Ben casselman, russell gold

Rescuers scoured the Gulf for the unaccounted workers late Wednesday as firefighters struggled to quench a towering fire that forced all aboard to flee.

The blaze on the Deepwater Horizon drilling rig, which broke out around 10 p.m. central Tuesday night, thrust a geyser of flames and smoke into the sky about 50 miles off the coast of Louisiana. Seventeen people were injured, three critically, rescue officials said.

The rig is operated for oil giant BP PLC by drilling contractor Transocean Ltd., which said the search for the cause of the fire would begin after the missing had been accounted for. But Transocean said one possibility that might explain the size and ferocity of the blaze is a blow-out, an uncontrolled burst of oil and natural gas from the well.

Some industry analysts said they feared the accident might temporarily damp the pace of oil development in the deepest reaches of the Gulf, which has become a significant exploration hotspot for international oil companies seeking new sources of petroleum. The industry is booming, and has been challenged by a tight supply of rigs and skilled workers.

The accident comes at a sensitive time politically for the industry. President Obama late last month proposed allowing drilling in new areas of the eastern Gulf of Mexico and off the southern Atlantic coast, where it was banned. Supporters argue the industry has become much safer. The Transocean fire could be an untimely reminder of risks.

“Is there a domino effect from this?” asked Arun Jayaram, a Credit Suisse analyst. “It seems like there would be some collateral damage.”

The incident could spark calls for increased regulation, said Kevin Book, managing director of ClearView Energy Partners, a consulting firm. The American Petroleum Institute, the industry’s main trade group, put out a statement Wednesday standing by its safety record.

“Every incident is both one too many and a powerful incentive to improve training, operational procedures, regulations, industry standards and technology,” the statement said.

The rig, which analysts said would cost $600 million to replace, was listing badly Wednesday, the U.S. Coast Guard said. A so-called semi-submersible, the rig is a nearly 400-foot-long floating platform that uses thrusters to hold it in place above a well. Transocean is the world's largest offshore drilling contractor, with more than 21,000 workers and 140 rigs, many of them state-of-the-art vessels.

BP says it had just wrapped up exploratory drilling at the Deepwater Horizon’s site and was in the process of analyzing the results at the well, which extends through 4,992 feet of water and another 13,000 feet under the seabed. BP, along with U.S. companies such as Chevron Corp., has announced significant oil fields in recent years.

Months of wrangling may ensue over responsibility for the fire. Transocean was largely in control of the drilling; BP had representatives aboard the rig who would have given instructions on where and how the contractor should drill.

Transocean executive Adrian Rose said at a press conference in New Orleans: “We are deeply saddened by this event.” Company spokesman Guy Cantwell declined to comment on the rig’s safety record.

Still, the fire may bring renewed public scrutiny to BP, as the incident comes five years after the explosion and fire at its refinery in Texas City, Tex., which killed 15 people.

BP says it stands ready to help with the investigation. It says has invested more than $1 billion to fix problems at Texas City, part of a multi-year program emphasizing safety.

In recent years, oil companies have pushed further offshore in search of oil, as older, easier oilfields dry up and foreign governments cut access to reserves.

The emphasis on deepwater exploration has led to a surge in construction of rigs capable of drilling in such depths. The number of deepwater rigs—capable of drilling in 3,000 feet of water or more—has grown 43% since 2006, according to research firm ODS-Petrodata.

The boom in rigs has strained contractors, which have struggled to find experienced workers to run them.

Big companies such as Transocean have had to move workers onto newly built rigs, while also fending off new, smaller companies looking to hire away veteran crews.

Transocean has grown especially fast. In 2007 it merged with rival GlobalSantaFe in an $18 billion deal. Integrating the two companies has been a challenge, said Doug Sheridan, managing director of EnergyPoint Research, a firm that rates drillers and other oil service companies based on interviews with their customers.

Mr. Sheridan said Transocean’s safety ratings have remained strong since the merger. But he added, “You have to ask the question, ‘Have we been stretched thin? Did something fall through the cracks?’”

Transocean spokesman Greg Panagos dismissed such concerns. He said the company is a “very safety conscious organization. It’s the top priority in the company.”

Deepwater Horizon was one of five Transocean ships given safety awards by the U.S. Minerals Management Services last year.

There were spots on its record. It partially flooded in May 2008 and began to list, after a worker accidentally opened a valve that let in seawater, federal records show. No injuries were reported. The rig had a small fire in 2005. No one was injured.

There were at least three rig fires in the Gulf this year before the Horizon incident and 14 last year, including several that forced crew members to evacuate, according to data from the Minerals Management Service.

Major fires, in which oil and gas catch fire, are rarer. In 2001, a big platform tipped over and caught fire off Brazil, killing 11.

The oil markets didn’t react strongly to the news, falling 17 cents in futures trading to close at $83.68 a barrel. The fire occurred at a long-term BP prospect called Macondo, not an existing producing oilfield.

Deepwater wells have become important for companies such as BP as well as for the broader oil supply. The Gulf of Mexico produces more than 1.6 million barrels a day, about 30% of U.S. oil output, federal data show.

Production from the Gulf has fallen recently as early, shallow-water discoveries have begun to dry up.

But new, deepwater drilling has begun to reverse that trend. Gulf output was on track to rise last year for the first time since 2006, preliminary data from the Energy Information Administration show.

The fire raged until the rig slipped beneath the surface. Workers were unable to shut off the flow from the well before the rig was submerged, raising the possibility that oil could be gushing into Gulf waters. Officials are mobilizing for a cleanup operation in case a large oil spill occurs, in what has become one of the worst industry disasters in decades.

"It certainly has the potential to be a major spill," said David Rainey, head of Gulf of Mexico exploration for BP PLC, at a news conference Thursday. The U.S. Coast Guard said it didn't know whether oil continued to flow after the rig sank.

On Wednesday, the Coast Guard estimated that 310 barrels of crude oil were flowing through the well per hour. Most of that had been burned off in the fire. With the fire contained, that oil is likely to be released into the Gulf. A five-mile-wide sheen was visible Thursday near the rig, about 50 miles off Louisiana.

The combined catastrophe of loss of life and potentially significant environmental damage comes just as the Obama administration had embraced the possibility of opening up new sections of the Gulf and some other parts of the U.S. coastline to offshore drilling for the first time in nearly 30 years. The White House said late Thursday that Mr. Obama had met with top federal officials about the incident and would make sure "the entire federal government was offering all assistance needed."

Even if the spill is contained quickly, the sight of the rig engulfed in flames and black smoke already might have had an impact.

"These images are going to resonate for a long time," said Allan Pulsipher, executive director of the Center for Energy Studies at Louisiana State University.

The fire broke out about 10 p.m. Tuesday. Company officials say one possible cause was a blowout, an uncontrolled burst of oil and natural gas from the well. Workers had very little time to evacuate before the explosion, perhaps about five minutes, but 115 workers fled and were brought back to the Louisiana shore by helicopter and by boat.

Yet officials from Transocean Ltd., the rig's owner and operator, say they believe based on eyewitness interviews that 11 missing workers might not have made it off the rig. Coast Guard officials say they would continue their search for the missing at least through the night.

BP, the British oil giant that had hired Transocean, deployed a small armada of ships and aircraft to the area as frantic efforts were under way to shut off the flow of oil from the well.

Workers have dispatched a remote-controlled submarine to the seabed to trigger a device that would clamp off the well and stop the flow of oil. If that fails, BP said it would move in another rig to drill back into the well and try to re-establish control. Transocean officials say a potential rig has been located in the Gulf.

BP was days away from announcing a "commercially attractive" oil discovery, according to a person familiar with the matter. The Macondo prospect, where the rig was located, contained "tens of millions of barrels" of crude-oil reserves, this person said.

The Deepwater Horizon was a modern rig, a nine-year-old floating town on the cutting edge of exploration. In September, it drilled a record 35,050-foot-long well, the equivalent of about half the length of Manhattan. BP was paying about $500,000 a day to use the rig, which analysts say would cost an estimated $600 million to replace.

Transocean officials said workers had recently finished installing a steel production pipe into the well. The pipe also had been cementing the well in place by filling up the open area between the pipe and well walls.

This should have prevented oil or gas from moving up the well, said Robert MacKenzie, managing director of energy and natural resources at FBR Capital Markets and a former cementing engineer in the oil industry.

"A blowout after you set your final casing and cement, I've never heard of that," he said. "I cannot recall anything even remotely close to this, in terms of magnitude and scale. This is something that is exceedingly rare."

A 1969 well blowout off the coast of Southern California, which spilled between 80,000 and 100,000 barrels over a 10-day period, helped build anti-drilling sentiment that led in 1982 to a moratorium on offshore oil development. That moratorium only recently has been lifted.

Environmentalists are seizing on the incident. "While we don't need to oppose all offshore drilling, those in the industry who tell us there will never be a problem, that they've changed their ways, are way over promising," says Jim Marston, director of the energy program for the Environmental Defense Fund.

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ROBERT, La.—Officials were considering setting fire to a giant oil slick in hopes of preventing it from lapping onto the environmentally sensitive Gulf of Mexico shoreline in the wake of an offshore drilling disaster.

Response efforts continued Tuesday as debate over offshore drilling heated up in Washington, with two senior House Democrats questioning whether BP PLC and rig operator Transocean Ltd. had an adequate emergency plan in place.

The slick, which began when a Transocean rig called the Deepwater Horizon caught fire and sank, had grown Tuesday to 100 miles by 45 miles—or about the size of Jamaica. The fast-moving slick was about 20 miles off the Louisiana coast Tuesday morning and the state had activated a response plan, the U.S. Coast Guard said Tuesday.

While Coast Guard officials say a controlled burn of some pockets of the crude sitting on the water's surface isn't an optimal solution, they say it is better than letting the oil hit the beaches and marshes lining the Gulf Coast, which will likely happen by this weekend if weather patterns hold. Officials could try the measure Wednesday, said Rear Adm. Mary Landry.

Such burn technique has been carried out before, such as off the coast of Newfoundland. The environmental downside is that it creates "air pollution issues," said National Oceanic and Atmospheric Administration official Charlie Henry.

The planning came as BP, the oil company that contracted with Transocean to use the rig, had failed to shut down the gushing crude. "We will not stop until we have exhausted every single option," BP executive Doug Suttles said, adding that the company was spending $6 million a day in the effort.

The drilling rig caught fire April 20; 11 workers are missing and presumed dead. The fire raged until the rig sank Thursday, severely bending the pipe that connected it with equipment on the seafloor. Crude began to gush from the end of the pipe, as well from a hole in it.

BP says it plans to drill an 18,000-foot relief well to stop the oil flow and also plans to put in place a dome above the leak to contain the spill. The dome is being built, and it will be put in place in two to four weeks, Mr. Suttles said.

The scale and complexity of the operation highlights the titanic struggles faced by the modern oil industry. Locked out of easier-to-exploit oil reservoirs by governments in developing countries, international oil companies such as BP invest billions of dollars every year in scouring the depths of the sea for oil and gas. But when problems arise, they are equally difficult to conquer.

Safety also remains a contentious issue, one sure to come up in investigations of the rig fire.

On Tuesday, House Energy and Commerce Committee Chairman Henry Waxman (D., Calif.) and Rep. Bart Stupak (D., Mich.) sent letters to BP and Transocean asking the companies to explain what they knew about the risks of drilling at the site.

Mr. Waxman and Mr. Stupak expressed concern that the BP and Transocean were attempting to contain the oil spilling from the well "with techniques that have never been used before at these ocean depths."

A spokesman for BP said he hadn't seen the letter and wasn't immediately prepared to comment. A spokesman for Transocean said the company will respond to the letter "in short order."

In the meantime, the spokesman said, "we remain focused on supporting our people and providing full support to BP" and the Coast Guard and Interior Department.

In June, the U.S. Minerals Management Service proposed mandatory safety rules that would replace the voluntary system in place now.

The rules, which are based on guidelines drawn up by the American Petroleum Institute, would require companies to identify potential hazards at all facilities and adopt written operating procedures, among other changes.

The MMS reviewed more than 1,400 offshore incidents, which together killed 41 people, and found that most were due to human error or faulty procedures.

According to the MMS, all of the biggest oil companies, including BP, have already adopted the API's guidelines. But many of them, including BP, Exxon Mobil Corp. and Royal Dutch Shell, objected to an MMS proposal that companies' safety programs be audited every three years, at the companies' cost.

In a letter published in September on the federal government Web site regulations.gov, Richard Morrison, BP's vice president for Gulf of Mexico production, wrote that while the company "is supportive of companies having a system in place to reduce risk, accidents, injuries and spills, we are not supportive of the extensive, prescriptive regulations as proposed in this rule."