As most people are becoming aware of, the Gulf of Mexico oil spill is
dramatically changing the politics of energy in this country. Weeks
after the tragic explosion that killed 11 workers and resulted in the
leak, President Obama suspended oil exploration in two areas of the
coast of Alaska; cancelled pending lease sales in the Gulf and off the
East Coast; extended by six months a moratorium on deepwater
drilling permits; and suspended operations at 33 exploratory wells
being drilled in the Gulf.
Many believe the president overreacted, as politicians tend to
do when the media spotlight shines brightly on them. But, beyond
politics his actions will have serious implications on future supply of
both oil and gas, and thus, force a spike in prices, particularly down
the road when new production areas were scheduled to come on
line. His actions obviously have a near-term impact as well, including
the loss of thousands of energy jobs, not to mention the impact on
fishing and tourism.
First a little background on Gulf drilling. We currently get 33
percent of our oil and 10 percent of our natural gas from the Gulf of
Mexico. According to the Louisiana Mid-Continent Oil and Gas Association
(LMOGA) there are currently 4,515 producing shallow-water
wells and 591 producing deepwater wells. Deepwater is anything
deeper than 500 feet. Some 80 percent of the Gulf oil production
and 45 percent of the gas production comes from the 591 deepwater
production wells.
The six-month moratorium on Gulf exploration will, in all likelihood,
result in a 12-18 month halt in exploration because the 33
drilling rigs currently in operation will either be moved overseas, or
idled. The thousands of workers displaced by the moratorium will
leave the industry, or look for similar work elsewhere. History shows,
though, that whenever there is a downturn in drilling and people
leave the industry they rarely come back. Some of the world’s most
experienced and talented people will be lost, and at a time when
there already is a shortage of such people.
According to LMOGA, each of the 33 rigs currently operating in
the Gulf have day lease rates ranging from $250,000 to $500,000,
resulting in a daily loss of about $16,500,000. Each rig averages
between 90 and 140 workers. Each job supports four other jobs in
related support industries. People naturally go where the work is.
