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BOEM schedules central gulf lease sale for June 20

An update to the article was added Jan. 27.

The US Bureau of Ocean Energy Management will hold a consolidated central Gulf of Mexico lease sale in New Orleans on June 20, the US Department of the Interior agency announced. The sale, which will be the last during the 2007-12 US Outer Continental Shelf program, will include all unleased areas in the planning area off Louisiana, Mississippi, and Alabama, BOEM noted.

The announcement followed US President Barack Obama’s statement, during his Jan. 24 State of the Union address, that he was directing DOI to open 75% of the US Outer Continental Shelf to oil and gas leasing and development. DOI said in its Jan. 26 announcement of the June 20 lease sale that the proposed 2012-17 program would make more than 75% of undiscovered, technically recoverable oil and gas on the OCS available for development, including 12 scheduled lease sales in the gulf.

“The central Gulf of Mexico remains the area with the greatest offshore oil and gas potential in the entire US OCS, and this proposed sale is another important step in making this area available for safe and environmentally responsible exploration and development,” BOEM Director Tommy P. Beaudreau said. “We are moving forward with this sale based on careful analysis of the best scientific information available and consideration of all of the public comments we have received.”

News of the sale drew only mild cheers from oil and gas industry associations and related groups, which basically suggested that reality doesn’t match the rhetoric. Erik Milito, American Petroleum Institute’s upstream director, said on Jan. 26 that the US Energy Information Administration projects that 2012 production in the gulf will be more than 20% lower than in 2010. “The administration’s plans for offshore leasing will keep more than 85% of the US offshore areas off-limits,” he added.

National Ocean Industries Association Pres. Randall B. Luthi said NOIA is pleased that the sale has been scheduled, but pointed out that it’s actually a combination of two sales that were scheduled previously. “It’s nothing new, nor is the claim that 75% of the resources on the OCS are open to development,” he said. “It is just smoke and mirrors to hide the fact that we’re still exploring in the same areas we have been in the last 30 years.”

‘Several steps behind’

In fact, Luthi continued, seven federal OCS sales which originally were in the final 2017-12 schedule were canceled—one off Virginia, one in the western gulf, and five off Alaska. “So while we move one step forward today, we are already several steps behind,” he said. “If the president and his administration are serious about more access, they should at least put Virginia offshore exploration and development back on the table.”

The Gulf Economic Survival Team applauded BOEM’s announcement, but Executive Director Lori LeBlanc said while lease sales provide opportunities to improve US energy security and create jobs nationwide, “permits are the key to turning this opportunity into reality.”

LeBlanc said, “We hope that today’s announcement is followed by a commitment to resolve the tough challenges that remain in making the permitting process for gulf energy activities as efficient as possible. Nearly a year and a half after the lifting of the deepwater moratorium, there continues to be tremendous uncertainty with regard to the federal government’s ability to timely approve the necessary plans and permits required to get the drill bits turning.”

The proposed OCS Sale No. 216/222 includes 7,250 unleased blocks covering nearly 38 million acres 3-230 miles offshore in 9-11,115 ft of water, BOEM said. It estimates that the central gulf contains close to 31 billion bbl of crude oil and 134 tcf of gas currently undiscovered and technically recoverable. BOEM said the June lease sale could result in the production of 1 billion bbl of crude and 4 tcf of gas.

Terms reflect reforms

The sale’s terms will reflect recent administrative reforms, BOEM indicated. These include escalating rental rates to encourage prompt exploration and development of leases, as well as time under the lease if the operator demonstrates a commitment to exploration by drilling a well during the base period, according to BOEM. Lease durations are graduated by water depth to account for operating differences, it indicated.

BOEM said it also recently increased the minimum bid for deepwater tracts to $100/acre from $37.50/acre after its analysis of federal gulf lease sales over the past 15 years showed that deepwater acreage receiving less than $100/acre, adjusted for energy prices at time of each sale, experienced virtually no exploration and development drilling.

Luthi said the announcement also was a good reminder that comments still are being taken on the next 5-year OCS program, which would take effect on July 1. “Unfortunately, the proposed plan currently does not include any sales outside the areas that have been explored for 30 years,” he continued. “I am hopeful that the American public, through the comment process, will stress how important it is to increase our home grown energy program and greatly expand the proposed strategy.”

The latest sale’s proposed terms and conditions, which will be finalized in a final notice of sale at least 30 days beforehand, have been posted online, and are also available from BOEM’s Gulf of Mexico Public Information Office in New Orleans.

Contact Nick Snow at nicks@pennwell.com.


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