Policy Matters: Declining Gulf Discoveries, Exploration Concerning for Future U.S. Offshore Production

Mark Green
Posted August 24, 2023

Looking at steep declines in key benchmarks signaling trouble for future U.S. oil production in the Gulf of Mexico, Americans must wonder if that’s the outcome the Biden administration wanted all along – as it continues to delay a new five-year federal offshore leasing program and imposes other restrictions on offshore production.

Check out these graphics from the offshore blog of Bud Danenberger – an engineer for 38 years with the U.S. Interior Department’s offshore oil and natural gas program – that don’t bode well for future Gulf production, which accounted for 15% of total U.S. oil production in 2021:

New Gulf deepwater discoveries down

The Bureau of Ocean Energy Management (BOEM) shows zero new deepwater fields discovered since March 2021 and just three in the past five years, Danenberger writes.

The decline is underscored in a broader historical context below, showing discoveries since 1975:

New Gulf exploratory well starts down

Another important indicator for future Gulf oil production is the number of new deepwater exploratory wells started, which is critical in finding new resources and determining the feasibility of developing a specific offshore reservoir. This year is shaping up to be the third straight year with fewer than 50 exploratory well starts, Danenberger writes, with just eight companies starting wells. In 2001, he writes, 24 companies drilled 149 exploratory wells.

This is significant. The short analysis is that the trend lines for future Gulf production – which, again, supplies 15% of U.S. oil – are not good, which will reduce American energy security. Read this Q&A with Holly Hopkins, API’s vice president of Upstream Policy, for a full discussion of the strategic necessity for robust offshore production, led by the Gulf.

There also is an environmental consideration. A recent study found that U.S. crude oil production in general and Gulf production specifically have greenhouse gas emissions intensity lower than the emissions intensity of crude oil production from much of the remaining world. Rising demand for oil, if not met with Gulf production, will be met by production elsewhere.

As for the Biden administration’s hand in these developments (actually, non-developments), start with the long-delayed five-year offshore leasing program – a blueprint for the offshore leasing the government intends to do. A program to replace one that expired last summer is long overdue. In the Q&A linked above, Hopkins notes the negatives of not having a leasing program in place because the program is essential for the long-horizon planning, investment, exploration and development needed to produce offshore oil and natural gas.

The kicker is that the administration’s proposed leasing program includes a “zero sale option” – that is, the option to not hold any lease sales at all. 

That and delays finalizing the program are stark messages to American producers. Every day the administration delays the program it signals to energy companies and potential investors that Washington is not serious about supporting the kind of offshore production needed to keep America growing economically and energy secure.

Meanwhile, the administration is pursuing new restrictions on oil and natural gas vessels operating in the Gulf that Hopkins said could lead to higher energy costs and weaken U.S. energy security:

“The recommended actions are not justified by existing data nor operational experience, would impose significant burdens on the men and women currently working in the region, and unfairly single out oil and gas traffic in an area that is one of the most used maritime areas in U.S. waters.”

These are not the actions of an administration that is doing its best to strengthen American offshore production in general and in the Gulf specifically. Rather, these are the actions of an administration that, at best, is ambivalent toward American offshore production, or worse, hostile to it.

Perhaps the administration tipped its hand on its offshore intentions in the introduction to its proposed five-year leasing program being prepared by the Bureau of Ocean Energy Management (BOEM):

“BOEM’s short-term (20-year) production forecast for existing leases shows steady growth from 2022 through 2024 and declining thereafter (see Section 5.2.1). The long-term nature of OCS oil and gas development, such that production on a lease can continue for decades makes consideration of future climate pathways relevant to the Secretary’s determinations with respect to how the OCS leasing program best meets the Nation’s energy needs. …

“BOEM continues to research potential net-zero emissions pathways and implications for the National OCS Program and will review available data to refine its analysis in the PFP (proposed final program).  Importantly, the Secretary may re-evaluate national energy needs on an ongoing basis prior to holding any lease sales included in the National OCS Program. These additional decision points allow the Secretary to consider new information about national energy needs, policy direction, or other factors in choosing whether to hold any lease sale.” (Page 3, emphasis added)

Bottom line: A new federal five-year offshore leasing program is more than a year overdue and it includes an option for the administration to hold zero lease sales. Meanwhile, few lease sales have been held, new discoveries have plummeted and the number of new exploratory well starts has dwindled to almost nothing.

It’s a recipe for significant harm to American offshore production.