U.S. Gulf of Mexico Technological Advancements and ILX Strategy Driving Investments and Reserve Growth
EAI, Inc.'s latest GOM production outlook highlights leading operators' renewed approach to offshore development with focus on development efficiency
DENVER, June 16, 2020 /PRNewswire-PRWeb/ -- The latest project development focus of operators in the U.S. Gulf of Mexico has been targeting infrastructure-led exploration (ILX) near existing platforms following some advancement in seismic technology which has allowed for better subsalt visualization. This has led to significantly increased reserves around existing infrastructure which improves project economics and utilization of the platforms.
Continued improvements in technology and application to existing reservoir/ field areas are expected to further expand the reserve base around existing platforms along with incremental production. This has driven the ramp-up of a number of smaller scale tieback projects either active or coming online in 2020 including Stonefly, Orlov, Katmai, Atlantis Phase 3 and others on top of incremental production from greenfield projects with the largest being the Shell Appomattox project.
Operators targeting these resources have a much lower capital investment requirement on infrastructure and construction and will be able to bring new projects online faster. Based on EAI, Inc.'s analysis, there is significant excess offshore platform infrastructure capacity to accommodate roughly 1.1 MMBPD of additional production at the platform level among the top 15 platforms (not inclusive of Mars or Thunderhorse developments).
In the recent past, breakeven costs for a greenfield production platform in the deepwater GOM ranged from $50 - $70/BBL. However, new techniques implemented in the development of larger-scale projects has allowed them to become more efficient.
Leading GOM operators such as Chevron, Shell, and others are targeting greenfield projects with much lower breakeven oil prices in the range of $25 - $35/Bbl (with some pause in this lower crude price environment). Additionally, the emerging ILX trend which has led to significant reserve growth coupled with the utilization of open production capacity of nearby infrastructure has supported tieback wells with breakeven oil prices in the range of $15 - $30/Bbl.
These advancements will also support investments in existing assets in the GOM such as the Anadarko assets (Occidental owns, potentially selling "non-core" assets to pay down debt) which include the Lucius, Heidelberg, Marco Polo, and Constitution platforms that have additional tieback and reserve addition upside along with existing infrastructure to transport the crude to market.
GOM production has ready access to the Gulf Coast refining market spanning the Texas City - Baton Rouge - Alliance and Pascagoula corridor as well as the Clovelly - St. James hubs for accessing the foreign refining market.
Following a retraction of inland light oil supply, a premium value for gas oil rich crude grades (post global light product demand recovery for the pandemic impacts) and access to a ratable downstream market, GOM platform values for light and medium sour grades tend to be stable and minimize some of the price risks associated with the value of some inland crude resources. These net positive benefits will continue to drive interest and investments in production assets as well as the midstream business as global demand recovers and provides more sustainable crude price support.
The insights provided in this article are from EAI, Inc.'s recently completed GOM production outlook update as part of its overall Gulf of Mexico Deep Dive Study. EAI, Inc.'s Gulf of Mexico Deep Dive product is built from the reservoir level up including wells, companies, production levels and crude grades linked to platforms and pipelines (or FPSO) with connection to onshore facilities and U.S. or export market refineries. Analysis provided in EAI, Inc.'s Gulf of Mexico Deep Dive can be used to support asset/resource acquisitions and divestitures, project planning and investment decisions, refinery crude slate planning, logistics needs and assessments and crude price / market planning.
About EAI, Inc.
EAI, Inc. is an energy consulting firm offering leading-edge products and services with expertise spanning a variety of business areas at the global, regional, asset, and resource level of detail. EAI works with a wide range of companies including international energy firms, independent refiners, resource development firms, investment institutions, marketers and retailers, transportation companies and government agencies.
To learn more about this study and other informational products, please contact EAI at [email protected] or visit http://www.crudehub.com.
SOURCE EAI, Inc.
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