U.S. Gulf of Mexico (GOM) production data from the Minerals Management Service lags Texas and Louisiana’s state data by 15 months, but even though it appears that offshore natural gas production is on the upswing, it’s still too early to say, according to a new report by Stephen Smith Energy Associates.

In his latest monthly gas production outlook, the analyst noted that the last month U.S. offshore data available was February 2002. From April 2001 to February 2002, combined production from Texas, Louisiana and offshore declined to 31 Bcf/d from 34 Bcf/d. “We are left to speculate about GOM production for the last 15 months, but our survey data suggests there has been a continued decline, with some signs of stabilization in early 2003 as Canyon Express and other deepwater GOM gas production has come on line.”

Smith used 1Q03 gas production numbers for the last nine quarters for producers representing nearly half of all U.S. production. To account for lost production in 4Q02 for tropical storm Isidore and Hurricane Lili, he added back 0.7 Bcf/d as an estimate of the production lost.

“Measuring the production decline over the seven-quarter interval form 4Q01 through 4Q02, results in an annualized decline rate of 6.7%. Measuring the production decline over the two quarter interval from 4Q02 through 2Q03, results in an annualized decline rate of 1%.”

Last year’s decline rate “appears to have eased considerably in 2003,” the analysts noted. “One component of the 2002 decline was the shift to deepwater projects to find economic oil and gas. But such projects typically involve a three- to five-year lead time until production after appraisal, as compared with one- to 15-months for shelf projects.” The report noted that some of these types of projects, such as Canyon Express, recently have come on line and “there are more to come.”

The report also noted that the “so called ‘deep shelf’ play cannot establish momentum overnight.” Drilling at deeper depths had brought “inadequate returns “given the gas prices and the state of 3D seismic capability of several years ago.” Now, with gas prices higher and showing some “staying power,” seismic technology as improved, but it will require some time and effort to “rebuild a new ‘deep shelf’ prospect inventory.”

Because of the ready access to existing GOM shelf platforms and pipelines, the analysts said “lead time for deep shelf discoveries will be typical of shallow shelf prospects. The unknown in all of this is the degree to which this play proves economic (although some of the early results are starting to look encouraging).” However, they added that the “degree of success for a large deep shelf industry commitment is not yet known with confidence.”

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