Gulf of Mexico Shallow Water

1. Gulf of Mexico Shallow Water - Declining Oil and Gas Production and Increasing Cost Limits Growth Prospects of International Oil Companies

2. Shallow Waters of GOM offshore Will Experience Sharp Fall in Crude Oil and Natural Gas Production by 2018 Crude oil and natural gas production in shallow water regions has been declining over the past few years. Most of the producing assets in the shallow waters of the Gulf of Mexico (GOM) Offshore are past their peak production and have been witnessing a steep fall in production during the last 15 years. The share of shallow water production in the total GOM production has decreased from 67% in 2000 to 35% in 2009. Shallow water production declined from 917.6 million barrels of oil equivalent (MMboe) in 2000 to 347.8 MMboe in 2009, registering an average annual decline rate of 10.8% during the period 2000-2009. The oil production declined at an average annual rate of 8.2% and natural gas declined at a rate of 11.8% during the same period. The recent discoveries in shallow waters of GOM Offshore will not be able to offset the fall, which is likely to continue until 2018. Total shallow water oil and gas production is expected to decline to 100 MMboe in 2018, declining at an average annual rate of 13.8% during the period 2010-2018 Shallow Water of GOM Offhsore Will Experience Sluggish Exploration Activity The shallow water region has experienced muted investment in recent lease

3. sales. Historical lease sales from 1992 to 2009 indicate that the exploration activities are shifting the focus from shallow waters to deepwater regions. The Central Gulf of Mexico Lease Sale 213 attracted a total investment of $950m, out of which $101m was attracted by the shallow water region, representing a percentage share of 11%. The Central Gulf of Mexico Lease Sale 210 attracted a total investment of $115m, of which the shallow water region was able to attract $10m, representing a percentage share of 11%. In the Central Gulf of Mexico Lease Sale 208, shallow water attracted a total investment of $45m, representing a percentage share of 6.5% of the total lease sale investment. Despite stricter regulations and project delays post BP oil spill, the deep waters of GOM offshore will continue to witness encouraging exploration activity. For further details, please click or add the below link to your browser: http://www.globaldata.com/reportstore/Report.aspx?ID=Gulf-Of-Mexico-Shallow-Water-Declining-Oil-and-Gas-Production-and-Increasing-Cost-Limits-Growth-Prospects-of-IOCs&ReportType=Industry_Report&coreindustry=Industry_Report&Title=Energy_and_Utilities

4. The Share of IOCs in Total Oil and Gas Production in Shallow Waters of GOM Offhsore has Fallen in Last 10 Years The IOCs which dominated the total oil and gas production in shallow waters of GOM offshore in the last decade have been experiencing a sharp fall in production. IOCs contributed 52% to the total shallow water oil and gas production in 2000, witnessing a fall of 4% in 2009. The production of independent companies also fell during the period; however their contribution to the total oil and gas production in the region increased in 2009. Independent oil companies accounted for a 52% share in total oil and gas production in 2009. The reversal in the percentage contribution in total production in shallow water is attributed to higher annual decline rate of IOCs than the independent oil companies. The annual decline in oil and gas production of gas independent companies was 9.7% compared to an 11.8% annual fall of production of IOCs during the period 2000-2009. Recent New Discoveries Prompt IOCs to Invest in Deep Water Projects Fiscal incentives such as Deep Water Royalty Relief Act (DWRRA) and advances in deep water drilling and seismic imaging in the last two decades have stirred an interest in deepwater exploration activities. In the last few years the deepwater areas of GOM Offshore have reported a number of significant oil

5. and gas discoveries during 2000-2010.The shallow water region reported eight discoveries, while the deepwater regions reported 34 discoveries. The oil and gas production has been in a sharp decline in shallow water areas which are extensively explored and hold lesser drilling opportunities compared to the deepwater areas of GOM. Moreover the deepwater areas of GOM offshore have reported a larger discovery size than that of shallow waters. As a result the deep Waters in recent lease sale 208, 210 and 213 have attracted more than 90% investment in shallow waters with $1.6 billion. The only major discovery announced in the GOM shallow water is the Davy Jones gas discovery in early 2010, by McMoRan Exploration Company. The discovery is estimated to have 2-6 tcf of natural gas reserves. The discovery may boost the exploration in deep natural gas plays in the shallow water region and could attract fresh investments in this relatively unexplored prospect. For further details, please click or add the below link to your browser: http://www.globaldata.com/reportstore/Report.aspx?ID=Gulf-Of-Mexico-Shallow-Water-Declining-Oil-and-Gas-Production-and-Increasing-Cost-Limits-Growth-Prospects-of-IOCs&ReportType=Industry_Report&coreindustry=Industry_Report&Title=Energy_and_Utilities

6. IOCs quit Shallow Waters Assets to focus in Deep Water Proejcts- Independents Remain Committed With most of the producing assets of shallow waters past their peak and declining, the international oil companies have been shifting their focus to the more prolific deep waters of the Gulf of Mexico. Large discoveries in deep waters during 2008–2010 have increased the attractiveness of the deep waters of GOM Offshore. IOCs with a greater appetite for risk; technological edge and financial prowess have been making investments in the deep waters of GOM offshore and are exiting from their shallow water assets. IOCs such as Royal Dutch Shell and Exxon Mobil Corporation have recently sold some of their shallow water properties to independent oil companies such as W& T VI, LLC and Energy XXI. Such deals allow IOCs to sell off their mature assets in shallow waters and channelize the investments in deep water projects. Capital constrained, independent oil companies buy these assets to increase their asset portfolio and create additional recompletion and drilling opportunities in the shallow waters of GOM Offshore. As a result independent oil companies account for 52% of the total production in the shallow waters of GOM offshore and continue to strengthen their presence there. IOCs on the other hand have dominated production from the deep waters of GOM Offshore and this is likely to continue in the years to come.

7. Global Data’s new report, “Gulf of Mexico Shallow Water - Declining Oil and Gas Production and Increasing Cost Limits Growth Prospects of International Oil Companies” analyses the shift of international oil companies from the shallow water of Gulf of Mexico to deep waters of the Gulf of Mexico Offshore. The report compares the reserves, production, investments and economics of upstream operations in shallow and deep waters of GOM offshore to explain the attractiveness of deep waters projects and the shifting focus of ICOs from shallow to deep waters. Mergers and acquisitions in shallow waters have also been discussed to analyze the growth prospects of IOC in the region and their growing interest in deep water projects in GOM Offshore. For further details, please click or add the below link to your browser: http://www.globaldata.com/reportstore/Report.aspx?ID=Gulf-Of-Mexico-Shallow-Water-Declining-Oil-and-Gas-Production-and-Increasing-Cost-Limits-Growth-Prospects-of-IOCs&ReportType=Industry_Report&coreindustry=Industry_Report&Title=Energy_and_Utilities Visit our report store: http://www.globaldata.com

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