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Archive for the ‘Gulf of Mexico’ Category

Interesting new player in the deepwater Gulf of Mexico – GOM 1 Holdings Inc.

Posted in decommissioning, energy policy, Gulf of Mexico, Offshore Energy - General, Regulation, well control incidents, tagged , , , , , , on April 9, 2024| Leave a Comment »

Houston, TX, March 29, 2024. Beacon Offshore Energy LLC (“Beacon”) announced today the completion of the divestment of its non-operated interests in certain fields in the deepwater Gulf of Mexico in accordance with a previously executed definitive agreement with GOM 1 Holdings Inc., an affiliate of O.G. Oil & Gas Limited. The divestment includes Beacon’s 18.7% interest in the Buckskin producing field, 17% interest in the Leon development, 16.15% interest in the Castile development, 0.5% interest in the Salamanca FPS/lateral infrastructure, and 32.83% interest in the Sicily discovery.

Beacon

According to BOEM records, GOM 1 HOLDINGS INC, a Delaware company, registered with BOEM effective 3/15/2024. The parent entity, O.G. Oil & Gas Limited, is a privately held E&P company incorporated in 2017 and based in Singapore.

O.G. Oil & Gas Ltd is part of the Ofer Global Group, “a private portfolio of international businesses active in maritime shipping, real estate and hotels, technology, banking, energy and large public investments.”

After a partial takeover by O.G Oil & Gas Limited in 2018, New Zealand Oil and Gas is now 70% owned by the Ofer Global Group. Among other interests, NZ Oil and Gas produces from fields offshore Taranaki, NZ.

Because they are jointly and severally liable for safe operations and decommissioning, minority investors should take a strong interest in safety management and financial assurance. Investors should remember that partners are adversely affected by the mistakes of the operating company. Anadarko and Mitsubishi took a hit following the Macondo blowout. To what extent had they been monitoring bp’s risk and safety management programs for drilling operations?

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Climate change is happening today! 😉

Posted in climate, energy policy, Gulf of Mexico, Offshore Energy - General, Wind Energy, tagged , , , , on April 8, 2024| Leave a Comment »

… and you deniers are fully responsible. There’s a reason why Texas is the most affected state 😉

But fear not, we will line our shores with wind turbines, restrict offshore oil and gas leasing, and subsidize carbon disposal in the Gulf of Mexico. All of this “help” will have a negligible effect on the climate, which will continue to change as it always has and always will.

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Sale 259 bid rejections: how did the govt fare?

Posted in CCS, energy policy, Gulf of Mexico, Offshore Energy - General, tagged , , , , , on April 2, 2024| Leave a Comment »

14 of the high bids at Gulf of Mexico Lease Sale 259 were rejected. Did those tracts receive bids at sale 261? What was the net gain or loss of revenue? See the summary bullets and table below

  • 6 of the 14 tracts received no bids whatsoever
  • 5 of the 14 tracts received higher bids that were accepted.
  • 2 tracts received substantially higher bids that were again rejected
  • 1 tract received a lower bid that was accepted
  • net bonus revenue gain to the govt from the bid rejections (pending re-offering at future sales): $1,032,877
  • net bonus revenue gain = 0.27% of the total high bids at sale 261
  • net loss in future rental and royalty payments: ????

For a net bonus revenue gain to date of only 1/4 of one per cent, 8 of the 14 sale 259 tracts with rejected high bids remain closed to exploration. The timing of any future sales is very much in doubt given the minimalist 5 year leasing plan and the associated legal challenges.

Current bid evaluation practices only make sense if regular lease sales are held on a predictable schedule, as has historically been the case.

Meanwhile, 100% of the improper CCS bids (199/199) were accepted at the last 3 oil and gas lease sales.

area and blockSale 259 rejected high bid – companySale 261 high bidbid acceptedgovt gain (loss*)
DC 6222,101,836 – Shell615,628 – Shellyes(1,486,208)
GC 173307,107 – Woodsideno bidNA(307,107)
GC 5471,783,498 – Chevronno bidNA(1,783,498)
GC 5911,291,993 – Chevronno bidNA(1,291,993)
GC 642605,505 – Anadarkono bidNA(605,505)
GC 777583,103 – bpno bidNA(583,103)
AT 51,551,130 – Anadarko5,215,628 – Shellyes3,664,498
AT 133607,107 – Woodsideno bidNA(607,107)
KC 745707,777 – Beacon2,422,222 – Beaconno(2,422,222)
KC 789707,777 – Beacon2,143,299 – Beaconno(2,143,299)
WR 794724,744 – Beacon1,487,624 – Beaconyes762,880
WR 795774,242 – Beacon5,301,107 – Woodsideyes4,526,865
WR 796774,242 – Beacon3,310,107 – Woodsideyes2,535,865
WR 750724,744 – Beacon1,498,555 – Beaconyes773,811
total govt. gain1,032,877
*Loss based on rejected sale 261 high bid. If no sale 261 bid, loss based on sale 259 high bid. These tracts could receive bids at a future sale.

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Gulf of Mexico production declined further in January. How big of a factor were the “sheen shut-ins?”

Posted in Gulf of Mexico, Offshore Energy - General, oil spill response, pipelines, tagged , , , , on April 1, 2024| Leave a Comment »

Average GoM oil production from Nov. to Jan. was more than 130,000 BOPD below the July to Oct. average. Production in Jan. 2024 was 245,000 BOPD lower than Sept. 2023 production. (See the table and chart below.)

The production shut-ins associated with the mysterious November sheen in the Main Pass area were no doubt a contributing factor to the decline, but the magnitude and duration of those shut-ins has not been disclosed. The source of the sheen has apparently still not been determined, nor has any information been provided on the status of the Federal investigation. The absence of transparency is disappointing.

production monthGoM oil production (BOPD, 1000’s)
Jan. 20241752
Dec. 20231829
Nov. 20231845
Oct. 20231950
Sept 20231997
Aug. 20231890
July 20231935
EIA data

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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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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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CNOOC holding onto Gulf of Mexico leases

Posted in Offshore Energy - General, Gulf of Mexico, energy policy, Guyana, tagged , , , , , , on March 15, 2024| Leave a Comment »

Appomattox FPU
Stampede TLP

In light of the TikTok drama in Washington, I thought I’d take another look at Chinese ownership of Gulf of Mexico oil and gas leases.

A year ago, it was reported that State owned China National Offshore Oil Corp. (CNOOC) was considering an exit from its operations in the US, Canada, and the UK because of sanctions concerns. That may still be the case for other properties, but CNOOC has retained its Gulf of Mexico lease interests.

Per BOEM lease data, CNOOC continues to own 25% and 21% interest respectively in the important Stampede (Green Canyon 468, 511, and 512) and Appomattox (Mississippi Canyon 391, 392, and 393) deepwater projects. CNOOC reports are positive on those operations, noting that the production wells have performed better than expected.

CNOOC also owns interest in five other GoM leases. No CNOOC lease interest has been assigned to other companies in the past two years.

As is the case with CNOOC’s position in Guyana’s Stabroek block, their GoM lease holdings were acquired as part of CNOOC’s takeover of Nexen in 2013.

I welcome foreign investment in our offshore program, and see little downside in Chinese entities owning minority shares of OCS leases. GoM lease ownership does advance CNOOC’s understanding of deepwater exploration and development technology, but that knowledge can also be acquired elsewhere, sometimes in partnership with US companies (as is the case in Guyana).

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Can Nord Stream AG ‘pig’ the investigation pipeline?

Posted in accidents, climate, energy policy, Gulf of Mexico, natural gas, pipelines, tagged , , , , , , , , , on March 14, 2024| Leave a Comment »

Pictured: pig for cleaning gas pipelines. Will Nord Stream’s suit against the insurers unplug investigation findings?

Nord Stream AG has sued insurers Lloyds and Arch in the English High Court for failing to pay for pipeline damage incurred during the Sept. 2022 Baltic Sea explosions. The estimated pipeline repair costs range from €1.2 to €1.35 billion, and Nord Stream is seeking €400 million from the insurers.

Could this litigation help us learn more about the findings of the official Nord Stream investigations? After 17 months of investigation, Denmark recently concluded that “there are not sufficient grounds to pursue a criminal case in Denmark.” Only nineteen days before Sweden had announced that “Swedish jurisdiction does not apply and that the investigation therefore should be closed.” These weak announcements at the end of lengthy investigations seem too convenient, and may lend credence to Hersh’s Nord Stream account or a recent variation that implicates the UK. Germany is presumably still investigating, and it remains to be seen whether they will release findings.

Could the parties in the Nord Stream case pursue documents or testimony from the Swedish, Danish, or German investigation teams? Both sides in this case, Nord Stream AG and the insurers, would benefit from details that could help identify the responsible parties.

It’s more than a little hypocritical for Western governments and their NGO partners to rail against offshore oil and gas operations while quietly accepting (without investigation) the economic and environmental consequences of the Nord Stream sabotage. Compare the Nord Stream methane emissions with those associated with Gulf of Mexico operations.

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US offshore carbon disposal: And so it has begun…

Posted in CCS, climate, decommissioning, energy policy, Gulf of Mexico, Offshore Energy - General, Regulation, tagged , , , , , , , on March 7, 2024| Leave a Comment »

Bayou Bend CCS LLC commenced drilling an offshore (Texas State waters) and an onshore stratigraphic well for carbon sequestration in the first quarter 2024.

Talos

Is offshore carbon disposal ocean dumping? One of the provisions that was slipped into the “2021 Infrastructure Bill” exempted carbon sequestration from the Marine Protection, Research, and Sanctuaries Act of 1972 (Ocean Dumping Act). This exemption revises the OCS Lands Act and thus does not apply to State offshore lands. The Texas offshore wells must therefore be permitted by EPA as “Class VI wells,” as is the case for onshore disposal wells. However, Texas and Louisiana have asked the EPA for “primacy,” which would allow state agencies to approve and oversee these operations.

Meanwhile, the regulations for carbon disposal on the OCS, which the Infrastructure Bill mandated by November 2022, have yet to be published for comment. The latest Federal regulatory agenda indicates a publication date of 12/00/2023 for these regulations. Presumably the staff work has been completed and the rule is stalled in the review process.

Despite the absence of a regulatory framework, BOEM has accepted sequestration bids at the last three oil and gas lease sales. These bids were evaluated as if the leases were being acquired for oil and gas exploration and production, even though the bidders’ intentions were widely known. Why was BOEM a willing participant in this charade, not just at one sale, but at three sales in succession?

Given that the perceived carbon disposal bonanza is dependent on mandates and subsidies, one has to wonder about the massive revenue projections for this industry and raise concerns about the associated public and private financial risks. What is the long term business plan for this industry? Who will be monitoring the offshore wells (in perpetuity)? How will the public be protected from financial assurance and leakage risks? We will see how the myriad of carbon sequestration issues are addressed in the proposed regulations.

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