Crude Oil, NGLs, Refined Products
January 02, 2025
COMMODITIES 2025: Year-2025 to see record oil output, but few recent lease sales may take longer-term toll
HIGHLIGHTS
Oil output in 2025 should be roughly 2 million b/d
Biggest fields to start up: Shenandoah, Whale, Ballymore
More regularly-held bid rounds are needed in US Gulf
This is part of the COMMODITIES 2025 series where our reporters bring to you key themes that will drive commodities markets in 2025
The US Gulf of Mexico is headed for record oil production in 2025 of around 2 million b/d for at least the next couple of years, although the lack of regular lease sales in recent years could result in dwindling output in the long run, analysts say.
Several large deepwater fields are scheduled to debut in 2025, including at least two large discoveries that were originally slated to come online the year before. They are Shell's Whale field in the Gulf's remote Alaminos Canyon area offshore Texas, designed for peak production of 100,000 b/d of equivalent oil; and Beacon Offshore Energy's Shenandoah field, designed for 120,000 b/d of oil and sited in the Walker Ridge area offshore Louisiana.
Also in the 2025 production lineup are Chevron's Ballymore field, with a design capacity of 75,000 b/d which is being tied back to the major's Blind Faith platform in the US Gulf's east-central Mississippi Canyon area, 160 miles southeast of New Orleans, and LLOG Exploration's new Salamanca hub in the Gulf's Keathley Canyon area, which will produce the Leon and Castile discoveries with about 66,000 boe/d of output capacity.
Also, both Shell and Beacon will also each start up a smaller field. Shell will put its Dover discovery online in mid-2025, to be tied back to its producing Appomattox hub with peak output of 21,000 boe/d, in east-central Mississippi Canyon, while Beacon recently said it would place the Zephyrus field onstream in Q4 2025, whose resources are estimated at 75 million boe although anticipated daily output was not immediately released.
The average 2 million b/d of oil output estimated for 2025 would be "an all-time high," Matt Snyder, head of North America for energy research consultants Welligence, said.
"The last all-time high was back in 2019 at roughly 1.9 million b/d," Snyder said. "We should be able to hold those levels for a few years, with production starting to decline towards the end of the decade – i.e., 2028-2029."
S&P Global Commodity Insights forecasts 2025 US Gulf crude production at a tick shy of the 2 million b/d mark -- at 1.97 million b/d, and averaging 2 million in 2026.
Shenandoah comes online in 2025
Elevated US Gulf production isn't the only excitement 2025 will bring. Oil operators in the US Gulf have just begun to exploit high-pressure Paleogene reservoirs which are likely to feature prominently in future production.
Chevron's Anchor field, the first such field, came online in August 2024 as the major discovered how to produce deep, remote and geologically complex fields bearing 20,000 psi of pressure. Shenandoah will be the second to come online in mid-2025, and final investment decisions for others have followed.
Shell sanctioned its first high-pressure development, Sparta, in December 2023; BP did likewise with its Kaskida field in July 2024, saying development of that 2009 discovery "unlocks the potential to develop 10 billion barrels of discovered resources [by BP] in place in the US Gulf Paleogene."
Another BP Paleogene final investment decision is expected in 2025 for its Tiber field, which like Kaskida were each estimated to contain multi-billion-barrels equivalent of oil and gas.
Still more high-pressure 20,000 psi fields are expected to be discovered in the years to come, since upstream operators acquired clusters of untapped blocks during the last couple of US Gulf lease sales in areas around existing Paleogene finds such as Anchor and Shenandoah, said Commodity Insights technical research principal George Laguros.
Anchor appears to have opened an entirely new area for development, Laguros said.
"Technological advances are driving a new wave of developments in the [Paleogene], enabling previously stranded discoveries to be developed economically, turning once-inaccessible resources into viable projects and paving the way for further advancements in the deepwater US Gulf," he said. "These assets could sustain and grow production rates in the US Gulf deepwater over the next decade."
| Field name | Location | Operator | Production capacity | Water depth (feet) | Year of discovery |
| Ballymore | Mississippi Canyon | Chevron | 75,000 b/d | 6,600 | 2018 |
| Dover* | Mississippi Canyon | Shell | 21,000 boe/d | 7,500 | 2018 |
| Salamanca | Keathley Canyon | LLOG | 67,000 boe/d | 6,000/6,500 | 2014/2011 |
| (Leon/Castile fields) | |||||
| Shenandoah | Walker Ridge | Beacon Offshore Energy | 120,000 b/d | 5,600 | 2009 |
| Whale | Alaminos Canyon | Shell | 100,000 boe/d | 8,600 | 2017 |
| Zephyrus** | Mississippi Canyon | Beacon Offshore Energy | (Total resources 75 million boe) | 3,500 | 2023 |
| Source: Companies | |||||
Tiberius to be greenlighted
Kosmos Energy's Tiberius deepwater field is also expected to be sanctioned next year. Tiberius, a Wilcox discovery in 2023 and located in 7,500 feet of water in remote Keathley Canyon, would likely be tied back to the Occidental Petroleum-operated Lucius production facility, located about six miles to the northwest.
But some analysts are worried that the project pipeline could dry up at least temporarily, stemming from the Biden administration's attempts to pause lease sales in 2021, followed by court and Congressional battles that ultimately restored only a few US Gulf auctions between 2024 and 2029 of what are typically two per year.
The first of three agreed-upon US Gulf sales during that period will occur in 2025, followed by one in each of 2027 and 2029. Analysts believe that will be competitive as producers attempt to scoop up desirable acreage while it's available.
"Fewer lease sales going forward will mean companies will need to re-think leasing strategies," Mfon Usoro, Wood Mackenzie principal analyst, said. "Companies will likely be more flexible with exploration budgets to add material acreage in each sale and the selection of blocks will need to be more ambitious."
"In the 2025 lease sale, we could see higher bid amount per acre, especially for deepwater and ultra-deepwater blocks," Usoro said. "Although capital discipline will play a crucial role in companies' budgets, some could loosen their purse strings to secure prime acreage."
Some analysts claim incoming US president Donald Trump could add lease sales to the 2025-2029 roster, but that could take a couple of years as public meetings must be scheduled, held, their comments digested and further input is gathered, and environmental studies completed. By that time, it will be near the end of the decade and time to begin mapping out the 2029-2034 schedule.
'Feeding the beast' of E&P
Between January 2021, when Biden took office and delayed the US oil and gas leasing programs, and June 2029 when the current five-year program expires, "we typically would have had 17 lease sales, but we'll end up with only six," Laguros said. "You have to have continual lease sales to feed the beast" of exploration, production and development.
Meanwhile, exploration will continue in the Gulf. Wells to watch for in 2025 include Talos Energy's Daenerys, a target containing an estimated 100 million-300 million boe in the Walker Ridge area and located at 26,000-31,000 foot total depths.
In addition, Hess Corp, which is scheduled to merge into Chevron in 2025, is currently drilling at Vancouver, a well in the Gulf's prolific Green Canyon area which has been described as a large hub-class prospect of 100 million boe-plus.
"We do think a lot of industry eyes will be on the US Gulf of Mexico in the coming years," said Welligence's Snyder.