MMS official predicts surge in Gulf of Mexico oil production

The Gulf of Mexico is booming with activity, Minerals Management Service gulf OCS regional director Chris Oynes told the Offshore Technology Conference Wednesday. Deepwater oil production is surging, and government officials are trying to find incentives to boost flagging gas production in shallow water, Oynes said.


By the OGJ Online Staff

HOUSTON, May 2 -- The Gulf of Mexico is booming with activity in deep and shallow water areas, Minerals Management Service gulf OCS regional director Chris Oynes told the Offshore Technology Conference Wednesday.

Deepwater oil production is surging, and government officials are trying to find incentives to boost flagging nonassociated gas production in shallow water, Oynes said.

Missing from his remarks were statements on keenly awaited issues such as a decision on the use of floating production, storage, and offloading systems in the gulf and the disposition of eastern gulf Sale 181, still tentatively set for December 2001.

Otherwise, Oynes gave a broad summary that depicted the gulf as one of the world's busiest exploration and development areas where operators drilled 1,364 wells in 2000.

A periodic gulf oil production projection, which MMS expects to issue in the next 10 days, will indicate that more steep increases lie ahead. These include the first production from Crazy Horse and other new fields, Oynes said. Companies have had so much success in deep water that the next OCS resource assessment is also expected contain higher numbers, he added.

Operators are producing oil from 37 deepwater fields now compared with only 11 in 1995, and many more fields will start up in the near future. A map made about a year ago showed eight expected deepwater oil field startups in 2001-02, and now MMS is aware of 13 more startups expected during the same period.

Oil production is on a slight decline in shallow waters, which produce most of the gulf's gas.

Shallow-water gas production is down 18% since 1996 to 3.9 tcf/year in 2000. This is still 80% of Gulf of Mexico gas production and 20% of US gas production.

MMS is looking at improving incentives for gulf gas production. Oynes admitted that a royalty holiday for the first 20 bcf of gas produced from formations at 15,000 ft or deeper on certain leases has not elicited greater production because gas prices exceed the price threshold set out in the regulations.

Royalty relief is appropriate because gas from those depths often comes from formations that pose risks such as high pressures, high temperatures, and high hydrogen sulfide concentrations, Oynes said.

Most gas produced from deepwater fields is associated with oil production.

Oynes said the industry has not had a major accident in the gulf for quite some time. He said MMS will work closely with the 11 operators bidding for their first gulf tracts in the March 2001 lease sale to help maintain safe operations.

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