How Is the Upstream Oil Industry Reacting to the BP Spill?

Oil & Gas IQ

As efforts continue in the Gulf of Mexico to stem the flow of oil from the Deepwater Horizon rig and recover that which has already entered the water, the upstream oil industry is beginning to assess how it will cope with the disaster.

The effects of the spill on the upstream oil industry in the United States were felt almost immediately when the authorities placed a ban on drilling while the incident was investigated.

Initially the ban was intended to last for six months, although this was overruled by a judge who claimed the long time period of the ban could not be justified. The White House has said it will challenge this.

The American Petroleum Institute (API), which represents the upstreamoil industry, has also spoken out against the ban, citing concerns about energy security and jobs.

Commenting at the end of May, API's president and chief executive officer, Jack Gerard, said that "deepwater development is a key component of domestic energy security."

"Additional moves to curtail domestic production by postponing exploration and development off the coasts of Alaska and Virginia, as well as areas in the Gulf, have the potential to significantly erode our energy and economic security," Gerard said.


Just days after the incident at the Deepwater Horizon rig, the API announced that it would be creating two new taskforces to concentrate on the area of offshore equipment and offshore operating practices.

"This tragic incident requires that we re-double our commitment to continually improve safety and response practices," Gerard said.

The taskforces' remits cover the testing and maintenance of blow out preventer equipment and the enhancement of the practices within the upstream oil industry, which cover the drilling of deepwater wells.

In addition to this in early June the API formed a further two taskforces to deal with the issues related to subsea well control and clean-up operation, engaging equipment manufacturers, subsea specialists, spill experts and deepwater contractors.

The aim of the taskforce, which is compiled of equipment manufacturers, subsea specialists, spill experts and deepwater contractors, is to provide information to Congress at it works to create further policy within the area of oil spills. The taskforce's findings will help the upstream oil industry address best policy for future responses to such disasters.

However, despite the steps being taken to ensure the upstream oil industry is better cushioned against such disasters in the future, the incident is likely to have had a huge effect on employee morale.

Christine Probett, a management and human resource Professor at San Diego State University, told MSNBC: "In a crisis situation, many companies focus externally only on things such as public relations and a firm's stock price."

"If there is no internal communication, employees expect the worst and productivity drops significantly while employees speculate on what might happen."

UK Upstream Oil Industry Response

The ramifications of the oil spill are have been felt much further away that the Gulf of Mexico and indeed the United States.

Over in the UK, the Oil Spill Prevention and Response Advisory Group was formed to assess how members of the upstream oil industry operating in the country could improve their practices.

Members of the group include representatives from the industry, drilling contractors, the Department for Energy and Climate Change, the Health and Safety Executive and the Marine and Coastguard Agency.

Key areas that have been identified by the group for enhancement include the well examination process, the verification process, subsea containment equipment and systems, and competency and standards for key onshore and offshore leaders.

Mark McAllister, chief executive of Fairfield Energy Ltd, said: "We are going to be rigorous in our testing and questioning of what we have in place here in the UK, not because we think our practices and procedures are not up to standard but because we cannot be complacent in the face of what is happening in the Gulf of Mexico."