Is a Revival Underway in the Gulf of Mexico?

---

Researched by Daniel Graeber for Industrial Info Resources (Sugar Land, Texas)--Another 250,000 barrels per day (BBL/d) of oil are coming out of the U.S. territorial waters of the Gulf of Mexico, after the start of various new operations, with BP plc (NYSE:BP) (London, England) starting its first new platform since the Deepwater Horizon oil spill in April 2010.

BP began production from the Argos platform in the Gulf of Mexico almost two years to the date after the facility arrived in Corpus Christi, Texas. Rising some 27 stories above the ocean floor, and representing a $9 billion investment, Argus marks BP's effort to extend the life of its Mad Dog field.

Mad Dog, among the top 10 regional producers, was discovered in 1998, but appraisals from 2009-2011 doubled the resource estimate, necessitating another platform.

Argos has a peak production capacity of 140,000 BBL/d of oil, and it will increase BP's gross-operated capacity in the Gulf of Mexico by about 20%.

"BP anticipates its production in the U.S. Gulf of Mexico to grow to about 400,000 barrels of oil equivalent per day (BOE/d) net by the mid-2020s, and average 350,000 BOE/d across the decade," the company said.

Argos is also the first new facility for BP since the Deepwater Horizon oil spill, among the worst tragedies to strike the industry. Oil leaked for 87 days and the federal government imposed a six-month moratorium on drilling after the incident.

"Safely starting up the Argos platform is an incredible milestone for BP and a proud moment for our team, who delivered the project with an impeccable safety record," said Starlee Sykes, BP's senior vice president for Canada and the Gulf of Mexico.

BP remains one of the premier producers in the region, with Argos marking its fifth production platform in the U.S. waters of the Gulf of Mexico.

The federal government estimates that total Gulf oil production will average 1.9 million BBL/d this year, representing 15% of total U.S. crude oil production. Total offshore estimates put the available resources at 61 million BOE, with about 18 million BOE in deepwater basins, according to the federal Bureau of Ocean Energy Management.

"Argos demonstrates BP's continued commitment to investing in the United States," said David Lawler, the chairman and president of BP America. "We're one of the largest energy producers in the country and are adding more resilient hydrocarbons at a critical moment."

That "critical moment" points to supply-side tightness in the second half of the year. Using supply and demand figures from the latest monthly market report from the economists at the Organization of the Petroleum Exporting Countries (OPEC), London oil broker PVM said Monday that global oil inventories could decline at a rate of 1.09 million BBL/d.

And while shale accounts for more than 70% of total U.S. crude oil production, there are concerns about a declining rate of growth. But in 2018, before the pandemic, Andy Brown, the head of upstream activity for Shell plc (NYSE:SHEL) (London), said deepwater was in some cases competitive with shale, with break-evens in deepwater at about $30 per barrel.

It was Shell, meanwhile, that was the first out of the 2023 gate with new production offshore. The company was joined by Norwegian energy major Equinor ASA (NYSE:EQNR) (Stavanger, Norway) in announcing the start of production at its Vito platform in February, which boasts a peak capacity of about 100,000 BOE/d.

Equinor noted that designs were reconfigured to lower the cost for Vito by 70% from its original estimates. Describing the Gulf as one of its "core areas," Equinor is among the top five producers in the region.

And it's not just the big oil companies doing all the work. More than 30 companies offered bids totaling $309 million in Lease Sale 259, the first offshore drilling auction in more than a year. Chevron Corporation (NYSE:CVX) (San Ramon, California) was the top bidder with a $104 million offer, and sales overall were 38%, or $72 million, higher than the previous lease in 2021.

Offshore remains attractive. Norwegian consultant group Rystad Energy (Oslo, Norway) estimates offshore could draw in as much as $214 billion in new investments this year and account for 68% of total production through next year, an increase from 40% between 2015 and 2018.

"Offshore oil and gas production isn't going anywhere, and the sector matters now possibly more than ever," said Audun Martinsen, the head of supply-chain research at Rystad.

Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) platform helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking more than 200,000 current and future projects worth $17.8 trillion (USD).