BP to begin deep-water drilling off coast of Libya

By Guy Dinmore and Eleonora de Sabata in Rome

Published: July 23 2010 - The Financial Times

BP will start deep-water drilling off the coast of Libya within weeks in spite of concerns about the UK group’s environmental and safety record after the Gulf of Mexico oil spill disaster.

The move comes as BP faces increased scrutiny over its acquisition of rights to a big oil and gas field off the African coast three years ago, a subject that overshadowed the visit of David Cameron, UK prime minister, to Washington this week.

At 1,700 metres below sea-level in Libya’s Gulf of Sirte, the well will be 200 metres deeper than the Macondo well in the Gulf of Mexico which triggered the worst US offshore oil spill disaster when the Deepwater Horizon rig exploded on April 20, killing 11 people.

“Drilling will start within a few weeks,” BP confirmed.

Tony Hayward, BP’s chief executive, signed the $900m exploration agreement with Libya in 2007, calling it BP’s biggest single such commitment. The company has since revealed that it lobbied the UK government that year over a prisoner transfer agreement between Britain and Libya.

Mr Hayward is considering a request to appear before the US Senate foreign relations committee on Thursday to respond to questions about the release of Abdel Basset al-Megrahi, the Lockerbie bomber set free last year by Scottish authorities on compassionate grounds.

BP has said it “was not involved in any discussions with the UK government or the Scottish government about the release of Mr al-Megrahi”.

The spot where BP will drill its first exploratory well lies inside the “Line of Death” proclaimed by Muammer Gaddafi in the 1980s in claiming Libya’s total rights over the Gulf of Sirte. It is the area to which, in 1986, Ronald Reagan, the then US president, dispatched naval forces to challenge the Libyan leader’s claims, sinking two Libyan naval vessels and killing more than 30 Libyans.

No government has challenged Libya’s mineral rights to the area that BP is exploring but environmentalists are dismayed that drilling will start before inquiries into the Gulf of Mexico disaster have concluded. BP said it would “move forward with great caution”, adding that it would apply lessons learnt from the investigations into Deepwater Horizon to all offshore operations.

Barack Obama’s imposition of a moratorium on deep-water drilling in the Gulf of Mexico has highlighted the growing importance of new exploration across the Mediterranean. Diamond Offshore, a US deep-water driller, is moving a rig from the Gulf of Mexico to Egypt, while Australia’s APX started drilling last week between Tunisia and Italy. Shell plans to start exploring soon off western Sicily.

Italy has speeded up its procedures and granted 21 new exploration permits. New limits imposed on near-shore drilling in response to the Gulf of Mexico spill apply only to future operations and barely affect the most promising areas off Sicily.

With cash-strapped governments courting Libya’s oil-fuelled sovereign wealth funds, countries such as Italy, Greece and Malta – all within a radius of 500km (310 miles) of the Gulf of Sirte – have refrained from commenting on Libya’s plans.

However, environmentalists and politicians have expressed concerns. A proposal by Günther Oettinger, Europe’s energy commissioner, for a moratorium on deep-water drilling in European Union waters failed to get a response from Mediterranean states.

“You don’t stop flying because of a plane crash,” said Shokri Ghanem, the head of Libya’s national oil company who signed the 2007 deal with Mr Hayward in the presence of Tony Blair, then UK prime minister.

Antonio D’Alì, chairman of the Italian Senate’s environment commission, has said he is “very worried” about BP’s plans. He called for a unified approach from governments, not unilateral decisions based on national interests.

“The problem is not BP or Libya. The sea has no boundaries and when accidents happen, in national or international waters, effects are felt in the whole Mediterranean,” Mr D’Alì said.

“Considering it is already one of the most oil-polluted seas in the world, the impact of a major spill could be irreversible.”

The Gulf of Sirte is a breeding ground for endangered bluefin tuna, while rare loggerhead turtles nest on Libyan shores. However, a disaster could have a much wider impact.

Nadia Pinardi of the Mediterranean Operational Oceanography Network said: “Most of the effect would be felt in the deep sea around the gulf as, with time, oil transforms into tar-balls and sinks. But currents in the area are very complex.”

Waters flow mainly east towards Egypt but winds and eddies could push a slick north through important anchovy, tuna and swordfish fishing areas.

Ezio Amato, former chairman of the International Maritime Organisation’s oil pollution response unit, said the Mediterranean already suffered the equivalent of a Deepwater Horizon disaster every year from thousands of minor spills.

More than 1m tonnes of oil is transported daily through the sea, a quarter of the world’s traffic. Discharges are illegal yet a stream of oil and oil products – estimated at 150,000-600,000 tonnes a year – escapes from shipping, refineries, ports and pipelines.

A rich area for marine biodiversity, the Mediterranean is extremely sensitive to pollution. Almost a lake, its waters take up to 90 years to mix with the Atlantic through the narrow Strait of Gibraltar.

The effects of oil pollution are felt high up in the food chain. Plankton store and concentrate hydrocarbons from the surface and pass them on all the way to top predators. Whales and dolphins were found to have accumulated high levels of oil-derived compounds in their blubber two years after the Haven oil tanker exploded off Italy in 1991, spilling 140,000 tonnes of oil.

Fish caught close to the wreck a decade later showed a significant number of liver tumours.

The Mediterranean’s deepest well, at 2,400m, lies in Egyptian waters. Its oil ministry is under fire after disclosing a spill from a rig that polluted 160km of Red Sea coastline last month only once it had been reported in the media.

While Libya is not noted for its press freedom, BP’s own record on transparency has been attacked in the US. Congressman Ed Markey leading a subcommittee investigating the disaster, said BP could not be trusted and “has lost all credibility”.

In the event of a disaster off Libya, BP said it had “detailed contingency plans in place, a multitiered response”.