Posted on 10/21/2013 5:50:31 AM PDT by thackney
Polluted by crude, crises and fears of ceaseless political entanglements, the Gulf of Mexico looked endangered as an oil hub after BP’s massive 86-day spill three years ago.
But international oil companies, including BP, are ramping up in the largest U.S. offshore oil and gas region again, drilling some of the largest new fields and jostling for lucrative reserves as oil gets harder to find in the much-tapped reservoirs of the Middle East.
The Gulf has accounted for 19 percent of U.S. oil production this year, according to the Energy Information Administration.
Oil companies are set to unleash a backlog of drilling and development work in 2014 after years of deep-water exploration with advanced seismic technology, potentially pushing the Gulf’s daily oil production up by 180,000 barrels to 1.55 million barrels per day next year. That follows a 19 percent decline over the previous three years, according to the information agency.
“Companies still see it as a place for production growth and where there are still fields to be discovered and developed,” said Nimmi Henderson, an analyst with Wood Mackenzie. Big integrated producers also are attracted to the region’s easy access to U.S. markets and refineries, she said.
Wood Mackenzie expects the Gulf to beat its 2009 daily production peak of 1.8 million barrels in three years, when the bulk of this decade’s new production will be online. Output could exceed that level in 2016 and 1.9 million barrels by 2020, according to Wood Mackenzie projections.
Driven by booming shale plays, U.S. onshore production is still outpacing the Gulf, and is expected next year to eat into the offshore region’s share of the country’s total projected output of 8.5 million barrels per day.
But high oil prices have pulled capital to places where producers can get the most of it, and deep-water operators in the Gulf can pump more oil with fewer wells than onshore producers — even with the oversight and safety expenses put in place after BP’s Macondo well blew out in 2010, said Michelle Foss, chief energy economist at the Center for Energy Economics at the University of Texas.
“You can flow enormous volumes,” Foss said. “Comparable investments in West Texas would need more wells and much more capital (per barrel). The Gulf of Mexico is much more economic.”
Some of the biggest oil fields in the Gulf — the Dalmation, the Lucius, the Big Foot and the Jack St. Malo oil fields — are expected to come online next year, according to Wood Mackenzie. And by 2020, 12 to 15 new fields are slated to start up, containing 78.86 billion barrels of oil equivalent in undiscovered, recoverable resources, according to data compiled by Bloomberg.
International oil companies, including BP, Chevron and Shell, dominate the Gulf with deep pockets and 24 of the 38 deep-water rigs operating in the Gulf. Highly developed infrastructure and political stability make the U.S. deep water an attractive venture for firms of means that can afford the risk.
“You have to decide, ‘Do we want to expend the time and effort over three to four years to get to the production phase?’” said David Smith, an analyst at Johnson & Rice Co. “Knowing how stable the terms of your deal are plays a big role in how attractive it is.”
Balance sheet bulge gives the international producers a distinct edge over U.S. independents, and companies like Exxon Mobil could drill economically in the Gulf even if the price of oil dropped to $30 per barrel, said James Klingsporn, an analyst at Bentek Energy. Benchmark U.S. crude ended Friday at $100.81 a barrel.
“You have to look at the balance sheet: They can take the risk,” Klingsporn said. “Some of the smaller companies need production to back it up, whereas Exxon, Statoil, Shell can take risk with the resources.”
Two lease sales for Gulf acreage this year drew a combined $1.3 billion, drawing 468 bids for 2 million acres in the Central and Western Gulf. Shell, ConocoPhillips, and BHP Billiton led the pack with bids of more than $120 million each, Bloomberg data show.
Rig activity in the Gulf has favored development activities over exploration, though this is starting to change. Since the beginning of this year, the proportion of rigs looking for new discoveries has increased from 20 percent of all the rigs in the Gulf to 40 percent, said Henderson of Wood Mackenzie.
The higher development activity means producers are “seeing a significant ramp up in production” through late 2014, Klingsporn said.
The Gulf of Mexico changed overnight on April 20, 2010, when BP’s well blew out, destroying Transocean’s Deepwater Horizon drilling rig and killing 11 workers. The ensuing oil spill 5,000 feet below the surface of the ocean lasted until July 15, 2010 and pushed millions of barrels of oil into the Gulf.
The Obama Administration instituted a three-month moratorium on some deep-water operations in the Gulf shortly after the spill, and BP could be years away from putting legal battles over the worst U.S. offshore oil spill behind it.
But that hasn’t stopped several companies from coming back to the fields they operated before the Macondo spill, Henderson of Wood Mackenzie said.
Industry observers worried the region would never “get beyond all the politics and crisis mode everyone was in after Macondo,” said Foss of the University of Texas.
“I was worried,” she said. “But here we are.”
“Industry observers worried the region would never “get beyond all the politics and crisis mode everyone was in after Macondo”
Putting big money into the politically correct hands always clears the road.
In fact, it looks nothing like that and is 90% water when it comes out of the ground. This is one reason it breaks down by natural processes. "Texas tea" is a more apt description.
Crude Oil comes in many "flavors", colors, sweet/sour, thick or thin, etc.
90% water when it comes out of the ground
That depends where you are on the production curve. But what we move, pipeline or rail, has all the water that can be reasonable separated already removed.
The only time you are going to get a 90% water to oil mix during production is when you are producing from a fresh water zone which is very seldom except on top of a dome.
A 90% salt water, doesn’t mix with oil and is easily separated, to oil ratio during production is common with stripper wells.
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