We begin today’s Daily Reckoning about 209 kilometres south-east of New Orleans, at lease block 807 of the outer continental shelf, in the Gulf of Mexico. If you teleported there right now from rainy Melbourne you’d find yourself on top of the Mississippi Canyon formation. But for such a foreign and unlikely place to find an oil platform, you might as well call it Mars.
Mars is the name of the tension leg oil platform built by Shell in 1989 at just this spot on the earth to produce an estimated 700 million barrels of oil and oil equivalent. From head to toe the platform is 990 metres high- nearly three times the height of Melbourne’s Eureka tower. What’s more, Mars produces oil drilled at a depth of nearly 900 metres below the waves of the Gulf.
Gee. That is a lot of trouble to go to for tank of petrol, isn’t it?
This is what we’ve come to in this third great wave of industrialisation. Oil is the chief source of liquid and transportation fuels. You drill for oil where you can find it, even if it’s hundreds of miles offshore and hundreds of metres below the surface of the ocean. If there were an easy substitute for oil that cost less to find and produce and delivered the same amount of useful, portable energy we’d be using it, wouldn’t we?
Shell is hungry for new oil reserves to add to its balance sheet. Kicked out of several major projects in Russia, it’s come back to Australia eyeing Woodside (ASX: WPL). What’s different between now and 2001 when Peter Costello nixed Shell’s acquisition of Woodside? Well, Shell might be willing to pay more. And Shell – along with nearly every other oil major – is going to develop projects that just a few years ago were uneconomic at lower oil prices.
The Daily Reckoning Australia