Budget Deal Allows Deepwater Oil Drilling in Gulf of Mexico
Deepwater oil and gas drilling has been stalled out for some time, budget deal addresses this concern
The recent national budget compromise, announced toward the end of 2013, will allow deepwater oil and gas exploration to continue throughout specific parts of the western Gulf of Mexico. This exciting byproduct of the budget conundrum has long reaching implications for the domestic energy production sector, and may help add dramatically to the US oil supply – already near historic highs. The new legislation would establish an agreement between the US and Mexico regarding oil and gas reservoirs located in international boundaries in the Gulf.
With the US enjoying a major spike in domestic crude oil production right now, output from the Gulf area is set to make up a bigger slice of the production pie than it has in recent years. Horizontal drilling and hydraulic fracturing techniques (fracking) have helped drilling crew locate and extract crude from shale formations across the central US.
Since the Gulf of Mexico hasn’t played quite as large a role in the domestic oil market, adding more production from this region will have a restrained impact on oil prices. This means that less production from the area won’t adversely affect the price of oil on the market, nor will huge gains cause a collapse in prices either. In the end, more oil is a good thing.
Removing the drilling moratorium will unlock huge reserves of oil and gas
The budget compromise and subsequent drilling and exploration agreements effectively removed a moratorium on about 1.5 million acres in the western Gulf of Mexico. Now, major oil companies like Chevron, Shell, and BP are showing interest in accessing these areas. According to the Interior Department’s Bureau of Ocean Energy Management, experts estimate that the area in question contains as much as 172 million barrels of oil and 304 billion cubic feet of natural gas.
The move will help significantly bolster domestic production
For the first time in nearly 20 years, the level of domestic oil production has surpassed imported oil. This has effectively changed the US’ position in the global energy market, as domestic demand for foreign-sourced oil has dwindled over the past few years. With less reliance on foreign oil, the United States’ ability to negotiate more effectively in key parts of the world has increased.
The specific budget agreement in question is also credited with easing automatic spending cuts for two years, eliminating the risk of a government shutdown, as well as reducing the deficit by $23 billion.