Offshore drilling is the mechanical process of drilling below the seabed to access a natural resource. Most offshore drilling activities involve the exploration and extraction of petroleum, which often lies beneath rock formations that are found below the seabed.
When offshore drilling technologies were first introduced, the deepest a platform could operate was 300 feet. Today’s offshore drilling platforms can access resource deposits that are up to two miles below the surface of the water. That has created a segment of the industry that is referred to as “deepwater drilling,” which is defined as production that occurs at depths greater than 1,000 meters.
With offshore drilling, we are able to access oil reserves that have not been tapped before. It is also a practice that can be quite dangerous, as rigs have been known to capsize, explode, and cause environmental damage through leaking oil.
Here are the most important offshore drilling pros and cons to think about.
List of the Pros of Offshore Drilling
1. It provides more domestic self-sufficiency for natural resources.
In 2017, Iran exported 777 million barrels of oil. Worldwide, about 96 million barrels of oil and liquid fuels are produced every day. As demand for crude oil and refined products continues to increase, there is a need to improve domestic production levels in the developed world. Offshore drilling is one solution that can ease the pressures on the import market, especially with the political pressures that occur with the oil import/export relationships in the Middle East region.
2. It can reduce the costs of oil-related products for consumers.
Crude oil is a commodity that trades on the basis of supply and demand. If supply levels are low and demand is high, then the price of oil and related products goes up. If supply levels increase without an increase in demand, then prices go down for consumers. Since 2010, the global demand for crude oil has increase by about 12 million barrels of oil per day. Establishing offshore drilling locations allows us to meet the growing demand levels while reducing costs as much as possible for consumers.
3. It creates jobs at the local level.
In the Gulf of Mexico, at the time of the Deepwater Horizon accident, there were 115 active rigs in operation. All three types of offshore rigs, including semi-submersibles, were present. Only 68 of the rigs that were in the rig were working at the time. In 2011, there were an additional 10 rigs in the Gulf of Mexico, with just 34 of them working. In total, there about 12,500 direct employment opportunities provided in the area, with indirect opportunities totaling about 50,000 workers.
4. It helps to develop the developing world.
Some of the world’s most advanced economies have been taking advantage of the benefits that oil provides for nearly 3 centuries. In the developing world, the effects of the Industrial Revolution are just beginning to be felt. Numerous countries have large deposits of natural resources that could be developed through offshore drilling and other methods, but do not have the material means to do so. As the costs for offshore drilling decrease, there is a good opportunity for the world economy to advance because the developing world will finally become developed.
5. It can support retirement and investment accounts.
The oil market operates on futures, which means investors will take contracts on what they think the price of the commodity will be in the future. That means a contract to purchase oil at $80 per barrel 3 months from now might be issued today. If the price of oil reaches $90 per barrel at the time the contract is due, then the investor earns $10 per barrel from their initial investment. There is always a chance that negative financial impacts can happen, but the production offered by offshore rigs does support many retirement and investment accounts around the world.
6. It can reduce taxpayer liabilities.
Governments typically issue leases or licenses that permit producers to install platforms and perform offshore drilling. The funds that come from these activities can be funneled into a variety of different programs that benefit everyone. Federal royalties are also assigned to extracted resources by the U.S. government. In 2016, the government collected about $2.5 billion in revenues from oil activities.
List of the Cons of Offshore Drilling
1. It is associated with numerous potential environmental hazards.
The Deepwater Horizon incident killed 11 people and exposed more than 45,000 square miles of the Gulf of Mexico to crude oil. Exposure to crude oil in just small amounts is toxic to most forms of marine life. In this one incident, 4.9 million barrels of oil spilled into gulf waters. More than 15,000 bird species, 1,200 fish species, 2,900 mollusc and crustacean species, and 29 marine mammal species were threatened by this incident.
2. It creates a pollution hazard.
The Environmental Protection Agency in the U.S. states that “petroleum refineries are a major source of hazardous and toxic air pollutants, such as BTEX compounds.” As part of the supply chain that begins with offshore drilling, the oil produced by these activities is a major source of several air pollutants, including carbon dioxide, carbon monoxide, hydrogen sulfide, particular matter, and sulfur dioxide. Some of the chemicals which are released during the refinement process are known carcinogens.
3. It can create health issues.
Just because offshore drilling platforms are out at sea does not mean they do not impact living conditions on land. The various pollutants that are created by these platforms, including the air emissions, are known to aggravate some respiratory conditions, like childhood asthma. They may be responsible for some developmental or reproductive health issues as well. The chemicals used in the supply chain can also impact the health of the water around the platform, in groundwater tables, and other access points.
4. It may reduce jobs in other industries.
The presence of offshore drilling may encourage some job development, but it also reduces job development in other industries. The hospitality industry is often the first affected when offshore drilling is developed in a community. Platforms create a negative visual impact on the horizon for those looking to enjoy a beach. The effects of pollution can make it difficult to go outside. Some people do benefit with better wages because of this industry. Others can struggle to simply survive.
5. It creates survival risks for platform workers.
There are some good, high-paying jobs that can be found in the offshore drilling industry. Engineers within the industry earn an average of $72 per hour. Even basic laborers on an offshore drilling platform earn more than $38 per hour. Despite the high wages, the fatality rates for offshore workers in the United States are 7 times higher than they are for the general population. The rate is 27.1 per 100,000 offshore drilling workers, compared to 3.8 per 100,000 for all employees.
6. It has high capital costs for the initial investment.
Depending upon the type of oil rig being used for offshore drilling, the cost of a new platform m may be as little as $20 million, or as much as $1 billion. For oil producers, the establishment of a new rig for offshore drilling is one of the largest capital expenditures that they face. In the United States, the least expensive offshore drilling rigs are priced around $200 million, with the average cost of a new installation reaching $650 million.
7. It does not resolve the question of international dependency.
Just because offshore drilling is authorized does not mean that the platform will become productive. Domestic demand can change over time as well, which means the new platform would not cut into the usage gap being experienced. Although offshore drilling can increase overall domestic supplies, it is not a guarantee that foreign dependence on oil will be eliminated. In some instances, foreign dependence may not even be diminished, despite the presence of offshore drilling.
8. It may not produce any resources.
Offshore drilling is reasonably reliable, especially with modern exploration methods and technologies employed. There still is some risk with this process, however, as some natural deposits may not be accessible or may not have the same level of reserves that was anticipated.
There are guaranteed reserves in this industry and there are estimated reserves. Far too often, policies are set on the estimates instead of the guarantees, which ultimately costs everyone more at the end of the day.
These offshore drilling pros and cons show an industry that is attempting to balance the demand for energy and resources with a need to protect the environment. New drilling techniques and technologies help to prevent oil leaks while improving worker safety. At the same time, however, there are no safety guarantees in this type of industry. For proponents, that means an emphasis should be placed on more innovation, while critics will point to the safety in renewables as a viable alternative.