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What to Expect in Gulf of Mexico Drilling in 2014

Published By: Houston BizBlog


The Gulf of Mexico is back as one of the hottest plays in energy.

While developments in shale drilling have been in the spotlight, the Gulf has quickly rebounded from the drilling moratorium following the Macondo blowout. Strong demand for acreage, especially deep- and ultra-deepwater positions, drove bids to record highs during the 2013 Bureau of Ocean Energy Management auctions.

Here are five important things you should know heading into 2014:

1. Watch for well results in the deep- and ultra-deep water Gulf of Mexico

Recent discoveries from the Lower Tertiary-aged reservoirs in the deepwater Gulf have investors excited. Three ultra-deepwater announcements in 2013 explain why.

Well results from the Anadarko Petroleum Corp.-operated Shenandoah-2, drilled in 5,800 feet of water, indicate the Shenandoah prospect may contain two or three times more oil than the original estimate.

Chevron Corp.’s oil discovery at its Walker Ridge Block 98-1 well in the Coronado prospect is one of the deepest wells drilled in the Gulf. And Shell Oil Co. has plans to drill 9,500 feet below the surface of the Gulf, which would be the deepest offshore oil well in the Gulf.

2. Expect an increased Gulf rig count

Baker Hughes reports 56 Gulf rigs as of Nov. 8, up from 41 at the start of 2012. In the deepwater, watch for an increased proliferation of drillships and increased day rates for leasing them.

3. 2014 auctions should attract significant interest

The Bureau of Ocean Energy Management plans to auction three Gulf leases in 2014, one in each of the Eastern, Central and Western regions of the Gulf. Expect to see increased auction demand, especially for the Central and Western deep- and ultra-deepwater blocks.

Also keep an eye on the Mexican energy reform in 2014: If pending Mexican constitutional reforms occur, the Mexican energy market will open to foreign E&P companies which would create a surge in E&P activity in the Mexican portion of the GOM.

4. Emerging technology is revolutionizing Gulf of Mexico E&P activity

Recent innovations in seismic techniques, geologic modeling and advancements in engineering are allowing companies to drill in ever deeper waters and harsher environments. These new tools allow companies to see through layers of salt deposits and into formations that were never thought to have existed. Watch for an increase in new private equity-backed entrants with cutting edge technologies partnering with the large independents in Gulf exploration activities.

5. Gulf Coast infrastructure

Recent announcements by Enterprise Products Partners and Phillips 66 to build LPG terminals along the Texas Gulf Coast, along with the Department of Energy’s conditional approval of LNG exports from certain Gulf Coast export facilities, help support the growing demand story in the Gulf producers’ backyard.

In addition, the proximity to well developed pipeline and transportation facilities make the Gulf of Mexico the most advantaged offshore play in the world.

Gabriel Procaccini is partner in the Houston office of Akin Gump Strauss Hauer & Feld LLP. Parker Lee is an associate at Akin Gump Strauss Hauer & Feld LLP.