Transocean CEO defends deep-water drilling

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Transocean Ltd. , the company at the centre of the oil spill in the Gulf of Mexico, is confident deep-water drilling will continue in the Gulf and elsewhere despite the explosion at its rig last month that killed 11 workers and resulted in a massive oil leak.

"I think it is difficult to overemphasize the importance of the energy industry to the U.S. economy," Steven Newman, Transocean's chief executive officer, told analysts on a conference call Thursday.

"The energy industry is a source of revenues, it is a source of jobs, and it's a source of economic growth. I don't think that the [Obama]administration are going to act rashly about this ... the [drilling]industry will continue."

Swiss-based Transocean is one of the largest oil drilling companies in the world and it operated the Deepwater Horizon rig that exploded April 20. The blast sunk the oil platform and ruptured the well, sending 800,000 litres of oil spewing into the ocean daily ever since.

Mr. Newman said Transocean is still investigating what happened and it is working on plans to stop the leak. The company has disclosed that the U.S. Department of Justice has asked it to preserve documents. That could signal a criminal probe by the government.

There has been much debate about who will cover the cleanup costs of the disaster, which have been estimated as high as $15-billion (U.S.). The Obama administration has pointed to BP PLC, which leased the rig, while BP has said Transocean has to shoulder some of the costs.

Thursday, Mr. Newman cited Transocean's contract with BP and made it clear he believes the British oil giant is on the hook. The "way the contract language typically reads, we are indemnified from any expense or claim related to pollution from the wellbore," he said. "We believe in this particular instance the contract is pretty clear about that. As I said at the outset, our industry has a long history of contract sanctity; and we expect BP to honour that."

Transocean officials estimated its cost for the blast at about $200-million, consisting mainly of insurance deductibles. The company said it renews its insurance annually and had just started the negotiations process. "Clearly the Deepwater Horizon incident will have an impact on the level of premiums that we can expect," Ricardo Rosa, the company's chief financial officer told analysts.

During the call, Mr. Newman also questioned the need for tighter regulations including the adoption of acoustic control systems that can automatically shut down a well. Brazil and Norway require these systems which activate a blowout preventer, or BOP, with sound waves.

"That acoustic control system is just one more alternative means of functioning the BOP in addition to the many means that already exist for functioning the BOP," Mr. Newman said. "So in terms of adding additional flexibility or redundancy, I am not sure that once you consider all of the redundancy and flexibility that already exists, that adding an acoustic control system changes that picture meaningfully."