Offshore drilling project now looks unlikely, Chevron says

RALEIGH (AP) — It’s now unlikely that Chevron USA will proceed with plans to drill for oil off the North Carolina coast — an announcement met with applause by opponents of the proposal.

“This is sort of a reprieve, but we’re not going to put our guard down,” said Robert Lamme, a spokesman for Senate President Pro Tem Marc Basnight, a coastal resident who is against drilling.

A Chevron spokesman said in early February that the oil giant has suspended plans for at least a year to sink an exploratory well 45 miles off Cape Hatteras, citing low gas prices and opposition from environmentalists and politicians. A final decision on whether to continue the project will be made this summer.

“I’d say there is a low probability we would pursue drilling a well in North Carolina right now,” said Andy Hardiman, vice president for Chevron’s deep water business unit. “There’s a high probability that we won’t go forward.”

The prospect of oil wells off the coast horrified many environmentalists, fishermen, coastal residents and others, who fear that oil spills and development could harm an area considered a rich fishing ground. And Basnight worried oil drilling off the state’s coast would wreck the Dare County economy.

Opponents had promised to mount a fight similar to that against Mobil Oil Corp.’s plans to drill in the same area a decade ago. The state has set aside $367,000 for a study of the effects of the drilling.

A bill by former U.S. Sen. Lauch Faircloth to block the drilling failed last year in Congress, but by the end of 1998 Chevron faced a bigger problem: the lowest gas prices, adjusted for inflation, in 60 years.

Chevron’s 1998 fourth-quarter earnings dropped 63 percent from a year earlier. The oil industry’s woes have led to deep cuts in capital spending and the abandonment of risky projects such as oil exploration in virgin U.S. territory, said Fadel Gheit, a senior oil analyst with Fahnestock & Co. in New York.

“This is an industry that has very few friends,” Gheit said. “Obviously when the economics are bad and you have no friends, there’s no reason to put more capital in an area where you’re not welcome and you’re not making money.”