The Current Outlook for Offshore Drilling

Recently, we have heard quite a bit of news concerning offshore drilling.

At the end of January 2015, the federal Bureau of Ocean Energy Management (BOEM) released its 2017–2022 offshore lease draft plan offering 14 new offshore drilling leases, including one for the first time along the Mid- to Southern Atlantic coast. BOEM has already held some meetings with residents along the Atlantic coastline, with more planned in March in places like Atlantic City and Savannah. The meetings have allowed residents to learn about the process of offshore drilling and engage with federal officials in person and on the website, through March 30. Experts from several fields have already participated in the debate, including Erik Milito, director of Upstream and Industry Operations at the American Petroleum Institute, who sent a letter to the editor of the New York Times about how the U.S. isn’t doing enough “to keep pace with countries around the world.”

Following on the heels of the BOEM announcement, The U.S. Department of the Interior released offshore-drilling draft rules that would require oil and gas companies drilling in the Arctic to have an “integrated operations plan that details all phases of the exploration program for purposes of advance planning and risk assessment.” While it may take time for these draft rules to become finalized, the intention seems to be to hold drillers closely to those standards even before they’re approved. The Interior also stated that it wanted to ensure not only environmental and personnel safety in the Arctic but also to provide enough flexibility for “technological innovation.”

Finally, industry chatter concerning offshore drilling and oil prices remained downbeat, with news breaking at the end of February that “the number of deepwater rigs ‘stacked’ or scrapped is set to hit a two-decade high.” Offshore driller SeaDrill predicted a little less than a quarter of the world supply of such rigs would be idle this year. Additionally, day rates for deepwater rigs have fallen to $400,000 as drilling companies have reduced exploration budgets and shed contracts due to reduced crude prices. This has led many investors to wonder when prices will appreciate and become more sustainable.