MMS, the National Institute of Standards and Technology, and Environment Canada were leaders in developing and testing in situ burn spill response capabilities in the 1990’s. Tests at the MMS (now BSEE) Ohmsett facility and at sea offshore Newfoundland demonstrated this important spill response option.
BSEE has continued to advance the MMS spill response research program, and recently announced an exciting enhancement to in situ burn capabilities. BSEE and the Naval Research Laboratory invented a low-emissions atomizer burner designed to cleanly and quickly burn spilled oil, even after oil has been emulsified with water. See the video below.
The atomizer works by converting a stream of liquid, in this case, neat or emulsified crude oil, into a fine spray. The combustible spray is then able to completely burn without the plume of black smoke or residue, leaving the area safer for people, wildlife, and the environment. The burner interfaces with off-the-shelf pumps and air compressor equipment, so the collected fuel can be pumped to the burner. It can be mounted on a floating platform to stand freely in the water and has been successfully tested on waves.
With regard to shelf drilling activity (<1000′ water depth), a total of 55 wells were started in 2021 and 2022 (first quarter). Only 2 of these wells, both by Walter Oil and Gas, were classified as exploratory. The most active drillers (by far) were Arena Offshore (30 well starts) and Cantium LLC (16 well starts). Ankor, EnVen, and Talos were the only other operators with drilling activity.
9/30/2021 – BOEM announces Lease Sale 257 as necessary to comply with the order of the Louisiana Federal Court. DOI will “continue its comprehensive review of the deficiencies associated with its offshore and onshore oil and gas leasing programs.”
11/15/2021 – Press Secretary Psaki: “We believe the (Louisiana court) 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.”WTI = $80.85/bbl
11/17/2021: Sale 257 bids opened and announced despite pending litigation. In a surprising twist, Exxon was the sole bidder on 94 carbon sequestration tracts offshore Texas. Neither the Notice of Sale nor the environmental review announced or assessed carbon sequestration operations in Federal offshore waters. BOEM/DOI have not commented publicly on the CCS bidding.
1/27/2022: Judge Contreras, DC Federal Court, vacates Sale 257. The Judge agreed with the plaintiffs’ assertion that BOEM failed to consider the effect that reduced production (and thus higher prices) would have on foreign consumption and the associated GHG emissions. 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. 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, which are based on proprietary assessments, are now public information, thus compromising the integrity of the leasing process at the next sale (if and when that occurs). WTI= $87.61/bbl
2/8/2022: API and the State of Louisiana appeal the Sale 257 decision.
2/24/2022: Russia invades Ukraine
2/28/2022: The Administration announces that it will not appeal the Sale 257 decision. WTI = $96.13
3/8/2022: WTI peaks at $123.70/bbl
3/30/2022: EIAP Report for API and NOIA estimates economic impacts from leasing program delays noting: In most cases, additional leases are required to produce an existing field fully or to underpin the economics of processing and transportation infrastructure. It is thus important for the industry to have continued opportunities to secure leases through a predictable leasing program. (US lease blocks are too small for optimal development in deepwater and frontier areas, increasing the importance of regular lease sales.)
New Fortress Energy Inc. (NASDAQ: NFE) (together with its affiliates, “NFE”) today announced that it has concurrently filed applications with the U.S. Maritime Administration, the U.S. Coast Guard and U.S. Department of Energy to request all necessary permits and regulatory approvals to site, construct and operate a new offshore LNG liquefaction terminal off the coast of Louisiana (“the Project”) with a capacity of exporting approximately 145 billion cubic feet of natural gas per year, equivalent to approximately 2.8 million tons per annum (MTPA) of LNG.
The Project will be located in federal waters approximately 16 miles off the southeast coast of Grand Isle, Louisiana, and will access abundant U.S. gas supply by leveraging existing infrastructure. Procurement of all long-lead materials is complete and modular assembly of equipment is underway. Subject to the receipt of all required permits and approvals, NFE targets beginning operations in the first quarter of 2023.
Even after full recovery from Hurricane Ida, Gulf of Mexico production remained well below the August 2019 monthly peak of 2.044 million BOPD. Production should trend upward in the near term as the Vito, Anchor, Argos, King’s Quay, and Whale floating production units come online. However, to sustain production near or above 2 million BOPD, exploration activity needs to be stimulated. This will be difficult given the suspension of leasing, and the continuous legal and administrative challenges.
Meanwhile the April 1 rig count held steady at 14.
In addition to the obvious concerns about depleting the strategic petroleum reserve, further mortgaging our economic future, and increasing national security risks, the directive to withdrawal 1 million BOPD from the Strategic Petroleum Reserve for 6 months raises a few comments specific to US offshore production:
The 1 million BOPD withdrawal is equivalent to ~60% of the daily production from the entire Gulf of Mexico offshore sector. How will this massive 6-month withdrawal will effect regional markets and logistics?
Will the Dept. of Energy have to assess the GHG effects associated with their withdrawal of oil from the SPR? More specifically, will DOE be required to assess the increase in GHG emissions as a result of the increased foreign oil consumption that will result from the reduction in oil prices? This is what Judge Contreras ordered BOEM to do when he vacated Gulf of Mexico sale 257.
If it’s okay to produce and consume oil from the SPR facilities (mapped below), why is new leasing and exploration being constrained in the adjacent Gulf of Mexico?
Yesterday, EIAP issued a report for API and NOIA that estimates economic impacts from leasing program delays. The fundamental reason for regular sales has not received much public attention, but is summarized succinctly in the report:
In most cases, additional leases are required to produce an existing field fully or to underpin the economics of processing and transportation infrastructure. It is thus important for the industry to have continued opportunities to secure leases through a predictable leasing program.
Keep in mind that US lease blocks are the smallest in the offshore world, too small for optimal development in deepwater and frontier areas. The smaller the blocks, the greater the importance of regular lease sales. Pictured below is a 2017 graphic graphic which superimposes Kosmos Energy’s blocks off Senegal and Mauritania on the Central Gulf of Mexico. Note that the six West African blocks encompass 36,000 sq km and are the equivalent of 1600 GoM lease blocks.
Mr. Domangue began his career with BSEE in 1997 and has more than 30 years of experience in the oil and gas industry. He has served as the Deputy Regional Director for Districts, Investigations, Environmental, and Enforcement (DIEE), as Senior Technical Advisor for the BSEE Gulf of Mexico Region and was the Acting Chief of the National Offshore Training Center. Mr. Domangue also previously served as Office Supervisor for Regional Operations, and as District Manager for the Houma District Office of the BSEE Gulf of Mexico OCS Region. He holds a BS degree in petroleum engineering from Louisiana State University.
