US must promote Gulf deepwater drilling to meet oil demand - Hess

08 March 2011 17:50  [Source: ICIS news]

HOUSTON (ICIS)--The US must further promote deepwater drilling to avoid an impending energy crisis, the chief executive of US energy firm Hess said on Tuesday.

Company CEO John Hess said that the US deepwater drilling moratorium introduced in the aftermath of the April 2010 BP oil rig explosion and resulting oil spill has been lifted “in name only”.

Specifically, US officials “need to provide clarity around regulatory requirements and begin approving permits for drilling to resume”, he said.

On 28 February, the US issued its first new deepwater drilling permit since the spill, but much more drilling may be needed, Hess said.

“The Gulf of Mexico is essential to the nation’s energy security,” he said, pointing out that 30% of US crude oil production and 13% of natural gas production came from the Gulf, most from the deepwater.

“We need to get our offshore drilling industry going again,” he added.

Hess spoke at the CERAWeek 2011 energy conference in Houston. He acknowledged the tragedy of the BP accident, but said that the industry has taken significant steps to increase deepwater safety.

“We just need the political leadership in Washington to give the green light for the industry to get back to work,” he said.

On the whole, Hess said global oil producers were not investing enough in production capacity to keep up with rising demand.

“As demand grows in the next decade, we will not have the oil production capacity we will need to meet demand,” he warned.

“Supply will then have to ration demand and prices will skyrocket, with the likely outcome of bringing the world’s economy to its knees,” he continued.

“The $140/bbl oil price of three years ago was not an aberration – it was a warning.”

As such, steps such as increased deepwater drilling are desperately needed to fend off rapid growth in global population and transportation.

Other steps Hess suggested included higher fuel efficiency standards for automobiles and to maintain existing tax provisions to encourage drilling.

Hess said that renewable fuels could be part of the solution, but said that the industry “does not have the scale, timeframe or economics to materially change the outcome as much as we would hope”.

The CERAWeek 2011 conference lasts through Friday.

By: Ben DuBose
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