$11bn cost of banning Gulf of Mexico offshore drilling

Paul Boughton
Banning offshore drilling in the Gulf of Mexico (GoM) would cost the offshore services industry almost $11bn a year, Datamonitor has estimated.
However, the independent business analyst believes such a move is highly unlikely despite the ongoing political fallout from the disastrous BP oil spill.

The current production of oil in deepwater areas in the GoM corresponds to nearly 1.8 million bbl/day. Fields expected to come onstream by 2014 in the GoM are estimated to add a further 250,000 bbl/day. As these new fields correspond to virtually 14.0 per cent of the current Gulf of Mexico output, any restrictions on E&P (exploration and production) could have grim repercussions in terms of total output.

Datamonitor, which has just completed research into the future of oil production in the US, has found that reducing offshore activities in the GoM could represent the loss of business opportunities for equipment manufacturers and suppliers equal to nearly $11 billion per year.

Gregory Lemaire-Smith, associate energy analyst at Datamonitor, said: “If the accident in the Gulf of Mexico triggers a spiral effect, the impact on the global oil and gas offshore industry could be alarming.

“As oil consumption continues to grow worldwide and companies face increasingly difficult challenges - shrinking margins, unfavourable production sharing agreements, and capital intensive fields with high lifting costs - any restriction in the exploration of offshore areas would be bad news.”

He added: “Our research clearly demonstrates that the state of the oil market doesn’t allow the US the luxury of closing offshore regions to activity – a fact that both political parties are all too aware of.  

“The Deepwater Horizon explosion may have caused one of the worst spills in living memory and shaken the very foundations of the world's most significant piece of environmental legislation, the US climate bill, but eventually oil will emerge as the winner.”

Datamonitor believes that safety improvements being worked on in the wake of the Deepwater Horizon oil rig explosion should not only focus on spill-containment, but also control of gaseous emissions, aqueous discharges and non-aqueous drilling fluids.

The report, entitled Oil Production in the US, examines the prospects for reducing the oil deficit.

For more information, visit www.datamonitor.com

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