Gulf of Mexico output to rise 43 pct by 2019

10 04, 2012 by Reuters

An exploration and production resurgence in the Gulf of Mexico two years after a six-month drilling shutdown because of the BP Plc oil spill is expected to increase output nearly 43 percent by 2019, energy consultancy Wood Mackenzie said on Wednesday.

Excluding new discoveries between now and then, the consultancy's forecast sees current output of 1.4 million barrels of oil equivalent per day jumping to a new peak of 2 million boe/d, said deepwater Gulf analyst Lauren Payne.

"We expect to see 37 floating rigs in the Gulf by the end of 2012, a five-year high," she said at a briefing on the forecast.

The U.S. government shut down drilling in the Gulf for six months after BP's Macondo well about a mile (1.6 km) beneath the water's surface ruptured in April 2010 and spewed nearly 5 million barrels of oil. BP capped the well about three months after the blowout, and the government lifted the ban in October that year.

However, no drilling permits were approved until late February 2011 when companies were able to comply with stricter safety requirements, including rapid-response systems to address spills and ruptures.

So far this year, the U.S. Bureau of Safety and Environmental Enforcement, which regulates Gulf oil and gas activity, has approved 385 deepwater drilling permits, up 38 percent from 278 approved in 2011.

That is 18 percent fewer than 454 approved in 2007, the 20-year high.

Payne said drilling for production wells is up in known fields as well as exploratory wells seeking to find oil and gas and appraisal wells that assess how big a discovery may be.

Julie Watson, Wood Mackenzie's senior Gulf analyst, said companies are expected to spend $70 billion on exploration through 2030 to reap $30 billion in value from output.

And a wide array of producers are staying or jumping in to the Gulf despite concerns that post-Macondo regulations and increased safety requirements might make it too expensive for smaller players.

Newfield Exploration Co last month said it would sell all of its Gulf assets to W&T Offshore to focus on onshore assets in the United States and Asia.

Plains Exploration and Production last month said it would buy BP's interests in three older oil and gas platforms and some other Gulf interests as BP focuses on larger fields and sells other assets to help pay damages for the 2010 spill.

Wood Mackenzie said that 45 percent of the Gulf's oil and gas platforms are operated by oil majors, followed by 35 percent run by large-cap companies and 20 percent by independents.