Meanwhile, challenges to Cook Inlet Sale 258 (humble as it was with only one bid) and GoM Sale 259 continue. It’s a great country (if you like endless litigation)!
In addition to Lease Sale 257, the IRA also required Interior to offer three other lease sales in Alaska and the Gulf that it previously declined to hold. Lease Sale 258, in Alaska’s Cook Inlet, was held in December but received only one bid. Earthjustice is challenging that sale. Earthjustice is also challenging Lease Sale 259, in the Gulf of Mexico, which was held in March. Lease Sale 261, also in the Gulf, will be held by September of this year.
According to EIA data for 2001-2021, Gulf of Mexico flaring and venting volumes peaked in 2001 at 21.6 bcf, 2.25 times the volume flared or vented in 2022 (ONRR data for 2022). However, gas production in 2001 was 5.05 tcf, 6.4 times higher than in 2022. The % of the produced gas that was flared or vented in 2001 was thus 0.4%, less than 1/3 the 2022 rate of 1.22%.
Points to consider:
In 2001, gas production was mostly from gas wells, which have lower flaring/venting rates. As gas production declined because of lower gas-well gas (GWG) production, flaring/venting rates increased (see the chart below). This would account for some of the difference in flaring/venting rates (2001 vs. 2022). However, in recent years, the % of gas-well gas flared or vented has been between 0.3 and 0.5% which is comparable to the rate for all gas production (0.4%) in 2001. So the reduction in GWG production is not the entire reason for the higher flaring/venting rates in recent years. Hence the need for more transparency on flaring/venting performance.
Oil-well gas (OWG) production alone in 2001 (923 bcf) was higher than total gas production (784 bcf) in 2022. If the oil-well gas (OWG) flaring/venting rate was the same as the recent rate for OWG (1.2-1.5%), the volume of gas flared or vented from OWG alone (only 18% of total gas production in 2001) would have accounted for 11.1 – 13.8 bcf or 51-64% of the total volume flared/vented in 2001.
A very large increase in OWG flaring in December skewed the 2022 data (921 million cu ft vs 522 million in November, see 2nd chart below). OWG vented and gas-well gas (GWG) vented also spiked in December (third chart). Were these spikes associated with production startups, major compressor issues, administrative/accounting corrections, or other issues?
Although total venting increased by 407 million cu ft (21%) in 2023 vs. 2022, the overall venting trend is still favorable (last chart).
Kudos to ONRR for posting the flaring/venting data.
More regulator/industry transparency on flaring episodes is needed, particularly in light of the PNAS paper and the June 2022 Inspector General Report.
Industry consultancy Rystad Energy estimates Guyana will be pumping 1.7 million barrels per day by 2035, which is higher than other major offshore basins including the Gulf of Mexico, ranking the country as the world’s fourth largest offshore oil producer.
The GoM is currently producing >1.8 million bopd. If Rystad/OilPrice intended to say that Guyana production will exceed GoM production in 2035, that could be the case. However, sustained GoM production in 2035 could easily be >1.7 million bopd with proper resource management by government and industry. In fact, BOEM’s latest forecast (table below) calls for production >1.8 million bopd in 2031, the last year in their forecast.
Based on drilling contractor rig activity reports, the table below lists 19 deepwater MODUs under or soon to begin contracts in the GoM. (Further details are pasted at the end of this post.) Per the Valeris report, platform rigs are operating on bp’s Thunder Horse and Mad Dog platforms. Per the BSEE borehole file, Arena and Cantium continue to drill development wells on the GoM shelf.
“BSEE will continue to evaluate the process for issuing decommissioning orders and will continue to issue decommissioning orders to jointly and severally liable parties on a case-by-case basis.“
Although the news release for BSEE’s final decommissioning rule asserts that the regulations “provide the certainty requested by industry,” that does not seem to be the case. The main change in the final rule was to delete the reverse chronological order (RCO) provision which called for issuing decommissioning orders to the most recent predecessor first. Instead, BSEE may continue to issue decommissioning orders arbitrarily.
While deleting the RCO provision may be advantageous for the regulator, and in some cases for the public, claiming that the decision provides certainty for industry is quite a stretch. BSEE may continue to issue a decommissioning order to anyone in the ownership chain, whether the company was a recent lessee or one that had owned the lease decades ago. Original or early lessees may be held liable for decommissioning old facilities regardless of subsequent damage, modifications, or neglected maintenance.
The absence of a defined procedure for issuing decommissioning orders may also expose BSEE to new legal challenges, particularly in cases where a company has not held the lease for decades. A 1988 letter from the Director of the Minerals Management Service to Amoco (attached below) explicitly relieves the assignor (predecessor) of decommissioning liability after the lease has been assigned. A revised bonding rule published on May 22, 1997 reversed that policy, but decommissioning liability for leases assigned prior to the 1997 rule may still be very much in question.
Another concern is the split jurisdiction for decommissioning between BSEE and BOEM. The financial, land management, operational, and environmental aspects of decommissioning are inextricably intertwined and attempts to divide these responsibilities between two bureaus with separate regulations is a prescription for gaps, overlap, inconsistency, inefficiency, disputes, and confusion. Decommissioning should be regulated holistically, not with separate “BOEM-only” and “BSEE-only” regulations.
Finally, wind facility decommissioning may prove to be even more challenging given the higher facility density and economic uncertainties. The regulatory regime needs to be clearly established early in the development phase.
Sharing this touching tribute to the 11 men who died on the Deepwater Horizon on April 20, 2010. These American heroes gave their lives exploring for energy to power our economy. The video is introduced by singer Trace Atkins, a former Gulf of Mexico rig worker. Please take a moment to watch.
Prior to the installation of these platforms, the last deepwater platform addition was Shell’s Appomattox in 2018. That gap in deepwater platform installations was the longest since Bullwinkle was installed in 1988.
The 5 new structures will increase the deepwater platform count by 9% from 56 to 61, and in the next few years should account for approximately 1/4 of GoM oil production.
Bud's Offshore Energy (BOE) 