Usually, my View From The Bridge contains a different monthly theme. Sadly, one subject continues to dominate the oil industry again this month – Deepwater Horizon.
Clearly the most important issue is, in the short-term, stemming the oil that continues to flow into the Gulf of Mexico. It would appear that finally, through the efforts of BP and the oil industry in general, a technological solution may have been found to at least stem the flow of a man-made disaster. However the forces of nature continue to both overwhelm and be overwhelmed while a permanent solution is developed.
Of the 16 worst oil spills listed 15 occurred in 1991 or before. The Ixtoc spillage in 1979, also in the Gulf of Mexico and the largest spill from a single well in recent history, was in just 150ft of water but took 10 months to cap. So we should again prepare for the long haul. But what are the possible long-term implications not just in the US, but globally as a result of this current tragedy?
Is this accident really exclusive to BP/TransOcean or could this have happened to ANY of the deepwater drillers? ExxonMobil have an impressive reputation (post Valdez) of faultless execution, and others are believed to have already taken steps to avoid a similar blowout occurring; but in pushing the limits of drilling experience could this have happened to them as well? Sinochem has just signed a $3bn deal with Statoil for a stake in the Peregrino deepwater field off the coast of Brazil – a brave or a confident decision? What if this had happened to a ‘minor’ operator - who lack the BP resources to "dig themselves out of the hole"?
President Obama’s moratorium on offshore drilling is certainly going to hit the industry hard, but it also has a geo-political impact for an administration that has stated it wants to reduce its dependence on foreign oil imports. Some people will argue: “Why not just raise the taxation on “gas” to European levels and trim back demand?”
The nuclear industry may be quietly hoping this will improve their fortunes, but Three Mile Island and Chernobyl served as wake-up calls for society regarding the long term risks of that energy source. Current coal pollution levels in China, demonstrated in the ‘before and after’ environment during the Beijing Olympics, clearly illustrate the implications of over-dependence on that resource.
In my opinion, there is a much greater social change required if we are really going to prevent more major catastrophes such as Deepwater Horizon. With a global society demanding ever greater amounts of carbon resources, without heeding the consequences, deepwater drilling and other more challenging forms of carbon resource mining are a necessity and, by its very nature, what can go wrong, will go wrong - it is just a matter of when. There are no easy options.
As always, if you have any news or comments then contact us at bulletin@oats.co.uk.
Sebastian Crawshaw, Chairman OATS