U.S. Invokes Defense Production Act to Restart California Offshore Rigs as Supply Crisis Deepens
Energy Secretary Chris Wright has directed Houston-based Sable Offshore Corp. to restore operations at the shuttered Santa Ynez unit off Santa Barbara, invoking the Defense Production Act to address the Middle East supply disruption.
In a dramatic escalation of the federal response to the global oil supply crisis, U.S. Energy Secretary Chris Wright on Sunday directed Houston-based Sable Offshore Corp. to restore production at the Santa Ynez offshore unit in federal waters off Santa Barbara, California, facilities that have been idle since a 2015 pipeline rupture.
Wright invoked the Defense Production Act to compel the restart, signaling the administration's growing concern about energy security as the Strait of Hormuz conflict enters its third week with no resolution in sight.
Three Rigs, Two Pipelines, One Processing Facility
The Santa Ynez unit comprises three drilling rigs in federal waters, connected by offshore and onshore pipelines to the Las Flores Canyon Processing Facility. The complex was one of the most productive offshore operations on the Pacific coast before the 2015 Plains All American Pipeline rupture forced a complete shutdown.
Sable Offshore, which acquired the assets in recent years with the intention of restarting production, had been navigating a lengthy regulatory approval process. The Defense Production Act invocation effectively bypasses remaining permitting hurdles, prioritizing national energy security over the standard review timeline.
BP's Kaskida Deepwater Project Approved
In a separate development, the U.S. Interior Department approved BP's Kaskida deepwater project in the Gulf of Mexico, one of the largest Paleogene discoveries in the basin. The project, with an estimated 275 million barrels of recoverable oil, is expected to begin production in 2029.
While Kaskida won't provide near-term supply relief, the approval signals the administration's commitment to accelerating domestic production across all available basins.
Permian Basin and U.S. Production Response
The price surge is already triggering a drilling response onshore. The EIA projects U.S. crude production will average 13.6 million barrels per day in 2026, a new record, with higher prices supporting increased drilling activity across most basins. Expanded pipeline capacity in the Permian Basin is enabling more associated natural gas to reach market, with U.S. natural gas production forecast to hit a record 120.8 Bcf/d this year.
International Drilling Activity Accelerates
The supply crisis is also catalyzing drilling activity globally. Saudi Arabia plans to complete 400–500 wells annually beginning this year. The UAE has partnered with SLB and Patterson-UTI in the Turnwell joint venture to drill and complete 144 wells in its initial phase. In Argentina, shale production from the Vaca Muerta basin is hitting new highs as pipeline expansions unlock additional capacity.
Meanwhile, Eni has discovered more than 1 Tcf of natural gas in two offshore Libya exploration wells near the Bahr Essalam field, which could be rapidly developed through tie-backs to existing infrastructure, providing a potential new Mediterranean supply source.
Alaska LNG Gains Momentum
The conflict is also reviving interest in long-delayed LNG projects. The $44 billion Alaska LNG project, led by developer Glenfarne, is attracting renewed attention from Asian buyers desperate for supply alternatives to disrupted Middle Eastern sources. Glenfarne aims to reach a final investment decision in 2026–2027, with first LNG shipments targeted for 2031.
Wood Mackenzie has warned that the Middle East conflict threatens 200 million tonnes per year of Asian LNG demand growth over the next decade, after Qatar declared force majeure on shipments.
Sources: Houston Public Media, U.S. EIA, World Oil, Reuters
By Oil Authority · Oil Authority