Tuesday, June 15, 2010

Economic Impact of the Obama Drilling Moratorium: $4 Billion Now... Many Billions Later

Thanks to The Oil Drum, we have a pretty good idea how much economic damage President Obama's ill-advised drilling moratorium will inflict upon the Gulf. Obama had ordered work halted on 33 exploratory wells in the Gulf.

Direct Impact for 6-month moratorium:
$2.43B Rigs and tenders
$1.45B Wages
$0.22B Lost taxes and fees
$4.11B Total

The suspension of exploratory drilling means that the 33 floating drill rigs, which cost hundreds of thousands of dollars per day to lease, will be idled for six months or more. About 33% of the country's domestically produced oil and 10% of the nation's natural gas comes from the Gulf.

$250,000 to $500,000 per day, per rig – results in roughly $8,250,000 to $16,500,000 per day in costs for idle rigs... Secondary impacts include...

• Supply boats – 2 boats per rig with day rates of $15,000/day per boat - $30,000/day for 33 rigs – nearly $1 million/day
• Impacts to other supplies and related support services (i.e., welders, divers, caterers, transportation, etc.)

Jobs – Each drilling platform averages 90 to 140 employees at any one time (2 shifts per day), and 180 to 280 for 2 2-week shifts... Each E&P job supports 4 other positions

• Therefore, 800 to 1400 jobs per idle rig platform are at risk
• Wages for those jobs average $1,804/weekly; potential for lost wages is huge, over $5 to $10 million for 1 month – per platform.
• Wages lost could be over $165 to $330 million/month for all 33 platforms
• Secondary impacts: Many offshore workers live in Louisiana. The state is going to see a decrease in income taxes and sales taxes that would normally be paid by those employees. (The state does not collect a sales tax on oilfield supplies and equipment used offshore.)

...The 33 gulf wells where operations are suspended were the ones inspected immediately after the Deepwater Horizon blowout (per Interior Secretary Ken Salazar); in those inspections, “only minor problems were found on a couple of rigs”. Salazar believes “additional safety measures can be taken including dealing with cementing and casing of wells and significant enhancements and redundancies of blowout prevention mechanisms. Although these rigs passed the inspections, we will look at standards that are in place.”

Look at the positive side: the economy is running so smoothly that a few billion dollars going down the drain won't hurt a bit.

No comments: