Once oil prices began to drop precipitously during the summer of 2014, so did capital expenditures on offshore energy exploration and production in the Gulf of Mexico. Louisiana’s economy suffered as result. Now we’re beginning to see offshore capital expenditures rebound, and that’s good not only for the Pelican State but for the entire country as well. A new study by the Norwegian analyst firm Rystad Energy found that for every dollar invested in the North American shale market this year, a dollar is also earmarked for the development of new offshore resources. Both will receive approximately $70 billion in capital expenditures in 2017, an equivalence not seen since 2013. Two new field development projects, by BP and Shell, have now been sanctioned for the Gulf of Mexico. This trend is driven in part by higher oil prices, which have climbed from a low of less than $30 per barrel to roughly $52 per barrel today — and by cost-cutting and efficiency improvements undertaken by the offshore drilling industry and its suppliers.
With offshore deposits again becoming sound investments, the impact of this rebound on Louisiana’s economy in terms of jobs, growth and tax revenue is clear. But it’s also good for the country as a whole, as the offshore energy industry contributes significantly to U.S. energy security and supports hundreds of thousands of jobs in all 50 states and contributes tens of billion dollars in economic activity each year. The shale boom, which played an important role in driving down energy prices, won’t last forever. A new study by the U.S. Energy Information Administration determined that “tight oil production” — or production from easily accessible onshore shale resources — will peak by 2026. At that point, well productivity will begin to decrease and drillers will be forced to move to less productive fields.
To ensure that we continue to reap the benefits of abundant, affordable energy, it’s essential that we adhere to an “all of the above” approach —and that includes both offshore oil and natural gas resources. Unfortunately, during its last months in office the Obama administration made it harder to do so by unilaterally declaring huge swaths of the Outer Continental Shelf in the Arctic and Atlantic oceans off limits to oil and natural gas exploration and production. And, two weeks before Inauguration Day, the Interior Department denied seismic survey permits in the Atlantic, even though the department itself has decided that seismic testing poses no threat to the marine environment. The U.S. offshore energy industry is the safest and most secure in the world. According to a 2014 study by Quest Energy Resources, it has the potential to create more than 800,000 new jobs by 2035 if the federal government allows access to new deposits in additional territorial waters. Let’s hope the Trump administration and Congress follow through on their promises to encourage — rather than discourage — development of our offshore energy resources.
associate director, Tulane Energy Institute