Yesterday, Lars Herbst attended the EIA’s Annual Energy Outlook presentation. The slides are attached.
Below is a custom chart from the EIA data tables. While EIA predicts growth in renewable generating capacity, US oil and gas production are nonetheless projected to increase slightly through 2050.
Posted in energy, energy policy, natural gas | Tagged EIA, Energy Outlook 2023, natural gas production, oil production | Leave a Comment »
Of the 1.7 billion acres of Federal land on the US Outer Continental Shelf, only about 73 million acres in the Gulf of Mexico and 1 million acres in the Cook Inlet may be offered for oil and gas leasing. Official or de facto exclusions prohibit leasing in the entire US Atlantic, the entire US Pacific, all Alaska areas except the Cook Inlet, and most of the Eastern Gulf of Mexico. No other coastal nation has restricted access to oil and gas resources to this extent.
As demonstrated in recent sales, many of the tracts being offered have little or no production potential. Only 308 tracts (1.7 million acres) received bids in GoM Sale 257. 94 of the high bids were for sequestration purposes and were arguably invalid. Sale 258 in the Cook Inlet only received a single bid.
The number of active leases, currently 2153, has been at a historically low level for the past 2 years. Only 0.7% of our OCS is leased and thus open to exploration. 26% (552) of these leases are already producing, leaving a historically low number of nonproducing leases.
Oil is where you find it, not where you wish it was or want it to be. Denying access to all but a small portion of the OCS limits exploration strategies and prevents publicly owned resources from supporting our economy in the manner intended by the OCS Lands Act.
Posted in Alaska, energy policy, Gulf of Mexico, Offshore Energy - General | Tagged active leases, areas excluded from leasing, drilling, OCS Leasing Program, producing leases | 1 Comment »
The shrinking of the OCS oil and gas program continues. In an attempt to placate opponents of the Willow project, the President has removed the entire Beaufort Sea from oil and gas leasing consideration. Unsurprisingly, the opponents of Willow are no less irate.
Under the authority granted to me in section 12(a) of the Outer Continental Shelf Lands Act, 43 U.S.C. 1341(a), I hereby withdraw from disposition by oil or gas leasing for a time period without specific expiration the areas designated by the Bureau of Ocean Energy Management as the Beaufort Planning Area of the Outer Continental Shelf that have not previously been withdrawn.
Posted in Alaska, energy policy | Tagged Alaska, Beaufort Sea, Hilcorp, Kulluk, Liberty, Mukluk, Northstar, Presidential withdrawal, Willow Project | Leave a Comment »
Per yesterday’s post, below are US OCS fatality data from a 2014 presentation. Ten year intervals were selected for 1975-2004. The longer 1953-1974 era was selected so the activity indicators (well starts and production) would be comparable with the next 3 intervals. The last interval (2005-2013) was limited because the presentation was prepared in 2014.
Fire/explosion fatalities exceeded fall/struck fatalities only in the first interval (1953-1974). As one would expect, the fire/explosion deaths were associated with a limited number of better known incidents (e.g. Main Pass 41, Bay Marchand, Macondo). While the overall trend is favorable, fall/struck incidents and helicopter fatalities at offshore platforms have proven to be more chronic.
I hope to update these data in the not too distant future.
Posted in accidents, Gulf of Mexico, Offshore Energy - General, well control incidents | Tagged falls, fires and explosions, helicopter incidents, OCS fatalities, struck by equipment | Leave a Comment »
The most common causes of offshore fatalities and serious injuries, falls and being struck by equipment, receive little media attention because there is no blowout, oil spill, or fire. However, these are often the most difficult types of incidents to understand and prevent. Human and organizational factors predominate, and prevention is dependent on a strong culture that emphasizes worker engagement, awareness, teamwork and mutual support, effective training and employee development, risk assessment at the job, facility, company, and industry levels, stop-work authority, innovation, and continuous improvement.
This new BSEE Safety Alert addresses such a fatal incident on the Pacific Khamsin drilling rig, and makes recommendations that have widespread applicability.
Incident summary:
While unlatching the lower Marine Riser Package from the Blowout Preventor in preparation for ship relocation, a crewmember was lifted into the air after being struck by a hydraulic torque wrench (HTW), hitting a riser clamp approximately six feet above the elevated work deck before falling to the rig floor. The crew member was given first aid and transported to the drillship’s hospital, where he was later pronounced deceased.
In an upcoming post, BOE will provide historical fatality data by cause and operations category.
Posted in accidents, drilling, Gulf of Mexico, Offshore Energy - General | Tagged BSEE, falls, Pacific Khamsin, Safety Alert, safety culture, struck by equipment | Leave a Comment »
HOUSTON — Oil and gas industry leaders say they’ve seen a big shift in tone from the Biden administration over the past year, helping to smooth over one of the president’s rockiest relationships.
Washington Post
Perhaps the Washington Post reporter is correct, but the “big shift in tone” is not apparent in the offshore sector. The only lease sales have been mandated by Congress, the 5 year plan is still 9 months from completion, the lease sale terms have been less than favorable, and language in the draft 5 year plan does in fact express the intent to phase out oil and gas.
Posted in climate, energy policy, Offshore Energy - General | Tagged Biden administration, fossil fuels phase out, offshore program | Leave a Comment »
The offshore oil and gas (O&G) sector is set for the highest growth in a decade in the next two years, with $214 billion of new project investments lined up. Rystad Energy research shows that annual greenfield capital expenditure (capex) broke the $100 billion threshold in 2022 and will break it again in 2023 – the first breach for two straight years since 2012 and 2013.
Offshore activity is expected to account for 68% of all sanctioned conventional hydrocarbons in 2023 and 2024, up from 40% between 2015-2018.
Rystad
Comments:
Posted in energy policy, Gulf of Mexico, Guyana, Norway, Offshore Energy - General, UK | Tagged Brazil, Guyana, Norway, offshore investment, Offshore is back!, Rystad, UK | Leave a Comment »
Washington, DC — Today, U.S. Senator Joe Manchin (D-WV), Chairman of the Senate Energy and Natural Resources Committee, released the following statement on the Department of the Interior’s (DOI) unprecedented delay in releasing a five-year leasing plan.
“Monday night, the Department of the Interior made it painfully clear – again – that they are putting their radical climate agenda ahead of our nation’s energy security, and they are willing to go to great lengths to do it. The earliest that Interior will release a legally required program for 2023-2028 offshore oil and gas leasing will be the end of this year. That’s 18 months late. This is the first time in our nation’s history that we haven’t had a 5-year leasing program released before the old plan expired. Every other Administration, Democrat and Republican, has managed to follow the law in a timely fashion.
“Let me be clear – this is not optional. The Outer Continental Shelf Lands Act mandates that the Secretary of the Interior “shall prepare” this program to “best meet national energy needs.”
“What is even more terrifying is that on top of this disturbing timeline, Interior refuses to confirm if they intend to actually include any lease sales in the final plan, which is an issue I sounded the alarm about when Secretary Haaland appeared before the Senate Energy and Natural Resource Committee on May 19, 2022. I will remind the Administration that the Inflation Reduction Act also prevents them from issuing any leases for renewables, like offshore wind or onshore solar unless there are first reasonable lease sales for oil and gas that actually result in leases being awarded. And I will hold their feet to the fire on this.”
Senator Manchin
Plain English; no need for interpretation 😉
Posted in climate, energy policy, Offshore Energy - General | Tagged 5 year leasing plan, DOI, OCS Lands Act, Senator Manchin | Leave a Comment »
Senator Manchin and the Alaska delegation criticized the DOI decision memo for Sale 258. The memo implied that the highest allowable royalty rate was chosen to minimize bidder interest and limit future production. Unfortunately, the “Inflation Reduction Act,” which mandated these lease sales, was not particularly helpful in creating interest in the less attractive OCS tracts like those in the Cook Inlet and the shallower waters of the Gulf of Mexico.
Sec. 50261 of the IRA raised the minimum allowable royalty rate from 12 1/2% to 16 2/3%, while capping the maximum rate at 18 3/4%. This provision favors deepwater operators, typically majors and large independents, whose royalty rates were capped at 18 3/4%, the same rate as for previous OCS sales.
Conversely, the IRA royalty provisions penalize the smaller companies and gleaners who are critical to sustaining shallow water (shelf) operations, including environmentally favorable nonassociated (gas-well) natural gas production, by raising the minimum royalty rate to 16 2/3%. DOI exacerbated IRA’s impact by electing to charge the highest allowable royalty rate for Cook Inlet and GoM shelf leases. The net result was a 50% royalty rate increase from prior sales (12.5 to 18.75%).
The table below illustrates the royalty rate implications of the IRA language and the DOI decisions.
| Area | Sale | Date | % royalty: <200m water depth | % royalty: >200m water depth |
| Cook Inlet | 244 | 6/21/2017 | 12.5 | 12.5 |
| GoM | 256 | 11/18/2020 | 12.5 | 18.75 |
| GoM | 257 | 11/17/2021 | 12.5 | 18.75 |
| Cook Inlet | 258 | 12/30/2022 | 18.75 | 18.75 |
| GoM | 259 | 3/29/2023 | 18.75 | 18.75 |
Notes:
Posted in Alaska, energy policy, Gulf of Mexico, Offshore Energy - General, Regulation | Tagged Alaska, Cook Inlet, Inflation Reduction Act, Lease Sale 258, lease terms, royalty rate, Sale 244, Sale 256, Sale 257, Senator Manchin | Leave a Comment »
That is the amount of oil the US government has “borrowed” from the Strategic Petroleum Reserve without replacing. At $80/bbl, that’s ~$28 billion worth of oil. Not refilling the SPR exposes the US to much greater costs, in terms of economic and national security risks. Those who were around during the 1970’s certainly remember the embargoes and the resulting disruptions that led to the establishment of the SPR.
The SPR has a fill rate of only 685,000 bopd, so a complete refill would require 518 days, which would have to be spread over years because of supply, operational, maintenance, and price considerations. The promised purchase of 3 million bbls in February never occurred, and we are now told that DOE “would like to start buying within the next year, depending on the window of opportunity.” This is not particularly encouraging, especially given that the mandatory sale of another 26 million bbls is upcoming this spring. So it looks like the SPR may be down another 20+ million barrels heading into 2024, an election year. Good luck making significant purchases then.
This is the hole we are in as a result of non-emergency SPR sales for price moderation purposes. Meanwhile, Congress has proposed the following legislation:
The last bill is interesting, but has little chance of passing and would be difficult to implement given other legislative, judicial, and administrative constraints on leasing and production. Having a plan is one thing; implementing it is quite something else.
Posted in energy policy, Offshore Energy - General | Tagged legislation, national debt, SPR depletion, Strategic Petroleum Reserve | Leave a Comment »
Bud's Offshore Energy (BOE) 