MMS sells more than 91 bcf of RIK gas

The US MMS sold more than 91 bcf of gas it received from gulf offshore producers as RIK to nine high bidders, the DOI agency said Oct. 23.

Oct. 26, 2007

2 min read

Nick Snow
Washington Editor

WASHINGTON, DC, Oct. 26 -- The US Minerals Management Service sold more than 91 bcf of natural gas it received from Gulf of Mexico offshore producers as royalties in kind to nine high bidders, the Department of Interior agency said Oct. 23.

The gas will be delivered in 13 sales packages over 5-12 months beginning Nov. 1 to 13 offshore pipeline systems originating in the gulf, MMS said. Bear Energy LP, BG Energy Merchants, ConocoPhillips Inc., Louis Dreyfus Energy Services, National Energy and Trade LP, PPM Energy Inc., Sequent Energy Management LP, United Energy Trading LLC, and Williams Trading Co. submitted the winning bids.

Bidding was strong for the sale as 21 companies tendered 175 offers for the gas, MMS Director Randall Luthi said. Revenues would total $641 million at current prices, although actual revenues will vary based on prices over the life of the contracts, he added.

The gas in the sale was taken as royalties in kind instead of cash payments from federal Gulf of Mexico leases. MMS then sells such gas competitively on the open market. It has said that the program is more efficient, reduces regulatory and reporting costs, provides early certainty to royalty values, and ensures a fair return on public royalty assets.

House Natural Resources Committee Chairman Nick J. Rahall (D-W.Va.) has criticized the program and attempted to impose limits on its use in legislation which the committee passed last spring.

Luthi said MMS will continue to use royalty-in-kind sales in tandem with royalty-in-value, or cash, payments depending on the particular business case to ensure a fair return on public royalty assets.

Contact Nick Snow at [email protected].