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Posts Tagged ‘Gulf of Mexico’

BOEM just released their update of Gulf of Mexico OCS oil and gas reserves as of 12/31/2019. Oil reserves increased by 35.2% as a result of 6 new fields being added.

The reserve additions are necessary and welcome given the high depletion rates from 2002 to 2018 when reserves (plotted above) declined steeply while production rates held steady or increased. The concerns about the sustainability of current GoM production rates, as expressed in our 7/26/2021 post, remain given the historically low levels of exploratory drilling. For the reasons presented in that post, our view is that the importance of GoM production will increase, not decrease, over the next decade.

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BSEE data

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As expected given the magnitude and track of Ida, the necessary inspections, and the onshore damage, most GoM production remains shut-in. (BSEE data)

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1,698,557 BOPD per BSEE. Updated recovery chart:

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Shell Offshore Inc. (Shell), a subsidiary of Royal Dutch Shell plc, conducted an initial flyover of our assets in the path of Hurricane Ida. During this initial flight, we observed damage to our West Delta-143 (WD-143) offshore facilities. When it is safe to do so, we will send personnel offshore to provide a closer inspection of these facilities to understand the full extent of the damage and the degree to which our production in the Gulf of Mexico will likely be impacted.

Shell news release

This is a very significant report given the importance of the WD 143 platform in transferring all production from Shell facilities in the “Mars corridor.” These facilities include the Mars, Olympus, and Ursa platforms.

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In a bit of a surprise, the volume of shut-in GoM oil production rebounded to more than 1.7 million BOPD (see BSEE’s 9/2 update). Because several deepwater platforms had reportedly resumed production, the sharp increase in shut-in volumes could have something to do with downstream facility damage or bottlenecks. The daily Ida shut-in volumes are plotted below.

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In light of the ongoing litigation regarding the Department of the Interior’s “leasing pause,” DOI’s Record of Decision for Sale 257 is most encouraging. The viewpoints expressed in the two quotes below are fundamental to the future of the OCS Oil and Gas Program. Hopefully, all parties can put aside their differences and build upon these consensus views.

While offshore exploration and development cannot be made risk free, OCS oil- and gas-related activities can be conducted safely and responsibly with strong regulatory oversight and appropriate measures to protect human safety and the environment.

ROD, p. 5

The decision to hold Lease Sale 257 recognizes the role that GOM oil and gas resources play in addressing the Nation’s demand for domestic energy sources and fosters economic benefits, including employment, labor income, and tax revenues, which are highest in Gulf Coast States and also distributed widely across the United States. Revenues from offshore oil and gas lease sales support national conservation programs and coastal resiliency for applicable coastal states and political subdivisions under the Gulf of Mexico Energy Security Act of 2006.

ROD, p. 7

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Noble doesn’t address the rumored disconnect and relocation issues, but in a carefully worded statement confirms that the Globetrotter II encountered hurricane conditions.

SUGAR LAND, Texas, Aug. 29, 2021 /PRNewswire/ — Noble Corporation (NYSE: NE, “Noble” or the “Company”) today announced that all personnel onboard the Pacific Sharav, Noble Globetrotter I, and Noble Globetrotter II ultra-deepwater drillships in the US Gulf of Mexico are safe and accounted for following Hurricane Ida.  Each rig successfully secured its respective well in progress and took evasive actions to avoid the storm’s path.  Of the three, the Noble Globetrotter II is the only vessel that encountered hurricane-force conditions.  The vessel maintained stability throughout the weather event and is operating on its own power with functional marine and safety systems.  A full assessment of its condition will be completed as soon as the weather clears.

GLOBETROTTER II photo
Globetrotter II

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After an amazing 38 year career with MMS and BSEE, Lars Herbst has announced that he will retire at the end of 2021. Lars had important technical and managerial roles in the development of the deepwater Gulf of Mexico, the response to major hurricanes including Ivan, Katrina, and Rita, controlling the Macondo blowout and addressing the related regulatory issues, and the offshore industry’s response to the COVID-19. Lars was an active participant in the International Regulator’s Forum and is recognized worldwide for his operational and regulatory expertise. Best wishes to Lars as he transitions to the next phase of his life.

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In the early 1990’s, Department of the Interior (DOI) and Department of Energy (DOE) leadership dabbled at re-branding the OCS Oil and Gas Program by reversing the order of the words. Clever? Perhaps by Washington public relations standards. One senior manager even changed his license plate from “OCS OIL” to “MMS GAS” (not much competition for those tags 😃). Technical staff were less enthused about this simplistic marketing gimmick that misrepresented the historical and scientific facts about oil and gas production. For many years, natural gas was a byproduct of oil production that was commonly flared. (This practice continues in some regions of the world, although to a lesser extent than in the past.)

Understandably, the Oil and Gas Journal wasn’t very impressed by the change. I saved a copy of their 1/24/1994 editorial (attached) on the subject. Per the OGJ:

We at the Journal love natural gas. But that doesn’t warrant an attempt to repeal the laws of nature and ignore the weight of tradition by renaming everything “gas and oil” this and that.

John L. Kennedy, Editor, Oil and Gas Journal, 1/24/1994)

To their credit, BOEM and BSEE web pages and announcements during recent administrations (both parties) indicate a preference for the more traditional “oil and gas.” (The DOE website largely ignores the existence of either oil or natural gas.) Surprisingly, the American Petroleum Institute (API), an industry trade organization with more than 100 years of history, is now consistently using “natural gas and oil.” This rearrangement of words is not entirely consistent with the interest of API’s members. In the offshore sector, the primary interest of API members is in finding and producing oil. if you think otherwise, look at the EIA GoM gas production data. Most of the Gulf’s declining gas production is now associated with deepwater oil production, and BSEE rightfully requires that this gas be used for fuel or transported for sale. Similarly, gas is a secondary consideration for API members exploring in Alaska given that 35 trillion cu ft of North Slope gas still awaits a pipeline.

Oil companies, and those who represent them, should be proud of their current and historical role in producing oil (and gas) for our economy, security, and way of life; and of the men and women who have toiled to locate and produce petroleum resources for the benefit of society. Are there better energy alternatives? Perhaps, but issues with these alternatives remain to be resolved, and oil and gas will continue to be important. Let’s focus on producing these resources as safely, cleanly, and reliably as possible.

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