Independents operating in the Gulf of Mexico (GOM) in 2009 contributed nearly half of the 400,000 jobs, $70 billion in economic value and $20 billion in revenue that was generated in the Gulf Coast states by the energy industry, according to a new analysis by IHS Global Insight.
The study, “The Economic Impact of the Gulf of Mexico Offshore Oil and Natural Gas Industry and the Role of the Independents,” was commissioned by Houston’s Cobalt International Energy Inc., whose primary exploration efforts are in the GOM. The analysis found that independents represent a “significant and growing portion” of the economic value of the offshore industry in the GOM, as well as a “large and growing portion” of the deepwater segment of the industry.
“The study demonstrates the significant contribution and important role of independents in the Gulf of Mexico offshore oil and gas industry, both today and in the future when measured in jobs, economic value and government revenue,” said James Diffley, lead author of the report. Diffley is group managing director of U.S. Regional Economics for IHS Global Insight. “The offshore Gulf of Mexico also plays a huge part in the nation’s energy security and is a leading contributor to the economic vitality of the four-state Gulf region.”
If independents were “excluded” from operating in the GOM, the study forecast that by 2020 300,000 jobs would be eliminated “and result in a loss, over 10 years, of $147 billion in federal state and local taxes from the Gulf region. If the independents are excluded just from the deepwater, the job loss would be 265,000 jobs by 2020, and $106 billion in tax revenues over the 10-year period.”
Actual federal tax losses would be larger because the economic analysis only included the Gulf region (Louisiana, Texas, Mississippi and Alabama) and not the revenue impact on income earned elsewhere in the United States from manufacturing and investment activities related to the Gulf.
“The resulting vacuum would be filled only marginally by the major oil companies,” the report’s authors said. “The loss of the independents could actually precipitate an overall decline in activities because of the integration between majors and independents.
“Because of the scale of the independents’ involvement in the Gulf, including the deepwater, their exclusion would likely lead to ‘a significant shrinkage in offshore oil and gas activity…and a dilution of the U.S. technological and industry leadership.’ This would mean a significant decline in oil output from what otherwise would be the ‘growth engine’ of domestic U.S. oil production.”
The offshore is a growing component of domestic energy production both for the United States and the world, according to the report. The U.S. offshore — primarily the Gulf of Mexico — now produces 30% of U.S. oil and 10% of U.S. natural gas. The United States recorded an increase in domestic oil production in 2009 for the first time since 1991, which was attributed to developments in deepwater production, and factored in a decline in oil imports, said the report.
Independents now hold majority stakes in 81% of all producing GOM leases and 46% of the producing deepwater leases, the authors estimated. “Independents have drilled 1,298 wells in the deepwater and they currently account for over 900,000 boe/d (oil and natural gas together).”
Last year the group accounted for more than 200,000 jobs, $38 billion in economic benefit and $10 billion in state and federal tax revenues and royalty payments in 2009, the study found. By 2020 for the industry as a whole — independents and majors — industry jobs will climb to nearly 520,000, annual economic benefits will total more than $113 billion, and tax and royalty revenue will total nearly $30 billion, or around $267 billion over the 10-year period.
Separately, Standard & Poor’s (S&P) on Thursday published “Sun, Surf and Spill: Will the Economic Damage Spread Beyond the Gulf of Mexico?,” which also examines the possible economic impacts to the GOM region since the Macondo well blowout in the deepwater.
“Industries that are central to the region’s economies aren’t as essential to the rest of the country,” said S&P Senior Economist Beth Ann Bovino.
Even if the Macondo well is successfully capped, she said, “up to 250,000 Gulf jobs are in danger of disappearing this year.” The housing sector, which already has seen double-digit price declines across the area, also could take a hit. And with more people in the region out of work, consumers likely will spend less.
“This devastation may persist even as the national economy moves ahead,” said Bovino.
A copy of the report is available at www.ihsglobalinsight.com/gulfoileconomicimpact.
©Copyright 2010Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.
© 2020 Natural Gas Intelligence. All rights reserved.
ISSN © 1532-1231 | ISSN © 2577-9877 |