A lot has happened in the deepwater Gulf of Mexico (GOM) since the 2010 Deepwater Horizon explosion and oil spill. Exploration and planned or new production platforms in the deepwater U.S. Gulf continues to grow, which is good news for both the blue water and brownwater sectors.
The resurgence in deepwater GOM activity is marked by about a dozen large and expensive new projects. One is Royal Dutch Shell’s Olympus platform located about 130 miles offshore in about 3,000' of water. Other companies with new projects include Hess, Exxon Mobil and Chevron. BP also has two projects in the Gulf. Together these projects have the capacity to pump well over one million bbls. of oil a day.
The increase in GOM deepwater oil production marks a turning point from the recent long-term pattern of declining GOM output. U.S. Gulf oil production had been nearly four million bpd in 2001, declining to about 1.9 million bpd by 2013. Meanwhile total U.S. oil production increased from nearly 16 million bpd in 2001 to nearly 20 million bpd by 2013. The GOM share of total U.S. oil production declined from 25% in 2001 to about 10% in 2013.
The resurgence in deepwater GOM oil production was a natural development in response to the sustained oil prices of $100 bbl. in recent years. Even with the recent 40% drop in oil prices, most planned deepwater oil production increases are expected to proceed.
The current resurgence and competitive position of deepwater GOM oil production seems secure. However, there are several uncertainties such as rising costs and competition from the significant increase in land-based domestic crude production that has marginalized the GOM deepwater market share during the past decade and contributed to the current drop in oil prices.
Regardless of the longevity of the resurgence of GOM deepwater, the new large platforms that are coming on line will provide a long-term market for the oil and gas vendors and services required to support it.
Louisiana and Texas should see positive long-term economic impacts. And the positive downstream effects from deepwater development will include the shallow-draft barge industry.