Trump administration move could unlock 65 billion bbls of oil equivalent

“The US offshore sector held approximately 180 billion boe of original resources, oil and gas combined, before the first offshore production took place,” says Sonia Mladá Passos, senior analyst at Rystad Energy. “In the Gulf of Mexico, which is the world’s most mature offshore region, nearly 50% of these original resources have been translated into production since the 1960s. The remaining 50%, or 90 billion boe, are still to be discovered offshore US.”

This figure includes also areas in the GOM with historical exploration activities. “Looking purely at areas that are potentially going to come out of restriction, we are talking about something closer to 65 billion boe,” Passos says. This figure excludes resource potential from western and central areas of the GOM – both coastal and deep waters. It includes, however, the eastern part of the GOM, which is currently under congressional moratorium until the end of June 2022.

The eastern GOM is a rather controversial area. Compared to the other restricted areas, it has better coverage of infrastructure. At the same time, its geology is better known. Although the eastern GOM might be more prospective, it is unlikely to see any exploration activity before the end of the moratorium in 2022. “As Rystad Energy commented in a press release before Christmas, the world needs new discoveries since it currently consumes 79% more hydrocarbons than it discovers. The proposed policy can potentially open interesting new areas that operators can invest in,” says Passos. According to Rystad’s analyses, if the operators utilise the full potential of these areas, exploration activity offshore US could reach a new peak after 2030, with some 200 exploration wells drilled per year on average, implying annual investment levels of approximately US$15 billion.

Note that all figures mentioned above represent the high-case scenario, expecting all of the unexplored areas to see exploration activities in the future, and disregards constraints such as limited access to capital, lacking infrastructure or environmental concerns. “The question remains, what is the likelihood of companies prioritising exploration and development in all of these areas. During the last three years, we did not see high interest in exploration in the deep-water GOM,” says Nils-Henrik Bjurstrøm, Product Portfolio Manager and Head of Exploration analyses at Rystad Energy.

In recent years, the US observed a tremendous shift of E&P spending towards shale. In 2017, companies in the US directed over 60% of their total investments to shale, and this trend is likely to increase to about 70% in the coming decade. “This prevailing trend could impose a risk for the offshore exploration potential to be realised,” says Bjurstrøm.

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