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US Deepwater Oil Industry at Risk from Gulf Disaster

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The catastrophic oil leak from a BP-operated rig off the coast of the U.S. state of Louisiana and the Obama administration's six-month moratorium on further deepwater drilling threaten one of the nation's most vital industries. Oil and gas operations in the Gulf of Mexico have become an important source of jobs as well as energy for the United States.

Officials in Texas, Louisiana and other states on the Gulf of Mexico say the moratorium on new drilling in deepwater could put thousands of people out of work and prompt companies to move their expensive rigs to other parts of the world where they are in demand.  President Obama last week said he would lift the moratorium sooner if the commission examining safety issues can complete its work sooner.

Thousands of energy sector layoffs could devastate Gulf state economies dependent on the industry for much of their income and growth.  But the rest of the nation would also feel the impact if there is a dramatic decrease in oil production in the Gulf.

Despite the current crisis, Tyler Priest, an energy sector historian at the University of Houston, says the United States will have to keep drilling there or import more oil from other nations.

"It is understandable that people now are very nervous about offshore oil when they can see the huge impact that something like this has and is going to have," he said. "But, on the other hand, we need oil from offshore.  The Gulf of Mexico accounts for 30 percent of our domestic oil production."

Priest says energy companies started working on rigs offshore as early as 1938, but that underwater drilling expanded rapidly after World War II as resources became harder to find elsewhere.  The oil fields tapped in deepwater operations have also proved to be very lucrative, he says.

"The productivity of deepwater reservoirs is incredibly high," Priest said.  "[They are] very prolific wells: so you can get from a single well 20, 30, even 40,000 barrels a day, whereas onshore or in shallower water a good well would produce 1,000 to 3,000 barrels a day."

There has not been a significant accident at a deepwater operation in the Gulf of Mexico for more than 30 years, but Tyler Priest says the magnitude of the current one is likely to result in increased scrutiny and regulation.  The problem he says government will face is finding inspectors and regulatory officials with enough training and experience to properly carry out the assignment.

"They do have their work cut out for them because this is probably the most sophisticated industry on earth today," he said.

But Priest says government and industry will have to address the problems associated with exploiting resources in such risky environments.  The University of Houston professor says the current crisis should prompt a serious discussion of energy development.

"One thing this disaster will do is force us into a debate and a conversation and maybe those will lead us to the formulation of a national energy policy or national energy strategy," he said.

Among the possible solutions ahead, Tyler Priest says, would be conversion of freight transportation vehicles to natural gas, which has now become abundant in the United States thanks to advances in drilling techniques.  But any such move would take many years to complete and, in the meantime, he says, the country will still need oil.

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