Report: Oil money has bright future

01 13, 2014 by Houma Courier

Big promises and big numbers from oil companies poured in during 2013, a year that saw oil production in the Gulf of Mexico surpass levels set before response to the 2010 BP oil spill temporarily shuttered deep water exploration.

Those promises are increasingly becoming realities, according to local oil and gas officials.

“Based on what is happening in the port and the level of interest we have and the type and amount of expansion we’re seeing, I would say that what is taking place in the deepwater Gulf of Mexico is absolutely here to stay,” said Chett Chiasson, director of Port Fourchon, which services about 90 percent of the vessels that work in deepwater Gulf oil fields.

A report released last week by the American Petroleum Institute, a national trade group that represents the energy industry, predicts a robust stream of investment in oil and gas platforms throughout the U.S.

National investment in oil and gas production assets are projected to peak at nearly $110 billion in 2019 and remain above $80 billion annually through 2024, according to the institute’s report.

The first days of 2014 have been peppered with mixed news coming from the oil companies. Chevron announced the scaling back of an initial $42 billion commitment for the year to $39.8 billion, cutting plans for several major acquisitions.

Oil prices rose slightly at the end of the week as Libya threatened to torpedo oil shipments but have now fallen for two consecutive weeks to $92 per barrel after peaking at more than $100 per barrel in late 2013.

Companies investing in the Gulf should have a comfortable price margin, even if prices may fall temporarily, Chiasson said.

“I feel that currently there is a pretty good price cushion,” Chiasson said. “It’s a possibility for prices to go down. But if you’re looking at a $100 per barrel of oil, I think we would all be surprised if it went below $70 at some point.”

The U.S. Energy Information Administration has revised its forecasts for oil production and consumption. Production in 2013 was nearly 60 percent higher than was predicted by the administration in 2007, and worldwide gasoline consumption is expected to increase by about 15 percent through 2025, instead of dropping as had been predicted in 2007 forecasts.

A key point of the institute’s report was the potential to access new reserves of oil. New diamond-head drilling bits have enabled drilling at deeper surface — levels up to 10,000 feet below the earth’s crust or sea floor.

Increased access to the portion of the Gulf that borders Mexican waters has also boosted confidence for continued investment. Congress ratified a treaty with Mexico that allows U.S. companies to share access to more than 1 million acres of drillable sea floor with the Mexican oil monopoly PEMEX.

The American Petroleum Institute report also points out the potential reserves that remain legally off-limits to oil and gas exploration. According to the report, 87 percent of government-controlled Gulf oilfields, where there is an estimated 48 billion barrels of oil and 219 trillion cubic feet of natural gas, remain off limits to drilling companies.

Both the Atlantic and Pacific coasts, as well as the eastern portion of the Gulf, remains off limits to oil and gas exploration due to ongoing environmental and political opposition citing concerns over environmental damage, such as the BP oil spill, and climate-related threats due to increased consumption of carbon fuels including oil and natural gas.

The report, titled “America’s Energy, America’s Choice,” makes repeated calls for the American public to support increased access to oil and gas resources.

“If we are to realize this bright new energy future, America must make the right decisions today by deliberately choosing to take even greater advantage of our domestic oil and natural gas resources,” the report says. “This report highlights how America can choose a future where the oil and natural gas industry continues to contribute to our nation’s economic recovery and job creation.”