The Gulf of Mexico Will Save the U.S. from a Sharp Decline in Oil Production
Oil production in the United States is likely to decline next year, but the scale of the downturn will be significantly reduced thanks to the Gulf of Mexico.
According to Wood Mackenzie, offshore producers in the Gulf are expected to add 300,000 barrels per day in 2025, and an additional 250,000 barrels per day in 2026 due to new projects. This will raise production in the region to over 2 million barrels per day, which is approximately 40% higher than in 2020. The increase is taking place against the backdrop of a slowdown in shale oil production in the U.S. According to the short-term energy outlook published on Tuesday by the Energy Information Administration (EIA), total U.S. production is expected to decline by 0.4% to 13.37 million barrels per day.
Falling oil prices are hurting shale drillers, while large long-term projects in the Gulf are beginning to come online.
“Most people are focused on onshore projects, while the real growth this year will be offshore. Projects in the Gulf of America are gaining momentum, and that should surprise many,” said Miles Susser, senior analyst at Wood Mackenzie, in an interview with Bloomberg.
Chevron will increase its output in the Gulf of Mexico by 50% compared to last year, reaching 300,000 barrels per dayby 2026. Shell’s project Sparta, with a capacity of 90,000 barrels per day, is scheduled to be launched in 2028. BP plans to launch several production projects in the region by the end of the decade. These will increase production capacity by approximately 20%, to over 400,000 barrels per day. All this is happening while hydraulic fracturing (fracking) drillers are warning that U.S. shale oil production may have peaked.
Jesse Jones, senior analyst for exploration and production at Energy Aspects, noted that production growth in the Gulf of Mexico has outpaced shale oil growth only due to low oil prices and slowing demand. According to Bruce Niemeyer, president of Chevron’s Americas production business, the company’s new developments in the Gulf are profitable at crude oil prices below $20 per barrel, making them among the cheapest in the world.
“NiK”: Active oil production in the Gulf of Mexico began in 1981. When oil consistently traded at $100 per barrel from 2008 to 2015, the region experienced a production boom. Later, companies began cutting infrastructure costs and reducing project expenses. Eventually, they succeeded in making offshore production more economical.
