See other Editorial Articles
Title: Louisiana Oil Spill Threatens Future U.S. Oil Supply
Source:
[None]
URL Source: [None]
Published: May 3, 2010
Author: http://seekingalpha.com/article/202531-l
Post Date: 2010-05-03 16:20:15 by tom007
Keywords: None
Views: 192
Comments: 9
Louisiana Oil Spill Threatens Future U.S. Oil Supply 1 comment by: Daryl Montgomery May 03, 2010 | about: APC / BP / CAM / HAL / OIH / OIL / RIG / XES / XOM Daryl Montgomery picture Daryl Montgomery 797 Followers 24 Following Follow * Profile * Articles (119) * Comments (48) Send Message You are currently following Daryl Montgomery Stop Following You are no longer following Daryl Montgomery About this author: * Visit: The Helicopter Economics Investing Guide Submit an article to back to yahoo finance add to my yahoo back to cake * Customize Font Size: * Print * Email * Recommend 0 Share this page Share0 As the easy to get to oil on land has become scarcer, the industry has increasingly been forced to develop offshore wells in deeper and deeper water. This strategy is not without its risks, as the recent explosion of the Deepwater Horizon drill rig off Louisiana last week made evident. The event is rapidly turning into one of the worst environmental disasters of all time and may surpass the Exxon Valdez spill in Alaska. The opening of new offshore wells is likely to be suspended for some time and consequently long-term projections for oil production should be lowered. The Gulf of Mexico is a prime source of offshore oil and gas production, but it is by no means the only one in the world. Major offshore production also exists in the North Sea and even the Middle East. New discoveries off the west coast of Africa and the waters off Brazil have gotten the media's attention as the great hope for oil production in the future. When I first read the hype about the large deep water deposits east of Brazil (which are also under a lot of earth as well as water), I noted a brief comment that stated the technology doesn't currently exist to tap these deposits. The recent disaster off Louisiana demonstrates that the technology also doesn't exist to fix a blowout or spill from currently existing offshore wells. The description of the size of the oil spill varies considerably from one report to another. At first it was just a few thousand barrels a day, then some sources stated 42,000 gallons a day were leaking, while higher estimates have now reached 210,000. There is a device called a blowout preventer that was supposed to have kept the explosion and leak from happening, but it failed. Working around it is now something that is a major factor in trying to fix the problem. There are actually three leaks and there are now plans to cap the biggest one with a dome that is currently being constructed for this purpose. This has never been attempted in a well 5,000 feet under water, though it has worked in shallow water. The U.S. Coast Guard is also planning a controlled burn of the oil slick, as it nears coastal Louisiana and heads toward the beaches of Florida. Burning has been done in rivers, but this would be a first attempt in the ocean. The oil industry is clearly in uncharted territory in trying to deal with this disaster. Perhaps we should ask ourselves how reliable are their other deep water wells? There was a spill in a Gulf of Mexico well, the IXOT 1, in 1979, but it was in 150 feet of water, not 5,000 feet below the water's surface as is currently the case. It leaked up to 30,000 barrels of oil a day for nine months. Attempts to cap the well, more easily done considering the more favorable circumstances, failed at first. Two relief wells had to be drilled and only then could the leak be stopped. It would take months to drill a relief well now in the offshore Louisiana location. Needless to say, oil service stocks have taken a hit because of the Louisiana disaster. ETF OIH has declined more than ETF XES, though. British Petroleum (BP) has been down as much as 13% so far. Anadarko (APC) also has a 25% stake in the well and Mitsui a 10% stake. President Obama has declared that they are fully responsible for all clean up costs. The first class action suit relating to the spill has already been filed and claims for damages to fishing and related industries could be enormous. Transocean Ltd (RIG) owned the rig and its stock has dropped 21% so far. Halliburton (HAL) was in charge of the drilling and Cameron International (CAM) supplied the failed blowout preventer. Ironically, President Obama just announced the expansion of offshore drilling one month ago. There is going to be considerable blow back from this oil spill that is likely to put any future U.S. offshore drilling on hold for some time to come. And that is going to have serious consequences. The Gulf of Mexico is the only place in the U.S. where oil production has grown in the last 15 to 20 years. Unfortunately, it is a region fraught with problems. Only five years ago, BP's Thunderhorse platform was supposed to start producing 250,000 barrels of oil a day (under three miles of water). It never happened. Before Rita and even before Katrina came along, the fairly minor hurricane Dennis blew past it and wiped it out. As if there aren't already enough problems in the Gulf, hurricane seasons starts next month. Disclosure: Long oil
Post Comment Private Reply Ignore Thread
Top • Page Up • Full Thread • Page Down • Bottom/Latest
#1. To: tom007 (#0)
Nonsense. Chinese will be drilling this year not far off the Florida coast, I am sure they would be more than willing to sell to us, rather than ship it to China.
More like terrorist attack used to justify foreign oil.
Why not the U.S. just seize the oil rig when it's ready.
We owe them money, so we have to be nice.
That is a very weak excuse.
deleted
The relationship between morality and liberty is a directly proportional one. "You've got to put right and wrong above legal and illegal. Because when tyranny becomes law, rebellion becomes duty; and it is not rebellion at all, it is submission to the higher law that our government is in rebellion to. We're not the rebels, they're the rebels."
Wait....how did they know that? Am I being monitored?
MapQuest really needs to start their directions on #5. Pretty sure I know how to get out of my neighborhood.
Evidentally.
"Satan / Cheney in "08" EAT THAT BEGINNING SENTENCE WITHIN THE ARTICLE.
"Sarah "Kiss my Torah" Palin" -- Jethro Tull, circa 2010-04-14
Louisiana Oil Spill Threatens Future U.S. Oil Supply
#2. To: tom007 (#0)
Louisiana Oil Spill Threatens Future U.S. Oil Supply
#3. To: Cynicom (#1)
Chinese will be drilling this year not far off the Florida coast, I am sure they would be more than willing to sell to us, rather than ship it to China.
#4. To: PaulCJ (#3)
Why not the U.S. just seize the oil rig when it's ready.
#5. To: Cynicom (#4)
We owe them money, so we have to be nice.
#6. To: tom007 (#0)
#7. To: tom007 (#0)
You are currently following Daryl Montgomery Stop Following
#8. To: SonOfLiberty (#7)
#9. To: James Deffenbach, Original_Intent (#0)
As the easy to get to oil on land has become scarcer, the industry has increasingly been forced to develop offshore wells in deeper and deeper water.
Top • Page Up • Full Thread • Page Down • Bottom/Latest