The 'Obamatorium' – what Ron Neal, the co-founder and co-owner of Houston Energy calls the continuing de facto drilling moratorium in the Gulf of Mexico – is only one component of the political risk that has arisen in what was once a thriving oil & gas activity center.
Speaking at the Winter NAPE in Houston last month, Neal said he was concerned that further delays in permitting will kill the economics of projects proposed for the Gulf.
Right now, he said, the country is sending nearly $1 billion per day to other countries to quench America's thirst for oil. Of that sum, about half – $505 million per day – goes to OPEC members, he said.
'We are willing to die for oil in another country. We are willing to kill for oil in another country. We are willing to lose jobs for oil in another country. We are willing to sacrifice our economy for oil from another country, instead of drilling in American waters,' he said. The government seems to be 'punishing' the oil industry, perhaps for 'being evil profiteers' while at the same time pushing a green energy agenda, he said.
That couples with the 'tremendous disincentive' a Bureau of Ocean Energy Management Regulation & Enforcement employee might have to actually sign off on a deepwater drilling permit, Neal said. The situation in the Gulf of Mexico is worsening, he said, because of uncertainty and complex – and in some cases, unrealistic – standards. For example, he said, following the Macondo disaster last year, the government has talked about requiring liability insurance of up to $20 billion per well. 'That doesn't exist,' he said. 'If they institute that, the entire Gulf of Mexico will fail.'
And to try to arrange funding for exploration activities in the Gulf? 'Wall Street has little interest in the Gulf. The Gulf has political risk,' Neal said. Formerly, that level of political risk was reserved for other countries that were likely to change the rules in mid-game, he added. Now, he said, 'if you tried to raise money on Wall Street for the Gulf of Mexico, you're a pariah. You'd do better to try to raise money on the street corner.'
NAPE Winter is focused on unconventionals. 'These plays are expanding. The resource size is growing,' Pete Stark, VP at IHS, said, referring to the shale plays in North America as the 'shale gale.' IHS estimates over 25 billion boe of recoverables have been identified in these plays.
'It will be interesting to see what shakes out in these plays.' OE