U.S. OCS LEASING PLAN CALLED INADEQUATE, MINIMUM EFFORT

U.S. petroleum industry groups are pessimistic about the Bush administration's proposed 5 year offshore leasing plan.

Robert Stewart, president of the National Ocean Industries Association, called the plan "very inadequate." The new plan takes a conservative approach to exploration on the Outer Continental Shelf (OGJ, Feb. 25, p. 29).

In its most immediate action, the Interior Department's Minerals Management Service will offer 29.1 million acres under 5,420 blocks in the Central Gulf of Mexico during OCS Sale 131. It is scheduled to begin at 9 a.m. next Mar. 27 at the Clarion Hotel in New Orleans.

INDUSTRY REACTION

Of the new proposed sale schedule, Stewart said, "Given the current situation in the Persian Gulf, the need to develop our own energy supplies is increasingly urgent. It is hard to understand how a comprehensive National Energy Strategy could fail to take advantage of the tremendous energy potential of the OCS."

The American Petroleum Institute said the draft plan represents "the minimum effort" required to keep the offshore leasing, exploration, and development program alive in the U.S.

API said, "Too many acres that offer the best prospects for finding substantial amounts of oil and gas remain off limits to the offshore industry because of congressional moratoriums and the administration's willingness to defer action on large coastal areas. We believe those are serious mistakes that harm the nation's energy security and economic well being.

"Our country depends on foreign sources for almost half of its oil. The updated plan does little to take advantage of potential domestic resources to stem the rise in imports.

"In this time of crisis, we find it remarkable that our federal government has asked foreign countries to increase their oil output and then proposes such an unambitious offshore leasing schedule."

NEW PROPOSAL

After evaluating comments on the draft proposal, MMS will issue another draft this summer, then a final proposal next spring.

The new draft proposal calls for as many as 23 sales in 12 areas during 1992-97, down about one third from the current plan. Half of the 23 sales will be in the Gulf of Mexico.

Except in the gulf, the new program will offer less acreage in all sale areas, focusing on what Minerals Management Service thinks are the most promising offshore structures. MMS will offer only about one third of the acreage of the current plan, issued in 1987.

One reason for the reduced number of sales is President Bush's decision last June to defer sales off Washington/Oregon, Northern and Central California, North Atlantic area, and southern Florida (OGJ, July 2, 1990, p. 46).

MMS will proceed with leasing off the Atlantic Coast. Two sales combining parts of the Mid and South Atlantic planning areas are to be considered, one in 1994 and one in 1997. For each sale, 1,000 blocks will be considered at first. That will be narrowed to just 250 blocks.

MMS said there is the potential for a 5 tcf gas field off North Carolina "which would be the biggest offshore gas field in U.S. history."

GULF OF MEXICO

Eastern Gulf of Mexico sales would be held in 1994 and 1997, limited to 200 tracts each. Only tracts north of 26 N. Lat. would be offered.

Some of the sale areas are within 20 miles of shore, although Florida Gov. Lawton Chiles has urged MMS not to allow drilling within 100 miles of the Florida coast.

Annual sales would be held in the central and western Gulf of Mexico, where the entire planning areas would be opened to bidding.

MMS considered trimming the acreage offered in those sales to specific geologic areas. "We tried to delineate it from several standpoints, but it is one big Cretaceous basin," the agency said.

Under Bush's plan, MMS would consider leasing 87 blocks in the Santa Maria basin and Santa Barbara Channel off southern California in 1996 or later. MMS will spend $1 0 million/year during the next few years for environmental, socioeconomic, and geologic studies of the area.

Nevertheless, Rep. Leon Panetta (DCalif. said he will seek to continue moratoriums blocking lease sales along the entire California coastline.

Off Alaska, sales are planned in 1993 and 1996 for the Beaufort Sea and in 1994 and 1997 for the Chukchi Sea. MMS figures the Chukchi Sea has a 6 million bbl potential.

On the schedule is a 1994 Cook Inlet sale and a 1995 sale in the Yakutat area of the Gulf of Alaska. Also, MMS would consider two sales in five other lower potential areas, selecting the areas with the highest industry interest.

The plan includes a new decision making regimen called the Area Evaluation and Decision Process. MMS called the process "flexible," allowing the pace of decisions to be based on collection and analysis of information and consultations with affected parties. There are to be many opportunities to evaluate decisions to proceed, delay, or terminate the process.

MMS continues to prepare a legislative proposal that will allow it to share some federal OCS revenues with coastal communities near offshore activity.

NEXT MONTH'S SALE

Tracts to be offered in Sale 131 range from 3 to 220 miles off Louisiana, Mississippi, and Alabama in water depths ranging from 13 ft to 10,500 ft.

Bidding will be under the usual cash bonus with fixed royalties and minimum bids of $25/acre.

MMS will offer 5 year leases on 1,295 blocks in water less than 1,310 ft deep, 8 year leases with stipulation that lessee must begin drilling within 5 years on 204 blocks in water from 1,310 to 2,950 ft deep, and 10 year leases on 3,921 blocks in water that's more than 2,950 ft deep.

Royalty rates will be 12.5% on 1,295 blocks with 5 year primary terms and 16 2/3% on 4,125 blocks with B-10 year primary terms.

MMS estimates recoverable hydrocarbons developed as a result of Sale 131 will be 130 million bbl of oil and 1.21 tcf of gas. With 18.7 million acres under lease in the gulf, production amounts to 685,000 b/d of oil and 10 MMcfd of gas.

In central gulf Sale 123 held in March 1990, MMS offered 5,667 tracts covering 30.5 million acres. Of the area offered, 525 tracts were leased for bonuses totaling more than $424 million.

Copyright 1991 Oil & Gas Journal. All Rights Reserved.