By Lori LeBlanc, LMOGA Offshore Committee Director for BIC Magazine
Necessity is the mother of invention, as the old saying goes. The Gulf of Mexico offshore oil and gas industry is proving that necessity not only produces bold new ideas but a renewed focus on efficiency and productivity.
Since crude oil prices plunged in late 2014, oil and gas producers have been grappling with a “new normal” in the economic reality of U.S. deepwater production. As we begin 2018, the industry recognizes that the $80 per barrel market we experienced just a few years ago will likely not reappear soon and that prices will hover more closely to $50 per barrel in the foreseeable future. And while deepwater production is a long-term investment, it is this modern commodity price environment that now comes into play as producers start new projects in the Gulf.
Out of economic necessity has come innovative new approaches in the design of deepwater structures, operational efficiencies, and expanding exploration in key hub areas in the Gulf where companies have existing infrastructure. Even though this is an economically challenging time, it’s also a very exciting time for the industry from a technology perspective with innovations that will continue to make Gulf oil and gas development attractive for decades to come.
In fact, the federal government’s August 2017 Gulf of Mexico lease sale generated $121 million worth of bids for 90 tracts, and companies so far this year have spent more than $315 million pursuing offshore GoM tracts, according to the Bureau of Ocean Energy Management. That’s an increase of 76% compared to lease sales in 2016. A report from Wood Mackenzie cites six new projects in the Gulf between 2015 and mid-2017, and the U.S. Energy Information Administration predicts that seven new projects will go online between by the end of 2018.
All of these figures demonstrate that, with industry’s innovative new approaches to efficiency and productivity, the Gulf remains economically viable.
Following are just a few examples of strategies implemented by Gulf producers to operate more competitively now and into the future:
- Standardized well design with standardized components that allows the company to make orders for multiple wells at the same time and helps crews know exactly how to drill and complete each well;
- Utilization of long-term rig contracts to stabilize costs, as well as tightening the scheduling and rentals for offshore logistics;
- Shell and other companies are now focusing on lease sales specifically located at their key hub areas, which allows them to use existing infrastructure to increase production in the Gulf through subsea tiebacks. In September, LLOG announced several new projects which will implement such tieback systems;
- Shell is studying the design of a floating platform for the Vito project that will optimize development;
- BP has worked with operator partners to simplify and standardize operation and worked with contractors and vendors to increase efficiencies, and has invested in new technology to increase productivity, which has reduced production costs by 35 percent since 2014;
- And enhanced seismic and digital technologies are breathing new life into old fields and allowing companies to extend production in these fields longer than expected.
America’s offshore oil and gas industry is committed to America’s Gulf and to producing American energy safely and more efficiently than ever before. This will provide our nation and our coastal communities with the dependable energy, good jobs and economic benefits we all need for decades to come, regardless of the peaks and valleys of the global oil market.