Are Gulf Drilling Companies Creating Jobs?
Lori Ann LaRocco conducts the following interview:
There is an interesting fact that many may not know, there are more rigs in the Gulf of Mexico now than there were before the Deep Water Horizon accident.
At the date of the explosion there were 115 rigs in the Gulf. This includes all three types of offshore rigs: Jack Ups, Semi-submersibles and Drill Ships. Out of the 115 rigs, 68 were working and 47 were not.
Fast forward to February 3, 2011, there are 125 rigs in the Gulf. Thirty-four are working and 91 are not. What’s interesting with the research is we have seen an increase of two drill ships.
At the time of the explosion, there were nine drill ships, eight were working, one was not. Now there are 11 drill ships in the Gulf. Three working, eight are not.
Now mind you the number of rigs not working has increased, but these rig workers are still being employed. Sources tell me companies are confident they will be able to drill in the Gulf in the near future so they still have their employees on the payroll.
I decided to speak with Moody’s (NYSE:MCO) Analytics Economist Chris Lafakis. Lafakis is no ordinary economist. He specializes in energy and has been following these trends. I asked him to break down what he is seeing both on the oil, natural gas and alternative energy front.
He also gave me his estimate of how many people are really working in off-shore drilling in the US: not more than 12,500.
LL: The fact there are more rigs in the Gulf than before the disaster, what does that tell you about the confidence in the oil industry?
CL: This tells me that industry believes 2011 will be the year in which permitting recovers from Deepwater Horizon. If oil drillers did not believe that the administration would normalize its process of awarding permits to new drillers, there would be far fewer rigs in the Gulf of Mexico today, and rigs that are primarily used for deepwater drilling would not be on contract for the rest of the year.
LL: The unofficial moratorium has been an emotional topic for those who are in the industry. Based on your extensive research, just how many jobs does Gulf drilling create?
CL: There are 50,000 employees in the entire natural resources and mining industry in Louisiana. About 10 percent are not related to oil or gas extraction, and my sense is that 75 percent or more of the oil and gas extraction jobs are related to onshore activities as opposed to offshore activities.
Of the 175 active drilling rigs in LA, only 24 are offshore, and there are only three offshore rigs in Texas. It is certainly true that more employees are employed per rig in offshore than onshore, but my sense is that offshore drilling in the Gulf doesn’t directly employ more than 12,500 workers. Also, keep in mind that the moratorium only applied to deep water drilling, and that there are 10 more rigs in the Gulf now than there were prior to Deepwater Horizon.
LL: Does this number employed include the ripple effect jobs that service the rigs (like food services for example)? If not, can you quantify that?
CL: No, it does not. Economists typically account for the ripple effect jobs by using employment multipliers.
It is true that the average oil driller is well-paid; thus, the employment multiplier is higher than for most industries. If we use a high multiple of 4 and a high estimate of 12,500 workers, the number of auxiliary jobs supported would be 50,000.
Under that scenario, the number of jobs both directly and indirectly supported by the offshore industry would be 62,500, or roughly 3.3 percent of total employment in Louisiana and 0.05 percent of total employment in the U.S.
LL: The Obama Administration has been a champion for green jobs and they have used numbers to back up their position of why the nation should go green. Have you been able to come up with those numbers? Do you have any hard numbers?
CL: The biggest challenge with respect to clean energy is distinguishing from a clean energy economy job and a regular one. The government has taken a stab at classifying a “green” job using two methods, one is aggressive and the other is more conservative. According to their research, green products and services is about 1 to 2 percent of our total private business economy in 2007 which translated into about 1.8 to 2.4 million jobs.
PEW completed an alternative study that used an even more conservative criterion for measuring jobs in the clean energy economy. They found that employment in the clean energy economy accounted for 0.5 percent of total U.S. employment in 2007. The study also revealed that clean energy economy jobs have grown more than 2.5 times faster than regular jobs in the U.S. economy since 1998.
Lori Ann LoRocco is a Senior Talent Producer at CNBC, and author of “Thriving in the New Economy:Lessons from Today’s Top Business Minds.”
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