Analysis: Gulf of Mexico oil surge

By: Kristen Hays and Terry Wade

Corpus Christi, Texas (Reuters) - The Gulf of Mexico, stung by the worst offshore oil spill in US history in 2010 and then overshadowed by the onshore fracking boom, is on the verge of its biggest supply surge ever, adding to the American oil renaissance.

Over the next three years, the Gulf is poised to deliver a slug of more than 700,000 barrels per day of new crude, reversing a decline in production and potentially rivaling shale hot spots like Texas's Eagle Ford formation in terms of growth.

The revival began this summer, when Royal Dutch Shell's (RDSa.L) 100,000 barrels per day Olympus platform was towed out to sea 130 miles south of New Orleans - the first of seven new ultra-modern systems starting up through 2016. It weighs 120,000 tons, more than 200 Boeing777 jumbo jets.

The Gulf Of Mexico's growth will bolster the United States' emerging role as the world's top oil and gas producer, a trend led by advances in hydraulic fracturing and horizontal drilling that unlock hydrocarbons from tight rock reservoirs in places like North Dakota's Bakken and the Permian of West Texas.

Rising domestic production and the start of natural gas exports may transform the economy and realign geopolitics as US reliance on foreign oil declines.

The resurgence in the Gulf is occurring even though the US government imposed stringent safety and environmental rules after BP Plc's (BP.L) Macondo spill. Foreign countries from Brazilto Angola have also aggressively courted Big Oil to invest in developing their offshore fields. And the shale boom has diverted billions of dollars in capital onshore.

The deepwater Gulf, considered the most technically challenging offshore oil patch, remains alluring even as other areas struggle. Brazil attracted only a single bid this month for its once-touted Libra field, yet global companies still compete fiercely for the right to drill in the Gulf.

"A barrel of discovered oil in the Gulf of Mexico is difficult to beat for value anywhere else, even with the increased costs of doing business," said Jez Averty, senior vice president of North American exploration at Norway's Statoil (STL.OL).

Huge finds over the last decade - in what engineers call "elephant fields" that can produce for 25 years or more - are lifting growth in a basin some companies once abandoned, fearing it was drying up or its resources were beyond reach.

"This is still one of the premier oil and gas regions in the world and that's why we've never left," said Steve Thurston, vice president of Chevron Corp's (CVX.N) North American exploration and production division.

Even after decades of production in the Gulf, government estimates have shown that 48 billion barrels could still be recovered.

The area of the Gulf of Mexico where most of the new infrastructure will start up is in an ancient geological trend in its deepest waters 200 miles or more from shore known as the Lower Tertiary, estimated to hold 15 billion barrels of crude.

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