Mexico oil sector accidents raise doubts about deep water exploration

By David Alire Garcia

MEXICO CITY (Reuters) – As Mexico opens its energy market to more private investment, the country’s drive to exploit untapped deepwater oil riches has raised safety concerns due to mounting accidents that have blotted the country’s safety record.

The biggest Mexican oil refinery Salina Cruz has been offline since a fire broke out at the coastal facility on Wednesday following a tropical storm, the latest in a string of mishaps.

Violent summer storms have visited Mexico for years, but the country has very little experience in deep water drilling, a risky activity still marked by the 2010 Deepwater Horizon well blow out in the northern Gulf of Mexico that killed 11 people and pumped 5 million barrels of oil into the sea. That disaster prompted a rethink of safety measures in the United States.

As a result, U.S. operators now have on permanent standby a so-called capping stack that ultimately sealed the well, while third-party inspectors verify deepwater project safety.

Mexico, which awarded its first eight deepwater projects in a December auction, so far has none of these safeguards.

“All these companies are going into Mexican deep waters naked with none of the protections set up on the U.S. side,” said George Baker, publisher of Mexico Energy Intelligence.

Industry executives and regulators say there is still time to ensure adequate protections are in place.

The first wells will be drilled as soon as 2019 and a second round of deep water blocks is due to be auctioned in December.

Carlos de Regules, head of Mexico’s oil safety regulator ASEA, said companies beginning deepwater operations, like France’s Total and China National Offshore Oil Corporation, already have clear rules to follow.

“The operators have to show they can react, contain and deal with the possibility of an out-of-control well,” he said.

De Regules said ASEA aims to certify third-party inspectors in the next year, but noted it was up to companies whether they wanted to follow the U.S. capping stack model or create their own.

Leaving it up to companies may not be enough, said Miriam Grunstein, a Mexico City-based oil regulation expert. “It’s up to (ASEA) to make sure the industry does it,” she said.

Alberto de la Fuente, president of the AMEXHI association of Mexican oil producers, said emergency response firms such as Oil Spill Response have entered Mexico, and the industry is examining its options.

“I’m positive about what’s been achieved, but we need to redouble our efforts,” he said.

(Reporting by David Alire Garcia; Editing by David Gregorio)