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Posts Tagged ‘Exxon’

Another chapter in the Santa Ynez Unit saga

Posted in California, decommissioning, Offshore Energy - General, tagged , , on November 8, 2022| Leave a Comment »

HOUSTON, Nov 6 (Reuters) – Exxon Mobil Corp will take up to a $2 billion loss on the highly leveraged sale of a troubled California offshore oil and gas field that have been idled since a 2015 pipeline spill.

Sable Offshore, a blank check company founded by industry veteran James Flores, will borrow 97% of the $643 million purchase price from Exxon under a five-year loan. Blank check companies raise money to acquire operating businesses. If Flores fails to restart production at the Santa Ynez field by the start of 2026, Exxon could take back the entire operation, Sable disclosed in a filing.Flores will seek permits to restart Santa Ynez and expects to pump about 28,100 barrels of oil and gas per day beginning in 2024, according to a Sable investor presentation. The field has 112 wells and the potential for at least another 100 wells, its presentation showed.

Jim Flores is well known in the offshore industry dating back to his days as CEO of Flores & Rucks, a Gulf of Mexico exploration and production company, in the 1990’s.

And Exxon is no doubt still on the hook for decommissioning these massive platforms.

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What’s next for Exxon’s sequestration leases?

Posted in CCS, Gulf of Mexico, tagged , , , on October 25, 2022| Leave a Comment »

Offshore

Per BOEM’s leasing data base, all 94 of the Sale 257 “carbon sequestration leases” (blue) were issued with an effective date of 10/1/2022. However, Sale 257 was an oil and gas sale, and the leases do not convey carbon sequestration rights. Each lease will expire in 5 years absent oil and gas production or ongoing drilling operations.

These oil and gas leases may not be repurposed for sequestration or other purposes unless an alternate use RUE is issued competitively in accordance with 30 CFR § 585.1007.

So what’s next for these 94 leases, 31% of the entire sale?

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Now that the Sale 257 leases have been issued, questions remain

Posted in energy policy, Gulf of Mexico, Offshore Energy - General, tagged , , , on September 22, 2022| Leave a Comment »

Which bid was rejected? BOEM announced that 307 of the 308 high bids were accepted. One bid was rejected on fair market value grounds. The unsuccessful bid is not specified on the Sale 257 web page.

When can we expect a statement from Exxon on their intentions for the 94 blocks they acquired? Those 94 blocks (31% of the entire sale) are the elephant in the room, yet we have heard nothing from the company. Given Exxon’s apparent interest in using these leases for CCS purposes, and the tax credits and Federal funding associated with CCS projects (as per the Infrastructure Bill and Inflation Reduction Act), clarification regarding Exxon’s intentions would seem to be appropriate.

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Another new Aera era!

Posted in California, Offshore Energy - General, pipelines, tagged , , , , , , on September 12, 2022| Leave a Comment »

A fresh start for Aera Energy with IKAV, a German asset management company that purchased Aera from Shell and ExxonMobil.

From 1997 to 2007, Aera operated the Beta Unit offshore Huntington Beach. Since selling those facilities, all Aera operations have been conducted onshore, primarily in Kern County, a historically important California oil production area. Aera will continue to operate these onshore properties for IKAV, which looks like an interesting company.

Platforms Ellen and Elly, Beta Unit

Meanwhile, the Beta Unit has been in the news because of the October 2021 spill from the pipeline transporting Beta Unit production from Platform Elly to shore.

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If the Schumer-Manchin bill is enacted, what happens to the Sale 257 CCS bids?

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

The subject legislation requires the Secretary of the Interior to accept the highest valid bid that was received for each tract offered in OCS Lease Sale 257. Exxon was the sole bidder on 94 tracts on the nearshore Texas shelf. The leases were to be acquired for carbon sequestration purposes.

The CCS bids should not be considered valid given that:

  1. Sale 257 was an oil and gas lease sale. The Notice of Sale said nothing about carbon sequestration and did not offer the opportunity to acquire leases for that purpose. Therefore, the public notice requirements for CCS leasing (30 CFR § 556.308) were not fulfilled.
  2. Because there was no draft or final Notice of Sale, interested parties and the public did not have the opportunity to consider and comment on CCS leasing, tract exclusions, bidding parameters, and other factors.
  3. 30 CFR § 556.308 requires publication of a lease form. No CCS lease form was posted or published for comment.
  4. CCS operations were not considered in the environmental assessments conducted prior to the sale.
  5. No evaluation criteria for CCS bids have been published.

Unexpectedly, the Infrastructure Bill, signed on 11/15/2021 (just 2 days before Sale 257) included a provision for OCS carbon sequestration. However, that legislation did not require CCS leasing or authorize DOI to sell CCS leases as part of an oil and gas lease sale; nor did it exempt DOI from complying with its leasing regulations. Instead, It gave the Secretary a year (until 11/15/2022) to promulgate necessary implementing regulations. If carbon sequestration in the Gulf of Mexico is deemed to be desirable, a separate CCS sale should be held when the regulatory framework has been established.

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GoM exploration is insufficient to support sustained production at current levels

Posted in drilling, energy policy, Gulf of Mexico, Offshore Energy - General, tagged , , , , , , , on July 26, 2022| Leave a Comment »

Foremost energy experts like Daniel Yergin understand that oil and gas will be critical to our economy and security for decades, and that offshore production is an important component of our energy supply chain. Unfortunately, our massive outer continental shelf has, from an oil and gas standpoint, been effectively reduced to the central and western GoM.

Opportunities in the GoM are being seriously constrained by the extended pause in leasing. A lease sale has not been held for 615 days, the longest US offshore leasing gap since the 1950’s.

Reserve replacement and sustained production are dependent on exploration. The charts below illustrate the decline in GoM exploratory drilling and the reduced activity by some of the more important operating companies.

Per BSEE data, the number of exploratory well starts averaged only 3/month for the last 18 months (chart 2). This level of activity is the lowest since the early days of deepwater operations (chart 1). There was even more drilling during the post-Macondo moratorium (2010-2011).

ConocoPhillips and Exxon have not drilled a GoM exploratory well since 2016 and 2018 respectively. Activity by other operators has also declined significantly (chart 3). BP has not spudded an exploratory well since Sept. 2021.

No one should be surprised by the sharp decline in reserves and the dearth of recent field discoveries. Hopefully, government and industry will engage in a more thorough discussion of these trends and measures that might improve the intermediate and longer term production outlook.

chart 1
chart 2
chart 3

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Alaska and Pacific OCS compliance leaders

Posted in Alaska, California, Offshore Energy - General, Regulation, tagged , , , , , , , , on July 21, 2022| Leave a Comment »

Northstar, Beaufort Sea

The only current Alaskan OCS production is from Northstar, a joint State-Federal Unit in the Beaufort Sea. The production island is in State waters, but 7 of the wells produce from the Federal sector. The field was originally developed by bp, but Hilcorp is the current operator. To date, BSEE has conducted 5 inspections of the facility in 2022, and no incidents of noncompliance (INCs) were identified.

Per BOEM records, 4 companies operate Pacific (California) OCS facilities that are currently producing. Three of those operators have superior 2022 inspection records. No INCs were issued to either Exxon (11 Santa Ynez Unit inspections) or Freeport-McMoRan (24 Platform Irene inspections). Only 2 warning INCs were issued during 12 inspections of Beta Operating Co. platforms Ellen, Elly, and Eureka in the Beta Unit offshore Long Beach.

Marine life on Platform Eureka, from this Hakai article

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Interesting Forbes graphic: Apple vs. Exxon

Posted in energy policy, Uncategorized, tagged , , , on June 18, 2022| Leave a Comment »

Forbes

Apple has full control over the price of its products and trounces ExxonMobil’s earnings in every quarter. Apple could slash the price of its products and still make a huge profit. But ExxonMobil can’t slash the price of its products because it doesn’t set the price.

Forbes

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Exxon and API responses to White House letters to refiners

Posted in energy policy, Offshore Energy - General, Regulation, tagged , , , on June 17, 2022| Leave a Comment »

Good response from Exxon to the White House letter.

In the short term, the U.S. government could enact measures often used in emergencies following hurricanes or other supply disruptions — such as waivers of Jones Act provisions and some fuel specifications to increase supplies. Longer term, government can promote investment through clear and consistent policy that supports U.S. resource development, such as regular and predictable lease sales, as well as streamlined regulatory approval and support for infrastructure such as pipelines.

Exxon

Perhaps Exxon will return to the Gulf of Mexico if the Administration commits to regular and predictable oil and gas lease sales. The company hasn’t drilled a well in the Gulf since 2019.

The longer API letter comments on the fundamentals of refining markets and operations while also addressing the Administration’s “end fossil fuel rhetoric” and negative regulatory signals. Who would want to make major refinery investments under these circumstances?

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California decommissioning – the band plays on

Posted in California, decommissioning, energy policy, rigs-to-reefs, tagged , , , , , , , , , on May 31, 2022| Leave a Comment »

Offshore California, the best that most facility operators and their predecessors (to the extent they continue to hold decommissioning liabilities) can hope for is a graceful exit with manageable financial losses. (The situation is a bit different for Exxon’s Santa Ynez Unit, which has been shut-in since 2015 while the company seeks to resolve oil transportation issues resulting from an onshore pipeline rupture. Here is the latest episode of that amazing saga.)

California’s Federal offshore, where 9 mobile drilling units (MODUs) were operating concurrently in the early 1980s, hasn’t seen a MODU in over 30 years. However, 23 production platforms, some of which are massive structures, remain (see the presentation below). At this point, these platforms are expensive monuments given that their combined production (per EIA) is only 7000 BOPD.

Regardless of their production status, the California offshore platforms continue to be ecologically significant. Dr. Jerry Schubel is among the many marine scientists who understand the importance of the life that has grown on and around these structures. The scientific community also sees other research, educational, and recreational uses for these platforms as per our Rigs-to-Reefs +++ page. 

In the absence of workable State reefing/reuse legislation, not much is going to happen. Questionable Federal decisions on the management of decommissioning funds are another impediment to timely action. (See “The troubling case of Platforms Hogan and Houchin.”)

To their credit, State and Federal agencies, trade organizations, and interested third parties continue to discuss the issues and consider alternatives. A recent workshop was helpful in that regard. Attached is the excellent presentation by Bob Byrd and John Smith, who have been at the vanguard in addressing California decommissioning issues. Embedded below is the YouTube video of the presentations from their session. These are excellent updates for those who have an interest in decommissioning issues.

byrd-smith-2022-occ-decommissioning-overview-1Download

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