Future oil production from the Gulf of Mexico (GOM) appears bright, and while natural gas production from the shallow waters is declining at an alarming rate, deepwater finds may hold great promise for new reserves, the regional director of the Minerals Management Service (MMS) told a Houston audience this week.

Speaking at the annual Offshore Technology Conference, Chris Oynes said a survey of operators found that oil production from the GOM should grow to more than 2 million bbl/d by 2005 as new fields in deepwater ramp up. However, natural gas output will not do as well.

“The Gulf is a vibrant, growing and developing area,” but it will take “a lot of drilling, not just 50 or 60 wells” to keep the natural gas production at a rate needed by North America. Deepwater expansion, especially for natural gas, could change the reserve image of the GOM, said Oynes. By the end of 2007, MMS predicts that 65% of the oil and 26% of the gas will come from fields deeper than 1,000 feet.

Deep gas reserves, below 15,000 feet in water, may contain as much as 20 Tcf, representing “almost a new province,” Oynes said.

Nearly 25% of U.S. natural gas is from the GOM; 80% currently is from shallow water. In the deepwater, several huge oil reserves have been uncovered, holding the promise for deepwater gas as well. MMS forecasts 31 fields are expected to begin production by 2007, including Shell Exploration and Production Co.’s Na Kika and BP’s Thunder Horse fields. In 2004, five new projects are set to ramp up, said Oynes, and production hubs are under development to enhance development from other fields, which hold smaller reserves.

Assuming new technology will offset high decline rates in shallow-water fields, MMS calculates that natural gas, in the high scenario, will slip gradually from 13.03 Bcf/d in 2003 to 12.51 Bcf/d by 2007. In the low scenario — assuming shallow-water declines are not compensated by new technology — output drops during each of the next five years, with production standing at 11.98 Bcf in 2003 and dropping to 9.86 Bcf/d in 2007.

Oynes reminded the audience that MMS numbers do not take into account federal incentive programs for deep drilling in shallow water, and it is too early for the agency to gauge how those incentives may impact the numbers.

Oynes also offered two GOM scenarios for oil production in the next few years. In the high scenario, total oil output for the Gulf will grow from 1.7 million bbl/d this year to 2.05 million bbl in 2005 before topping out at 2.14 million bbl/d in 2006. In a second, “low” scenario, MMS predicts oil production starting at 1.53 million bbl/d this year and topping out at 1.79 million bbl/d in 2006.

Output will begin to slow down in 2007, according to MMS. However, Oynes said some of the problem will not be a drop in reserves, but in part because oil and gas operators are conservative in their estimates.

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