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By 2011, the deepwater portion of the Gulf of Mexico will account for 80% of oil production from the entire province, the U.S. Minerals Management Service predicts in its first 10-year energy projection. During the coming decade, peak oil production is expected to rise by 43% and natural gas production by 13%. Gulf of Mexico oil production, currently 1.5 million barrels per day, will rise to 2 million barrels a day by 2006 and will peak at rates as high as 2.25 million barrels per day in 2011. The MMS estimates that the deepwater regions of the Gulf-in more than 1,000 feet of water-contain about 56 billion barrels of oil that remain to be found. The deepwater and ultradeepwater fields already contribute roughly 1 million barrels of oil per day to the 1.5-million-barrel total for the entire Gulf. A plethora of discoveries is driving the robust growth in deepwater production. More than 100 deepwater developments have already been placed on production, and during 2003, operators announced 13 additional deepwater discoveries. At least 10 more finds were made through November 2004. Several very large projects, including BP's Thunder Horse, Mad Dog and Atlantis developments, will come online during 2005 and 2006. The outlook for natural gas production is not quite so bright, however. Short-term declines in gas production are projected in the Gulf as the existing fields age. Current Gulf gas production is 12 billion cubic feet per day; after a decline to 11 billion per day, the MMS projects this production will rebound beginning in 2008. Gas volumes will reach a peak of more than 13 billion cubic feet per day in 2011. The longer-term growth in gas production will come from recent deep discoveries in the shallow-water shelf region. The MMS pointed out that 38% of the 351 tracts bid on in the Western Gulf lease sale, in August 2004, are in less than 200 meters of water. Additionally, gas volumes from the shelf will be bolstered by new wells in the deepwater province, which are often associated deposits. The federal government is aiding E&P efforts in the Gulf through royalty-relief incentives. As of November 2004, there were 17 areas where deep-shelf, producing wells had qualified for royalty relief. "Energy companies are responding positively to new incentives offered under the president's energy plan that allow them to tap into pockets of oil and gas in areas of the Gulf that otherwise would not be economical to produce," says Rebecca Watson, assistant secretary of the Department of the Interior's Land and Minerals Management. She adds that "to help ensure our future energy security, we need to reward developers for the huge risks they take when they explore in deepwater and deep-shelf areas." -Peggy Williams
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