Costing a Green Future

Norway’s oil company, Statoil, is drilling wells in the far north, in the Barents Sea. This offshore drilling project includes many safeguards because of Norway’s relatively strong environmental regulations. According to the University of Alaska, some of the features of this project include reinjecting carbon dioxide into the field, as well as drill cuttings. The Norwegian government does not allow any discharges during normal drilling conditions, whether the discharge is mud, oil, or water.

One interesting feature of the Snohvit, or Snow White, drilling operation is that the drilling equipment is located on the floor of the sea, and engineers on the coast operate the facility remotely. This underwater rig is 89 miles offshore, so it sets a record for operating a drill at a distance. This seems like a very long distance for remotely controlling a complicated system such as a drill. In addition, the natural gas pipeline must also be at least 89 miles long to transport the liquid natural gas to the shore facility. According to Statoil, the shore facility is located in Melkoya in the Hammerfest region.

Snohvit is also located farther north than any other oil field in the world. According to Statoil, the ocean this far north in Alaska is frozen solid, although warmer currents prevent this part of the Barents Sea from freezing. Using an underwater rig is necessary here because of the icy winter storms which would damage a rig above the waves. Underwater temperatures are much warmer than temperatures at the surface of the ocean. The freezing temperatures require additional precautions, such as using electrical heating and antifreeze to keep the pipeline free of ice. Norwegian University of Science and Technology, Trondheim plans to improve control room technology so that equipment in future oil fields can also be controlled from a long distance.

Pipelines only bring the oil from Snohvit to the shore. The main facility converts this natural gas into liquid natural gas so tankers can deliver it across the ocean to other ports. According to Norwegian University of Science and Technology, Trondheim, the Snohvit rigs collect gas as well as liquid petroleum compounds, producing a multiphase flow which is complicated to transport to the facility on the shore.

This project is also designed to reduce the use of toxic chemicals. According to Alaska University, the Snohvit operation replaces chemical or petroleum based muds with water based muds. Dope was not used to coat the pipes and casings, so this product which contains petroleum as well as metal particles will not leak into the sea. The decision not to use dope is another unique feature of this project. E and P Magazine reports that the oil company ConocoPhillips is also working on dope free projects in the North Sea, which reduce waste disposal costs and involve less risk to oil rig workers along with their environmental benefits.

PESTLE analysis is a marketing planning tool that focuses on the external forces which affect a company. This type of analysis adds the additional factors, environment and law, to the basic PEST analysis which includes political, sociological, economic, and technological factors. Rapid Bi provides some detail about PESTLE and its numerous variations.

PESTLE provides information about the implications of the Gulf Oil spill for British Petroleum, which is responsible for this event, as well as its competitors and all of the other people and organizations along the southern coast of the United States and the eastern coast of Mexico. Politically, this crisis provides a major advantage to environmental groups who wish to reduce the oil consumption of the United States and other developed nations. New offshore oil drilling has already been suspended by President Obama, and this crisis has impressed the risks of petroleum extraction on many people around the world.

Economic factors come into play with the large oil spill. The cleanup costs will be paid by British Petroleum, likely raising the price of oil since the petroleum extractors will budget the likely cleanup costs and other expenses into their sale prices. Additional regulations that restrict the areas that companies can drill in reduce the total amount of oil that can be easily extracted, requiring additional extraction from remote areas and materials where extraction is difficult such as shale oil.

Sociologically, this spill destroyed the reputation of British Petroleum. The company’s greenwashing will not be effective now, and competitors like Shell must prepare for a consumer backlash that can easily effect them. This spill increases the motivation of consumers to buy renewable energy from various sources.

Technologically, the cleanup methods have not been effective at cleaning up the mess. This includes the gigantic concrete containment dome, which does not appear cheap to make. This accident provides much greater motivation for researchers to invent new methods of cleaning up an oil spill, such as bacteria that eat the oil.

Legally, there will be many new restrictions on oil extraction in the future. This might convince the public to support other measures such as carbon taxes and increased restrictions on coal mining, especially when the spill took place soon after the mine collapse disaster. Natural gas may also be restricted because Liquid Natural Gas Terminals provoke concern about explosion risk in coastal communities.

Environmental factors include each of the issues mentioned above. This oil spill is one of the milestone events, and similar disasters such as the sinking of the Exxon Valdez catalyzed the necessity of environmental management for the public and lawmakers. This disaster caused people to recall several other large incidents such as the oil spill off Santa Barbara and the large oil spill in 1979 in the Gulf of Mexico.

An accident in the Gulf of Mexico created a large oil spill that is still growing, and British Petroleum has to pay for the cleanup costs. Already costing millions of dollars a day, the cleanup expenses will increase even more once the spill reaches the shore of states such as Florida and Louisiana. British Petroleum will be paying a lot of the damages, but how much will the total cost of this spill add up to?

British Petroleum is paying several costs. The oil spill itself is expensive to clean up. A comparison can be made to the Exxon Valdez oil spill, a famous accident that occurred in Alaska twenty years ago. The pilot of the oil tanker, who was suspected to be drunk at the time, crashed the tanker and released more than 257,000 barrels of oil into the ocean. This is equivalent to about 38,800 metric tons, according to the Alaska website.

The Exxon accident is actually not the largest oil spill on record, it is well known because of the amount of environmental damage and cleanup cost. There was a very large oil spill in the Gulf of Mexico in 1979, at an oil well named the Ixtoc I. The well was not shut down for almost a year, and the oil that was released caught on fire, sending a vast plume of smoke into the air. Although this location is farther south than the BP spill, the oil still reached as far as the beach of Texas. Coastal areas of Mexico absorbed much higher amounts of oil, affecting beach resorts like Veracruz as well as the fishing industry, tropical fruit plantations, and other businesses. Information on exactly how much oil was released in this accident varies. It is suspected to be at least 454,000 tons, according to Cedre. This figure is more than ten times as much oil as the Exxon spill.

Although the cost of the barrels of oil is significant, it is much less than the cost of the environmental cleanup. A million barrels at $80 each is 80 million dollars, and the cleanup costs, including fines and other expenses, were in the billions for both British Petroleum and Pemex. These spills occurred several decades ago so the effect of inflation is added to cost estimates of the current spill. According to CNN, the biggest hit so far was to British Petroleum’s stock price; since the oil spill occurred the value of BP’s stock has dropped by 25 billion dollars. If the well can be capped quickly, the cleanup and restoration costs will not be that high. BP planned to give itself an environmentalist image by manufacturing green power supplies such as solar panels. Their credibility is now destroyed, losing them goodwill and potential investors. Federal and state legislation is likely to block drilling in many locations, especially offshore, where BP was planning to drill for oil, eliminating expected revenue and leaving BP with properties that other oil companies will not want to buy.