Could Non-US Oil Regions Benefit from Biden Policy?
A long-lasting pause in public leasing in the United States would, in the long run, benefit other offshore oil producing regions that compete for capital and investment into similar plays.
That’s according to Matthew Bey, a senior global analyst with Stratfor, a global geopolitical intelligence platform and RANE company, who told Rigzone that a pause of a few months or a year would not have a major impact, but one that lasts more than a year would begin to leave an impression. Looking at regions which could benefit, Bey noted these could include the North Sea, West Africa, and Brazil, as well as other offshore oil and gas producing countries.
James Davis, the director of short term and head of supply at FGE, a London headquartered global energy consultancy, highlighted that if U.S. President Joe Biden’s pause on new oil and natural gas leases in offshore waters becomes permanent, investment offshore the U.S. Gulf of Mexico will ultimately be redirected elsewhere in the world.
“If investors and operators are looking for like for like activity, they may redirect their attentions to Mexico’s offshore licence areas, frontier plays offshore Guyana, and perhaps even Suriname or Brazil,” Davis said in a statement sent to Rigzone.
“This view was echoed by Chevron’s chief executive officer in response to the potential restriction and that there were indeed investment opportunities elsewhere in the world,” Davis added in the statement.
Davis noted that, in the short to medium term, this trend will be more extreme if there is a ban on drilling permits as well as new leases.
“There is still a lack of clarity over what the final agenda will be. Whilst a ban/halt to onshore permits is expected to be put in place, the same rules will not apply to offshore as it puts too much investment that has already taken place at risk and will bring about huge opposition,” the FGE representative said.
Providing his view on whether a pause on public leasing in the U.S. would lead to increased oil and gas activity in other parts of the globe, Steve Everly, a managing director in the energy and natural resources sector of global business advisory firm FTI Consulting, said it’s “certainly possible, but it will depend on how long any pause lasts”.
“This is a capital intensive industry that makes investment decisions based on multi-year plans,” Everly added.
“If the moratorium is in place long enough for companies to shift investment to another part of the world, it will also take a long time to bring that investment back to the United States if or when the moratorium is lifted,” the FTI Consulting managing director went on to say.
Biden announced a pause on new oil and natural gas leases on public lands and offshore waters, pending completion of a comprehensive review and reconsideration of federal oil and gas permitting and leasing practices, in an executive order published on January 27. He was inaugurated as the 46th president of the United States on January 20.
“The United States and the world face a profound climate crisis,” Biden stated in the executive order.
“We have a narrow moment to pursue action at home and abroad in order to avoid the most catastrophic impacts of that crisis and to seize the opportunity that tackling climate change presents,” he added.
“Domestic action must go hand in hand with United States international leadership, aimed at significantly enhancing global action,” Biden went on to say in the executive order.
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