Our latest research shows there is potentially a bright future for the recovery of the deepwater oil and gas industry in the US GoM. Although the relatively high E&P costs in the region lead to a preference for near-field exploration and expansion as development options – only Anchor and Vito are currently considered for development as standalone projects whilst other large developments (e.g. Chevron’s Big Foot) are ‘hub class’ projects – the US GoM is not short of potential for the discovery and development of new prospects. Only 33% of the technically recoverable reserves have been produced, with 48% remaining undiscovered. The BOEM estimates that 51% of these technically recoverable undiscovered resources – some 37.7 billion boe – are economically viable at $50/bbl oil price.
When considered alongside the current and potential regional rig market, where 21 of the 43 deepwater rigs currently stationed in the US GoM are under contract with possibly 12 more rig contracts still to come, there is evidence for growth in exploration and development, and room for the industry to expand.
Explorers require a higher margin to offset the risk of dry holes, however. Visible wells have been submitted to the BOEM by the operator, but this is no guarantee that they will be drilled when scheduled. Companies vary their activities according to a variety of factors, including oil prices and internal scheduling. Our development forecast takes these factors into account in forecasting future rates of activity.
The potential for the economical discovery and development of a prospect in the US GoM remains, as evidenced by the two ‘hub class’ projects due online in 2018 (Big Foot and Stampede) and the well-publicised go-ahead for BP’s Mad Dog Phase II development. Our forecast for exploration and development activities in the GoM shows levels bottoming out in 2017 and 2018, and then continuing to recover over the next seveerred development option, though, with only Chevron’s ral years. Constrained by high costs, near-field exploration and expansion continue to be the prefAnchor and Shell’s Vito being considered as for development as standalone projects.
As it stands, under development and future development projects currently scheduled are set to bring on-stream less than half of the average annual capacity over the next six years that was added each year in the previous seventeen. Some slowing of capacity additions is to be expected as the US GoM matures, but if the US is to remain a deepwater production powerhouse, exploration and development will need to increase. The US deepwater glass is half full, but more investment is required to drain it completely. In other words, as resource base discovery approaches 50%, you need to invest in a straw.