Lunes  28 de Junio de 2010

Scale of BP spill fund scares rivals

The former Police frontman tells Emma Jacobs that touring with an orchestra will breathe new life into old favourites

Washington’s pursuit of BP to set up a $20bn fund to pay the liabilities from the fatal explosion of Deepwater Horizon in the US Gulf of Mexico could have dramatic, unintended consequences for other companies in the oil industry.

Executives and analysts warn that many of the smaller companies operating in the Gulf will be driven from the area by the potential costs of operating there. This would in turn leave one of the world’s most prolific oil regions reserved exclusively for three big companies: Exxon-Mobil, Chevron and Royal Dutch Shell.

The rhetoric from Washington in the past two weeks, including the demand that BP pay the wages of idled oil industry workers, has already done a lot of damage, says Ben Dell, analyst with Sanford Bernstein, the financial services group.

The practical reality has become the real problem even before discussions over whether to raise the liability cap for energy companies from $75m to $10bn have concluded, he says.

“Washington is basically saying an oil company has endless liability if it spills. Very few companies will want to, or be able to, afford to operate in the US Gulf of Mexico under those conditions,” he said, adding: “If Anadarko had been operating the well, it would be in Chapter 11.”

As a junior partner, holding a 25 per cent stake in the ill-fated Macondo well, Anadarko, the independent US exploration and production company, is struggling to convince investors that it can survive the spill.

It is a lesson other companies will heed, potentially fleeing the US Gulf completely, analysts warn.

“Small, lesser capitalised operators in the deepwater Gulf of Mexico are toast,” says Ralph Eads, chairman of the energy investment banking group at Jefferies.

Chasing the smaller companies from the Gulf is “a huge blow to activity, a material blow to future US oil production, a material blow to jobs in Texas and Louisiana and to government revenue”, says Mr Dell, noting that in the past smaller US independent oil and gas explorers and producers, such as Mariner, Anadarko and Cobalt, rather than the majors, had provided the boost in drilling in the Gulf of Mexico when cash flow allowed.

Cobalt, the $2.8bn private-equity backed explorer, has proved so much more successful in the Gulf of Mexico than some big oil companies that Total, the fifth-largest western oil company, is relying on the company to teach it how to find oil there.

Since the spill, Cobalt has had to delay its drilling programme because of the moratorium, going as far as declaring a force majeure on one of its rigs in order to avoid paying rent on it. Meanwhile, concerns that its balance sheet will not withstand the increased liability coverage that will be expected of companies following the BP accident have pushed its shares down by almost 50 per cent.

Mergers and acquisitions activity is also likely to be affected. Days before the BP disaster, Apache agreed a $2.7bn cash and stock deal to take over Mariner, the Houston-based oil and gas company that has about 85 per cent of its production offshore, with significant deepwater exposure.

Apache remains committed to the deal after Mariner shareholders approve it. But other potential buyers in the space might hesitate, argue industry bankers.

Tom Petrie, vice-chairman of Bank of America Merrill Lynch, notes that the response of the US government to the oil spill could deter some would-be acquirers. “The tone set so far raises a question about whether there will be an easy exit for those who decide ‘I’m not prepared to bet my company every time I drill a well in the Gulf of Mexico,’” he says.

Some analysts argue that a greater focus on safety across the industry could benefit some makers of rig equipment as demand for the most technologically advanced parts, including so-called blow-out preventers, increases.

But any benefit could be dwarfed by lost business caused by the seven-month drilling moratorium in the US Gulf of Mexico and the eroded negotiating position drillers now have in Brazil, which no longer has to compete for rigs with the US Gulf of Mexico.

Meanwhile, Fatih Birol, chief economist at the International Energy Agency, said extended bans on drilling in the Gulf and new safety regulations that raise the cost of deepwater drilling would shift the world’s reliance even more towards national oil companies.

“This is, from an oil security point of view, a crucial question,” he said.

While most oil executives and analysts agree that US regulation must be tightened and safety improved, they warn that raising the liability of causing a spill could come back to haunt lawmakers.

Two years ago, oil producing countries were unable to keep up with demand, unleashing anger among voters who paid more than $4 a gallon for petrol.

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