IEA slashes Gulf of Mexico supply forecasts

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The Paris-based IEA has cut 2010 and 2011 Gulf of Mexico oil production levels by 60,000 barrels a day (b/d) and 100,000 b/d respectively after the moratorium imposed on deepwater drilling throttled new supply for six months and the oil spill itself haemorrhaged millions of gallons of oil from April this year.

"Macondo still casts a shadow, at least over the lead times for US deepwater supply growth," says the IEA in its latest monthly Oil Market Report. "In the US Gulf of Mexico too, activity is stirring again after a six-month hiatus, with tighter permitting and operational standards hopefully resulting in safer, but still economic new supply."

However, the IEA says that despite the drawdown on production forecasts, it is confident that companies will invest more in the region.

"Oil companies are queuing up to submit requests to recommence drilling, including many of those previously active in the area," says the IEA. "The new regulator, the Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE), has said it hopes that first permits will be approved at the end of the year. The regulator and oil companies acknowledge that this will mean further delays in drilling programmes, as well as planned field start‐ups, but the question remains what this will mean for production volumes."

The moratorium on drilling new offshore wells, which was imposed by the US government on May 27 this year, was lifted on October 12 this year, after authorities determined that new regulations and safety requirements had been sufficiently tightened. However, the US Energy Information Administration says  this ban will result in an average reduction in 2011 crude oil output of 82,000 b/d.

Oil major Shell reported that it had ‘lost' 10,000 b/d of oil and gas output in the January to September period and estimates a further 40,000 b/d shortfall in 2011 due to postponed drilling at its Perdido, Glider, Brutus and Auger prospects.

Chevron reported an estimated shortfall of 10,000 b/d in the second half of 2010. And, as widely reported, operators in shallow water have complained that despite no official cap on drilling, de facto there have also been delays in permitting.

Rating agency Moody's Investors Service estimated that it could take two years for producers, rig operators and service firms to restore production in the deepwater Gulf to pre-spill levels, in a report published in June.

Don't forget to check out Energy Risk's special report on the oil markets, which includes a Oil Price Outlook feature and an-depth look at the Aftermath of the BP Oil Spill.

 

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