The U.S. government will open nearly 45 million acres in the Gulf of Mexico to oil and natural gas development later this month, at a time when low prices are forcing producers to cut back sharply on their exploration budgets.
But the industry’s troubles have had little impact so far on oil output in the region. In fact, unlike onshore production, which has been tapering off as oil prices decline, Gulf of Mexico production is on its way to setting a record in 2017.
“Production in the (Gulf of Mexico) is less sensitive than onshore production in the Lower 48 states to short-term price movements,” the U.S. Energy Information Administration wrote in a recent
ROCKMAN wrote:sub - Not predicting it but the Rockman wouldn't be shocked if a lot of tracts are leased...especially Deep Water. Remember it can be the better part of 10 years between winning a lease and first production. So what oil/NG prices would you use for your new offshore field's first production in 2026?
ROCKMAN wrote:sub - Not predicting it but the Rockman wouldn't be shocked if a lot of tracts are leased...especially Deep Water. Remember it can be the better part of 10 years between winning a lease and first production. So what oil/NG prices would you use for your new offshore field's first production in 2026?
tita wrote:Tell me if I'm wrong, but regardless of the price producers may expect 10 years from now, they also have to replace their depleting production. And it's not like there is a lot of opportunities around to do this. They are not sitting on a continuous output, and this is their main revenue stream.
Alfred Tennyson wrote:We are not now that strength which in old days
Moved earth and heaven, that which we are, we are;
One equal temper of heroic hearts,
Made weak by time and fate, but strong in will
To strive, to seek, to find, and not to yield.
ROCKMAN wrote:tita - As T points out there are two primary ways to grow reserves: with the drill bit and thru acquisitions. But there’s also risk there just like with drilling. Consider the XTO acquisition by ExxonMobil back in 2010. They gave XTO shareholders $41 BILLION in XOM stock based upon the assumption that the NG prices would soon be increasing. They were wrong…very wrong: “Tillerson added that ExxonMobil underestimated the US natural gas industry’s capacity to keep growing output through the low price period. “We missed, slightly, the industry’s pent-up capacity. Maybe we were off a year or two,” Tillerson said.” And XOM continued to sell NG at those lower prices
But here’s the problem with taking advantage of the current market conditions: the assets Big Oil needs must be long lived. Acquiring $40 billion in producing shale assets today actually makes the situation worse from the standpoint of reserve replacement if much of that shale production is still in the high decline phase. They would represent even more pressure on a Big Oil to find even more new reserves to replace that depletion.
That’s why the “growth thru acquisition” model isn’t going to work as well today as it did decades ago. There is very little long life reserves available today compared to past busts. Even acquiring major Deep Water GOM production doesn’t work very well: while their decline may be slower than the shales most would deplete just 4 or 5 years after an acquisition. As many here already know the US oil industry is dying. There might be occasion signs of recovery as we just saw with the shales. But that wasn’t a remission of the cancer killing the oil patch but just a momentary pause on the way to the morgue. LOL.
Alfred Tennyson wrote:We are not now that strength which in old days
Moved earth and heaven, that which we are, we are;
One equal temper of heroic hearts,
Made weak by time and fate, but strong in will
To strive, to seek, to find, and not to yield.
ROCKMAN wrote:sub - Not predicting it but the Rockman wouldn't be shocked if a lot of tracts are leased...especially Deep Water. Remember it can be the better part of 10 years between winning a lease and first production.
pstarr wrote:There is little or no more money for deep water. Tupi, deep-water Angola nothing happened at $100. Not after the blowout. Not with $40 oil.
Alfred Tennyson wrote:We are not now that strength which in old days
Moved earth and heaven, that which we are, we are;
One equal temper of heroic hearts,
Made weak by time and fate, but strong in will
To strive, to seek, to find, and not to yield.
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