Trying to Size the BP Disaster

Here is a bit from a posting by Geoffrey Styles at the Energy Outlook blog. Styles is a retired industry insider, so his comments are well worth listening to:

In trying to imagine the range of outcomes, we must consider the rate at which the oil is flowing, how long it will flow, and the relative success of efforts to recover or break down the oil that has leaked before it reaches the shoreline, fisheries and other sensitive environments. A high-end projection of the volume of oil spilled might involve a leak that is actually well above the current 5,000 barrel-per-day (bpd) estimate, and that continues as long as it took to cap last year's Timor Sea leak: 10 weeks. Even at 5,000 bpd, that would eclipse the total spilled from the Exxon Valdez before it ended. And if oil were leaking much faster, as some estimates suggest, the result could rival the largest oil tanker spills, such as the Amoco Cadiz in 1978, while still falling short of the 1979 blowout of Pemex's Ixtoc-1 well farther south in the Gulf. We may never know the true extent of the spill, because there's no accurate way to measure the quantity of oil currently flowing from 5,000 ft. down in the Missississipi Canyon.

If that's the far extreme, what might a less dramatic scenario look like? As described in this morning's New York Times, BP is pursuing several approaches that could either shut off the well quickly, or at least contain the leakage until the well can be sealed by means a relief well drilled into the same formation to block the flow to the current well. The critical event following the explosion on the drilling rig was the apparent failure of the blowout preventer, which BP has been attempting to activate by remotely-operated vehicles (ROVs.) The BOP was supposed to cut off the errant flow--literally. The quickest solution would be to set a new BOP in place and activate it to crimp the riser and drillpipe and shear them off. From my limited understanding of the techniques involved, doing this at depths like these, using only ROVs, and with a well that might be blowing gas and oil at much higher rates once the bent riser and drillpipe were removed would be extremely challenging. BP's plan to use "domes"--essentially underwater cofferdams--to contain and siphon off the oil as it comes out of the well could be nearly as tricky to pull off, though with less downside if it failed. If any of these techniques worked, the total volume of the spill might be limited to something under 150,000 bbls, assuming that the well has already leaked 50-60,000 bbls. That would still qualify as a very large oil spill--much larger than early estimates projected--though far short of a true worst-case.

Read the full posting to get additional information and links to relevant material.

Styles makes clear that he thinks drilling should continue. I agree. The question here isn't to "stop" exploration. It is "how to make sure this doesn't happen again". Technology advances only when you learn from your mistakes. The executives at BP may want to cover up the mistake and ignore it, but the job of government regulation is to make sure that a thorough investigation takes place and the appropriate lessons are learned. The financial penalty to BP should get its executives to take this seriously. But even if it doesn't, the role of government is to make sure that all corporations "learn the lesson" and do what is necessary. That is the point of regulation.

Bush and the right wing Republicans like to pretend that all actors in the business world are rational and "do the right thing" because the market incentives will lead them to do that. That is hooey. There are more than enough executives who run a business like a professional crook, i.e. "get in, grab the loot, and get out fast". That is optimizing from the individual's perspective, but it is disaster from a society's viewpoint. That's the purpose of regulation. To make sure the the values of society really count.

I find it funny how Republicans talk about "family values" and then get caught in scandals. They also talk about the virtues of the marketplace, but cases like BP point out that "corporate values" cut corners just like politicians (and most people). You can't rely on moral truisms or "market incentives" to get people and corporations to do the right thing. You need regulations with teeth.

There are few silver linings in the BP disaster in the Gulf of Mexico, but this is it: this disaster is going to force government to get much tougher on regulating offshore oil exploration.