Few outside the oil industry have heard of Cairn Energy, but those who have keep a close eye on the Edinburgh-based explorer. Cairn has made some smart bets in the past, striking oil where other, bigger, outfits swore there was none. Next month it will start drilling off Greenland, in a stretch of sea known as Iceberg Alley.
Unusually, it will use two drilling rigs, so if there is a blowout from the first the second can immediately start on a relief well to stem the flow of oil.
BP, choking on the flow of trouble from its own blowout in the Gulf of Mexico, might wish it had done the same. The $20 billion it has already agreed to shell out for clean-up and compensation is just the start.
Thousands of lawyers are currently working hard to get the figure increased, on behalf of clients ranging from the wildlife of Louisiana state to the Mimosa Dancing Girls strip joint in New Orleans (who want compensation because those fishermen among their clientele can no longer afford the entertainment).
Estimates of the total claims involved are wild, uncertain and up to half a trillion dollars.
Chief among BP’s tormenters is a self-styled Louisiana country lawyer, Daniel Becnel, who calls himself the ‘King of Torts’ (a tort being a civil wrongdoing). King Tort has form – a veteran of class-action lawsuits, he once helped force Big Tobacco to cough up an estimated $270bn. Five other tort cases also led to billion-dollar-plus payout days. He launched the first federal lawsuit against BP just eight days after the spill began and has gathered hundreds to his banner since.
BP, wary of fighting on its opponent’s territory, is trying to get the hearings moved from Louisiana to Texas. A court will hear its case next week.
In the past, perhaps, BP would not have been so worried. When Exxon Mobil was fined over the Exxon Valdez oil spill, the company went back to court – for 14 years – to get the fine reduced, from $5bn to $0.5bn.
But many in the industry say this will not happen again. The world has changed. And that, in turn changes the way the industry behaves. Companies will, from now, spend a little more to prevent accidents rather than face a tidal wave of costs like those being run up by BP.
The price of doing so can always, after all, be passed on at the petrol pump.
Over the peak
Staying with BP, a reader – and old acquaintance – writes to point out that the oil giant’s latest Statistical Review (the Good Book for oil men and women) offers the best evidence yet that we have passed the global peak in oil production. The figures for global oil production over the past six years are worth repeating here:
2004: 80371 (thousand barrels per day)
2005: 81261
2006: 81557
2007: 81446
2008: 81995
2009: 79948
As John says: ‘we may have to wait another year or two to be sure, but the plateauing over four years is pretty conclusive’. The fact there seems to be less oil to go round these days is, of course, the reason BP (and Cairn) are looking for more in such difficult conditions as the deep-sea bed …
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“Any investment bank will see it’s a money spinner.”
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