June 28, 2010

The first domino

The moratorium on drilling in the Gulf of Mexico in water depths greater than 500 feet may have caused it's first fatality. This will probably cost maybe 100-120 jobs on the $50K to $125K salary range. The rig will likely move to West Africa, providing those jobs to European Expats and African nationals.

The moratorium is overkill, and it will cost the U.S. dearly if the stay is not upheld.

UPDATE: Guess I missed it, but apparently Statoil declared force majeure in the GOM about two weeks back.

UPDATE: Seems another has fallen.
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5 Comments:

jeg43 said...

I was puzzled to learn you opposed the moratorium on deepwater drilling in the Gulf. It seemed to me to be necessary in order to prevent any more disasters of this kind - specially when BP still can't state with any certainty exactly what caused the blowout.
That aside, the reasons for the force majeure declarations in your post seem not to be related to the deepwater drilling moratorium but to new regulations issed by the Bureau of Ocean Energy Management Regulation and Enforcement (NTL's).
The two NTL's (notice to leasees) (NTL 2010-N05 and 2010-N06) can be found here:
http://www.gomr.mms.gov/homepg/regulate/regs/ntls/ntl_lst2.html
I read through them and as they are filled with technical terms pertaining to drilling and numerous references to other regulations, I sure don't claim to have a complete understanding of them - but to the limits of my understanding, they seem to be a serious effort to make future drilling safer.
I regret that anyone has lost their job because of the gulf disaster but if such job loss will help prevent further such disasters, I guess I feel it is acceptable. Any such loss is BP's responsibility and they should be held to pay for it.

Anonymous said...

My recent job offer in the Bering Sea disappeared because of the moratorium but it does seem reasonable to only have 30 - 35 drilling rigs out of service until more is know. It's my understanding over 3,600 pumping platforms are still in operation as they are not affected.

Valerie DeFrance

Mule Breath said...

My opposition here parallels my dislike of kneejerk reactions in general. This moratorium makes no more sense than would shuttering the auto industry due to the Toyota recalls or grounding commercial airlines following the JAL 123 crash. In a region already harmed greatly by curtailment and closures within the seafood and recreation industries, the moratorium is heaping insult upon economic injury. Eventual job losses could be in the hundreds of thousands.

Expecting BP will be held responsible for all costs, current and future, is na├»ve. With so many variables, I can’t see how we will be able to even identify all the costs. Gulf Coast residents and U.S. taxpayers will be stuck with at least the intangibles, so I simply can’t see us inflating our exposure.

Large scale failure to follow safe practices in the drilling industry is a recent phenomenon, resulting mostly from Bush era regulatory failures. This blowout is an extreme example of why we need good regulation, but with no other major incident on record, I think the industry overall is run safely. The people running those rigs generally don’t want them to blow up. With the specter of the Mississippi Canyon 252 Macando blowout haunting them… you can bet the engineers have already honed safety practices to a sharp edge.

Regarding the force majeure filings in the GOM, you are correct that the petitioners are citing the regulations for cause, but the real reason is the moratorium. Operators signed contracts with drillers and now want out of those contracts because of delayed spud dates and regulation related cost inflation.

Anonymous said...

I think I see your point. It's beyond just the rigs shut down, it is also the wide ranging school of unintended consequences.

Valerie DeFrance

Mule Breath said...

Exactly. This is already evident with the losses within the tourism and commercial fishing industries.

For every rig job lost, 3+ other jobs could be lost in unrelated industries.

The multiplier effect.