Oil Industry Has Had To Learn Lessons From The Deepwater Disaster

The Deepwater Horizon disaster in April 2010 was the largest offshore spill ever in the U.S. It humbled one of the oldest, biggest and most distinguished oil firms, BP PLC (BP.LN), forcing it to set aside $20 billion in compensation and sacrifice its chief executive. No wonder the oil industry is doing some soul searching.

In response to the catastrophe, oil companies have taken measures ranging from delaying drilling to devising new technologies to contain giant spills. Big oil has also drastically improved the oversight of contractors and training.

Soon after the disaster, BP postponed its offshore drilling projects in Libya. This was before the current unrest forced it to mothball its Libya strategy for the longer term. Moreover, Total SA (TOT) of France said it would take a closer look at its deep water CLOV project in Angola-before launching it August 2011.

Searching for oil deep under the sea tends to yield the reward of huge gushers. But the blow-out preventer--the device used on a rig to stop the release of natural gas--also has to deal with unusual levels of pressure. This is critical to the safety of the entire operation.

In the case of Deepwater Horizon, the device couldn't resist the flow, which led directly to the catastrophe. The sheer scale of the disaster also meant it took months to plug the well.

To make sure any response to another potential deep-sea oil leak on this scale is swifter in the future, industry groups have worked hard to design new technologies. In the U.K., an industry body representing companies, unions and regulators, has asked Cameron International Corp. (CAM), the specialist oil equipment engineer, to build a device to close off or 'cap' a well in the event of a blowout.

Separately, Exxon Mobil Corp (XOM), Royal Dutch Shell PLC (RDSA), Chevron Corp (CVX) and ConocoPhilips (COP) have jointly pledged $1 billion to design a containment system that would rapidly respond to deep-water spills in the Gulf, with an initial version of the equipment planned for delivery in February. In addition, BP, along with governments in countries like Angola, have said they will tighten audits on rigs.

Another issue pointed out in reports on the disaster-lack of proper training, notably of contractors--is also being addressed by both BP and Total. However, only time will tell if this is enough to prevent another tragedy on the scale of Deepwater Horizon.

By Benoit Faucon, Dow Jones Newswires; 00 44 20 7842 9266; benoit.faucon@dowjones.com