The oil gushing unchecked from an undersea well in the Gulf of Mexico could permanently scar coastal lands and bring down some of the energy companies tied to the accident if efforts to control the spill are unsuccessful, experts said on Tuesday.
The financial impact from the oil well blowout on April 20 that killed 11 workers and created a massive slick remains difficult to measure precisely, but the estimates of the damage continue to grow.
“This is going to be protracted and consume years, and the liability will have to measured in the billions of dollars. The only question is it in the tens of billions or hundreds of billions,” said David Kotok, chairperson of money management firm Cumberland Advisors.
First at risk are the smaller energy companies linked to the spill — Transocean, owner of the rig that exploded and sank, and Cameron International Corp, which sold it the well head equipment.
BP, one of world’s largest oil companies, is unlikely to feel the financial heat because of its massive size, but its promise to pay damages to those hurt by the spill will still squeeze its cash reserves and stock price.
Analysts previously said the total bill could exceed $14-billion — a figure Kotok said was too low — with clean-up costs borne by BP forecast to be perhaps as much as half that cost.
Shifting winds have so far prevented the oil slick from washing ashore, but westerly winds in the next few days may push the slick toward the Florida coast, where the tourist industry could be devastated, according to Aaron Studwell, chief meteorologist with First Insight Trading in Houston.
If it were to turn west, the slick could disrupt operations at the Louisiana Offshore Oil Port, the key offloading point for many of the largest oil tankers that deliver foreign oil to US refineries, as well as production at numerous other offshore wells.
“Within that area where you see the [oil] sheen, there’s 1,3-billion cubic feet of [natural gas] production [and] over 300 000 bpd of crude production,” he said. “That’s equivalent to a major hurricane shut-in.”
While some weather models have warned the oil slick could move south along the Florida coast and threaten the Keys or the Everglades and push up the Atlantic Coast of the state, the government’s National Oceanic and Atmospheric Administration said its 72-hour forecast foresaw no danger to Florida.
Given the fast-evolving nature of the catastrophe, many economists are still reluctant to put an outright dollar figure on its potential costs.
Still, experts at the Harte Research Institute for Gulf of Mexico Studies have estimated as much as $1,6-billion of annual economic activity and services are at risk, with the impact coming primarily from damaged ecosystems, fishing and tourism.
Gauging the potential effects is all the more difficult because of uncertainty surrounding the length of time to clean it up and because of the unpredictable path of the leaking crude.
“It’s going be around a long time. These oil spills can persist for many, many years,” said Larry McKinney, the institute’s director.
Even so, clean-up on the those beaches could be far easier than in the wetlands around Louisiana, where the pollution has already triggered a ban on commercial fishing and could threaten shipping in and out of the Mississippi.
Energy companies at risk
BP shares have dropped nearly 20% since the April 20 explosion that killed 11 workers and sent the massive Transocean drilling rig, Deepwater Horizon, to the ocean floor.
That has wiped off nearly $30-billion in value from BP’s London shares — triple the market value of Cameron International, the company that supplied the well head equipment designed to prevent blowouts.
“I’m not at all sanguine here. I wouldn’t buy the stocks in the sector,” Cumberland’s Kotok said, adding the uncertainty around the liability made the companies risky bets.
Halliburton, which helped cement the blown-out well in place, has shed about $2,7-billion, or about 10% of its market value over the past two weeks.
BP and its 25% partner Anadarko Petroleum in the oil block will have to cover the clean-up costs and damages proportionate to their shareholdings, leaving BP with 65% of the bill.
In Venice, Louisiana, fishing boat captain Dan Dix said he feared his entire industry was at risk.
“Our biggest concern is that the oil comes in at any kind of volume and it settles into that cane. Once it settles in the cane, it destroys the cane, it kills the shrimp,” he said.
“If you kill the shrimp, you kill the fish that feed off the shrimp, and if you kill the fish then there is nothing left in the Gulf of Mexico. That would absolutely be a disaster for years and years.” – Reuters