Oil Companies Respond Slow To New U.S. Lease Plan

Analysts are saying that the oil and gas industry’s response to the Trump administration’s announcement last week—that almost all of the U.S. continental shelf may soon be open for drilling leases—is due to be slow.

The draft program, which would replace President Barack Obama’s leasing plan through 2022, which restricted drilling in the Arctic and other federal waters, fulfills the White House’s promise to encourage the American fossil fuel sector, even as the international community opts for renewable and alternative energies in the fight against climate change.

If the proposal is adopted, 47 potential lease sales could open up 25 of 26 planning areas, with the exception being Alaska’s North Aleutian Basin, which was deemed off limits by President George W. Bush, according to a report by Oil and Gas Investor. Nineteen sales would still proceed in offshore Alaska, seven in the Pacific, twelve in the Gulf of Mexico and nine in the Atlantic.

In eight years, the Obama administration oversaw 11 lease sales, while the Carter Administration authorized a record 36.

But drilling in the newly authorized areas is not so simple, according to William Turner, a senior research analyst for Wood Mackenzie.

“When you’re developing these new areas it requires one or two things either you develop it with an FPSO [unit] like is done in West Africa with shuttle tankers that run back and forth with the oil or you lay export pipeline, which is what we’ve traditionally done in the Gulf of Mexico. That’s a huge expense,” Turner said. “Is the government later going to come around and devise or subsidize some of those investments?”

Republican states like Florida, with large tourism sectors that depend on clean beaches and rig-free views, are still against the new leasing proposal, paving an uphill path for the its adoption.

By Zainab Calcuttawala for Oilprice.com:

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