Many moons ago, I stumbled out of graduate school and into the waiting arms of what is now Diamond Offshore
I'm therefore especially sickened by last month's accident in the Gulf of Mexico, which appears to be the result of an inexcusable failure by BP
Red flags that could have signaled what was about to occur were ignored by both the industry and the Minerals Management Service (MMS), the government agency that oversees offshore drilling. Indeed, as The Wall Street Journal noted recently, back in 2005 a pair of Texas A&M professors wrote in a journal article that, "An area that has seen this stagnation and resulting call for change has been blowout control in deep and ultra-deep waters."
The WSJ also noted that the MMS has "in recent years moved away from requiring specific safety measures in offshore drilling and instead set broad performance goals that it was up to the industry to meet." To my way of thinking, this approach and the accident that resulted from it will lead to several less-than-desirable outcomes.
- Offshore drilling is almost certain to be saddled with a massive regulatory overcorrection. Indeed, such producers as ConocoPhillips
(NYSE: COP), Petrobras (NYSE: PBR), and recent IPO Cobalt Energy (NYSE: CIE)have had their shares battered while projects are put on hold during the search for the cause of the Deepwater Horizon explosion.
- Perhaps as many as 7,500 drilling jobs will be lost in the Gulf unless the go-ahead is received for the start-up of new projects by midsummer.
- With a bevy of new offshore regulations likely in the offing, it may be eons before new areas offshore of the East and West coasts are opened to drilling.
In the meantime, my advice to Foolish energy investors is to look hard at ExxonMobil