Wood Mackenzie: GoM Lower Tertiary capex to exceed $50 billion by 2020

Offshore staff

HOUSTON–A recent Wood Mackenzie analysis predicts that the Lower Tertiary play will drive long-term production growth in the deepwater US Gulf of Mexico, with an expected $50 billion in development capex through 2020.   

Analyst Jackson Sandeen stated, "The commercial success of the Lower Tertiary has been robust, leading all other plays in our probable (commercial, pre-FID) development category with 54% of recoverable reserves.

“Our base case model for a generic 300 MMboe Lower Tertiary field indicates a total valuation of $575 million, but this does not come without uncertainty. Reservoir characteristics can greatly impact project value depending on initial production rates and the pace of well decline. If the recovery factor in our base case is increased by 2%, an additional $462 million could be realized."

Wood Mackenzie estimates Lower Tertiary production in 2013 to be 113,000 boe/d, roughly 8% of regional production. By 2028, the play’s production will outgrow the current leading subsalt Miocene play to roughly 41% of regional production or 533,000 boe/d.

Sandeen said technical challenges of the Lower Tertiary must be overcome for the play to remain attractive, but warned that costly solutions have the potential to erode project value if operators fail to increase recovery factors.

11/19/2013