Is It Twilight for Deepwater US Gulf Megaprojects?

Abstract

In early February, TotalEnergies revealed its plans to withdraw from the North Platte deepwater development in the US Gulf of Mexico (GOM). Given the historically inviting and economically competitive US offshore when it comes to oil and gas development, word of the French producer’s decision struck an ominous chord. Things have changed for operators looking to forward multibillion-dollar megaprojects in the GOM. Today, there may be more headwinds than ever before facing future large-scale developments—an unfavorable political regime, competition for investment not only with other oil projects around the world but also with renewable projects, and supply chain woes that have made the waits for long-lead-time items even longer, along with the simple fact that the region has gone several years with very few major discoveries. The backlog of potential GOM megaprojects is stuck in the single digits, and likely is less than five. Shell has its Leopard find and Blacktip complex. Equinor has Monument. After that, things get gray. The number of Lower Tertiary wells—where any elephant fields remaining would likely be found—has decreased steadily over the past decade (Fig. 1). According to the Bureau of Ocean Energy Management (BOEM), six Lower Tertiary exploration wells each were drilled in both 2013 and 2014. That number dipped to four in 2015 and 2016. Only one was tallied each year between 2018 and 2020. Of the 25 Lower Tertiary wildcats drilled between 2013 and 2020, BOEM counts seven as oil discoveries, nine as noncommercial, and nine as dry holes. The slide in activity could be related to soft oil prices or it could be that the region, which has been actively explored since around 2000, has matured. TotalEnergies’ Chief Patrick Pouyanne told investors that it was not US policy that made the company shift gears, but rather the fundamentals of the company’s portfolio. “It’s a purely intrinsic decision linked to the project and linked also to our capital allocation,” he said. “It’s honestly at the limit—at the high limit of the range we gave ourselves. North Platte, because of its size, in fact, we knew it. It’s not a giant field. It’s really on the high side of these metrics. So that’s one point. And second point, we prefer to invest in Sepia and Atapu in Brazil rather than in North Platte.” North Platte straddles four blocks in the Garden Banks area of the US GOM in about 1300 m of water. The field development plan was based on eight, 20,000-psi subsea wells and two subsea drilling bases connected via two production loops to a newbuild, lightweight floating production unit (FPU). Oil production at plateau level was expected to average 75,000 B/D with associated natural gas. “TotalEnergies just signed up with Brazil, which has projects more along the lines of what they’re looking for—200,000 B/D-type projects with future upside,” explained Justin Rostant, principal analyst with Wood Mackenzie. “Similarly, in Uganda, they just signed on the Lake Albert (Tilenga) project, which includes multiple fields they’re going to jointly develop—again another 200,000 or 250,000 B/D project. The Uganda project also includes investments in a 60,000 B/D refinery, a 1440-km export pipeline, and potentially a renewable power project. So, truly it’s an integrated megaproject. They also just had a massive discovery in Namibia. Again, a multibillion-barrel discovery that will turn into another megaproject. Those are the kind of projects they’ve been looking at and North Platte just could not compete.”