Gulf disaster not slowing oil companies' march to offshore drilling
In the wake of BP's disastrous oil spill in the Gulf of Mexico, which has yet to be contained, many environmentalists and political observers thought the allure of offshore oil drilling would take a hit.
But while the short-term picture for offshore drilling is cloudy, there are few signs that the energy industry intends to move away from offshore drilling -- including deepwater exploration, like that which the Deepwater Horizon rig was conducting before its fateful April 20 explosion.
That's because the offshore drilling industry operates on a different, longer-term cycle than politics. Due to the immense cost and scale of offshore drilling projects, the companies involved operate on multi-year plans and leases, which they have no intention of abandoning after one disaster, even if it is the biggest oil spill in history.
In the short-run, the energy industry is bracing for a series of setbacks: lawsuits, regulations, even temporary drilling bans. For example, on Monday, the Obama administration revealed the details of a six-month moratorium on deepwater drilling (defined as deeper than 500 feet), including some 30 exploratory wells.
But six months is a short time horizon for deepwater offshore drilling projects, which take years to get off the ground. With shallow water drilling showing diminishing returns, the major oil companies view deepwater drilling a fixed part of their future: Deepwater rigs capable of drilling 3,000 or more have increased 43% since 2006.
In fact, when you read the offshore drilling industry press, you'd hardly know any calamity had occurred in the Gulf of Mexico. For example, last Friday the online magazine Rigzone, a leading drilling industry publication, profiled Transocean, the company whose Deepwater Horizon rig met its end on April 20.
The piece was relentlessly upbeat about Transocean's current operations and future prospects. Out of the company's 65 "jackup" rigs for shallow water drilling, 39 are being leased by oil companies for drilling. Their semi-submersibles for deepwater drilling -- like Deepwater Horizon -- are doing just as well: 41 out of a fleet of 51 are under contract, or 80%.
And more are on the way: Transocean is just now rolling out "five new enhanced Enterprise-class drillships." These include the Discoverer Inspiration, leased through March 2015 by Chevron, Deepwater Champion, which will begin leasing with ExxonMobile in January 2011; and Discoverer Luanda, which BP will start leasing in July 2010 for seven years.
The piece ends with some speculation about the oil disaster hurting 2010 profits, but the overall conclusion doesn't change: "Transocean still strong and growing."
Despite the disaster still unfolding in the Gulf, the energy and offshore drilling industries feel the same way about their future.
But while the short-term picture for offshore drilling is cloudy, there are few signs that the energy industry intends to move away from offshore drilling -- including deepwater exploration, like that which the Deepwater Horizon rig was conducting before its fateful April 20 explosion.
That's because the offshore drilling industry operates on a different, longer-term cycle than politics. Due to the immense cost and scale of offshore drilling projects, the companies involved operate on multi-year plans and leases, which they have no intention of abandoning after one disaster, even if it is the biggest oil spill in history.
In the short-run, the energy industry is bracing for a series of setbacks: lawsuits, regulations, even temporary drilling bans. For example, on Monday, the Obama administration revealed the details of a six-month moratorium on deepwater drilling (defined as deeper than 500 feet), including some 30 exploratory wells.
But six months is a short time horizon for deepwater offshore drilling projects, which take years to get off the ground. With shallow water drilling showing diminishing returns, the major oil companies view deepwater drilling a fixed part of their future: Deepwater rigs capable of drilling 3,000 or more have increased 43% since 2006.
In fact, when you read the offshore drilling industry press, you'd hardly know any calamity had occurred in the Gulf of Mexico. For example, last Friday the online magazine Rigzone, a leading drilling industry publication, profiled Transocean, the company whose Deepwater Horizon rig met its end on April 20.
The piece was relentlessly upbeat about Transocean's current operations and future prospects. Out of the company's 65 "jackup" rigs for shallow water drilling, 39 are being leased by oil companies for drilling. Their semi-submersibles for deepwater drilling -- like Deepwater Horizon -- are doing just as well: 41 out of a fleet of 51 are under contract, or 80%.
And more are on the way: Transocean is just now rolling out "five new enhanced Enterprise-class drillships." These include the Discoverer Inspiration, leased through March 2015 by Chevron, Deepwater Champion, which will begin leasing with ExxonMobile in January 2011; and Discoverer Luanda, which BP will start leasing in July 2010 for seven years.
The piece ends with some speculation about the oil disaster hurting 2010 profits, but the overall conclusion doesn't change: "Transocean still strong and growing."
Despite the disaster still unfolding in the Gulf, the energy and offshore drilling industries feel the same way about their future.
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Chris Kromm
Chris Kromm is executive director of the Institute for Southern Studies and publisher of the Institute's online magazine, Facing South.