ACCESS NUMBER: 31058

STUDY TITLE: The Current Dynamics of the Oil and Gas Industry 

REPORT TITLE: Dynamics of the Oil and Gas Industry in the Gulf of Mexico: 1980-2000, Final 

Report 

CONTRACT NUMBER: 1435-01-00-CT-31058 

SPONSORING OCS REGION: Gulf of Mexico 

APPLICABLE PLANNING AREA(S): Western, Central, and Eastern Gulf of Mexico 

FISCAL YEAR(S) OF PROJECT FUNDING: 2000; 2002 

COMPLETION DATE OF REPORT: February 2003 

COST(S): FY 2000: $157,740; FY 2002: $36,047; CUMULATIVE PROJECT COST: $193,787 

PROJECT MANAGER: Barbara Wallace 

AFFILIATION: TechLaw, Inc. 

ADDRESS: 4340 East West Highway, Bethesda, Maryland 20814 

PRINCIPAL INVESTIGATOR(S)*: B. Wallace, J. Duberg, J. Kirkley, D. Olien, R. Olien 

KEY WORDS: History, price, corporate organization and strategy, economics, finance, 

technology, labor, regulatory environment, September 11th aftermath. 

BACKGROUND: The Gulf of Mexico (GOM) has a large share of the country’s known offshore 

oil and gas resources and dominates U.S. offshore oil and gas activity. Much of the technology 

needed to push farther into the gulf and other parts of the world was initially developed by the 

offshore oil industry operating in the GOM. The role of the oil and gas industry operating in the 

gulf has changed over time. Traditionally, the region supported the industry locally and as it 

expanded internationally. In more recent years, the flow has been from abroad to the GOM. 

The GOM was known as the “Dead Sea” in the mid-1980’s because the decline in oil and gas 

prices after 1981 made the higher cost of offshore exploration and operation unattractive. That 

changed with a variety of factors or events, including the discovery of subsalt reservoirs in 

shallow water, lower prices from service providers, production from new deepwater reservoirs, 

technological advances, and the Deep Water Royalty Relief Act. The dynamics of the oil and gas 

industry have changed since the Minerals Management Service was established in 1982. Some 

of the changes of the last 20 years were unanticipated; others were slow to emerge as trends. 

This study sought to increase the understanding of the sources and forces of social, economic, 

and industry impacts from the oil and gas industry operating in the GOM and what those sources 

and forces mean for the future. 

OBJECTIVES: (1) To gather and review the knowledge of local, national, and international 

changes in the oil industry operating in the Gulf of Mexico between 1980 and 2000 and (2) To 

relate the significance and the implications of those changes to social, economic, and industry 

impacts in the Gulf of Mexico. 
ACCESS NUMBER: 31058

DESCRIPTION: The study focused on two issue areas and four cross-cutting topics as shown in 

the following table: 

 Issue Area 

Topic 

Oil and Gas Price Change Corporate Organization and 

Strategy 

Economics and Finance 

Technology 

Labor 

Regulatory Environment 

Changes that occurred in the issue areas and cross cutting topics reflect changes in industry in 

general, the oil and gas industry specifically, or individual companies or projects. 

One of the Appendices, written in 2002, examines dynamics in the industry related to stakeholder 

expectations, globalization, and risk management after September 11, 2001. 

SIGNIFICANT CONCLUSIONS: The following factors stand out as major forces that created 

change in the oil and gas industry between 1980 and 2000: 1) increasing volatility of prices, 2) 

rising costs of oil and gas projects, 3) globalization of the industry, 4) increased concern for 

shareholder value, 5) ascendance of technology, and 6) management of risk. 

A convergence of factors led to the resurgence of the GOM. The shift to areawide leasing 

allowed companies to assemble GOM tracts sufficiently large enough to increase the potential for 

finding oil and gas and to justify deepwater exploration. The Deep Water Royalty Relief Act 

allowed MMS to suspend royalty payments to increase interest in deepwater exploration. 

Seismic imaging reduced the probability that exploration would be unsuccessful and that 

additional oil and gas would be found in properties being reworked. Technology also made 

improvements in production. Prices were generally improving in the mid-1990’s. Companies 

whose business focus is the GOM, with favorable technology, regulatory, and price factors, 

began a series of exploration and development activities which resulted in the resurgence of the 

GOM. 

STUDY RESULTS: Changes in the industry between 1980 and 2000 led to industry and 

socioeconomic impacts onshore and offshore. The industry is now a high tech, new economy 

industry. Risk management, corporate strategy, technology, and other factors have pushed the 

oil and gas industry in the direction of increasingly complex arrangements and operations. In the 

20-year period, the strategy shifted from science-based to economic-based production. 

Technology has generally allowed the industry to produce more oil and gas with less 

infrastructure and fewer personnel. The time required to do work has been reduced and the 

amount of information to do work has increased. 

A significant change related to personnel occurred in the last 20 years. The industry responded 

to price volatility with a series of cost cutting programs that changed the way the industry uses 

personnel and how prospective workers respond to the industry. The cost cutting programs have 

left the industry with a shortage of personnel in all areas, reduced worker loyalty, dispelled the 

idea of job security, and made recruitment more difficult. 

The basic steps to find, produce, and market petroleum remain unchanged and involve both 

onshore and offshore activities and result in onshore and offshore impacts. Changes in the 

industry are modifying these impacts. The rise of information technology is redefining where work 

is done. The ability to transmit electronically large amounts of information with ease and monitor 

physical activities remotely means that workers, in many cases, can be physically remote from 

where work is done. Technology advances have meant more can be done with fewer people. 

Corporate decision-making has led to the ascendancy of Houston as a concentrated center of oil 
ACCESS NUMBER: 31058

and gas companies and employment, shifting activities from New Orleans, Denver, Tulsa, and 

other formerly prominent oil and gas cities. 

STUDY PRODUCTS: Wallace, B., J. Duberg, and J. Kirkley. 2003. Dynamics of the Oil and Gas 

Industry in the Gulf of Mexico; Final Report. OCS Study 2003-004. Prepared by TechLaw, Inc. 

U.S. Dept. of the Interior, Minerals Mgmt. Service, Gulf of Mexico OCS Region, New Orleans, LA. 

253 pp. 

Dynamics of the Oil and Gas Industry in the Gulf of Mexico: 1980-2000: electronic bibliography.