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January 2011 Issue

Firing Line Report: Optimism Growing,
But Worries Linger for Offshore Oil

By Lauren Masterson
Managing Editor
Sea Technology Magazine

Once again this year, Sea Technology magazine asked leaders in the oceanographic/marine products and services industry to contribute to our annual Firing Line Report, updating us on their business over the past year and giving insight into what they anticipate for the market in 2011.

Their responses suggest that the effects of the global recession are beginning to ebb. Unlike last year, when more than a third of respondents reported that their sales had declined, most respondents this year said their sales in 2010 were either above or level with 2009. And when asked to describe the mood in the domestic and international ocean markets, most said they felt a sense of optimism.

Respondents seemed to apply this optimism less to their own businesses, however; nearly all of the responders replied that they expect sales at their own company to remain at or drop below current levels.

Offshore Oil Potential
The industry's disappointment with offshore oil and gas over the past couple of years has given way to a sense of unrealized potential.

Most respondents said they thought offshore oil had the greatest potential for growth, but they expressed concerns regarding U.S. federal government policies toward offshore oil after the Deepwater Horizon spill in the Gulf of Mexico.

Earlier in 2010, it seemed that some restrictions on offshore oil and gas leasing were about to be lifted. In late March, President Barack Obama laid out his plans for domestic energy production with an updated Minerals Management Service (MMS) Five-Year Leasing Program. The new plan would have enabled preliminary exploration to begin on areas off the Atlantic Coast from Delaware to Florida, areas in the Chukchi and Beaufort Seas in Alaska, and 24 million additional acres in the Eastern Gulf of Mexico.

This good news for the U.S. offshore industry was swiftly countered, however. Less than a month later, an explosion damaged the Deepwater Horizon drilling rig, which had been drilling for BP plc (London, England) in the deepwater Gulf of Mexico, causing the Macondo well to spill millions of barrels of oil into the gulf.

The effects of the spill, the largest accidental marine spill to date, were far-reaching. While it provided some short-term business opportunities for those involved in the pollution control market as authorities struggled to control the spill and protect the gulf, there was a major regulatory backlash.

As the government hastened to reassure the public that officials were doing all they could to ensure offshore drilling's safety, several major changes were implemented.

Within a month, Secretary of the Interior Ken Salazar had issued an executive order dissolving MMS, carving it into three separate bureaus. By the end of May, the Obama administration had imposed a six-month moratorium on all new drilling permits in waters deeper than 500 feet, and the administration continued to add a litany of restrictions and regulations in an attempt to ensure drilling safety.

As a result, while most of the respondents felt that offshore oil and gas was the field with the most potential for growth, their optimism for the industry was tempered by their uncertainties about how the latest federal regulations will affect this sector.

Active Product Categories
Respondents said that their most active product categories in 2010 were electrical equipment and fiber optic systems. Various types of sonar were also marked as categories of high activity.

Though manufacturers in the oceanographic/marine products and services industry were beginning to see some signs of hope for renewed prosperity over the past year, most are still hesitant to forecast a stellar year to come for their business. The overall mood appears to be cautious, watching and waiting to see how new government regulations will impact the industry.

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Sea Technology is read worldwide in more than 110 countries by management, engineers, scientists and technical personnel working in industry, government and educational research institutions. Readers are involved with oceanographic research, fisheries management, offshore oil and gas exploration and production, undersea defense including antisubmarine warfare, ocean mining and commercial diving.