The Obama Administration is likely to stay focused on toughening regulatory oversight of the U.S. offshore oil industry and may push back lifting a ban on deepwater drilling after the latest accident in the Gulf of Mexico, analysts said.
The fire on a Mariner Energy oil and gas platform in shallow waters of the U.S. Gulf on Thursday was a major setback for companies hoping for an early end to the government's drilling moratorium and raised more questions about the safety of offshore drilling.
"This explosion will make it less likely that the moratorium on offshore drilling will be lifted," said Rick Muller, senior analyst for Energy Security Analysis Inc in Boston.
The United States is still reeling from the BP oil spill in the Gulf of Mexico.
Interior Department officials declined to comment on whether the Mariner accident would prompt Interior Secretary Ken Salazar to consider expanding the current deepwater drilling moratorium to shallow waters.
Such an action would be a blow to the oil industry, which has complained that the department has been too slow to approve permits for shallow water drilling since the Gulf oil spill.
The Interior Department imposed a six-month halt on exploratory deepwater drilling in late May after an explosion on April 20 left a well spewing crude into the Gulf.
The oil industry and regional lawmakers slammed the drilling ban and said it would drive idled rigs to foreign waters, cost thousands of jobs, and cut regional production.
On Wednesday, a federal judge ruled against the government's request to throw out an industry lawsuit challenging the moratorium, though this accident could strengthen the government's case, analysts said.
"This will help the government argue in court that it should be careful about putting safety rules in place before letting producers get back to drilling," Muller said.
The Interior Department had said it was considering lifting the ban for "certain categories" of rigs before November 30, when the ban is due to end. But after Thursday's accident the department may hesitate to do so, analysts said.
"Anything that casts any kind of shadow on the industry right now certainly complicates lifting the moratorium," said Bruce Bullock, director of the Maguire Energy Institute at Southern Methodist University in Texas.
President Barack Obama, whose administration was accused of being slow to act on the BP spill, has insisted a "pause" on drilling was needed to give the government time to impose tougher oversight on the industry.
"Any headline of a rig explosion so close on the heels of the deepwater explosion will have psychological effects," said Peter Beutel, president of Cameron Hanover in New Canaan, Connecticut.
"The fire will give fresh ammunition to those supporting a moratorium against offshore drilling to suggest that running rigs in the middle of the ocean is dangerous," Beutel said.
U.S. Representative Edward Markey, a Democrat from Massachusetts, said in a statement the accident "highlights the significant risks associated with offshore drilling, and that much is left to be done to keep America's workers and waters safe from those risks."
Environmental groups criticized offshore oil and gas operators after Thursday's accident.
"We know that this kind of disaster is a result of a dirty and dangerous industry that cuts corners on safety, and takes too many risks in the effort to find more oil and make bigger and bigger profits," Greenpeace USA Oceans Campaign director John Hocevar said in a statement.
Kieran Suckling, executive director of the Center for Biological Diversity, called on the government to put all offshore oil and gas operations on hold until it can be determined they are safe.
"Offshore drilling in the Gulf of Mexico is like playing Russian roulette. It's not a matter of if something will go wrong, it's a matter of when," Suckling said.
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