Oil executives sent a strong challenge to Barack Obama on Tuesday, warning at a major oil conference that the American president's ban on risky deepwater drilling would cripple world energy supplies.
As a BP executive standing in for embattled CEO Tony Hayward was heckled by protesters, other industry leaders used the gathering to rally around the British company, arguing that eliminating deepsea rigs in the wake of the Gulf of Mexico oil spill was unsustainable.
Obama slapped a six-month moratorium on deepwater drilling in the Gulf as part of his struggle to show that his administration is responding forcefully to the disaster. The decision halted the approval of any new permits for deepwater drilling and suspended drilling at 33 existing exploratory wells in the Gulf.
The ban, which is being contested in a U.S. court, reflects growing unease about oil companies seeking to drill farther out to sea and deeper than ever before. The process is expensive, risky and largely uncharted — but the industry argues it is also necessary in a world where land and shallow water oil supplies are running out.
If the deepwater drilling ban holds — and is adopted elsewhere — it could signal an industry seachange.
Transocean Ltd. president and CEO Steven Newman, owner of the Deepwater Horizon rig where an April 20 explosion killed 11 workers and set off the worst oil spill in U.S. history, called the deepwater ban an unnecessary overreaction.
"There are things the administration could implement today that would allow the industry to go back to work tomorrow without an arbitrary six-month time limit," Newman told reporters on the sidelines of the conference in the British capital. "Obviously we are concerned."
Chevron executive Jay Pryor said the U.S. government's move will "constrain supplies for world energy."
"It would also be a step back for energy security," Pryor, global vice president for business development at the U.S. company, told delegates at the World National Oil Companies Congress.
The moratorium is being challenged in court by an oil services company, Hornbeck Offshore Services of Covington, Louisiana, which claims the government arbitrarily imposed the moratorium without any proof that the operations posed a threat. A federal judge in New Orleans, Judge Martin Feldman, says he will decide by Wednesday whether to lift the moratorium.
Hornbeck, which ferries people and supplies to offshore rigs, says the moratorium could cost Louisiana thousands of jobs and millions of dollars in lost wages.
In addition to the Gulf, there are more than 20 offshore rigs in Britain's North Sea, although they do not operate in waters as deep as the Gulf. Brazil, which sits on the world's potentially largest deepwater oil beds, has no deepwater rigs yet but plans to build 28 rigs in the coming years.
BP chief of staff Steve Westwell, who was heckled during a speech in which he stood in for Hayward, said "regulators around the world will obviously want to know what happened" to cause the blown-out well in the Gulf and will change their procedures accordingly.
"The world does need the oil and the energy that is going to have to come from deepwater production going forward," Westwell said. "Therefore, the regulatory framework must still enable that to be a viable commercial position."
Westwell was interrupted twice during his address by protesters from Greenpeace shouting "we need to end the oil age!" The hecklers were escorted out of the heavily policed central London hotel by security.
Pryor was diplomatic when asked if his company would have been as reckless as BP, whose leader skipped the gathering after receiving stinging criticism for watching his yacht compete Saturday off England's Isle of Wight. That glitzy outing that drew outrage on the Gulf coast and an acerbic response from the White House.
"There's no zero probability for everybody in this room," Pryor said. "There's always going to be that one chance in 10 million there's an accident. Just like the nuclear and airline industries."
The blown-out BP undersea well has already leaked more than 120 million gallons of oil into the Gulf, according to the most pessimistic U.S. government estimates. Oil has been washing up from Louisiana to Florida, killing birds and fish and coating marshes, wetlands and beaches. A pair of relief wells considered the best chance at a permanent fix won't be completed until August.
Shukri Ghanem, the head of Libya's National Oil Corp. who serves as the North African nation's de facto oil minister, also came to BP's defense, saying he was happy the company operated in his country. BP has onshore operations and shallow water rigs in Libya.
Ghanem, who said he planned to meet with Hayward in London, said the spill is "a real tragedy, but in a way it's exaggerated."
"It is unfortunate, but it is an opportunity to be more careful in the future," he said.
BP signed an exploration and production deal with Libya's National Oil Co. — worth at least $900 million — in June 2007, sending the company back into Libya for the first time in more than 30 years. Libya's proven oil reserves are the ninth largest in the world, while vast areas remain unexplored for new deposits.
Libya has said it plans to start deep water drilling in the Mediterranean "pretty soon."
Some believe the oil industry may be crying wolf. Many analysts say the continued strength of oil prices, which have mostly fluctuated between $70 and $85 over the past months, can be attributed to excessive speculation in the futures market. In reality, there has been a slow recovery of oil demand since the global credit squeeze and there are huge stockpiles of crude and refined products in the United States.
The International Energy Agency expects oil demand to rise less than previously expected this year, cutting it forecasts last month by a daily 220,000 barrels, to 86.4 million barrels a day.
Outside the London conference, Greenpeace protester Emma Gibson called on BP to end its investment in a controversial Canadian tar sands project and end deepwater drilling.
"We really need to speed up progress to end the oil age," Gibson told reporters.
Westwell said Hayward was "genuinely sorry" not to be at the conference, where he had been due to give a keynote address on about the global responsibilities of international oil companies.
"He and I both hope you understand his schedule is under incredible pressure at the moment," Westwell told delegates.
When questioned about Hayward's position and whereabouts, Westwell said "he is the CEO" and added Hayward was in London attending to other company matters.
Hayward had been scheduled to hand over daily oversight of the U.S. oil spill to BP managing director Bob Dudley, perhaps in August, but speculation is rife that the handover might come sooner rather than later.
AP reporter Andrew Khouri contributed to this report.
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