Despite lower commodity prices and a worldwide oil demand that has failed to keep pace with supplies, crude oil production in the federal U.S. Gulf of Mexico (GoM) is set to reach a record high of 1.9 million barrels per day (MMbbl/d) in 2017.

That is according to a report issued by U.S. Energy Information Administration (EIA).

Following a year that saw eight deepwater fields start up production, the years 2016 and 2017 are expected to bring six more deepwater projects. The projects had already received approval and were already along in the development process before oil prices sank to the $30/bbl range. But the fate of other newer projects may be in jeopardy. This is in spite of the offshore region’s being generally less sensitive to short-term crude price fluctuations compared to their shale counterparts.

“Decreasing profit margins and reduced expectations for a quick oil price recovery have prompted many GoM operators to pull back on future deepwater exploration spending, reduce their active rig fleet by scrapping and stacking older rigs, and restructure or delay drilling rig contracts,” the EIA warned. “These changes added uncertainty to the timelines of many GOM projects, with those in the early stages of development at greatest risk of delay or cancellation.”

Estimates from the EIA show crude oil production could reach 1.6 MMbbl/d by year-end 2016 and climb to nearly 1.8 MMbbl/d in 2017. By year-end 2017, the EIA believes crude oil production would have reached 1.91 MMbbl/d, accounting for 21% of the forecasted U.S. crude oil output that year.

Projects expected to contribute to production growth in 2016 are:

  • Shell’s ultradeepwater Stones Field, which Shell said is estimated to contain more than 2 billion barrels of oil equivalent, in the Walker Ridge area. Located in the GoM’s lower tertiary geologic trend, the field will be developed using eight subsea production tiebacks to an FPSO vessel equipped with a turret and a detachable buoy configured with lazy wave risers.
  • Noble Energy’s Gunflint, where first production is on target for a mid-2016 startup. The Mississippi Canyon area, subsalt Miocene discovery also will be developed as a subsea tieback, which reduces project costs and start-up times. The tieback will be connected to Williams’ Gulfstar;
  • The Anadarko Petroleum Corp.-operated Heidelberg, which is set for first oil in second-quarter 2016. Estimated to hold estimated recoverable reserves of between 200 and 400 MMbbl, Heidelberg is being developed as a truss spar under the Design One, Build Two strategy, which lowers costs. Its companion, Lucius, reached first oil in 2015. With a topside operating weight of 16,000 tons, the Heidelberg truss spar has a capacity of 80,000 bbl/d and 80 MMcf/d, according to Anadarko;
  • Freeport McMoRan’s Holstein Deep in the Green Canyon area. The field, where first production is expected by mid-2016, is also being developed initially as three-well subsea tieback. Plans are for the three wells to produce at an estimated 24 Mboe/d in aggregate, Freeport-McMoran said in its latest earnings report news release.

If all goes as planned, at least two more developments will began production in 2017. These are LLOG Exploration’s Son of Bluto 2 and Freeport McMoRan’s Horn Mountain Deep—both as subsea tiebacks.

Although market conditions may have slowed exploration spending, opportunities still exist for companies to boost acreage positions that could lead to more discoveries in the future.

The U.S. Bureau of Ocean Energy Management on Feb. 18 said about 45 million acres will be made available for oil and gas exploration in the GoM during two March 23 lease sales.

  • Covering 44.3 million acres, Sale 241 includes about 8,349 unleased blocks located from three to 230 nautical miles offshore Louisiana, Mississippi and Alabama, in water depths ranging from three to more than 3,400 m (9 to 11,115 ft), while
  • Sale 226, covering the Eastern Planning Area, includes 162 whole or partial unleased blocks spanning 595,475 acres. The blocks range in water depths from 810 to 3,113 m (2,657 to 10,213 ft) offshore eastern Alabama and western Florida, BOEM said in a news release about the sale.

Velda Addison can be reached at vaddison@hartenergy.com.

Offshore