Tags: OK | Energy | Conference

Energy CEOs: Gulf Oil Spill 'A Real Setback' for Industry

Friday, 30 Apr 2010 02:30 PM


The massive oil spill in the Gulf of Mexico will significantly set back industry efforts to increase offshore drilling, the CEOs of two Oklahoma City-based independent energy companies said Friday.

Devon Energy Corp. CEO Larry Nichols and Chesapeake Energy Corp. CEO Aubrey McClendon spoke during an annual Oklahoma State University energy conference, with OSU President Burns Hargis asking questions submitted by audience members.

The first question was about the April 20 explosion of a rig operated by BP and owned by Transocean Ltd. It left a blown-out well a mile underwater that is releasing more than 200,000 gallons of oil a day and threatening the Gulf Coast. Oil from the spill reached the Louisiana wetlands at the mouth of the Mississippi River on Friday.

Nichols said dealing with cleaning up such a spill is "uncharted territory" because "nothing like this has happened offshore" before. He also said the spill will have economic affects on the industry.

"Politically, it's a real challenge," Nichols said. "People will use, or misuse, a tragedy like that to further their own objectives. The possibility of opening up the rest of offshore ... has undoubtedly closed now."

That indeed seemed to be the case. David Axelrod, a top adviser to President Barack Obama, said Friday on "Good Morning America" that "no additional drilling has been authorized and none will until we find out what has happened here." Obama had recently lifted a drilling moratorium for many offshore areas, including the Atlantic Ocean and Gulf.

Devon Energy had said last November it planned to divest itself of its Gulf assets, and Nichols said the company coincidentally is no longer drilling in the Gulf because of those sales. He said that from what he's learned of the rig explosion, "there's no logical explanation for what went wrong" but that he suspects "it was a series of cascading errors."

McClendon said it's still too soon to know what the environmental implications of the spill will be.

"The question is, is it a minor environmental inconvenience or is it a full-blown environmental catastrophe," McClendon said. "We don't know that yet."

McClendon's company has focused primarily on natural gas exploration and production and long has called for increasing the use of natural gas as a vehicle fuel. He said in a roundabout way, the explosion might make more people listen to those who are pushing a similar agenda.

"This is a real setback for our country's drive to reduce foreign oil dependency," he said. "Those barrels (of oil) that don't get developed in the Gulf will get developed elsewhere in the world. ... It drives up the price of oil."

When that happens, he said, he hopes it will convince lawmakers and others to encourage the use of more natural gas.

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