The latest Baker Hughes Rig Count Report shows only 10 rigs actively drilling in the Gulf. All are at deepwater locations – 7 in the Mississippi Canyon area, 2 in Green Canyon, and 1 in Alaminos Canyon. Per the BSEE borehole file, Shell accounts for most of the current MS Canyon wells and the Alaminous Canyon well. Beacon is also drilling in the MS Canyon, and the Green Canyon well appears to be a Chevron operation.
Only Anadarko/Oxy, Beacon/BOE, BP, Chevron/Hess, Shell, and Talos have spudded deepwater exploratory wells in 2025 YTD. Arena and Cantium are the only shelf drillers – all development wells.
Technological advances and extensions of past discoveries have sustained Gulf production, but declines are certain over the longer term if drilling activity doesn’t increase. Oil price uncertainty is an issue, but that’s always the case. Semiannual lease sales are now legislatively required and the terms will be attractive, so those issues are off the table. Let’s see what the bidding looks like at the upcoming sale.
The decline in deepwater discoveries (BOEM data below) is particularly discouraging. Per BOEM, the last deepwater field discovery was in March 2023.
The average oil production rate for the Gulf OCS was 1.915 million bopd in June, the highest rate since Oct. 2023 and thus the highest in the history of the Gulf of America 😉.
Natural gas production, which is now primarily from oil wells (i.e. associated gas) and is thus more closely linked to oil production rates, increased by >10% in June to over 60 bcf. As was the case for oil, gas production was the highest since Oct. 2023.
It is now peak hurricane season, so the eyes of production forecasters are focused on the tropics. Few need to be reminded about what happened 20 years ago when Hurricanes Katrina and Rita roared through the Gulf, preceded by Hurricane Ivan “The Terrible” one year earlier. Those 3 hurricanes triggered major improvements in hurricane preparedness, particularly with regard to stationkeeping capabilities.
The “One Big Beautiful Bill Act of 2025” (OBBB), Public Law 119-21, which was signed into law on July 4, 2025, includes a significant offshore production directive (section 50102) that has received little public attention:
“The Secretary of the Interior shall approve a request of an operator to commingle oil or gas production from multiple reservoirs within a single wellbore completed on the outer Continental Shelf in the Gulf of America Region unless the Secretary of the Interior determines that conclusive evidence establishes that the commingling—(1) could not be conducted by the operator in a safe manner; or (2) would result in an ultimate recovery from the applicable reservoirs to be reduced in comparison to the expected recovery of those reservoirs if they had not been commingled.”
This is, to the best of my knowledge, the first time in the history of the OCS oil and gas program that Congress has directed the safety regulator to approve well completion practices that could increase safety, environmental, and resource conservation risks.
Rather than calling for the operator to demonstrate that a downhole commingling plan is safe and optimizes resource recovery, the plan must be approved unless BSEE proves conclusively that the operation could not be conducted safely or that resource recovery would be reduced. This is the antithesis of the operator responsibility doctrine, a fundamental principle of the OCS regulatory program, and safety management principles that call for the operator to demonstrate that safety, environmental, and resource conservation risks have been effectively addressed.
Only 40 days after the OBBB was signed, BSEE published a direct final rule implementing the downhole commingling directive. This is warp speed for promulgating a Federal regulation! In keeping with the rush to finalize the rule, the preamble asserts that “notice and comment are unnecessary because this rule is noncontroversial; of a minor, technical nature; and is unlikely to receive any significant adverse comments.”
I intend to submit comments prior to the Sept. 12 deadline. These comments will assert that the rule does not qualify for an exemption from the Administrative Procedures Act’s public review and comment requirement. I will also recommend that BSEE consider hosting a public forum during the comment period to present their research on downhole commingling and discuss the risk mitigations.
Below are some of the issues/questions that should be considered during the public comment period:
BSEE’s own fact sheet acknowledges the well-known pressure differential, crossflow, and fluid compatibility risks associated with downhole commingling. The public should have the opportunity to provide input on the extent to which “intelligent completions” and other production technology are effective in mitigating these risks.
The industry-funded Univ. of Texas (UT) study, which led to a relaxation of downhole commingling restrictions, was specific to the “unique Paleogene Gulf of Mexico fields.” Does BSEE have evidence that supports the applicability of the study to other fields?
The authors of the UT study acknowledged that their findings were based on a “simple but reasonable geological base case model.” They also acknowledged the need for “a more comprehensive study using advanced geological models to explore additional geological features.” What are BSEE’s plans for additional research?
Should an independent assessment of Gulf of America downhole commingling safety and resource recovery risks be conducted before finalizing a rule that essentially mandates approval of all applications?
BSEE’s April 2025 policy change raised the allowable pressure differential for commingling production in Paleogene (Wilcox) reservoirs from 200 psi to 1500 psi. Unlike the policy update, the new rule includes no boundaries whatsoever.
What criteria will BSEE use in determining that there is “conclusive evidence” that a commingling request would be unsafe or would reduce ultimate resource recovery? Will BSEE disapprove any requests outside the parameters in the current policy guidance or subsequent updates?
There are many more issues that remain to be discussed, which is why the downhole commingling rule should be published in draft form, with a comment period of at least 90 days.
Attached is a good update on the Walton Morant license offshore Jamaica. Note that the large Exxon deepwater block offshore Trinidad (7765 sq km) is only 1/3 the size of the massive Walton Morant license (22,400 sq km), and that the Walton Morant license is nearly 1000 times the size of a deepwater Gulf of America lease block.
JL Daeschler shared a London Sunday Times piece about the Piper Alpha fire that killed 167 workers, the worst tragedy in the history of the offshore industry. We were troubled by the headline, because it seems inconceivable that any UK offshore worker could call July 6, 1988, the best day of their life. However, Punchard helped a number of workers escape the fire, so his mixed message is somewhat understandable.
Lord Cullen’s comprehensive inquiry into the Piper Alphatragedy challenged traditional thinking about regulation and how safety objectives could best be achieved, and was perhaps the most important report in the history of offshore oil and gas operations. That report and the US regulatory response to the tragedy are discussed in this post.
BSEE’s new downhole commingling rule, which responds to a Congressional mandate, is contrary to Cullen’s Safety Case principles in that it puts the burden of proof on the regulator to conclusively demonstrate that a potentially hazardous operation is unsafe.This is exactly the opposite of the approach recommended by Cullen. It’s also the first time in the history of the OCS program that Congress has dictated approval of complex downhole operations. More on this in a later post.
JL Daeschler, pioneering subsea engineer, artist, resident of Scotland, and BOE contributor, visited The Great Tapestry of Scotland exhibition in Galashiels. He shared this image of a tapestry tribute to North Sea workers.
JL reports that the Great Tapestry is 143 m long, and that more than 1000 people worked 50,000+ hours on the various historical panels!
Beneath the North Sea oil panel is some historical information and the names of those who did the stitching:
Talos announced successful drilling results at the Daenerys prospect (Katmai West #2) in the Gulf of America (Walker Ridge blocks 106, 107, 150, and 151).
Daenerys is a good example of the evolution of deepwater project ownership, which was once exclusively the domain of major international oil companies. Over the past 20 years, participation by independents increased gradually, followed by smaller independents and informed investment companies.
Impressively, the Daenerys partnership (table below) includes a tribe that has the same % ownership as a super-major, and a highly efficient investment company owned by a single person.
Talos (operator)
large US independent
27.0% share
Shell
international supermajor
22.5%
Red Willow
private company owned by the Southern Ute Tribe
22.5%
Houston Energy
private independent focused on deepwater energy resources
I never liked the label “slips, trips, and falls” (STFs) because the words “slips and trips” trivialize the most common cause of serious offshore casualties. Perhaps, the name of this category should be simplified to “falls,” because that is the consequence of concern.
Unfortunately, STFs persist at an unacceptably high rate. In the attached Safety Alert, BSEE informs that between May 2024 and April 2025, 22% of all injuries were attributed to STFs. Many of these injuries were classified as major.
BSEE conducted focused inspections of 19 facilities (17 different operators) to better assess the STF problem. They found common deficiencies in training, hazard identification, and other preventive measures. These deficiencies and the associated safety management recommendations are listed in the Safety Alert.
Kudos to BSEE for their excellent Safety Alert program. Unfortunately, unacceptable delays in updating their incident tables and OCS performance measures data make it difficult to assess industry wide safety performance trends. The most recent data are for 2023, and some of those data raise concerns. For example, the number of fires (152) was the highest in the history of the performance measures data set (dates back to 1996) by some margin. What happened in 2024 and the first half of 2025? These data should be readily available and posted in a timely manner. No offshore facility fire is trivial.
Eloquent eulogy by DCOR (platform operator) CEO Alan Templeton: “Last Sunday, August 10, I joined a small group of DCOR personnel on Platform Esther to witness her final moments of operation. At exactly 3:00 p.m., we pressed the ESD on the production deck, and one by one, the sounds of compressors and pumps faded until the platform fell silent — a profound and bittersweet moment in California’s energy history.
For over half a century, Esther stood off the coast of Orange County, first installed in the early 1960s as one of California’s iconic man-made oil islands. She blended into the horizon while quietly producing oil and gas, surviving storms, and later being rebuilt in 1985 into the platform we know today. More than just steel and pilings, Esther was a proving ground for innovation, a dependable asset, and a source of pride for the men and women who worked safely on her decks.
While she has now been permanently shut in, her legacy remains — a testament to the ingenuity, resilience, and dedication that have defined California’s offshore industry for generations.“
Litigation prematurely ended production at Esther, which would have had an estimated 15 more years of operative life. The attached settlement agreement, shared by John Smith, ends a dispute between the State Lands Commission and DCOR over repurposing a pipeline to transport oil from state Platform Eva to Federal Platform Edith (diagram above).
In exchange for relinquishing its mineral rights and decommissioning Platform Esther, the settlement grants DCOR a $10 million royalty credit on future oil produced from Platform Eva. This credit is significantly less than the value of remaining production from Esther.
Platform Esther, is one of three remaining oil production platforms in California state waters.
Bud's Offshore Energy (BOE) 