Times, They Are A Changing...
In a recent article Nissa Darbonne discusses some interesting issues surrounding the Oil and Gas industry in light of the well control events is the Gulf and Marcellus Shale. These events, along with the publicity surrounding the large fracture stimulations being used in today's shale wells, will most likely lead to new regulations for drilling and completing wells in the US.
What impact these new regulations will have on the industry and the profitability of some large development projects is yet to be seen. We know offshore insurance rates will increase significantly for those who can find insurance, and many companies will be forced to self-insure or exit the Gulf. This begs the question, how do you exit the Gulf in today's environment? This is certainly not a seller's market for offshore assets. So, if your company has offshore assets in the Gulf and you can't find affordable insurance, yet you can't afford to self-insure (assuming the government will allow self-insurance) and you can't find anyone willing to buy your assets for a reasonable price, what can you do? This problem is only compounded by any offshore drilling moratoriums which could put into doubt future development programs, or at least their near-term timing.
Regardless of these recent events and the public policy changes that may result, the country's energy needs are growing and will have to be met with an increased domestic supply of hydrocarbons. So, despite the inevitable fact that the rules of the game will likely be changed, domestic oil and gas is not going away. As Nissa Darbonne's article points out, this is another reason to diversify your portfolio.
