The Trump administration has floated a plan to open nearly every U.S. offshore area to oil and natural gas exploration, which could attract billions in investment and potentially unlock up to 65 billion boe, Rystad Energy said Friday.

The largest leasing proposal in history, unveiled on Thursday, drew broad support from the usual suspects, the energy industry and its allies. The 2019-2024 draft proposed program (DPP)  would make more than 90% of the total Outer Continental Shelf (OCS) acreage and more than 98% of the undiscovered, technically recoverable oil and gas resources in the federal offshore available for future exploration and development. By comparison, the final program in place had 94% of the OCS off limits.

“The U.S. offshore sector held approximately 180 billion boe of original resources, oil and gas combined, before the first offshore production took place,” said Rystad senior analyst Sonia Mladá Passos. “In the Gulf of Mexico, which is the world’s most mature offshore region, nearly 50% of these original resources have been translated into production since the 1960s. The remaining 50%, or 90 billion boe, are still to be discovered offshore U.S.”

The offshore figures include areas in the Gulf of Mexico (GOM) with historical exploration activities.

Potential Still Unknown

“Looking purely at areas that are potentially going to come out of restriction, we are talking about something closer to 65 billion boe,” Passos said. The figure excludes resource potential from Western and Central Planning Areas of the GOM, both coastal and deepwater, it includes the Eastern Planning Area, currently under congressional moratorium until July 2022.

The eastern GOM is a “rather controversial area,” Rystad analysts noted. “Compared to the other restricted areas, it has better coverage of infrastructure. At the same time, its geology is better known. Although the eastern GOM might be more prospective, it is unlikely to see any exploration activity before the end of the moratorium.”

Rystad in December reported that the world currently consumes 79% more hydrocarbons than it discovers, which makes opening up more areas offshore the United States particularly attractive.

“The proposed policy can potentially open interesting new areas that operators can invest in,” Passos said.

If producers were able to utilize fully the potential of the newly discovered domestic oil and gas, “exploration activity offshore U.S. could reach a new peak after 2030, with some 200 exploration wells drilled per year on average, implying annual investment levels of approximately $15 billion.”

Rystad’s estimates represent the high-case scenario, which anticipates that all of the unexplored areas would see exploration activities, disregarding constraints such as limited access to capital, infrastructure or environmental concerns.

“The question remains, what is the likelihood of companies prioritizing exploration and development in all of these areas? During the last three years, we did not see high interest in exploration in the deepwater GOM,” said Rystad’s Nils-Henrik Bjurstrom, head of exploration analyses.

In recent years, the United States observed a tremendous shift of exploration and production spending, with most capital directed to onshore unconventional basins, according to Rystad.

Last year, U.S. operators directed more than 60% of total investments to shale/tight resources, a trend that could increase to about 70% in the next decade.

“This prevailing trend could impose a risk for the offshore exploration potential to be realized,” Bjurstrom said.

DPP A Roadmap, Not A Destination

How much more access U.S. operators may gain in the offshore remains a question. The Department of Interior acknowledged that the final proposal, which would be overseen by the Bureau of Ocean Energy Management (BOEM), could offer fewer leases in fewer locales.

According to ClearView Energy Partners LLC, the 47 proposed sales in 25 of 26 OCS planning areas far outstrips the “ambition of its recent predecessors at the draft proposal stage...In short, we view BOEM’s 2019-2024 DPP as a vigorous assertion of a...president’s new energy policy priorities.” However, the DPP “is only the second stage of a four-stage process.

“Political compromises could still winnow down its scope. In addition, at $60/bbl, operators may be leery of bidding for contentious leases that have potential to invite lengthy legal challenges (even if those leases are in high-prospectivity regions of the OCS).”

In fact, the DPP may have the support of the Gulf Coast states and from Alaskan officials eager to see their vast resources explored.

Alaska Gov. Bill Walker called the DPP “an important step toward allowing Alaskans to responsibly develop our natural resources as we see fit. My administration is committed to responsible resource development, and has established a pattern of working successfully with our congressional delegation and federal agencies to unleash Alaska’s energy potential...We look forward to continued dialogue to ensure that any offshore development takes into account environmental and safety concerns, and robust input from community residents who live, work, and subsist in the lease sale areas included in this proposed plan.”

Alaska’s GOP Sen. Lisa Murkowski, who also is chairman of the Committee on Energy and Natural Resources, mirrored Walker’s comments. She said the proposal is “another positive step as we seek to reinforce our nation’s status as a global energy leader.” She said Interior Secretary Ryan Zinke’s “blank slate” approach to exploration “launches a new discussion with local stakeholders to determine where responsible energy development should take place. While nothing in this proposal is final, it is good to see the administration seeking to expand access in places like Alaska, rather than limiting our opportunities.”

However, the proposal to drill in sensitive areas off the West and East coasts drew bipartisan scorn. Republican Govs. Rick Scott of Florida and Larry Hogan of Maryland called on Interior to withdraw their states from any leasing plans.

Hogan, said he would oppose the plan "to the fullest extent that is legally possible." Maryland Attorney General Bill Frosh went even further, noting the state would fight every step of the way to protect our shores and our Chesapeake Bay from the dangerous and irresponsible decisions of this administration."

The Trump administration, said Frosh, is “placing the interests of the oil industry above the well-being and interests of millions of Americans who depend upon clean water for their livelihoods and who treasure it as their heritage.

Virginia Gov.-Elect Ralph Northam, a Democrat, said the plan would jeopardize the state’s economy and environment and imperil national security.

"As governor, I'll join other governors in opposing this decision and continue my record of fighting for state-driven conservation solutions," Northam said.

The three Democrats governing the West Coast states, Washington’s Jay Inslee, Oregon’s Kate Brown and California’s Jerry Brown, also vowed to challenge any lease sales off their shores.

In a joint statement, the trio said the DPP "flies in the face of decades of strong opposition from Republicans and Democrats alike" across the West Coast. The trio vowed to "do whatever it takes" to prevent the proposal from moving forward, calling it "reckless and short-sighted."