EIA: Tight Oil, Gulf of Mexico Deepwater Drive Projected Increases in U.S. Crude Oil Production

 EIA's Annual Energy Outlook 2012 (AEO2012) early release reference case, providing updated projections for energy markets through 2035, projects increased domestic crude oil production driven by development of tight oil resources onshore and deepwater resources in the Gulf of Mexico. Tight oil refers to oil produced from shale, or other very low permeability rocks, with horizontal drilling and multi stage hydraulic fracturing technologies.

EIA projects that U.S. domestic crude oil production will increase from 5.5 million barrels per day in 2010 to 6.7 million barrels per day in 2020. Even with a projected decline after 2020, U.S. crude oil production projections remain above 6 million barrels per day through 2035.




The AEO2012 early Release Reference case projects that onshore tight oil production will increase significantly, reaching 1.3 million barrels per day in 2030 and remaining above 1 million barrels per day for the remainder of the projection. As with shale gas, the application of recent technology advances significantly increases the development of tight oil resources. Projections are made for selected tight oil plays; at this point, not all plays have been, or are being, evaluated for the application of emerging production technology.

The AEO2012 also projects that continued development of deepwater crude oil resources in the Gulf of Mexico will become an increasingly important component of domestic crude production. Drilling in the Gulf of Mexico Outer Continental Shelf has resumed following the lifting of the 2010 moratorium, but on a schedule moderated by a slower permitting process with increased environmental review. Production in the Gulf of Mexico fluctuates as new large development projects are brought on stream.

The AEO2012 Early Release Reference case assumes that lease options in the Pacific and Atlantic will eventually be opened, but significant production from those lease sales is projected to occur after 2035. Most of the Eastern Gulf of Mexico Planning Area remains under a Congressional drilling moratorium (the Gulf of Mexico Energy Security Act of 2006) until 2022.  

Rigzone: Obama Orders Expansion of Oil Drilling

Nine months after the end of the nation's worst oil spill, President Obama is ordering the Interior Department to expand drilling in the Gulf of Mexico, hold annual lease sales in Alaska's National Petroleum Reserve and speed up geological research of exploration prospects off the south and mid Atlantic coasts.

The moves, announced in the president's Saturday radio address, are not so much a reversal as a return to the policy stance Obama adopted in March 2010, shortly before the Deepwater Horizon drilling rig exploded in flames and BP's Macondo well began gushing millions of barrels of oil into the Gulf of Mexico.

In his four minute address, Obama touched on the hardship caused by $4 a gallon gasoline, but made no mention of last year's spill, an environmental disaster that temporarily derailed new wells and set off political sparring over drilling permits that Republicans and oil executives say have been needlessly delayed.

Instead, the president said he would increase access to the Alaskan reserve, an area four times the size of New Jersey. He said that he was also ordering Interior to hold a Gulf of Mexico lease sale this year and two in 2012, thus completing the department's five year plan for the area. And he said that seismic work off the Atlantic coast would map out new areas for future lease sales.....Read the entire article.


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Deepwater Drilling Ban Lifted by New Orleans Federal Judge

A New Orleans federal judge lifted the six-month moratorium on deepwater drilling imposed by President Barack Obama following the largest oil spill in U.S. history. Drilling services shares jumped on the news.

Obama temporarily halted all drilling in waters deeper than 500 feet on May 27 to give a presidential commission time to study improvements in the safety of offshore operations. More than a dozen Louisiana offshore service and supply companies sued U.S. regulators to lift the ban. The U.S. said it will appeal the decision.

U.S. District Judge Martin Feldman today granted a preliminary injunction, halting the moratorium. He also “immediately prohibited” the U.S. from enforcing the ban. Government lawyers told Feldman that ban was based on findings in a U.S. report following the sinking of the Deepwater Horizon rig off the Louisiana coast in April.

“The court is unable to divine or fathom a relationship between the findings and the immense scope of the moratorium,” Feldman said in his 22-page decision. “The blanket moratorium, with no parameters, seems to assume that because one rig failed and although no one yet fully knows why, all companies and rigs drilling new wells over 500 feet also universally present an imminent danger”.....Read the entire article.


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Traders Ditching Oil Hoarded At Sea As Market Tightens

The amount of oil held in tankers at sea has halved from its April 2009 peak of 90 million barrels according to ship broker ICAP. Given that much of this oil was held in order to arbitrage current vs. future oil prices, a reduction in floating storage implies a tightening of the oil market.

WSJ: ICAP said there were currently 21 trading VLCCs offshore with some 43 million barrels of crude. Seven of these are expected to discharge in February and one more in March. So far, it appeared those discharged cargoes wouldn't be replaced by new ones.

"I haven't seen any fixtures for VLCC storage in the last two weeks," said Simon Newman, ICAP's senior tanker analyst. "That would imply that storage looks set to fall in the short term."

Assuming there are no new fixtures, the amount of crude in storage could sink to 27 million barrels by March, the lowest level since the current contango play began in late 2008.

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Schlumberger CEO Says Smaller Services Companies to Fold or Merge

Chief Executive Andrew Gould of oilfield services giant Schlumberger predicts that further consolidation in the services industry, as well as the fall of smaller U.S. rivals, is likely to occur in the year ahead, according to a report by Dow Jones Newswires.

"There will be even more consolidation of smaller services companies in the U.S., if not mortality for some, as some will just not be able to service their debts," Gould said at the Offshore Europe conference in Aberdeen, Scotland.

Gould cited the cancellation or delaying of industry projects, which has made capital less readily available, as one of the primary challenges the oilfield services sector has faced during 2009.

From the staff at Rigzone

SBM Suffers 14.6% Profit Slide, OPEC Considers Next Cut

"SBM Suffers 14.6% Profit Slide"
Offshore contractor Single Buoy Moorings reported final results for 2008 in line with its preliminary announcement with net profit of US $228 m which was down 14.6% from $267 m in 2007....Complete Story

"OPEC February Production Down 28.07 Million Per Day"
The 12 members of the Organization of the Petroleum Exporting Countries pumped an average 28.07 million barrels per day (b/d) in February, as the oil producer club continued its efforts to slash oversupply and prevent oil prices falling further....Complete Story

"Oil Rises More Than $4 as OPEC Members to Consider Fourth Production Cut"
Crude oil rose more than $4 a barrel, the biggest gain in three weeks, before OPEC meets this weekend to consider a fourth production cut....Complete Story

Crude Oil Industry Headline News

"Shell Remains Bullish on Long-Term Energy Prices"
Royal Dutch Shell Plc expects energy to be expensive in the long term as the world tries to meet growing demand without harming the environment, its chief executive said on Thursday....Complete Story

"OPEC Ready for Further Output Cut"
The Organization of Petroleum Exporting Countries (OPEC) stands ready to make further cuts in oil supply if prices remain subdued, the cartel's secretary general said Thursday....Complete Story

"Shell to Boost Investment Despite Oil Drop"
Oil major Royal Dutch Shell Plc plans to buck an industry-wide trend of investment cuts on the back of a $100/barrel drop in crude prices and lift its capital expenditure....Complete Story

Crude Oil Industry Headline News

"Exxon Allowed to Drill on Contentious Alaska Oil Field"
Alaska officials gave ExxonMobil permission to proceed with drilling on a dormant North Slope oil and gas field that had been the subject of a legal battle....Complete Story

"Obama's Interior Secretary Voices Openness for Offshore Drilling"
Interior Secretary Ken Salazar indicated Tuesday that the Obama Administration could be open to expanded offshore drilling and is considering doing away with the controversial "royalty-in-kind" program....Complete Story

"ConocoPhillips Has Big Loss But Shares Up"
ConocoPhillips reported a massive fourth-quarter loss on Wednesday compared with a year-earlier profit, but the company's shares rose about 1% in premarket trading....Complete Story