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MMS ENVIRONMENTAL STUDIES PROGRAM: ONGOING STUDIES |
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MMS OCS Region: |
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Title: |
Diversifying Energy Industry Risk in the |
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Planning Area: |
Gulfwide |
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Total Cost: $165,302 |
Period of Performance: FY 2006 - 2009 |
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Conducting Organization: |
Coastal Marine Institute,
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MMS Contact: |
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Description: Background: The impacts associated with oil and gas supply interruptions created by hurricanes Katrina and Rita went beyond the region’s economy by impacting both national and international energy markets. These oil and gas supply interruptions occurred during perhaps one of the most inopportune times in the recent history of energy markets and underscored the need for diversifying energy industry risk in the Gulf of Mexico (GOM). This project proposes to investigate how the energy industry diversifies its risk exposure in general in the GOM, with a particular emphasis on insurance-related issues. Risk mitigation is secured through the use of various strategies, including but not limited to the following: the private insurance market, energy supply portfolio management, alternative energy development, and non-traditional markets such as hedge funds. All strategies, but most notably the private insurance market, have undergone significant changes in recent years. Pre-Katrina and Rita, major energy-producing and consuming companies were already beginning to invest considerable amounts of money in diversifying risk by re-allocating energy supply portfolios because there are continued strong business cases for doing so, irrespective of the current intense period of tropical activity. Geopolitical uncertainty had created considerable upward pressure on energy prices throughout the global economy, and forced many integrated companies to reassess the manner in which they make energy supply investment decisions. |
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Objectives: The purpose of this research is to examine the main issues associated with the energy industry’s risk diversification strategies, with a particular focus on the implications that these strategies will have not only on major oil and gas companies, but also smaller independents and Gulf Coast communities. The questions and topics that need to be examined in the Gulf of Mexico-specific analysis include: · How
do the major oil and gas companies’ allocate their energy supply portfolios traditionally
and how have those traditional allocations changed post-Katrina and Rita? · How
will diversifying energy supplies impact corporate goals and business development
in the · Given
the large amount of offshore infrastructure impacted by the recent hurricanes,
and the heavy concentration of offshore infrastructure in the Gulf, will insurance
issues play a greater role in influencing energy companies’ investment decisions? · Will
any of the impacts of changing current energy supply portfolios impact local and
state economies and if so, how do they compare to traditional E&P economic
impacts? |
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Methods: The methods will include a detailed literature review and synthesis of existing information, including: annual shareholder reports and 10-Q SEC filings from all major oil and gas companies operating in the GOM, research institute analyses, equity analyst reports, Wall Street Journal articles, government reports, trade journal articles, and trade association reports. |
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Products: A final report publication with annotated references. |
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Importance to MMS:
This research will provide MMS with
a thorough study on risk diversification choices being made by energy companies
and how they relate to the GOM region and its oil and gas activities. The study will specifically address how these
changes are impacting industry and have the ability to impact the communities
and economies of the |
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Current Status: A list of representative energy companies (E&P, seismic acquisition, drilling, integrated service, and midstream/field service) with operations and/or activities in the GOM is constructed. Background and baseline research on the representative companies, including the collection of their annual reports, is in progress. |
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Final Report Due: |
March 2009 |
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Publications: |
None |
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Affiliated WWW Sites: |
None |
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Revised date: |
August 2008 |
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ESPIS |
ESPIS
- All completed ESP Studies: |