MMS issues final notice of eastern Gulf of Mexico Lease Sale 189

By OGJ editors

HOUSTON, Oct. 17 -- The US Department of the Interior's Minerals Management Service issued a Final Notice of Sale Wednesday for Eastern Gulf of Mexico (GOM) Sale 189. The lease sale, which will be held Dec.10 in New Orleans, La., will include 138 unleased blocks covering 794,880 acres in the eastern GOM. The blocks are 100-196 miles offshore in water 1,600-3,425 m deep.

"This sale area [within an area of 256 blocks in the 1.47 million-acre Eastern GOM Planning Area] is the same as Eastern GOM Sale 181 held in December 2001," commented MMS Regional Director Chris Oynes (OGJ Online, Dec. 06, 2001). "It remains one of great interest because of the potential oil and gas in the area. There is already production inside the sale area at BP's Kings Peak project in Desoto Canyon 133, and MMS has received 20 exploration plans for leases in the area."

Sale 181 was criticized at that time as a "missed opportunity" by National Ocean Industries Association and others in the industry that deplored the elimination of about 75% of the original sale area after Florida Congressmen and Gov. Jeb Bush protested exploration in those easternmost waters.

Royalty exemptions
Sale 189, which covers an initial period of 10 years, includes a provision for royalty suspension of 12 million boe for leases in water 1,600 m and deeper, subject to certain price thresholds. The deepwater royalty relief measure was recently adopted in the Gulf of Mexico to increasing domestic production of natural gas and oil. In addition, lessees can apply for additional discretionary royalty relief on these leases, if needed.

Undiscovered economically recoverable hydrocarbons in the area are estimated at 65-85 million bbl of oil and 0.26-0.34 tcf of natural gas, and MMS [www.gomr.mms.gov] estimates the net economic value for this sale to be $100-500 million in 2003 dollars.

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