WHAT'S AHEAD IN 2001

Offshore sector ready to handle challenges enroute to bright future

Richard M. Currence, Executive Vice President, Tidewater, Inc., and Chairman, NOIA, New Orleans

During the past year, it has been my privilege to serve as chairman of the National Ocean Industries Association (NOIA). Looking at the industry from that perspective, 2000 has been a remarkable year indeed. The rapid rise in oil and natural gas prices led to wide speculation as to whether we were seeing a temporary spike in prices or the onset of a new paradigm.

Those higher prices caught the public’s attention when heating oil rates spiked in the Northeast last winter, and when gasoline prices rose dramatically last summer, especially in the Midwest. Because this is an election year, higher prices also caught our politicians’ attention, and energy policy quickly became a campaign issue.

"While Gulf of Mexico activity grew, it did not keep pace with the growth rate for oil and gas prices."    – Alexander Kemp

We still don’t know what all of the fallout will be from this latest "energy crisis," but it did prompt President Clinton to authorize the release of 30 million bbl of crude oil from the Strategic Petroleum Reserve. Results of that decision are not yet clear at this writing. One thing is clear, however – our politicians once again have signaled to the public that the federal government will intercede in the market to protect their "right" to cheap energy.

While the level of Gulf of Mexico (GOM) activity grew, it did not keep pace with the growth rate for oil and gas prices. Part of this stemmed from uncertainty about how long higher prices would last. Another part was due to still-fresh memories of the beating that the industry took during the era of $9 oil as recently as two years ago. Looking ahead, I am optimistic that we will see a steady GOM activity increase, both on the shelf and in deep water. A significant portion of that growth will stem from higher natural gas prices and the clear need to enhance our ability to meet growing gas demand.

Expanding gas demand may be about to open yet another GOM frontier. While only in its earliest stages, MMS is exploring what might be done to stimulate deep drilling for gas on the shelf. ("Deep" is defined here as wells drilled to greater than 18,000 vertical ft below the mud line.) It appears that consideration is also being given to possible new incentives for subsalt projects. NOIA has been asked by MMS to coordinate the industry / agency effort in this area. While it is far too early to forecast an outcome, this activity clearly demonstrates the growing recognition by government and industry that new approaches will be required if we are to meet future gas demand.

The most exciting GOM area continues to be deep water. Technological advances continue to enable E&P operations in ever-deeper water. While new deepwater projects continue to make headlines, exploratory drilling is occurring in record-setting water depths. The greatest technical challenges surround production and transportation of oil and gas from these ultra-deep wells. One answer may lie in the deployment of floating production, storage and offloading systems (FPSOs). Oil would be produced to a tanker-like vessel for preliminary processing and transportation to shore by shuttle tankers. MMS is already studying the potential environmental impacts of FPSOs.

Also in the deepwater arena, the automatic, royalty relief provisions of the Deepwater Royalty Relief Act expired in November 2000. For all of the past year, NOIA has led an industry-wide effort to work with MMS to develop new deepwater royalty relief policies to replace the expired legislation. While not yet complete, significant progress has been made, and we hope to see the process conclude before the end of the year.

One of NOIA’s major challenges is evolution of the petroleum industry. Tracking our shifting membership amid mergers and acquisitions is one of the necessities of life in this industry. This trend – which we don’t expect to end anytime soon – underscores the need for the association to continue its program of aggressive recruitment.

When I wrote this, election day was still a month away. From all appearances, the presidential election was too close to call. It also was anything but clear as to which party would control the Senate and the House of Representatives. Regardless of the election’s outcome, it is clear that we will have a new administration to deal with and new members of Congress to engage.

One of the things that disturbed me about the course of the campaign was the seeming glee with which some candidates bashed "Big Oil" at every opportunity. That, coupled with a lot of dreamy rhetoric about increased fuel efficiency and renewable fuels, suggests that some of our politicians and a large portion of the public-at-large are woefully uninformed about the reality of our energy situation.

What is obvious, and has been obvious for some time, is that there is a crying need to make the public more energy literate. This task is so vast that no one segment of the energy industry can carry the load alone. It will take an effort on the part of all who are involved in energy to carry to the public the message of how critical reliable energy sources are to their future well-being and the well-being of our nation. Only when that message has been received and understood can we begin to discuss what must happen to ensure that those reliable energy sources will be there when they are needed. NOIA is prepared to do its part.

The year 2000 has been quite a ride, and I feel fortunate to have seen it unfold from my position as NOIA’s chairman. Looking ahead, I think that our industry’s future is bright. There will be numerous and difficult challenges, but I believe our industry has the tools and the will to overcome them.

Richard Currence is executive vice president of Tidewater, Inc., and chairman of the National Ocean Industries Association. Mr. Currence began his industry career soon after he earned his LLB at Tulane University’s School of Law in 1964, when he joined Texaco, Inc., as a contract attorney. Since that time, he has served in a variety of posts throughout the offshore service vessel industry. In 1978, he became president and CEO of Gulf Fleet Marine Corp. In 1985, Mr. Currence joined Tidewater, Inc., as senior vice president, becoming executive vice president in 1990.