Despite low oil, Gulf of Mexico production expected to hit record high

Even with the price of oil hovering near $30 a barrel, crude production from the Gulf of Mexico is expected to hit record levels in 2017, the U.S. Energy Information Administration projects.

Because deep-water projects are costly and take years to come online, many expensive projects were authorized before the price of oil began to plummet. In general, Gulf production is less sensitive to short-term crude pricing movement than onshore shale production.

The EIA projects Gulf production will average 1.63 million barrels per day this year and 1.79 million barrels a day in 2017, including hitting 1.91 million barrels in December 2017.

The previous high of more than 1.7 million barrels came in 2009 in advance of the 2010 drilling moratorium after the Deepwater Horizon tragedy.

Gulf oil is expected to represent 18 percent and 21 percent of total U.S. crude production in 2016 and 2017, respectively.

The low price of oil is keeping most energy companies from approving new Gulf projects, but several are already in the works. The market instability changes add an element of uncertainty because projects in the early stages of development could be delayed, the EIA noted.

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The EIA is counting on additional oil coming from 14 new deep-water projects, including eight that came online last year. Four are expected to start this year, as well as two more in 2017.

Some of the projects already in operation include Royal Dutch Shell’s Perdido and Mars B projects, Exxon Mobil’s and Anadarko Petroleum’s Lucius, and Noble Energy’s Rio Grande. Some of the fields yet to come online are Shell’s Stones and Noble’s Gunflint. Anadarko’s Heidelberg field just came online in January.

Shell’s Stones field will use the first floating production, storage, and offload vessel, or FPSO, in the Gulf.

With the exception of Anadarko’s Lucius field, each of the fields was developed as a subsea well that is tied back to nearby existing production facilities. The use of subsea tiebacks allows producers to reduce both project costs and start-up times. The Lucius field produces oil using a floating production platform that supports drilling, production, and storage operations, known as a truss spar.

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