With several major projects scheduled to start up beginning later this year, hopes are for waning Gulf of Mexico (GoM) production to pick up.

Figures recently released by the U.S. Energy Information Administration (EIA) show production in the GoM’s federal waters has steadily declined since 2003. Fossil fuel production for the federal offshore area stood at about 7,500 trillion Btu in 2003; however, that number fell to less than 4,000 trillion Btu, mostly due to plummeting natural gas production, by year-end 2013. The fall came as developers ramped up production onshore in shale plays, boosting supplies of not only gas but also oil across the U.S.

The moratorium imposed following the Deepwater Horizon accident played a role, but the data show the downward trend for gas emerged years beforehand although there were some occasional spikes in production between 2006 and 2007 as well as between 2008 and 2010.

“The once-larger federal offshore volumes have declined every year through [fiscal year] 2013, down 74% from [fiscal year] 2003. That decrease has been only partially offset by the now-larger onshore volumes, which have increased 17% over the period,” the EIA said in a report about sales of fossil fuels produced from federal and Indian lands. “This declining natural gas production from federal lands coupled with increasing total U.S. natural gas production steadily reduced the federal lands share of total U.S. natural gas production.”

From 2003 to 2013, gas production from federal GoM land plummeted from just under 120 Bcm (4,250 Bcf) to just more than 28 Bcm (1,000 Bcf). Likewise, volumes of natural gas plant liquids (NGPL) also dropped during that time period, down 14%, as onshore NGPL volumes grew by 40%.

Oil production stats were not as dramatic. Crude oil production on federal GoM land was more than 525 MMbbl in 2003 but dropped to just under 450 MMbbl by year-end 2013. There were notable production jumps, including from 2009 to 2010 when production increased from just more than 500 MMbbl to just less than 600 MMbbl.

But the situation appears to be turning around, at least for oil, according to Barclays, which issued a research report focused on GoM oil July 11.

“Significant decline rates and maintenance, as well as reduced drilling activity in the aftermath of the Deepwater Horizon oil spill, have led to steeper field level declines that have reversed only recently,” Barclays said. “Oil-directed drilling rigs dwindled from 20 to five on average after the incident, and operators deferred drilling activity at existing fields. Since then, however, drilling activity for oil and gas has picked up, increasing almost 50% in 2012, 20% in 201 and 10% in 2014 YTD [year-to-date] compared with the prior year.”

During the past two years, natural field declines or major turnarounds have led to lower-than-expected production, Barclays said, noting these include the Droshky, Shenzi and Great White fields as well as a major turnaround at BP’s Thunderhorse.

“Current projections estimate the federal GoM will grow from 1.4 Mbbl/d in 2014 to 1.6 Mbbl/d in 2015,” Barclays said in the report. “New well performance and keeping decline rates in check will influence the GoM’s contribution in 2015. Production from the Lower Tertiary play is still in its infancy and comes mainly from experimental production at Cascade and Chinook. The first real test of production comes from the Jack and St. Malo fields.”

Chevron’s Jack/St. Malo and Big Foot projects are on schedule for a 2014 startup and second-quarter 2015 startup, respectively. Between now and 2017, there are six other major GoM oilfield projects scheduled to come online. These include the Anadarko-operated Lucius and Heidelberg developments, both 80,000 bbl/d spars. First oil for the Lucius project is expected this year, while first oil for the Heidelberg project is anticipated in 2016, according to the company’s website.

Hess’ Tubular Bells development is also due to start up this year. Earlier this year, Hess said its 2014 capital and exploratory budget includes $400 million for the development and startup of the deepwater project. Hess, which has 57% interest in the project and serves as operator, will install the hull, topsides and subsea equipment, complete two production wells, and will drill a fourth production well, according to a news release. Other major projects include ExxonMobil’s Julia, Noble Energy’s Gunflint and Shell’s Stones.

Contact the author, Velda Addison, at vaddison@hartenergy.com. Image on the home page is courtesy of Anadarko.

Comments