US Gulf Oil Output Could Rise To 2.4 Million Barrels Per Day, Industry Leaders Say

Oil output from the U.S. Gulf of Mexico can continue growing despite market uncertainty created by the most geopolitical volatility in decades, oil and gas industry leaders said on Monday.

U.S. President Donald Trump’s global tariff announcements since last month have contributed to a decline in oil prices and fears of an economic downturn.

This will make it harder for oil producers to follow his call of “drill, baby, drill.”

U.S. oil prices have fallen about 20% since early April, closing at $57.12 a barrel on Monday.

Prices have also been pressured by a decision from the Organization of Petroleum Exporting Countries and allies to accelerate output increases, as well as Saudi Arabia’s warning that it can withstand a prolonged period of lower prices.

“We’ve never been in a situation where we have so much geopolitical volatility,” Occidental Petroleum (OXY.N), CEO Vicki Hollub said during a panel discussion at the Offshore Technology Conference in Houston on Monday.

Investments in offshore projects are longer cycle and take into account decades of production.

Shale has a shorter production cycle, with wells turned on and off quickly in response to prices.

“I believe over the next few years we will see a strong, resilient, robust, offshore market,” said Girish Saligram, chief executive officer of oilfield service company Weatherford.

Operators will remain focused on offshore and an easier regulatory environment and permitting processes will help, Saligram added.

The Trump administration last week said it would implement an emergency permitting process for energy projects on federal lands, slashing approval times that typically take months or years to at most 28 days.

U.S. Gulf oil output could jump to as high as 2.4 million barrels per day from the current level of roughly 1.8 million bpd, said Erik Milito, president of the National Ocean Industries Association.

Advances in technology, including artificial intelligence, are also helping production, executives said.

“We’re seeing that today with the projects that are coming online, highly sophisticated projects that are overcoming a lot of the challenges that we saw 20 years ago,” Milito said.

Last year, Chevron delivered an industry first as it started production in a U.S. Gulf of Mexico field under extreme subsea pressures of up to 20,000 pounds per square inch.

The Trump administration plans to hold a lease sale for the U.S. Gulf in June as had been planned by former President Joe Biden’s administration.

That will be critical for the industry because shale oil production will eventually plateau and begin to decline, making it important to grow offshore exploration, Hollub said.

“We have to find a way to get more out of the Gulf of Mexico, and that’s got to happen in a big way,” she said

Offshore production from the U.S. Gulf accounts for about 15% of total U.S. crude output.

Industry leaders pointed to inflation as another challenge.

Tariffs are going to have an effect on costs and dilute margins, Weatherford’s Saligram said, adding the company was trying to mitigate the cost impact through supply chain management and passing along higher costs to customers.

Magda Chambriard, CEO of Brazil’s state-owned oil company Petrobras, told a panel his company was challenging its local suppliers and challenging international supplies on cost.

“We need to find a way to make these (offshore) projects feasible’ amid volatility and inflation impacting development costs,” said Renata Baruzzi, Petrobras’ chief of engineering.

Source: Reuters