Quo vadis major oil company? Out of the deep water Gulf?

[twacowfca]

Think about the implications of BP's big loss.  What major oil company will even think about drilling in the deep water Gulf of Mexico in the US zone even if and when the ban on drilling there is lifted?  Who will pick up the leases?  At what price?  Who will be willing to take the risk of drilling?  Who will go broke waiting for drilling to resume?  Comments?

[onyx1]

This Thursday from Ken Peak, CEO Contango Oil & Gas:

 

“The question on many minds these days is the impact of the Gulf of Mexico oil spill on the industry and in our case, Contango specifically. Obviously no one knows, but I will venture an opinion since it goes to the core of our business model and future. I am certain we will face increased regulatory and permitting costs and scrutiny. I believe we can deal with these challenges. I am certain we will face an increased emphasis on safety, and in particular, redundancy in 'fail safes'. I welcome these new standards, but believe everything we are currently doing already meets a very high threshold of safety adherence. Hopefully, it is recognized and understood that no human endeavor is ever, and can never be made to be, absolutely, totally and flawlessly 100% fail safe.

 

“There are two areas that give me great concern. The first is the concept of unlimited environmental liability for a spill, or a limit so high that a debt-free company with an approximate $1.0 billion market cap like Contango is in essence, asked to 'bet the Company' every time we drill a well. The move in recent days by some in Congress to retroactively change the law regarding environmental liability does not give me great confidence in our government. Nor do comments about 'boots on throats'. The second area that causes great concern is the thought of going to jail for a judgment error or equipment failure – especially if the MMS approved the procedures that were being followed.

 

“There is at the moment, an enormous amount of understandable emotion and anger together with political populism spewing forth along with the Gulf of Mexico spill, but I believe, and hope, that once the spill is contained, that serious reflection and thought will be brought to bear on how the nation, coastal states in particular, and the livelihood of tens of thousands who depend on a vibrant offshore exploration industry, can beneficially coexist.

 

[woodstove]

Mr Peak's comments are very sane, and much to the point.  Thanks for posting them.

 

We've seen a massive oil release before, ie at the end of the 1st gulf war in 1990-ish, when the Kuwaiti wells were dynamited.

 

The difference is that in Kuwait, the releases were on land, and hence localized.  A release into the ocean spreads.

 

I think land drilling is where the safe haven is, for investors in oil companies and drilling services.

[biaggio]

Mr Peak's comments are very sane, and much to the point.  Thanks for posting them.

 

We've seen a massive oil release before, ie at the end of the 1st gulf war in 1990-ish, when the Kuwaiti wells were dynamited.

 

The difference is that in Kuwait, the releases were on land, and hence localized.   A release into the ocean spreads.

 

I think land drilling is where the safe haven is, for investors in oil companies and drilling services.

 

Agree.

 

Should be good for Canadian oil, oil sands, natural gas