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Oil companies reeling from drilling moratorium uncertainty

US criminal probe into oil spill ongoing: attorney general
Washington (AFP) July 11, 2010 - The US Justice Department is still investigating the causes of the Gulf of Mexico oil spill to determine whether to bring criminal charges, Attorney General Eric Holder said Sunday. "The investigation is ongoing. We are in the process of accumulating documents, talking to witnesses on both the criminal side and the civil side," he told CBS "Face the Nation." But Holder said there was no timetable to decide whether charges would be brought against BP, which leased the Deepwater Horizon rig from Transocean, the world's largest offshore drilling contractor based in Houston, Texas.

The rig exploded on April 20 killing 11 workers and then sank two days later, unleashing the nation's worst ever environmental disaster with tens of thousands of barrels of crude gushing into the sea every day. "Our primary concern at this point is getting the spill stopped," Holder said, as the crisis entered it 13th week and BP engineers raced to install a new cap the British energy giant hopes will contain all the leaking crude. A system installed by robotic submarines a mile down on the sea floor has been siphoning up oil to surface vessels for the past few weeks, but the slick has washed ashore in four southern US states, devastating industries such as fishing and tourism. Holder was quick to stress that when he announced the probe on June 1, he had been careful not to mention BP by name as it was not the only party involved with the Deepwater Horizon rig.

"What I did say was that we had opened a criminal investigation but did not indicate who the subject of the investigation was," Holder said. "And that is a very serious thing because there are a variety of entities and a variety of people who are the subjects of that investigation. And for people to conclude that BP is the focus of this investigation might not be correct." At congressional hearings back in May, BP, Transocean and Halliburton blamed each other for the spill as executives from all three oil titans were grilled by US lawmakers. BP says rig owner Transocean was responsible for the failure of the giant blowout preventer valve which made it impossible to regain control of the well, but Transocean said all the operations were run by BP. The finger was also pointed at Halliburton, the oil services company which was responsible for vital cement work around the wellhead, which should have sealed the exploratory well until full production began.
by Staff Writers
New York (AFP) July 9, 2010
Fed up with the uncertainty surrounding offshore drilling following the Gulf of Mexico disaster, oil companies are considering increasing their inland exploration activities or venturing abroad.

President Barack Obama imposed a moratorium on deepwater drilling after a deadly explosion on a BP-leased rig in April caused a devastating spill of crude into the gulf that has imperiled fragile coastlines and wildlife.

But a federal judge blocked the moratorium last month after 32 oil companies and local officials argued it was causing irreparable economic harm.

A court on Thursday denied the Obama administration's bid to stay that judge's order pending appeal.

Amid the legal uncertainty, oil companies remain in limbo.

The Obama administration had also signaled that a new order will be issued soon to block deepwater drilling regardless of how the court ruled.

With their crews and equipment idled since the moratorium was issued in May, oil companies are considering moving their drilling operations inland or abroad.

"If the moratorium is relatively long, you'll see assets leave the Gulf of Mexico, and go to Brazil, or West Africa and it will take some time to take these assets back to the Gulf of Mexico," said Gary Flaharty, spokesman for Houston-based oilfield services company Baker Hughes.

He said companies which moved abroad could stay there for sometime.

"If they pay for mobilizing a rig in Brazil or West Africa, I don't think it will be for a single well, so it could be an extended period of time before we get back to a normal activity level in the Gulf of Mexico," Flaharty said.

Anadarko Petroleum, which owns 25 percent of BP's blown-out well, said it was "evaluating opportunities" to reallocate some of its 2010 capital from the gulf to other areas, including onshore liquids-rich areas such as Wattenberg in Colorado, the Maverick Basin in South Texas and the Bone Spring play in East Texas.

For US giant ExxonMobil, if the moratorium remained, "we will need to redirect our human resources -- the technical talent -- to other parts of the world where we are allowed to work," said company spokeswoman Cynthia Bergman White.

"We will also redirect rigs and equipment elsewhere. It is too expensive not to do so."

ExxonMobil faced delay in plans to drill an exploration well at the Hadrian prospect at oil-rich Keathley Canyon in the Gulf of Mexico scheduled to begin the week of May 10.

Preparations to drill at the Hoover Diana platform in the gulf have also been suspended.

The uncertainty has made increasing investment on onshore drilling a "natural consequence," said James Williams, oil analyst at WTRG Economics.

"Typically, if you have an exploration budget, and you can't drill in one area, you still need to offset your decline in production by drilling new wells, and if you have opportunities onshore, you have to take them," he said.

Onshore drilling activities in the United States have already doubled over the last year or so but the pace in recent months has been rapid.

Of the 587 rigs drilling for oil, 580 are based onshore compared with just 225 a year ago.

"That was happening anyway but the pace in the last two or three months has been very strong," Williams said.

Bruce Vincent, chairman of the Independent Petroleum Association of America, which has almost 5,000 members, is more concerned about the additional costs to be incurred due to stringent regulations following the BP disaster that has led to two to four million barrels of oil so far into the Gulf waters.

"What will happen is regulators will build in even more redundancy," he said.

"You'll need more equipment. You'll need to have it inspected more often. You'll probably need more people on site -- certainly higher qualified people -- that will take more manpower. All of that will add cost and expense."

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Obama loses drilling moratorium appeal
New Orleans, Louisiana (AFP) July 9, 2010
The Obama administration lost its bid to keep a six-month freeze on offshore drilling, and BP was to outline Friday its next steps to cap the well gushing oil into the Gulf of Mexico. A federal judge blocked the deepwater drilling moratorium last month after 32 oil companies and local officials argued it was causing irreparable economic harm. The Fifth Circuit Court of Appeals on Thursda ... read more

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