The State of Gulf Production

Mark Green
Posted February 29, 2012

The New Orleans Times-Picayune reports that permitting in the Gulf of Mexico in the year since the administration’s deepwater drilling moratorium ended is slightly lower than it was in the year before the 2010 Macondo accident:

“Feb. 28, 2011, was the date that the Interior Department approved the first permit for an oil company to drill a new well in more than 500 feet of water after it had implemented new safety rules. In the year since then, there have been 61 permits to drill new wells in more than 500 feet of water issued by the Bureau of Ocean Energy Management, Regulation and Enforcement and its successor agency, the Bureau of Safety and Environmental Enforcement. In the same one-year period from Feb. 28, 2009, to Feb. 27, 2010, the government issued 67 such permits.”

The pace of permitting is important – so it’s concerning that, approaching two years since the administration’s drilling ban, the trajectory of permitting is, at best, flat instead of growing.

New resource access is absolutely crucial to America’s energy security. The oil and natural gas industry is ready to invest in new development if given the chance. Currently, it looks like the opportunities are still limited. Check out U.S. Sen. Mary Landrieu trying to make that point with Interior Secretary Ken Salazar during a hearing this week (h/t Ed Morrissey at Hot Air).

Another data set offers more perspective. The Energy Information Administration’s February “Short-Term Energy Outlook” shows that while overall domestic production increased in 2011 (more on this below), federal Gulf production is estimated to be down 21 percent this year from 2010:

“Domestic crude oil production increased by an estimated 110 thousands bbl/d to 5.59 million bbl/d in 2011.  A 380-thousand bbl/d increase in lower-48 onshore production in 2011 was partly offset by a 40-thousand bbl/d decline in Alaska and a 230-thousnd bbl/d decline in output in the Federal Gulf of Mexico (GOM).”

According to EIA, Gulf production was down from 1.55 million barrels per day in 2010 to 1.32 mb/d in 2011 and is estimated to fall to 1.23 mb/d in 2012 – the 21 percent decline.

Now, here’s an even starker figure: EIA forecast in 2010 that Gulf production would reach 1.76 mb/d this year. The difference between that forecast and the most recent estimate for Gulf production this year is a whopping 30 percent.  Here it is in a chart:

The red represents lost oil – lost energy and lost revenue to government. Total lost government revenue (in royalties and corporate tax payments) as a result of the Gulf slowdown from May 2010 until December 2011 is an estimated $5 billion, according to API analysis of EIA data.

Now, about overall domestic production. Steven Hayward at Powerline notes a report in the New York Times’ Greenwire publication that 2011 oil production on federal lands fell by 100 million barrels from 2010. Hayward details what that stat does to the administration’s claim about boosting domestic output:

“The increase in domestic oil production is occurring on private and state land, such as North Dakota. As I’ve noted here before, the explosion in the production of the Bakken field in North Dakota almost stops completely at the Montana border.”

In other words, production has increased in areas not under government control. More domestic oil was produced despite the administration’s policies, not because of them.