US gulf output keeps creeping higher despite maturity

• Date: 01 February 2020
• DOI: http://doi.org/10.1111/oet.12756
• Published date: 01 February 2020

FOCUS

US gulf output keeps creeping higher despite maturity

The western US Gulf of Mexico (GoM) remains America's

only large offshore producing region, with drilling bans

having prevented large-scale development in the eastern

Gulf, and on either the US Atlantic or Pacific coasts.

1

The

region is also the country's biggest source of conventional

crude and the world's most mature offshore province.

Despite its age, new discoveries and developments are set

to keep increasing production over the next few years

from current record levels.

Over recent years, oil and gas output from the GoM

has been rising, although it has fallen as a proportion of

the US total—as shale output grows even faster. Produc-

tion from the GoM federal offshore accounted for 17% of

the US total in 2018, at 1.8 mn bpd—which was a record.

It edged up again in to 1.9 mn bpd in 2019 (despite shut-

ins for Hurricane Barry), and the US Energy Information

Administration (EIA) expects another record in 2020

(of 2 mn bpd), including any downside from likely hurri-

cane activity.

Despite the rise, the EIA expects the GoM share to fall

to 15% of total US crude oil production in 2020, compared

with 23% in 2011 (and 17% in 2018), as onshore produc-

tion growth (especially shale) continues to outpace off-

shore production growth—which has lessened its relative

important to the US energy sector.

The GoM also accounts for 5% of total US dry gas pro-

duction, while downstream, over 45% of total US petro-

leum refining capacity is located along the US Gulf coast,

as well as 51% of total US gas processing plant capacity.

A large portion of US crude imports arrive at ports in the

area, and much of the crude produced inland is piped to

the coast for refining and distribution. The pipeline infra-

structure that criss-crosses the region (on and offshore) is

some of the densest and most heavily utilized in the

world.

1|MAJORS LEAD THE WAY

Unlike the mature UK North Sea, where many of the

major western oil companies have divested as the size of

opportunities has fallen, the US Gulf still retains all its

big producers. BP is among the biggest,

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with output of

about 300 000 boe/d, up from less than 200 000 boe/d

about 5 years ago. The UK-head-quartered major expects

its output in the region to reach 400 000 boe/d by the

mid-2020s. Shell is also active, and has been particularly

successful in the GoM deepwater, with its output likely

to catch up with BP as it brings on new fields (see

Table 1).

Overall, eight major new projects came online in 2019

in the GoM and four more are expected in 2020. These

projects contributed over 40 000 bpd in 2019, and about

190 000 bpd is expected in 2020 as projects ramp up pro-

duction, according to the EIA. A new area of the Gulf

also began producing in 2019—Shell's Appomattox field

became the first Norphlet play (located along the eastern

Gulf rim) field to come online in May last year.

This year, projects coming onstream include BP's

Atlantis North (third phase of Atlantis project) off the

coast near New Orleans, which the company set in

motion in early 2019 with a budget of $1.3 bn. The pro-

ject comprises eight new wells that will add 38 000 bpd to

BP's production at Atlantis, and was initiated after BP

found another 400 mn bbl of oil at the field. BP says it

also plans to develop reservoirs at its Manuel prospect,

where Shell holds a 50% stake.

2|DEEPWATER HIGH-PRESSURE

Looking further ahead, in late 2019, Chevron said it would

go ahead with its Anchor project in the Green Canyon

area of the Gulf, which will be the region's first deepwater

high-pressure development.

3

Use of this new technology,

which is able to handle pressures of 20 000 psi, opens the

door to other high-pressure opportunities in the GoM.

Development costs at the 440 mn bl Anchor field are

expected to be about $5.7 billion, and the project calls for

a subsea arrangement and semi-submersible floating pro-

duction unit that will produce 75 000 bpd of crude and

28 mn cfd of gas beginning in 2024.

Chevron is the operator and holds a 62.86% stake,

with Total holding the remaining 37.14%. The pair also

DOI: 10.1111/oet.12756

4© 2020 John Wiley & Sons Ltd Oil and Energy Trends. 2020;45:4–17.wileyonlinelibrary.com/journal/oet