Oil Spill Continues to Dominate the Energy Scene – Commentary
I commented in the last issue on some broader implications of the deadly TransOcean Horizon and Massey Mine explosions, including contrast with the first approved offshore wind farm. As a ‘confirming list’ of disturbing shortcuts, poor maintenance, fingerprinting, headlines the escalating environmental tragedy, the most likely consequence is that, along with immediate delays, more stringent permitting, safety procedures, training, and oversight will certainly follow. However, fears that the woes of the US GOM will travel to global offshore markets seem, to me, overdone. Not only is a significant stall in US exploration and production as unlikely in a Democratic administration as a Republican one (risk of backlash from $5 gasoline. etc), but most other significant offshore markets have more stringent procedures than the US, and those that don’t (much of West Africa) don’t seem to care. In addition, so far, the reservoirs of West Africa’s offshore have been much more benign than the deepwater GOM.
The anecdote that sticks is that the drilling plan (including safeguards and emergency response) for BP’s Macondo well, including safeguards, as approved by the Minerals Management Services (MMS), was 58 pages long. The average North Sea drilling package is a foot and a half thick.
However, any delays resulting from a global re-think, could have a material effect on crude supplies. Deepwater contribution to global supply, modeled at 9.5 million b/d by 2017, will probably lag. Already (see below) signs of strain in nonOPEC supply growth, in part due to project deferrals during the inflationary services period (2006-9), are evident. And, for projects that move forward, the tightness of offshore services and assets may moderate to the benefit of Brazilian and West African operators over the next few years.