U.S. Takes Steps to Open Waters to Drillers

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Written by Daniel Graeber for Industrial Info Resources (Sugar Land, Texas)--Offshore energy groups hailed a decision by the Trump administration to re-open the Gulf of Mexico (designated by the administration as the Gulf of America) and other federal waters to drillers, with one estimating the region brings billions of dollars to the U.S. economy.

Interior Secretary Doug Burgum on Monday ordered the Bureau of Ocean Energy Management to begin the steps necessary to prepare a new schedule for offshore oil and gas leases on the continental shelf.

"Under President Donald J. Trump's leadership, we are unlocking the full potential of our offshore resources to benefit the American people for generations to come," Burgum said in a statement.

In one of his last acts of office, former President Joe Biden instructed the Department of the Interior (DOI) to remove more than 625 million acres of federal offshore waters from oil and gas leasing, from the East Coast to the Gulf of Mexico and the Pacific.

Trump, however, declared a national energy emergency, laying out an aggressive energy policy that erased much of his predecessor's cleaner goals.

Erik Milito, the head of the National Ocean Industries Association, hailed the measure as a way to restore the "long-term certainty and stability" of the energy sector, particularly in the Gulf of Mexico. By his estimate, the region brings more than $30 billion to the U.S. economy and supports nearly 400,000 jobs.

"A robust leasing program ensures continued investment, innovation and global leadership in safe, responsible offshore energy production," he said.

The Interior Department estimates the entire U.S. Outer-Continental Shelf holds an estimated 68.79 billion barrels of oil and 229.03 trillion cubic feet of natural gas in undiscovered reserves. The Gulf of Mexico, however, is the only area producing significant quantities of oil, and it is only a marginal gas producer.

Federal estimates point to an average production rate of 1.8 million barrels per day (BBL/d) this year, which would account for about 13% of total U.S. crude oil production.

On Monday, Chevron Corporation (NYSE:CVX) (Houston, Texas) and TotalEnergies SE (NYSE:TTE) (Courbevoie, France) announced the start of new production at the Ballymore field, located offshore about 160 miles southeast of New Orleans. Peak production is estimated at 75,000 BBL/d, with another 50 million cubic feet per day in natural gas.

In response to further offshore potential, the American Petroleum Institute (API) said a more predictable five-year lease program is necessary to advance Trump's agenda of American energy dominance.

"We applaud Secretary Burgum and the administration for taking action to unleash America's vast offshore oil and natural gas resources and restore a pro-American energy approach to federal leasing," said Holly Hopkins, the API's vice president for upstream policy.

Some in the industry, however, have suggested Trump's trade policies could undermine his energy agenda on economic grounds. While the break-even price for drillers is lower offshore, respondents from the energy sector told the Federal Reserve Bank of Dallas in a quarterly energy survey that energy dominance would be tough to achieve due to low oil prices.

Erratic trade policies, meanwhile, have created economic headwinds. The Federal Reserve Bank of Atlanta is pointing to a contraction during the first quarter. West Texas Intermediate (WTI), the U.S. benchmark for the price of oil, was trading Tuesday morning at about $63 per barrel, down some 11% so far in April.

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