Offshore drilling still a major source of oil—and risk

The oil industry has been growing rapidly in the U.S. for years, thanks to major deposits that have recently become available with the help of new drilling technology. But while much has been made of advancements in onshore hydraulic fracturing, equal efforts have been put forward to improve drilling techniques offshore.

According to a recent article in the Oil & Gas Journal, innovation on land has played a big role in facilitating offshore development. 

"The more we can cross-learn between the two segments, the faster we can improve," Torstein Hole, senior vice-president at Statoil ASA, said at a recent panel discussion at the Offshore Technology Conference in Houston.

However, while many similarities come into play, it is also true that offshore drilling operations face entirely unique challenges. While shale development operations on land must worry about their effect on nearby population centers, soil and ground water, offshore operations have the entire ocean to contend with. As the news source notes, this added difficulty leads to slower development, higher costs and fewer wells.

The risk of this type of drilling was never more clear than in the aftermath of the Deepwater Horizon oil spill that occurred in the Gulf of Mexico in 2010. An explosion on the oil platform caused the rig to sink and allowed a consistent oil leak to continue for days until a cap could finally be put in place. Three years later, the companies involved with the rig—Transocean and BP—agreed to pay the U.S. government $1.4 billion and $2.4 billion, respectively, for violating the Clean Water Act.

And yet, despite this history of risk, oil companies and their investors know that there are benefits to drilling offshore. In many cases, the potential resources are much larger and promise a more sustainable return, relative to opportunities on land. The U.S. Energy Information Administration predicts that growth in offshore drilling will help the U.S. reach 9.6 million barrels per day of production by 2016.

At the same time, efforts must be made to ensure that spills are minimized and their effects are mitigated as quickly as possible. At the conference in Houston, Christopher Smith, principal deputy assistant secretary at the U.S. Department of Energy, told the audience that oil spills are an international challenge that require all nations to work together and find solutions.

One example he cites is that of the Arctic, which has been a site of increasing development. It is also a place where seven nations share boundaries that may occasionally be in dispute.

"There is a fear and mistrust about us being able to drill there without incident." Smith said. 

For this reason, it is crucial for rig operators to take proactive steps to ensure that they are acting safely and minimizing the chance of major accidents that could later turn into international disputes. By working with environmental consultants, oil companies can take steps to reduce their impact and legal liability.