Survey finds Gulf of Mexico oil production should keep growing

Oil production in the Gulf of Mexico should grow to more than 2 mm bpd by 2005 as new fields in deep water come on line, according to a survey of operators by the Minerals Management Service (MMS).
"The Gulf is a vibrant, growing and developing area," said Chris Oynes, regional director for the agency.
Oynes presented the agency's latest five-year projection for oil and gas output at the Offshore Technology Conference in Houston.
However, the output of natural gas will be doing good to hold its own, the director said. While the future of oil production is bright, the shallow-water portion of the Gulf is declining at an alarming rate, and it will take "a lot of drilling, not just 50 or 60 wells" to keep the gas flowing at a rate that the nation needs.

About 25 % of the US's natural gas comes from the Gulf, and 80 % of that comes from shallow waters. But the deeper waters are oil-prone, and 31 fields are expected to begin production in 2007, including Shell's Na Kika and BP's bn-barrelThunder Horse.
Five new projects are slated for 2004, Oynes said. Plus, production hubs are being developed that enhance the economics for developing other fields, which hold smaller reserves. The agency presented two scenarios for the future, one high and one low.

In the high scenario, total oil output for the Gulf will grow from 1.7 mm bpd this year to 2.05 mm barrels in 2005 before topping out at 2.14 mm barrels in 2006. That 2 mm barrels is equivalent to a small OPEC country, or about twice that of Alaska.
This is a continuation of the growth that saw oil production from the Gulf reach 900,000 bpd in 1995, and top 1 mm barrels in 1996. In the low scenario, oil production starts at 1.53 mm bpd in 2003 and tops out at 1.79 mm barrels in 2006.
Both scenarios show output starting to pull back in 2007, blamed in part on oil and gas operators being so conservative in their estimates. "At some point, of course, it will stop," Oynes said of the rapid growth.

Natural gas, in the high scenario, drifts downward from 13.03 bn cfpd in 2003 to 12.51 bn cfpd in 2007. In the low scenario, which assumes shallow-water declines similar to the past, the output slips during each of the five years, starting with 11.98 bn cf in 2003 and ending with 9.86 bn cfpd in 2007.
The high scenario assumes that new technology, such as that filling Reliant Centre at the OTC, will be able to offset the current high decline rates of shallow-water fields. Also, the numbers do not take into account a federal incentive program for deep drilling in shallow water, plus a recent proposal to sweeten that incentive. It is considered too early to gauge those impacts.
Estimates are that deep gas reserves, below 15,000 feet in water less than 656 feet, contain as much as 20 tcf, representing "almost a new province," Oynes said. The expansion into the deep waters basically changes the image of the Gulf, which by the end of 2007 will have 65 % of its oil and 26 % of its gas coming from fields in water over 1,000 feet. Getting all of this oil back to shore in a cost-effective manner represents an opportunity for the shuttle tanker concept, according to speakers at an OTC briefing.

A Houston-based company called American Shuttle Tankers is proposing their use in the Gulf, especially involving oil fields far from pipelines. The company would park its tankers, with capacity from 750,000 to 800,000 barrels each, next to offshore platforms. Smaller tankers would then pick up the oil and take it to shore.
This offers cost savings over floating production, storage and offloading systems, which have been proposed for the Gulf, according to Peter Lovie, vice president of business development for American Shuttle Tankers. The floating platforms are moored to the bottom, which is a costly process in deep water.

The environmental impact statement that cleared the way for use of floating production, storage and offloading systems in the Gulf also permits shuttles, said Lovie. While used in parts of the world such as the North Sea and off Australia, the deep Gulf would be unique.
His company has talked to the major oil companies and all of the large independents, according to Lovie. There could be contracts signed within a year, followed by two or three years to build the ships.
American Shuttle Tankers is basically a Houston clone of its parents, Navion of Stavanger, Norway, and Skaugen Petro Trans of Houston. Navion operates a fleet of shuttle tankers in the North Sea while Skaugen is the largest lightering provider in the Gulf. The biggest competitor for the shuttle concept are the pipelines, which currently carry all of the oil and gas from wells to land.