Quest Offshore Resources, Inc.1600 Highway 6, Suite 300Sugar Land, TX 77478Tel. 281.491.5900Fax 281.491.5902
The Current State of Gulf of Mexico Offshore Oil and Gas Exploration and Development
While the offshore Gulf of Mexico oil and gas industry has seen some signs of recovery from thelow state it was in during the drilling moratorium, activity levels are still well below the levelsseen before the Macondo incident and well below the levels of the Quest baseline forecastbefore the incident. From a permitting, rig, and drilling activity perspective the industry is atbest flat compared to where it was before the drilling moratorium, with the growth that hadbeen previously expected both delayed and diminished. The only industry sector seeing healthygrowth is in the development of projects not dependent on further near term drilling. While thisis a positive, the majority of these projects were already well in the works before the incidentand are thus seeing these major equipment orders despite the moratorium.
As of the end of September, 21 floating rigs (those with subsea blow out preventers) areoperating in the Gulf of Mexico, of which only 18 are currently drilling wells.
Pre-moratorium 33 floating rigs were operating the Gulf of Mexico with 29 drilling wellsat that time.
This indicates a roughly 37 percent drop in both the number of rigs operatingand drilling.
Since the moratorium began, 11 rigs have left the Gulf of Mexico. Only one of these hasreturned, 3 rigs are currently sitting idle.
7 of these rigs have left to African countries including Egypt, Nigeria, Liberia, andThe Republic of Congo. 3 of these rigs have left to South America, includingBrazil and French Guiana. The remaining rig recently mobilized to Vietnam.
This translates to approximately 60 wells lost based on the original contract terms of these rigs.
The loss of these rigs amounts to lost spending of $6.3 billion and annual lost directemployment of 11,500 jobs over two years.
While the number of rigs operating in the Gulf of Mexico is expected to recover topre-moratorium levels by the middle of 2012, this fails to take into account the number of rigs which were expected to be operating in the region (based on stated operator schedules)in 2012 or future years.