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FEATURE ARTICLE: US Gulf of Mexico Deepwater Activity Could Increase in 2022

By on December 27, 2021 0

Further sanctions for deepwater exploration and Gulf of Mexico projects in the United States could be in reserve for the E&P sector in 2022, assuming oil prices hold, analysts say.

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The 12 or so deep-water Gulf discoveries recorded in 2021 could expand by two more next year, and several fields that have patiently waited several years of price volatility may finally be given the green light, said Sami Yahya, Senior Energy Analyst – Supply and Generation for S&P. Platts Global Analysis.

“We could potentially see more discoveries and final investment decisions next year,” Yahya said. “US Gulf operators still have a healthy appetite for exploration, especially as crude prices remain robust.”

“Near field exploration [around deepwater production hubs with declining output] will probably continue to be the main strategy, ”he said.[This] Not only improves the economic record of new discoveries, but can also help accelerate development, given the existing infrastructure and the short cycle time expected for connections. “

Current US Gulf oil production is 1.769 million barrels per day, according to the latest estimates from Platts Analytics. Production is expected to increase to 125,000 bpd in early 2022 and end the year at 2 million bpd.

The three largest projects in the Gulf slated to come online in 2022 are Shell’s Vito field, BP’s Mad Dog Phase 2, and three fields operated by Murphy Oil: Khaleesi, Mormont and Samurai.

“This is the first time in a long time that we’ve seen three new facilities come online in a year,” said Mfon Usoro, US Gulf of Mexico upstream analyst for Wood Mackenzie.

Mad Dog Phase 2 will also feature a new production center named Argos with 140,000 bpd of gross oil capacity, and Vito will also feature new production infrastructure capable of producing 100,000 boe / d at peak.

The beginnings of King’s Quay

Murphy’s three fields will produce at a new 80,000 bpd production center known as King’s Quay. Khaleesi and Mormont will deliver the first oil in H1 2022 and Samurai in H2 2022.

The hubs can be used later to accommodate future production from as yet undiscovered fields located within a radius of about 30 miles.

Vito was due to go live in 2021, but concerns over the pandemic have led Shell to postpone its debut.

The initial cost of Mad Dog Phase 2 was over $ 20 billion, but by simplifying and standardizing its platform design, the overall cost has been lowered to $ 9 billion. When it was sanctioned in December 2016, it was expected to be profitable at around $ 50 / b.

Along with larger projects, a few smaller fields are slated to debut in 2022, all hooks or hooks to existing infrastructure. Two of the private Gulf player LLOG Exploration are Taggart, which will connect to the Devil’s Tower, and Spruance, which will connect to the Lobster facility, said Mark Adeosun, senior offshore analyst for Westwood Global Energy Group.

In addition, Shell’s Power Nap field, producing 35,000 boe / d of oil at peak, will be linked to the Major’s Olympus platform.

“Basically, it’s about using existing facilities … [and] optimization of facilities, which always reduces development costs as well as breakeven prices, ”said Adeosun.

In addition to producing a new field, several discoveries are expected to be cleared in 2022, including Chevron’s Ballymore, a field in the emerging Norphlet geologic game off eastern Louisiana / Mississippi that was initiated by Shell. Shell’s Rydberg field, also in Norphlet, is also under scrutiny for a possible final investment decision in 2022.

Break-even points below $ 40 / b

“I think the reason we’re optimistic about these projects going forward is the economic criteria; they’re all below $ 40 / bbl in balance,” Usoro said. “They look healthy enough in today’s market to be sanctioned.”

Two other projects that could get the green light in 2022 include TotalEnergies’ North Platte field, an ultra-deep game first discovered in 2012, and LLOG’s Leon / Castile fields, although some expect FID can slide in 2023.

Additionally, Shell’s Blacktip field and a related discovery earlier this month, Blacktip North, could be moved to the top of the development queue, Usoro said.

“Shell made some really important discoveries in the Perdido region,” a remote area in the southwestern Gulf of the United States, she said. “I wouldn’t be surprised to see them move up the rankings … after 2022” to be considered for FID.

2021 has also been productive for the US Gulf, as several major-operated projects have come online, including the September expansion of a major BP field, Thunder Horse South Expansion Phase 2. The project added a maximum of 25,000 boe / d to the Thunder Horse giant field. , one of the largest in the Gulf of the United States, with a production capacity of 250,000 b / d of oil and 200,000 MMcf / d of natural gas.

A year of embraces

But it was above all a year of embraces, of small fields linked to existing production centers with a decrease in production compared to the large original field. For example, Murphy’s Calliope is linked to BP’s Na Kika production facility and LLOG’s Praline is linked to Talos Energy’s Pompano production center.

Looking ahead, the sale of leases in the US Gulf in November resulted in more bids as well as more money paid for the leases, which could mean more drilling in the next few years. Yahya said.

“The operating environment in the Gulf of the United States is arguably the best it has been in recent years,” he said. “This is supported by [not only] dramatically improved crude prices, but relatively low break-even points at or below $ 45- $ 50 / bbl and the fact that the US Gulf offers some of the lowest carbon emissions in the market, which is become an important factor for many global operators. “

“It should be noted that the latest offshore lease auction yielded the highest number of total bids since 2019, reflecting the competitive advantage still offered by the Gulf of the United States,” Yahya said.

AMERICAN GULF FIELDS EXPECTED ONLINE IN 2022

Domain name

Owner

Volume (boe / d)

Location of the US Gulf area

Taggart

LLOG

10,000

Mississippi Canyon

Spruance

LLOG

9,000

Ewing Bank

Samurai

Murphy

See note

Green Canyon

Khaleesi

Murphy

See note

Green Canyon

Mormont

Murphy

See note

Green Canyon

Mad dog 2

PA

140,000 *

Green Canyon

Vito

Shell

100,000

Mississippi Canyon

Energy nap

Shell

35,000

Mississippi Canyon

NOTE: The three Murphy Oil fields will produce at the King’s Quay facility, which has a capacity of 80,000 b / d

Source: S&P Global Platts Analytics, companies