The strong resurgence in exploration and production (E&P) activity in the deepwater Gulf of Mexico (GOM) puts the offshore region well on its way to a "new equilibrium" in 2013, according to Wood Mackenzie.
The UK-based consultancy last week issued its upstream outlook at a briefing in Houston. Preceding the deepwater drilling moratorium that followed the Macondo well blowout, there had been "huge" exploration success in the GOM. Since the moratorium was lifted, the momentum had been slowed but it was not diminished because of heavy investments, the wide range of opportunities and the plethora of global explorers, according to the firm.
"The moratorium and exodus of several mobile offshore drilling units from deepwater GOM in 2010 sharply hindered drilling activity through 2011, but it has rebounded very well in 2012," said Wood Mackenzie GOM analyst Lauren Payne. "We expect this trend to continue, driven primarily by development drilling as operators seek to boost production levels and bring new projects onstream."
More than $20 billion is forecast to be spent to drill development wells for onstream projects through 2015. Subsea and facility spending are seen as becoming "bigger drivers as new projects like Jack/St. Malo and Hadrian move forward in development."
The Chevron Corp.-led Jack/St. Malo development is considered an essential piece in the oil major's output going forward, with first production expected in 2014 (see NGI, July 30; Dec. 12, 2011). ExxonMobil Corp. is leading the development of Hadrian in Keathley Canyon near the promising Lucius prospect, with first production also forecast for 2014 (see NGI, Dec. 19, 2011; June 13, 2011).
Subsea and facility investments are expected to represent $27 billion in capital spending through 2015. "Production has suffered in part because the low drilling levels in 2010/2011 could not mitigate natural decline, but we expect regional production to exceed 2009's peak in 2018/2019 at 2 million boe/d," Payne said. The GOM deepwater should remain an attractive and "vibrant" E&P hub for years.
"We expect more than $70 billion to be spent on exploration in the region by 2030, more than all the other key deepwater provinces combined," said Wood Mackenzie's Julie Wilson, senior analyst for the exploration service. Based on investment plans, more than 12 billion boe is forecast to be discovered by 2030, which would create about $30 billion of value. "These results are materially surpassed only by Brazil, which has enormous potential in its pre-salt play."
What sets the GOM deepwater apart and what drives the high investment levels are the "wide range of opportunities available and the large number of explorers,"according to the consultancy. For instance, 48 operators are working in the deepwater GOM, versus 15 in Angola and Brazil.
"Opportunities in this region range from small, low-risk prospects to giant targets in extreme conditions," Wilson said of the U.S. deepwater play. "Abundant infrastructure and an open, competitive environment allow smaller companies to create value from the more mature plays. Larger companies exploring for giant volumes must contend with remote, ultra-deep waters and reservoirs that are buried to extreme depths below thick salt layers that impede seismic imaging."
Assisting the array of global operators "is an above-ground environment that is still considered to be among the most attractive in the world, despite a changed regulatory environment that undoubtedly has created some uncertainties."
Ample unused processing capacity in the GOM deepwater also may create significant value for hub owners and satellite operators if the right terms are reached.
"By 2017, up to 70% of deepwater GOM processing capacity will remain unused, although the available amount will be smaller due to technical and operational reasons," said upstream research analyst Norm Pokutylowicz. "Demand for it will come in the form of infill development and tiebacks, while value will be derived either by operators monetizing their discovered resources or in the form of tariffs from third-party tie-backs."
By 2017 an additional 2 billion boe of reserves may be produced by subsea tie-backs from fields under development, probable developments and those yet to be discovered. "By then, new third-party tiebacks are also expected to generate each year an extra $200 million in tariffs."
Some obstacles could deflate the optimistic forecast. "Capital, equipment and personnel constraints in the GOM and globally could affect project prioritization," according to the outlook.
"The recent lack of exploration drilling will impact long-term reserves replacement," said Payne. "In addition, the high-profile Paleogene play still faces substantial technological risks, in an ultra-deepwater environment with very poor reservoir qualities. That being said, we are well on our way to achieving this 'new equilibrium' in the GOM in 2013, and the future...from there is very bright."
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