Oil rigs leave Gulf of Mexico for more lucrative jobs

The biggest long-term threat to oil and natural-gas production in the Gulf of Mexico isn’t hurricanes. It is the dwindling supply of drilling equipment.

Jack-up and deep-water rigs, the massive platforms and ships that drill for oil and gas in the ocean, are leaving the Gulf of Mexico for more lucrative jobs elsewhere.

This is expected to accelerate production declines in the Gulf, putting upward pressure on domestic energy prices. The rig exodus is squeezing what was an already tight market for drilling equipment. In 2001, about 148 rigs were in the Gulf. Now, about 90 remain, and more are expected to leave soon.

The rig migration will have the most pronounced effect on natural-gas production and prices because most of the rigs leaving the Gulf are jack-ups used to find gas in shallower waters. Gulf gas reservoirs are often quickly exhausted, so energy companies must keep punching new wells to maintain production. It “certainly puts an upward bias to natural-gas prices in the long-term,” says Jeff Tillery, an analyst with Pickering Energy Partners.

Wall St. Journal