INSIGHT: To understand US Gulf oil spill, think location

18 May 2010 16:27  [Source: ICIS news]

By Lane Kelley

Oil containment efforts on the beaches of the Gulf of MexicoHOUSTON (ICIS news)--The recent oil spill in the Gulf of Mexico shines a bizarre light on that axiom cited by real estate people and restaurateurs that the three most important elements of the business are location, location and location.

Location has undoubtedly made this spill a tough problem. The Deepwater Horizon rig where the blowout occurred was more than 50 miles offshore of Venice, Louisiana, when it caught fire and sank on 22 April, killing 11 workers and leaving an oil gusher from a wellhead more than a mile deep in the Gulf.

Those prone to wondering why humans can put men on the Moon but fail at any number of earthbound endeavours may want to consider that the space shuttle Atlantis will most likely begin and finish its final mission, a trip to the International Space Station and back, before BP can execute its proclaimed "almost certain" solution to the Gulf spill, which is to drill a second well that will offset the one leaking oil.

Location has been a huge factor in determining the massive television and print coverage by the US and British media, which have covered every new twist in BP's efforts to cap the undersea wellhead.

From the first attempt of installing a 100-tonne "dome" on top of the wellhead that failed, to the "top hat" solution that also failed, to the latest siphon idea using a mile-long tube to funnel 42,000 gallons of crude a day from the wellhead into a tanker, each new solution tried by BP has earned a nifty graphics presentation in every corner of the media.

New satellite images of the oil slick pop up constantly on the internet, not only of the black ooze on top of the water but also of a recently discovered 10-mile long plume underwater.

And for television viewers wanting a microcosmic view, there has been video of the oil spewing out of the pipe more than a mile down on the ocean floor, provided by BP as part of its effort to plug the well and also the growing negative publicity.

Small wonder that an Irish bookmaker, Paddy Power, now is making odds on how long Tony Haywood will survive as BP chief executive. At 8/11 odds, Power's bet is that Haywood will be gone by the end of this year.

Imagine the reaction from the American and British media to a similar blow-out off the coast of South Africa, or anywhere in the Middle East or at a location not easily accessible by a major airport.

In fact, the largest oil spills in history have been in such spots. The largest accidental spill (according to The Economist magazine) also occurred in the Gulf of Mexico, in 1979, but not near the US coast. It occurred near the bottom of the Yucatan Peninsula, when 147m gallons of crude flowed out of the Mexican Ixtoc-1 well after a blowout.

That well took nine months to cap and caused untold environmental damage. The largest deliberate oil spill occurred in 1991 and was the handiwork of Iraq's Saddam Hussein, whose troops opened Kuwaiti oil field valves allowing an estimated 520m gallons of crude to flow into the Arabian Gulf.

So far, the Deepwater Horizon spill's potential - what it might become - is of as much concern as its actual size, which is still dwarfed by the historic disasters - the BBC last week said it did not even rate among the top 50 spills. But that ranking could change soon.

A scientist from the University of Georgia said underwater plumes discovered over the weekend suggest that the amount of oil flowing from the well could be substantially greater than the estimates from BP or the US government.

Location is everything when it comes to making damage assessments.

This spill has prompted a daily torrent of expert estimates on its environmental impact - the underwater oil plumes, for example, could poison and suffocate sea life for a decade or more, not to mention the economic damage that would be done to the Gulf coast fishing industry and tourism in Florida, which has benefitted for decades from aquamarine waters lapping onto pristine beaches.

A London newspaper on Monday summed it up succinctly, saying the spill off Louisiana "threatens to eclipse the 1989 Exxon Valdez spill off Alaska as the worst US ecological disaster ever". Some publications say it already has surpassed the Valdez in size.

Whatever the case, the spill's location carries added significance because it is near New Orleans, which was ground zero for another Louisiana disaster, Hurricane Katrina, in 2005.

The costliest US hurricane and one of the deadliest, Katrina also served as a flashpoint for criticism of a US president - George W Bush - over the federal government's response (or presumed lack thereof) to the disaster.

President Barack Obama's response to the oil spill over the past month has also generated criticism accusing his administration of lax regulation of the offshore oil industry and also that it has not done enough to help spill victims, such as the US Gulf coast fishing industry.

The knock-on effect from this spill will be significant, whichever way you look at it.

BP will suffer from years from the costs of the clean up. The oil industry's reputation is severely dented as are prospects for new drilling in some of the world's most pristine environments.

The Obama administration treads a fine line but might be expected to promote tougher drilling regulation.

The biggest losers are the environment and those who earn their living from the sea.

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By: Lane Kelley
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