Dear OilPrice Reader ,

Greetings from London.

Another interesting week in the energy world and we have a great newsletter lined up for you tomorrow.

From tomorrow’s Inside Investor:

The Gulf of Mexico is heating up again and the excitement is returning for deep water drilling. After three years of declining production from the Gulf, we are now poised to see a return of strong production growth, perhaps even eclipsing the growth of the much more hyped tight oil plays of the Bakken and Eagle Ford.

And that’s great for investors because the stocks most closely associated with deep water drilling in the Gulf of Mexico have been left mostly for dead since the Macondo disaster of 2010. As compared with the high-flying Bakken stocks, these are values that shouldn’t be overlooked.


First, the Gulf of Mexico only contains a few key players, unlike shale oil plays. For the majors, Shell and BP still dominate the assets in deep water in the Gulf, with Chevron and Conoco making inroads, particularly after the latest massive deep water finds at Coronado and Shenandoah. Our Inside Opportunities piece is also focused on the Gulf of Mexico and takes a detailed look at the sub-salt plays.

From tomorrow’s Inside Opportunities report:

Gulf of Mexico is Back, and Subsalt is all the Rage

In late March, the US Department of Interior released the results of its Central Gulf of Mexico lease sale 227. It was a great auction, with a LOT of interest—52 companies, 407 bids and 320 tracts up for offer--and heavy bidding competition. This is only a fraction of the blocks up for grabs (4.5%), so there’s a lot more to come.

This is the rebound from the 2010 oil spill, which saw a major slump in bidding. This time around, minimum bids for deep-water acres were around $100 per acre, compared to 2012 when the minimum per acre was only about $37. Then, companies bought acreage, but failed to do anything with it. Now, with the minimum bid raised, and more time allowed on the lease if operators drill wells, there should be more activity. (In November 2012, when the DOI offered over 20 million acres in the western Gulf, it generated only $233 million in bids on 3% of the land offered.)

These sub-salt plays were temporarily sidelined by the shale revolution onshore, but now what we are about to see—in part spurred by sub-salt and pre-salt success in Brazil--is the true development of sub-salt plays in the Gulf of Mexico. Analysts believe we could see $70 billion spent on exploration here by 2030, making it THE most active deep-water play in the world—more active than all of them combined.

The details of the lease sale are telling, especially in terms of the number of bids for deep and shallow-water acreage. There were 131 bids for acreage in depths of 1,600 meters or deeper, and 85 bids for acreages at depths of 200 meters or less. This unexpected interest in the shallow depths is indicative of a potential revival of this Gulf of Mexico area that had largely been abandoned.

Let’s recall the Gulf of Mexico potential here:

• 11.5 trillion cubic feet of proven gas resources
• 1.4 billion barrels of proven crude reserves
• New fields coming online
• New discoveries announced at an impressive pace
• Resumption of lease sales
• Deep-water development picking up
• Chevron has set a fast pace for developing its Gulf of Mexico plays: Jack/St. Malo, Big Foot and Tubular Bells fields, with production expected to start in 2014 and total estimates of 500 million bbls of potentially recoverable oil
• Deep-water drilling focus on the Miocene and Lower Tertiary structures
• Lower Tertiary play sits beneath a thick wedge of salt that is about 70 miles wide and 200 miles long and could contain about 31 billion bbls of oil and 134 trillion cubic feet of gas undiscovered, and technically recoverable
• Total recently made a significant discovery at its North Platte prospect in the Garden Banks block, estimating several hundred million barrels of oil


Our Executive Report takes a detailed look at the energy opportunities in Syria – Geologists believe the offshore gas potential is immense.

In our detailed report we take a detailed look at the geology of the country, geopolitics, the current developments in the Civil war and where the risks and opportunities lie for investors.

From tomorrow’s Executive Report:

Syria: The Next New Frontier, Unexplored and Geopolitically Meteoric

In 2011, shortly before conflict broke out in Syria, the government was preparing to begin bidding for its first offshore exploration blocks in the Levant Basin region. That, of course, has been put on hold, and three key basins analogous to massive finds in Israel and Lebanon remained entirely unexplored.

Geologists think it’s a gold mine.

There’s not much talk of this publicly, while all eyes are focused on who is controlling Syria’s onshore oilfields amid the fighting. But this is what we do know: The geology of the Eastern Mediterranean is highly prospective, and Syria has three key basins to tap into: Cyprus, Levantine and Latakia.

According to the US Geological Survey, the Levant Basin, which covers Israel, Syria, Lebanon, Cyprus and Palestine, contains around 122 trillion cubic feet of gas and at least 1.7 billion barrels of oil. The Israeli discoveries in the Levant basin, at its Leviathan and Tamar fields, have brought this into clearer focus, and as we noted in last week’s Intel Notes, this is the thing to watch as the end game for the Syrian conflict unfolds.

Before the conflict, the Syrian government on 24 March 2011 had announced its plans for an offshore auction. Up for grabs were three blocks with a total area of 9,038 square kilometers. To assist with bidding, there was some 5,000 km of seismic data for offshore Syrian territory in water depths ranging from 500 to 1,700 meters.

Stay tuned as we’ll be sending tomorrow’s newsletter around noon CST.

Kind regards,

James Stafford
Editor, Oilprice.com