Could the Offshore Drilling Ban Make Things Worse?

The six-month ban on drilling in the Gulf of Mexico could encourage companies to move their rigs to other parts of the world, increasing the nation's reliance on imported oil. But it would also increase our reliance on long-distance shipping to bring that oil to the U.S. and increase the probability of oil being spilled at sea. Over the last half-century, transport vessels have been responsible for almost two-thirds of all marine oil spills, according to data arranged by Tulane University professors.


The moratorium on deep-water drilling in the Gulf that was announced last Thursday affects 33 rigs. Oil companies pay roughly $450,000 per day to lease those particular oil rigs, according to Johnson, Rice & Company, a New Orleans-based institutional research firm. And many of those companies are locked into lease agreements that will be difficult or expensive -- or both -- to break.

But there's an upside for the oil companies: there is some economic logic to moving rigs elsewhere. Oil companies lease rigs from their owners and the contracts governing those agreements can vary: some apply regionally, others are worldwide; some include harsh penalties for breaking a contract, others allow for it under extraordinary circumstances.

But the owners of 11 rigs -- one third of those affected by the ban -- would benefit "in short order" from moving their rigs to new locations, such as off the coasts of Brazil or West Africa, said David Smith, a senior Johnson & Rice analyst who compiled the report with a colleague. "A lot of deepwater acreage has opened up in the last ten years," he said. "It's still exploratory, but they could use the rigs."

If the moratorium lasts for 12 to 18 months, as one Morgan Stanley analyst predicts, the number of Gulf rig owners for whom moving would be worthwhile could be as high as 25 to 30, Smith said. Industry sources suggest contractors are already shopping their rigs internationally, he said.

As the rigs move away, the nation's reliance on importing oil increases. That means increased activity among transport vessels, which have been responsible for most of the oil spilled since the mid-1900's, according to numbers compiled by professors at the Tulane Energy Institute.

They found that 61 percent 60 percent of all oil spilled came from vessels, while only 16 percent 17 percent came from rigs. The Tulane professors used Wikipedia as a guide to major oil spills, but confirmed the cited primary sources in each instance. (On using Wikipedia, Professor Eric Smith, an Associate Director of the Institute says "there are other sources, but I wouldn't expect the answers to be dramatically different.")

Between 4.9 million and 5.9 million tons of oil has spilled since the mid-1900's, according to the Tulane data, and 3.2 million to 3.3 million of it came from vessels. "We have a much worse safety record with tankers than we do with drilling rigs," Professor Smith said. Although, in North America the United States, 49 percent 19 percent of oil spilled has come from rigs, with 43 percent 63 percent from vessels and the remainder from other sources. (Update: These numbers reflect revised data, just for the United States, which includes the oil spilled from the ongoing Deepwater Horizon leak up to and including Wednesday of this week.)
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Niraj Chokshi is a former staff editor at TheAtlantic.com, where he wrote about technology. He is currently freelancing and can be reached through his personal website, NirajC.com. More

Niraj previously reported on the business of the nation's largest law firms for The Recorder, a San Francisco legal newspaper. He has also been published in The Hartford Courant, The Seattle Times and The Age, in Melbourne, Australia. He's also a longtime programmer and sometimes website designer.

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