Gulf of Mexico 'still worth drilling': report

The deep water Gulf of Mexico is still a good bet for exploration and production despite recent regulatory changes in the wake of the Macondo disaster, according to a new report.

US authorities have moved to strengthen regulatory oversight of the offshore industry since the April 2010 oil spill, splitting the previous regulator into three separate bodies and increasing the number of permits required.

Global energy research and consulting firm WoodMackenzie said on Wednesday that its study had nonetheless found the Gulf of Mexico was still an attractive place to invest, citing the region’s geology, its well-developed infrastructure and a stable fiscal regime.

“There are large yet-to-find volumes in maturing and emerging plays alike”, the report said, adding that a typical discovery makes positive returns in all geologic plays.

At the same time, the report acknowledged existing technology had some catching up to do before the local resource potential could be fully tapped.

The high cost of extracting remaining play from remote areas and challenging reservoirs would necessitate billions in development drilling and facility capital, the report admitted, pitching the five-year budget for this at $82 billion.

However, the Houston-headquartered consultancy also said higher oil prices could lead to “project economics improving dramatically”.

The report pointed out that with a typical breakeven rate of $75 per barrel of oil, “the majority of Gulf of Mexico fields will be profitable to develop if the oil price stays at or above $80 per barrel in the long-term”.