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The Current State of Gulf of Mexico Offshore Oil and Gas Exploration and Development

The Current State of Gulf of Mexico Offshore Oil and Gas Exploration and Development

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Published by Energy Tomorrow
While the offshore Gulf of Mexico oil and gas industry has seen some signs of recovery from the low state it was in during the drilling moratorium, activity levels are still well below the levels seen before the Macondo incident and well below the levels of the Quest baseline forecast before the incident. From a permitting, rig, and drilling activity perspective the industry is at best flat compared to where it was before the drilling moratorium, with the growth that had been previously expected both delayed and diminished. The only industry sector seeing healthy growth is in the development of projects not dependent on further near term drilling. While this is a positive, the majority of these projects were already well in the works before the incident and are thus seeing these major equipment orders despite the moratorium.
While the offshore Gulf of Mexico oil and gas industry has seen some signs of recovery from the low state it was in during the drilling moratorium, activity levels are still well below the levels seen before the Macondo incident and well below the levels of the Quest baseline forecast before the incident. From a permitting, rig, and drilling activity perspective the industry is at best flat compared to where it was before the drilling moratorium, with the growth that had been previously expected both delayed and diminished. The only industry sector seeing healthy growth is in the development of projects not dependent on further near term drilling. While this is a positive, the majority of these projects were already well in the works before the incident and are thus seeing these major equipment orders despite the moratorium.

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Published by: Energy Tomorrow on Oct 03, 2011
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11/09/2012

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Quest Offshore Resources, Inc. 1600 Highway 6, Suite 300 Sugar Land, TX 77478 Tel. 281.491.

5900 Fax 281.491.5902 The Current State of Gulf of Mexico Offshore Oil and Gas Exploration and Development While the offshore Gulf of Mexico oil and gas industry has seen some signs of recovery from the low state it was in during the drilling moratorium, activity levels are still well below the levels seen before the Macondo incident and well below the levels of the Quest baseline forecast before the incident. From a permitting, rig, and drilling activity perspective the industry is at best flat compared to where it was before the drilling moratorium, with the growth that had been previously expected both delayed and diminished. The only industry sector seeing healthy growth is in the development of projects not dependent on further near term drilling. While this is a positive, the majority of these projects were already well in the works before the incident and are thus seeing these major equipment orders despite the moratorium.   As of the end of September, 21 floating rigs (those with subsea blow out preventers) are Pre-moratorium 33 floating rigs were operating the Gulf of Mexico with 29 drilling wells o  This indicates a roughly 37 percent drop in both the number of rigs operating and drilling. Since the moratorium began, 11 rigs have left the Gulf of Mexico. Only one of these has o 7 of these rigs have left to African countries including Egypt, Nigeria, Liberia, and The Republic of Congo. 3 of these rigs have left to South America, including Brazil and French Guiana. The remaining rig recently mobilized to Vietnam.    This translates to approximately 60 wells lost based on the original contract terms of The loss of these rigs amounts to lost spending of $6.3 billion and annual lost direct employment of 11,500 jobs over two years. While the number of rigs operating in the Gulf of Mexico is expected to recover to pre-moratorium levels by the middle of 2012, this fails to take into account the number of rigs which were expected to be operating in the region (based on stated operator schedules) in 2012 or future years. these rigs. returned, 3 rigs are currently sitting idle.

operating in the Gulf of Mexico, of which only 18 are currently drilling wells. at that time.

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The number of floating rigs operating in the Gulf of Mexico was expected to have

already exceeded this level in late 2010 before the moratorium, with 38 rigs expected to be operating in the Gulf.  While rig counts are forecast to return to pre-moratorium levels of 35 floating rigs operating by mid 2012, prior to the incident and regulatory slow-down, operating numbers were expected to have reached 44 rigs.  Despite the return to pre-moratorium rig counts in mid 2012, drilling activity is not expected to return to pre-moratorium levels before 2014 due to low permitting rates and operators not relocating rigs back to the Gulf of Mexico.

Figure 1: Exploration and Appraisal Drilling Forecasts (Pre and Post Moratorium) vs. Floating Rig Counts

Source: Quest Offshore Resource, Inc.  Despite the end of the moratorium, the number of exploration and appraisal wells drilled from floating rigs will still be well below previously expected levels into the foreseeable future.  As rig counts begin to recover, the rate of permitting for wells in the Gulf of Mexico will continue to hinder the pace of drilling in the Gulf.  Despite the drilling moratorium leading to no permits for deepwater wells being issued for four months during the September 2009 to September 2010 time period, this 12 month period still saw 59% more permits (114) issued than the period from September 2010 to September 2011 (50).  The 50 permits issued from September 2010 to September 2011 are even lower at 63 percent below the levels seen from September 2008 to September 2009.

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Number of Permits Issued
10 15 20 25 0 5

Sep-08
Oct-08

Nov-08
Dec-08 Jan-09

Feb-09
Mar-09

Apr-09
May-09 Jun-09

Jul-09
Aug-09

Sep-09 Oct-09
Nov-09

Source: Bureau of Ocean Energy Management
Dec-09
Jan-10 Feb-10
Month Development Exploration

Mar-10
Apr-10

May-10
Jun-10 Jul-10

Aug-10
Sep-10

Oct-10
Nov-10 Dec-10

Jan-11
Feb-11

Mar-11 Apr-11
May-11

Figure 2: New Deepwater Well Permits Issued: September 2008 to September 2011 Exploration vs. Development

Jun-11
Jul-11 Aug-11

Sep-11

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