Matthew Simmons is an author and energy investor who happens to give some pretty good presentations. I noticed a new one that had some very important fact I'd like to highlight.
Here's the Presentation [PDF]. It was put together for Acadiana Business Magazine and is all about the Louisiana's oil industry.
As I've pointed out before, there's a huge amount of infrastructure off the Louisiana coast. At least $100 billion dollars in offshore infrastructure. Simmons points out that offshore is the most important "Parish" in the state. The heart of Gulf of Mexico Oil production is in South Louisiana. All of the major support bases and logistical centers, as well as the pipelines and a good chunk of the refineries are in Louisiana.
There are a couple of slides I'll steal that I think are important because they illustrate a point far better than I can in words:
Production Scorecard, From Matthew Simmons
One of the realities of offshore fields is their incredibly short lifespans. They are incredibly prolific for a couple of years and then the pressure gives out and the field depletes. Cognac peaked at 72,000 barrels/day 5 years after first oil. 10 years after that it was 17,000 barrels/day. Today, it's roughly 2,000 barrels/day. Since words don't really describe it as well as pictures, here's a few more slides I'll highlight:
NOTE: Curves from Simmons & Co.
What do the curves all have in common? Quick peaking fields with harsh declines (>10%/year sometimes, 4-6%/year is industry average). Because of that, 90% of the production comes from less than 10% of the fields. There are a lot of platforms out there that are only kept around because their abandonment costs are so high [not entirely true; a lot have extended leases on life thanks to subsea fields or pipeline stations for deeper fields]. Trace amounts of pollutants are one concern (see the Brent Spar for an idea of what I'm talking about), but I think the bigger issue is the hazard to marine traffic. The Gulf of Mexico has two of the biggest ports in the world (NOLA and Houston). Some of these platforms are only a couple thousand feet of major shipping lanes, which is like threading the needle for the really big, really unmaneuverable oil tankers and cargo vessels. There have been some minor collisions and some major near misses, but so far there's been no major accidents.
Another of his points I don't totally agree with: Louisiana's oil infrastructure is very old, which is true, but it tends to be pretty well cared for and Katrina was, in some respects, a blessing in that a lot of old equipment got replaced and upgraded. Rust isn't as big a deal as it could be. He raises the specter of having to rebuild or expand the LOOP. I've heard of the latter, but I've never heard of anyone saying the LOOP was rusting away.
One of the major subjective assertions he makes, that I happen to agree with, is that the demographics of the Louisiana oil industry, in terms of the aging workforce, might be the WORST IN THE ENTIRE GLOBAL OIL INDUSTRY. There's some young engineers that have been hired since the 2000-era boom and some old guys who survived the cutbacks in the 1980's, and almost nobody in the middle. Not a day goes by without more older engineers going into retirement. A company can keep a stable headcount, if you're lucky, but you'll never be able to keep the experience and talent level the same. The oil industry is paying a price for firing so many workers at the end of the oil bust. The business people thought the Gulf was a "Dead Sea" and these workers would no longer be needed. Oops.
Louisiana's oil industry has had several obituaries written for it, but it's not dead yet. When things are said and done, Louisiana will still be playing a major role in bringing energy to the nation, no matter what form that may come in.