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Page added on May 27, 2010

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The Peak Oil Crisis: After the Spill

Production

Deepwater wells which may be providing the bulk of whatever oil production is left in the next decade are another matter. This week the President is scheduled to announce a new series of regulations for offshore drilling – how these regulations are accepted by the industry and how they are enforced will tell us much about offshore drilling in the years to come.

First, it is obvious that with BP facing fines and clean-up expenses running into the $10s of billions and some senior executives likely facing early retirement, no one in the oil industry wants another Deepwater Horizon. The problem is that deep water drilling is so horribly expensive – about $1 million a day to lease and operate a deepwater rig – that managers in the field will feel constant pressure from Headquarters to get the job done as quickly as possible and move on to the next drilling site.

It would not be surprising if the Presidential Investigating Commission concludes that pressure from above was a factor in the decision to declare the well sealed and pull out the protective drilling mud, despite indications that all was not well.

It is not yet clear whether the drilling industry, or the government for that matter, wants government inspectors aboard every drilling rig participating in critical operational decisions that could result in a blowout. With a million dollars a day at stake, it is unlikely that the industry wants relatively low level inspectors deciding that the cement needs another day or so to dry properly. The upside of course is that should the unthinkable happen, the industry is in a good position to pass the liability on to the government if it signed off on the procedure.

FCNP.com



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