The People of America's Oil and Natural Gas Indusry

Study: Effects of Gulf Drilling Policies Detailed

Mark Green

Mark Green
Posted January 11, 2012

Policies have consequences. Certainly, we’ve seen economic impact in the 2010 decision to halt deepwater drilling in the Gulf of Mexico and the subsequent slow pace of oil and natural gas permitting. A new study released by API underscores this:

The effects of the deepwater drilling moratorium and subsequent permit slowdown have already reduced total capital and operating expenditures in the Gulf of Mexico by a combined $18.3 billion for 2010 and 2011 relative to pre‐moratorium plans. Since April 2010, eleven deepwater drilling rigs have left the Gulf of Mexico. These rigs have gone to countries such as Brazil, Egypt and Angola. Through 2015, the investment in other regions instead of the U.S. associated with these rigs is estimated to be over $21.4 billion including drilling spending and associated project equipment orders, even accounting for the portion of equipment that will likely be manufactured in the United States. As a result of decreases in investment due to the moratorium, total U.S. employment is estimated to have been reduced by 72,000 jobs in 2010 and approximately 90,000 jobs in 2011.

Let those numbers sink in. More than $18 billion in capital and operating expenditures means lost investment, lost economic stimulus from an industry that’s a proven supplier of stimulus. Deepwater drilling rigs departing for places where they can be put to work means more lost investment. The job losses are remarkable, more than 160,000 over nearly two years. API President and CEO Jack Gerard:

“The economic impacts of the moratorium are still being felt. We’re not doing what we should be doing to help meet our nation’s energy needs, deliver revenue to our government, and create jobs.  This is not just hurting people in the Gulf, it’s hurting people across the country.” 

Key findings in the study prepared by Quest Offshore Resources:

  • Gulf deepwater permits currently are being issued at less than half the rate compared with pre‐moratorium levels.
  • Shallow water permits are being issued at rates 40 percent lower.
  • By issuing future drilling permits at pre-moratorium rates, the number of shallow water projects delayed could be significantly reduced from 85 (under the current path) to 37 from 2012-2015, and from 48 to 9 for the deepwater (see chart below). The increased number of projects would boost investment by more than $15 million from 2012-2015, raising average annual U.S. employment between 17,000 and 49,000 jobs per year over the same time period.

Certainly, the administration talks about more domestic oil and natural gas production. What’s needed is less talk and more action. Gerard:

“Energy policy needs a course correction. Our industry has a vision of an energy future that will support and create millions of jobs and strengthen our energy security.  It is based on smart, realistic deployment of all of America’s energy assets, including our ample supplies of oil and natural gas.”

ABOUT THE AUTHOR

Mark Green joined API after a career in newspaper journalism, including 16 years as national editorial writer for The Oklahoman in the paper’s Washington bureau. Mark also was a reporter, copy editor and sports editor. He earned his journalism degree from the University of Oklahoma and master’s in journalism and public affairs from American University. He and his wife Pamela live in Occoquan, Va., where they enjoy their four grandchildren.