Deep-water drilling goes on despite BP disaster (News Feature)

By Alexander Missal Jul 24, 2010, 10:49 GMT

Sao Paolo/London - It is a disaster, said Brazilian President Luiz Inacio Lula da Silva.

He was referring to the massive oil spill in the Gulf of Mexico after an oil rig that had been drilling a well for BP exploded in April. Nonetheless, Lula added, Brazil would not be discouraged from tapping an oil field in its coastal waters at a depth of nearly 5,000 metres.

'We've got technology and, God willing, won't allow anything similar to happen here,' he remarked a few weeks ago.

Whether or not they bank on divine protection, many countries still cannot resist the temptation to flood their coffers with money from the production of 'black gold.'

The oil industry does not appear to be chastened either. Certainly not Halliburton, which is the world's second-largest oil services company and was once headed by Dick Cheney, former vice president of the United States.

'The events in the Gulf of Mexico have not stifled our enthusiasm for increased deep-water activity in the coming years,' Dave Lesar, the company's current chief executive, told shareholders recently.

And according to Libya's state oil company, drilling will begin next month off the country's Mediterranean coast at a depth of nearly two kilometres. Its partner in the project, believe it or not, is BP.

Calls by environmentalists and Western politicians for a ban, or at least a moratorium, on deep-water drilling seem like roars by toothless tigers. In June, a federal judge in New Orleans - in the region most affected by the BP spill - lifted a six-month moratorium on deep-water oil drilling imposed by U.S. President Barack Obama.

The judge deemed the administration action excessive and unsupported by facts, agreeing with drilling-support companies that had argued the blanket moratorium was causing them irreparable economic harm.

The US government responded on July 12 by issuing a revised ban that could allow operations to resume if companies demonstrate they do so safely.

Since then, German Environment Minister Norbert Roettgen has called for a moratorium on oil and gas drilling in the North Sea. But he said he did not expect other countries with North Sea drilling rights to go along.

One of those countries, Britain, Europe's second-largest oil producer after Norway, is planning to go ahead with exploratory drilling in the North Sea at depths comparable to those in the Gulf of Mexico.

Oil production in the North Sea has been declining, and deep wells are the only means to exploit oil fields west of the Shetland Islands. The area holds up to 20 per cent of Britain's oil and gas reserves but has hardly been developed because of harsh climatic conditions.

Britain's energy department assured that the government would be extremely careful and said the country's existing oil safety regulations were among the world's strictest. In the wake of the BP spill in the Gulf of Mexico, it added, offshore oil rigs would be inspected twice as often as before.

Meanwhile, the accounting and consulting firm Deloitte registered an 86 per cent increase in North Sea drilling during the second quarter of 2010 compared with the same period a year ago.

How and where oil is produced is purely a matter of economics. All current techniques to extract oil from undeveloped fields are very costly and worthwhile only when the price of oil is right.

The oil deposits off Brazil lie in deep water - and also under a thick layer of salt. But if the relation between extraction costs and the price of oil is favourable, high profits are possible.

Brazil holds presidential elections this fall. Lula had the electorate in mind when he said, 'It's logical. If the oil belongs to Brazil, we want Brazil's 190 million people to benefit from the oil money.'

There are no guarantees that all will go smoothly. The semi-public Brazilian oil concern Petrobras once operated the world's largest offshore oil rig. It exploded and sank of Brazil's coast in 2001.