Studies Highlight Job, Economic Potential of Expanding US Offshore Leasing

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The United States could create almost 840,000 jobs and generate more than $200 billion in government revenue by opening the eastern Gulf of Mexico and U.S. Atlantic and Pacific Outer Continental Shelf (OCS) to offshore oil and natural gas leasing, according to the findings of three energy industry group studies.

Two studies released Wednesday by the American Petroleum Institute (API) and National Offshore Industries Association (NOIA) highlighted the economic potential that could be realized by adding these areas to the federal government’s next five-year leasing program. Currently, 87 percent of federally controlled offshore acreage is off-limits to offshore oil and gas development.

The studies in this series include a previously released study that focused on the Atlantic OCS. These studies conclude that, by 2035:

  • Pacific OCS development could create over 330,000 jobs and raise $81 billion in government revenue
  • Eastern Gulf development could result in nearly 230,000 new jobs and raise $69 billion in government revenue
  • Atlantic OCS development could create almost 280,000 jobs and raise $51 billion in government revenue

Opening all three areas to oil and gas development also could add approximately 3.5 million barrels of oil equivalent per day to domestic energy production, lead to almost $450 billion in new private sector spending, and contribute over $70 billion per year to the U.S. economy, according to API’s website.

These study results hinge on if the U.S. government starts holding lease sales in these areas in 2018. Quest Offshore Resources conducted the studies in the series at the request of API and NOIA.

The defeat in the U.S. Senate of the Keystone XL pipeline makes it a good week to highlight other oil and gas possibilities in the United States, said NOIA President Randall Luthi in a conference call with reporters on Wednesday.

 “The U.S. oil and gas industry is a major source of jobs, revenue, economic activity and reliable and affordable energy,” said Luthi.

U.S. onshore shale activity has created a new energy renaissance in the United States, but the nation can do much more.

Opening additional offshore areas for exploration could put the United States on a course to be a world leader in energy production, Luthi said. Allowing exploration and production in these areas also will be needed to offset the anticipated peak and decline of U.S. Gulf of Mexico production by 2021. Those plans need to be made now, said Erik Milito, API director of upstream, during the conference call.

Earlier this month, Wood Mackenzie forecast that the U.S. deepwater Gulf would set a new production record in 2016, but would plateau for the remainder of the decade as production from legacy fields decline and a limited number of new projects come onstream.

The energy industry organizations timed the reports’ release to provide input to the U.S. Department of the Interior (DOI) as it works on a draft for the 2017-2022 OCS Leasing Program. DOI has not yet released its proposed draft, but has indicated it expects to publish the draft in the December 2014 to January 2015 timeframe, an API spokesperson told Rigzone.

Milito said they were not concerned about the lack of bids in Eastern Gulf Lease Sale 225, noting that companies take a deliberate approach based on the economics of their current portfolio when deciding on what to bid. Opening new areas for exploration is critical in allowing for better understanding the potential of the OCS. At one time, U.S. Gulf reserves were estimated at between 7 to 9 billion barrels oil, but thanks to exploration and development, that estimate reserve is now closer to 50 billion barrels of oil.

API sees the Bureau of Ocean Energy Management’s decision to issue an environmental impact statement to allow seismic survey work in the Atlantic as an important step towards understanding the seafloor and the geology beneath it. While exploratory drilling is still needed, “it’s great to see the government moving ahead and gaining a better scientific understanding [of this area] over the next year,” Milito noted.

With polls indicating that 70 percent of U.S. voters in this year’s mid-term elections support offshore drilling and 57 percent of voters thinking the federal government isn’t doing enough to encourage domestic oil and gas production, Milito said the next offshore leasing program “is an opportunity for the Obama administration to let  those voters know  their voices are being heard.”

North Carolina stands to benefit the most from the opening of the Atlantic OCS to exploration and development. Annual spending on Atlantic OCS oil and gas activity in the state could reach almost $3.3 billion in 2035, with direct employment of more than 20,000 jobs and indirect and induced employment of more than 35,000 jobs in that year.

California would see the biggest employment impact on the west coast if the Pacific OCS is opened to exploration and production, the studies found. More than 175,000 jobs related to OCS oil and gas activity could result in 2035, with over $16 billion in gross domestic product contributions to the economy in 2035 and cumulative state government revenue from 2017 to 2035 of over $17 billion.

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