Gulf of Mexico Operators Transition to Faster, Cheaper Developments as Production Decrease Looms
Authors: Wright Blake 
Published: December 2022

The US Gulf of Mexico (GOM) has long been a sound investment opportunity for operators looking for world-class oil fields, stable government regimes, and predictable regulatory requirements. Since the 1980s, the region’s deeper waters have been populated by fresh infrastructure as commercial discoveries were made, appraised, and developed. Today, more than two dozen floating production platforms and miles of export and transport pipelines populate the area, with more on the way as producers continue successful exploration programs in the area. There have been nearly 90,000 offshore wells drilled in the GOM to date.
The GOM arena has experienced a few bumps in the road over the past few years due to both COVID-19 and the challenges to the most recent lease sale that was revoked, then later reinstated. While GOM oil production dipped from its peak in 2019 due in part to the global pandemic, the area is still an appealing region for operators. Operators used that period to focus on short-cycle and low‑cost recompletions, infills, and tiebacks rather than larger, capital‑intensive projects.
According to a report released by the US Bureau of Energy Management (BOEM), GOM production is expected to experience growth and multiple record years of total oil production, despite off‑trend production levels in 2020 and 2021. Gas production is expected to experience moderate increases but is not expected to rebound near previous highs. The growth in annual oil production predicted in the following years is supported by a strong project queue as deferred projects will now be executed. From 2022 through 2024, oil production is forecast to have strong growth, followed by a relative plateau (until 2027) and a gradual decline through 2031, the end of the forecast period (Fig. 1). Around 70% of new GOM production in 2023 is expected to come from just three projects: BP’s Argos, Shell’s Vito, and Murphy’s King’s Quay.
The predicted decline may be due in part to the number of new wells being drilled in the area. The well count for the GOM in general had a decade’s peak back in 2018; however, the count has trended down ever since. According to analysts at Enverus, industry averaged almost 30 ultradeepwater wells per quarter during 2018 and 2019. Last year, that number was around 15. With fewer wells come fewer discovery opportunities. With fewer discoveries backfilling the queue of potential developments, the GOM could be headed for a lull in new project commitments. Additionally, Wood Mackenzie research found that net discovered resource by company in the GOM fell from more than 1 billion bbl in 2017 to around 250 million bbl in 2021.
Research from Rystad Energy showed just two deepwater GOM hub-based developments received a green light in 2021 (Shenandoah and Whale), while so far in 2022, only one (Salamanca) has been approved (Fig. 2). Counter to that, several subsea tiebacks are in the queue. While these historically represent smaller production volumes, they also represent significantly reduced cycle times from inception to first oil.