A U.S. Energy Information Adminstration report says dramatic advances in offshore drilling technology have tripled the water depth record for gas or oil production on the U.S. outer continental shelf from 1,760 ft in 1989 to 5,376 ft in 1997. Since then, operators have drilled in depths exceeding 7,000 ft.
Technological advances also have lessened the time between discovery and initial production for offshore projects, which enhances the expected economic returns. Development times for deepwater prospects have been especially impressive, declining from 10 years for a discovery in 1984 to roughly 2 years for fields discovered in 1996.
However, the near-term outlook for offshore gas production may suffer as a result of the low 1998 gas prices, which have been caused in part by the plummet in crude oil prices, according to the EIA analysis. Although 1998 offshore production is not expected to show a significant drop, the cumulative impact of decreased drilling and other support work during the year may be substantial.
A low-supply scenario suggests that U.S. offshore gas production in 2002 could decline by almost 30% from the 1997 level. A high-supply scenario using more optimistic assumptions indicates that gas production in 2002 could rise by 39% from 1997 levels.
EIA said, over the longer term, prospects for gas supplies from the offshore show potential for substantial growth. Recoverable gas resources in undiscovered fields in the federal waters of the Gulf of Mexico were estimated to be 96 tcf as of the end of 1995, with an additional 37 tcf to be proven in already known fields. Combined with the 29 tcf in reserves already proved for this area, this is equivalent to the 1997 estimate of 165 tcf in proved reserves for the U.S. as a whole.
"Recovery of this huge resource depends on the underlying technology and economics," said EIA. "In addition to developing new technology, companies have directed their efforts at improving potential profitability by aggressively managing costs, accelerating project development, and increasing well productivity."
Fields in water deeper than 10,000 ft may provide more than 1.9 bcfd by 2002, up from 0.4 bcfd in 1997, said EIA.
It said the Deep Water Royalty Relief Act, by increasing the probability of economic success in waters deeper than 200 m, has greatly stimulated bidding for offshore leases since it took effect in 1996. More than half of all lease bids received by the Federal government for Gulf of Mexico waters were for blocks in water depths of 800 m (2,526 ft) or more.
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