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Archive for March, 2024

On Easter weekend, grateful…

Posted in Offshore Energy - General, Uncategorized, tagged , on March 29, 2024| Leave a Comment »

… to be able to speak openly and candidly about issues that have been an important part of my professional life for more than a half century.

Whether you represent Big Oil, Big Gas, Big Wind, Big Green, Big Stick (regulators 😀), Big Swamp (Washington DC friends 😉), or none of the above, thank you for visiting this modest, independent blog.

Regardless of your faith, nationality, political views, or thoughts about world events and offshore energy, I hope you have the opportunity to spend time with friends and family this weekend.

Feeling Grateful

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60 Minutes segment on deep sea mining and the Law of the Sea treaty

Posted in climate, deep sea mining, energy policy, Offshore Energy - General, tagged , , , , , , , on March 28, 2024| Leave a Comment »

I’m posting Sunday’s 60 Minutes segment that focused on deep sea mining and the failure of the US to ratify the UN Convention on the Law of the Sea (UNCLOS). Supplementary comments:

  • Most Federal employees involved with ocean energy policy, past and present, have supported US government ratification of UNCLOS.
  • The offshore industry has long supported UNCLOS. Industry trade associations, including API, IADC, and NOIA, are on the record as favoring ratification.
  • While concerns about UN management of deep sea mining access are understandable, some coordinated administrative structure is needed.
  • The Metals Company and other companies pursuing deep sea mining opportunities clearly disagree with the assertion that ocean floor mineral harvesting is not economically viable.
  • While it’s too soon to draw firm conclusions, there are reasons to believe that deep sea mining is environmentally preferable to onshore mining.

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Alexander Kielland tragedy: 44 years ago today

Posted in accidents, Norway, Offshore Energy - General, tagged , , , , on March 27, 2024| Leave a Comment »

Remembering the 123 offshore workers who lost their lives on this day in 1980 in one of the offshore industry’s great tragedies 🙏

See the excellent interview with Magne Ognedal that describes the evolution of Norway’s highly regarded offshore regulatory regime following the Alexander Kielland tragedy.

Photo: Norwegian Petroleum Museum

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Which power source is best to meet the growing demand for affordable, reliable, and clean electricity?

Posted in climate, energy policy, natural gas, Offshore Energy - General, tagged , , , , on March 26, 2024| 2 Comments »

Unsurprisingly, the winner is natural gas.

A new report ranks eight key energy industry sectors based on their ability to meet the growing demand for affordable, reliable, and clean electric power generation.

As governments around the nation attempt to impose a transition from traditional energy resources to energy sources open referred to as renewables, natural gas is the energy source that is best suited to integrate with the intermittency inherent in the use of wind and solar. Gas provides a reliable, affordable, and increasingly clean source of energy in both traditional and “carbon-constrained” applications.

Gas faces headwinds in the form of increasingly extreme net zero energy policies that will constrict supplies if implemented as proposed. Gas could also improve overall reliability if onsite storage was prioritized to help avoid supply disruptions that can occur in just-in-time pipeline deliveries during periods of extreme weather and demand.

MCPP-NWU Report Card

This blog has been saluting natural gas for years, most recently in this post. From an environmental standpoint, offshore natural gas production is particularly attractive, especially nonassociated gas-well gas.

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How China became a factor in the Stabroek (Guyana) dispute

Posted in Canada, energy policy, Guyana, Offshore Energy - General, tagged , , , , , , on March 25, 2024| 4 Comments »

State-owned Chinese National Offshore Oil Corp. (CNOOC) has now joined Exxon in filing an arbitration claim to establish their right over Hess’s share of the prolific Stabroek block offshore Guyana. How did CNOOC acquire its 25% share in the block?

So, an apparent afterthought in CNOOC’s takeover of Nexen has (1) proven to be extremely profitable, (2) given the company and the Chinese government leverage in the Exxon-Chevron supermajor dispute, and (3) opened the door for CNOOC to increase their interest in the massive Stabroek field.

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Nice pop in the GoM rig count

Posted in drilling, Gulf of Mexico, Offshore Energy - General, tagged , , on March 22, 2024| Leave a Comment »

Swimming upstream against the Federal policy current, Gulf of Mexico drilling is demonstrating impressive forward progress. Baker Hughes reports 22 active GoM rigs on 3/15/2024, an increase of 3 from the previous week.

Glancing at the charts, this appears to be the highest GoM rig count since Nov. 2019, and is double the recent low of 11 in 2022.

It’s unclear whether Baker Hughes is including the CCS drilling operation offshore Texas. If so, the actual oil and gas rig count is 21 rather than 22.

Baker Hughes also reports 1 active rig offshore California (decommissioning?) and 1 active rig offshore Alaska (Endicott or Northstar?)

Per Baker Hughes, no rigs are currently active offshore Canada.

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RIP Jerry Boelte, LLOG founder and offshore safety leader

Posted in Gulf of Mexico, Offshore Energy - General, tagged , , , , on March 21, 2024| Leave a Comment »

Jerry Boelte, LLOG founder and offshore energy leader, passed away last month in a single vehicle accident. Boelte, a New Orleans native and LSU petroleum engineering grad, turned LLOG into a major deepwater player in the Gulf of Mexico.

In 2023, LLOG was the 6th biggest oil producer in the Gulf of Mexico trailing only Shell, bp, Anadarko, Chevron, and Murphy. As a natural gas producer, LLOG ranked fifth ahead of major GoM operators like Chevron and Hess.

Boelte built LLOG into a company with a strong commitment to safety and environmental protection. In that regard, the company achieved BOE Honor Roll status in 2023 and 2022.

LLOG’s ‘Who Dat’ floating production system in 3100′ of water in Mississippi Canyon Block 547 has produced more than 100 million bbls of oil equivalent. More on ‘Who Dat.’

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Granholm’s SPR update: Interesting math

Posted in energy policy, tagged , , , on March 20, 2024| Leave a Comment »

U.S. crude oil stockpiles in the Strategic Petroleum Reserve (SPR) at year-end will be at or exceeding the level prior to a massive 180 million barrel sale two years ago, U.S. Energy Secretary Jennifer Granholm said on Monday.

While the Department of Energy only expects to replenish by the end of this year about 40 million barrels since the 180 million sale, another 140 million barrels that would have been drained from 2024-2027 will stay in the SPR due to the cancellation in 2022 of congressionally mandated sales.

The department declined to provide a final number of stocks expected to be in the reserve at the end of the year.

Reuters

Reality check:

  • 40 million is not equal to 180 million.
  • Not withdrawing 140 million more bbls does not add 140 million bbls to the depleted reserve.
  • Based on the Secretary’s comments, the over-under for the reserve at the end of the year is 390 million bbls. (Take the “under.”)

The actual SPR status:

Sec. Granholm is also quoted as saying the administration’s LNG permitting pause “will be long behind us by this time next year.” Skeptics might see this as confirmation that the permitting pause was strictly for election year political purposes.

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How much of the decline in shelf bids is attributable to higher royalty and rental rates?

Posted in CCS, decommissioning, energy policy, Gulf of Mexico, Offshore Energy - General, Regulation, tagged , , , , , , , , , , on March 19, 2024| Leave a Comment »

A post from last March discussed the high and seemingly unfair royalty and rental rates for new leases in the shallow waters of the Gulf of Mexico shelf. A 50% increase in the shelf royalty rate for lease sales 259 and 261 combined with rather punitive rental rates have likely contributed to the sharp decline in bidding for shelf lease blocks (see table below).

This decline in shelf bidding is unfortunate because the smaller companies that operate in the shallow waters of the Gulf are critical to sustaining the production infrastructure. These companies are also significant producers of environmentally favorable nonassociated (gas-well) natural gas.

lease saleshelf blocks with bids
(excluding CCS bids)		sum of high shelf bids
($million, excluding CCS bids)
25746$8.1
25929$4.1
26113$1.7
The royalty rate for shelf production jumped 50% from sale 257 to sales 259 and 261

BOEM has completed their evaluation of the Sale 261 shelf bids (see below). Each of these blocks received only a single bid, and every bid was accepted. Ironically, the invalid CCS bids for blocks that have no oil and gas value, were the first to be accepted. This was also the case for Sales 257 and 259.

CompanyBlockhigh bid ($)
per acre ($)		date accepted
ByronSM 60128,750
25.75		2/2
ByronSM 70182,235
33.32		2/20
CantiumGI 35125,000
25.00		2/20
CantiumGI 36125,000
25.00		2/20
CantiumMP 314125,000
25.00		3/12
CantiumSP 63125,000
25.00		3/12
ArenaEI 231135,000
27.18		2/20
ArenaEI 277135,000
27.18		2/20
ArenaEI 281135,000
27.18		2/20
ArenaEI 340135,000
27.18		2/20
ArenaEI 343135,000
27.18		2/20
ArenaWD 119135,000
26.75		3/12
FocusV 152121,152
25.16		2/20
Repsol36 CCS bids187,200 (1)
32.50		1/23
(1) All of the Repsol bids were $32.50/ac. Total bids varied by block size, but were $187,200 for the 5760 acre blocks.

Suggestions:

  • Seek a legislative fix to the Inflation Reduction Act😉 provision that established a 1/6 royalty rate floor for all OCS leases (formerly the royalty rate was 1/8 for leases on the shelf).
  • In the interim, administratively lower the royalty for shelf leases to 1/6 (from 18 3/4%).
  • Reconsider the rental rate scheme for shelf leases.
  • For future oil and gas lease sales, accept all high bids that exceed the specified minimum bid (currently $25/ac for the shelf). The Gulf of Mexico shelf has been extensively explored and developed for 70 years. While prospects remain, they are generally marginal as evidenced by the recent lease sale results. Fair market value is what any company is willing to bid (above the specified minimum).
  • Focus on assuring that lease purchasers are technically qualified to minimize safety risks, and that financial assurance for decommissioning (for new and existing leases owned by the high bidder) has been fully addressed.

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Rincon Island Phase 2: first major California decommissioning project since 1996

Posted in California, decommissioning, Offshore Energy - General, tagged , , , , on March 18, 2024| Leave a Comment »

Rincon Island, “the 9th Channel Island“

Per John Smith, Rincon Island (Phase 2) will be the first major production facility decommissioning project in California state waters since the Chevron 4-H platform removals in 1996.

Rincon Island and the onshore facility were constructed in 1959 and used for oil and gas production. In December 2017, Rincon Island Limited Partnership, the most recent lessee, transferred its lease interests to the State after becoming financially insolvent. Phase 1 of decommissioning included the plugging and abandonment of all oil and gas wells and removal of service equipment at Rincon Island.

The proposed Phase 2 project, analyzed within the Environmental Impact Report (executive summary attached), would prudently retain Rincon Island and the Rincon Island Causeway in their current configuration. Phase 3 will prepare Rincon Island and the Onshore Facility to be leased for yet-to-be determined new uses.

rincon_deir-esDownload

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