Posted in CCS, energy policy, Gulf of Mexico, Offshore Energy - General, Regulation, tagged accidents, bid acceptances, carbon disposal, Exxon, Lease Sale 261, Repsol on January 31, 2024| Leave a Comment »
As previously posted here and here, carbon disposal bidding at the last 3 oil and gas lease sales has made a mockery of the leasing process and the regulations that guide it.
Hopefully, the carbon sequestration regulations that are under development will preclude conversion of leases acquired at Sales 257, 259, and 261. At a minimum, these regulations should require a competitive process for converting any oil and gas leases.
Posted in energy policy, Gulf of Mexico, natural gas, tagged Marcellus Shale, OCS oil and gas, Pennsylvania, private land, shale gas, Texas Permian on January 31, 2024| Leave a Comment »
A friend owns land in the Texas Permian. His family gets a nice royalty check every month that has helped them get through some difficult times. Texas Permian production is almost entirely from private land, which is a big part of the success story. Payments to private land owners by responsible producers engender public support, access to resources, and growth in production. Add to that the continuous improvements in horizontal drilling, well stimulation and completion practices, and you have the success story that is the Texas Permian.
Similarly, private and state land plus technology launched the natural gas boom in my native state of Pennsylvania. When I was a student, we looked back at the Titusville/Colonel Drake glory days, and no one dreamed that the state would become a major natural gas exporter. Today, pipeline constraints, particularly in NJ and NY (which has managed to prevent access to the state’s substantial Marcellus and Utica shale resources) are preventing PA from further increasing gas sales.
The offshore lands on the US Outer Continental Shelf are a different story. Unfriendly, bordering on hostile, leasing policy (and not just during the current administration) has been partially overcome by advances in deepwater well and facility design that have lowered costs and increased productivity. However, OCS oil production is a fraction of what it could be.
OCS gas production has fallen dramatically since the turn of the century. Ultradeep (subsurface) gas production was not economically viable and production was fading even before onshore shale gas began to dominate US gas markets. Most of the current OCS gas production is associated with deepwater oil production.
The charts below tell the story.
Posted in climate, energy policy, natural gas, Offshore Energy - General, tagged GHG emissions, LNG export pause, natural gas, offshore gas on January 30, 2024| Leave a Comment »
In the wake of the decision to “pause” LNG export approvals, it’s important for us to also pause and reflect on the natural gas revolution.
Gas now accounts for 40% of our power generation.
The gas boom’s economic and environmental benefits are compelling. Greenhouse gas emissions currently get most of the attention. In that regard, methane (CH4) is a hydrogen transporter that emits far less CO2 than other fossil fuels when burned.
Less attention has been given to natural gas’s other important air quality advantages – low NOx. SO2, and particulate emissions. These emissions have greater local significance from a human health standpoint. Those who have ridden a bike behind a natural gas powered bus have no doubt experienced the natural gas advantage firsthand.
Other environmental considerations particularly favor offshore natural gas when compared to energy alternatives. These include low well and facility density, no groundwater pollution risk, and minimal risk to wildlife.
Compiled below are links to BOE posts on natural gas issues and advantages.
Posted in energy policy, Offshore Wind, tagged BOEM, NASEM, NOAA, Offshore Wind, Rice's whale, RIght Whale, strategy on January 29, 2024| 1 Comment »
Key takeaways after reviewing the BOEM/NOAA strategy document:
NARW status (pages 7-14):
BOEM/NOAA strategy:
Questions:
Pictured below: density of NARWs near wind leases and hydrodynamic effects of turbines
Posted in accidents, California, Offshore Energy - General, oil spill response, seeps, well control incidents, tagged 1969, Dos Cuadras field, Platform A, Santa Barbara blowout, Union Oil Company on January 28, 2024| Leave a Comment »
On January 28, 1969, well A-21, the 5th well to be drilled from Union Oil Company’s “A” platform began flowing uncontrollably through fractures into the Santa Barbara Channel.
The absence of any well casing to protect the permeable, fractured cap rock meant that the operator couldn’t safely shut-in a sudden influx of hydrocarbons into the well bore (i.e. a “kick”). Shutting-in the well at the surface would create well bore fractures through which oil and gas could migrate to shallow strata and the sea floor. The probability of an oil blowout was thus essentially the same as the probability of a kick (>10-2). Compare this with the historical US offshore oil blowout probability (<10-4) and the probability of <10-5 for wells with optimal barrier management.
Here, in brief, is the well A-21 story:
Here is the link to an excellent US Geological Survey report from 1969 that describes the geologic setting, well activities, and remedial measures after the blowout.
We need to continue studying these historically important incidents, not just the technical details but also the human and organizational factors that allowed such safety and environmental disasters to occur. The idea is not to shame, but to remember and better understand.
Posted in decommissioning, Gulf of Mexico, Offshore Energy - General, tagged Andrew Konczvald, decommissioning, Pioneering Spirit, safety, Thunder Horse on January 26, 2024| Leave a Comment »
The financial, technical, and regulatory aspects of decommissioning have received much attention on this blog. Andrew Konczvald sends this photo with regrets that the behemoth “Pioneering Spirit” wasn’t available when he was concerned with such matters.
For comparison (size only given the different missions), the massive Thunder Horse floating production platform (see below) in the Gulf of Mexico is 136 m x 112 m, only 12 m narrower but just over 1/3 of the Pioneering Spirit’s length.
Posted in energy policy, tagged SPR refill, Strategic Petroleum Reserve on January 25, 2024| Leave a Comment »
Posted in Alaska, Gulf of Mexico, Offshore Energy - General, Regulation, tagged Alaska, bid adequacy procedures, BOEM, fair market value, Friends of the Earth, Gulf of Mexico, Marshall Rose, OCS oil and gas program, Ted Tupper on January 24, 2024| Leave a Comment »
15,531 of the 15,537 comments on the bid adequacy rule were from a single organization, Friends of the Earth. I have no problem with the Friends of the Earth campaign given that their comment letter is pertinent to the topic. Their main point is that the bid adequacy process fails “to factor in the climate and social costs of continued Outer Continental Shelf oil and gas lease sales into the bid process.” Although that may be a reasonable position, those issues are addressed in the programmatic and sale specific environmental reviews which factor into when and where sales are held, tract exclusions, special lease stipulations, and the comprehensive operating regulations. Once bids are submitted, the issue (and the sole purpose of the bid adequacy rule) is whether those bids represent fair market value for the oil and gas resource potential of the leases being offered.
Given that 96.3% of the US OCS is off-limits to oil and gas leasing, only 0.7% is currently open to exploration, and the new 5 year plan includes the fewest lease sales in OCS program history, it’s rather a stretch to argue that environmental concerns are not being prioritized.
The State of Alaska submitted very good comments (attached) that point to the historical differences in Gulf of Mexico and Alaska leasing. The State argues that a simpler approach to determining fair market value would encourage exploration and development on offshore lands that have seen little of either in recent years. Knowing BOEM’s expectations prior to the sale, perhaps through higher minimum bid requirements, would ensure that companies do not underbid and that tracts are successfully leased.
The Gulf of Mexico leasing program of today is looking more like the frontier area leasing of the past. As previously noted, the uncertainty regarding future sales changes the historic GoM leasing dynamic. The next opportunity for purchasing unleased GoM tracts is now a troubling unknown. This would seem to make it less prudent to reject bids based on uncertain prospect evaluations. Absent leasing and exploration, the true resource and revenue potential will never be known.
It was good to see the strong comments submitted by my former Minerals Management Service colleagues Dr. Marshall Rose and Ted Tupper. Marshall, who was our Chief Economist, commented that the proposed rule did not identify the problem and explain how the rule addressed that problem. Ted, a senior statistician, points to past failures of the bid adequacy process and proposes specific changes. It’s great to see the passion that our retired employees have for the program they were so instrumental in developing and managing.
Posted in Jamaica, Offshore Energy - General, tagged extenstion, farmout, Jamaica, United Oil and Gas, Walton Morant License on January 23, 2024| Leave a Comment »
“We are very pleased to announce the agreement of terms for a two-year license extension in Jamaica. United has dedicated significant effort to the technical aspects of this asset, which has over 2.4 billion barrels of unrisked oil potential and the promising Colibri prospect. This extension will empower us to confidently continue our farm-out campaign, seeking a strategic partner to unlock the immense potential in this region. The support from the Government of Jamaica underscores our relationship and the optimistic industry outlook in Jamaica. We will continue to focus on the recent positive interest that has been shown by a number of parties, and with the extended licence, this is a significant opportunity for the benefit of all stakeholders.”
United Chief Executive Officer, Brian Larkin, 1/22/2024
Posted in decommissioning, Gulf of Mexico, Offshore Energy - General, tagged Bullwinkle, Cognac, compliance, decommissioning, Fieldwood, merger, QuarterNorth, Talos on January 23, 2024| Leave a Comment »
Safety first: As a descendant of troubled Fieldwood Energy, which had a very poor safety and compliance record, QuarterNorth Energy (QNE) had much to prove. That said, QNE has had a good compliance record in its brief 2 year history. During 76 facility inspections in 2022 and 2023, QNE was cited for only 15 Incidents of noncompliance, all but 2 of which were warnings. This is on par with the companies that had the best compliance records during that period.
BSEE’s incident statistics are hopelessly out-of-date, with the latest data being for 2021, so we have limited information on QNE safety incidents. However, BSEE’s District Investigation Reports, which document the more significant incidents, are relatively current and no QNE incidents were investigated in 2022 and 2023.
Platforms: Consistent with the general sense that QNE inherited the best of Fieldwood’s facilities, the company’s 15 platforms include Bullwinkle, the Thunder Hawk floating production unit in 6050′ of water, and prominent shelf platforms Tarantula and Hickory.
The acquisition reunites 2 iconic Shell platforms under the same ownership. QNE’s Bullwinkle, installed in 1988 in 1353′ of water, is the world’s tallest (non-compliant) steel tower platform. Talos’s Cognac, installed in 1978 in 1023′ of water, is the first platform in >1000′ of water.
Production and reserves: Per Talos, QNE adds 30,000 boe/d of production and 69 million boe of reserves.
Drilling: Per BSEE records, QNE was the operator for 2 deepwater exploration wells, both of which are classified as completed.
Active leases: The QNE acquisition will add 51 leases to the Talos’s 143 lease inventory.
Recent lease sale activity:
| Sale | QNE | Talos |
| 257 | 2/1 | 10/10 |
| 259 | 6/4 | 5/4 |
| 261 | 6/4 | 14/13 |
Sales price and decommissioning: QNE was already on the market for “more than $2 billion,” shortly after the company was formed. Talos is paying $1.29 billion consisting of 24.8 million shares of Talos’s common stock and approximately $965 million in cash. A case study of the complex Fieldwood bankruptcy and the outcomes for the various parties would be most interesting. Also of interest would be a study of the decommissioning obligations of the former companies and the extent to which the sale proceeds are being applied.
Bud's Offshore Energy (BOE) 