Gulf’s $1.5 trillion oil wildcat play marks post-spill drilling 'renaissance'
US oil output is rising in no small part because of a major deep-water oil play that turned the Gulf of Mexico’s drilling fortunes from bust to boom.
Deep below the Gulf of Mexico lies a structure called the Lower Tertiary, long thought by academics to be basically barren of oil. Today, oil company geologists claim the peculiar geologic dome holds a $1.5 trillion oil treasure.Skip to next paragraph
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Largely thanks to a risky play by a consortium of major oil companies in the mid-1990s, a Gulf region thought to be largely tapped out, it turns out, hadn’t even begun to give up its real spoils, leading to an oil boom that has turned the United States from a net gasoline importer to a net exporter for the first time in 50 years.
The 2010 Deepwater Horizon spill gave the nation pause as it emptied 4 million barrels of crude into the Gulf, which cost at least $40 billion to clean up. Questions remain whether ensuing inspection reforms and industry guidelines changes were enough to protect the region from another devastating spill.
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But only three years after the deepwater disaster, the Gulf of Mexico is in a drilling “renaissance,” according to analysts, part of a remarkable energy transformation in the US that’s driving oil company profits and easing geopolitical realities, but, unfortunately for US drivers, hardly shaving any cents off the now-standardized $3.50-a-gallon at the pump.
“A series of recent finds in the ultra-deep has profoundly changed the thinking on US offshore geology, with 2013 seeing the Gulf of Mexico become one of the most promising frontier oil plays in the world and the fastest-growing offshore market,” writes Edward Klump in a Bloomberg News play-by-play exclusive of a tense 1995 meeting among oil executives in a Houston conference room.
A six-month drilling moratorium after the Macondo well blew up helped pose the fundamental question of how and why oil companies are drilling at depths where a blowout could occur. But the experience at the Macondo well upon which the Deepwater Horizon sat has also given drillers new insights and experiences in how to deal with future runaway wells in the deepest deeps.
But more critically, growing oil demand in nations like China – the main reason why US gas prices remain high, despite growing output – have driven wildcatters to make huge plays that are now paying off in about 40 percent of new holes – way above the 30 percent global average for new wells.