Despite the perception of weakness in the offshore segment, the U.S. Gulf of Mexico (GoM) matches the Permian Basin in importance for U.S. oil and gas production, according to Rystad Energy.

That assessment comes even though GoM production is expected to fall while Permian production continues its strong growth, said Artem Abramov, the consultancy’s vice president for analysis.

“The evolution of deepwater startup activity in second-half 2016 positions GoM for the prolonged growth in 2017,” Abramov wrote.

Both the GoM and Permian experienced improved drilling efficiency in 2015-2016, the report said. To build on that, the U.S. Energy Information Administration said in its latest Drilling Productivity Report that May production in the Permian, spanning Texas and New Mexico, could reach 2.36 million barrels per day (MMbbl/d), an increase of nearly 76 Mbbl/d.

The GoM produced 1.73 MMbbl/d of oil in December 2016, 20 Mbbl/d below its all-time high output of 1.752 MMbbl/d in September of 2009, the Rystad report said.

GoM oil production in January 2017 almost reached 1.748 Mbbl/d, Abramov said, adding that production increased by 19 Mbbl/d from December 2016.

The GoM in its entirety, not just the portion used for U.S. offshore drilling, has a total area of about 600,000 sq miles, and links the ports of Florida, Alabama, Mississippi, Louisiana and Texas with six Mexican states, according to the Gulf of Mexico Foundation.

The Permian Basin is about 250 miles long by 300 miles wide and, according to DrillingInfo, most of the increased hydrocarbon production in recent years has come from the multi-stacked Sprayberry, Wolfcamp and Bone Spring areas in the Permian’s Delaware and Midland sub-basins. Abramov said the driving force behind these multi-stacked areas was the overall expansion of unconventional activity.

The API gravity of crude in the two areas does not vary greatly—or at least not now—“as a lot of recent deepwater developments produce fairly light crude as well,” Abramov said. This was not the case historically, he added, noting U.S. refineries were designed for heavier crudes. Now, GoM producers can more easily find domestic refinery contracts along the Gulf Coast, he said.

How much crude could be produced in both areas?

The Permian could add between 450 Mbbl/d and 500 Mbbl/d in 2017, and about that amount in 2018, Abramov said. In 2018, one large, 450-Mbbl/d pipeline in the Permian will be turned in-line. Between 300 Mbbl/d and 450 Mbbl/d of capacity can be added through existing pipelines, he said.

Abramov cautioned, however, that any more growth in the Permian will come with “severe bottlenecks and cost escalation.”

Setbacks are something already experienced with production in the GoM.

Production outages are likely for the GoM Abramov said, noting the February fire on Phillips 66’s Paradis Pipeline. “Typically, we observe [one to two] unplanned outages each year, which have some material impact on the total GoM supply. Most frequently, unplanned outages are associated with the hurricane season [in the third quarter].”

The 2017 Atlantic hurricane season begins June 1.

Abramov predicted a minor decline for February’s final GoM production, saying “next week we should get final production [information] for February.” He noted that in March, though, production likely passed September 2009’s 1.752 MMbbl/d.

Erin Pedigo can be reached at epedigo@hartenergy.com.

Offshore