Tue | Jul 28, 2015

Deepwater oil-drilling implications for the Caribbean

Published:Sunday | May 16, 2010
Vessels surround a drilling rig at the site of the Deepwater Horizon in the Gulf of Mexico on Thursday, May 6. - AP Photo

David Jessop, Contributor


When the oil rig the Deepwater Horizon sank in flames on April 20, few could have imagined that three weeks later, the well would continue to spew crude oil into the Gulf of Mexico and threaten the coastal economies of the southern United States and their reputations as holiday destinations.


Although the slick has not touched Caribbean shores because of the distance, prevailing currents and winds, what has happened has serious implications for the large number of nations in the region that hope strengthening oil prices will make viable similar deep-drilling operations within their own economic zones.

Broadly speaking and much oversimplified, the Caribbean sits on two main strata of oil-bearing rock and a number of tectonic faults where possibilities for the discovery of oil and gas are said to exist, often in very deep water.

Energy-led wealth

The consequence is that nations, including Belize, Cuba, the Dominican Republic, Jamaica, The Bahamas, Grenada, Barbados, Suriname and Guyana have seen an upsurge in geophysical research and exploration as rising oil prices and advances in technology have made possible, in theory, the prospect of a find leading to the type of energy-led wealth that Trinidad has seen.

However, events in the last few weeks in the Gulf of Mexico have raised questions about the future of exploration in very deep water.

As BP's Chief Executive Officer, Tony Hayward recently told Bloomberg News, much depends on the company's response to the present crisis: "If we deal with the situation in a way that minimises the environmental impact, it will cause some debate. If the environmental impact is serious, as a consequence, there won't be much, if any, extension of offshore drilling."

As is now well known, the Deepwater Horizon exploded, killing 11 workers. Since then, the rig's owners, BP, who commissioned the drilling, plus those who manufactured the deepwater technology involved, have been trying, so far without success, to cap or seal the vents from which oil is erupting.

Ending the disaster, which took place at around 5,000 feet below sea level and involved a well being drilled to a depth of around 22,000 feet, is quite literally as difficult as operating on the moon, as the technology required and possible solutions are largely untested. It also involves huge costs and uncertainty and raises challenging political, jurisdictional, environmental and economic questions.

What would happen if such an event should occur in the Caribbean, or there should be some unforeseen accident or incident involving one of the shipments of radioactive waste that regularly passes through the Caribbean?

Implications of oil spills

If as recent indications suggest, oil beneath the Caribbean Sea at depths hitherto unviable or technologically too challenging can be recovered, how will governments balance economic need against the risk?

To illustrate the implications, imagine for a moment what might happen if Jamaica's north coast or Barbados's west coast were to see oil wash ashore from a similar high-profile incident.

The reputational damage would be enormous, and while the probability is that actual costs would be borne by whoever caused the event, the negative and less tangible effects would last for years. Under such circumstances, the requirement is to be proactive and respond effectively, as has happened in recent days in Florida, where changing weather conditions and a seasonal phenomenon relating to ocean currents look likely to propel residue from the slick into the Florida mangrove, onto the Florida Keys, and then towards Miami Beach and beyond. There, the administration has decided not to wait but to pre-emptively introduce a state of emergency and establish a campaign to try to reassure tourists and protect its US$65 billion tourism sector.

The Deepwater Horizon disaster raises other questions.

Do all Caribbean nations that are actively encouraging oil exploration have the necessary contingency plans, environmental legislation and the ability to monitor regulatory requirements to ensure that in the event of a crisis or threat they can respond, and that they have done everything necessary to offset the actual and reputational damage that would occur?

While some Caribbean nations, and most notably Trinidad and Tobago, have understood the need to develop better planning, legislation and an effective regulatory regime, it is apparent that few of the Caribbean's tourism-dependent economies have as robust an approach.

Surprisingly too, few seem to have debated the inherent contradiction between the environmental imperatives of a region in which tourism underwrites most economies, and the interests of oil companies looking for new and more stable locations in which to operate.

Understandably, Caribbean governments have been driven by a desire to expand national wealth through the recovery of any oil and gas reserves that may lie in their economic zone, however, to do so without a clear framework or holistic view of the consequences of any disaster ought, at least, to give pause for thought.

Earlier this year, the same platform that is now on the ocean floor identified a vast reserve of oil at great depth beneath the Gulf of Mexico.

There, it found for BP the giant Tiber field containing between four and six billion barrels of oil at a depth of 35,000 feet, beneath 4,100 feet of water, and which present technology can only partially recover. This and other finds in the Caribbean Basin means that irrespective of present problems and protests, oil recovery in the region will continue to gather pace, and extraction will occur at ever-deeper levels and at the limits of technology.

This is potentially good news for some Caribbean nations, as long, that is, as Governments recognise the imperative of addressing the risks that go with the rewards.

David Jessop is director of the Caribbean Council. Email: david.jessop@caribbean-council.org.