Expectations are high that the Obama administration is going to come down tougher on offshore oil and gas drilling later today.
Yet just weeks ago, this year was set to be quite a special one for deepwater oil drilling in the Gulf of Mexico, and for US offshore drilling generally.
In March, things were looking particularly good for drillers. Just weeks before the Deepwater Horizon explosion, the Obama administration said it would expand offshore leases, while the Perdido platform began operation, extracting oil at an ocean depth of 8,000 feet. Operated by Shell (BP and Chevron are also part-owners), the platform was working at pioneering depths in the Gulf’s ‘lower tertiary’ deposits – rich in oil, but extremely deep.
At the time, when Shell’s US manager Marvin Odum said Perdido “presented technical challenges unlike we’ve ever seen in the Gulf of Mexico,” it was something of a brag. The platform itself could be expanded and the technology developed there, Odum said, would be useful in other challenging areas.
Now, it’s not looking so hot. Several reports are suggesting that the Obama administration’s response to Ken Salazar’s report on offshore drilling will extend the ban on new deepwater permits (shallow water drilling, according to Reuters, will be excepted), and announce more regulations for offshore drilling generally.
Shell’s plans to drill in Alaska (which before the GoM accident, was seen as a key test for the expansion of offshore drilling) and appraisals at BP’s deeper-than-deep ‘Tiber’ discovery have both already been delayed by the temporary moratoriums following the accident.
This could have implications for all the majors, including Exxon, Chevron and Total, who are very keenly pursuing the big reserves that the Gulf of Mexico holds at ever-increasing depths. The technology may be challenging and expensive, but it avoids the headache of resource nationalism found in South America and the Middle East; the risk of security fears in Africa; and the the geological uncertainty of new plays such as Greenland and the Falklands Islands.
And it’s not just the Gulf of Mexico. Exploratory drilling in the Arctic will also be halted until 2011, according to reports.
The question now is whether any of the regulatory changes would be momentous enough to prompt a shift in focus from the oil majors.
Related links:
What the leak says about the search for oil – FT Energy Source
A new era for GoM deepwater oil - FT Energy Source
Analysis: US to reap fruits of deepwater drilling – Rigzone
Exxon Valdez spill indicative of what might be in store for Gulf - FT Energy Source
