There won’t be a deal without significant energy production provisions and Manchin is on the record regarding the need for action on offshore oil and gas leasing. We’ll see what happens.
Archive for the ‘Gulf of Mexico’ Category
Will the Manchin – Schumer talks lead to a timely resumption of offshore oil and gas leasing?
Posted in energy policy, Gulf of Mexico, Offshore Energy - General, tagged leasing, Manchin, offshore oil and gas, Schumer on May 27, 2022| Leave a Comment »
Coming to the Gulf of Mexico to work for BOE (the E&P company, not the blog 😀)
Posted in drilling, Gulf of Mexico, Offshore Energy - General, tagged atlas, Beacon, Blackstone, BOE, titan, transocean on May 23, 2022| Leave a Comment »
The drilling business, particularly the deepwater sector, has never been for the faint of heart, and the past few years have included the added stresses of COVID, negative oil prices, anemic exploration activity, and offshore leasing “pauses.” Transocean nonetheless managed to build two 8th generation drillships, the Deepwater Atlas and Titan, both of which are slated to operate in the Gulf of Mexico.
The Atlas will begin drilling for Beacon Offshore Energy (unrelated to the BOE blog 😀) in the Shenandoah field (almost heaven?😀) later this year. The Titan is expected to begin drilling for Chevron next year. The rigs will be outfitted with 20,000 psi blowout prevention equipment and will be well-equipped for the growing number of high pressure prospects in the Gulf. Here is Transocean’s promotional video for the two rigs.
Both Beacon and Chevron fared well on our Gulf of Mexico scorecard. A bit of information about Beacon (BOE):
- Wholly owned by funds managed by Blackstone Energy Partners.
- CEO Scott Gutterman was previously the CEO of LLOG.
- There are a number of related investment partnerships under the Beacon umbrella and they are often joint lease owners.
- Per BOEM data, BOE has interest in 11 Gulf of Mexico leases.
- The company has an excellent compliance record: 12 facility inspections (presumably all were drilling units) resulted in only 1 INC (violation).
- Per BSEE, Beacon had 22 well starts since 2008. (Mystery: While the Blackstone and Beacon websites indicate that the company was formed in 2016, BSEE’s online borehole file shows 10 well starts prior to that year with the exact same company name. Presumably, the borehole file data are in error because BOEM data do not show any Beacon lease interest prior to 2018.)
- Beacon bid on one tract in Lease Sale 257 (Nov. 2021) and was the sole bidder (sale was voided by DC Federal Court).
- Beacon bid on 3 tracts in Sale 256 (Nov. 2020) and was the high bidder on one.
- Beacon acquired interest in 2 leases in Sale 254 (March 2020), 7 in Sale 252 (March 2019), and 2 in Sale 251 (Aug. 2018)
- In February 2022, Blackstone reportedly advised clients that they would no longer invest in oil and gas projects. Presumably, that doesn’t affect the Beacon operations (or perhaps the folks at Blackstone have come to their senses 😀).
Leasing program update – about as good as we could hope for at this point
Posted in energy policy, Gulf of Mexico, Offshore Energy - General, tagged 5 year leasing plan, DOI, Gulf of Mexico, US offshore oil and gas leasing on May 19, 2022| 1 Comment »
WASHINGTON — During testimony before the U.S Senate Committee on Energy and Natural Resources today, Secretary of the Interior Deb Haaland confirmed that, despite delays in implementation from the previous Administration, the Interior Department will release the Proposed Program – the next step in the five-year offshore energy planning process – by June 30, 2022, which is the expiration of the current program. A Proposed Program is not a decision to issue specific leases or to authorize any drilling or development.
DOI
Here is the timeline for the 5 Year Leasing Program (light blue).
A sale this year under the new program is thus highly unlikely. The process will no doubt be delayed even further by litigation. As we have said previously, the only hopes for a sale this year are a successful appeal of Judge Contreras’s Sale 257 ruling or successful congressional action (unlikely but possible under the circumstances).
Chevron sanctions Ballymore; BSEE conducts pre-production inspection of Shell’s Vito platform
Posted in energy policy, Gulf of Mexico, Offshore Energy - General, tagged Ballymore, BSEE, Chevron, offshore leasing, Shell, Vito on May 19, 2022| Leave a Comment »
Ballymore will be produced with 3 seafloor wells (6540′ water depth) that are expected to transport 75,000 bopd via a three-mile subsea tieback to Chevron’s Blind Faith floating production unit. Per BOEM, the Ballymore field was discovered in December, 2017. First production is expected to be in 2025.
Shell’s Vito floating production unit was inspected last week by BSEE personnel. Vito is expected to begin production later this year or early next year and produce up to 100,000 bopd. Per BOEM data, the Vito field was discovered in 2010.
As these projects demonstrate, deepwater development takes time and is often dependent on related projects on other leases. This is why future production is dependent on regular, predictable lease sales.
As energy prices soar, remember these 3 things…
Posted in climate, energy policy, Gulf of Mexico, Offshore Energy - General, tagged 5 year leasing plan, DC Federal Court, India coal, Lease Sale 257, oil prices on May 18, 2022| Leave a Comment »
- Gulf of Mexico Lease Sale 257 was vacated on 1/27/2022 because DC Federal Court Judge Contreras ruled that BOEM failed to consider the “positive” effect that higher prices (the logical result of lower production) would have on reducing foreign consumption and the associated GHG emissions. Think about that in the context of the timing and magnitude of this ruling. Why did the court fail to consider the other logical consequences of tight oil supplies and higher prices – increased coal consumption and energy poverty? To avoid the latter, India, the world’s second largest coal producer and consumer, is boosting coal production to record highs.
- The Administration, which had only proceeded with Sale 257 because a prior court ruling invalidated the President’s leasing pause, chose not to appeal the decision by Judge Contreras. Why appeal a decision that is consistent with your agenda?
- The legislatively mandated 5 year leasing program, without which no Federal offshore leases sales may be conducted, expires at the end of June. This is why last week’s cancellation of the 3 remaining sales in the current 5 year program was rather meaningless. Despite bipartisan congressional support for prompt completion of a new 5 year plan, this does not appear to be a high priority for the Department of the Interior. The only hope for a sale this year might be a successful appeal by Lousisiana and API of Judge Contreras’s Sale 257 ruling.
BSEE/USCG issue Safety Alert on the Globetrotter II incident during Hurrricane Ida (8/29/2021)
Posted in accidents, drilling, Gulf of Mexico, hurricanes, tagged BSEE, Globetrotter II, Gulf of Mexico, Hurricane Ida, Noble, Shell on May 17, 2022| Leave a Comment »
BOE was troubled by this incident and the contractor’s statements that followed.
BSEE has posted a strong safety alert.
The BSEE investigation concluded that the operator and contractor representatives failed to promptly start the Temporary Abandonment (TA) procedures.
BSEE’s investigation report provides complete details on the incident.
Questions about Gulf of Mexico carbon sequestration
Posted in CCS, climate, energy policy, Gulf of Mexico, pipelines, Regulation, tagged BOEM, carbon sequestration, CCS, DOI, Exxon, Gulf of Mexico, infrastructure bill, Lease Sale 257, OCS Lands Act on May 12, 2022| Leave a Comment »
Background:
- A provision in the “Infrastructure Bill” that was enacted on 11/15/2021 amended the OCS Lands Act to provide for offshore carbon sequestration.
- Because carbon disposal is arguably dumping, the legislation included an exemption from the Marine Protection, Research, and Sanctuaries (Ocean Dumping) Act of 1972.
- The bill mandated that the Secretary of the Interior (DOI) promulgate implementing regulations within one year (l.e. by 11/15/2022).
- These provisions were added to the bill without debate and their inclusion was a surprise to most observers. Presumably, DOI had the opportunity to review the text, because that is standard practice.
- The legislation also authorized $2.5 billion for commercial sequestration projects.
- 2 days after the Infrastructure Bill was signed (11/17/2022), Exxon was the only bidder (Oil and Gas Lease Sale 257) on 94 nearshore tracts off the Texas coast. The sale notice did not mention carbon sequestration; nor had DOI assessed the potential environmental impacts of sequestration as required by NEPA.
- Sale 257 was vacated by the DC Federal Court for reasons unrelated to the sequestration bids.
Questions:
- What are the costs per ton of offshore carbon sequestration including emissions collection, offshore wells and platforms, the associated pipeline infrastructure, ongoing operational and maintenance costs, and decommissioning?
- What is the timeframe given that the starting point is likely years away?
- How long would CO2 sequestration continue.
- Who pays? Polluters? Federal subsidies? Tax credits?
- Who is liable for:
- safety and environmental incidents associated with these projects?
- CO2 that escapes from reservoirs, wells, and pipelines (now and centuries from now)?
- decommissioning?
- hurricane preparedness and damage?
- For Gulf of Mexico sequestration, how much energy would be consumed per ton of CO2 injected? Power source? Emissions?
- To what extent will these operations interfere with other offshore activities?
- Relatively speaking, how important is US sequestration given:
- the steady progress that is being made via natural gas and renewables?
- the massive emissions elsewhere?
- the continued growth in worldwide coal consumption?
- What are the benefits of offshore sequestration relative to investments in other carbon reduction alternatives?
- Will BOEM conduct a proper carbon sequestration lease sale with public notice (as required by BOEM regulations) such that all interested parties can bid?
- What will be the lease terms?
- Environmental assessment?
- How will bids be evaluated?
- What happens to the Exxon bids if the Judge’s Sale 257 decision is reversed?
- What is the status of the DOI regulations mandated in the legislation with an 11/15/2022 deadline?
- When will we see an Advanced Notice or Notice of Proposed Rulemaking?
- Given that DOI has no jurisdiction over the State waters and onshore aspects of these projects, what is the status of parallel regulatory initiatives?
- Finally and most importantly, how does drilling offshore sequestration wells instead of exploration and development wells increase oil and gas production?
Gulf of Mexico scoreboard
Posted in drilling, Gulf of Mexico, Offshore Energy - General, tagged AnadarkoOxy, Arena, bp, Cantium, Chevron, exploration, Exxon, Gulf of Mexico, Hess, INCs, LLOG, Murphy, natural gas production, oil production, Shell, violations, well starts on May 10, 2022| Leave a Comment »
- Operating companies that produced >1 million bbls of oil or >1 BCF of gas in 2021 are listed in descending order based on oil production.
- Both the total number of well starts and the number of exploratory wells are indicated
- An INC is an Incident of Noncompliance (i.e. a violation). W=warning, CSI=component shut-in, and FSI=facility shut-in are the enforcement actions.
- All of the below data are publicly available on the BSEE-BOEM websites.
| 2021 oil (MMbbls) | 2021 gas (BCF) | 2021/22 well starts total-expl | 2021/22 INCs W-CSI-FSI | |
| Shell | 149.8 | 190.8 | 28-12 | 11-14-4 |
| bp | 114.0 | 82.7 | 5-2 | 6-3-4 |
| Chevron | 83.7 | 42.2 | 8-8 | 1-1-3 |
| Anadarko (Oxy) | 67.7 | 57.8 | 8-6 | 8-5-1 |
| Hess | 27.5 | 61.7 | 2-2 | 7-4-0 |
| Murphy | 25.1 | 50.0 | 7-7 | 4-8-1 |
| LLOG | 20.4 | 29.0 | 3-0 | 1-1-1 |
| Talos | 17.7 | 23.0 | 5-0 | 25-26-14 |
| BHP | 14.5 | 5.9 | 3-2 | 2-3-0 |
| Exxon | 13.2 | 2.3 | – | 1-1-1 |
| Beacon | 10.5 | 15.7 | 1-0 | 0-0-0 |
| Fieldwood | 10.4 | 24.7 | – | 685-235-91 |
| EnVen | 9.6 | 12.6 | 6-0 | 2-6-3 |
| Kosmos | 9.4 | 8.4 | 1-1 | 1-0-0 |
| Arena | 8.6 | 27.9 | 32-0 | 68-45-19 |
| Walter | 8.1 | 36.2 | 2-2 | 3-1-2 |
| Cox | 6.2 | 30.3 | – | 237-169-3 |
| Eni | 4.7 | 13.6 | 2-0 | 8-0-2 |
| W&T | 5.0 | 27.2 | 1-0 | 65-40-7 |
| Cantium | 4.5 | 5.5 | 18-0 | 23-15-2 |
| QuarterNorth | 4.2 | 8.3 | – | no data |
| GoM Shelf | 2.3 | 4.8 | – | 52-5-2 |
| ANKOR | 1.4 | 2.5 | – | 0-0-1 |
| Byron | 1.0 | 4.4 | – | 5-8-2 |
| Renaissance | 0.7 | 1.6 | – | 20-9-3 |
| Sanare | 0.3 | 4.5 | – | 38-20-3 |
| Helis | 0.2 | 1.2 | – | 1-0-2 |
| Contango | 0.03 | 5.0 | – | 4-0-0 |
| Samchully | 0.02 | 1.2 | – | no data |
Comments:
- “Energy transition” companies Shell and bp still love the Gulf of Mexico, which is a good thing for them and us. Together they accounted for 42.4% of the 2021 oil production.
- The top 4 producers, Shell, bp, Chevron (includes Unocal), and Anadarko accounted for 2/3 of GoM oil production, nearly all of which was from deepwater leases.
- Those are impressive production numbers for Anadarko (Oxy). No wonder Warren Buffett likes Oxy stock.
- The relative number of deepwater exploratory wells is mildly encouraging given our concerns about sustaining production.
- Exploratory well determinations are rather subjective and may not be entirely consistent.
- Understandably, no exploratory wells were drilled by Arena or Cantium, the companies responsible for most well operations on shelf (shallow water) leases.
- Overall, the INC numbers are impressively low for the deepwater operators, with Chevron and LLOG standing out. BSEE does not post the specific violation information (more on this in an upcoming post), so it’s difficult to properly assess a company’s compliance record.
- Unfortunately, incident data could not be included on the scoreboard. BSEE’s incident tables are badly out of date, and no 2021/2022 summaries have been posted.
- Fieldwood’s disturbing INC numbers were discussed earlier this year. High INC rates for 3 other operators have also were noted last month.
- Exxon production is limited to the Hoover Diana spar, which was installed 22 years ago. The largest US oil company has only drilled one GoM exploratory well (2018) in the past 5 years. Currently, their main GoM interest seems to be the sequestration (disposal) of onshore emissions. (More on this topic in an upcoming post.)
4 House Democrats send letter to the President urging completion of the 5 Year leasing plan
Posted in energy policy, Gulf of Mexico, Offshore Energy - General, Uncategorized, tagged 5 year leasing plan, 532 days, DOI, House Democrats urge action, Senate Democrats support on May 6, 2022| Leave a Comment »
One important action your administration can take to ensure American energy independence is to publish a new Five-Year Outer Continental Shelf Oil and Gas Leasing Plan (“Five-year Plan”) as required under the Outer Continental Shelf Lands Act of 1953. Finalizing the Five-year Plan, with frequent area-wide leases, would help bring millions of additional barrels of U.S. oil to market. According to a recent analysis by Energy and Industrial Advisory Partners, a further delay of federal offshore leasing could result in 500,000 fewer barrels of domestic oil produced per day, 60,000 lost jobs, and a $900 million per year decrease in federal conservation funding.
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The four Democrats are Texas Representatives Vicente Gonzalez, Sylvia Garcia, Henry Cuellar and Lizzie Fletcher.
Meanwhile, the Senate approved language supporting the issuance of a new 5 Year Program ASAP. Four Democrats -Joe Manchin (D-WV), Kyrsten Sinema (D-AZ), John Hickenlooper (D-CO), and Mark Kelly (D-AZ) – voted for the measure.
When will we hear from the Department of the Interior on the status of the 5 Year Program? It has now been 532 days since the last US offshore lease sale.
Bud's Offshore Energy (BOE) 