The US Department of Interior (DOI) has recently made public its plan of leasing 73 million acres in the Gulf of Mexico for crude oil and natural gas production. The areas in question are blocks off the coasts of Alabama, Mississippi, Louisiana, Florida and Texas.
The plan oversees leasing some 14,000 offshore sections 3 to 230 miles off coastline. According to the DOI data, these areas hold a total of 90 million barrels of crude oil and 327 trillion cubic feet (tcf) of natural gas.
Interior Secretary Ryan Zinke stated that allowing oil and gas producers access to federal lands and waters is the basis for US President Trump’s plan of making the United States energy independent.
The proposed plan echoes the previous administration’s plan for the Gulf of Mexico fossil fuels production. However, the Obama administration was somewhat more humble, suggesting a lease of 64 million acres.
The Gulf of Mexico is an extremely promising region attracting oil and gas producers from across the world. However, it still bears the scars from old wounds. It was the Gulf, where in 2010 an explosion and subsequent fire at the Deepwater Horizon platform led to the biggest oil spill in history, which took years and billions of dollars to undo the damage.
Nevertheless, as the memory of Deepwater Horizon fades into history books (and an occasional blockbuster), oil production in the Gulf is picking up, nearing its all-time high prior to the accident.
If the United States were indeed to open up their doors, the region could see an influx of global producers, which could lead to potential crude oil output from the country exceeding even the boldest forecasts.
Recently, the Energy Information Administration (EIA) increased its crude oil production expectations from 2017 from 8.98 million barrels per day to 9.21 million. The 2018 forecast has also been upwardly revised to 9.73 million bpd from 9.53 million.
The anticipation of the Federal Reserve rate hike and mounting US oil supplies have done well to undermine oil prices this week. Earlier during the Thursday session, WTI has found itself below $50 per barrel for the first time since December 8, as well as at the lowest point it has been since after the Organization of Petroleum Exporting Countries (OPEC) announced its production cut agreement on November 30.