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Gas Output Continues to Slow in Gulf of Mexico

Natural gas production in the Gulf of Mexico (GOM) will continue to decline over the next four years because of aging projects in shallow water, officials with the Minerals Management Service (MMS) said last week. However, oil-heavy deepwater projects will help oil output to jump "substantially," possibly reaching 1.8 million b/d in the next several years.

Future increases to gas output, said government agency officials, depend on whether undiscovered resources offshore are successfully developed. MMS officials discussed the findings from two reports at the 40th Offshore Technology Conference in Houston.

The reports, "Gulf of Mexico Oil and Gas Production Forecast: 2009-2018" and "Deepwater Gulf of Mexico 2008: Interim Report of 2008 Highlights," discuss current leasing, exploration and production activities as well as a synopsis of deepwater activity in the GOM over the past 17 years. Last year 15 deepwater discoveries and seven new projects ramped up production in 1,000 feet (305 meters) of water or deeper, GOM Regional Director Lars Herbst said.

"The Gulf of Mexico is one of the single largest suppliers of oil and gas to the U.S. market...With continued interest and activity in deepwater areas of the Gulf of Mexico, we anticipate that oil production will continue to be strong with a large portion of production coming from projects in deeper water depths," Herbst said.

Based on an MMS analysis, shallow water gas output is seen declining by 17.5% annually; shallow water oil production is tracking a 13% effective annual decline. However, deepwater projects, which are oil-heavy, are increasing. The forecast does not explicitly detail oil and gas output that may result from the Gulf of Mexico Energy Security Act of 2006, which among other things mandated calling for the Eastern Gulf Lease Sale 224, which includes a part of the Eastern GOM Planning Area more than 125 miles off the Florida Coast and west of the Military Mission Line.

The forecast also does not include the opening of 5.8 million acres offshore Louisiana known as the 181 South Area, part of the Central Planning Area, for lease for the first time since 1988.

The energy industry "continues to confront and overcome technological challenges as energy production moves into deeper waters in the Gulf of Mexico," Herbst noted. "As the trend to deepwater continues, our emphasis is focused on safe and environmentally responsible energy development..."

More than half (57%) of all GOM leases last year were located in water depths of more than 1,000 feet, including 141 producing deepwater projects, according to MMS. Additionally, almost three-quarters (73%) of the tracts receiving bids in three MMS lease sales held in 2008 were in deepwater areas.

The deepest discovery last year was Murphy Oil Corp.'s Diamond prospect, located in Lloyd Ridge Block 370, which was in 9,975 feet. The second deepest, by partners StatoilHydro LLC and ExxonMobil Corp., was the Hal prospect, located in 7,657 feet in Walker Ridge Block 848. Noble Energy's Tortuga prospect, located in Mississippi Canyon Block 561, is in 6,305 feet of water. And BP plc and Noble jointly announced the Freedom prospect discovery in Mississippi Canyon Block 948 in 6,095 feet of water.

Copies of the GOM energy forecast and the deepwater report are available at www.mms.gov.

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