MORE than 90 days have passed since the fatal Deepwater Horizon explosion, consequent oil spill and subsequent temporary capping of the Macondo well in the US Gulf of Mexico.
The state with the most to lose from this tragic event is clearly Louisiana. It ranks as the US’s number one oil&gas state, with more rigs and platforms, more miles of pipeline and more of its underlying economy dependent on hydrocarbons than any other.
It also has an extensive and fragile coastal eco system that, at least in the medium term, is in for some difficult times.
The state agency responsible for Louisiana’s economic wellbeing is Louisiana Economic Development (LED), an agency that Energy readers will likely be familiar with if they have commercial ties with the region.
Since the end of April, when the blowout occurred, LED has worked closely with the state’s business community and its economic development partners to assist impacted industries and support the management of business recovery efforts, and has devoted time and resources to assessing the economic impact of the spill as well as establishing a business emergency operations centre.
The spill formed part of a twofold hit on the state because, in addition to the environmental and economic impact of the Macondo spill, the six-month offshore drilling moratorium imposed by the US federal government could cause further damage to Louisiana’s economy, and particularly its energy sector.
Louisiana’s elected and business leaders have urged Washington to reverse the drilling moratorium as this would safeguard more than 20,000 jobs in Louisiana and prevent additional damage to the communities already impacted by the oil spill.
In an early preliminary study carried out by LED, the following estimates underscore what is at stake for Louisiana’s economy:
The active deepwater drilling moratorium, if it continues for an extended period, could put at risk more than 20,000 existing and potential new jobs in the next 12-18 months.
New and pending information requirements for shallow-water drilling are causing permitting delays that could lead to significant additional economic impacts on top of those caused by the deepwater drilling moratorium.
The spill could have up to a $1.5billion cumulative economic impact from reduced activity in commercial fishing.
During the summer, LED has met with several of the top oil&gas exploration and oilfield service companies to address the impact of the six-month deepwater drilling moratorium, and has also remained in close contact with other vital industries in Louisiana to assess current and future impact on their operations.
The state is used to recovery from disasters. Remember, it’s only five years ago that the Gulf Coast was hit by Hurricanes Katrina and Rita. The region overcame a lot of obstacles to recover and rebuild following the hurricanes, and it will again in the wake of the oil leak.
There are clearly lessons that will be learned on many levels from the happenings of the last three months. Certainly, in the early days, many people, experts and laymen alike, misunderstood the gravity of the situation.
This may have been because, technically, nobody had been here before in this depth of water with this type of problem, and many thought that the so-called proven methods of containment would work. Clearly, they did not.
The, in my view, misguided public-relations management by BP and its senior executives will unquestionably come back to haunt them.
The worse case for many is that they will lose their jobs.
The shareholders could potentially lose their company to a predatory rival, and/or litigation surrounding the issue will drag on for years, draining resources – both cash and management time – thus devaluing their investments.
With the bulk of the institutional shareholders – approximately the same percentages on both sides of the Atlantic – being large pension funds, this could have economic implications for a far wider audience than just Louisiana.
For a second time in half a decade, many people on the Gulf Coast believe that their federal government was not sufficiently fleet of foot in the face of an obvious disaster to respond in an appropriate way, whether that was to avert or minimise a negative environmental impact or to respond with resources to assist the commercial entities involved in working to cap the leak.
Many of the various US national agencies charged with giving approvals for local state initiatives seemed – similar to five years ago – to take an inordinate amount of time to reach a conclusion to their deliberations and, even then, appeared on occasion to ride roughshod over the wishes of the local state and parish officials.
Meanwhile, the state government in Louisiana, having learned some tough lessons in 2005, quickly established 12 business recovery centres throughout southern Louisiana to offer one-on-one consultations and provide assessment of economic loss for small businesses, and by May 1, only days after the rig explosion, had set up the nation’s first emergency operations centre, working with the Governor’s Office of Homeland Security and Emergency Preparedness (GOHSEP), which is dedicated to business recovery efforts.
Called LA BEOC, it is a partnership between LED, GOHSEP, Louisiana State University, the University of Louisiana-Lafayette, the state’s business leaders, trade associations, economic development organisations and representatives from Louisiana’s volunteer organisations active in disasters.
While the tragedy of this incident will live in the memory of all those closely involved, particularly the families of the 11 employees who lost their lives, the long-term business of oil&gas extraction from the Gulf of Mexico that began in 1949 will go on, and the state of Louisiana, its people and its government will remain at the forefront of those efforts.
They will continue to employ the best technologies and practices from at home and around the world – including Aberdeen – during both the good times and the bad to keep the oil&gas flowing to a population that needs to come to terms with its energy requirements and the risks that its industrial base takes in order to satisfy that demand.
David Smallman is managing director of Pathfinder Team Consulting and a Louisiana aficionado