Industry executives expect regulatory costs to soar

Three years after the deadly Gulf of Mexico blow out, rig explosion and oil spill,  more than 80 percent of top oil executives believe that regulation will get a lot tougher in the coming years.

They  believe that compliance costs will increase as a result of these new regulations, according to a recent survey by GL Noble Denton, an international technical services company.

The company released the survey at the  Offshore Technology Conference this week in Houston.

“People say they see things tightening up, and the regulatory response to a huge accident, with the establishment of BSEE,” said Arthur Stoddart, executive vice president for GL Noble Denton, referring to the federal  Bureau of Safety and Environmental Enforcement. “They are moaning a little bit about the costs and that it will be difficult to comply with them, that they make things harder to execute.”

The U.S. Interior Department  overhauled its regulation of the offshore industry in response to the blowout of BP’s Macondo well in 2010, creating the safety bureau and requiring operators to complete comprehensive and auditable safety plans.

Operators are required to demonstrate by Nov. 15 that these plans, called  Safety and Environmental Management Systems, have been audited in-house, and they must undergo independent audits by June 2015.

The new plans require operators to demonstrate that they are prepared for scenarios such as a well blowout or a worst-case oil discharge.

Despite the overwhelming cost concerns surrounding offshore regulation, 47 percent of executives surveyed said that the new rules will increase safety practices.

“Our feeling is, some people will always complain about regulations,” Stoddart told FuelFix. “About half of them say that this will be a burden but it will improve things, because it is requiring us to do things that will increase safety and reduce the chance of a spill, so it is not wasted money.”

The cost of the new regulations is expected to hit smaller operators the hardest.

“We are also seeing people indicating that the knockoff effect is that smaller companies are going to struggle in this new environment, which may result in consolidations and acquisitions in the market,” Stoddart said, noting that 60 percent of those surveyed believed that there would be an increase in mergers and acquisitions.

More than 100 top executives from the oil and gas industry participated in the survey, which also included several in-depth interviews GL Noble Denton said.