By - Jim Vess

U.S. crude production in the Gulf of Mexico hit a record in 2017, output is projected to grow

Energize Weekly, April 18, 2018

U.S. crude oil production in the Gulf of Mexico hit a record 1.65 million barrels a day in 2017—and 2018 and 2019 production is set surpass that, according to the federal Energy Information Administration (EIA).

Gulf production hit that highest recorded annual level despite platform outages and pipeline problems in December 2017, as several new fields came online, EIA said.

Based on production from new and existing fields, the EIA projects that annual crude oil output will reach 1.7 million barrels a day in 2018 and 1.8 million barrels a day in 2019. The Gulf will make up 16 percent of total U.S. oil production for both years, according to the EIA’s Short-Term Energy Outlook.

Seven new projects came online in 2016, and production was ramped up in 2017 as they collectively produced an average of 126,000 barrels a day. Two more projects started production in 2017, adding another 10,000 barrels a day last year. EIA said it anticipates these nine projects to ramp up even more over the next two years.

Producers expect four new projects to come online in 2018 and six more in 2019, the agency said. The water depth of these Gulf fields ranges from 1,200 feet to 7,844 feet.

Still, uncertainties in oil markets could affect long-term planning and operations in the Gulf and “the timelines of future projects may change accordingly,” EIA said.

Gulf projects are less sensitive to short-term oil prices than onshore projects because of the long lead time required for exploration and development, but they were subject to the drop-in oil prices between 2011 and 2016.

“In 2015 and early 2016, decreasing profit margins and reduced expectations for a quick oil price recovery prompted many Gulf of Mexico operators to pull back on future deepwater exploration spending and to restructure or delay drilling rig contracts, causing average monthly rig counts to decline through 2017,” the EIA said.

The rebound in oil prices hasn’t yet had a significant effect on Gulf operations, but they do have the potential to lead to increasing rig counts and field discoveries in coming years, EIA said. Falling rig counts in the Gulf don’t impact production the way falling rigs counts for onshore operations do, but they do affect discoveries of new fields.

In March 2018, the Bureau of Ocean Energy Management held a lease sale for more than 14,000 federal Gulf of Mexico blocks, most of which did not receive any bids.

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