US President Joe Biden temporarily banned drilling in oil and gas wells. However, even if it left most of the US crude production untouched, it could end operations on the shelf of the Gulf of Mexico, because to date, production in the area has already declined very sharply.
Artem Abramov, head of shale research in Rystad Energy, said if the temporary halt was changed into permanent, the United States will lose up to 200,000 bpd by the end of this decade, that is, roughly 11 million bpd of production.
"The deep waters of the Gulf of Mexico will fully bear the brunt of this ban as it belongs to the government," said Elisabeth Murphy, an exploration and production analyst at ESAI Energy. According to her, this will mean a 40% drop in output by 2030.
But according to Goldman Sachs, this constraint in the energy industry could actually help prop up oil prices this year and next.
In fact, from 2015-2019, total spending in the Gulf of Mexico fell by 50%, reaching less than $ 14 billion. Exploration costs declined by nearly 70% over the same period.
Vincent Piazza, an analyst at Bloomberg Intelligence, said that even without new leases on federal lands, natural gas producers and oil producers would still be able to survive. Delayed drilling is also unlikely to reduce activity, at least until the second half of Biden's presidency.
Oil companies operating in the Gulf could also redirect their investments to private shale lands, said Jarand Rystad, Chief Executive Officer of Rystad Energy.
US researchers also noted that after years of wasteful spending as well as uncontrolled production, which led to a series of oil price crashes, authorities already learned from their mistakes, thereby pledging to curb production even as crude oil rebounded amid OPEC supply cuts.
