With Sept. production revised down slightly, there have been no 2 million bopd months for 4 years (since Nov. 2019).
Archive for the ‘Gulf of Mexico’ Category
GoM production dipped a bit in November
Posted in Gulf of Mexico, Offshore Energy - General, tagged 2 million bopd, Gulf of Mexico, Nov. 2023, oil production on February 1, 2024| Leave a Comment »
All 36 of Repsol’s carbon disposal bids at Oil and Gas Lease Sale 261 were accepted by BOEM!
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.
Private land + technology powers US oil and gas production
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.
Andrew wishes he had one of these back in the day 😀
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.
15,537 comments on a nerdy bid adequacy rule…
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.
Thoughts on the Talos acquisition of QuarterNorth
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.
Important helideck safety alert
Posted in accidents, Gulf of Mexico, Offshore Energy - General, Regulation, tagged BSEE Safety Alert, helideck safety, NTSB on January 17, 2024| Leave a Comment »
The attached BSEE Safety Alert addresses chronic and persistent helideck issues that pose significant risks to offshore workers. Meanwhile, we are still waiting for the final NTSB report on the tragic 12/29/2022 helideck incident that killed the helicopter pilot and 3 passengers.
Sale 261: Repsol’s nearshore Texas bids should be rejected without delay
Posted in CCS, climate, Gulf of Mexico, Offshore Energy - General, tagged BOEM, carbon disposal, Exxon, Lease Sale 261, Repsol, Texas GLO on January 15, 2024| Leave a Comment »
The above map shows the offshore carbon disposal leases acquired by Repsol from the Texas General Land Office (GLO) and the adjacent Federal tracts Repsol bid on at OCS Lease Sale 261. There should be absolutely no confusion regarding Repsol intentions at Sale 261. They plan to develop a large CO2 disposal hub offshore Corpus Christi and bid improperly at an OCS oil and gas lease sale to support that objective.
Perhaps blinded by visions of “a stream of U.S. government grants, followed by generous tax credits for every ton of carbon stored,” Repsol (Sale 261) and Exxon (Sales 257 and 259) have made a mockery of the OCS leasing process and the regulations that guide it. The Repsol bids should be promptly rejected.
So what about the Exxon nearshore Texas leases that have already been issued? Given that Exxon misled the Federal government and improperly acquired carbon disposal leases at an oil and gas lease sale, those bids should be cancelled pursuant to 30 CFR § 556.1102:
(c) BOEM may cancel your lease if it determines that the lease was obtained by fraud or misrepresentation. You will have notice and an opportunity to be heard before BOEM cancels your lease.
While Exxon’s oil production increases in the Permian Basin and offshore Guyana are impressive, is it not hypocritical for Exxon and other major producers to capitalize on the capture and disposal of emissions associated with the consumption of their products? Is it not just a bit unsavory for oil companies to cash in on (and virtue signal about) carbon collection and disposal at the public’s expense? Perhaps companies that believe oil and gas production is harmful to society should be reducing production rather than engaging in enterprises intended to sustain it.
Sale 261: the deepwater supporting cast
Posted in Gulf of Mexico, Offshore Energy - General, tagged Alta Mar, CL&F, CSL Exploration, Deepwater, Gulf of Mexico, Houston Energy, Lease Sale 261, Red Willow, RIdgewood Energy, Westlawn on January 11, 2024| Leave a Comment »
Among the top 10 companies at Sale 261 (based on the number of high bids) are household names Shell, Chevron/Hess, Oxy/Anadarko, and bp, and international majors Equinor (Norway) and Woodside (Australia).
Lesser known companies have also become important deepwater players including two, Red Willow (owned by the Southern Ute tribe) and Houston Energy, that cracked the top 10 bidders list. Other emerging deepwater companies, Ridgewood, CSL Expl, Westlawn, Alta Mar, and CL&F were also active sale 261 participants. All of these companies bid in partnership with other independents.
| Company | 257 | 259 | 261 |
| Red Willow | 5 | 13 | 25 |
| Houston Energy | 5 | 9 | 18 |
| Ridgewood | 0 | 2 | 8 |
| CSL Expl | 1 | 1 | 3 |
| Westlawn | 0 | 3 | 5 |
| Alta Mar | 0 | 0 | 9 |
| CL&F | 0 | 0 | 3 |
Sale 261: Successful contrarians continue to see value in leases on the Gulf of Mexico shelf
Posted in Gulf of Mexico, Offshore Energy - General, tagged Arena Energy, Byron Energy, Cantium, Gulf of Mexico shelf, Lease Sale 261 on January 10, 2024| Leave a Comment »
The interest of the majors and most independents has shifted entirely to deepwater prospects, as evidenced by the above graphic and sale data. Nonetheless, a few resourceful companies continue to find value in the shallow waters of the continental shelf.
“There’s an art to finding oil—particularly in the Gulf of Mexico. After decades of drilling, this world-class basin still holds vast potential for those skilled enough to unlock it. Arena energy is applying expert insight and advanced technology to identify new Gulf of Mexico oil and gas exploration opportunities. This is the art of oil finding in the 21st century.“
Arena Energy
Arena Energy, a successful shelf operator for a quarter of a century, was the leading shelf bidder with 6 high bids. In 2023 Arena was once again the most active shelf driller with 20 well starts. They claim a 94% drilling success rate. Arena currently operates 123 platforms and is the GoM’s 7th ranked natural gas producer and the 11th ranked oil producer.
Cantium, another leading shelf operator, was the high bidder on 4 tracts. Cantium drilled 10 wells in 2023 and currently operates 86 platforms. Cantium claims to maintain “the highest level of operational safety and regulatory compliance by maximizing efficiencies and empowering employees,” and publicly available compliance data bear that out. Cantium was a BOE Honor Roll company for 2022, and a preliminary look at the data indicates that their 2023 performance was also excellent. Cantium is ranked 18th in both oil and natural gas production.
Byron Energy, which is headquartered in Australia, is the only international company investing in the GoM shelf. Byron was the high bidder on 2 tracts and currently operates 2 platforms. The company drilled 3 wells in 2023. Byron intends to continue focusing on the shallow waters of the Gulf.
Thoughts on the attributes of a successful shelf operator:
- Bid alone and conduct operations independently to facilitate efficiency and timely decisions.
- Lean and flat organizational structure for optimal communication and effective project management.
- Skilled staff and state-of-the art exploration technology.
- Outstanding contractor selection and oversight.
- Safety, environmental, and compliance leadership, absent which your company won’t be around for long.
- Think small. Gleaning old fields and producing modest new discoveries can be profitable!
- Control growth and debt. Busts follow booms and highly leveraged companies are the most vulnerable.
- Study the successful shelf operators and the failures. What did they do right and wrong?
