platforms

In the stormiest market environment for crude oil in many years, it’s hard to find a spot where the sailing is smooth. If even-keel conditions exist anywhere in the oil-producing world today, it might be the offshore Gulf of Mexico, where producer decisions to invest in new platforms or subsea tiebacks are based on very long-term oil-price expectations and the production, once initiated, is steady. In the second half of the 2010s, Gulf producers significantly reduced the average breakeven prices needed to justify their most promising new investments — from more than $55/bbl back in 2015 to less than $35/bbl today. Given what’s happened to crude oil prices the past few days, however, it’s logical to wonder whether any of even the best prospective Gulf of Mexico projects will be sanctioned this year. Today, we discuss how cost-cutting and efficiency improvements have made the offshore Gulf a comparatively steady, growing base of U.S. crude oil production that so far has been less vulnerable than shale output to oil-price gyrations.

It may be easy to forget in these days of Permian this and Permian that, but crude oil production in the offshore Gulf of Mexico (GOM) set a number of new, all-time records in the past couple of years. Better yet, with a handful of key producers in the Gulf planning low-cost, subsea tiebacks to existing platforms — and still discovering more oil — it’s a good bet that offshore production will continue its upward trajectory into the early 2020s. And, unlike U.S. shale wells, whose production peaks early then trails off, wells in the GOM typically maintain high levels of production for years and years. Where do offshore production and drilling activity stand in the Shale Era, and where are they headed? Today, we review recent production gains in the Gulf and examine why the GOM remains the oil sector’s Energizer Bunny.