Is US Offshore Oil on the Rise?

Over the past decade the US has drastically ramped up its onshore shale production. A rebound in crude has pushed prices to over US$60 a barrel, which could further bolster the industry and transform global energy markets. Now, experts are predicting that the boom will filter down to America's offshore crude production industry.

Back in 2000, offshore oil sourced in the Gulf of Mexico represented around 25% of the country's crude output. At the same time, the US Energy Information Administration projected that all new US crude production would be derived from offshore sources. While the predictions were realistic at the time, the onshore shale revolution completely upended the industry. By 2017 the market share had dropped to around 18%. Now the market appears to be making a comeback.

A series of fortunate events

The boom has been largely fuelled by ongoing advancements in the oil, coal and natural gas industries. An increase in global oil demand is also supporting America's offshore industry, with experts predicting that demand will increase to 1.7 million b/d in 2018. In turn, offshore oil will emerge as a key resource for meeting the world's rising energy needs.

The lucrative nature of offshore wells will also help to bolster the industry. Generally, offshore deposits are usually much larger than their onshore counterparts. While initial exploration and infrastructure costs are high the payoffs are huge, which makes offshore projects an attractive prospect for investors.

Stabilising oil process are another factor helping to fuel offshore growth, with steady price increases offering offshore investors both security and incentive. Increasing prices also create bigger profits which can be used to fund offshore exploration. The US may not be part of OPEC, however the cartel's November 2016 agreement to slash production by 1.8 million b/d could see America channel up to US$1.8 trillion in offshore capital expenditures by 2022.

Offshore oil set to fuel US export industry

Ultimately, a growing offshore oil industry will help the US feed the booming export trade that's emerged over the past few years. In December 2015, a flourishing domestic drilling and production market saw the US lift the 40-year national ban on crude oil exports. Now, analysts estimate that US oil exports are up to around 1.6 million b/d, which represents 9% of the country's total refining capacity.

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