Global Perspectives on the GOM Crisis

Editor’s Note: Since April, the focus of the energy industry, the business community and the world at large has been the evolving crisis in the Gulf Mexico. With the crisis nearing a critical juncture, it is an opportune time to assess global perspectives on how this disaster will impact the energy industry in the years to come. Pipeline & Gas Journal assembled a panel of experts from Hill & Knowlton, one of the world’s leading public relations and reputation management firms, to provide their thoughts on the fallout.

Participants from Hill & Knowlton represent the major regions around the globe, including:

• Asia Pacific – Glenn Schloss, H&K Hong Kong
• Europe – Jim Donaldson, H&K London
• Latin America – Max Cano, H&K Santiago
• Middle East – Brian Shrowder, H&K Dubai
• North America – Chris Gidez, H&K New York

P&GJ: What do you see as the near- and long-term consequences of this disaster in your region, from a legislative and regulatory standpoint? Do you foresee any scenarios where these consequences could be felt differently by oil and gas (O&G) companies, based on their geographic status (i.e., IOCs vs. NOCs)?

BS: Paradoxically, although the Middle East is the world’s largest oil-producing region, the effect of the spill is likely to be more muted here than in other parts of the world. The onshore oil industry is much bigger than offshore, and offshore drilling in the Arabian Gulf is conducted in fairly shallow waters near thinly populated coastlines. Nevertheless, an impact is inevitable: any tightening of international industry standards will be reflected in national regulations. While NOCs enjoy close relationships with their respective oil ministries, the onus will be on IOCs to prove their ability to meet these requirements.

JD: It has prompted a review of safety and environmental regimes at both the European and national levels. In the United Kingdom, the energy ministry has already announced a doubling of annual environmental inspections on drilling rigs, and further measures are likely. Given that the regime here is already pretty tough following Piper Alpha (the North Sea oil production platform, operated by Occidental Petroleum, which exploded in 1988, killing 167 men), any changes may well be tinkering round the edges rather than substantial.

Similar discussions have been taking place in Brussels, where the European Commission is considering whether to review European Union legislation on safety procedures and environmental protection in the event of an accident. Given the number of drilling rigs in the North Sea, the UK and Norway will be the countries most significantly implicated by any regulatory changes. Given that it is not a member of the EU, Norway will be able to choose what changes it wants to implement, whereas the UK will have little choice. That may give rise to Norway being able to open up a competitive advantage, but reputation-wise, they will probably want to be seen to be adhering to EU standards. Ultimately, any O&G business operating in Europe will have to adhere to any new regulatory standards if they want to be taken seriously, and there is every possibility that new regulations will be brought forward if the current situation is prolonged.

MC: O&G is a key business for the entire Latin American region. There are likely to be for impacts in the midterm: