Chairman, National Ocean Industries Association
This week, the Offshore Technology Conference kicks off its 50th year. The offshore industry has developed incredible technological advances since the first OTC in 1969. Today, offshore technology rivals that of the space industry, making it possible to find and develop oil and gas in previously unreachable areas. Modern offshore technology makes exploration possible in deeper waters and in high-pressure/high-temperature environments, and yields seismic data that allows for more targeted drilling to reduce the number of dry holes, thus lowering costs.
Unfortunately, depressed commodity prices and massive regulatory requirements have reduced new exploration to a near standstill. Competition from onshore development at home and from other countries promoting attractive offshore lease and royalty terms prompts a look at the long-term prognosis for oil and gas development on the United States outer continental shelf (OCS).
While these challenges are significant, the long-term outlook for offshore energy has not changed: the US and the world will continue to need crude oil and natural gas for the foreseeable future. In the latest Annual Energy Outlook released by the US Energy Information Agency (EIA), fossil fuels are predicted to supply nearly 80% of US energy demand in 2050. Likewise, a growing global middle class that wants cars, air conditioning and household appliances is expected to grow energy demand by 28% by 2040. Globally, EIA still expects fossil fuels to account for 77% of energy consumption.
A national offshore oil and natural gas leasing plan should reflect our growing world. Thankfully, the Trump administration is working to replace the Obama administration’s restrictive 2017-2022 program, which needlessly locked up 94% of the OCS. In contrast, the Trump administration’s 2019-2024 National Oil and Gas Leasing Draft Proposed Program (DPP) proposes opening 90% of the OCS to exploration and development. This is a sea change for energy security.
Now we have a chance to bring jobs, economic growth and energy security to areas along the Gulf of Mexico and beyond. Opening up areas outside of the Gulf of Mexico to oil and gas exploration and development presents an unprecedented opportunity to bring new jobs, revenue and economic growth to states that desperately need them. In addition, it reduces the risk of interruptions to our oil and gas supply by diversifying the geographic location of offshore production. Storms ravage the Gulf of Mexico annually, but thanks to the diligence and dedication of offshore workers, there were no reported damages or spills from offshore facilities during 2017’s historic hurricane season. However, nearly 25% of the Gulf of Mexico crude oil and natural gas production was temporarily shut down due to Hurricane Harvey, while 92% of oil production and 77% of natural gas production was temporarily halted due to Tropical Storm Nate.
The National Ocean Industries Association (NOIA) has long advocated for expanded access to our nation’s offshore resources. Having so much of our OCS closed to oil and natural gas development is incredibly shortsighted and puts the US at a strategic disadvantage, especially as other countries, like Russia, China, Norway, Canada, and Mexico are developing energy projects off their shores to meet rising global energy demand. At a time when Russian LNG exports are being unloaded in Massachusetts and US Senators have written to the Trump administration that a proposed natural gas pipeline from Russia to Germany could erode US leadership, the United States should be as aggressive as possible opening up our energy resources.
Along with direct access to the OCS through more lease sales, the US needs a regulatory regime that encourages offshore energy development. Over a span of a few days in January, both Chevron and Shell announced what could turn out to be historic finds in the US Gulf of Mexico. This is great news for American energy production, but finding and producing oil and gas is only half the battle. Navigating the regulatory maze that stretches project development timelines 10 or more years provides a set of challenges that even the best scientists and engineers cannot solve. Companies need a clear and stable regulatory environment to turn raw resources into the energy that powers our daily lives.
As the offshore industry works to meet the world’s energy demands, one thing is certain – the future will not be the same as the past. To keep up with our growing world, we will need all forms of energy, including offshore wind. With strong winds, a shallow continental shelf and close proximity to population centers, the Atlantic seaboard is driving strong interest in offshore wind development. During the construction of Deepwater Wind’s Block Island Wind Farm, companies that were traditionally involved in the oil and gas industry, including Montco Offshore and Gulf Island Fabrication, showed that offshore oil and gas and offshore wind can thrive together.
The offshore energy future is bright. The United States has an abundance of oil and gas resources, and the industry has the technology and the know how to tap these valuable resources. Now, we just need policies from Washington, DC, that encourage, not constrain, offshore energy exploration and production. Smart energy policy will create jobs, spur economic growth, strengthen our energy and national security and provide affordable and reliable energy for Americans and our allies. With smart energy policies, the United States can be energy dominant for the next generation.
John Gellert is the CEO of SEACOR Marine and serves as the 2018-2019 Chairman of the National Ocean Industries Association (NOIA). Gellert has been with SEACOR Marine and predecessor companies for over 25 years. During his career, he has had a series of international postings and appointments with both marketing and operating responsibilities in Europe, West Africa, and South East Asia. He assumed responsibility for SEACOR’s entire offshore vessel group in 2005 and has been CEO of SEACOR Marine since its spin-out as a separate public company in June 2017.