Proposed Mediterranean Deepwater Moratorium Unlikely to Gain Traction

Published on August 2, 2010

According to The Financial Times, pressure is growing in Europe to impose a moratorium on deepwater drilling in the Mediterranean Sea.  BP is planning to begin deepwater operations off the coast of Libya within weeks and has a rig in place preparing to drill in the Gulf of Sirte, an area believed to hold large deposits of oil.

The planned exploration well is 200 meters deeper than the ill fated Macondo well which blew out in April and was only recently capped.  BP’s exploration in Libya has attracted additional controversy because of allegations that the company may have lobbied the Scottish government to release Libyan national Abdel Baset al-Megrahi from prison, the only man ever convicted for a role in the 1988 bombing of Pan Am 103.

While concern regarding the safety of deepwater operations in the Mediterranean is justified in light of what took place in the Gulf of Mexico in recent months, it appears highly doubtful that a Mediterranean-wide ban will occur.  According to the Financial Times, the moratorium effort is being led by Italy’s environmental minister.  There has also been a proposal by the European Union’s energy commissioner to impose a moratorium within EU waters.

Oil spills do not recognize national or EU boundaries and a spill off the coast of Libya could potentially threaten Europe.  However, an attempt to impose a moratorium through the Union for the Mediterranean seems unlikely to succeed.  The countries in question have widely varying economies with different levels of dependence on oil exploration.  According to the useful CIA World Factbook entry on Libya, oil accounts for 95 percent of export earnings, 25 percent of GDP, and 60 percent of public sector wages.  This is a far higher level of economic concentration than the Gulf Coast economies that were impacted by the Deepwater Horizon disaster.

It is possible to envision deepwater exploration bans in richer Mediterranean countries with a more diversified economy, but highly unlikely to believe that countries like Libya would ever take such a step.  The Union for the Mediterranean does not have the legal authority to compel countries to accept a moratorium.  The richer countries such as Italy would be better served by preparing oil spill contingency plans and publicizing the lessons learned from the many technical flaws and human errors that led to the Deepwater Horizon disaster.

Disclosure:  The author owns shares of Noble Corporation which currently has rig Noble Homer Ferrington operating in Libya contracted to ExxonMobil through April 2012.

Proposed Mediterranean Deepwater Moratorium Unlikely to Gain Traction