A slowdown in the pace of permitting offshore drilling and related work has idled dozens of rigs in the Gulf of Mexico, but the economic pain could be just beginning, service company executives said today.
The leaders of companies that provide rigs, manufacture drilling equipment and install it offshore painted a bleak picture during a panel at IHS Cambridge Energy Research Associates’ CERAWeek conference. The current slowdown in work for drilling rigs will translate into dropped demand for subsea equipment and installation work months and even a year down the line, they said.
Joe Dunbar, a business unit manager for Parker Hannifin Corp., which manufacturers equipment for connecting subsea wells, said he doesn’t see a light at the end of the tunnel. I’m “trying to find optimism,” Dunbar said, but “there is none.”
“The worst part is yet to come,” Dunbar said. “If these drilling rigs remain idle, every industry related to the oil and gas business on the coast is going to suffer and they are going to suffer greatly.”
A Parker Hannifin subsidiary is 90 percent focused in the Gulf of Mexico — a dynamic that has been “devastating” given the decreased demand, Dunbar said.
Other companies that have broader, international portfolios are less exposed to damage from a drop in Gulf work.
Jim Johnson, executive director of Hunting Energy Services, Inc., said the company that supplies equipment and components was able to balance a drop in Gulf of Mexico demand by taking advantage of an uptick in business internationally, particularly in Southeast Asia and the Middle East. Hunting is also benefiting from exploration of shale plays nationwide.
The outer continental shelf was a good market for years, but now is “a dead man’s zone,” Johnson said. Johnson depicted a contest between shale and shelf — with shale winning. With the decline in Gulf drilling, Wall Street’s energy — and capital — has shifted toward shale, he said.
John Nesser, executive vice president of J. Ray McDermott, which delivers pipelines and subsea systems after drilling has finished, said the company has moved one of its installation vessels to Asia. “It was just better for us to get it out of the Gulf,” Nesser said, and get it to a place where there were “opportunities to work it.”
McDermott’s other major installation vessel in the Gulf of Mexico has been cold-stacked — and it will remain that way until the company can line up a portfolio of work, Nesser said. “We’re not going to bring it out unless we have a campaign of work” for it, he said.
All of the executives said that permit delays that are affecting rigs now will translate to industry-wide slowdowns.
“Each of our companies have pretty varying business models, but what starts at the rig . . . will soon have a negative impact on the entire industry and the region and the country as a whole,” said Jim Noe, a senior vice president for Hercules Offshore and the leader of an industry group lobbying for speedier permit processing. “We are just now experiencing the early phases of what we will be experiencing for years to come.”
Since last year’s oil spill, the Bureau of Ocean Energy Management, Regulation and Enforcement has approved 37 permits for new shallow-water wells and four new deep-water wells.
Officials with the ocean energy bureau and the Interior Department said they were not invited to attend CERAWeek. But bureau director Michael Bromwich has stressed that the agency is working to clarify requirements for offshore drillers and is working as expeditiously as possible to vet permit applications.
The executives said they are seeing a slowdown in the government’s issuance of permits for all sorts of work, including development permits to hook up pipelines.
Even a big surge in drilling permits wouldn’t immediately mean a jump in demand, Dunbar said. “It’s not a business you can turn on and off like a water faucet.”
Johnson predicted that permitting will not rise to historic levels until October 2012, just a month before the presidential elections. “I truly believe a lot of it is political” and it will take “a lot of outcry” about rising gas prices for things to change, Johnson said. Permitting might not return to normal levels until “there’s a level of pain and awareness” about how important the offshore business is, he said.
Visit FuelFix this week for the latest news from IHS-CERAWeek. You can also follow @FuelFixBlog on Twitter. Look for the latest updates from our reporters under the #CERAWeek hashtag.
This my friends is your punishment for not getting on the bandwagon and willingly turinging this state into part of the Obamanation as we were expected to do.
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Just remember why your gas is so high and why unemployemnt has spiked at better than 10 percent in this state when the next election rolls around and vote for someone who will let the oil companies drill for what we need now and also at the same time develop other methods of energy be it nuclear, green, or whatever!!!!!!!!!!!!
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This little dictator in office really needs to be brought down to Earth. As do a lot of members of the HOuse and Senate!!
The destruction of the oil industry in the GOM IS political and it is going as it was designed by Nobama and company…. Nobama said that he wanted gasoline prices to go up and since he has been in office they have gone up and at the rate it is going the economy WILL stall again….. Nobama also stated that he thought electicity prices should triple in price…. This is designed to increase the costs so that his alternative energy will be economically viable as it isn’t when fuel prices are lower….. BTW Nobama supporters how is that hope and change working out for you now?????
Drilling for oil and gas in the GOM doesn’t fit into the Van Jones model for inter-city development. pdh42 is right, Obama has wanted higher prices for energy from day one and the BP spill gave him an excuse to do just that by slowing our domestic drilling and production. I really don’t believe he puts the entire country ahead of his political and social agenda.
Oil service firms say Gulf slowdown will last for years
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Hopefully it will pick back up after this retard is given the boot next year….
Barack Insane Obama….thank you so much…may you rot in he!!
Yeah, it will last until Obama leaves office and drags the other 2 stooges, Salazar and Bromwich, with him. Then we’ll have to contend with not having any rigs, boats, tools, etc. to work the GoM because they’re all working for Obama’s puppet master, George Soros, at PetroBras in Brazil.
How does the Obama mantra go? “Don’t let a crisis go to waste”? Obama wants the US to stop using oil and viola’ along comes the Macondo tragedy to make his dream a reality.
Thanks to Obama we now have even more of our hard earned dollars going to the middle east. And our stupid government wants to send aid money there and probably bring a bunch of them to America for votes.
We have a sorry president and a sorry bunch of PC democrats and some republicans that are more interested in their power than what is good for America.
Can someone explain why our current administration is willing to go into Lybia with military? I think the Lybian’s have a right to settle their own problems and NOT have a bunch of NATO idiots sticking their collective nozes in their business. I don’t care for Ga-daffy but I think we should respect that he is/was the leader of Lybia and he has a right to try to keep his power even if he fights a bloody war.
Well, we certainly didn’t need any oil exec to tell us this. We knew this from the beginning.
This is Obama’s fault – period.
When Obama talks “punishing your enemies” he really means it doesn’t he?
What a pathetic excuse we have for a “president”.
The gulf ban will last years only until the free market and US O&G industry HATING progressive socialist is out of The White House.
The slowdown will last until Bozo Obama is out of the White House.
At what point does the Odummba admin become an actual fraud?
Sorry folks, but had BP’s well not blown out, there would be no history of The Gulf Oil Spill. Hate Obama all you want, but the Gulf would be BAU (business as usual) had BP, Halliburton and Transocean not let that well get away from them.
The “actively drilling” rig count is 1707 today, with 46 of those being in the US GOM. There are 311 more rigs drilling today, than there were at this time a year ago, and between 1999 and the present, only 2007 and 2008 had more rigs actively drilling.
I’m trying real hard, but I don’t recall this much crying from 2000-2004, when less than 1200 rigs were drilling. Funny, huh?? “W” was in office 4 years, and less than 1200 rigs were drilling… Obama is in office and there are 5,000 more rigs drilling than back then. How could that be?? Enjoy swimming in facts for a minute or two, as I’m sure this info will also be selectively forgotten.
http://investor.shareholder.com/bhi/rig_counts/rc_index.cfm
Oh!!!! I almost forgot the best part!!! With oil skyrocketing… I find it quite interesting that over 50% of the actively drilling rigs are drilling for gas. LOL
I feel their pain, but like them when I was out of work – I just cant reach them. Awhhhhhhh too bad, so sad – suck it up and learn a new vocation – isnt that what yall told me?
SheepFoSho: Same as Bush’s – after his second term.
I read an obituary last week in The Woodlands Villager. At the end it stated, ” In lieu of flowers donations may be made to a charity of one’s choice or to the campaign of ANYONE who runs against Obama.” I don’t know the deceased, but will honor his wishes with a donation when the time comes.
SarahATP – You totally ignore fear/confidence in your conclusions. What is so interesting about drilling for something that you know where it is and you have the ability to go for it? What is the conspiracy factor at the gas pump where you fill up?
SarahATP – The Oil & Gas business could be one of the few industries that might help get our economic engine running again. Most of the comments here only reflect frustration with an administration with little understanding of the industry. BP had to put up $20 billion for their mistakes. All of us have to pay for Obama’s mistakes and the price tag will be a lot more than $20 billion. BP finally shut their well in. Maybe the Coast Guard will “help” Obama shut down his disaster in the making.