ISSUES & ANALYSIS: MMS setting groundrules for FPSOs in Gulf of Mexico

Senior Oil and Gas Writer Sam Fletcher outlines the US Minerals Management Service's plans for a regulatory system governing use of floating production and storage systems for the first time in the Gulf of Mexico.


Sam Fletcher
OGJ Online

US Minerals Management officials will hear public testimony this week on the proposed use of floating production, storage and offloading systems (FPSOs) in the Gulf of Mexico in New Orleans and Lake Charles, La., and in Houston.

Last month MMS officials released their initial draft of an environmental impact statement on the proposed use of FPSOs in gulf waters greater than 200 m or 656 ft. The first public hearing on that proposal was held in Mobile, Ala., Monday evening.

Other hearings are scheduled at 6-8 p.m. Tuesday in New Orleans; Wednesday in Houston; and Thursday in Lake Charles.

So far, MMS officials are firm on two points relating to the use of FPSOs in the gulf: No long-term flaring of natural gas will be permitted, and any proposal for reinjecting that gas must include a commitment to produce it at a later date.

"You have to do something with the gas, not just tanker the oil," Chris C. Oynes, regional MMS director, told industry representatives at a 3-day deepwater conference and workshop last week in Houston.

Assumptions
The base case that MMS officials now are evaluating involves a permanently moored, double-hulled ship-shaped FPSO with the capability of storing up to 1 million bbl of oil. Production equipment and on-board processing equipment would be the same as those used with other existing deepwater production facilities in the gulf, officials said.

Produced oil would be offloaded into 500,000 bbl shuttle tankers for transport to ports in Texas or Louisiana, including the Louisiana Offshore Oil Port (LOOP). An attendant vessel would be required during offloading operations.

That amounts to "a generic proposal," said Oynes, since no offshore producer has yet submitted a development plan for using such a vessel in those waters.

He said when a plan is submitted an environmental review would still be required for that specific proposal. However, Oynes said, such a review would take only 6 months instead of the 2 years for the current environmental impact statement (EIS).

As drafted, the EIS would ban the use of FPSOs in the lightering prohibited area the US Coast Guard has established off Texas and Louisiana. FPSOs also would be barred in the Corpus Christi, Port Isabel, Viosca Knoll and Mississippi Canyon leasing areas.

Final decision
Following the hearings and other public comments, MMS officials expect to release a final draft of the proposed EIS in December and finalize their decision on the use of FPSOs in February.

Meanwhile, MMS is considering adopting for FPSOs existing industry standards from such areas as the planning, design and construction of floating production systems; design and hazard analysis for offshore production facilities; and design of marine risers for floating production systems and tension-leg platforms (TLPs).

"We're trying diligently not to re-invent the wheel, since FPSOs have been used for so long in so many other areas of the world," Oynes said.

FPSOs have been used off Australia, Brazil, Canada, and West Africa, as well as in Southeast Asia, the South China Sea, the Mediterranean, and the North Sea, but not yet in the US Gulf of Mexico.

Worldwide use
A total of 97 FPSOs have been used in ongoing or completed offshore production operations around the globe since the late 1970s. Representing a total 460 years of service, those vessels have produced and processed an estimated 6.4 billion bbl of crude oil. There are some 70 FPSO systems now in service or under construction, officials reported.

A study of just 20 of those operations, involving 1.6 billion bbl of production revealed 206 reported spills totaling 4,641 bbl during a combined total of 119 years of service. MMS said that is equal to 2.9 bbl spilled for every 1 million bbl produced.

By comparison, they said, offshore operators in the Gulf of Mexico have produced about 5.5 billion bbl of crude since 1980, with spills averaging 1 bbl for every 89,500 bbl produced.

There have been six spills in excess of 1,000 bbl each from oil pipelines in the gulf since 1981, MMS officials reported. The largest reported spill from a FPSO was 3,900 bbl, they said.

MMS officials acknowledge that floating production systems such as the TLPs and spars previously used in the gulf may not be the best applications for future deepwater projects, especially in locations even further beyond the reach of the existing oil pipeline infrastructure.

Deepwater potential
The MMS currently is proceeding with plans for an oil and gas lease sale in the eastern gulf off Alabama and Florida in December 2001�the first in those waters since 1988. The proposed offering includes about 5.9 million acres, with 62% of that area in deep waters out to 7,400 ft and far beyond the existing pipeline infrastructure in the central and western gulf.

"The deepwater Gulf of Mexico has emerged as a world class oil and gas province in the last 4 years," said Oynes. "Between 1996 and 1999, more than 3,000 new leases were issued in water depths of 200 m or more. Exploration activity has accelerated rapidly."

Of the 7,530 federal oil and gas leases now active in the gulf, he said, about half are in deepwater. That includes 437 leases in water depths of 400-800 m and a whopping 3,195 in depths beyond 800 m.

Although relatively few of the deepwater leases are producing yet, Oynes said, deepwater oil production exceeded conventional shallow-water oil production in the gulf last November for the first time.

"There has been a steady ramp up of new production projects in the gulf's deep waters," he said. "More than 100 discoveries have been made in deep water. About 35 deepwater fields have gone on production, including nine in 1999."

Deepwater production in the gulf has grown to an estimated 224 million bbl in 1999 from an annual level of 55 million bbl in 1995. Last year, the gulf produced an estimated 494 million bbl of oil.

Deep waters accounted for 42% of all of the offshore oil produced from the Gulf of Mexico last year, compared with only about 15% of all gulf gas. Although the deepwater frontier in the gulf is weighted more toward oil, Oynes said, gas production from those waters increased to 840 bcf last year, up from 181 bcf in 1995.

"The stage is set for even more growth," Oynes said. He credits new technology and the royalty relief provisions enacted by Congress in 1995 for the increase in US deepwater activity.

The automatic provisions for deepwater royalty relief that became effective in 1996 will expire in November of this year. However, Oynes said, the MMS retains the administrative authority to continue some provisions of royalty relief for deepwater projects. And it currently plans to continue offering "some type of royalty relief" for deepwater lease sales in 2001 and beyond.

Subsea production systems are the largest single production method used in the gulf. But eight deepwater projects use fixed platforms, either jackets or towers; and 10 use floating systems, primarily TLPs.

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