De facto drilling ban could cut US oil output by 12% - study

25 January 2011 16:58  [Source: ICIS news]

WASHINGTON (ICIS)--A prolonged ban on deepwater drilling in the Gulf of Mexico would cut domestic US oil production by 12%, force some 125,000 people out of work and cost the US $18bn (€13bn) in lost revenues, energy sector officials said on Tuesday.

The American Petroleum Institute (API) said that a study it commissioned with the Wood Mackenzie energy and mining analytical group showed that if the Obama administration delays the resumption of deepwater drilling until next year, “long-term deepwater development could be seriously jeopardised”.

Kyle Isakower, the institute’s vice president for economics and regulatory policy, said that the Wood Mackenzie study “projects that nearly one-third of US deepwater production could be rendered uneconomic, resulting in less energy production, less investment and less revenue to government”.

The US imposed a ban on deepwater drilling in the Gulf in the wake of the April 2010 Deepwater Horizon rig explosion and the resulting months-long oil leak. 

While the ban was lifted in October last year, Isakower argued that continuing drilling permit delays and ongoing changes in permit criteria by the administration effectively maintain the ban.

“The potential harm is alarming,” Isakower said, referring to the de facto ban.

“We are talking about a transformation of the future relevance of deepwater Gulf development to US domestic energy production, and a major threat to Gulf region jobs and the nation’s energy security,” he said.

Isakower said that a two-year delay in the resumption of deepwater drilling would cause a shortfall of as much as 680,000 bbl/day (bpd) by 2019.

“That’s approximately equal to total current Alaska oil production or 12% of total current US oil production,” he said.

That 680,000 bpd production loss could be permanent, he said, because a two-year delay would drive energy development capital and deepwater drilling equipment to foreign projects, perhaps never to return.

According to the Wood Mackenzie analysis, that shift of capital and deepwater drilling capacity would cost the US some $70bn in investments and $18bn in fees to the US Treasury between this year and 2022.

The capital flight and the downturn in Gulf drilling would translate into a loss of 125,000 jobs by 2015, the study said.

The full text of the analysis is available at the API website.

($1 = €0.73)

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By: Joe Kamalick
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