Updates
Later, 10;04 am: just after posting the original post, Bernanke delivered "the Fed" speech. Very upbeat remarks for the market but this talking point: consumers are being hammered by high price of gasoline. Cue up Connie Francis.
Original Post
I think of the recent Oil Drum article: the Precautionary Principle.
And finally, this article: imports from Saudi Arabia increased in 2012.
Those three data points/articles came to mind when I saw the RBN Energy post today: bridge over troubled waters.
The Deepwater Horizon explosion in April 2010 effectively halted new drilling in the offshore Gulf of Mexico (GOM). Between April 2010 and June 2012 production fell by 400 Mb/d.
At the same time the shale revolution led to increases in US production – up 790 Mb/d during 2012 – the largest annual increase on record. In the last quarter of 2012 GOM oil production began to recover and is forecast to increase to 1.5 MMb/d by the end of 2014. Today we look at the impact Macondo had on GOM crude production.
The April 20 2010 BP Macondo disaster had a momentous impact on the Gulf Coast regional crude oil production. The Federal government ordered a six-month moratorium on new deepwater drilling in US offshore waters (deepwater is considered to be greater than 500 feet deep). The moratorium also required existing permitted wells to stop drilling. The moratorium was lifted in October 2010 but it wasn’t until February 28, 2011 (314 days after Macondo) that the Interior Department approved the first new deep water drilling permit for an oil company.[An aside: I remember blogging about the permitorium, the moratorium, and then the slow-rolling, receiving a lot of comments that I was wrong. RBN Energy summarizes that period very succinctly. Nice to see.]
Had there been no shale revolution during the events in the Gulf, things could be a lot worse. But the thing that jumps out at me, when drilling in the Gulf was shut down, there was no Plan B. The shale revolution was not a Plan B; it was simply fortuitous.
US crude oil production topped 6 MMb/d by the end of 2012 up by 790 Mb/d during the year - the largest increase in annual output on record. Most of that increase was in the Bakken, Eagle Ford and Permian basins. Prior to the shale revolution increases in US crude production between 2007 and 2010 came from offshore GOM fields.
The Macondo accident in April 2010 halted GOM crude production growth and it is only just beginning to recover. The recovery proves that deepwater drilling risks are still considered worth taking by producers. GOM offshore production may not be headline news like shale oil but it still represents 20 percent of US production and that number looks set to increase in the next two years.By the way, that's an interesting data point: the GOM represents 20 percent of US production; the Bakken represents about 12 percent.
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Note to self: 76
