By Gary Taylor in Houston

June 8 - With BP finally starting to gain in the battle with its runaway Macondo well, oil industry focus began turning June 7 to the future regulatory look for a post-Macondo Gulf of Mexico -- including a suggestion that operators might be required to drill relief wells as a precautionary addition to deepwater exploration projects.

While providing the latest update on BP's success with capping the Macondo well during a White House press conference June 7, US Coast Guard Admiral Thad Allen raised the possibility of requiring future exploration projects to include relief wells as a precaution.

Allen and White House Press Secretary Robert Gibbs said it would be appropriate for the presidential oil spill commission to consider recommending that oil companies include relief wells while drilling exploration wells to reduce the amount of time needed to kill the main well if a similar disaster occurs.

"I think that would be a legitimate point to be raised and put in front of the commission as they do their work," Allen said.

"That would fall under the regulatory framework that the commission would evaluate in order to determine the best way to operate this in a fail-safe atmosphere moving forward," Gibbs said.

Tudor Pickering Holt Managing Director Dave Pursell, reacting to the idea of including a relief well as a requirement for future drilling projects, said: "It doubles the cost of every well." He added: "That would really impede exploration in the Gulf. It would make the Gulf less competitive."

But Pursell also agreed that the industry will face some difficult decisions in an effort to guard against another Macondo-like disaster in which a blowout preventer fails to prevent a massive spill. "The longer that well leaks, the more likely something onerous like that will become," said Pursell.

And he also said BP's rivals will soon begin to distance themselves from the British major if the US puts all of them in the doghouse for future projects.

"The first thing they would say is, 'I'm not BP.' They have to," said Pursell, speculating on how other operators would react to a requirement they double their exploration costs by drilling a relief well simultaneously beside every exploration well in the Gulf.

TPH has laid much of the blame for the Macondo incident on BP's basic well design, noting in a May 28 report: "The root cause started on a piece of paper in Houston—the well design. As far as we can tell, Macondo failed because of bad well design/construction—augmented by some bad luck along the way" (ON 6/1).

Elaborating in an interview, Pursell cited his discussions with other operators, saying their reaction to Macondo has ranged from "We'd have never done it this way" to "This is indefensible."

Despite concerns about the cause of the disaster, Pursell and TPH have given BP high marks for its innovative efforts to stop the spill that began April 20 with the blowout at Macondo in 4,993 feet of water about 40 miles from Venice, Louisiana (ON 4/22).

After seven weeks of experimenting with a number of responses in this unprecedented event, BP finally was gaining the upper hand with the successful June 4 installation of a containment cap as the first phase in its Lower Marine Riser Package system (ON 6/7).

By June 7, Admiral Allen reported that the cap had diverted 11,000 barrels in the previous 24 hours to the surface for production from what has been estimated as a 12,000-to-19,000 b/d leak. Expectations are for continued improvement as BP engineers tweak the system to capture more of the spill.

But Allen and BP also have warned that the only permanent solution will come with completion of a relief well sometime in August.

Until then, Gulf Coast states from Florida to Louisiana will be defending their shores against what has become the largest oil spill in US history and BP's financial liability will be substantial (ON 5/27).

Before requiring double drilling on Gulf exploration projects, however, analyst Pursell said BP's efforts grappling with Macondo have actually provided a technological model for the industry in dealing with similar crises.

"Why not have three containment domes of different sizes on hand and ready to go?" Pursell suggested.

Reviewing the parade of tactics employed by BP from its initial struggle to force the BOP to work to its failed attempt with the top kill clogging procedure, Pursell said the industry will be able to move quicker with some tested strategies in the future (ON 5/28).

"Top kill was an interesting concept," said Pursell. "It all made sense, but it took longer because they had to work through the processes."

Several investigations remain under way in an effort to determine the causes of the disaster and the reasons for failure of the blowout preventer. That blowout destroyed Transocean's Deepwater Horizon drilling rig and killed 11 of 126 workers on board.

It also raised questions about the BOP on the rig manufactured by Cameron International and the cement work by Halliburton in the wellbore 13,000 feet beneath the sea floor (ON 5/14).

With BP's LMRP apparently working, however, TPH moved quickly to declare it a "success" that represents "great news."

In a report, the Houston-based firm calculated the impact will reduce the Macondo liability by $10 billion worth of fines.

"Stopping this much oil in early June versus late August amounts to almost a million barrels less oil spilled," said TPH, adjusting its estimate for liability down $10 billion to $25-$30 billion.

As a result, TPH expects a rebound ahead for shares of BP and its 25%-Macondo partner Anadarko Petroleum.

In the wake of Macondo, BP saw its share price fall 38% from $59.48 on April 19 to $37.16 on June 4, while Anadarko shares dropped 39% in the same period from $73.32 to $45.03. With the apparent success of LMRP becoming clearer June 7, BP shares fell 1% to close at $36.76 while Anadarko shares held flat to close at $44.82.

Analysts have noted that other factors also weigh on shares of all E&Ps, including questions about the duration of the US government moratorium on new Gulf drilling and concerns about the potential for a post-Macondo regulatory crackdown.