Industry Flexes Muscles Again in Gulf of Mexico

Abstract

The oil and gas industry is flexing its muscles once again in the US Gulf of Mexico (GOM) with a surge of activity expected to support a robust level of deepwater development through the end of the decade. While headlines worldwide have gone to onshore North American shale drilling, the GOM remains a premier objective for the world’s largest international companies. A single deepwater well can produce more than a large number of onshore shale wells combined, which translates to a lower capital cost per barrel for companies with the financial and technical wherewithal to develop deepwater resources. The doubt cast over the future of GOM development in the aftermath of the fatal BP Macondo well blowout and oil spill in 2010, and the ensuing deepwater drilling moratorium, has receded. Containment Advances Two multicompany organizations, the Marine Well Containment Company and the Helix Well Containment Group, have now developed capping stack and spill recovery systems designed to contain a Macondo-sized blowout with equipment and resources permanently located in the GOM. The development and availability of sufficient containment technology was a necessary condition for the United States government’s decision to resume issuing deepwater drilling permits. In addition, the government completed a major reorganization of its offshore regulatory system, strengthening offshore development oversight and the safety and environmental enforcement functions. With the resumption of deepwater drilling permits and renewed acreage leasing, GOM activity has steadily increased over the past 2½ years. As a final symbol of restored drilling and development momentum in the GOM, BP placed the high bids on 24 deepwater blocks in the federal lease sale for the central Gulf on March 19. Days earlier, the US Environmental Protection Agency (EPA) had lifted a suspension enacted after Macondo that barred BP from receiving new government contracts. As a condition for regaining contract bidding rights, including bidding on government oil leases, BP agreed to retain an EPA-approved independent auditor to ensure that the company meets safety, ethics, and corporate governance standards. Floating Rigs Increase The number of floating drilling rigs that are active in the GOM—semisubmersibles and drillships that are designed for deepwater projects—has increased from 27 in October 2011 to 45 at the beginning of the year, according to data from IHS. Over the same period, the number of active jackup rigs—those rigs designed for shallow waters—fluctuated between 30 and 36 and at the start of the year stood at 31. The figures suggest the growing share of deepwater projects in total GOM activity.