THE US Gulf of Mexico shallow water slowdown precipitated by the BP Macondo disaster could cost more than $10billion and threaten the region’s economy, particularly that of the Louisiana state.
The report from the Maguire Energy Institute at SMU Cox School of Business finds that the US Interior Department’s slowdown in issuing permits for new shallow-water drilling operations – despite lifting the moratorium on this segment of the industry in May – has placed 40,000 Gulf region jobs in jeopardy, with “very serious economic implications for the region that rival, or exceed, those of the spill and moratorium.”
“Studies have found that over the course of one year, should 75% of the rigs become stacked as a result of Bureau of Ocean Energy Management (BOEM) inaction on issuing permits, the direct economic losses to the nation’s businesses and workers would exceed $4.3billion, with Louisiana taking the biggest hit and Mississippi second,” the report claims.
“Adding in the ripple effects of lower indirect and induced spending, the nation’s income losses could exceed $12.5billion.”
The institute claimed that, despite the industry’s “demonstrated safety record” and straightforward approach to sub-surface energy resource extraction, as of September 22, BOEM had issued only six permits for new shallow-water wells in the five months since the April 20 disaster that resulted in the Deepwater Horizon rig sinking and led to the worst pollution incident in US petroleum industry history.
“Prior to the spill, the Interior Department issued an average of 10 to 15 permits for new shallow-water wells per month,” says the report.
“The vast majority of companies working in shallow water are small, independent operators, making the interruption of new shallow-water drilling especially harmful to both them and the small businesses along the Gulf Coast that support them.”
It is important to realise that the Maguire report concentrates on the shallow water part of the US Gulf industry only. The consequences of the fortunately just-lifted deepwater moratorium add to the scale of the economic difficulties faced by the region.