Wednesday, May 05, 2010

Deepwater Horizon Oil Rig Math

BP Market Cap (May 5, 2010): $161 billion
Cost to clean up the spill: > $14 billion
BP 2009 Profit: $14 billion
Annual value of oil produced at well DH was drilling @ $80/barrel: $1.75 billion
Deepwater Horizon platform cost: $560 million
Entire 2009 Department of Interior Energy Program budget: $528 million
Offshore Energy Program budget: $196 million

So is the fact that DoI gave BP an environmental impact exemption really a surprise? Even when the odds of calamity are minuscule, the consequences are massive. Like the failures at the SEC and FEMA, this disaster was partially caused by poor oversight and corruption. An epic failure by all involved.


husmanen said...

Wow, read some of your links. Amazing, sad and frustrating.

So this is why they never had a Plan "B".

The handling of this situation, pre and post, is starting to get a "CDO" squared feeling to it :-(

Max said...

The risks are hugely disproportionate to the oversight. Kinda like the SEC and Madoff.

Buying Time said...

This is a sore subject for me....I grew up very close to Avila Beach on the Central Coast....just to refresh folks memories (excerpted from Wikipedia).

In the 1990s, Unocal oil storage facilities leaked, causing a massive oil spill under the town. As described by Economist and Crisis Consultant Randall Bell in his book Strategy 360, "...the company pumped oil products through the pipeline, but only a portion made it to the tankers. Obviously, this meant that there was a leak in the pipeline, but nothing was done. This situation continued until hundreds of thousands of gallons had leaked under the town. What would have been a relatively small issue to initially correct became California's largest contamination case." After years of negotiation, Unocal agreed to a thirty million dollar settlement, which has been used to rebuild the town. The contaminated soil was excavated and replaced with clean fill. Many of the town's homes and businesses were demolished in the cleanup process.