Gulf of Mexico Production to Increase Over the Next Decade

New incentives encouraging energy companies to explore and develop hard-to-reach areas of the Gulf of Mexico, will help boost peak oil production in the Gulf by 43% and natural gas production by 13% over the next decade.

This is according to Rebecca Watson, Assistant Secretary of the Interior for Land and Minerals Management, who states that energy companies are responding positively to new incentives offered under the President's Energy Plan, which allow them to tap into pockets of oil and gas in areas of the gulf that otherwise would not be economical to produce. She made this statement on releasing the Minerals Management Service's (MMS) latest energy projections for the Gulf.

The objective of the MMS, a bureau of the Department of the Interior, is to manage the mineral resources of the Gulf of Mexico Outer Continental Shelf (OCS) in an environmentally sound and safe manner.

"For American consumers, this will mean less dependence on unstable sources of imported energy," Watson says. "The Gulf of Mexico delivers more oil and gas to the US market than any single domestic or foreign source, but many older, easier-to-reach fields have passed their peak. Exploration has shown more gas can be produced at deeper depths under existing shallow water infrastructure; and oil can be produced at tremendous depths. To help ensure our future energy security, we need to reward developers for the huge risks they take when they explore in deep-water and deep-shelf areas."

Since 2001, incentive programs for deep-water areas of the gulf have been conducted, and new incentives for other areas have been introduced.

The latest production estimate by MMS is based on a new methodology. In addition to surveying oil and gas companies, MMS analyzed recent deep-water discoveries and projected deep-water reserves.

According to MMS projections, oil production in the Gulf will increase to a record 2 million barrels per day by 2006, compared to the current rate of 1.5 million barrels per day, and could reach 2.25 million barrels a day by 2011. The projected increase in oil production will apparently provide enough additional energy to heat 3.5 million new homes.

"A rise in deep water oil production is fuelling this dramatic increase, and almost 80% of Gulf oil production in 2011 is expected to come from this resource rich region," Watson explains. "We expect our greatest oil production to come from the deep water region of the Gulf; while in the case of natural gas, both the deep-water and the shallow-water deep shelf hold the most promise."

Chris Oynes, MMS Gulf of Mexico Regional Director, adds that the Gulf is now in its ninth year of sustained expansion of the deep-water frontier. "It appears likely that the region 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."

Based on information obtained from new exploration activities in the Gulf of Mexico and in the Scotian Basin offshore Canada, MMS estimates that 76 billion barrels of oil and 406.1 trillion cubic feet of natural gas are technically recoverable from federal offshore areas. These estimates represent the potential hydrocarbons of an area that can be produced using current technology, without any consideration to economic feasibility. Current technology includes drilling in water in excess of 3000 meters deep and to depths in excess of 9600 meters. Present methods include subsea completions and tie-backs, extended reach drilling, multi-lateral completions, and floating production systems.

The MMS long-range projection of deep-water projects to be pursued, shows oil production in the Gulf of Mexico will drive the increase in the coming years. After these projects reach their production peaks, MMS believes that the anticipated 2 million barrels of oil per day level can be maintained if operators commit to developing existing discoveries and continue to explore the deep water frontier.

As has been the case in the North Sea, gas production in the Gulf is however expected to show some decline in the short-term as old fields begin to be exhausted and then to show an increase again as new wells in deep-shelf and deep-water areas come into production. Projections show that natural gas production will rebound beginning in 2008 and will reach more than 13 billion cubic feet per day in 2011.

Gulf of Mexico natural gas production is slightly more than 12 billion cubic feet per day. The Minerals Management Service forecasts that total Gulf natural gas production levels will decrease slightly by 2007 to just over 11 billion cubic feet per day.

"Our quality of life and economic security is dependant on a stable and abundant supply of affordable energy," Watson concludes. "By carefully integrating energy and environmental policy we can encourage the production and development of energy sources offshore and on our public lands to help meet those needs while protecting the environment."

This article provided courtesy of EyeForEnergy