U.S. Oil Companies Crank Up Production in Gulf of Mexico

Wall Street Journal | June 23, 2016 | Lynn Cook & Erin Ailworth

Oil companies are pumping more crude off the U.S. coast in the Gulf of Mexico, a surprising trend that shows the resilience of the nation’s energy industry.

Despite the worst price downturn in a generation, so much oil is starting to pour forth from offshore fields near Louisiana and Texas that it is partially offsetting declining output from shale regions on shore and propping up total American oil output.

The U.S. is currently pumping about 8.7 million barrels a day, 480,000 less than at the end of last year, according to the Energy Information Administration, as low prices spur companies to shut down new exploration and some existing shale-oil wells begin to peter out.

Production is forecast to drop further to 8.5 million barrels a day later this year.

But well over 500,000 barrels a day of new Gulf crude is set to come online this year and next, according to a Wall Street Journal analysis of government data, company presentations and regulatory filings.

The Gulf surge threatens to prolong the glut of crude that has built up in storage around the U.S. and helped push down prices, said Roger Diwan, vice president of financial services at IHS Energy.

“The projects are coming faster and sometimes bigger than expected,” he said. “The ramp-up seems to have accelerated during low prices.”

Gulf production is rising in part because a handful of massive oil fields sanctioned for development years ago by companies like Freeport McMoRan Inc. and BP PLC when prices were higher are starting to pump oil this summer and fall.

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