Easing the way offshore
The Trump administration trims rules in an effort to draw more companies to the Gulf before production falls
WASHINGTON — With a looming production decline in the Gulf of Mexico, the Trump administration is moving quickly to reduce regulations and open up leasing across U.S. waters to attract more oil and gas companies.
Last week the agency that oversees offshore drilling announced plans to roll back Obama-era drilling rules put in place after the explosion of the Deepwater Horizon drilling rig in 2010.
“Attitude and regulation
matter in a big way. If a company has a choice where it deploys its capital, the price of the commodity matters, but that’s the same everywhere with some small marginal differentials,” Scott Angelle, who leads the Bureau of Safety and Environmental Enforcement, said in a recent interview. “It is clear that one of the differences between this administration and the previous administration was they were interested in driving people out of the Gulf of Mexico.”
But if President Donald Trump hopes to boost U.S. offshore oil and gas production, he has his work cut out for him. Last year oil production from the Gulf of Mexico averaged 1.6 million barrels per day, an all-time record. But with investment down significantly since crude prices fell in 2014, analysts are projecting production to begin declining in 2022.
“There’s still a fear prices will go down again,” said Imran Khan, a senior manager at the research firm Wood Mackenzie. “Once the decline starts to kick in, unless we start sanctioning some more projects, we’re looking at at least three to four years of decline, if not more.”
The hope within the oil and gas sector is that Trump will not only loosen regulations but vastly expand the waters available to explore. All U.S. waters, with exception of the Gulf of Mexico, are virtually off limits for drilling. But Trump has plans to change that, with a lease sale scheduled for next year for the Beaufort Sea off the northern coast of Alaska.
At the same time, the administration is weighing whether to open exploration in the Atlantic Ocean, off Virginia, North Carolina and South Carolina, despite objections from governors that industry will foul their coastlines and hurt lucrative tourism.
Erik Milito, director of upstream at the American Petroleum Institute, the industry trade and lobbying group, said that at some point the Gulf “would be expecting to see declining production. There’s only so much you can do when you’re isolated. From a policy standpoint, we’re hoping for expanded opportunities.”
Drilling in the Gulf of Mexico is concentrated in its eastern sections, and the industry is hoping to extend exploration to the central and western Gulf. But the potential for expanded drilling under reduced safeguards for drilling is drawing opposition from environmentalists worried that another Deepwater Horizon is looming.
That effects of the explosion, which caused more than 4 million barrels of crude to spill into the Gulf, are still being felt today, said Cyn Sarthou, executive director of the environmental watchdog Gulf Restoration Network.
Tar balls still show up on beaches after storms. Large stretches of coral beds off Texas were killed and still haven’t come back. And scientists have documented an increased death rate in a population of dolphins on the Louisiana coast that Sarthou believes is connected to the spill.
“As long as we don’t have regulations that require safety for workers and the environment ahead of profit, the possibility continues of another BP disaster,” she said. “We’re moving into deeper and deeper water with greater and greater risk.”
The U.S. Gulf faces increasing competition from offshore fields in Brazil and Mexico, where oil is found in shallower waters and easier to access. But the Gulf remains a draw for large oil and gas companies.
With so many platforms, pipelines and other equipment already in place, projects there don’t have the large costs of developing offshore fields in in other countries, Khan said. And with more than a century of drilling history, geologists are well tuned to the vagaries of the ocean bottom in the Gulf of Mexico.
But each year companies go into deeper and deeper water, accessing fields with greater degrees of underground pressure, increasing the risk of an accident.
For the Bureau of Safety and Environmental Enforcement, that will mean deciding whether companies can produce oil without putting workers and the environment at risk.
“You’re poking a straw into very high pressure,” Khan said, “so you’re going to need the equipment able to contain it.”