HOUSTON -- The United States will start talks with Mexico next month on forming a joint regime for addressing oil spills in the Gulf of Mexico -- an effort that the leader of the U.S. effort hopes will eventually include Cuba.

William Reilly, who co-chaired the U.S. National Commission on the BP Deepwater Horizon Oil Spill, told oil and gas industry executives here yesterday that he will travel to Mexico this month to lay the groundwork for a bilateral agreement for preventing and cleaning up Gulf oil spills.

Cuba may also be asked to join the effort, Reilly said, given its efforts to launch exploratory offshore drilling. Mexican officials will be asked to serve as intermediaries between the United States and Cuba, which do not have a diplomatic relationship.

"Cuba should also be a part of that as much as possible," Reilly said. "As we move into deep waters we have every reason to be partners."

Reilly reflected on the state of offshore drilling safety at the annual IHS CERA energy conference here, his final remarks to a large audience of oil and gas industry executives as co-chair.

Expressing satisfaction with the direction the oil industry has taken on safety since his commission issued its recommendations, Reilly called a major speech here yesterday by BP PLC's CEO, Robert Dudley, "splendid" and takes the executive on his word that BP "does get it and is trying to reform itself" (E&ENews PM, March 8).

BP's reforms are running in tandem with broader efforts in global offshore drilling, Reilly said.

"A renewed culture of safety does seem to be emerging," Reilly said.

He added that having the shift spurred by last year's massive Gulf spill has been "a terribly expensive way to bring about innovation," a reference to billions of dollars paid in the cleanup and in damages.

The industry has come a long way, Reilly said.

The commission found oil and gas companies' spill contingency systems to be "pro forma" and "copycat," he said. Problems were widespread, including a notable lack of spill-containment methods and equipment, no agreed-upon oil dispersants and weak to nonexistent response plans.

Warning signs ignored

Signs of trouble were ignored prior to the BP spill, he said.

Beyond BP's questionable safety record, Reilly said incidents involving its corporate partners in the ill-fated Deepwater Horizon spill pointed to disaster. There was poor cementing delivered by Halliburton Co. to an offshore well in Australia and a little-publicized accident at a Transocean Ltd. oil platform in the North Sea, he said.

"There was plenty of evidence that it was a systematic problem," he said. "The solution has to be systematic."

Most urgent, Reilly said he wants the industry to form a deepwater-drilling safety organization. Such a body would not only offer advice and technical assistance, he said, but should be empowered to audit companies' safety and response systems and possibly even levy fines.

Ali Moshiri, Chevron Corp.'s president for exploration and production in Africa and Latin America, strongly disagreed with some of Reilly's assertions. Moshiri appeared with Reilly in a panel discussion on deepwater drilling.

Moshiri rejected the notion that the risk of a major accident in offshore platforms is an industrywide problem. He argued that each deepwater well has its own characteristics and its own set of risks and that the vast majority of operators tread carefully and properly given the huge financial risks involved.

"It is not a systematic problem," Moshiri said. "It was an accident and it should not have happened."

Industry estimates put the number of deepwater oil and gas wells at around 14,000 globally. The total amount of oil available to such wells is estimated at roughly 250 billion barrels, with barely 10 percent of that tapped by any operation. Deepwater production makes up around 6 percent of total oil and gas output today and is estimated to increase to 14 percent of global production by 2020.

Moshiri said that is telling that one of 14,000 wells failed last year.

Since 1995, deepwater wells have expanded to a level that took Saudi Arabia 65 years to reach -- producing roughly 12 million barrels of oil equivalent per day, he said.

But Reilly was unmoved, stressing the need for an independent safety assessor to police the industry. A coalition of oil company executives are expected to issue a formal response to this proposal on March 18, he said.

Nonetheless, Reilly said the industry overall has moved much faster than expected to improve offshore drilling safety. He called the Marine Well Containment Co. formed by BP and other major oil and gas producers "remarkable" and saw no need to continue constraints on new drilling in the Gulf of Mexico.

"We did not really understand or support a moratorium on 33 rigs," Reilly said. "I do think it's safe to resume drilling."