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Exxon Distances Itself From BP’s `Dramatic Departure’ in Gulf


Federal investigators must determine if BP Plc took risks “beyond industry norms” with the Gulf of Mexico well that exploded and caused the worst U.S. oil spill, Exxon Mobil Corp. Chief Executive Officer Rex Tillerson said.

The April 20 disaster that killed 11 workers and sank Transocean Ltd.’s Deepwater Horizon drilling rig “represents a dramatic departure” from the track record of deep-water oil explorers, Tillerson said in remarks prepared for a House Energy and Commerce Committee panel hearing today.

Something went wrong at the BP project about 5,000 feet (1,524 meters) below the sea surface that hasn’t happened at the 14,000 other deep-water wells drilled without incident worldwide, Tillerson said. The catastrophe has damaged livelihoods and coastal environments and will cause loss of public trust in the oil industry, he said.

“We need to know if the levels of risk taken went beyond industry norms,” said Tillerson, who oversees a company that pumps more oil than every member of OPEC except Saudi Arabia, Iran and Iraq.

Exxon, based in Irving, Texas, has drilled 262 deep-water wells in the past decade, 35 of which were in the Gulf of Mexico, he said. Proper well design, workforce training, redundant safety systems and regular maintenance help mitigate the risks involved in drilling miles below sea level, Tillerson said in the remarks.

‘Questionable Decisions’

BP, the biggest oil producer in the Gulf of Mexico, made five “questionable decisions” aimed at cutting costs and speeding completion of an overdue project in the days and weeks preceding the disaster, U.S. Representatives Henry Waxman of California and Bart Stupak of Michigan wrote in a letter to BP CEO Tony Hayward that was released yesterday.

Hayward is scheduled to testify before U.S. lawmakers on June 17. David Nicholas, a BP spokesman, said in an e-mail it would be inappropriate to comment ahead of Hayward’s testimony.

Exxon overhauled its safety procedures after the 1989 Valdez tanker spill off the Alaskan coast, Tillerson said in his remarks. The Valdez incident, which Tillerson described as “the low point’ in Exxon’s history, was one of the worst U.S. spills before the failure of BP’s Macondo well.

John Watson, chief executive officer at Chevron Corp., and ConocoPhillips CEO James Mulva are scheduled to testify at today’s hearing in Washington. Lamar McKay and Marvin Odum, the presidents of the U.S. units of BP and Royal Dutch Shell Plc, respectively, have also accepted invitations.

Increased Scrutiny

Shell follows well-drilling safety standards that lawmakers have said were sidestepped by BP, Odum said in a May 14 letter to Elizabeth Birnbaum, former director of the U.S. Minerals Management Service, which oversees the offshore drilling industry. Shell’s plans to explore for oil and natural gas off Alaska’s coast face increased scrutiny as a result of the Gulf oil spill.

“Shell has design standards and practices that have enabled us to successfully and safely drill many deep-water and shallow-water wells worldwide,” Odum said in the letter to Birnbaum. “Shell will rigorously apply an appropriate similar level of standards in all well operations on the Alaska” outer continental shelf.

More than 30 deep-water rigs have been ordered to stop drilling in the Gulf of Mexico for at least six months while federal officials conduct a review of offshore safety practices. The moratorium has forced Exxon, Shell and other major oil companies to suspend their deepwater exploration plans in the Gulf.

Rigs Leaving

The Gulf accounts for 30 percent of U.S. oil production, according to the Energy Information Administration.

When the moratorium is lifted and federal regulators allow deep-water oil exploration to resume, there may be few rigs remaining in the Gulf of Mexico to do the work, said Gianna Bern, president of Brookshire Advisory & Research Inc. in Flossmoor, Illinois, which advises oil companies on strategy and risk management.

Drilling vessels are starting to leave the Gulf to take up assignments in the South China Sea and offshore Indonesia, said Bern, a former BP crude trader. Those vessels won’t be able to return to U.S. waters for a year or longer, she said.

“This is a challenging time for everyone in the industry because there’s some level of guilt by association going on,” Bern said. “With oil continuing to spew out in the Gulf of Mexico, the whole industry is going to be set back.”