ACCESS NUMBER: 19903 

STUDY TITLE: Characteristics and Possible Impacts of a Restructured OCS Oil and 

Gas Industry in the Gulf of Mexico 

REPORT TITLE: Characteristics and Possible Impacts of a Restructured OCS Oil and 

Gas Industry in the Gulf of Mexico 

CONTRACT NUMBER: 14-35-0001-30660-19903 

SPONSORING OCS REGION: Gulf of Mexico 

APPLICABLE PLANNING AREA: Gulf of Mexico 

FISCAL YEARS OF PROJECT FUNDING: 1993; 1994; 1995 

COMPLETION DATE OF REPORT: November 1995 

COSTS: FY 1993: $47,000; FY 1994: $50,000; FY 1995: $2,994 

CUMULATIVE PROJECT COST: $99,994 

PROGRAM MANAGER: Ruth Seydlitz 

AFFILIATION: Environmental Social Science Research Institute 

ADDRESS: University of New Orleans, New Orleans, Louisiana 70148 

PRINCIPAL INVESTIGATOR: Ruth Seydlitz 

KEY WORDS: Gulf of Mexico; OCS Oil and Gas Industry; Five Types of Oil and Gas 

Companies; Oil and Gas Extraction; Business Environment; Business Characteristics; 

Business Practices; Major Corporations; Independent Companies; Possible Impacts; 

Restructured Industry 

BACKGROUND: A restructuring of the offshore oil and gas industry in the Gulf of 

Mexico began in the mid-1980s. Major companies have been reducing their presence 

while independent firms have been more aggressive. The resource base now is 

substantially different from the resource base when the major corporations began 

operations about a half a century ago. New sources of oil and gas are in areas from 

which extraction is increasingly difficult and capital intensive such as subsalt regions 

and deep water. In addition, the infrastructure is aging. Hence, operating conditions in 

the Gulf create different challenges and place different pressure on the companies 

currently operating than those experienced by the major corporations. Therefore, it is 

important to examine the characteristics, environment, and practices of companies 

currently active in the Gulf. 
ACCESS NUMBER: 19903 

OBJECTIVES: (1) To examine the characteristics of major and independent operators 

currently active in oil and gas exploration and production in the offshore Gulf and to 

determine how these characteristics have changed since 1986. (2) To investigate the 

business environment and to see how this has changed since 1986. (3) To explore 

how the characteristics of the companies affect their practices. (4) To explore how the 

business environment influences the practices of companies. (5) To determine if there 

is any evidence that a shift in the companies involved in offshore exploration and 

production in the Gulf has occurred. (6) To discuss potential impacts of such a shift. 

DESCRIPTION: There were two data collection phases of this project. Their first was 

an exploratory study of 11 significant major corporations and independent companies. 

Face-to-face in-depth interviews with key representatives form these firms were 

conducted. The results were used to construct an interview instrument, which was used 

in the second phase. The second phase was to conduct telephone interviews with 

upper level executives from five types of companies active in the offshore Gulf of 

Mexico. The companies were selected by random sampling within each of the five 

types of firms. The sample consisted of 11 major corporations, 13 large and 4 small 

integrated businesses. These numbers represent relatively large percentages of each 

of the five types of companies. The interview instrument used in the second phase of 

this project consisted of open-ended questions concerning the companies' 

characteristics and use of service firms in the fall of 1994 and in 1986; the executives' 

predictions about the future of the oil and gas industry in the offshore Gulf; and the 

influences of leasing policies, technological developments, federal agencies, and 

environmental regulations on the companies' practices in the Gulf. Frequency and 

percentage distributions were calculated for the questions that elicited answers that 

could be quantitatively coded. Content analysis was used to analyze the responses to 

the questions that elicited answers that could not be quantitatively coded. 

SIGNIFICANT CONCLUSIONS: The results reveal that there are five distinct types of 

companies operating in the Gulf: Major cooperation’s, large and small integrated 

independent firms, and large and small nonintegrated independent companies. The 

findings also suggested that six trends are occurring. First, there was an increase in the 

number of companies operating in the Gulf between 1986 and the fall of 1994. Second, 

most of the companies obtained more oil and gas in 1993 than in 1986. Third, most of 

the firms were more involved in exploration in the Gulf in 1994 than in 1986. Fourth, 

participation in joint ventures increased between 1986 and the fall of 1994. Fifth, 

changes in the companies' activities suggested a tendency toward becoming involved in 

downstream integration operations. Sixth, changes in characteristics, views of the 

business environment and practices implied that a shift is occurring in activity in the 

Gulf: the nonintegrated independent businesses are becoming more involved while the 

major and integrated independent companies are maintaining a steady rate of activity or 

reducing their involvement. 

STUDY RESULTS: The findings revealed that there were more differences between 

the five types of companies by integrations (integrated vs. nonintegrated firms) than by 

size or the usual categorization scheme of major vs. independent businesses. 
ACCESS NUMBER: 19903 

Regarding the companies' characteristics, the findings showed that most of the 

companies extract both petroleum and gas. Also, most of the firms obtained more of 

both substances in 1993 than in 1986, especially the nonintegrated firms. Moreover, 

the majority of the firms had their headquarters in the Gulf region, particularly the 

independent companies, while only about half of the other offices were in this region, 

mainly those of the nonintegrated concerns. Further, the bulk of the companies 

increased their staffs between 1986 and 1994, particularly the nonintegrated 

businesses. Finally, there were three key areas of employment: production/platform 

maintenance and operation, exploration, and administration. 

The responses to the questions about the business environment revealed that there 

was widespread support for areawide leasing and the reduction in the possible 

regulations (in descending order of influence): the Clean Water Act, the financial 

responsibility provisions of OPA '90, the Clean Air Act, and the increases in lease 

bonding to cover plug-and-abandon liabilities. Also, almost all of the companies used 

3D seismic data, about half did horizontal drilling, and very few, mainly major 

corporations, were involved in deep water or subsalt exploration. Moreover, almost all 

of the companies were involved in such joint ventures and most of the firms increased 

their involvement in such projects between 1986 and 1994. In addition, the use of 

service companies was ubiquitous and most of the firms made greater use of these 

companies in 1994 than in 1986. Finally, the majority of the officials were optimistic 

about the future of oil and gas extraction in the Gulf. 

Business characteristics affected the companies' operations. Major corporations 

extracted the most oil and gas, had their headquarters out of the Gulf region, and had 

the largest staffs. Independent firms were more involved in exploring in 1994 than in 

1986 and had their headquarters in the Gulf area. Integrated businesses had more of 

their other offices outside the Gulf region while nonintegrated ones had more of their 

other offices in the Gulf zone. In addition, integrated firms tended to close their other 

offices in this area between 1986 and 1994 while nonintegrated ones tended to open 

other office in this area. Moreover, integrated companies had larger staffs than did 

nonintegrated ones and integrated concerns tended to reduce their workforces between 

1986 and 1994 while nonintegrated ones tended to enlarge their staffs. 

The business environment also influenced the companies' practices. Almost all of the 

executives felt that the prices of oil and gas influence operations, over two-thirds of 

them were negative about the prices in the fall of 1994 and almost half were not 

optimistic about future prices. In addition, the executives felt that areawide leasing and 

the reduction of the minimum bid increased activity in the Gulf. Moreover, the 

executives viewed 3D seismic data and horizontal drilling positively while deepwater 

and subsalt exploration were too new for the executives to have an opinion on how 

these two technologies would affect their firms' operations. Finally, the executives were 

concerned that the four possible regulations would have adverse effects on the 

business environment and thus oil and gas activity in the offshore Gulf. 
ACCESS NUMBER: 19903 

There was more evidence for a shift in activity levels of different types of companies in 

the Gulf than evidence against such a shift. The results indicated that the three types of 

integrated companies are reducing their presence in the Gulf while the nonintegrated 

businesses are engaging in more exploration and production in this area. The evidence 

for the shift includes the following. First, the nonintegrated firms overwhelmingly were 

obtaining more oil in 1993 than in 1986 while only about half of the integrated 

businesses obtained more oil in 1993 than in 1986. Second, the vast majority of the 

nonintegrated companies did more exploring in 1994 than in 1986, yet only about half of 

the major and small integrated corporations were more engaged in exploring in 1994. 

Third, most the major corporations' headquarters were not in the Gulf region while most 

of the nonintegrated corporations' headquarters were in the area. Fourth, integrated 

firms closed offices in the Gulf zone while nonintegrated enterprises gained offices in 

this territory. Fifth, the integrated endeavors reduced their staffs while the 

nonintegrated concerns added employees between 1986 and 1994. Sixth, the bulk of 

the nonintegrated firms were more involved in joint ventures in 1994 than in 1986 while 

only about half of the integrated companies participated in more of these operations in 

1994 than in 1986. Seventh, the representatives of nonintegrated businesses were 

more optimistic about the workforce size in 1998 than were those from integrated 

companies. 

The potential impacts are due not only to the shift in the operators in the Gulf, but also 

to the changes in the prices of oil and gas, the degradation of the pipelines and other 

aspects of the infrastructure, the increases in the costs of drilling, and various other 

factors. Three categories of potential impacts were discussed: 1) working conditions 

and employment, 2) operations and 3) government revenues. 

STUDY PRODUCTS: Seydlitz, R., J. Sutherlin, and S. Smith. 1995. Characteristics 

and possible impacts of a restructured OCS oil and gas industry in the Gulf of Mexico. 

Prepared by the Environmental Social Science Research Instituted, Department of 

Sociology, University of New Orleans. OCS Study MMS 95-0055. U.S. Department of 

the Interior, Minerals Mgmt. Service, Gulf of Mexico OCS Region, New Orleans, La. 

196 pp.