ACCESS NUMBER: 31154 

STUDY TITLE: Deepwater Program: Supply Logistics of OCS Oil and Gas 

Development in the Gulf of Mexico – Evaluation of Technological and Economic 

Parameters of Ports as Supply and Manufacturing Bases 

REPORT TITLE: Supply Network for Deepwater Oil and Gas Development in the 

Gulf of Mexico: An Empirical Analysis of Demand for Port Services 

CONTRACT NUMBER: 1435-01-01-CA-31154 

SPONSORING OCS REGION: Gulf of Mexico 

APPLICABLE PLANNING AREA: Central Gulf of Mexico 

FISCAL YEAR(S) OF PROJECT FUNDING: 2001-2004 

COMPLETION DATE OF REPORT: June 2004 

COST(S): FY 2001; $220,993: CUMULATIVE PROJECT COST: $220,993 

PROJECT MANAGER(S): J. Jayawardana 

AFFILIATION: UNO National Ports and Waterways Institute 

ADDRESS: University of New Orleans, College of Urban & Public Affairs, New 

Orleans, LA 70148 

PRINCIPAL INVESTIGATOR: J. Jayawardana 

KEY WORDS: Ports, New Iberia, Morgan City, Fourchon, Galveston, Deepwater Oil 

and Gas Industry 

BACKGROUND: Ports and port-associated support facilities provide critical staging 

areas for OCS oil and gas related activities. This supply network has expanded 

greatly in size, complexity, and sophistication since the installation of the first offshore 

platform in 18 feet of water off the Louisiana coast in 1947. As indicated in recent 

MMS-funded research on Port Fourchon, LA, the expansion of the offshore industry 

into deepwater has imposed new challenges on the exiting logistical system. Ports 

must be understood as a physical infrastructure, as intermodel foci of transportation 

networks, and as institutions operating in the context of fluctuating industry demand, 

consolidation of functions, and competition for business, services, and development 

funds. 

OBJECTIVE(S): The objectives of this study are to analyze the logistics of the 

offshore oil and gas industry’s transportation support system in the Gulf of Mexico by: 
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1. analyzing in detail, the operations of three Louisiana ports: Port Fourchon (a 

service base port), Port of Iberia (a fabrication port), and Port of Morgan City (both a 

service base and a fabrication port) and one Texas port: Galveston (a service port); 

2. defining technological procedures of a port providing services and or fabricated 

equipment to the offshore industry; 

3. analyzing the transportation network supporting the system from inland 

destinations to the ports, and modes of transport offshore; 

4. analyzing interrelationships among various economic sectors and the oil and gas 

industry based on transport volumes and activities; and, 

5. delineating major supply and demand relationships relating to transportation 

demand and offshore output. 

DESCRIPTION: This report presents an empirical analysis of the demand for port 

services generated by the deepwater oil and gas industry during its phenomenal 

growth during the last decade. During this period, the deepwater oil production 

registered a nine-fold increase while the gas production increased sixteen fold. In 

addition, technological developments in seismic data acquisition, large deepwater 

field discoveries, and the innovative production systems completely transformed the 

industry and the logistical support network. Although the logistical support system is 

a vital component of the industry, empirical studies analyzing the supply network 

adjustments from the perspective of port services are currently not available. 

Therefore, the demand analysis in this report fills a void and is intended to be useful 

for port planning and investment decisions. 

The methodological approach followed in the analysis was determined by the nature 

of port activities at each port and data availability. For example, for Port Fourchon 

the demand for port services was estimated using time-series data from 1992 to 

2001. The variable relationships between several industry variables and port 

services such as port tonnage, truck traffic and inland barge traffic were estimated 

using regression analysis. Similarly, for the Port of Morgan City specializing in 

shipbuilding, the demand relationships for vessel traffic on the Atchafalaya River and 

the industry variables were estimated. 

The regression models for Port Fourchon indicated that for every additional OCS well 

drilled the truck traffic at the port will increase by about 673 trips a year, inland barge 

traffic by 7 trips, and the tonnage handled at the port by 11,400 tons. Similarly, 

another model predicted that for every mile of pipeline approved, truck traffic will 

increase by 217 trips, barge traffic by 3 trips, and port tonnage by 46,000 tons. 

SIGNIFICANT CONCLUSIONS: Based on all the information in this report, it is 

evident that the ports have expanded infrastructure investment to meet the growing 

needs of the deepwater oil and gas industry. As the industry grew at a faster pace 
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than the supply of port services during the period, the ports have enjoyed higher 

returns resulting in better financial performance. However, as the deepwater oil and 

gas industry reaches a plateau, more information is needed in port investment and 

planning decisions. This report is an attempt to provide such information. 

STUDY RESULTS: Using empirical estimates, demand forecasts were developed 

through 2010 for each variable. According to these estimates, truck traffic is 

expected to grow by 67 percent between 2001 and 2010, barge traffic by 25 percent 

and the port tonnage by 100 percent. 

The regression models estimated for the Port of Morgan City indicated that for every 

additional OCS well rigged the number of non-self propelled vessels on the 

Atchafalaya will increase by about 12 trips. The traffic forecasts through 2010 

indicated a 62 percent growth for the period 2001 to 2010. 

With more than 60 percent of the port tenants engaged in OCS related services, the 

Port of Iberia experienced continuous growth in the 1990’s. Since activities at the 

Port of Iberia are concentrated on the assembly of prefabricated structures, repair 

and maintenance, a quantitative database with relevant demand and supply was not 

available. However, analytical models developed on port financial performance and 

infrastructure expansion indicated increasing demand for offshore services. The 

OCS service activities at the Port of Galveston have emerged as an important sector 

with an increasing share of waterfront land devoted to offshore activities and the 

location of several large-scale tenant operations in recent years. 

A qualitative analysis of different port variables also indicate the extent of 

adjustments made by the ports during the period. For example during the 1992-2001 

period, port tonnage handled increased seven-fold and port operating revenues 

increased by 82 percent at Port Fourchon. The operating revenues at the Port of 

Iberia increased three-fold during 1992-2000 the period. The amount of waterfront 

land allotted to OCS activities at the Port of Galveston increased twenty-fold during 

the same period. 

STUDY PRODUCT(S): Jayawardana, J. and A. Hochstein. 2004. Supply Network 

for Deepwater Oil and Gas Development in the Gulf of Mexico: An Empirical Analysis 

of Demand for Port Services; Final Report. Prepared by UNO National Ports and 

Waterways Institute. U.S. Dept. of the Interior, Minerals Management Service, Gulf 

of Mexico OCS Region, New Orleans, LA. OCS Study MMS 2004-047 98 pp.