WATCHING WASHINGTON DRILLING REBOUND IN THE GULF?

With Patrick Crow Although some major operators are reducing their leasehold in the Gulf of Mexico, independents are as optimistic as ever. Speaking at a National Ocean Industries Association meeting last week, oilmen said the combination of rebounding natural gas prices, lease turnover, and better technology may spur a resurgence of drilling in the gulf. Joe Foster, chairman and CEO of Newfield Exploration Co., Houston, said a major restraint is that many operators want to see if higher gas

April 12, 1993

3 min read

Although some major operators are reducing their leasehold in the Gulf of Mexico, independents are as optimistic as ever.

Speaking at a National Ocean Industries Association meeting last week, oilmen said the combination of rebounding natural gas prices, lease turnover, and better technology may spur a resurgence of drilling in the gulf.

Joe Foster, chairman and CEO of Newfield Exploration Co., Houston, said a major restraint is that many operators want to see if higher gas prices are real and to see cash in their pockets rather than in projections.

POSITIVE TRENDS

However, Foster sees some positive trends for smaller companies active in the gulf.

For one thing, major companies continue to upgrade their leasehold, selling tracts that may be marginal for them but not necessarily for independents.

Foster said offshore operators also are increasingly inclined to hire contractors for services their own employees used to perform.

"We've been very pleased with the 'partnering' we've done with turnkey contractors," he said. "Even as gas prices rise, partnering and property upgrading will continue to make sense in the Gulf of Mexico."

Randy Stewart, Kerr-McGee Corp. group vice president, said U.S. majors are being lured overseas by the potential of large discoveries and pushed by overregulation at home.

He said the trend will continue, but "we shouldn't expect the majors to abandon the gulf entirely in the near term."

Kerr-McGee holds about 200 blocks in the gulf, "about the only U.S. basin that cannot be considered mature."

Among other things, the company is running more seismic surveys around oil and gas fields, seeking better exploitation of leases using existing infrastructure.

Dale Bossert, Union Pacific Resources Co. production vice-president, said "the potential is still very very large" for the gulf.

He was optimistic because leases on 2,500 blocks are due to expire within 5 years and technology that previously was used only by majors has become increasingly available to independents.

Bossert predicted the gulf will see more use of horizontal drilling. What's more, he said, "I believe eventually the entire gulf will be reshot using 3D seismic."

NEGATIVE SIDE

On the negative side, independent operators are concerned about their ability to meet the Minerals Management Service's bonding requirements for platform removal.

MMS has a logjam of about 1,000 applications to assign leases in the gulf, many going from majors to independents. It is worried that independents may not be able to pay for platform removal when fields are depleted.

The agency, which pegs the potential cost to remove today's 3,800 offshore platforms at $5 billion, plans to issue a final rule on bonding requirements this spring.