The ongoing slump in oil prices has created a new atmosphere concerning the future of energy in the U.S. Many drilling companies will find it tough to post profits at current price levels while others have significantly scaled back their original 2015 plans for production.
New policy initiatives on behalf of the Obama administration indicated the way forward in the U.S. will be a matter of striking the right balance between both energy demand and the need for environmental protection. The New York Times reported the president is prepared to announce a new offshore federal leasing program that allows oil and gas drilling off the coast of Atlantic.
Virginia, Georgia and the Carolinas would be affected by the new plan, and companies are already positioning themselves to secure the first leases that may become available. While the approval process is a lengthy one, the U.S. Interior Department will spearhead the effort, which must also pass inspections and be up for public review prior to any action occurring.
"The demand for more drilling subsided due to a global supply glut."
The five-year plan will run from 2017 to 2022, and provide the oil and gas industry with a new frontier for development – a definite win for those looking to expand their operations offshore. While some states are hesitant to approve of such a plan, many, including Virginia actually pushed for similar policies in the past, according to The Times.
Protecting Alaskan wilderness
Just days before the announcement that Atlantic ocean drilling could take place in a matter of years, the Obama administration also indicated it plans to section off more than 12 million miles of land in the Arctic whereby future drilling is banned, The Washington Post reported.
Because Alaska's economic backbone relies on extensive oil drilling in the region, current drilling arrangements will be maintained. However, in the near future, additional wildlife refuges and offshore regions may be subjected to similar bans.
The move is seen by analysts as one of reconciliation as energy and environmental activists have made headlines in recent months, particularly due to the high-profile case of the Keystone XL pipeline.
Finding middle ground
With the new Congress in session, the president will face increased pressure from conservative factions that support expanded drilling. However, with prices of oil per barrel less than half of what they were six months ago, the demand for more drilling has subsided due to a global supply glut.
As such, onshore rig counts in the U.S. are predicted to fall more than a quarter in 2015 compared to the previous year, according to Wood Mackenzie data in RigZone.
The U.S. Energy Information Administration expects oil prices per barrel to rebound to $58 this year and further to $76 by 2016. The key to the future of the market will be just how much time it takes for the world to consume the excess supply of oil.
With the U.S. being a top importer and exporter of oil and gas, the government may continue to wait and see how the future energy market plays out. In the meantime, the president will likely continue on his current course of allowing drilling in certain areas while banning it in others.
"The administration remains far more bullish on offshore leasing than its environmental allies would like, if less so than industry and the G.O.P. wish," said former Interior Department official Paul Bledsoe, according to The Times.
Recent maneuvering indicates the second half of 2015 could be defined by oil and gas companies revamping production and returning back to their high-volume drilling levels of 2014, while also making inroads toward offshore operations.
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