Houston (Platts)--4May2009

US Gulf of Mexico oil production should exceed 1.6 million barrels/day
within the next 10 years and could rise as high as 1.9 million b/d if
industry-announced discoveries and undiscovered resources realize their full
potential, the US Minerals Management Service said Monday.

US Gulf oil production was 1.3 million b/d in February, according to MMS.

The anticipated hike in oil production "reflects not only production from
the many projects slated to come online in this year, but also the addition of
volumes that were shut-in during 2008 as a result of hurricane activity,"
according to an MMS report issued at the Offshore Technology Conference in
Houston.

MMS said the Gulf's deepwater region, with water depths above 1,000 feet,
continues to successfully transition from an area of great potential to one
where production is actually fulfilling the promise of investments made in the
last decade.

With 15 newbuild drilling rigs contracted for delivery to the Gulf
through 2011, the MMS expects increased drilling in the ultra-deepwater where
water depths are 5,000 or more.

While operators continue to develop oil-rich deepwater leases in the USG,
natural gas output is expected to stabilize or decline, MMS said.

"The small contribution to gas production from industry-announced
discoveries reflects the overall trend of lower gas-oil ratios anticipated in
the subsalt Miocene and Lower Tertiary plays, found in deepwater Gulf of
Mexico," MMS said.

Based on existing shallow and deepwater operator comments, the MMS said
it expects Gulf gas production to hit 7 Bcf/d this year, then decline beyond
2009.

In the Gulf's shallow waters, where production has a longer history, the
MMS said it expects a 13% annual decline for oil output and a 17.5% annual
decline for gas.

--Gary Taylor, gary_taylor@Plaats.com