The Daley Note: October 20, 2023
Several deepwater projects have started up this year and are helping lift US Gulf of Mexico (GOM) oil production.
The GOM accounts for 15% of total US crude oil production. Offshore production has not returned to pre-pandemic levels but has been steadily increasing since 2022.
GOM production averaged 1,929 Mb/d in July 2023, an increase of 250 Mb/d from January 2022 output of 1,680 Mb/d, according to East Daley’s Crude Hub Model (see figure). Poseidon Pipeline has seen the biggest increase in flows and is now at ~92% utilization in the Crude Hub Model.
Several deepwater projects are contributing to higher supply this year. Woodside in September started the Shenzi North project, located in the Green Canyon area 120 miles offshore Louisiana. Shenzi North will feed into the Shenzi platform, which is sized to produce up to 100 Mb/d of crude oil.
In April 2023, BP brought its deepwater Mad Dog Phase 2 project online in Central Gulf waters. Mad Dog is owned by BP (60.5%), Chevron (15.6%) and Woodside (23.9%). BP estimates the new project can produce up to 120 Mboe/d of oil and natural gas.
Privately owned LLOG Exploration is the lead operator for the two largest GOM projects coming online over the next two years. The Shenandoah field is expected to hit first oil in late 2024 with maximum production of ~100 Mb/d.
The Salamanca field, a second LLOG project, has a total capacity of 60 Mb/d and should produce first oil in early 2025. According to East Daley’s Crude Hub Model, both projects will be transported to the Cameron Highway Pipeline Offshore System (CHOPS) operated by Genesis Energy (GEL). East Daley includes these expansions in the Financial Blueprint for GEL.
Despite the recent gains, the offshore industry will need to continue exploring new acreage to maintain production, and the news has been ominous on this front.
In its latest five-year lease plan, the Interior Department has proposed the fewest offshore oil and gas lease sales in history. The agency’s environmental impact statement for the 2024-29 Outer Continental Shelf leasing program proposes a maximum of three oil and gas lease sales in the GOM. To stay in compliance with the Inflation Reduction Act, the three proposed lease sales are the minimum number required for the Interior Department to continue expanding its offshore wind leasing program. – Kristine Oleszek Tickers: BP, GEL.
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