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Archive for the ‘Gulf of Mexico’ Category

Another proposed decommissioning financial assurance rule is about to be published

Posted in California, decommissioning, Gulf of Mexico, Offshore Energy - General, tagged , , , on June 27, 2023| Leave a Comment »

The Bureau of Ocean Energy Management (BOEM) today announced proposed changes to modernize financial assurance requirements for the offshore oil and gas industry, in order to better protect American taxpayers from incurring the costs associated with the oil and gas industry’s responsibility to decommission offshore wells and infrastructure, once they are no longer in use. The proposed changes will publish in the Federal Register on June 29, which will open a 60-day public comment period that ends on August 28. 

It looks like BOEM punted on the contentious issue of considering predecessors when determining financial assurance requirements:

The proposed regulatory changes would provide additional clarity and reinforce that current grant holders and lessees bear the cost of ensuring compliance with lease obligations, rather than relying on prior owners to cover those costs. BOEM is interested in public comments on the costs and benefits of considering predecessors when determining how much financial assurance a company must provide.

On that point, comments will differ 😉.

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Cox bankruptcy raises significant decommissioning concerns

Posted in decommissioning, Gulf of Mexico, Offshore Energy - General, tagged , , , , , , on June 27, 2023| Leave a Comment »

As illustrated in the charts below, Cox has the distinction of being the Gulf of Mexico (world?) leader in aging offshore platforms. Per BOEM data, Cox (includes affiliates Energy XXI GOM and EPL) operates more than 1/4 of all GoM platforms. 44% of these platforms were installed prior to 1980, 114 of which are major structures (defined in notes below). 27 of these major structures were installed prior to 1960!

No information has been shared on the extent to which Cox or predecessor lessees are financially prepared to decommission these facilities. This could get rather uncomfortable for prior owners and the lessor (i.e. the Federal government). Keep in mind that the murky issue of predecessor liability for leases assigned prior to 1997 has not been addressed in the courts.

Notes: (1) A major structure contains at least 6 well completions or more than 2 pieces of production equipment. (2) The platform numbers in an earlier post are incomplete in that they include only structures with helidecks.

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Offshore industry uses unmanned underwater vehicles (UUVs) to support deepwater operations, not manned submersibles

Posted in Gulf of Mexico, Offshore Energy - General, Uncategorized, tagged , , , , , , , on June 26, 2023| Leave a Comment »

Ill-fated OceanGate Titan (Reuters photo)

Titanic tourism in manned vehicles was, of course, completely unnecessary and too risky to pass any serious risk assessment. Advanced offshore technology is providing exceptional images of the Titanic that can be viewed anywhere.

From the outset, deepwater oil and gas exploration and development were not dependent on divers or manned submersibles – far too dangerous. UUVs are used for maintenance, inspections, surveys, positioning equipment, and other operational purposes.

UUV technology advanced with demand as deepwater discoveries drove worldwide exploration and production. In 2021, deepwater (>1000′) leases accounted for 93% of GoM oil production and 76% of the gas production. For comparison, in 1985 only 6.0% of the oil and 0.8% of the gas were from deepwater leases.

In 2021, TechnipFMC won NOIA’s Safety in Seas Award for the Gemini® ROV System which can dive for a month at a time and change tools subsea instead of on deck. The Gemini® ROV System also includes a blowout preventer intervention system that supports well control and pipe shearing functions.

Below is a taxonomy for UUVs. The linked article provides further details. Gliders are particularly useful for surveying given the large distances they can cover (last image).

liquidgrid.com
Glider operation range compared to ROV and AUV. No close vessel required during a glider mission

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GoM helo crash (12/29/2022) – 4 fatalities – still no final report

Posted in accidents, Gulf of Mexico, Offshore Energy - General, tagged , , , , , , , on June 22, 2023| Leave a Comment »

David Scarborough, Island Operating Co. employee who died in the crash.

The preliminary NTSB report was posted on 1/18/2023, but the final report has still not been published. Status update:

Will the investigators consider longstanding regulatory fragmentation issues? The most recent Coast Guard – BSEE MOA for fixed platforms added to helideck regulatory uncertainty by assigning decks and fuel handling to BSEE and railings and perimeter netting to the Coast Guard.  This is the antithesis of holistic, systems-based regulation.

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BOEM accepts all 69 of the Sale 259 CCS bids

Posted in energy policy, Gulf of Mexico, Offshore Energy - General, tagged , , , , , on June 19, 2023| Leave a Comment »

Last week, BOEM announced the acceptance of all 69 of Exxon’s Sale 259 carbon sequestration bids. This is despite these facts: (1) Exxon’s intentions were known, (2) there were no provisions for CCS bidding in the Notice of Sale, (3) no environmental review of CCS leasing was conducted, and (4) there are no procedures for evaluating CCS bids.

Absent some type of legislative maneuver, carbon sequestration is not authorized under these leases. If Exxon is just acquiring the leases for evaluation purposes in preparation for a possible CCS sale in the future, their lease acquisitions may be okay. If they are planning on retaining these leases for actual sequestration operations, that is not okay, at least not until a competitive process has been established for awarding or reclassifying such leases.

It’s also noteworthy that there was a second bidder for th blocks (in red above). Presumably that company, Focus Exploration, was interested in acquiring the tract for oil and gas exploration purposes. However, the Focus bid was a bit lower, so Exxon got the tract.

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More on the Cox Operating bankruptcy

Posted in decommissioning, Gulf of Mexico, Offshore Energy - General, tagged , , , , , on June 14, 2023| 1 Comment »

Along with Cox Operating, six affiliates also filed: MLCJR , M21K, EPL Oil & Gas, Cox Oil Offshore, Energy XXI Gulf Coast, and Energy XXI GOM.

The BOEM platform data base lists only Cox Operating (276 platforms), EPL (10 platforms), and Energy XXI GOM (26 platforms) as current operators of OCS platforms. However, according to the Cox Operating website, the company operates 600 producing wells on 500 structures. Presumably, ~200 of those structures are in State waters.

According to testimony at the bankruptcy hearing:

  • In 2020, the OPEC price war drove oil prices down, while stay-at-home orders and well shut-ins associated with the COVID-19 global pandemic sharply reduced production.
  • The debtors’ assets suffered significant damage from five named storms and hurricanes during 2020 and 2021, leading to further reductions in production. Comment: According to BSEE, 7 tropical systems affected GoM operations in 2021, so the number of storms is not in dispute. The extent to which maintenance or preparedness issues contributed to the damage is unknown.
  • In 2020, a foreign-flagged vessel struck a platform owned by one of the debtors resulting in major damage and substantial losses of production. Comment: Apparently, this is the incident being cited. According to the BSEE report, the operator (Cox) was not at fault. Per BSEE: (1) The navigational lights and foghorn on the platform were maintained and in operational order, (2) the allision was not due to any platform related error, and (3) the platform’s operator and safety system responded in accordance with the regulations.
  • At this time, the debtors’ production volume is half what it was in 2019. Comment: Comparing the 2019 and 2022 production data, OCS oil and gas production are down by about 30% and 40% respectively. However, the 50% reduction figure seems reasonable given the likelihood of further reductions in State water production and in 2023.

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Cox bankruptcy rocks Gulf of Mexico offshore program

Posted in decommissioning, Gulf of Mexico, Offshore Energy - General, tagged , , , , on June 12, 2023| 2 Comments »

A Metairie-based oil company that’s one of the largest independent operators still working in the state’s shallow coastal waters has filed for bankruptcy protection, leaving dozens of south Louisiana service and supply companies facing potential bankruptcies of their own.

Bankruptcy court documents show Cox’s estimated liabilities are close to $500 million – more than $200 million of which is owed to small businesses in the Houma-Thibodeaux and Acadiana areas.

Court documents indicate that Cox followed a path that led to financial trouble for other companies in recent years: using debt to acquire large fields of aging wells in shallow Gulf waters.

Nola.com

This blog is primarily concerned with the potential impacts of the bankruptcy on safety performance, the plugging of wells, and the decommissioning of old facilities. Per BOEM’s data base, Cox currently operates 276 Gulf of Mexico platforms, all in shallow shelf waters. The company is reported (Nola.com) to owe $8 million in bond premiums needed to support well plugging operations.

Cox has not been an active driller of late with only 2 well starts since 1/1/2022 (BSEE borehole file).

Cox has been a major generator of INCs (incidents of noncompliance) with 437 INCs YTD. Cox has been responsible for 47% of all GoM INCs in 2023. Cox’s INC to inspection ratio was 2.46 vs. a combined ratio of 0.50 (490/972) for all other GoM operators.

Cox is currently ranked 11th and 18th respectively in GoM gas and oil production with 7.2 billion cu ft and 1.8 million barrels produced YTD.

BOE previously commented on Cox’s pursuit of Dept. of Energy funds to develop a carbon sequestration hub in the Gulf.

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Lease Sale 259 update (as of June 7)

Posted in Gulf of Mexico, Offshore Energy - General, tagged , , on June 12, 2023| Leave a Comment »

Per BOEM’s latest update, 137 of the 313 Sale 259 tracts receiving bids have now been accepted. No decision has been made on the other 176 high bids, including the 69 bids for carbon sequestration purposes. For the reasons previously expressed, I continue to believe those sequestration bids were invalid.

Also, no decision has been made on Green Canyon 777, another block of particular interest.

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Congratulations to the Offshore Operators Committee on their 75th anniversary

Posted in Gulf of Mexico, Offshore Energy - General, tagged , , on June 8, 2023| Leave a Comment »

I believe the OOC is the world’s oldest trade association for the offshore oil and gas industry. The OOC was formed in 1948, five years before the enactment of the OCS Lands Act and just one year after the first Gulf of Mexico well was completed out of sight of land.

For much of their history, OOC had just a single, part-time employee. The organization has matured, but still operates in the same efficient manner, relying on subject matter experts from their member companies. Since the days of the OCS Orders, the OOC has consistently provided informed comments on operating regulations. As a regulator, I had issues with some of their comments over the years, but the dialogue was (almost😉) always polite and professional.

Congratulations to the OOC for the support they have provided for US offshore energy! Although many have had important roles, these former OOC representatives come immediately to mind for their contributions to offshore safety: John Rullman, Steve Brooks, Mark Witten, Sandi Fury, Dave Wisch, Ken Arnold, Charlie Williams, Phil Smith, Peter Velez, Allen Verret, Wanda Parker, Cort Cooper, Charlie Duhon, Jodie Connor, Craig Castille, Susan Hathcock, and Pat O’Connor. Many of these retired safety leaders, and current OOC Executive Director Evan Zimmerman, were recipients of MMS Offshore Leadership Awards.

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March Gulf of Mexico oil production stable at 1.87 million bopd

Posted in Gulf of Mexico, Offshore Energy - General, tagged , on June 2, 2023| Leave a Comment »

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