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Gulf Projects Saved From Brunt Of Oil Price Storm

Gulf Projects Saved From Brunt Of Oil Price Storm

The plunge in oil prices may be hurting many companies with on-shore operations, but those drilling in the Gulf of Mexico (GOM) appear to be at least somewhat immune to the problem as it may correct itself by the time the Gulf fields begin producing, according to the US Energy Information Administration (EIA).

The agency reported March 3 that energy companies have been back at work producing oil and gas from deepwater wells in the GOM since the five-and-a-half month moratorium on drilling there prompted by the Deepwater Horizon accident of 2010, the worst in US history.

Even after the moratorium was lifted, development was slow to resume in the GOM through 2013. But now, the EIA says, a production surge is expected. “The relatively high number of fields that came online in 2014 and are scheduled for 2015 and 2016 production start-ups reflects the revival of interest and activity” in the GOM, the EIA report says. Related: Oil Majors Balk At Mexican Offshore Proposals

The estimated total, according to the agency, will be 1.52 million barrels per day in 2015, followed by 1.61 barrels a day in 2016.

The EIA expects eight new fields will begin production this year, and five more next year, all in the region known as the Mississippi Canyon due south of Louisiana. The report said they’ll add 265,000 more barrels per day by the end of this year, depending on the volatile weather in the region.

The report cautioned that the current price of oil, which has plummeted from about $115 per barrel in late June to about half that today, “adds uncertainty to the time lines of deepwater GOM projects.” But it added that “producers are collaborating to develop projects more cost-effectively” by acting quickly and sharing development costs.

“For instance, Chevron, BP, and ConocoPhillips recently announced a collaborative effort to explore and appraise 24 jointly held offshore leases in the northwest portion of the Gulf of Mexico’s Keathley Canyon” west-southwest of the Mississippi Canyon, the EIA said.

Meanwhile, the US Interior Department’s Bureau of Ocean Energy Management (BOEM) said March 3 that in August it will auction off 21 million acres of land beneath the GOM containing oil estimated at 200 million barrels and gas believed to amount to more than 900 billion cubic feet.

“The exploration and development of the Gulf of Mexico’s vital energy resources will continue to help power our nation and drive our economy,” BOEM Director Abigail Ross Hopper said in a statement. Related: First Drilling In 30 Years For This Forgotten Petro-Play?

The bureau has established a five-year lease program, ending in 2017, in which it has so far conducted seven auctions of land situated between nine and 250 miles off the US Gulf coast beneath water ranging in depth from 16 feet to more than two miles.

Last month the BOEM said it would put more than 40 million acres of the GOM up for auction on March 18. It estimated that that patch could produce as much as 1 billion barrels of oil and 4 trillion cubic feet of gas.

The GOM generates about 18 percent of US oil production and 5 percent of gas production, according to the BOEM. There’s no telling how much money the August auctions may raise, but previous sales brought in bids of more than $2.4 billion.

By Andy Tully of Oilprice.com

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