Gulf of Mexico royalty-in-kind gas sale to generate $537 million in revenue, MMS says

The federal government will receive more than $537 million from a sale of more than 76 billion cubic feet of Gulf of Mexico royalty-in-kind natural gas earlier this month, the US Minerals Management Service said on Oct. 27.

The federal government will receive more than $537 million from a sale of more than 76 billion cubic feet of Gulf of Mexico royalty-in-kind natural gas earlier this month, the US Minerals Management Service said on Oct. 27.

The estimate is based on current prices of approximately $7/MMBtu, the US Department of the Interior agency said. Actual revenue will vary over the five-month and 12-month contracts, it added. Delivery is scheduled to begin on Nov. 1, it said.

ConocoPhillips Co., Shell Energy North America US LP, United Energy Trading LLC, JP Morgan Chase, Williams Gas Marketing Co. and National Energy and Trade LP submitted winning bids for the gas, MMS said.

It said that gas in the sale was an aggregation of royalties taken in-kind as product instead of as cash payments from production on federal leases in the Gulf of Mexico. MMS began the royalty-in-kind program more than 10 years ago in an effort to increase revenue, improve efficiency and shorten the compliance cycle.

The program generated an extra $63 million of revenue during fiscal 2007 and approximately $150 million of additional revenue from fiscal 2004 through 2007, according to the agency. It also has been attacked by US House Natural Resources Committee Chairman Nick J. Rahall (D-W.Va.) and other members of Congress who have said that it is not being run properly.

Contact Nick Snow at nicks@pennwell.com

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