Energize Weekly, October 23, 2019
U.S. Gulf of Mexico crude oil production set a record in 2018 at 1.8 million barrels a day, according to the federal Energy Information Administration (EIA) Short-Term Energy Outlook.
The record-setting trend is forecast to continue in 2019 with production hitting 1.9 million barrels a day and 2020 with 2 million barrels a day – even with the shut-in of some platforms due to Hurricane Barry in July 2019 and adjustments for future weather-related shut-ins in 2019 and 2020.
Still, even at these levels of production, Gulf of Mexico (GOM) production on federal leases will account for 15 percent of total U.S. crude oil production in 2019 and 2020, compared with 23 percent in 2011, as onshore production growth continues to outpace offshore growth, the EIA said.
Hurricane Barry forced the evacuation of some production platforms and led to a fall in production in July to 1.6 million barrels a day from 1.9 million barrels a day in June. EIA estimates that production bounced back to 2 million barrels a day in August, although data is not yet available.
Eight new projects are slated to come into production in 2019, with another four in 2020. EIA estimates that they will add another 44,000 barrels a day of crude oil in 2019 and 190,000 barrels a day in 2020 as production ramps up.
“Uncertainties in oil markets affect long-term planning and operations in the GOM, and the timelines of future projects may change accordingly,” the EIA said.
Of the 12 new field starts, Murphy Oil, Occidental Petroleum, LLOG Exploration and Shell have two each. BP also has one new project coming online in 2020.
Since the discovery and development times for offshore properties are longer than for onshore, Gulf oil production is less sensitive to short-term oil price changes.
“In 2015 and early 2016, decreasing profit margins and reduced expectations for a quick oil price recovery prompted many GOM operators to reconsider future exploration spending and to restructure or delay drilling rig contracts, causing average monthly rig counts to decline through 2018,” EIA said.
Falling rig counts offshore do not affect current production as they do onshore, but instead may affect the discovery of future fields, the agency said.
“Crude oil price increases in 2017 and 2018 relative to lows in 2015 and 2016 have not yet had a significant effect on operations in the GOM, but they have the potential to contribute to increasing rig counts and field discoveries in the coming years,” EIA said.
