Thursday, July 15, 2010

Crisis Management by Committee - Day 86 of Oil Spill

This article from The Washington Times speaks to unintended consequences of the oil drilling moratorium. The six-month moratorium already has thrown thousands of oil workers in the Gulf region out of work and jeopardized the outlook for tapping the most promising prospects for oil discoveries in the U.S. since the 1970s.

But the repercussions from the work stoppage have only begun. Soon, an expected decrease in U.S. oil production will lead to increased imports to replace some of the 1 million barrels a day of oil produced in the Gulf, just as the nation had begun to make progress in reversing its rising dependence on foreign oil.

I think, at this point, with the continued promise of continuing on with the bans on offshore drilling that the Obama administration has determined it will double down and to hell with the people of the Gulf coast. I think this is the perfect opportunity for those in the administration who seek domination of environmental policies and energy policy to exploit this tragedy for their own ideologic goals. Useful idiots, like Homeland Security Director Napolitano will play along to get along.

Interior Secretary Salazar, a man who has made it perfectly clear that he is no friend to the oil drilling sector, has now issued a denial of drilling permits. As reported in the Houston Chronicle Oil and natural gas producers drilling in 500 feet or less of water will be able to resume operations once they resubmit exploratory plans and comply with new safety standards the Interior Department is set to begin advancing soon. In a drilling safety report issued May 27, Interior Secretary Ken Salazar provided a hint of some of the new requirements, including recertification of essential safety equipment and stiffened standards for capping wells.

This article speaks to the drilling rigs set to leave the Gulf of Mexico. Given that Diamond has put the process into motion by announcing its rigs moving to Egypt, this is not unexpected. In fact, it is what those of us living within the oil drilling industry have been shouting from the rooftops about.

“We believe the risk that a substantial number of deepwater rigs will leave the gulf has risen considerably,” FBR Capital Markets analysts wrote in a July 13 research note after Secretary of the Interior Ken Salazar issued a new moratorium on deepwater drilling. A New Orleans federal judge struck down the first drilling ban.

Salazar reissued a drilling moratorium on July 12 until Nov. 30, pending interim rules that might end it sooner. He also reserves his right to end the moratorium earlier or to extend it.

“Despite the focus on a Nov. 30 horizon, we believe that the content of the decision memo will increase the uncertainty in the minds of the deepwater producers as to when the moratorium may end,” FBR analysts said.

The government has decided to allow its panels of non-drilling experts to set the pace for the latest effort to stop the gusher - the newer cap installation. This speaks to the new government demands delaying the testing.

BP's work to cap its Gulf of Mexico gusher was in limbo Wednesday after the federal government raised concerns the operation could put damaging pressure on the busted well and make the leak worse. There is concern that added pressure from the new cap could cause the leak to increase. The stopped flow may cause an underground rupture, to the government's way of thinking. The government 'experts' have consulted with academics and Energy Secretary Chu for the latest decision - to use an "abundance of caution" so that the valves to be shut and cap tests don't increase pressure on the well. The extent of the damage to the well bore and the casting pipe has been uncertain from the start.

Adm Allen has decided to instruct BP to proceed with the well integrity test. This will be done in six hour intevals and after 48 hours the testing will be in stand down mode. A question to be asked is, why was the public not told immediately that the testing of the new capping stack was delayed? The cap was put into place on Monday and on Wednesday afternoon we learn of the decision made by the government on its instruction to BP. Where is the transparency? It was a last minute evaluation, with Adm Allen describing it as so.

Crisis management by committee. Day 86.

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