Deepwater GoM robust as XOM Julia field on-stream early


Even as the market cycles through its lowest point in 30 years, projects in deepwater Gulf of Mexico continue to come online, defying prevailing sentiments. ExxonMobil's Julia field, which came online this week, is one of seven deepwater GoM projects scheduled to start producing this year alone. Our analysts examine what this development means for potential growth within the sector.

Despite the current low point of commodity prices, new deepwater Gulf of Mexico (GoM) projects continue to buck prevailing trends and come online. One notable new project — one of seven expected to begin production in 2016 — is ExxonMobil's Julia field (NPV10: US$750 million), which the company announced on 19 April is officially on-stream.

One well in the new field recently achieved first production, with a second one expected to come on-stream within a few weeks. Initial wells at Julia have had high drilling and completion costs driven by complex lower tertiary geology and a high rig rate, but  we expect the cost structure to improve considerably when the current rig contract (US$557,000 per day) runs out in mid-2017.

Some of the field's  initial production was exported, marking the first international shipment of US offshore oil since the export ban was lifted. We expect Julia to reach an initial peak rate of 33,000 barrels of oil equivalent per day (boe/d) in 2020. With six more projects scheduled to come online this year, we expect deepwater GoM production growth of 18% year-over-year to 1.86 mmboe/d.

We project that Julia and its deepwater GoM peers under development will add an incremental 113,000 boe/d of production this year alone, even in the face of low oil prices — a facet of the oil supply/demand puzzle that often gets overlooked.

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