In the midst of the disruption to the global oil supply due to the Iran War, the GOA deepwater industry could reinforce its position as one of the most strategically advantaged oil and gas basins in the world. With the uncertainty of vessel traffic through the Strait of Hormuz disrupting roughly 20% of global oil supplies, stable, geopolitically insulated oil and gas basins will be favored for capital expenditures. The GOA is among the most stable oil and gas-producing regions in the world, and President Trump continues to push for more oil and gas production.

The economics of oil production in the GOA have been attractive, and as a result of the war, the economics of producing there will likely improve significantly relative to basins elsewhere in the world. Deepwater projects in the GOA need approximately $40 per barrel to break even, while new U.S. shale wells, in comparison, require around $60 per barrel, meaning that oil prices sustained above $80 per barrel deliver margins that GOA operators have not seen in more than a decade. The EIA forecasts that crude oil production in the Gulf of America will average 1.81 million barrels per day in 2026, contributing about 13% of U.S. crude oil production. Lower breakevens, infrastructure leverage, and no Hormuz exposure give the GOA a tremendous advantage to attract capital expenditures.

Accelerated capital flows into the GOA began in early April, when two of the owners of the Shenandoah offshore field kicked off a sale process, offering possible buyers 51% of the project, which is drawing interest from TotalEnergies, Shell, BP, Repsol, and Chevron. Shenandoah is an ultra-deepwater field with reservoirs around 30,000 feet deep, seen as having some of the greatest potential in the U.S. Gulf region. This has been complemented by federal policy support, as demonstrated by the first offshore oil and gas auction in two years, taking place this past December, with BP and Chevron as leading bidders.

A durable ceasefire that allows for the reopening of the Strait of Hormuz could bring crude prices back toward the $60 range; however, projects sanctioned today will produce oil well into the next few decades. Fortunately, the GOA will be favored in this possible scenario as subsea tiebacks extend existing infrastructure at incremental cost, ultra-high-pressure technology pioneered in the GOA is unlocking previously uneconomic reserves, and $40-per-barrel breakevens leave a substantial cushion below today’s prices.