Is Offshore Oil Production Back to Pre-Pandemic Levels?

COVID-19 has impacted every American’s life in some way. In March of 2020, when stay-at-home orders were issued, schools were closed, and non-essential businesses were forced to cease in-person operations, every person felt the impact in a different way. The same was true for offshore workers.

Certain oil and gas workers involved in drilling and production operations were considered “essential workers” and were able to keep doing their jobs, but the coronavirus presented significant risks. Social distancing on offshore platforms, helicopters, and boats proved extremely difficult. Some tasks had to be done with less personnel. Turnarounds and other operations had to be delayed. Then, a decreased demand for crude oil led to operators shutting in wells and limiting new operations.

107,000 oil and gas workers lost their jobs in 2020.

COVID-19 Affects Offshore Oil Production & Crude Oil Demand in 2021

The pandemic had a tremendous impact on the oil and gas industry. Stay-at-home orders directly impacted oil prices because the demand for petroleum was so low. Closures affected oil and gas production offshore and on land. The price of crude oil reached a 30-year low by May; oil production experienced its most significant year-over-year decrease by the end of 2020. Offshore oil operations in the Gulf of Mexico fell by 13%.

2021 brought increased production and more jobs, but the effects of the pandemic proved ongoing. In 2021, offshore oil production in the Outer Continental Shelf (OCS) increased by 12.53 million barrels but was still 70.38 million below where it was in 2019 before the pandemic hit. Our article, Analyzing COVID-19’s Impact on Offshore Workers & Oil Exploration in 2021, discusses the lasting impacts of the pandemic into 2021.

Now, as we are more than two-thirds of the way through 2022, we can consider whether offshore oil production has reached pre-pandemic levels – and where it may be headed in the coming years.

Predicted Decline in Offshore Oil Production in the Gulf of Mexico

According to the U.S. Energy Information Administration (EIA), offshore gas and oil production in the Gulf of Mexico is expected to continue its 3-year decline, even though 9 new fields are expected to come online in 2022. The EIA predicts that the additional crude oil production provided by these new fields will only be enough to equally offset the decline in production from existing Gulf of Mexico fields – if that.

In 2022, EIA statistics on federal offshore production in the Gulf Coast show that it has not reached pre-pandemic levels. The following data shows offshore crude oil production in the Gulf of Mexico for the first 6 months of 2019, 2020, 2021, and 2022, represented in thousands of barrels:

Looking at these numbers, you can see when offshore oil production first decreased as a result of the mid-March 2020 COVID-19 shutdowns, and how the industry has been struggling to recover ever since.

Offshore oil production has not yet reached pre-COVID levels, and there is no certainty that it will. Some have theorized that the demand for crude oil will decrease over the next decades, particularly with America’s commitment to clean, renewable energy sources (such as offshore wind), but the Inflation Reduction Act, which passed the Senate in August 2022, may prove otherwise.

The Inflation Reduction Act supports clean energy and aims for a 40% reduction in greenhouse gas emissions by 2030. Still, it also resurrects previously canceled offshore oil and gas lease sales in the Gulf of Mexico and Alaska and locks in new sales on land. If production from new offshore fields is enough to offset declining production in existing fields, not to mention shut-ins and evacuations because of hurricanes and heavy weather, we may yet see increases in offshore oil production.