The U.S. Minerals Management Service has issued an interim rule that sets conditions for suspending royalty payments for oil and gas produced on certain deepwater Gulf of Mexico leases.
The rule also details terms for granting royalty relief on producing leases in all Outer Continental Shelf areas through their conversion to net revenue share leases.
The deepwater portion of the rule implements provisions of the OCS Deep Water Royalty Relief Act for leases issued prior to Nov. 28, 1995, when the law was enacted.
Under the interim rule, published in the May 31 Federal Register, MMS will apply royalty suspension volumes to fields in the Central and Western Gulf of Mexico planning areas that would not be economic to produce without royalty relief.
Fields that did not produce before Nov. 28, 1995, and meet MMS economic determinations may receive royalty suspension volumes of at least 17.5 million bbl of oil equivalent (BOE) in 200-400 m of water, 52.5 million BOE in 400-800 m of water, and 87.5 million BOE in more than 800 m of water.
MMS issued an interim rule Mar. 25 spelling out royalty suspension volumes for new eligible leases, that is, deepwater leases issued as a result of sales conducted after Nov. 28, 1995.
Royalty relief gave a significant boost to Central Gulf of Mexico Sale 157, held Apr. 24. MMS received a record 1,381 bids for 924 tracts, including 471 bids on tracts in water depths of 200 m or more.
In addition, Tatham Offshore Inc., Houston, last week said it will file in July for royalty relief for its Sunday Silence field in Ewing Bank Blocks 958, 959, 1002, and 1003 in 400-800 m of water.
If MMS grants royalty relief quickly, Tatham can conclude financing arrangements for Gulf of Mexico production facilities and begin Sunday Silence development by mid-1997.
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