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Archive for the ‘Gulf of Mexico’ Category

Offshore leasing Catch 22

Posted in energy policy, Gulf of Mexico, Offshore Energy - General, tagged , , on March 2, 2022| Leave a Comment »

“The absolute earliest a new Lease Sale 257 could occur is July 2, which is after the expiration of the current five year program,” Interior said in a 28 February court filing (opting not to appeal the DC court decision invalidating the lease sale).

Argus

So, a new lease sale cannot occur until after the five year program expires and no sale may be held. Brilliant, Joseph Heller would be proud. It’s a good thing oil and gas supplies are plentiful and secure, and that prices are cheap.

Remember, the judge’s decision invalidating Sale 257 was that BOEM didn’t analyze the benefits of higher oil and gas prices (as a result of lower offshore production) in reducing international consumption and GHG emissions.

US offshore leasing – time for action

Previous posts on Sale 257.

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Half-step by Exxon?

Posted in energy policy, Gulf of Mexico, Offshore Energy - General, Russia, Uncategorized, tagged , , on March 1, 2022| Leave a Comment »

BP, Equinor, and Shell are exiting Russia, but Exxon’s response seems to be something less. Per Upstream:

US supermajor ExxonMobil is scaling back its operations on its flagship offshore development project in Russia’s Sakhalin Island region in response to the fallout from the crisis in Ukraine, according to the Sakhalin Online news website.

A consortium source cited by the Russian website claimed that foreign managers have been told to leave the project for an initial period of one month.

Upstream

Exxon accepted the political risks associated with lucrative Russian production, and they now have a massive moral and public relations dilemma. Will they try to wait this crisis out or take more permanent actions?

It would be nice to see Exxon return to the Gulf of Mexico where they haven’t drilled a well since 2019. Currently, Exxon’s primary interest in the Gulf is for carbon sequestration purposes. Perhaps they can focus more on the Gulf’s still promising production potential and less on its potential as a disposal site.

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US offshore leasing – time for action

Posted in energy policy, Gulf of Mexico, Offshore Energy - General, tagged , , , , on February 28, 2022| Leave a Comment »

Since well before the Putin crisis, this independent blog has been expressing concerns about sustaining US offshore oil and gas production without new leases and increased exploration (more here). Now that concerns about domestic production and energy security are heightened (understatement of the year!), let’s review where the leasing program stands:

  • 466 days have elapsed since the last oil and gas lease sale (Nov. 19, 2020), with no future sales in sight.
  • There had been 182 sales in the previous 66 years of the US offshore oil and gas program, an average of 2.76 per year. Never before (since 1953) has a year transpired without a lease sale.
  • Currently, there are only 2016 active US OCS leases and 506 producing leases, the fewest in at least 40 years (recent history charted below).
  • Despite favorable geology beneath the deepwater Gulf of Mexico and advanced exploration and well completion technology, US offshore oil production (1.713 million bopd per the latest EIA data – Dec. 2021) is down 16% from the August 2019 peak of 2.044 million BOPD. Gulf oil production is thus the lowest since 2018 (except during hurricane shutdowns).
  • New projects and higher ultimate recoveries from producing reservoirs could increase total offshore production by 10-20% over the next few years, but sharp declines will follow without new leases and increased exploration.

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Gulf of Mexico drilling activity is still depressed

Posted in drilling, energy policy, Gulf of Mexico, Offshore Energy - General, tagged , , on February 21, 2022| Leave a Comment »

The rig count remains low at 12 (see the updated chart below). Per BSEE’s borehole file, only 3 deepwater exploratory wells have been spudded in 2022 YTD (2/21) – one each for Shell, Hess, and Anadarko.

What’s going on? Better opportunities elsewhere? Uncertainty about lease sales? Concerns about legal challenges and the future of the US offshore program?

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Over-reliance on shale production? This is why regular lease sales and sustained offshore production are important.

Posted in energy policy, Gulf of Mexico, Offshore Energy - General, tagged , , , on February 18, 2022| Leave a Comment »

Meanwhile, however, drillers may be running out of sweet spots in the shale basins of the country. In an article citing well data, the Wall Street Journal reported earlier this month that because of the quick depletion rates of shale wells, low-cost resources are giving way to higher-cost deposits. And this is motivating a warier approach to production growth.

Markets Insider

The shale revolution made the US a net oil exporter, but skepticism about shale production forecasts suggests the need for other supply sources. Given the shale uncertainty and the unrealistic expectations regarding the energy transition, greater US dependence on imported oil is on the horizon. This bodes well for OPEC, but not so well for US and international consumers.

BOE post, 1/4/2022

Yet Lease Sale 257 was vacated because BOEM didn’t analyze the GHG reduction that would result from reduced international consumption caused by zero US leasing (and thus higher oil and gas prices). Fortunately US onshore production on private land is not subject to this absurd and economically destructive level of oversight.

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API appeals Lease Sale 257 decision

Posted in energy policy, Gulf of Mexico, Offshore Energy - General, tagged , , , on February 11, 2022| Leave a Comment »

“At a time of rising energy costs and heightened geopolitical tensions, the misguided decision to cancel the only lease sale held last year is contributing to significant uncertainty for U.S. natural gas and oil producers and limiting access to the affordable, reliable energy that’s needed here in the U.S. and around the world. We call on the Department of Interior to join us in this effort and appeal the court’s ruling …

API release

When will we hear from the Department of the Interior?

Update: We understand that Louisiana has also appealed the Sale 257 decision.

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Good news for America!

Posted in energy policy, Gulf of Mexico, Offshore Energy - General, tagged , , , , , , , , , , on February 10, 2022| 4 Comments »

BSEE.gov
  1. Pictured above are BSEE inspectors from the famed Houma District conducting one of their (always) thorough pre-production inspections at Murphy’s King’s Quay semisubmersible production platform in the Gulf of Mexico. [Trivia question: Who was the first Houma District Supervisor?]
  2. King’s Quay is one of six deepwater platforms expected to begin production in the Gulf over the next several years. Others include Shell’s Vito and Whale, BP’s Argos, Chevron’s Anchor, and Beacon’s Shenadoah. All are semisubmersible platforms, the current design of choice for the deepwater Gulf. Production semis have become smaller and more efficient, greatly improving the economics of deepwater projects.
  3. These platforms feature efficient gas turbines and compression systems that should increase the GHG intensity advantage of deepwater Gulf production.
  4. These are the first deepwater production structures to be installed in the Gulf since Shell’s Appomattox in 2018. Per our previous post on this topic, current GoM production rates are not sustainable without regular, predictable lease sales and increased exploration.
King’s Quay under tow

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More on the Lease Sale 257 decision

Posted in CCS, Gulf of Mexico, Offshore Energy - General, Offshore Wind, Wind Energy, tagged , , , , on February 2, 2022| Leave a Comment »

The judge correctly dismissed the unfounded claim that new oil and gas leasing would preclude wind development in the Gulf. BOE comments:

  • The number of GoM platforms is down 75% from its peak and continuing to decline.
  • Most new production is in the deepwater GoM and is accomplished with very few, remote and widely dispersed facilities. There are currently only 57 deepwater platforms across the entire Gulf.
  • The wind industry appreciates the synergy between offshore oil and gas and offshore wind operations. Indeed the oil industry has been very supportive of offshore wind, and some of the same operating companies and contractors are major players in both industries.
  • t has been 17 years since the enabling legislation was passed, yet we are still awaiting the first commercial wind project in the US Atlantic. You can’t blame the oil and gas industry for that delay. To the contrary, one can make the case that the presence of oil and gas operations would have accelerated Atlantic wind development.
  • The enabling legislation for offshore wind was drafted by the agency that managed the offshore oil and gas program and recognized the compatibility of oil and wind development. Wind development is clearly a high priority for BOEM, the current OCS land manager.

Will the Administration appeal the court decision to vacate the lease sale or does the decision assist them by reinstating their leasing pause? How will the conflict between the DC court decision and the injunction invalidating the leasing pause (Federal Court for the Western District of Louisiana) be resolved?

What does this mean for the 94 leases that were to have been acquired for carbon sequestration purposes? Will BOEM have a proper CCS sale after conducting an environmental assessment, determining bidding terms and evaluation criteria, and publishing a Notice of Sale? Or will there be a legislative end run that authorizes the issuance of the leases without these steps?

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November GoM production was close to the predicted 1.8 million BOPD

Posted in Gulf of Mexico, Offshore Energy - General, tagged , , on February 1, 2022| Leave a Comment »

Our last GoM update predicted November oil production of 1.8 million BOPD. The EIA figure released yesterday came in slightly less than that at 1.795 million BOPD.

Will 2022 startups push oil production back up to the 2.044 record achieved in August 2019? Possibly, but the longer term outlook is not compelling given reduced drilling activity and the dearth of recent discoveries. The long leasing pause will further compromise exploration by limiting opportunities to test new geologic interpretations and assess promising prospects.

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DC Judge rules in favor of higher oil and gas prices

Posted in climate, energy policy, Gulf of Mexico, Offshore Energy - General, tagged , , , , , on January 31, 2022| Leave a Comment »

The very disappointing 68 page ruling on Lease Sale 257 boils down to the following:

  1. BOEM had correctly determined that, from a GHG standpoint, US offshore production was preferable to more carbon intensive foreign production.
  2. The plaintiffs, who are seemingly intent on stopping all oil and gas production regardless of the economic consequences, argued that BOEM failed to consider the “positive” effect that higher prices (the logical result of lower production) would have on reducing demand.
  3. In particular, the plaintiffs asserted that BOEM failed to consider the effect that reduced production (and higher prices) would have on foreign consumption and the associated GHG emissions.
  4. The judge not only decided in favor of the plaintiffs, but ruled that BOEM’s omission was so serious that the lease sale had to be vacated.
  5. The judge reached this decision even though (1) the five year leasing plan expires in June leaving the timing of any future sale very much in doubt and (2) all of the sale 257 bids are now public information compromising the integrity of the leasing process at the next sale (if and when that occurs).

So, if BOEM has to consider the environmental benefits of higher oil and gas prices, shouldn’t they also have to consider the negative economic and environmental effects from the resulting price inflation and energy poverty? Are higher prices, which are most detrimental to the poor and to developing nations, “energy justice?”

If your only objective is the destruction of the US offshore oil and gas program, this was a great decision. For everyone else, this is yet another reason to be concerned about our energy future.

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