The U.S. Interior department has made a bold prediction regarding the Gulf of Mexico, forecasting a lofty 43 percent increase in oil production coupled with a 13 percent rise in natural gas production over the next decade.
Until now, Interior has avoided making long-term production forecasts of more than five years. In its first 10-year report, released Nov. 15, Interior’s Minerals Management Service sees mostly blue skies on the horizon for the U.S. Gulf.
However, the forecast is based on the assumption that operators commit to developing existing oil and gas discoveries and continue to explore the deepwater Gulf, where most of the remaining elephant fields are thought to exist. Nearly 80 percent of oil production in 2011 is expected to come from this region, according to the forecast.
With deepwater Gulf in its ninth year of expansion, “it appears likely that it will expand greatly over the next 10 years as more than 100 development projects have begun production and new discoveries that have occurred in the last three years will likely be developed,” said Chris Oynes, Gulf regional director the MMS.
Operators announced 13 deepwater discoveries alone in 2003 and another 10 so far in 2004.
MMS projects that overall daily oil production in the U.S. Gulf will increase to 2 million barrels by 2006 from 1.5 million barrels today and could reach 2.25 million barrels by 2011.
As for natural gas production, which has been on the decline for years in the U.S. Gulf, MMS is projecting that daily output will continue to decrease from a current 12 billion cubic feet to just over 11 bcf in 2007 before rebounding to 13 bcf between 2008 and 2011.
MMS said it used a new methodology to estimate this year’s production estimates for the U.S. Gulf. In addition to surveying oil and gas companies, the agency said MMS analyzed both recent deepwater discoveries and projected deepwater reserves.
“This method enabled MMS to forecast Gulf production 10 years into the future instead of the previous standard five-year projection,” the agency said. The forecast covers the period 2004 to 2013.
Incentives expected to spur exploration and development
Interior said that new government incentives to encourage companies to explore and develop “difficult-to-reach” areas of the U.S. Gulf would continue to spur exploration and development in deeper waters, as well as in shallower waters of the gas-rich continental shelf, where explorers are venturing to ever-increasing geological depths.
“To help ensure our future energy security, we need to reward developers for the huge risks they take when they explore in deepwater and deep-shelf areas,” Rebecca Watson, assistant secretary of the Interior for Land and Minerals Management, said in a news conference.
Without expanded royalty relief incentives announced in January, many deep gas prospects on the continental shelf simply would not be economical to drill, Watson said, adding that “energy companies are responding positively to new incentives offered under the President’s Energy Plan.”
The new incentives expanded the deep-shelf program to include about 2,400 existing federal leases and added sliding scale royalty relief based on depth and the number of wells drilled on a lease. Later, Interior added an incentive targeted specifically at ultra-deep wells drilled below 25,000 feet.
In an earlier study, MMS concluded that deepwater U.S. Gulf is expected to have ultimate reserves of about 71 billion barrels of oil equivalent, of which 56.4 billion barrels remain to be discovered. In contrast, the continental shelf is expected to contain ultimate reserves of about 65 billion barrels, of which 15.2 billion barrels remain to be discovered.
“We expect our greatest oil production to come from the deepwater region of the Gulf, while in the case of natural gas, both the deepwater and shallow water deep-shelf hold the most promise,” Watson said.
