Friday 21 December 2018

Next year is shaping up to be a good one in the US Gulf of Mexico, with the first increase in drilling in four years, first-ever production from a Jurassic play, key new project sanctions and an uptick in M&A all in the cards, global natural resources consultancy Wood Mackenzie said.

In its annual outlook, US Gulf of Mexico: 5 things to look for in 2019, WoodMac said that after four years of steady decline, exploration activity is expected to increase next year by 30%. Shell and Chevron will lead the way, but the actual growth in exploration will come from new entrants – Kosmos Energy, Equinor, Total, Murphy, and Fieldwood.

Next year may also mark a crucial point for the offshore industry, with Chevron’s Anchor project in Green Canyon Block 807 expected to move forward. Anchor, which has an operating pressure of 20-ksi, would be the first ultra-high-pressure project in the world to reach final investment decision (FID). FID at Anchor would be the culmination of more than a decade of multiple joint industry research and development projects to design kit that can safely produce at 20-ksi. The current limit is 15-ksi.

Success at Anchor will lead to the next wave of mega-investment in the Gulf of Mexico, as several 20-ksi projects are waiting to follow its lead. Wood Mackenzie believes that if Anchor moves forward, more than US$10 billion of investment could flow into the region.

Shell’s Appomattox development, in Mississippi Canyon Block 392, is due on stream in 2019 – marking the first production ever from a Jurassic reservoir in the Gulf of Mexico. This will be a significant milestone for Shell, as Appomattox is a cornerstone of its global deepwater strategy. All eyes will be on the well performance of the potential heavy hitter.

M&A activity in the Gulf of Mexico is also expected to pick up as a lengthy list of assets for sale continues to grow. A healthy number of positions were sold in 2018, but WoodMac expects more assets will be added to the for sale list. Private equity players are likely to want to sell as their assets get closer to maturation, while established players may continue to shed non-core positions.

While drilling activity and investment are returning to the region, a key factor to ensuring a strong year ahead and beyond will be holding on to the industry-wide efficiency gains made since 2014.