By Margaret McQuaile

June 4 - Ultra-deepwater production has played a crucial part in stemming the overall decline in US offshore crude production, and the six-month extension of the Gulf of Mexico drilling ban announced last week by President Obama will have a major impact on future output, analysts believe.

Edinburgh-based consultancy Wood Mackenzie says the combination of the moratorium and the potential impact of tighter regulation and new practices could see some 80,000 b/d of oil equivalent per day deferred from 2011 to later years.

"This is around 4% of our total deepwater [Gulf of Mexico] production estimate for 2011 of 1.875 boe/d," it says.

The volume of deferred oil could more than quadruple by 2015-2016 as tightened drilling safety rules and longer permitting timeframes slow activity and lengthen timeframes over all phases of exploration, appraisal and development, Woodmac says.

"These delays could defer over 350,000 boe/d (almost 19%) of deepwater GoM production in 2015 and 2016," it says.

Adam Sieminski of Deutsche Bank in Washington is projecting an even bigger volume cut for next year.

"The Woodmac estimate that around 80,000 boe/d would be deferred to later years may have to be doubled, in our view, to 160,000 b/d due to the suspension of current deepwater drilling in addition to new permits," he says.

Clearview Energy Partners -- using a figure of 1.7 million b/d for Gulf of Mexico production, 80% of which comes from the deepwater, and assuming a 12% decline rate -- calculates that "a de facto ten-month moratorium" would suggest 130,000 b/d of lost capacity by the middle of the first quarter of 2011. Should delays run a full year -- a possibility if the review period for exploration plans increases from 30 to 90 days -- this volume could rise to 163,000 b/d.

Barclays Capital estimates current deepwater oil production at 1.35-1.4 million b/d, including natural gas liquids and condensates. Assuming an underlying field decline rate of 10-15% per annum and a full year drilling ban, Barcap suggests that the potential output drop could be somewhere between 175,000 b/d and 275,000 b/d.

"If the drilling ban lasts only for the next six months, however, "we think the production impact should not be more than 75,000-150,000 b/d in 2011 compared [with] the worldwide oil production requirement of 81.7-82.7 million b/d," it says. "As a result, we don’t think the ban will have a material impact on...oil prices if it [is] lifted within the next 6-12 months."

Before the announcement of the extension of the moratorium, Credit Suisse had forecast a combined production growth rate of 0.9% per year for the main producers in the Gulf of Mexico -- Chevron, Hess, BP, Shell, ConocoPhillips, Marathon, ExxonMobil, Eni and Total -- between 2010 and 2015. Assuming a one-year delay in new project startups, the combined growth rate falls to 0.8%, while an indefinite delay would result in the growth rate falling to 0.7%.

Credit Suisse points out in an earlier, May 12 report that the deepwater Gulf of Mexico represents around 15% of total non-OPEC growth projects over the period to 2017 but only 5% of growth between now and 2013.

"The surge in offshore projects is back-end loaded, and this may give the industry more time to adjust," it says. "However, the timeline on this adjustment could take several years if, for example, regulations require all blowout preventers to be replaced with higher specification units or to allow time for [research and development] into subsea blowout response."

Credit Suisse warns that a three-year drilling delay could drive global spare production capacity as low as 2.4 million b/d in 2015 from the current level of around 6 million b/d, "consistent with an oil price spike."

Neil McMahon of Bernstein Research sees the fallout from the spill potentially affecting not just US deepwater projects but global ones as well, with a consequent impact on spare production capacity and, possibly, prices.

"For example, it is highly likely that deepwater rigs will have to conform to a global standard in order to work in all hydrocarbon basins, and that drilling practices adopted by the oil service industry and operators in the US will be exported overseas if they become the new safety benchmark," he writes, noting the potential for delays in new deepwater projects worldwide.

"Although it is unclear at this point if this is a likely scenario, just delaying new deepwater projects by one year from 2013 onwards impacts global oil supply by around 500,000 b/d between 2013-2017," he says.

McMahon says that while this volume may seem small in a global context, such a situation would decrease OPEC spare capacity (especially in the second half of the decade), which would lead to an increase in the oil price."

UBS says majors and exploration and production companies with large and flexible global portfolios are likely to move rigs from the Gulf of Mexico to other areas such as West Africa and Brazil, where "Petrobras is tendering for a large number of deepwater rigs."

UBS reckons medium-sized companies could start thinking about leaving the Gulf of Mexico.

"We expect mid-sized producers will be forced to consider exiting the deepwater [Gulf of Mexico] given the combination of the government’s more hostile stance toward deepwater exploration, likely increased costs, and potential material increase in the liability cap on any future oil spills," it says.

"Already, Plains Exploration and Newfield Exploration are openly questioning whether they should continue operating in the deepwater Gulf of Mexico," it says.

"This may provide an opportunity for international companies of appropriate size to enter the deepwater Gulf through company or asset purchase if they judge the risk/reward attractive."

Indeed, ConocoPhillips CEO Jim Mulva said June 3 that the Macondo disaster could redraw the map in terms of participants and practices in Gulf of Mexico exploration.