A. There’s also plenty of oil leases that are not being tapped into by oil companies, so you should talk to them about that and why.
- Hopefully, this was a glib response that is not indicative of the Administration’s understanding of oil and gas exploration and development.
- When you acquire a lease, you aren’t buying a certain amount of oil and gas in the ground that you can simply produce at your leisure. You are buying the opportunity to explore for and, if you are fortunate, produce oil and gas.
- Exploration begins with the acquisition, processing, and evaluation of geophysical and other data. If these data are encouraging, you seek internal, partner, and regulatory approvals to drill exploratory wells. The drilling of unnecessary wells makes no sense from any standpoint: financial, safety, or environmental.
- You have a limited amount of time to initiate production depending on the terms of your lease. Otherwise you lose the lease. The Federal regulators are strict about this, as they should be.
As has been noted on this blog, recent offshore exploration activity is not sufficient to sustain current production levels. The absence of regular lease sales is an important factor. The UK Energy Minister commented recently about the importance of new licensing and continued investment. Norway has also taken steps to encourage such activity. Note the emphasis on predictability in this statement from the Norwegian Ministry of Petroleum and Energy:
Predictability about which areas it is possible to apply for in APA (allocation in predefined areas; i.e. leasing or licensing) and regular replenishment of new area is important to achieve an effective exploration. APA rounds are therefore conducted annually.
Bud's Offshore Energy (BOE) 