Offshore production from the US Gulf is forecast to hit a new peak of 1.9 MMboe/d by 2016, which would see it overtake its previous highest level set in 2009, according to a new survey by industry consultants Wood Mackenzie.

But the long-term challenge to sustain this rise and replace reserves remains significant – WoodMac also points out that just to replace the oil and gas extracted from currently producing fields between now and 2021 (4.2 Bboe in total), the industry will need to find up to 55 deepwater GoM discoveries (77 MMboe on average) to make up that amount. Enhanced oil recovery techniques must also play a major part in further improving recovery rates from the emerging plays, it added.

New developments and the continued expansion of mature fields will drive the forecast rise in output between 2014 and 2016 to the 1.9 MMboe/d figure, before then levelling off for the remainder of the decade, as production from older fields continues to decline and a more limited number of new projects come onstream because of the current tightening of Capital Expenditure budgets by operators looking to control their costs. A total of 15 development projects are expected onstream between 2014 and 2016, but only eight are currently planned to start flowing between 2017 to 2020.

In recent years, deepwater GoM production has plunged from 1.8 MMboe/d in 2010 to 1.3 MMboe/d last year. WoodMac’s report, however, says that deepwater Gulf production will rise 18% per year from 2014 to 2016, with 2015 to see it climb 21% from this year’s level, and 2016 then seeing the planned production startup of Anadarko Petroleum’s Heidelberg field and the continued ramp-up of output from Chevron’s Jack-St. Malo project (due onstream later this year). Other new developments driving the rise include Delta House, Lucius and Big Foot.

Heidelberg (in Green Canyon Blocks 816, 859, 860 and 903) and Jack-St. Malo (in Walker Ridge Blocks 758 and 759) will produce a forecast 115,000 boe/d in 2016, says WoodMac.

The production growth forecast will be supported to a certain extent, adds WoodMac, by the redevelopment and extension of mature fields, including Thunder Horse and Mars.

In 2016, says WoodMac, the five fields (Delta House, Lucius, Big Foot, Thunder Horse and Mars) will account for 26% of output.

WoodMac’s production forecast would entail the industry spending US $17 billion in Capex this year to attain the 2015 target, some 30% more than in 2013. The Lower Tertiary play will make up 21% of the Capex this year, rising to 53% of the total by 2021.

Of the forecast slowdown from 2017-2020, Imran Khan, WoodMac’s GoM analyst, said that although only eight developments were currently expected to come online in that period (compared to 15 from 2014-2016), those eight would be important fields that could define the long-term success of the region. “Stones, Shenandoah and North Platte are part of the Lower Tertiary, which has garnered attention because of the potential to find large discoveries. However, the economics are currently challenging because of high costs, technological limitations and low recovery rates,” he said.

“Unless these obstacles are overcome, it will be difficult for the region to grow in the next decade. Not including yet-to-find reserves, we forecast that production will start to decline after plateauing out at 1.9 MMboe/d in 2021.The current slide in oil prices does not help the long-term outlook either, especially if the downward trend continues for a protracted period.”

Khan emphasized the need for the industry to sustain investment levels to support the production increase, with recent discoveries in deeper waters and emerging plays requiring more complex drilling and advanced technologies, both of which are highly capital intensive. He commented: “A typical development well in the Lower Tertiary can cost $300 million, as compared to the shallower, more established well-known plays, such as the Upper/Middle Miocene, where development well costs are closer to $100 million.”

Beyond 2021, WoodMac also points out, some of the GoM’s largest fields such as Mars and Mad Dog will have been producing for 15 to 20 years. “The impact from this depletion will be significant. Those fields currently onstream are expected to produce 4.2 Bboe between now until 2021. Based on the average deepwater GoM discovery size of 77 MMboe, almost 55 discoveries would be required to make up this amount.

“We believe this obstacle will potentially be overcome if recovery factors can be improved to take advantage of large resource volumes found in emerging plays. For example, if recovery rates double at the three large emerging fields – Appomattox, North Platte and Vito – their reserve base will increase to 2.5 Bboe.”

WoodMac’s outlook also highlighted the increased level of competition from other regions around the world, including nearby neighbour Mexico, especially as the GoM is still suffering from a sustained level of cost increases. Costs are rising at 5-10% annually, it said, despite the recent softening of the rig market. Khan concluded: “Unless the technology to improve recovery rates is developed and costs are reduced, the operating environment will only become more challenging and it will be difficult for the region to maintain a long-term production growth trajectory.”

Offshore