waiting to see if that accounts for much." The offshore industry is also waiting to see if promises made by Congress will be kept and what policies President Barack Obama will implement. "There is a lot of speculation as to how the new administration proceeds," said Cathy Landry, a spokeswoman for the American Petroleum Institute. "The industry hopes everyone looks at energy in the broader context of the economy. We hope for a fact-based comprehensive energy policy that recognizes the importance of the oil and gas industry not only to the nation's economy in terms of jobs for Americans, but also in terms of revenues for the federal government in terms of bonus bids, royalties, taxes and fees." In November, the Department of the Interior announced it had received record payments of $23.4 billion in royalties and bids in 2008 from domestic energy production, while state received $2.59 billion. Of the total, more than $10 billion came from bonus bids for offshore leases on the Outer Continental Shelf and Gulf of Mexico and Alaska. "These record payments demonstrate the importance of domestic oil and natural gas to our nation's economy," said Jack Gerard, president of the American Petroleum Institute. "Imagine how much more revenue and jobs could be created for the benefit of all Americans if Congress and the Obama Administration listen to the American people and put America's vast oil and natural gas resources, including those that have been subject to federal moratoria, to good use to strengthen our nation's economy and energy security." On Dec. 15, Obama named Steven Chu, a Nobel Prize winning physicist, as his secretary of energy. In the announcement, Obama pledged to follow through on a decades-long promise to reduce the nation's dependence on foreign oil. "This time it has to be different," Obama said in the announcement. "This time we cannot fail, nor can we be lulled into complacency simply because the price at the pump has for now gone down." Chu is internationally recognized as a leader in renewable energy research. While optimistic, industry leaders are cautious whenever a new administration enters the White House. "It's truly too early to know," Bennett said. "No one knows what will happen under this administration, so we'll just have to wait and see." Others are encouraged by Obama's early signals. "At this point, Obama is saying all the right things,"
38 MTR
Wells said. "[Obama] said it would be wrong to take this drop in prices as a sign we don't need to do something. He seems to have a clear understanding that this country needs a comprehensive energy policy and hopefully he sees a piece of it as expanded offshore drilling. We can talk about alternative energy all we want, but to get there we have to expand offshore drilling to bridge the gap in the long term." Wells said a key to that expansion is ensuring adequate funding for the U.S. Minerals Management Service, the agency that handles geological and environmental studies of offshore lease tracts to prepare them for exploration. "We must make sure Congress doesn't starve MMS and be the reason more areas aren't opened to exploration," Wells said. "Obama is in the right position to do what's right for the future, because when a Republican talks about expanded drilling, it produces an automatic response from opponents. But, when a Democrat talks about it, the nation could see some results."
Industry Starting To Feel Affects
With Main Street now seeing the affects of Wall Street, declines are beginning to be felt in the oil and gas industry. "The big driver in North America is natural gas and we're certainly seeing a falling rig count on land already and that will probably impact the Gulf of Mexico, at least on the shelf," said Gary Flaharty, a research specialist for Houston-based Baker Hughes Inc. "I think the deepwater producers will hold up OK and on a global basis oil is fundamentally tight. Obviously, we have the impact of a global recession. Natural gas production was up about 10 percent last year, but next year the Department of Energy expects production to be flat. So, we may see declines until those numbers get back more in line with demand." Robert Socha, vice president of marketing for Lockport, La.-based Bollinger Shipyards, said the shipbuilding sector was insulated from the downturn until recently. "When oil prices started to slip, boat utilization - while still strong - began to fall a bit and that trickles down to shipyards," Socha said. Customers began to revamp budgets, especially for those projects requiring new lines of credit, Socha added. "Day rates are still up at this point and the utilization is still there, but the industry is hearing from customers to do what they can to reduce rates now," Socha said. "For the most part, industry has been hesitant to jump in and reduce rates and from a shipyard perspective, this is a seasonal slowdown anyway."
January/February 2009
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