OCS DECISION PUTS FOCUS ON GULF

July 2, 1990
U.S. offshore oil and gas producers have two major responsibilities in the wake of President Bush's capitulation on Outer Continental Shelf leasing. They must hold Interior Sec. Manuel Lujan to his recent word on leasing in the Gulf of Mexico. And in the few areas where they still can lease and drill they must make no mistakes.

U.S. offshore oil and gas producers have two major responsibilities in the wake of President Bush's capitulation on Outer Continental Shelf leasing. They must hold Interior Sec. Manuel Lujan to his recent word on leasing in the Gulf of Mexico. And in the few areas where they still can lease and drill they must make no mistakes.

Producers can dispute Bush's decision to curtail OCS leasing-but not his sense of reality. Outside the gulf, coastal residents don't want offshore leasing. They don't want to hear arguments about how tanker traffic threatens their shores more than drilling and production. They just want gasoline for their cars and fuel for their furnaces and air conditioners, and they want it all cheap. Woe be the politician who tells them the facts about energy supply and markets.

A REALISTIC CHOICE

Bush might have stood up to the pressures and allowed the three controversial lease sales off California and Florida to carefully proceed. He might have advanced leasing elsewhere off the West and East Coasts, citing the government's statutory responsibilities to promote OCS oil and gas development. He could even have based his actions on concern for the environment. But obstructionist politicians still would have blocked leasing with eternal lawsuits and budgeting moratoriums.

So Bush made the realistic choice. He sacrificed future energy supply to environmental politics. He essentially shut down leasing and much potential drilling everywhere on the OCS except the central and western Gulf of Mexico and parts of Offshore Alaska. Still, environmentalists whined that he didn't go far enough. Sooner or later, even the environmentalist President will tire of their audacity, at which point something constructive will have resulted from this setback to national energy interests. For amusement in the meantime, producers can watch Energy Sec. James Watkins try to fashion a national energy strategy of any consequence with so much of the petroleum resource off limits to drilling.

Of course, there's always the Gulf of Mexico. As far as Lower 48 OCS exploration goes, there's only the Gulf of Mexico following Bush's decision. That's why Lujan's comment less than 2 weeks earlier is so important.

The Interior secretary said area-wide leasing would continue in the gulf. His earlier comments, and those by Minerals Management Service Director Barry Williamson, sounded much different. In fact, several heavy bidders in the last gulf lease offering, OCS Sale 123 in March, based their aggressive strategies on expectations that MMS would revert to a nomination system for subsequent leasing. Lujan said a departure from the area-wide program has never been in prospect.

AREA-WIDE SCHEME VITAL

Producers should welcome Lujan's assertion about the gulf-and never let him forget it. As the special report on p. 19 shows, the gulf's broad prospect range is attracting companies from around the world and independents from the U.S. onshore. Central to the allure is the ability of operators to work the gulf as a basin, an ability fostered by area-wide leasing. A move away from area-wide leasing would detract from the gulf's attractiveness, which could only hurt future energy supply.

If OCS leasing rules must change, it's some consolation that gulf rules might not. For all but the largest producers, the gulf is now the last opportunity to lease and drill the OCS. For U.S. energy supply, the gulf is the last hope for new contributions from the offshore resource in the near term. Gulf producers must understand how much pressure that puts on their performance. Their environmental and safety record is excellent. It has never been more important to keep it that way.

Copyright 1990 Oil & Gas Journal. All Rights Reserved.