April 13 (UPI) -- With two oil fields in the Gulf of Mexico starting production this year, and five on tap for 2018, offshore production is set to increase, a U.S. report found.
Eight new fields in the U.S. waters of the Gulf of Mexico started producing oil last year, leading to a high-water mark of 1.6 million barrels per day, beating the previous record set in 2009 by 44,000 bpd. By January, regional offshore production was up another half million barrels on a daily basis.
A March report from analytical group Wood Mackenzie found the cost to break even on oil and gas projects in deep waters, the U.S. Gulf of Mexico in particular, has dropped from around $70 per barrel to below $50 per barrel in some cases. Since 2014, Wood Mackenzie estimates the average cost to develop deep water projects has dropped more than 20 percent.
Lower crude oil prices last year curbed operations in the inland U.S. shale basins and total domestic oil production is responding positively to improving market conditions. A report from the U.S. Energy Information Administration said that, because of the time it takes to get offshore operations up and running, the Gulf of Mexico is less vulnerable to large swings in oil prices. With more than a dozen new fields in or entering into production, output is on the rise.
"Based on anticipated production levels at these new fields and existing fields, annual crude oil production in the Gulf of Mexico is expected to increase to an average of 1.7 million bpd in 2017 and 1.9 million bpd in 2018," the EIA's report read.
Wood Mackenzie noted that, just as development costs shrink, so does the pool of competition. More than 70 percent of the deepwater projects in consideration are operated by just eight companies.
Oil prices in some cases are at least $40 per barrel lower than when some of the fields in the Gulf of Mexico were discovered. That means there could be a long-term impact in the region as weaker market conditions catch up with offshore operations.
"The number of rotary rigs operating in the Gulf of Mexico decreased from an average of 55 in 2014, when the Brent crude oil spot price began dropping, to 22 in 2016," the EIA reported.