So how dependent is the USA on ultra deepwater production? I ask that question to have a sense on the government’s flexibility for a short term production moratorium and tough new regulation. This scenario is what the market seems to be predicting as an almost certainty. Well, this is how relevant the Gulf of Mexico crude production is:
30% of crude oil production and 19% of its reserves. If you include all liquid fuels the numbers are better but still big, with offshore GOM representing 8% of production and 15% of reserves. If you also consider that ultra deepwater production is not marginal anymore the probability of a production moratorium without real evidence of widespread negligence and corruption is probably low .
Long term, onshore reserves are a real alternative. It comprises a large percentage of the US crude reserves but it includes secondary recovery techniques like waterflooding that may be more expensive to extract. So expensive regulation of ultra deepwater drilling may be forthcoming.
The outlook for natural gas in the Gulf of Mexico once again surprises. Perhaps counter intuitively, its lower environment impact and less dependency could make it a target for grandstanding and short term measures.
Some natural gas GOM E&Ps like McMoRan Exploration (NYSE:MMR) have been hit as a consequence of the Macondo blowout and the suspension of exploratory drilling. MMR production is mostly in shallow water but their exploratory efforts are in ultra deep gas.
Disclosure: No position