|Bruce Beaubouef • Houston|
Production in the deepwater Gulf of Mexico is expected to reach a new peak of 1.9 MMboe/d in 2016, according to Wood Mackenzie's latest outlook. Driven by new developments and the expansion of older oil fields, this marks the first time production will surpass the previous production peak set in 2009.
"2014 is the start of the next significant growth period in deepwater GoM," explained Imran Khan, GoM analyst at Wood Mackenzie. "We expect production from 2014 to 2016 to grow 18% annually."
In 2015, Wood Mackenzie forecasts production to increase 21% from the 2014 level and the impact will intensify in 2016 when the Heidelberg field comes online and the Jack/St. Malo project ramps up. These three fields combined will produce 115,000 boe/d in 2016. In addition to new fields coming onstream, redevelopment and extension of older fields will also augment growth.
After hitting the new peak in 2016, Wood Mackenzie says it anticipates production to plateau for the remainder of the decade. Due to the depletion from legacy fields and a limited number of new fields coming onstream after that, a lack of growth is expected. The firm estimates that only eight developments will come online from 2017 through 2020, compared to 15 developments from 2014 through 2016. Khan explains that, although the number of fields coming onstream during the latter part of the decade is limited, these are important fields that are going to define the long-term success of the region. "Stones, Shenandoah, and North Platte are part of the Lower Tertiary, which has garnered attention because of the potential to find large discoveries," Khan observed.
However, the economics are currently challenging because of high costs, technological limitations, and low recovery rates, Khan notes. "Unless these obstacles are overcome, it will be difficult for the region to grow in the next decade," Khan observed. "We forecast that production will start to decline after plateauing out at 1.9 MMboe/d in 2021.The current slide in oil prices does not help the long-term outlook either, especially if the downward trend continues for a protracted period."
Wood Mackenzie's outlook emphasizes the need for a sustained level of investment to support increases in production. Recent discoveries have been in deeper waters and in emerging plays which require complex drilling and more advanced technologies that are highly capital intensive. Khan explains: "A typical development well in the Lower Tertiary can cost $300 million, as compared to the shallower, more established well-known plays, such as the Upper/Middle Miocene, where development well costs are closer to $100 million."
Consequently, capital spending is expected to increase in the coming years, especially in the emerging plays, according to Wood Mackenzie. "In order to meet our 2015 production forecast, $17 billion in capex will be required, which is 30% higher than 2013," Khan noted. "The Lower Tertiary will make up 21% of this capex and its share will increase to 53% of the total in 2021."
Furthermore, Wood Mackenzie's outlook underscores that the GoM will continue to see competition increase globally as regimes around the world try to attract capital and open their borders, such as the recent move by Mexico to open up its energy sector to foreign companies. The competition will also continue to stiffen because of a sustained level of increase in costs in the GoM, which continue to escalate 5-10% annually, despite the recent softening of the rig market. Khan concludes: "Unless the technology to improve recovery rates is developed and costs are reduced, the operating environment will only become more challenging and it will be difficult for the region to maintain a long-term production growth trajectory."
Hess begins production on Tubular Bells
Production has begun from the deepwater Tubular Bells field in the Gulf of Mexico. Operator Hess Corp. said that following a ramp-up, Tubular Bells should produce about 50,000 boed from three wells by year end.
The Tubular Bells field was discovered in 2003 and sanctioned in October 2011. It is in 4,300 ft (1,310 m) of water, 135 mi (217 km) southeast of New Orleans. The development uses Williams Partners spar-based Gulfstar FPS, which is the first such facility with the major components built on the US Gulf Coast. Hess holds a 57.14% interest in Tubular Bells and is the operator. Chevron U.S.A. Inc. has a 42.86% interest.
Chevron hits oil offshore GoM in Guadalupe prospect
|Chevron reports that it has made an oil discovery at the Guadalupe prospect in the deepwater GoM. The company began drilling the well in June 2014 using Transocean'sDiscoverer India deepwater drillship. (Photo courtesy Transocean)|
Chevron Corp. has made an oil discovery at the Guadalupe prospect in the deepwater US Gulf of Mexico. The well encountered significant oil pay in the Lower Tertiary Wilcox sands, the company said.
Situated in the Keathley Canyon block 10, Guadalupe lies about 180 mi (290 km) off the Louisiana coast in 3,992 ft (1,217 m) of water. The well reached a depth of 30,173 ft (9,197 m).
Chevron subsidiary Chevron U.S.A., Inc. began drilling the Guadalupe well in June 2014 using Transocean's Discoverer India deepwater drillship. More tests are being conducted on the discovery well and additional appraisal wells will be needed to determine the extent of the resource.
Chevron U.S.A., with a 42.5% working interest in the prospect, is the operator. Guadalupe co-owners are BP Exploration & Production, Inc. (42.5%) and Venari Resources LLC (15%).