Flashback: Gulf Drilling Vigorous after Disaster

Offshore oil platform in the Gulf of Mexico off the coast of Louisiana, April, 2017.

In the April 2014 issue of Business Alabama, four years after the April 20 explosion on BP’s Deepwater Horizon drilling platform in the Gulf of Mexico, our feature “Gulf Oil Feeding Frenzy” detailed the re-emergence of drilling in the Gulf.

Drilling activity hardly blinked at the environmental disaster of the BP spill. After a modest 18-month decline in Gulf production, there began a steady rise that has continued through 2018.

Set that alongside this month’s feature on Energen’s full-bore drilling in west Texas and you get the idea of an industry undaunted by anything, including low prices.

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“The Gulf states depend on offshore drilling, and no one would tolerate an end to it, ” said Philip Johnson in 2014. “Fishermen work on the rigs so they can pay for their fishing boats, ” the University of Alabama petroleum engineering professor said. “California doesn’t allow new offshore drilling, but their economy doesn’t depend on it.”

“A monster reservoir, ” Johnson called the Gulf, noting that the costs of production are monstrous as well — deepwater platforms costing around $3 billion.

To hedge the risk of another environmental blowup, exploration companies formed the Marine Well Containment Co., which comprises 10 members, including ExxonMobil, Chevron, ConocoPhillips and Shell. In 2013, MWCC selected Theodore, on the west side of Mobile Bay, as one of its two shore base locations.

“Gulf of Mexico oil production is among, if not the, most profitable of any region in the world, ” said Fadel Gheit, managing director of oil and gas research for Oppenheimer & Co. in New York. Unit profit in the Gulf of Mexico, he said, is $25 to $30 BOE, or 50 to 100 percent above the industry’s world average of $12 to $18 BOE.

With Gulf production at 1.2 million barrels a day in April 2014, industry analysts were estimating 1.9 million b/d by 2020.

Four years later, the U.S. Energy Information Administration recorded 1.7 million b/d in January 2017, with estimates of 1.9 million b/d by January 2019.

Chris McFadyen is the editorial director of Business Alabama. 

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