Course:ECON371/UBCO2011WT1/GROUP5/Article3
Drilling for Gas in Mediterranean Sea will Threaten Valuable Marine Life, Says WWF
Summary
The recently discovered colossal deep-sea gas fields in the eastern Mediterranean’s Levant Sea are causing a scramble to start drilling – while concerns for irreversible damage to outstanding marine biodiversity, as well as legally binding restrictions on deep-sea exploitation, are being ignored. The recently discovered Leviathan gas field, 135 km off the coast of Israel, is the world’s biggest deepwater gas find in a decade – with an estimated volume of 16 trillion cubic feet of gas – while the West Nile Delta gas field, discovered earlier this year, lies in Egyptian waters, 80 km northwest of Alexandria. But several legally binding agreements oblige countries to go through comprehensive EIAs before oil and gas exploration in the region can be approved, the most recent being the Offshore Protocol – or the ‘Protocol for the Protection of the Mediterranean Sea Against Pollution Resulting from Exploration and Exploitation of the Continental Shelf and the Seabed and its Subsoil’, which entered into force in December 2010. So the article wants the governments to step in and do many tests and try to cover all the potential risks and assets in the new endeavors in the Mediterranean.
Analysis
The article is based on a tradeoff between producers’ benefit and marine life protection. For the producers, they have an opportunity cost of either oil drilling but destroy the ecosystem with valuable marine life, or save the ecosystem but lose the profit of selling oil. As for the environmentalists, it’s their responsibility to protect the ocean.
For the producers, the Leviathan gas field, being the world’s biggest deepwater gas find in a decade, is in fact one of their best opportunities for oil production. Economically, oil drilling provides a number of jobs and employment opportunities for the country, as it takes a considerable number of people to operate. Furthermore, with an increase in oil production the country would not have to import oil, and thus the price of energy will decrease. As a result, individuals will spend less on gas, with more money to spend on services or other products, which generally boost up the economy.
Tudela, the head of Fisheries at WWF Mediterranean explained that the Maine ecosystems in Mediterranean Sea is unique, which they are particularly fragile and vulnerable to external interference. Other environmentalists also ensured that the highest environmental standards are set so to prevent exploratory drilling and future commercial exploitation. Also, it is proven that the consequences of oil spill can take forever to recover, which the producers are not capable of the recovery, or that they simply do not want to.
With the two sides given, oil drilling becomes a debate between the producers and the environmentalists: a tradeoff between oil production and valuable marine life.
The graph above shows that oil drilling will causes marginal cost to exist. Without the drilling, there will be no marginal cost as it is simply the Mediterranean Sea. In addition, there’s external cost as well, as there will be an environmental cost of polluting the marine life ecosystem and the cost of recovery.
Conclusion
Off shore oil drilling has always been a problem to all the ecosystems that are close to it. The government will take into the analysis of whether the opportunity cost of having Mediterranean ecosystems is more valuable than the oil extracted from these oil fields. Many past ecosystems have been destroyed due to the drilling and oil spilling and would take years to recover. Either the government see's this field as an opportunity for more natural resources pumped to the economy or the mindset of an environmentalist to conserve and protect the ecosystem.
Prof's Comments
The important thing here is that the impact of drilling on the marine environment is an externality. There is therefore a large difference between the private marginal cost to the gas company and the social marginal cost. Requiring the firms to adopt expensive measures to minimize the impacts and/or reduce the risks of damage is like forcing abatement, as these are measures the firm would not take on its own. These are both ways to express the issues going on in this article.
One issue unique to this situation is the fact that one of the gas fields is close to Israel. Given that its neighbours are not that friendly, the security value to Israel of having access to this gas is probably quite high, making them willing to pay a lot to secure the access. This could be as expensive environmental protection, or by simply ignoring the environmental rules.
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