US Gulf of Mexico Production Projected To Hit Record High
- Stephen Whitfield (JPT Senior Staff Writer)
- Document ID
- Society of Petroleum Engineers
- Journal of Petroleum Technology
- Publication Date
- April 2018
- Document Type
- Journal Paper
- 30 - 32
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The deepwater US Gulf of Mexico (GOM) sector has struggled since the onset of the oil price downturn in 2014, but as costs settle and operators establish new standards for running efficient projects, this year may be a significant turning point for the industry in the region.
In January, Wood Mackenzie published a report predicting that production of oil and gas in the deepwater GOM will reach an all-time record high this year, with more than 1.9 million BOPD, surpassing the previous record set in 2009 by nearly 10% and representing 13% growth year over year.
William Turner, Wood Mackenzie’s senior research analyst and lead author of the report, Deepwater GoM: 5 Things to Look for in 2018, said that, more than 2 months into the calendar year, the level of activity in the region is still on track to meet expectations. However, recent developments may have an effect on that trajectory.
In January, the US Department of the Interior (DOI) announced a proposal to place more than 90% of federal offshore land containing oil and gas—including land in the GOM—up for auction between 2019 and 2024. In February the DOI’s Royalty Policy Committee issued a recommendation for lower royalty rates for offshore oil and gas drilling on sea-bed owned by the US government.
If approved, royalties from off-shore drilling would drop from 18.75% to 12.5%, the lowest royalty rate per-mitted. The US Bureau of Ocean Energy Management (BOEM) had already relaxed royalty rates to 12.5% for some shallow-water leases in August 2017.
With the WTI and Brent crude prices still hovering in the low $60s as of early March amidst relatively high supply, the recommendation could make it more attractive for operators to look at bidding for offshore oil leases in the GOM.
Turner said while the decision on the royalty came faster than anticipated, it is likely the US federal government wanted it in place before Lease Sale 250 on 21 March. At the time of this writing, it was scheduled to be the largest regionwide sale in US history, with 77.3 million acres offshore Texas, Louisiana, Mississippi, Alabama, and Florida avail-able for exploration and development. The sale includes approximately 14,700 unleased blocks located in the GOM’s Western, Central, and Eastern planning areas. The BOEM estimated that these blocks contain about 90 billion bbl of undiscovered technically recoverable oil and 327 Tcf of undiscovered technically recoverable gas.
The royalty rate may have a bigger impact on operators’ decision making in the coming months. For instance, Turner said it is possible that Total may try to rebid for leases in the North Platte field—where it holds a 40% working interest—rather than taking over operation of its holdings from Cobalt International Energy.
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