forward to my noble friend’s Statement in a short while and the consultation process that is to follow.