Issue 127 – 2015 Santa Barbara Channel Drilling
Introduction…The Interior Department released the draft proposal Thursday for leasing areas of the U.S. outer continental shelve for drilling for oil and gas. The five-year proposal from 2019 to 2024 is aggressive expecting to lease 25 out of 26 planning areas.
Financial and political barriers…There are good prospects out there. That would include Alaska and Gulf of Mexico are well-developed. Sothern California and the Eastern Seaboard are attractive.
Much of the East and West Coasts are politically hostile. For example, Florida Governor Rick Scott joined the other politicians in opposing the proposal to protect its beaches. California has powerful legal tools to stymie offshore development. The California Coastal Commission has the power to say “no” to federal actions that could harm the coast of California and coastal waters.
The first hurdle for the Interior’s plan is a period of public comment and extensive environmental review under federal law, which the opponents can use to challenge the proposal as ecologically harmful.
Any company bidding on the leases could expect it to take a decade before drilling could start. The majors paid a high price for multi-year projects when prices fell, trashing returns and threatening their dividends.
In summary...As reported in this newsletter, U.S. Shale drilling budgets increased ten times faster than the rise of international oil companies’ budgets. North American drilling budgets were up 32% last year compared to just 3% budget increase for international projects. The shale is a faster safer payback when compared to the political, economic and time risk of offshore drilling. Click here to continue reading “Shale Expansion Dominates Competition.
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Sources: Bettina Boxall, “Trump’s plan to open California coastal waters to new oil and gas drilling probably won’t go very far,” Los Angeles Times, 6 Jan 2018; Liam Denning, “Will Oil Majors Really Sink Money Into America’s Waters?” Bloomberg, 5 Jan 2018.