Overview of the BP Macondo Catastrophe – Economic and Policy Implications
Table 1: Worldwide Operational and Prospective Wells, 1983–2007 Firm
Operational Wells
Region Africa
Europe
LOC 24 NOC IOC LOC
Latin America IOC LOC
North America IOC Others Worldwide
77 -
2
NOC 263 -
64 400 55 20 36 - -
-
20 -
NOC 20 397 74 288
LOC 134 154 NOC IOC
2 -
LOC 13 NOC 25
IOC 215 779 LOC 173 257 NOC 310 442
25 35 48 -
- - - - - - - -
- 515 - -
15 -
17 - -
32 34 33 15 - - -
34 33 47
70 41 47 1 -
18 -
2 306 1
1 181 - -
Prospective Wells
Type Slope Deep Ultra Slope Deep Ultra IOC
69 12 - - - -
16 -
82
2 107 -
21
88 144 50 16 - - -
6 55
16 723 229 3 359 19 374
62 98
IOC = international oil companies; LOC = independent US oil companies; NOC = national oil companies.
Table 2: Worldwide Discovered Fields and Estimated Reserves, 1983–2007
Firm
Region Africa
Europe Number of Fields
4 2 -
6 -
1 2
12 Others Worldwide
1 -
2 2
Latin America IOC LOC NOC
North America IOC
NOC 26 -
61 19 6 9 1 -
51 62
LOC 48 118 NOC IOC LOC NOC IOC
22 145
LOC 53 165 NOC 31
73
13 9
27 3
Reserves, million tonnes oil equivalent
Type Slope Deep Ultra Slope Deep Ultra IOC LOC NOC IOC LOC
80 464 - 123
-
4 -
2 -
12 24 24 9 -
1 -
- 1,033 -
12
0 -
- 243 483 -
92 -
5 218 2,631 122 2 -
39 - - - -
69 -
20 1,824 431 53 1,009 602 82 661 196 3
66
- 295 61 810 22
74
Finally, the profitability of deepwater projects under a royalty and tax system governing E&P operations in the GOM Region depends to a large extent on minimising capital and operating expenditures, keeping safety and environmental standards in perspective. The longer the time lags from leasing to production the higher the capital
The immediate reactions of the Obama administration to the Gulf catastrophe included the imposition of a six-month moratorium on deepwater drilling operations in the US Gulf of Mexico.
79 -
26 -
31 514 4,510 793 27 235 1,936 261 21 1,078 2,087 510
IOC = international oil companies; LOC = independent US oil companies; NOC = national oil companies.
significant operational presence in deepwater operations in the GOM.2 Stiffer drilling and completion rules, as well as undue insurance regulations bordering on liability fund requirements or cap, fees or high fiscal terms, may easily squeeze US independents out of the GOM and force IOCs to move deepwater rigs and investment from the GOM to the other ‘Golden Atlantic Triangle’ regions – Angola, Brazil and the Gulf of Guinea. The IOCs already have a dominant presence in the Gulf of Guinea as evident in Table 2.
Increased costs may also force US independents to reduce future E&P budgets and terminate contractual agreements because of regulatory uncertainty in the US operating environment. Of course, national oil companies (NOCs), such as Petrobras (Brazil), Statoil (Norway), Pemex (Mexico), China National Offshore Oil Corporation (CNOOC), Korea National Oil Corporation (KNOC), etc., venturing into the GOM may have to reconsider their investment strategies in the US deepwater under new unavoidable regulations. Furthermore, any unnecessary permit requirements resulting from the BP Macondo catastrophe may
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expenditures and ceteris paribus, the smaller the economic returns on deepwater investments. This is in contrast to the governing structure in other regions where deepwater operations are conducted under contractual arrangements and capital expenditures are recovered through cost oil, depending on specifications for cost recovery. Table 2 puts the competitive advantage of the GOM deepwater in a broad perspective. The table shows that, of the 568 fields discovered between 1983 and 2007, 311 were discovered in North America. Although North America accounts for 55% of worldwide field discoveries, it accounts for only about 23% of discovered reserves because IOCs tend to discover larger fields in other regions. The IOCs discovered 49% of reserves worldwide, on average; 81% of reserves in Africa and 60% of reserves in North America. It would not be difficult for the IOCs to move their investments elsewhere if regulations make the search for oil in the Gulf deepwater costlier than it is in the Gulf of Guinea, where the estimated finding and development costs for deep and ultra-deep prospects are significantly lower than in the GOM deepwater.5
Probable Impact of the Macondo Explosion on the US Gulf States’ Economy
Actual estimates of the likely implications of a Macondo-induced permanent economic decline in the US Gulf States are conjectural. However, there is a consensus that a permanent negative shock to deepwater drilling operations in the US Gulf will lead to a reduction in aggregate spending, which may affect many aspects of the Gulf Coast economy in terms of employment losses, lower gross state product (GSP), losses in Federal and State revenue and increased dependence on foreign oil.6
For example, despite the temporary nature of the six-month moratorium imposed on deepwater drilling in the aftermath of the Macondo
EXPLORATION & PRODUCTION – VOLUME 9 ISSUE 1
lengthen the time lag between discovery and production, diminishing the competitive advantage in the GOM Region. For example, North America, because of its technical advancement, infrastructure development and experience, currently sees a lag of only 68 months between deepwater discovery and first production, compared with 116 months in Europe and 80 months worldwide.4
Stricter regulations and
tougher fiscal regimes resulting from the Macondo blowout might easily reduce this competitive advantage.
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