Big Oil Going Big In The Gulf Of Mexico.
The oil industry is betting big on the Gulf of Mexico with both costs and production rising as a result.
The Gulf has seen a bit of a resurgence in production this year, after declining from a peak in 2009. The oil industry extracted 1.7 million barrels per day on average in the summer of 2009, which fell to 1.2 million barrels per day last year (see chart. Data from EIA).
But oil output is up around 15% since then, as the industry pours billions of dollars into the Gulf. The Wall Street Journal reported that several new projects from Royal Dutch Shell, Hess Corporation, ExxonMobil and Chevron are expected to come online before the end of 2015 and will have a combined production capacity of 900,000 barrels per day.
The production gains come with high price tags. Since 2010, deepwater wells have seen costs balloon by 25%, according to the WSJ. The average deepwater well can cost $300 million. Even worse, costs are rising by 5 to 10 percent each year.
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