Vast oil spill damaging to industry credibility

The black slick threatening vast stretches of the Gulf of Mexico's coast also threatens to deliver a hammer blow to the oil industry.

Energy giant BP is in the firing line, even though the Deepwater Horizon well rig was owned by another company.

BP said it would pay compensation for legitimate claims for property damage, personal injury and commercial losses.

"We are responsible, not for the accident, but we are responsible for the oil and for dealing with it and cleaning the situation up," chief executive Tony Hayward said on ABC's Good Morning America.

He said the equipment that failed on the rig and led to the spill belonged to owner Transocean, not BP, which operated the rig.

But the spotlight is again firmly on BP's safety record, particularly in the United States. In 2005 15 workers died when its Texas refinery exploded, and a year later a major leak occurred at one its pipelines in Alaska.

Hayward, who took over three years ago, promised a zero-tolerance approach to safety.

Even some industry critics, such as Jake Molloy, general secretary of the Offshore Industry Liaison Committee, a major trade union for offshore workers, reported an improvement in its approach in the North Sea.

But the Gulf spill - which continues to spew oil from three leaks 1.5km beneath the ocean surface - has renewed questions about operating in challenging areas.

Companies are struggling to maintain production as "conventional" production from mature fields including the North Sea declines.

This means the industry has to use new technologies and explore environmentally sensitive regions.

Not surprisingly, the oil industry - not just BP - is mounting a PR offensive in the US to reassure the public and politicians that offshore drilling is safe.

The Deepwater Horizon accident comes at a critical time for the industry.

After years of lobbying, a month ago Barack Obama agreed to open up new areas to offshore drilling, including in Alaska.

Companies including Shell said they planned to start drilling in the region this summer.

But the Gulf disaster has forced Obama to backtrack.

He announced that new no licences would be issued until an investigation into the spill was completed.

On the face of it, the statistics on the global industry's safety and environmental record are impressive.

The American Petroleum Institute reports oil spilled in the US in the decade up to 2007 was more than two-thirds less than 30 years before.

On safety too, the official data appears to indicate steady improvement.

According to the International Association of Oil and Gas Producers (OGP), in 2008 the total amount of hours lost as a result of injury was the lowest on record.

However, it admitted the fatality rate increased by 4 per cent as the number of severe cases rose, though it said the long-term trend was downwards.

Certainly, most executives take environmental and safety performance much more seriously than before. But oil spillages are not the only indicator of environmental damage caused by the industry.

Shell's figures show a steady increase in the amount of hazardous and non-hazardous waste it creates each year - 1.7 million tonnes in total in 2008.

Shell is using a quarter more energy to produce each barrel of oil than it did a decade ago.

The industry's performance outside North America is worse, although the official statistics are patchy.

According to the OGP, in 2008 the fatality rate in Africa was about 50 per cent higher than the global average; in South America, it is even higher.

Russia is not much better.

However, it says over the past decade the overall trend is again downwards. But it is questionable whether the industry can be relied on to provide accurate statistics.

Two years ago, when the Observer visited Fort McMurray, a bustling, Wild West town in Alberta at the heart of Canada's oil sands boom, George Poitras, a former chief of the Mikisew Cree First Nation, was scathing about the industry's claims.

Oil sands operators clear vast tracts of forest and promise to "reclaim" the land, returning it to its former state.

"Our elders back home laugh when the industry says this," he said.

"Who do they think they are - are they God or the creator? They destroy the boreal forest and they are going to put back the land to as good as it used to be? It's impossible."

In many cases, governments cannot be relied on to provide independent rigorous oversight.

The Albertan Government in large part relies part on Ramp, an industry-funded body that monitors the impact of oil sands operation on aquatic environment and is mistrusted by most environmentalists.

"It's all self-monitoring by the industry," said to Joyce Hildebrand from the campaign group Alberta Wilderness.

In Alberta, there are only a dozen officials to make sure that operators comply with environmental regulations in a province bigger than Spain.

In 2007, Shell was forced to dilute its stake in the US$20 billion Sakhalin II project in Russia's far east, ostensibly over its environmental record.

Deepwater Horizon notwithstanding, it is true that the oil industry has made significant improvements on its record on safety and oil spills compared with 30 years ago at the time of the Exxon Valdez disaster.

But companies cannot be relied on to monitor the more indirect environmental impact of their operations, particularly as they move into increasingly sensitive regions such as Sakhalin and the Arctic.

Greenpeace scientist Paul Horseman says: "Companies are good at publishing glossy reports with nice pictures of smiling people in different countries.

"But it's just another public relations exercise with which they try to produce the image that they are doing something of value and doing it safely. It's pure greenwash."

- OBSERVER