Since April 20, within the US the focus of the oil and gas industry has been on the Gulf of Mexico (GoM) and the continuing repercussions of the Deepwater Horizon blowout.

President Obama announced on May 27 that to avert another accident, there would be no deepwater exploration drilling in the GoM for another five months. Inside the US, particularly in Louisiana and Texas, that news was met with incredulity and dismay.

Martin Feldman, a US District Judge in Louisiana, ruled against the Obama administration’s deepwater drilling moratorium on June 22, but that ruling was immediately appealed in Washington. To all appearances, the ruling will not have a material effect on drilling in the long run.

Meanwhile, jobs and rigs in the deepwater GoM are at risk.

According to a press release put out by the International Association of Drilling Contractors, the drilling ban will have serious local economic repercussions.

“The federally ordered drilling suspension will idle approximately 33 deepwater mobile offshore drilling units not involved in the Macondo relief-well effort,” the press release said, each of which employs 180-280 workers, according to the Louisiana Mid-Continent Oil and Gas Association. “In addition, according to LMOGA, each of these jobs supports four other industry employees. This represents 900 to 1,400 jobs impacted per rig, or an aggregate 29,700 to 46,200 jobs total. LMOGA puts the direct wages lost as high as US $330 million/month. These figures exclude job and income losses within these workers’ communities.”

As industry workers in Louisiana and Texas wait to see how dictates from Washington will impact employment, others are examining how the incident will affect long-term investment in the region.

At an event hosted by Ernst & Young (E&Y) in Houston last month to present the results of this year’s US E&P benchmark study, the discussion turned to the Deepwater Horizon incident and the effects it will have on the US economy.

“The impact of this will be very substantive,” according to Marcela Donadio, Americas Oil & Gas Sector Leader for E&Y. The moratorium, in her opinion, will lead to a massive shifting of jobs and operations outside the US.

“We can’t forget,” Donadio said, “that this industry is very mobile. All of these assets are deployable.”

Donadio predicts that once these assets leave the US, it will be hard to bring them back. “It will be the jobs here that will be lost,” she said.

John Russell, Assurance Partner at E&Y, agreed. “If they leave the Gulf of Mexico,” he said, “those investments will be gone for five to 10 years.”
So the bane of the US is the boon for the world’s other deepwater regions. The 33 rigs that are likely to look outside the GoM for contracts will increase the number of deepwater systems available for E&P work elsewhere – Brazil, West Africa, Southeast Asia, the North Sea, Atlantic Canada, etc.

While those of us in the US worry about where the rigs will go and what will happen to production from the GoM as new regulations and requirements are ironed out, other regions of the world, like Atlantic Canada, are looking at the incident in the GoM in terms of how operations can be improved locally to make it easier for the rigs exiting the GoM to go to work in their offshore waters.
In the end, our loss is their gain.

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