Analysts forecast economic impacts of GoM oil and gas from leasing, permitting bans

he contribution to the US economy from oil and gas production in the federal waters of the Gulf of Mexico would take big hits from leasing or drilling bans, as measured by a report released May 26 by the National Ocean Industries Association (NOIA).

NOIA commissioned an analysis that forecasts employment, contributions to the economy, and government revenues from the Outer Continental Shelf (OCS) oil and natural gas under three scenarios: a base case in which current policies continue, a ban on new offshore leases, and a ban on new drilling permits.

The analysis, from Energy & Industrial Advisory Partners, a consulting group, forecasts sharp reductions in jobs, economic contributions, and federal revenues if a ban on new leasing begins in 2022, and sharper reductions under a ban on new drilling starting in 2022.

“Although no firm policy proposals have been advanced, one of a number of potential restrictive policy changes that has been discussed related to the Gulf of Mexico oil and natural gas activities has been an end to new leasing in the federal Outer Continental Shelf,” the report said.

Another policy change discussed has been a ban on new federal drilling permits on the OCS.

Such bans would devastate Gulf Coast economies and would damage the US as a whole, NOIA said in a statement accompanying the report.

Less oil, less gas, fewer jobs

Companies produced more than 2.3 MMboe/d from the OCS in the Gulf in 2019. The report’s base case forecasts output rising for some years and then declining to 1.96 MMboe/d in 2040, with an average over 2020-2040 of about 2.5 MMboe/d.

Under a ban on new leasing, the forecast is for a decline to 910,000 boe/d in 2040 with an average over 2020-2040 of 2 MMboe/d.

Under a ban on new drilling, the forecast is for a decline to 323,000 boe/d in 2040 with an average over a 2-decade period of 1.1 MMboe/d.

Gulf of Mexico federal offshore oil and gas work supported an estimated 345,000 US jobs in 2019. The base case forecasts an average of 370,000 jobs supported per year over 2020-2040.

With a new leasing ban, the estimate is for 268,000 jobs per year over the forecast period. With a drilling ban, the estimate is 179,000 jobs per year.

Smaller economy, less federal money

The base case forecast is for an annual average of $31.3 billion contributed to the US economy over 2020-2040. A leasing ban would cut that to $22.1 billion, and a drilling ban would shrink it to $14.4 billion, the report said.

Federal revenues over the forecast period would average $7 billion a year in the base case, $5.2 billion with a ban on new leasing, and $2.7 billion with a ban on new drilling.

Because the federal government shares Gulf of Mexico OCS oil and gas revenue with four coastal states, the states also would take a hit if new drilling is banned, the report said. Similarly, funds would shrink for the Land and Water Conservation Fund, supported by federal OCS revenues.