BP Ordered to Fix Safety Lapses on North Sea Rigs

LONDON (Dow Jones Newswires), Feb. 2, 2011

The safety regulator of the U.K. offshore oil and gas industry has ordered BP to fix significant safety lapses on three North Sea rigs, according to documents posted on the regulator's web site Wednesday.

The publication of the order comes as BP has vowed to transform itself into the safest offshore operator in the wake of the Deepwater Horizon explosion and oil spill last year, and is the latest in a series of setbacks to the hoped-for recovery in BP's reputation and profitability.

Tuesday, a U.K. court issued an injunction that halted a major Arctic oil exploration and share swap deal with Russia's Rosneft, at the request of BP's partners in its other Russian venture, TNK-BP. It also emerged that the U.S. Commodity Futures Trading Commission plans to charge BP over alleged manipulation of natural gas prices.

BP Chief Executive Bob Dudley said Tuesday that following the Gulf of Mexico disaster the company doesn't hesitate to shut down operations it deems to be unsafe, and has done so in Alaska and the North Sea in recent months.

However, the U.K. Health and Safety Executive, or HSE, identified a case in September where BP was aware of dangerous corrosion on a piece of equipment on a North Sea platform, but continued to operate it until it failed catastrophically. The HSE didn't say whether anyone was harmed in the incident.

That event came several months after April's Deepwater Horizon explosion, but before Dudley became BP CEO Oct. 1. Dudley has started a major shake-up of BP's approach to managing risk, creating an independent safety organization whose head reports directly to him.

Mark Bly, head of the new safety organization, said Tuesday improvements are already "rippling through the company. We are building the foundation to a much different approach to safety and operational risks."

The HSE issued BP the improvement notice Nov. 25. This isn't the harshest sanction available to the regulator, which has the power to immediately shut down operations where it finds the most serious violations.

Neither is BP the only North Sea operator to be sanctioned by the HSE. The regulator issued 17 improvement notices to 10 different companies in second half 2010, and one prohibition notice which shut down a platform operated by Canadian Natural Resources Ltd. in August.

The first HSE charge is that BP neglected maintenance of a heating line on the Schiehallion offshore platform.

"You were aware of severe wall thinning on the heating medium line from Sept. 21, 2010, but no operational risk assessment was carried out to determine whether this was safe for continued operation or should be shut down," the notice said. "The line failed catastrophically on Sept. 24, 2010, discharging approximately 27 [metric tons] of fluid at 123 degrees centigrade."

The HSE also said BP had failed to adequately address the risk to its workers from an oil leak in a turbine enclosure on the Clair platform and had considered running the ETAP platform without sufficient lifeboats.

"We have already taken a number of actions to improve this aspect of risk management and will ensure all lessons are shared and implemented," said BP in a statement. "BP's safety performance in the North Sea during 2010 improved considerably."

The regulator gave BP until May 31, 2011 to fix the problems.

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