U.S. Mulls More Drilling in the Gulf of Mexico

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Written by Daniel Graeber for Industrial Info Resources (Sugar Land, Texas)--To the applause of drilling advocates, the U.S. government has moved forward with plans for oil and gas drilling in the Gulf of Mexico, though the timeline might not be met with universal praise.

The Bureau of Ocean Energy Management (BOEM), part of the U.S. Department of the Interior, published a draft environmental review last week of four leasing options in the U.S. territorial waters as part of the lease program ending in 2029. The schedule envisions three lease sales over the time frame.

President Joe Biden's administration had been accused of dragging its feet on fossil fuel programs as it leaned in favor of the energy transition. Erik Milito, president of the National Ocean Industries Association, which advocates for more offshore work, said he was pleased to see the BOEM finally moving forward on plans for the first lease under the five-year plan.

"The Gulf of Mexico is more than just an energy source; it's a cornerstone of economic stability, energy innovation, job creation and environmental stewardship," Milito said on Friday.

The Gulf of Mexico accounts for about 15% of total U.S. crude oil production, or about 1.8 million barrels per day (BBL/d). Output next year is expected to be about 2% higher than 2024 levels, but still a bit below production trends from last year.

Because of stricter regulations on emissions and other factors, Gulf oil production is considered low-carbon relative to inland basins.

Under the BOEM's proposed leasing scenario, the review found there would be only a marginal impact on air quality, animal health and other environmental issues. The record of decision on the final environmental impact statement, however, might not be ready until 2026, meaning there would be no lease sale in the Gulf of Mexico next year.

That might put a spanner in the gears of President-elect Donald Trump's plans to capitalize on and advance U.S. energy dominance. The country is already the world leader in crude oil and natural gas production, as well as exports of liquefied natural gas (LNG), but Trump wants more.

A mid-December report from the Reuters news service, citing sources familiar with the agenda, found Trump would work to accelerate LNG exports and press for more drilling offshore and on federal lands.

But he may already be facing obstacles with his proposals. Many of his fellow Republicans voted in favor of the Inflation Reduction Act, which is packed with incentives for cleaner energy technologies. And private companies are beholden to their shareholders.

Chevron Corporation (NYSE:CVX) (San Ramon, California), for example, trimmed its capital spending program for next year by $2 billion to around $17 billion, with 75% of that slated for the inland Permian Basin. Amid a period of low commodity prices, many companies such as Chevron are favoring shareholder returns over new oil and gas projects.

"We continue to invest in high-return, lower-carbon projects that position the company to deliver free cash flow growth," Chairman and Chief Executive Officer Mike Wirth said. For more information, see December 9, 2024, article - Chevron Favoring Cash Flow Over Increased Production.

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