The shallow waters of the Gulf of Mexico (GOM) should be defined as a “distinct province” to avoid stranding substantial oil and natural gas resources, according to new research by the Department of Interior’s offshore regulators.
The Bureau of Safety and Environmental Enforcement (BSEE) and the Bureau of Ocean Energy Management (BOEM) in a joint report said the GOM Shallow Water Province, where water depths are under 200 meters, today primarily serves as a natural gas province, accounting for 33% of the gas production and slightly more than 10% of oil production.
“Production and infrastructure investment used to be substantially higher in the Shallow Water Province, but over the last 20 years, development has moved onshore or to deepwater operations,” regulators noted.
Since 1947, 47,765 wells have been drilled in shallow waters, but from 2008-2018, the number plummeted by 89%. The number of platforms installed have followed similar trend lines as 6,991 platforms have been installed since 1947, while 5,102 platforms have been removed.
While shallow water development today is almost entirely natural gas, both oil and gas production is down from historic highs. Since 1998, oil output has decreased 77%, and gas production is down 92%.
Nearly 100 platforms a year are being removed “with no new platforms being installed,” regulators noted. If this trend were to continue, the lack of development could strand as much as 179 million bbl of oil and 4,567 Bcf of natural gas.
The research was done to support President Trump’s executive orders to promote offshore energy infrastructure, independence and economic growth.
“This research provides critical information that energy development in the Gulf of Mexico should not be managed with a ‘one size fits all’ approach in how we avoid stranding our nation’s valuable energy resources,” said BSEE Director Scott Angelle.
“Although reversing the natural decline may not be entirely possible, promoting the recovery of the remaining oil and natural gas resources in the Gulf of Mexico Shallow Water Province, while protecting the interests of the American public, is an obligation this administration is taking action on.”
“Once the infrastructure is removed, we will not be able to recover these resources,” he said. “The nation is essentially on a ‘shot clock’ to make sure that does not happen.”
BOEM acting director Walter Cruickshank said the Interior agencies worked together “to encourage increased activity consistent with the resource conservation policy established by Congress under Outer Continental Shelf Lands Act.”
The BOEM has published updated discount rates for the two distinct GOM provinces, shallow and deepwater. The agencies also verified that BSEE has authority to consider applications for royalty relief on a per-project basis, which may include exploratory wells to promote developing discovered resources.
The updated discounted rate for the Shallow Water Province is to apply to special case royalty relief applications and is only applicable for new wells and production in the region.
“High royalty rates prevent as much as $20 billion in shallow water energy projects,” said Sen. Bill Cassidy (R-LA). “Lowering this barrier encourages production, which increases revenue for taxpayers and the number of jobs for Louisiana workers.”
Fellow Louisiana Republican Sen. John Kennedy said the reduction in shallow water drilling has hurt “workers across the state, from Houma to Cameron. The research...will help us develop an attack plan that will increase interest in the shallow waters and protect jobs.”
BSEE and BOEM concluded that when investment increases activity in the province, there are ancillary benefits for the province, region and country. According to BOEM, for every $1 million investment in shallow water, the total economic impact, including the reinvestment of state and local taxes, yields around $1.7-2 million in additional economic activity.