Seismic acquisition, leasing, drilling and discoveries-all have marched into ever-deeper waters in the Gulf of Mexico during the last five years. Activity and capital expenditures have greatly accelerated since the federal government offered royalty relief to deepwater producers, and service companies have provided more enabling technology. What are the results? "The rise in oil production from deep water has continued at a phenomenal pace, with a 24% increase from 2000 to 2001 alone," Chris Oynes, regional director of the Minerals Management Service office in New Orleans, said at the annual Offshore Technology Conference in Houston. According to a recent MMS report, "in a sense, production of oil and gas is only now hitting its stride and large increases are on the horizon for 2004-06." Last year, deepwater fields produced about 335 million barrels of oil, a tripling of production since 1997. Deepwater production now accounts for 59% of total Gulf of Mexico oil production, Oynes said. Deepwater drilling activity reached a record level in 2001, with the industry averaging 43 rigs working during the year. Operators drilled 208 wells and some 67 deepwater leases were drilled for the first time. By the end of 2001, there were 51 producing fields in the Gulf of Mexico in deep water (MMS defines that as deeper than 1,000 feet). Some 13 of those fields started producing in 2001. Another 13 or 14 are expected to start producing this year, Oynes said. The deepest field to come onstream last year? ExxonMobil holds that honor, as it began producing from the Madison Field in Atwater Canyon Block 24, which is in 4,854 feet of water. The shallowest was Walter Oil & Gas Co.'s MC 68 Field on Mississippi Canyon Block 68 in 1,214 feet of water. An estimated 570 million barrels of oil were produced in calendar 2001 from all of the Gulf of Mexico, up by about 50 million from 2000. In 1995, the entire Gulf produced 345 million barrels of oil. Most of the increase comes from deep water. Oil output from shallow water has steadily declined since the 1970s, while deepwater production keeps rising. Indeed, MMS says deepwater oil production is rapidly approaching the all-time-high shallow-water oil production record established in 1971. Gas production increased to an estimated 5.07 trillion cubic feet in 2001, versus 4.88 Tcf the year before and 4.78 Tcf in 1995. Shallow-water gas production also continued to decline, and was about 2% lower in 2001 than in the prior year. Shallow-water gas production in the Gulf overall has declined 19% since 1996, Oynes said. From deepwater fields, however, gas production is climbing, rising 20% last year to 1.18 Tcf. It was a mere 0.18 Tcf in 1995. Although the majors still dominate the deepwater plays, with Shell leading BP and ExxonMobil in overall production, the nonmajors now account for about 25% of all deepwater oil and gas production, the MMS says. (For more on independents in the deepwater Gulf, see "Deepwater Gulf of Mexico," Oil and Gas Investor, May 2002.) The industry keeps moving farther from shore into deeper water. This summer, production is expected for the first time from more than 7,000 feet of water, at the Aconcagua and Camden Hills fields. Currently there is no production of oil or gas in less than 7,500 feet of water and only minimal liquid production in less than 5,000 feet. The industry is pursuing numerous research projects, however, to make production in the deepest waters a reality. Discoveries have been announced in deeper water. Unocal's Trident find, in the Perdido Fold Belt in Alaminos Canyon, is in 9,687 feet of water. A successful appraisal well at the field was just drilled in 9,727 feet of water-the current water-depth record in the Gulf. -Leslie Haines