Search This Blog

Thursday, 11 November 2010

Deepwater Horizon, and a quote from Clay Maitland . . .

Most of you would have already read about as well as seen television and internet coverage on the DEEPWATER HORIZON accident in the US Gulf/Gulf of Mexico. And then gone back to your daily lives, heck yes, this is too far away, won't impact us.

Really? Well, put it briefly, this is what one important shipping analysts says on his regular features on the subject:-

Clay Maitland says:-

What will the economic consequences of the oil spill be? We don’t know, but I’m reminded of that recent movie about oil wildcatters: “There Will Be Blood”.

I do not believe that offshore drilling is completely dead in U. S. waters, including the Arctic, but it may be. It looks badly wounded. If so, expect a lot more imports of foreign-flag tankers, with the implied risk of tanker-related oil spills to come.

That means still more regulatory restrictions by the U. S. Federal and state governments. Hence the reason for industry concern about the sanctity of the 1990 Oil Pollution Act, as it applies to tanker vessels, limits of liability, and expansion of the list of directly responsible parties. Many things have changed since 1991, when that law went into effect; the rise of powerful oil trading firms, sometimes called the Vitol effect, being just one. The issue of “who chooses the tankers”, and therefore of quality of the vessels and crews, is with us yet, and becomes even more relevant if tanker traffic to North America is about to expand. We’ll have to see how that goes, too.

Another economic consequence: marine insurance faces a very different, and uncertain, future. The U. S. Congress is now fully aware, as it was in 1990, of what a bad thing limitation of liability is. Can Brussels be far behind? The enormous damage and loss claims emanating from the U. S. Gulf states will far exceed anything the London market has seen since the second world war. Yes, there will be blood.


The DEEPWATER HORIZON/2010 crisis in the US Gulf area impacts many of us in many ways.

For the US Government, an engineering mishap is being smartly converted into a natural disaster using some excellent PR, since nature is gentler on the future of Presidents there, unlike the monsoon here which decides it for the Government in India.  Katrina/Bush and now DEEPWATER HORIZON/Obama, not our fault, it was the Big Bad Sea.

For the environmentalists, there is a mixed bag - some have a "serves them right" attitude, some compare with Bhopal/1984 or Kuwait-Iraq '90s, and some go emotional on photographs of birds soaked in oil. For the media, there is the usual shrill structured amazement - how could "they" have made holes miles below the ocean's surface to  drill for and bring out oil, and not taken the precaution of figuring out how to stop it - like children who will claim they did not know that ice-cream can and will be spilt. What the media is paid for is to drill deeper into annual reports put out by large companies, where all these issues are listed in the fine print, with notes on the risks thereon.

As friends at sea talk about whole fleets of laid-up tankers being revived to load, ship-out from the Persian Gulf area, and store crude oil in the developed countries, and friends in the banking industry speak about how the complete dynamics of international commodities and shipping are shivering at the prospect of even more regulations adding to the costs, it seems that people on land have not the faintest clue on what to do next with such deep drilling accidents.

To bring things into simple persepctive - the depths involved are more than the height of Mount Everest over mean sea level. Now imagine that from this base, we try to pull out natural resources, to keep ourselves going on top of the mountain. So we all live on a plateau high up, way above the Himalayas, and somehow, way way down below on the ground at mean sea level, where it is also dark, cold, and where exist pressures able to crush diamonds into dust, some people, call them engineers, have now decided to dig huge holes and remove the foundations of the mountain to bring it up and make fuel out of it. Using a pipe, which they do not know how to stop, in case the bottom of the mountain caves in.

Can you and I remove the foundations of our homes to build higher floors? That's exactly where the deep oil drilling industry has now reached, in its push for energy, Fuelled by the rest of us. Because that's how it is - we climb higher and higher, and dig deeper below, after all, there's only water on top, right? Right. Think about what that water did when a little crack appeared on the surface of the ocean, during the tsunami, a few years ago.

And then, ofcourse, there are those who are busy making a profit out of this disaster, too. 34 billion dollars, and counting, likely to go up some more - simple physics tells you that all that money going down the pipe is going to surface somewhere else. And like after 9/11, the rest of the world will be expected to cough up the re-insurance bill. Likewise, the actual ownership of BP, shrouded within corporate googlies of the sort which are increasingly prevalent worldwide, will probably change - whatever that means. Or it will get merged with some other existing oil and energy major, and re-appear in yet another thinly veiled avatar.

What is certain, however, is that eventually the rest of the world, including us, will pick up the bill for the vast insurance claims, as well as the much higher fuel costs. And as seafarers, we will continue to sail those huge tankers with even bigger slop tanks and small ships which have less deadweight than the afore-mentioned slop tanks, and all points in between. And as for foreign flag tankers, and the risks their crews will take - hey, its your choice. But your salary better go up, because you will, like doctors and others, soon need to buy malpractice insurance or similar cover every time your ship calls a US Port.

The DEEPWATER HORIZON is just one more marker. That it happened off the shores of a developed country is probably why it is getting all the attention. But the real problem is not with the natural consequences of oil coming up and floating on the surface of the sea and along the beaches - it is there, deep down below, where the question remins the same - how deep do you drill?

The answer for which is this - as the price of oil keeps rising, the deeper they will need to drill.

And as on date, there are no conventions or agreements between countries worldwide on how deep they should drill into the earth's core. And that's where the fallacy lies, that is the real problem to solve. Not just OPA or other conventions that cover what happens on the surface of the sea.

No comments:

Post a Comment