Obama to Offshore Drilling: Not Off Limits, but With a Catch

Keith Kohl

Written By Keith Kohl

Posted July 13, 2010

bp oil spill 7-13-10

We’ve been waiting with bated breath for the government’s decision on deepwater drilling.

Today, they delivered.

U.S. Interior Secretary Ken Salazar unveiled the revised deepwater drilling moratorium. Yes, deepwater drilling is once-again on hold. This time, the suspensions will last until November 30.

According to Salazar, deepwater drilling poses a serious threat to marine, coastal and human environment. I guess it only too 80 days and the worst oil spill in history to convince him.

Why the eighteen-week delay?

According to the news release, it will allow sufficient time for several reforms:

  • Operators must submit evidence demonstrating the ability to respond effectively to a potential oil spill in the Gulf.

  • An assessment of wild well intervention and blowout containment resources to determine the strategies and methods that can be available should another blowout occurs.

  • The collection and analysis of key evidence regarding the potential causes of April 20, 2010 explosion and sinking of the Deepwater Horizon.

In other words, companies can’t drill until they prove they can handle a spill, a plan for future blowouts should be made for all to see, and the government still has no idea what caused the explosion.

You don’t need a crystal ball to see how this will affect offshore drillers.

Here’s a look at how some of them have performed over the last three months:

offshore drillers performance

Not surprisingly, the offshore industry has come out attacking the new moratorium. Among their concerns is who gets to decide whether their evidence on containment and response capabilities makes the cut.

If nothing else, this moratorium will inevitably going to create a hostile environment for drillers. Diamond Offshore Drilling Inc. (NYSE: DO) is already packing up. The company announced they are moving a rig out of the Gulf of Mexico to fulfill a multi-well contract in the Congo.

Diamond bigwig, Larry Dickerson, confirmed our suspicions, saying, “As the uncertainty about continued deepwater drilling in the [gulf] persists, we must consider alternatives that allow our deepwater assets to remain employed.”

I can’t help but wonder how many more operators will follow suit.

November is still a long ways off.

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