Curbs on US offshore drilling delay moves to reduce reliance on foreign oil

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7 December 2010, Oil

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The decision by the Obama administration has, unsurprisingly, been greeted with dismay by the major oil and gas companies. Also seen as a negative development is the decision to postpone lease sales for the western and central sections of the Gulf of Mexico from March 2011 until at least the end of the year and possibly until 2012. The shadow of the Deepwater Horizon explosion will hang over offshore oil and gas activity for many years to come and it is right that lessons should be sought and learned, but that does not mean that the federal government is wise to announce such a long hiatus in exploration activity at this stage.

It seems an awfully long time since last March, when the Obama administration announced a relaxation of rules governing offshore exploration activity. The rationale was that energy security was becoming an increasingly important concern for the US government and that boosting domestic production was part of the solution. In 2010 nearly 50% of the US's crude oil imports came from OPEC countries, and significant other volumes came from Canada, Mexico, and Russia. While no one is expecting immediate security concerns, the long-term trend will unavoidably be one of higher crude oil imports, particularly from Middle Eastern countries, and this must be an issue of political concern. In exchange for allowing drilling activity in the eastern Gulf of Mexico and the eastern seaboard, the administration was expecting Congress to take action to limit greenhouse gas emissions. The mid-term elections saw control of the House of Representatives switch to the Republicans, with the Democrats retaining control of the Senate by the skin of their teeth. This means that congressional action to limit emissions is now dead in the water.

The oil industry points out to anyone who will listen that that explosion aboard the Deepwater Horizon platform resulted from working practices that were outside the recognized industry norms. Essentially, the enhanced moratorium announced by the Obama administration puts all of the companies active in the Gulf of Mexico into the same frame as BP and its partners. Perhaps memories of the events of this summer are still too raw, but the US is in danger of seeing what was almost certainly a one-off accident as something it was not, namely a systemic industry failure

Of course, it is highly possible that the electoral timetable is playing a role here. The next presidential election will be held in November 2012, and during that year the issue of oil and gas exploration in deep waters will be very important in the littoral states of the Gulf of Mexico and the eastern seaboard. Opinion there is divided as to whether exploration activity should go ahead and in seeking re-election president Obama will need to tread carefully on this issue. By halting sales of exploration leases in the eastern section of the Gulf of Mexico and the southern Atlantic coast until at least 2017, when President Obama will leave office - assuming that he is re-elected - that problem has been firmly kicked into the lap of his successor. This is totally unnecessary.

Source: Datamonitor

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