Monday, October 2, 2023

Trump’s offshore oil plan will struggle to lure rigs from Guyana

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The world’s hottest offshore prospect for oil companies is off the coast of Guyana, where a string of major discoveries has drawn hundreds of millions of dollars in a quest for crude. But The Trump administration is hoping to lure some of that investment to the U.S. with a proposal to sell leases in almost every inch of the nation’s outer continental shelf. This includes territory hugging the U.S. East Coast that shares characteristics with Guyana, a tiny South American country.

Bloomberg reports that Geologists speculate that those U.S. waters could hold an equally tantalizing amount of crude oil and natural gas. But oil companies may not be willing to endure the high production costs and public opposition to find out. Gushers of litigation are more likely than gushers of oil.

“The industry’s focus is elsewhere, and just because the government says you can drill doesn’t mean companies will do it,” said Pavel Molchanov, senior vice president at Raymond James Financial Inc. Companies have no shortage of other prospects around the globe — without the costs and risk of the American East Coast, Molchanov said.

Drilling there could mean overcoming – or at least ignoring – the objections of every state government on the East Coast except those of Georgia and Maine, as well as widespread public hostility. More than 140 municipalities from Florida to New York have declared their opposition to offshore drilling, according to the conservation group Oceana.

That’s a significant barrier. Although the Interior Department can still sell offshore tracts over the objections of affected governors, states could make things difficult for oil companies that would have to stage equipment near offshore drilling operations.

Little is known about potential resources along the East Coast, because existing data stems largely from decades-old geological surveys and more than four-dozen wells drilled in the 1970s and 1980s. The old wells generally turned up natural gas and some indications of oil – too little to be considered commercially viable at the time. But a new generation of sophisticated three-dimensional seismic studies and drilling could pinpoint more, Bloomberg indicated.

“It’s just unknown territory,” said James Knapp, a geophysicist at the University of South Carolina. “Nobody can reasonably say that we know what’s out there.”

Petroleum geologists say there’s reason to be hopeful, however, based on discoveries in other parts of the Atlantic Ocean near Ghana, Angola, Brazil and Guyana – places that once butted up against what is now the continental U.S.

American waters have long been a top target for oil companies. But without an array of new U.S. options, they are increasingly moving their dollars – and their rigs – to other promising prospects around the globe, such as Guyana.

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