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Monday, May 1, 2006

Offshore Notebook

High Times

Things do seem to be booming in the offshore sector and promise to keep on doing just that.

Utilization of offshore rigs continues to inch up; it was above 83 percent in mid-April, according to the oil and gas industry web site Rigzone.com. More important, according to that source, offshore operators are ordering more rigs to be built in the coming years.

Eighty-eight "mobile offshore drilling units" are currently under construction or on order, which Rigzone said puts the offshore rig fleet on track for its largest growth in more than 20 years.

The building boom isn't expected to set any records. The last boom, when oil prices were comparable to today's levels, saw nearly 300 rigs built from the beginning of 1980 through 1983. Only about a third of that is expected to join the offshore fleet through 2009.

Part of that gap may be explained by comparing the inflation-adjusted prices of oil. The early 1980's level of $30 a barrel is $80-100 a barrel when adjusted for inflation, according to Rigzone, well below current prices of $60-70 a barrel. The gap also reflects the increasing difficulty in reaching new oil reserves, which typically are further offshore and deeper below sea level. This requires more capable (and pricier) rigs, which Rigzone noted are more difficult to justify financially.

Still, energy companies are pushing to tap those reserves, flush as they are with record profits. Last year, for instance, the U.S. companies Exxon Mobil and Chevron reported profits of $36.1 billion and $14.1 billion, respectively. They are also driven by what appears to be unrelenting demand for oil and gas, particularly in Asian economies that are sopping up supplies and sustaining high oil prices. Another motivating factor is the dwindling production of most U.S. areas other than the Gulf of Mexico.

Energy companies are taking advantage of technological gains that allow them to drill deeper--as far as 30,000 ft. down. This has helped oil production in the Gulf of Mexico jump. In 2004, the U.S. government recorded 531.9 million barrels from GoMex wells. That's 69.6 percent more than GoMex wells produced a decade earlier. 2004 also was a lighter year, with many platforms and pipelines having been damaged by Hurricane Ivan. In 2003, GoMex wells produced 569.1 million barrels, according to U.S. figures.

In addition to drilling and production, energy companies remain busy repairing damage to pipelines and rigs from last year's severe GoMex hurricanes--Katrina and Rita.

All of that activity is obviously good news for offshore support companies--maybe too good. The shortage of sufficiently qualified pilots and mechanics that some had been warning (and complaining) of is hitting hard, with rumors circulating of major operators mandating overtime for some pilots. Others are pressing their own pipelines for more skilled employees, as is the case of Air Logistics.

"We're as busy as ever," said Air Logistics President Mike Suldo. "We're limited right now only by the number of helicopters and pilots and mechanics we can get."

Air Logistics has partnered for several years with Vortex Helicopters, a Gulf Coast flight school, to supply it with skilled pilots. Under Vortex's Professional Pilot Program, students who complete the commercial- and instrument-rating training can apply for an internship with Air Log.

The offshore operator interviews Vortex's students, takes them on tours of its land-based and offshore facilities and sets them up to talk with Air Log pilots, giving them the chance to decide if offshore flying is for them.

Students with prospects at Air Log typically hire on as flight instructors to build the time that Air Log requires, which is about 1,000 hr. Suldo has said he likes the fact that Vortex students are coming out of Robinsons--the school's sole aircraft type--since they tend to be savvier about managing power and rotor energy and dealing with emergency procedures.

Vortex's facility in Long Beach, Miss. was wiped out by Hurricane Katrina last September. It saved most of its aircraft, but the hangar and student apartments were completely blown away.

As a result, the school has relocated to Acadiana Regional Airport in New Iberia, La., which is also Air Log's headquarters. At the new facilities, Vortex has three classrooms; the Long Beach site had one. More importantly, perhaps, its 17-bed dormitory has been replaced with a 128-bed unit.

Joe Sheeran, who owns Vortex with his wife, Mary, may need every one of those beds. In the three years that he has been running the program with Air Log, Sheeran said, Suldo has hired every pilot Vortex has sent him.

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