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Is BP's new oil field worth drilling?
A BP sign is seen outside a gas station in Fort Lauderdale, Fla.
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Kai Ryssdal: There was a gusher of news from the oil giant BP this morning. We'll go with the most promising part first: that the company has tapped what is described as a giant oil field 250 miles out in the Gulf of Mexico.
The not-so-promising part here is that the mother lode is as deep as an oil drill has ever gone underwater. As far as 4,000 feet down. We could be looking at a 10-year wait before any of the oil shows up on the market and that is if going to get it is even worth it.
Here's our senior business correspondent Bob Moon.
BOB MOON: It's either a hopeful sign that the world might not really be running on empty, after all, or an indication of how desperate our thirst for oil has become.
Some skeptics contend this discovery doesn't really help much. For starters, they say, it will inevitably necessitate higher prices. But analyst Stephen Schork argues that's exactly what the marketplace is responding to.
STEPHEN SCHORK: It brings home the adage in economics that high prices are the best cure for high prices. Because, you make the price high enough, someone out there is going to invent the technology to get the supply to the market.
Stephen Leeb watches the oil industry at Leeb Capital.
STEPHEN LEEB: Look, if oil were $5,000 a barrel, it would probably make sense to look for oil on the moon.
Leeb is convinced that bringing this undersea treasure to the surface will prove prohibitively expensive.
LEEB: When you're drilling a depth equivalent to Mount Everest into the water, you're going to need oil prices significantly higher than they are today.
Stephen Schork counters that recently successful deep sea exploration in the area suggests a possible trend and that would put oil speculators on the defensive.
SCHORK: Part of the run-up in oil prices over the past four years has been the perception the world was running out of oil. But the oil is there, and the technology, more importantly, is proving to get it out.
Stephen Leeb still isn't impressed, though. He points out a possible three-billion barrels sounds like a lot, but not next to the 25 billion from Alaska's Prudhoe Bay, for example. And the likely daily output would be a mere drop in the bucket.
LEEB: Three-hundred-thousand barrels a day, in the context of a world that right now is consuming, you know, close to 85-million barrels a day, is just not significant in terms of the oil scene.
Leeb does allow that the find should provide a significant boost to the fortunes of BP and its partners.
I'm Bob Moon for Marketplace.
Just because you sink a pipe into 4000 feet of water doesn't mean that the oil is going to be right there waiting for you, a well has to be drilled and the Tiber well is the oil and gas industry's deepest, at 35,050 feet in 4000+ feet of water. He was talking about drilling earth below the water and not drilling to the "bottom of the water".
Mr. Leeb may be an oil market expert but he sure doesn't know geography all that well. He states "When you're drilling a depth equivalent to Mount Everest into the water, you're going to need oil prices significantly higher than they are today."
Last time I checked Mt. Everest is just over 29,000 ft above sea level. and various basecamps at apx. 15,000 ft. BP stated the feld is in 4,000 ft of water.
So Leeb, do me a favor and if you are going to use an analogy use one that is at least pretty close.
Actually, if oil cost $5000/barrel, it would not be worth going to the Moon for it. Space travel is insanely expensive and will be even if it gets privatised....
More significantly, the question of how much something costs is an interesting one when its inherent costs are partially borne not by the extractors but by the public at large---in the case of petroleum, the costs of pollution in acquisition and use, the cost of obesity, the cost of the damage to our systems from petrochemicals, and the cost of employing a larger armed forces than we would have to otherwise---and don't think that deep-undersea wells won't need defence, they'd be eminently attackable. The oil industry pay for none of these: we all do.
