RBN Energy: the future of oil production in the Gulf of Mexico (archived).
Crude oil production in the Gulf of Mexico (GOM) has been riding high in recent months, still surfing the wave of deepwater and ultra-deepwater projects whose development started in the “good ole days” of $100/Bbl oil. Some incremental output is still being added, keeping GOM production levels high even as onshore oil output is declining in response to low crude prices and drilling cutbacks. But exploration and production companies (E&Ps) are cutting their spending on offshore projects, and unless oil prices start to rebound soon the Gulf too will see a leveling off—and after that, a gradual fall--in production. Today, we conclude our series on resilient production levels in the GOM with a look at recent cutbacks and what they may mean for Gulf oil output in 2016 and beyond.
U.S. oil production as a whole has been declining the past few months in response to plummeting prices, but that overall decline in output has come despite gradually rising production in the GOM. As we said in Episode 1, that’s because the incremental gains in output the Gulf has seen over the past few months are the result of investment decisions that E&Ps active in the GOM made a few years ago, when a barrel of crude was selling at a price equivalent to a very nice dinner out instead of the price of a hearty breakfast for two at Denny’s.
We also pointed out that while it may take much longer (and cost much more) to develop new production areas in the deepwater and ultra-deepwater Gulf than in tight oil plays on land, the output of the best GOM wells typically remains relatively high for several years, not just for a couple of years as is the case with shale wells on terra firma. In other words, if all drilling in the Gulf were to stop today, the GOM would still be producing a lot of oil five or even ten years from now; the same couldn’t be said, of course, if all shale drilling were to stop on a dime in the Permian Basin or the Bakken, with their wells’ high initial production rates and rapid production fall-offs. In Episode 2, we discussed the major GOM projects that two of the most active E&Ps in the Gulf—Shell and Noble Energy—either brought online in 2015 or plan to start up this year (2016). And last time, in Episode 3, we looked at the rest of the big GOM projects with production starting in 2016, including those operated by LLOG Exploration, Chevron, and Anadarko Petroleum.
In the lead essay in this week’s “The Talk of the Town” in The New Yorker, George Pucker talks about the presidential primaries in a “cutesy” sort of way. The first sentence in the second paragraph:
Direct primaries — the selection of candidates by voters instead of by party leaders — came into existence a hundred years ago. They were the inspiration of reformers who wanted to take power away from political machines and corporate interests, and return it to the people, who were believed to be wiser and more capable than the bosses, because they were less self-interested.
LOL.Tell that to Bernie Sanders. In the popular vote he swamped Hillary in the New Hampshire primary and tied her in Iowa (it was not entirely clear whether he might have won; though we will see later, whether he won or not, did not matter). Despite his impressive showing in both states, where does Bernie stand? He stands well behind Hillary because, as those “less self-interested voters” have found out, she “won” the majority of “superdelegates” by a wide margin. The “superdelegates” represent the party, the political machines, and the corporate interests.
Bernie Sanders noted this early on when he said the system was rigged.
The New Yorker, a staunch supporter of Hillary, conveniently edited Pucker’s article printing the myth that “less self-interested voters” were choosing among the two or three Democratic presidential wannabes. The hypocrisy.
[February 18, 2016: if you need more proof that the DNC leadership / the party machine will elect Hillary, don't take it from me. From The Hill: AP: Clinton raking in superdelegate votes.
Hillary Clinton has increased her lead in the Democratic primary since her resounding loss to Bernie Sanders in New Hampshire by wooing 87 new party superdelegates to support her campaign over the past week.
The Associated Press reports that Sanders won the support of 11 superdelegates over that same time period.While Sanders holds a small lead among pledged delegates awarded to him for his showings in Iowa and New Hampshire, Clinton's massive superdelegate lead puts her ahead 481-55 in delegates to the Democratic National Convention, according to the AP's count. Superdelegates are party leaders — mainly members of Congress and the Democratic National Committee — who are allowed to support the candidate of their choosing at the summer nominating convention.]In the same issue, James Surowieckie has a one-page essay on the slump in the price of oil as it relates to the stock market. There is nothing new there. He maintains global demand is not the issue; it continues to slowly and gradually increase, year-over-year. Supply is the problem. He does not that the US is a net importer, still importing 5 million bopd more than it exports.
But this is where he gets it wrong. He says that the US consumer has saved 190 billion dollars over the last six quarters which should be a godsend to the US economy. Again, writers are missing the 800-pound gorilla in the room: healthcare. Whether ObamaCare has made it worse or not is for others to decide. I don’t think it takes a rocket scientist to sort that one out. At $500/family member each month, the cost to the US citizen is substantial (not so much for non-citizens).
360 million x $250 / month = 90,000 million/month in healthcare premiums. $90 billion dollars each month and most of that money not likely “used” by the payee. In the last six quarters, that translates to $540 billion — substantially more than the $190 billion saved in gasoline costs.
This from the James Suvowiecki article: an October study by the JP Morgan Chase Institute found that consumers spent around seventy to ninety cents of every dollar they saved from lower gas prices.
We’ve done the math before. The savings translates into a McDonald’s dinner for four once every week or so for all Americans.
Let’s do the math another way. James says the country has $190 billion dollars in savings over the past 72 weeks. $190 billion / 360 million = $500/72 weeks = $7/week/American.
A #1 value meal at McDonalds: Big Mac, medium fries, and a soft drink — $7.00.
The law of big numbers always seems to work out. So, Americans are saving $7/week on their gasoline costs and paying $250/month on ObamaCare.