Queen's Speech

Lord Moynihan Excerpts

Wednesday 2nd June 2010 Lords Chamber

[Lord Moynihan]

My Lords, I warmly welcome the noble Baroness, Lady Wilcox, to her portfolio and congratulate both her and the ministerial team on the Front Bench today.

On the subjects of energy and environment raised by the Minister, I should like to address the specific question of the oil and gas business on the United Kingdom continental shelf, particularly in UKCS waters offshore, taking into account the recent Macondo oil well disaster and the loss of life in the Gulf of Mexico, and the previous disastrous Ixtoc 1 blow-out in 1979. In so doing I declare an interest: I have been a non-executive director of the Rowan group of companies based in Houston and today chair its HSE committee. Although we operate in the jack-up business, we are principally focused in natural gas, which is a very different market to the semi-submersible fleets used in ultra deep-water drilling such as BP’s Macondo oil well in the gulf.

It is clear that this is going to be an important issue for the Government and, in considering changes to our offshore oil and gas industry practice, I hope that in the light of the disaster we will all proceed with caution, consult widely and look to the industry as coalition partners when considering new measures for implementation on the UKCS, the vital objectives we should share for safe offshore working and the high priority to be given to environmental protection. The coupling of ultra deep-water oil drilling—in the case of the oil field operated by BP, 5,000 feet down in the Gulf of Mexico—with near-shore drilling projects would be unwise.

In this context, the US Government’s announcement of a moratorium on the approval of all new offshore oil and gas drilling permits failed to take into account some crucial issues which should be the subject of our attention in the North Sea—namely, that shallow-water drilling involves well developed and simpler processes for the extraction of energy resources. Notably, it has surface blow-out preventers. Jack-ups and shallow rigs in shallow water employ blow-out preventers above the surface of the water. These surface BOPs, which are so critical to safety offshore, are accessible for constant inspection, maintenance and repair and in emergencies can be controlled either remotely or by physical or manual manipulation. Access to their positioning above the water is very different from when the blow-out preventer is 5,000 feet down under water.

In the North Sea we focus extensively on clean natural gas. Shallow-water drilling sites predominantly involve clean natural gas resources with fewer environmental risks. The distinction between oil and gas in developing policy on this front is important. Also in the North Sea, wells in the shallow-water regions are drilled in predictable and mature reservoirs, and the reservoirs of greatest concern to us are the high-pressure wells. On the subject of lower pressure in the North Sea, a large percentage of the shallow-water rigs require positive external stimulation to produce the flow of oil and gas, significantly limiting risk or loss of control.

However, some key issues require consideration by the Government if we are consistently to ensure that our offshore drilling activities strive for improved safety levels. All safety cases now need to be reviewed, as should the legal and reporting processes to which they currently conform. These should cover both proactive and reactive issues in the context of safety, health and the environment and always be live documents and up to date. Detailed consideration could also be given to the design, capability and efficiency of the blow-out preventers I have mentioned. Their failure was the common denominator in both the BP well disaster and the Ixtoc 1 blow-out in 1979.

The time is now right for well control equipment and control systems to be further regulated. The HSE requirement in our country of a full inspection of all equipment every five years is too long—for example, Saudi Arabia has a three-year process—and well control training and certification should be regularly reviewed. An independent audit of the training programmes of the International Association of Drilling Contractors would also be welcome. Above all, absolute clarity in drilling operations as to who controls the well and who should shut it in is essential; the driller not the operator should always be responsible in this area.

Some of the measures I have proposed today would add additional costs to drilling companies, but these costs are surely worth investing in so that the oil and gas industry in the United Kingdom can work closely with government to ensure a safer, technically stronger and environmentally responsive energy sector both onshore and offshore.

In closing, I hope that BP’s chief executive, Tony Hayward, will not be sacrificed on the altar of American political expediency. He is a leader of exceptional quality and has reacted with authority, expertise and perseverance to an unprecedented disaster in ultra deep water. I wish both him and his colleagues well in resolving the technical and environmental challenges ahead.