FUEL FOR THOUGHT: US Gulf of Mexico may be on cusp of renewal, thanks to 20,000 psi play

For decades, the US Gulf of Mexico was referred to as the "Dead Sea" during economic downturns or other petroleum industry interruptions, only to spring to life again when oil prices spiked or another innovation or big discovery was announced.

But even though the Gulf in recent years has lagged in big discoveries, it may be about to prove itself all over again as more evidence is gathered from the first producing Paleogene play – Chevron's 20,000 psi high-pressure, high-temperature Anchor project. It will soon be followed by several others that will come online starting this year and for the rest of the decade.

Operators have shown interest in the Paleogene for many years, often willing to pay tens of millions of dollars for a piece of choice marine acreage just three square miles near existing high-pressure, high-temperature fields, some of which were discovered more than a decade ago but never produced.

Upstream operators have been producing for a decade from the deep, high-pressure area called the Lower Tertiary, or Wilcox Trend. Chevron's Jack/St. Malo fields were the first from that play to be produced, starting in December 2014. But as remote and deep as they were, those wells were lower pressured, around 15,000 psi, and in an area of the Central US Gulf geologists call the Wilcox Outboard Trend.

On the other hand, the 20,000 psi fields, also known as 20K fields, are generally found a further west in an area known as the Wilcox Inboard Trend. Although Inboard discoveries were made as far back as 2006, they could not be produced because the high-pressure technology hadn't caught up. Also, inboard trend prospects have more salt, which makes imaging more difficult and riskier, whereas outboard prospects and fields are generally less risky and a bit easier to image, owing to fewer salt issues.

Lower Tertiary output to grow 'significantly'

Currently, the Lower Tertiary contributes over 300,000 b/d of oil to total US Gulf of Mexico oil production of about 1.8 million b/d, a figure that will grow "significantly" as more 20,000 psi projects come online, said Matt Snyder, head of North America for energy consultancy Welligence.

"We estimate total recoverable reserves in the Lower Tertiary at approximately 4 billion barrels of oil equivalent," Snyder said. "So far, Anchor is outperforming other Wilcox developments with higher initial production rates and producing 60%-70% above the Lower Tertiary average, when normalized over the first 90 days."

Anchor, located in 5,000 feet of water, accesses oil and gas from a reservoir 34,000 feet below the water line and is producing into a hub infrastructure with a capacity of 75,000 b/d of oil and 28,000 Mcf/d of natural gas. It is expected to produce roughly 440 million barrels of oil over 30 years.

"Not only is the Anchor reservoir performing ahead of expectations, but Chevron appears to have designed an effective [well] completion strategy," Snyder said.

He added that based on "strong" early well performance, the 440 million boe of expected recoverable resource from Anchor over its lifespan could be upgraded. Snyder said both producing wells have surpassed initial production estimates of 13,500 b/d, with output of 15,500 b/d and 18,500 b/d.

Chevron brought Anchor online in August 2024, a decade after the field was discovered. Chevron approved its development in late 2019. A second such field, Beacon Offshore-operated Shenandoah, is expected online later this year, and several other high-pressure, high-temperature discoveries are also under construction and headed for first oil by the end of this decade, including Beacon's Monument in 2026, Shell's Sparta in 2028, and BP's Kaskida in 2029.

BP's Tiber and Beacon's Shenandoah South projects should be greenlighted later in 2025. BP's Kaskida and Tiber were two early 20,000 psi finds, discovered in 2006 and 2009.

Big bids for 20K psi blocks in 2023 sales

The 20,000 psi footprint is basically located in the Central US Gulf, covering swaths of the Garden Banks, Green Canyon, Keathley Canyon and Walker Ridge areas. Blocks in those areas attracted numerous large bids in the last two US Gulf lease sales in 2023.

From 1983 until 2021, at least two lease sales were held each year for US Gulf acreage. But court battles over leasing during former President Joe Biden's term stalled that process, and only auctions took place during his presidency. The next US Gulf sale is scheduled for Dec. 10, according to the US Bureau of Ocean Energy Management, and two more are slated in 2027 and 2029.

But the Trump administration wants more offshore sales. The sales cadence of the next several years could change as federal officials have launched a process to design a new schedule for future offshore auctions.

"There is likely pent-up demand for new leases given the reduced frequency of lease sales," said Mfon Usoro, principal analyst at Wood Mackenzie. "Strong lease sale participation from all players in the region is expected as companies look to bolster exploration portfolios and execute exploration strategies."

Anchor "will shape future exploration strategies" of upstream players, Usoro said. "We expect increased acquisition of seismic and exploration activity in Inboard Paleogene-prone areas."

Paleogene finds smaller than other frontier basins

With increased commercialization of Inboard Paleogene projects, production from the ultra-high pressure reservoir will account for 33% of US Gulf deepwater production by the next decade, Usoro said.

"The average discovery size for the Paleogene is 200 million barrels of oil equivalent, which is lower than other emerging and frontier basins," Usoro said.

There may be new Paleogene players, too. Talon Energy recently took stakes in the Monument field, now under development, and suggested it sees the Paleogene as a new opportunity for its future.

George Laguros, US Gulf of Mexico specialist and upstream technical research principal for S&P Global Commodity Insights, thinks the existing big players could enlarge their stakes in the Paleogene play by teaming up.

"Equinor wants to reduce its stake at Sparta, and BP is looking for partners at Kaskida/Tiber, where they currently have 100% working interest," Laguros said. "No way these companies will proceed at 100% ... too expensive and risky."

One might think large former US Gulf independent players such as ConocoPhillips or EOG Resources, which once were substantial presences in that arena, would be lured back in by the region's potentially big oil target opportunities. But Laguros said those and others who exited the region years ago to focus on shale basins onshore may not opt to return anytime soon.

Re-entry would be no small matter, entailing vast seismic purchases and hiring an entirely new team of geoscientists, since unconventional onshore operations are relatively simple compared to more complex conventional basins offshore, Laguros said.

"The thing about unconventionals is, if you know the rock is there, it's going to have oil in it," Laguros said. "In the conventionals, you may have the rock, but it may be filled with water. There's a lot of other things that play a part in figuring out if there's oil. It's much more complicated to develop a conventional prospect than going out and drilling 40-acre or 20-acre spacing, as in unconventionals.