The Obama administration is committed to further oil and gas
drilling in the Gulf of Mexico, but persistently low oil prices are
hampering near-term interest in the basin, a key administration
official said Friday.
"We'll continue with our leasing program in the Gulf of Mexico,
there's no question about that, but what the demand is for new
leases and new acreage ... is an interesting question," said Tommy
Beaudreau, the US Department of the Interior's chief of staff.
During an appearance at Columbia University's Center on Global
Energy Policy, Beaudreau said with producers slashing capital
spending amid a global supply glut and prices near $30/b there is
little current interest in Gulf of Mexico leases.
Despite operators seeing the Gulf as a "very reliable investment,"
and new geological data and drilling techniques boosting the Gulf's
supply potential, Beaudreau said drilling there is comparatively
costly amid the current price decline.
"The challenge there is that it's expensive," he said.
Beaudreau's comments come roughly a month before the administration
will hold two consecutive federal Gulf lease sales offering about 45
million acres. Those sales, Central Planning Area Lease Sale 241 and
Eastern Planning Lease Sale 226, are scheduled for March 23 and
expected to attract limited interest.
The last Gulf sale, a Western Gulf sale held in August, yielded
total high bids of $22.7 million, the smallest Western sale in over
30 years and just 20% of the $110 million yielded in last year's
comparable sale.
Beaudreau, the former director of Interior's Bureau of Ocean Energy
Management, said he expects interest in the Gulf to pick up as
prices recover and the market rebalances.
"There's very little doubt in my mind that the Gulf of Mexico is
here to stay," he said. "I do expect that while investment in leases
and major outlays for new development may be more scrutinized in the
near term, the Gulf of Mexico's not going anywhere over the long
term."
The apparent decline in interest for new Gulf leases comes as Gulf
production has become one of the rare areas of climbing US supply.
According to the US Energy Information Administration's latest
Short-Term Energy Outlook, the Gulf of Mexico is one of the few
areas where US supply is expected to grow in the near term.
"Several projects in the Gulf that began operations or will begin
operations in 2014-16 will push up production from an average of 1.5
million b/d in 2015 to 1.8 million b/d in the fourth quarter of
2017," EIA said. "It is possible some projects will start production
later than expected, potentially shifting some of the anticipated
production gains from late 2017 into early 2018."
EIA forecasts overall US crude production to fall from 9.43 million
b/d in 2015 to 8.69 million b/d this year and to 8.46 million b/d in
2017.
--Brian Scheid,
brian.scheid@platts.com
--Edited by Jason Lindquist,
jason.lindquist@platts.com
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