Drilling ban may devastate local firms
HOUMA — President Barack Obama’s ban on new deepwater drilling will devasate many local businesses and their workers, executives said Thursday.
“That was the stability for south Louisiana over the last couple of years,” Walter Thomassie, general manager with Thoma-Sea Shipbuilders in Lockport, said of deepwater drilling. “Deepwater exploration keeps us going. The economy as a whole in U.S. is not good. Deepwater exploration was a bright spot in a gloomy economic outlook.”
The oil-and-gas industry along the Gulf Coast has been struggling to work out the precise implications of a presidential order to halt permits for drilling in waters more than 500 feet deep. The same directive orders rigs exploring in deepwater, an estimated 33, 22 off Louisiana’s coast, to stop as soon as possible.
Obama issued the order to give experts time to pinpoint the root causes of the April 20 explosion of the Deepwater Horizon drilling rig, whose blowout has created the worst oil leak in the nation’s history. Between 180 to 280 people work on each of those rigs, according to estimates from the Louisiana Mid-Continent Oil and Gas Association, and each of those jobs is believed to support four more in related service businesses.
WHAT’S AT STAKE
In Texas, state figures show there were 86,900 jobs in oil and natural gas extraction in April and another 107,800 in support industries. Louisiana registered 9,000 extraction jobs and 36,700 support jobs.
Interior Secretary Ken Salazar’s report to Obama recommending the six-month moratorium notes that “offshore operations provide direct employment estimated at 150,000 jobs.” The report doesn’t mention possible job losses.
An analysis by Mid-Continent says the six-month moratorium would defer 80,000 barrels of daily production in 2011, or about 4 percent of projected deepwater production for the year.
The Gulf produces about 30 percent of the oil and 11 percent of the natural gas for the U.S.
“It appears that less draconian and potentially less harmful solutions such as increased inspection and recertification of equipment would be an acceptable compromise,” said Burt Adams, chairman of the Washington-based National Ocean Industries Association.
Terrebonne and Lafourche parishes’ economies are heavily dependent on companies that provide tools, services, personnel or boat transportation to the rigs.
Companies that carry equipment, drilling chemicals, groceries and other supplies will be among the first to feel the effects of the six-month ban on deepwater production.
Seacor Marine, which is based in Florida but runs much of its operation from Houma, is among them. Sixty percent of its fleet covers areas affected by the moratorium, according to Robert Clemons, vice-president and general manager for its Americas division. The company is discussing the next steps with its customers, some of whom are leaving the Gulf of Mexico. While some of Seacor’s ships can go along, others will simply be out of work.
“We’re projecting this to be very damaging to our bottom line,” Clemons said.
For the first month or two the moratorium stands, the company estimates it will need to lay off up to 400 workers. The impact could be twice that by the end of six months, he said.
Galliano-based Edison Chouest Offshore is privately held, but analyst research shows it to be the largest offshore-service player in the deepwater Gulf. Officials did not respond to multiple requests for comment Thursday, but the Times-Picayune reported the company had already begun towing two rigs to Africa.
Major publicly traded service companies like Schlumberger and Halliburton, which have a large footprint in Terrebonne and Lafourche, may also be forced to make changes or shift employees.
“It’s possible that there will be some movement,” said Teresa Wong, public-relations manager for Halliburton. “A lot of the operators are telling us they want to keep those rigs busy doing other things.”
If the company sees decreased activity in the Gulf, workers could be transferred to growing energy projects like onshore gas production in the U.S. or international deepwater projects scheduled to come online later this year, Wong said.
With decreased demand for offshore services, the companies that make service boats stand next in line in terms of impact.
Robert Socha, spokesman for Lockport-based Bollinger Shipyards, said up to 40 percent of the company’s employees could be affected if the ban stays in place for six months.
Thomassie said his company faces profound uncertainty since almost all of its business is targeted toward deepwater work.
Contracts already signed could be scuttled because many contain provisions that allow either party to back out if extenuating circumstances interfere.
HOUMA EXPANSION ON HOLD
The best-case scenario, Thomassie said, would be a 40 percent drop in revenue over what would have been otherwise projected over the next four years. His business could also dry up entirely within the next six months. The company’s plan to build as many as five new drydocks in Houma are now being reexamined.
Chet Morrison, chairman of Chet Morrison Contractors and its associated companies, said his firm has contracts in shallow waters that are also in limbo because of uncertainty over federal rule changes resulting from the Deepwater Horizon disaster. Operators Morrison’s company is working for haven’t been allowed to drill in areas potentially contaminated with oil.
“When any part of our industry is cut, everyone bleeds,” Morrison said.
So far, the part of the industry involved with producing oil and gas should continue more or less uninterrupted.
For the moment, that gives somewhat of a reprieve to local companies like J. Ray McDermott and Gulf Island Fabrication.
Those companies make production platforms and components used in oil-and-gas wells after exploratory drilling is complete.
Kerry Chauvin, CEO of Houma-based Gulf Island, said three deepwater platform projects in the Gulf expected to come up for bid this summer are on track to continue, good news for the company’s 1,400 workers.
POTENTIAL BRIGHT SPOT
The U.S. moratorium means service companies with an international presence, New Orleans-based Tidewater, which provides workboats and other offshore vessels, will likely find themselves with an edge.
Tidewater, the world’s largest international service fleet, only has eight vessels working in the Gulf, according to spokesman Joe Bennett.
That’s good news for workers at Quality Shipyards of Houma, a Tidewater affiliate.
The Gulf rigs, some valued at more than $1 billion, can charge rates of as much as $500,000 per day. They could find lucrative contracts working in international waters such as Brazil and West Africa, Bennett said.