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Archive for the ‘Gulf of Mexico’ Category

  • Exxon was the sole bidder on 94 tracts, all on the Texas shelf. All of the bids were $27.50/acre, just above the $25/acre minimum for shelf tracts.
  • Those bids accounted for 100% of Exxon’s bids and 30.5% of the high bids for the entire sale! 
  • Either Exxon sees resource potential that no one else (including Exxon) has seen for decades (I’m not discounting this possibility) or something else is going on here.
  • Stay tuned!

Absent Exxon’s surprise activity, this was a pretty typical sale of recent vintage: $177 million in high bids on 214 tracts. Even with all of the Exxon bids included, only tracts totaling 1.7 million acres received bids. (See previous post.)

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U.S. To Sell Area the Size of New Mexico For Offshore Drilling Just 5 Days After COP26

Newsweek
  • 80 million acres is the total area in the Gulf of Mexico that is open for possible leasing in Sale 257. The area receiving bids will be only a small fraction of that.
  • In the previous sale (256), which was almost exactly one year ago, the same area was open for sale and only 0.6% of that area received bids. Only 93 of the nearly 15,000 tracts offered received bids. 7 of the high bids were rejected, so only 86 new leases were issued.
  • There are currently only 2,027 active GoM leases (10.8 million acres), less than half the number that existed in 1/2016 (4460) and less than 1/3 the number that existed in the beginning of 2011.
  • US offshore leases are among the smallest in the world, only a fraction of the sized of those offered by most other nations with offshore oil and gas programs.
  • Modern deepwater development is noteworthy for high production from very few platforms. Only 57 surface facilities account for more than 90% of current GoM oil production.

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Q    Can I just ask one more on oil and gas?  So, we just saw President Biden take action now in terms of the — protecting oil and gas development on Native lands and Tribal lands.  But later this week, the U.S. government will open up for auction many, many acres — an area larger than several states, actually — to oil and gas leasing because of this legal situation. 

So there are critics who say that you should have done more to avert this action.  And I wonder if you can just say, you know, what action could potentially be done.  Is there — are there any last-minute steps that could be taken to prevent those auctions from going forward?

MS. PSAKI:  Well, you know, the President did — as you know, Andrea, but just to get others up to speed — issue an executive order pausing oil and gas leasing on public lands and in offshore waters to facilitate the identification and implementation of long-needed permitting and leasing reforms. 

Shortly thereafter, the Interior Department cancelled the pending offshore oil and gas lease in the Gulf of Mexico known as Lease Sale 257. 

So, what you’re referring to, I believe, is the fact that, in June, a federal district court in Louisiana stopped the President’s leasing pause and ruled that the Interior Department is legally required to go through with the sale of the Lease Sale 257, which is what you’re refer- — what Andrea is referring to in terms of putting up a bunch of lease sales — oil and gas lease sales. 

We believe the decision is wrong, and the Justice Department is appealing it.  So it’s in the courts; it’s in a legal process.  We’re required to comply with the injunction.  It’s a legal case and legal process, but it’s important for advocates and other people out there who are following this to understand that it’s not aligned with our view, the President’s policies, or the executive order that he signed.

Go ahead.

Q    So there’s no more la- — so, you can’t take any last-minute action to prevent that from going forward?

MS. PSAKI:  I would point you to the Justice Department.  They, of course, are appealing this, and I would point you to them for any legal action or what their options are.

White House

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GoM: BOEM proposes first Gulf oil and gas lease sale for 2021 - Lease Sale  257

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.

Reuters

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  • Chart 1: Gulf of Mexico rig count remains low
  • 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?

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No photo description available.
Photo by Clint Young

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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.

210902 Shell Go M Asset Map

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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.

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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. 

Forbes

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.

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Oil prices went negative a year ago: Here's what traders have learned since  - MarketWatch
MarketWatch
Monthly Oil Production
Forbes

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.

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