US drilling ban to remove 31,000 bbl/day of oil in Q4 - agency

07 July 2010 20:05  [Source: ICIS news]

OilHOUSTON (ICIS news)--The Obama administration's ban on deepwater drilling will remove 31,000 bbl/day of crude oil production from the US Gulf in the fourth quarter and 82,000/day in 2011, the Energy Information Administration (EIA) said on Wednesday.

The EIA, in its July short-term energy outlook (STEO), increased its prediction on production loss from 26,000 bbl/day in its last monthly report.

The figures are only a fraction of the 5.42m bbl/day produced in the US in the second quarter, according to the EIA.

However, fewer global options for crude oil are forcing companies to explore deeper in the ocean. And the moratorium proves a restriction on that supply - no matter how much it totals - and the infrastructure that supports it, said Andy Lipow, of Lipow Oil Associates in Houston.

Since the 27 May announcement, there have been multiple challenges and a block on the ban from a Louisiana district court, but the industry is making decisions as if the moratorium will stick.

"Even though the judge in New Orleans struck down the moratorium, it's not like the oil companies have started drilling," Lipow said. "Since the federal government is going to appeal the decision, that to me just extends the timeline of the moratorium where you don't want to do anything but also don't know what the rules are going to be."

The EIA said it would adjust its forecast on the effects of the moratorium as more information becomes available.

The drilling prohibition will also disrupt natural gas supply in the US Gulf, the EIA forecasted, compounding anticipated outages from storms.

The government-induced shutdown of drilling rigs in the Gulf would account for an average reduction of 50m cubic feet/day of natural gas supply in the second half of 2010 and a loss of 250m cubic feet/day next year, the EIA said.

Another 166bn cubic feet (bcf) in natural gas production will be lost in the Gulf due to hurricanes, compared with 19 bcf lost last year, according to EIA projections.

However, onshore production in the ever-growing shale gas fields will make up for the loss of natural gas output offshore, the EIA said.

Production will jump by 2 bcf/day, or 3.8%, this year in the lower 48 US states and climb by another 200m cubic feet/day in 2011, the EIA said.

Expected storm-related disruptions bumped the EIA's 2010 natural gas price forecast higher to $4.70/MMBtu for Henry Hub spot values.

The government agency also predicted an average of $5.17/MMBtu for 2011 Henry Hub prices.

The EIA, in contrast, left its West Texas Intermediate (WTI) crude oil price forecast unchanged from last month at an average of $79/bbl for the second half of 2010 and $83/bbl next year.

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By: Ryan Hickman
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