Filed under: Capitalism, Economy, Energy, Environment | Tags: Deepwater Horizon Oil Rig, Real Risk, Tragic Explosion
The explosion, fire and sinking of BP and Transocean’s Deepwater Horizon oil rig in the Gulf of Mexico eight days ago has been a tragedy that took the lives of eleven workers. “The preliminary assessment of the accident indicates that the rig was hit by an uncontrolled blowout — an unexpected surge in pressure in the well bore — that sent oil and gas rushing to the surface and onto the rig floor” That led to the terrible explosion and fire. There are blowout preventers on the rig, but why they didn’t work is unknown. Perhaps there was something wrong with the equipment, perhaps there was human error. It will probably never be known just exactly what went wrong.
President Obama announced today, eight days after the disaster, that Department of the Interior Swat Teams will be inspecting every oil rig in the Gulf of Mexico. “Swat Teams” from the Interior Department? Ken Salazar has his own swat teams? And these “swat teams” are so much more knowledgeable than two of the world’s most experienced companies — Transocean and BP? Homeland Security Secretary Janet Napolitano and Interior Secretary Ken Salazar are taking charge. The White House released photos today of President Obama being informed.
In spite of efforts by submersibles, they have not succeeded in capping the well, and the oil slick is approaching the Louisiana coast. It is, of course a terrible tragedy.
Robert Bryce, Managing Editor of the Energy Tribune, explains some of the risk in offshore drilling in a most informative article:
The fire and sinking of the Deepwater Horizon earlier this week provides yet another example of just how complex and dangerous the energy business can be. Sure, poker players in Vegas can wager tens of thousands of dollars at a time. But consider this: the lost revenue to BP – just from the loss of the oil production from the well being drilled by the Deepwater Horizon – amounts to about $600,000 per day. …
The accident on the Deepwater Horizon reminds me of a brief conversation I had a few years ago with James Mulva, the CEO of ConocoPhillips. I asked Mulva to name the most difficult part of his job. His reply: assessing risk. He said that ConocoPhillips had so many different businesses in so many different parts of the world, that he had difficulty in figuring out all of the regulatory, political, currency, and other risks that the company was facing. That conversation led me to think about risks facing companies that are drilling offshore.
Bryce lists, and explains, some of the kinds of risk and in so doing explains a lot about the oil business. There is Geologic risk, Engineering risk, Technology risk, Capital risk, Weather risk, Human error risk and Market risk. A very risky business, but essential.
Also just announced, is Secretary Salazar’s approval of the Cape Wind Project. Robert Bryce notes in his new book: Power Hungry, that:
More than 2,500 skyscraper-sized wind turbines, spread over 500 miles of terrain, and a passel of natural gas units at 90 percent of wind’s maximum output — and hundreds of miles of new transmission lines/voltage regulation — would be required to provide parity with the capacity of a single 1500 MW nuclear facility.
That sort of puts things in perspective. Opponents of Cape Wind promise a long legal process to defeat the project entirely. The administration seems to believe all the hype.
Do read the whole thing. We ordinary folk are far too ignorant about energy policy. The hype and misinformation are far too prevalent, and they get away with the misinformation because we don’t know any better. Besides, it’s really interesting.
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