Implications of the Gulf of Mexico oil spill for the UK: The Rt Hon Chris Huhne MP - Oral Parliamentary Statement

The House will wish to join me in expressing our deepest sympathy for those bereaved or injured in the explosion on 20 April. And for all the…

This was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government

The Rt Hon Chris Huhne

The House will wish to join me in expressing our deepest sympathy for those bereaved or injured in the explosion on 20 April. And for all the individuals and communities affected by spilling oil or fearing that they will be affected over the days and weeks to come. Our thoughts must be first with them.

On 20 April, an explosion and subsequent fire on board a drilling rig operated by Transocean under contract to BP in the Gulf of Mexico tragically killed 11 workers. On 22 April, the rig sank. On the sea bed, 1600 metres below, substantial quantities of oil were leaking into the ocean. The Blow-out Preventer which should have sealed this leak failed.

The causes of the accident are now subject to a US Presidential Commission of Enquiry and to civil and criminal investigation.

There has never been such a large leak of oil so deep in the sea. Attempts by BP, working under the direction of the US authorities, to seal the leak were not successful. The company then pursued a strategy of capturing as much oil as possible. In recent days, more than 15,000 barrels a day of oil has been recovered.

However it is also now thought that the leak is worse than previously thought. The US Government’s estimate of the daily flow of the leak is now 35,000-40,000 barrels per day. BP hope to be able to increase significantly the amount of oil it is capturing, but very large quantities of oil continue to be released into the sea.

Moreover, the leak will not be fully stopped until August at the earliest, when the first relief well which BP is already drilling should enable the original well to be plugged.

There is also an enormous operation to address the impact upon the environment of oil already in the water. Working under US Coastguard Admiral Thad Allen, over 2000 boats have been involved, skimming the water and using dispersant chemicals. Thousands of workers and volunteers on-shore are removing oil and maintaining coastal defences. The House will wish to join me in paying tribute to those involved in this work.

We understand and sympathise with the US Government’s frustration that oil continues to leak at the rate that it does. To appreciate the scale of this environmental disaster, each week a quantity of oil equivalent to the total spillage from the Exxon Valdez is escaping into the sea.

The US administration has said that BP is doing everything asked of it in the effort to combat the spill. We of course look to the company to continue in this and will do everything we can to help. The key priority must be stopping the environmental damage. In their phone conversation at the weekend President Obama reassured the Prime Minister that he has no interest in undermining BP’s value and that frustrations in America have nothing to do with national identity.

We have offered the US authorities dispersant chemicals, and will respond quickly and sympathetically to any request from US authorities for help.

Honourable Members will remember that in 1988 the Piper Alpha rig in the north sea exploded, with 167 fatalities. Following that disaster, our regulatory regime was significantly tightened, and we split the functions of licensing and health and safety in the UK.

The US have announced that in future in the US these functions will be dealt with by separate organisations. We hope that we have useful experience to offer of building and operating such a system. Officials from my Department and the Health and Safety Executive have been discussing this with their US counterparts.

Here in UK waters, it is my responsibility to make sure the oil and gas industry maintains the highest standards. I have had an urgent review undertaken.

It is clear that our safety and environmental regulatory regime is already among the most robust in the world. The industry’s record in the North Sea is strong.

But with the beginning of exploration in deeper waters West of Shetland, we must maintain vigilance. Initial steps are already under way, including doubling annual environmental inspections by DECC to drilling rigs.

I will review our new and existing procedures as soon as detailed analysis of the factors which caused the incident in the Gulf of Mexico is available, building upon the work already begun by the newly formed Oil Spill Prevention and Response Advisory Group. Given the importance of global deepwater production during our transition to a low carbon economy, I will also ensure that lessons and practice are shared with relevant regulators and operating companies.

Mr Speaker, I now turn to the position of BP. It is hugely regrettable that the company’s technical efforts to stop the spill have, to date, been only partially successful. But I acknowledge the company for its strong public commitment to stand by its obligation, to halt the spill, and to provide remedy and payment of all legitimate claims.

As BP’s chairman has said, these are critical tasks for BP must complete in order to rebuild trust in the company as a long term member of the business community in the United States, in Great Britain and around the world.

BP remains a strong company. Although its share price has fallen sharply since April, the company has the financial resources to put right the damage. It has exceptionally strong cash flow, and will continue to be a major employer and vital investor here and in the United States. In many ways, BP is effectively an Anglo-American company with 39 per cent of its shares owned in the US against 40 per cent in the UK.

Mr Speaker, there has been much speculation in the press about the impact on UK pension funds and whether the company will pay a quarterly dividend. This is entirely a matter for the BP Directors, who will no doubt weigh all factors and make a recommendation to their shareholders that is in their best interest - which of course includes the best interests of many UK pension funds.

Many citizens have real and legitimate worries about their pensions, but I would like to reassure the House that not only is BP financially sound, but pension funds that hold BP shares generally also hold a very diverse portfolio of assets. Their exposure to a single company, even a company as economically significant as BP, is limited.

In concluding my statement, I wish again to express the Government’s profound sympathy to those in the US affected by this accident, and by its aftermath. The priority must be to address the environmental consequences of the spill. Our concentration is on practical measures that can help in this. This disaster is a stark reminder of the environmental dangers of oil and gas production in ever more difficult areas. Coupled with the impact of high-carbon consumption this highlights yet again the importance of improving the energy efficiency of our economy and the expansion of low-carbon technologies. We must and will learn the lessons of these terrible events.

Published 14 June 2010