Monday, November 29, 1999

ANALYSIS - As BP well gushes, global offshore industry drills on

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Brazil's iconic Ipanema, a haven for surfers and sunbathers, could be one offshore drilling accident away from becoming a wasteland of oil slicks, tarballs and cleanup crews.But even for Rio's diehard beachgoers, the allure of future revenues from the deepwater oil fields about 200 kilometers (150 miles) to the south means even that worst-case scenario is worth the risk."It's logical for us to be scared -- can you imagine this beach covered in oil?" said Miguel Habib, 36, an instructor of Brazilian "foot volley," a combination of the country's beloved sport of soccer and beach volleyball. "But we need that oil."That sentiment goes far beyond Rio de Janeiro.Countries around the world are moving ahead with offshore oil exploration plans in increasingly deep waters despite the ecological disaster in the Gulf of Mexico that has led to a temporary moratorium U.S. deep water drilling.Slowing development of deep sea riches is unthinkable for developing nations such as Brazil, Nigeria and Angola -- the world's biggest offshore drilling centers where oil wealth is seen as the backbone of future economic growth.In Brazil, slated to invest tens of billions of dollars in deep water fields in the coming years, President Luiz Inacio Lula da Silva has hailed deep sea oil discoveries as a "gift from God" that will help end decades of poverty.Brazil has seen little of the opposition to drilling that has grown in the United States since the spill and prompted President Barack Obama to impose the moratorium.Analysts even expect Brazil to benefit from the BP accident because the U.S. moratorium has freed up deep water drilling rigs that have been in tight supply for years."It's a disaster, but I don't expect it to slow our own plans here," said Isaias Massetti, a Petrobras consultant and expert in offshore engineering.That should be good news for energy markets. Whether it likes it or not, the world is counting on deep water oil.Global crude production in waters deeper than 610 meters (2,000 feet) more than tripled between 2000 and 2009 to reach 5 million barrels per day, and could double again to 10 million barrels per day by 2015, according to consultancy IHS CERA.That is almost equivalent to the predicted increase in global oil demand through 2014, according to the International Energy Agency's medium-term forecasts issued last year.Environmentally conscious Norway has scrapped new offshore projects for now, without halting existing projects, but even developed nations like Australia show few signs of a political backlash that could imperil projects with new restrictions."Shutting down the industry and putting the nation's energy security, jobs and the economy at risk does nothing" to ensure safe oil exploration, said Australian Resources Minister Martin Ferguson, when asked of a possible drilling suspension.A field off Australia's coast last year leaked crude for three months before it was staunched.Though authorities have not completed a report on the causes of the 2009 spill, Australia last month opened new marine areas to exploration despite protests by conservationists.For a map of offshore drilling around the world click: IN AFRICAThe Gulf of Mexico events are unlikely to change much for West Africa, one of the world's poorest regions with ambitious plans to tap deep-water energy riches.This is particularly true in Nigeria, where most production growth is seen in offshore areas as companies trim onshore operations to reduce clashes with local communities and avoid guerrillas that have frequently bombed oil installations.Moving into deep water would help move oil production away from already polluted areas without slowing the energy industry, which is the mainstay of the country's heavily import-dependent economy.Years of spills and pipeline sabotage have left villages in the Niger Delta reeking of petroleum and killed off much of the area's fish.Many former fisherman now make a living filling canoes with oil stolen from pipelines and carrying it to illegal refining sites that billow clouds of smoke from the mangrove swamps."Some of us are beginning to think that you should leave the oil in the soil," said Alagoa Morris, field monitor for Environmental Rights Action in the Delta town of Ikarama, standing next to a pond blackened by a recent oil spill.The story is much the same in Angola, which is moving ahead with plans to tap fields in water depths of 2,000 meters (6,600 feet).Angola has more than 30 new oil discoveries under development off its coast and expects new ultra deep-water discoveries to bolster crude output by 16 percent next year to 2.2 million barrels per day."Sonangol is confident in the safety plan it has in place and will continue to improve it in order to drill deeper wells," said Joao Rosa Santos, a spokesman for Angolan national oil company Sonangol.Analysts say Africa's notoriously weak state institutions may leave it without sufficient government oversight to control risky deep-water projects. They point out that even U.S. regulators, with more resources than African counterparts, failed to adequately police deepwater operations.In the midst of oil-covered birds and black plumes of smoke it's difficult to see the BP disaster being forgotten in the United States or ignored elsewhere. History, however, suggests that's exactly what will happen.While the 1979 Three Mile Island meltdown led to outcry against nuclear power and froze its development in the United States, nearly three-quarters of the world's nuclear power generation capacity was built after that incident.A Reuters investigation showed U.S. authorities downplayed the chance of a deepwater accident in the Gulf of Mexico despite a major 1979 blowout in a Mexican offshore oil well that spilled crude for months.Norway continued with its North Sea oil production despite the Piper Alpha platform explosion that killed 167 workers, and Brazil's Petrobras has become a global offshore leader despite the 2001 sinking of the P-36 platform that killed 11 people.Already counting on the offshore fields to fuel its emergence as a global power, Brazil is prepared for the risks involved in producing that oil."Could an accident like that happen here? Sure it could happen," said Marcos Fernandes, 38, a municipal police officer folding up a security tent on Ipanema beach. "But that oil is going to improve things in this country."(Additional reporting by Henrique Almeida in Luanda, Nick Tattersall in Lagos, Randy Fabi in Ikarma, Nigeria, Fayen Wong in Perth, and Joshua Schneyer in Rio de Janeiro; Editing by David Gregorio)

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