Not much news regarding the suit to block Sale 257. U.S. District Judge Randolph Moss had previously authorized Louisiana Attorney General Jeff Landry to join the case as a defendant alongside the Department of the Interior (DOI), meaning that at least one party is sincerely interested in defending the sale. This comment by Judge Moss was telling:
Moss said he agreed to the state’s request to join the case because he harbored sufficient doubts that the state’s interests would be adequately represented by the federal government.
Chart 2: Exploratory drilling continues to decline and may be insufficient to replace reserves
Chart 3: Well starts and number of operators drilling remain at historic low levels
Chart 4: (1) One company (Shell) accounted for 39% of the 2021 YTD deepwater well starts in the GoM. (2) Five companies (Shell, Oxy/Anadarko, Chevron, Murphy, and BP) accounted for 80% of the deepwater well starts.
More certainty regarding lease sales would help. Prospective participants need assurances that they will have opportunities to apply findings and test exploration and development strategies. Will Lease Sale 257 be held on schedule next week?
Per Shell, production at Mars and Ursa has restarted. Olympus was restarted on 10/1. The December production figures should give us a pretty good indication of stabilized GoM production post Ida.
Among other provisions, EPA’s proposed rule, issued on 11/2/2021, specifies that associated gas be handled as follows:
Route associated gas to a sales line. If access to a sales line is not available, the gas can be used as an onsite fuel source, used for another useful purpose that a purchased fuel or raw material would serve, or routed to a flare or other control device that achieves at least 95 percent reduction in methane and VOC emissions.
Because the Dept. of the Interior has jurisdiction over air emissions on most of the Gulf of Mexico OCS, I assume this proposed rule does not apply to those facilities. However, the EPA proposal is not entirely clear in that regard. If the EPA proposal does not apply, will BOEM/BSEE be proposing similar restrictions in their regulations?
MMS/DOI considered prohibiting venting, but determined that adding flaring capability was not feasible for many shelf platforms, and for some platforms there would have been a net increase in emissions. That said, venting is not insignificant. A 2017 Argonne study indicated (table 2) that, for shelf platforms from 2011 through 2015, more than 3 times as much gas was vented as was flared. More recent data should be reviewed to get a better sense of the costs, benefits, and safety considerations associated with achieving further reductions in venting.
Current flaring/venting regulations for OCS facilities are here.
But here’s the thing. Whether you think it was the right thing to do, the reality is that passing legislation that is hostile to the U.S. oil and gas industry makes it even more difficult for domestic production to bounce back. So, instead of asking Russia and OPEC to pump more oil, we could look internally to what we could do in the U.S. to pump more oil.
From a US offshore perspective, there should be serious dialogue about how we can increase exploration and production. The risks associated with over reliance on imports have been repeatedly demonstrated over the past 5 decades. The horizontal drilling/well stimulation revolution has been a blessing, but given the sharp decline rates for fracked wells, we cannot solely rely on onshore production from tight reservoirs.
U.S. oil production plummeted and is unlikely to recover to pre-pandemic levels. The Gulf of Mexico will not be picking up the slack. GoM production peaked in August 2019 at 2.044 million BOPD. Absent increased exploration, that peak will never be exceeded.
1.60 to 1.74 million BOPD were shut-in from 8/28 to 8/31, reducing the average daily production for August to 1.535 million barrels per day, a net reduction of 312,000 BOPD from July. The September production figure will be significantly lower given that more than half of the GoM production was shut-in for 13 days in September and several hundred thousand BOPD were shut-in for the rest of the month. September production will be released at the end of November.
With regard to air emissions, the advantages of deepwater Gulf of Mexico production are rather obvious:
High production rates per well
Few surface facilities (57 deepwater platforms, 3% of GoM total, produce 90+% of oil)
Modern gas turbines for power generation
Tightly enforced restrictions on flaring and venting
Better control of fugitive emissions
Distant from shore (not a factor for GHG effects)
Wood Mackenzie, NOIA, and others contend that restrictions on GoM leasing are contrary to carbon reduction goals.
An important and unintended consequence of enacting more restrictive policies such as a lease ban or increase in royalty rate in the Gulf of Mexico is that it could give rise to carbon leakage to countries that export crude to US.
In light of the policy implications of GHG emissions, a Carbon Intensity Workshop is highly recommended. The estimates generated by Wood Mackenzie, Rystad, and others need to be explored in depth. Is data quality an issue? How are the data verified? Is there regulator or third party oversight? What are the assumptions behind the estimates? Also, for the purposes of US policy decisions, product transportation emissions should certainly be included. A barrel produced in the Middle East is not the same as a barrel produced in the GoM.
Looking at the chart above, I have immediate questions about the drilling emissions (blue). What wells are included? What about workovers and other well operations? I’m surprised that the deepwater GoM drilling emissions are so high relative to the other regions. While dynamically positioned MODUs have high fuel consumption rates, deepwater wells are few in number relative to shale drilling. Also, why are Brazil’s drilling emissions, which I assume are primarily associated with deepwater operations, so much lower that those for the GoM.
BOEM/BSEE and/or the Gulf Research Program (NASEM) would seem to be good sponsors for such a workshop.
Bud's Offshore Energy (BOE) 