How has deepwater development changed the energy picture in the US?

US production of crude oil peaked in 1970 at about 9.6 million barrels per day average during the year. Production began dropping as the old, established oil fields went into natural decline. At the same time demand was growing rapidly during the good economic years in the 1980s. As a result, imports of foreign oil began rising and reached a peak of approximately 6.5 million barrels per day in 1979. That was the year of the Iranian Revolution and second OPEC oil embargo that had a significant effect on the economy, triggered a recession, and led to a decrease in total crude oil usage for several years.

During that period, two new significant sources of oil were brought on stream, primarily offshore in shallow water in the Gulf of Mexico and the North Slope of Alaska. Alaskan oil production peaked in 1988 at approximately 2 million barrels per day, while Gulf of Mexico production kept relatively steady at approximatley 1 million barrels per day from the mid-1980s through the mid-1990s. Despite that, US production began to sharply decline in 1985. Figure 2 shows total US field production over time with the build-up to 1970 and dramatic drop-off in the 1980s.

But a new oil play was emerging in the Gulf of Mexico that would dramatically change the energy picture in the US. A number of oil companies, led by Shell Oil, utilizing new technology in the form of floating drilling and production systems, began development in waters that eventually exceeded 1 mile deep. Although there had been several marginally successful deepwater developments earlier, the start of the deepwater era is generally taken as installation of the Shell Auger Tension Leg Platform (TLP) in 1993. Shell and many other oil companies have since installed a variety of different systems and have successfully extended the technology to international deepwater fields.

Since the late 1990s offshore oil production has been relatively constant at about 1.5 million barrels per day with new fields being developed consistently to replace declining reserves from the older fields. This represents approximately a 50% increase over the pre-deepwater days. Currently, offshore production makes up about 16% of total US oil production. Figure 4 illustrates annual Gulf of Mexico crude oil production, which is one of the components of total US production in Figure 1.

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