The rising cost of oil affects everything from the price of a tank of gas to the cost of your cart of groceries. So accessing additional oil to help lower the cost of these things is a good thing, right?
Unfortunately, the answer isn’t that simple because the oil drilling process can have serious implications on everything from the environment to the economy.
Deep water drilling, a process for harvesting oil at water depths of over 500 feet, has been cost-prohibitive for many years. Yet with the rising cost of oil, it is a process that is becoming more appealing to major companies such as Diamond Offshore, TransOcean, and Baker Hughes. So why have companies begun investing more money in deep water drilling as opposed to shallow water drilling? The answer is simple: The deep water is where the oil – and the money – is.
The Greenpeace ship Esperanza is off the coast of Greenland, ready to challenge the oil industry’s reckless pursuit of the black stuff in increasingly remote and risky locations.
We probably all remember the Deepwater Horizon disaster of 2010, an explosion which killed 11 people and produced an oil spill in the Gulf of Mexico that flowed freely into the ocean for nearly three months before the well was capped. It is estimated that nearly 5 million gallons of crude oil spewed out of BP’s Macondo well into the Gulf before the well was capped.
The deep water location of the well, at over 5000 feet below the ocean’s surface, is what made containment so difficult.
Several attempts were made to contain the spill and protect the surrounding beaches and wetlands. Skimmer boats, oil dispersants, and MPC containment booms were employed to prevent the spread of the oil, but the magnitude of the spill was too large. In July 2010, the well was finally capped, but not before doing extensive damage to marine life and birds. Not to mention the damage that was done to the fishing and tourism industries in the Gulf of Mexico. There have also been reports as recently as March 2012 that oil from the Macondo well is still seeping. The cost of cleanup and government fines for BP and their contractors is expected to top out at over 42 billion dollars.
Now, we are not suggesting that every deep water drilling endeavor will result in a catastrophic economic and environmental disaster. We are just using the Deepwater Horizon example to present the worst case scenario. There are currently over 80 deep water oil wells operating in the Gulf, and the Macondo well has been the only one where there’s been a large problem. However, there are growing concerns because insurance for deep water rigs is so cost prohibitive and the popularity of deep water drilling is on the rise.
Concerns over companies obtaining proper insurance for deep water drilling excursions is not unfounded.
For example, Mexican company Pemex is planning to sink two new ultra-deep wells at 9,514 and 8,316 feet of water. Critics of the Pemex plan suggest that they have cut several corners in the insurance process, and are disregarding cautionary statements from Mexico’s oil regulator about the potential of a serious accident or spill. If a large spill were to happen, the major concern is that Pemex would be unprepared for the magnitude and the liability would be sky-high. After the Deepwater Horizon spill, the US mobilized a fleet of over 3000 boats to help with the containment effort and the cleanup along the coast. Pemex currently contracts fewer than 200 boats. Another major concern is that the company is owned by the Mexican government, so the burden of the cleanup costs would fall largely to the Mexican taxpayers. This has the potential to create an economic disaster for Mexico and put serious strain on their relationship with the United States.
While deep water drilling has the potential to increase oil production, effectively improving the country’s economy by lowering the cost of goods and services, there are a number of risks involved. Even with adequate insurance and back ups in place of emergency is deep water drilling really worth risking due to the devastating environmental impact of an accident?
Deep water drilling has been cost-prohibitive up until this point, which leaves us with concerns about companies cutting corners to try to save money. From issues of not obtaining proper insurance to not investing in proper technology or updated equipment, deep water drilling carries serious risks and companies should be prepared for potential catastrophes before moving forward with new gas and oil explorations on the sea floor.
About the Author: Mike Zook covers a containment solutions company that tries to minimize the damage of environmental spills through tools such as custom engineered storage tanks. He wants to encourage his readers to write their local congressmen to encourage eco-friendly efforts.