MMS issues notice for Aug. 22 Gulf of Mexico lease sales


By the OGJ Online Staff

WASHINGTON, DC, July 23 -- The US Minerals Management Service Monday issued notice for two Gulf of Mexico offshore lease sales to be held concurrently Aug. 22 in New Orleans.

They are Sale 180, which will offer 4,114 western gulf tracts, and Part 2 of central gulf Sale 178, which will offer 53 tracts in the area known as the "Western Gap."

The 53 blocks are in an area delineated by a new US-Mexico boundary agreement. Part 1 of Sale 178 was held in March.

Sale 180 will offer 4,114 unleased blocks covering 22.37 million acres off Texas and Louisiana. The blocks are 9 to 250 miles offshore in 8-3,000 m of water. Sale 180 includes 258 Western Gap blocks.

MMS said estimates of undiscovered economically recoverable hydrocarbons range from 10 to 90 million bbl of oil and 0.57 to 1.93 tcf of gas. There are 1,951 blocks in 800 m of water or more.

MMS said the western gulf sale would include the same production incentives as Part 1 of Sale 178.

MMS Acting Director Tom Kitsos said Lease Sale 180 would offer an incentive for drilling for deep gas in the shallow-water shelf areas. Fields would get a royalty suspension on the first 20 bcf of production from below 15,000 ft subsea.

Kitsos said, "This incentive was modified to address our reassessment of economic factors by raising the threshold price at which the royalty suspension would end from $3.50 to $5/MMbtu. This ensures that the incentive is not pulled back prematurely by wildly fluctuating gas prices.

"The incentive will stay in place during periods of modestly high natural gas prices but end when the price remains at sustained high levels over a period of a year. This incentive at this level is necessary to stimulate industry's willingness to invest in this high cost, high risk, and operationally difficult area."

Deepwater royalty relief will be available for tracts in more than 800 m of water. The specific terms for royalty relief will be granted to individual leases rather than fields. For Sale 180, the royalty "suspension volumes" range from 9 million boe in waters of 800-1,599 m and to 12 million boe for more than 1,600 m.

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