In Offshore Drilling Freeze, Rumblings of a New Era for Oil Industry

By Clayton, Mark | The Christian Science Monitor, May 27, 2010 | Go to article overview

In Offshore Drilling Freeze, Rumblings of a New Era for Oil Industry


Clayton, Mark, The Christian Science Monitor


The six-month moratorium on new deepwater offshore drilling announced by President Obama Thursday isn't likely to have a big impact on the oil industry - unless it's a sign of things to come.

In itself, President Obama's decision to impose a six-month pause on offshore oil leasing, announced Thursday, is unlikely to have any great impact on US oil supplies or prices in the short run.

But within the oil industry, there is some concern that this offshore drilling moratorium could be the beginning of a new oil regime, with significantly tougher regulations to follow, as Mr. Obama promised.

US companies still see the Gulf of Mexico as their backyard with a stable, relatively predictable political and regulatory regime. But if new strictures on the oil industry are seen as being too reactionary, the move could in the long run drive companies to less tightly regulated places like Angola in their search for the next big discoveries. That could mean a loss of jobs in Gulf states and possibly weaken US energy security.

IN PICTURES: Louisiana oil spill

"This could be a speed bump, or it could be the beginning of a transition toward long-term decline in US oil production," says David Pumphrey, an energy analyst at the Center for Strategic and International Studies in Washington. "It could put us in the position of importing more oil and possibly facing slightly higher oil prices in future because less non-OPEC oil is moving into the marketplace."

Obama's announcement Thursday marks a reversal of significant chunks of the offshore exploration plan he forwarded in March. On Thursday, he said he would:

Suspend planned exploration of two locations off Alaska's northern coast.

Cancel August lease sales in the western Gulf as well as a proposed lease sale 50 miles off the coast of Virginia.

Continue for six months an existing moratorium on any new permits to drill new deepwater wells in the Gulf and other areas of the outer continental shelf.

Suspend action at 33 deepwater exploratory wells being drilled in the Gulf until investigations are complete on the causes of the Gulf spill.

The president said to reporters that he had erred in one major respect when he planned for more offshore oil exploration in March: "I was wrong in my belief that the oil companies had their act together when it came to [handling] worst-case scenarios."

Calling oil industry connections with federal regulators at the Minerals Management Service "cozy and corrupt," Obama said he plans to unveil "aggressive new operating standards and requirements" for the offshore oil industry. …

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