Investors ask oil companies to outline deepwater risks, spill response plans

Paula Dittrick
OGJ Senior Staff Writer

HOUSTON, Aug. 5 -- A group of investors sent letters to 27 oil and gas companies asking each company to disclose information by Nov. 1 regarding its spill prevention and response plans for offshore operations worldwide following the Gulf of Mexico oil spill.

CERES, a leading network of investors and environmental groups, helped organize the investor letters. Nearly 60 investors, representing collective assets totaling more than $2.5 trillion, signed the letters. The group included comptrollers and treasurers from various US states and the UK-based Local Authority Pension Fund Authority Forum.

Transocean Ltd.’s Deepwater Horizon semisubmersible drilled the deepwater Macondo well for BP PLC and its partners. An Apr. 20 blowout resulted in an explosion and fire on the Deepwater Horizon, killing 11 people and resulting in an estimated spill of 4.9 million bbl of oil into the gulf.

Bill Lockyer, California state treasurer, said, "The gulf tragedy provided dramatic evidence that investors and pensioners have high stakes in deepwater oil exploration. In my state alone, the nation's two largest public employee pension funds have seen the value of their BP holdings plummet by $349 million."

The letter asked companies for details on five key topics:

• Investments in spill prevention and response activity, including offshore drilling and spill response capability.

• Spill contingency plans for managing deepwater blowouts.

• Lessons learned from the BP spill, including their position on possible new regulations and more robust enforcement on offshore drilling in the gulf and elsewhere.

• Possible actions to improve their safety contractor selection and oversight practices.

• Governance systems for overseeing management of offshore oil and gas operations.

"The Deepwater Horizon disaster was a game-changer for shareholders," said Pennsylvania State Treasurer Rob McCord. "Neither public nor private investors can make good decisions without better information that is delivered early and systematically.”

A second letter was sent by most of the same investors to 26 insurance companies that provide insurance for offshore drilling activity. The letter asks if insurers are considering adjustments to their overall exposure to offshore oil and gas operations.

Swiss Re, an insurance company, estimates total insured losses for all affected parties from the BP rig explosion and spill could top $3.5 billion—a figure that would surpass the $2.2-2.5 billion/year in insurance premiums worldwide for oil and gas exploration.

Contact Paula Dittrick at paulad@ogjonline.com.



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