Thursday, November 29, 2018
Royalty Relief Would Spark Gulf Investment
By Lori LeBlanc, LMOGA Offshore Committee Director for BIC Magazine

Pricing is everything. In retail and in real estate, we all know that price can either attract prospective buyers or drive them away.  The same can be said about the federal government’s approach to royalty revenue for offshore oil and gas production.

The U.S. depends on offshore revenue as it is the second largest income source to the federal treasury behind income taxes, funding everything from school lunches to coastal restoration. Without a sensible royalty rate for producing American oil and gas on the Outer Continental Shelf (OCS), however, our nation may be permanently driving away this important revenue source and a unique opportunity to be energy dominant. To ensure long-term revenues and increase offshore investments, the federal government must take a hard look at royalty rate reduction.
‘Epic’ Deepwater Oil, Gas Cost Reductions Facing Inflationary Headwinds, Says Wood Mackenzie
via Natural Gas Intel
"One of the key drivers in cost reduction in deepwater projects is lower rig costs, which is a cyclical factor," Wood Mackenzie research director Angus Rodger said. "But more importantly, there have also been big structural changes, such as the faster drilling of wells. For example, in the U.S. Gulf of Mexico it now takes half the time to drill a deepwater well compared to 2014.”

Reduced costs have come as some operators downsized projects or focused more on subsea tiebacks and brownfield projects. Project lead times have been reduced, along with well counts.

Earlier this month the  Big Foot  deepwater project offshore Louisiana, led by Chevron Corp., ramped up. It is expected to produce copious oil and natural gas, according to the Energy Information Administration (EIA).

Big Foot, which may hold up to 14 Bcf, is one of 10 gas-rich producing fields ramping up in the GOM this year, EIA said. Eight more gas-heavy fields are scheduled to begin producing in 2019, according to information reported to the Department of Interior’s Bureau of Safety and Environmental Enforcement.

“These new field starts may slow or reverse the long-term decline” in U.S. offshore output, EIA researchers said. “The 16 projects starting in 2018 and 2019 have a combined natural gas resource estimate of about 836 Bcf.”
The decline in GOM natural gas production occurred as the  number of producing natural gas wells  in the GOM declined, falling from 3,271 in 2001 to 875 in 2017. The technology and expertise required to produce oil and natural gas from the seabed is expensive and specialized, and costs of production platforms can often exceed one billion dollars. With the growth in exploration and production activities in shale gas and tight oil formations, onshore drilling became more economic relative to offshore drilling.

Most of the natural gas produced in the GOM is associated-dissolved natural gas produced from oil fields. Although older oil wells in the GOM tend to have higher natural gas content, newer wells are more oil-rich, resulting in less natural gas per well. According EIA’s  Natural Gas Annual , 59% of gross withdrawals of natural gas in the GOM were from oil wells in 2017, up from 13% in 1997.
BP decides on name for new Gulf of Mexico platform via Offshore Energy Today
The name, chosen by the project team and an employee survey, is a reference to Odysseus’ loyal dog from “The Odyssey,” and a nod to the Mad Dog spar, an existing production facility operated by BP that is located about six nautical miles away from the Argos site, BP said in a statement on Tuesday.

The Mad Dog 2 project includes the Argos platform with the capacity to produce up to 140,000 gross barrels of crude oil per day through a subsea production system from up to 14 production wells and eight water injection wells.

“Selecting Argos as the name of our newest platform is an important milestone for the Mad Dog 2 project, which remains on track and on budget,” said Starlee Sykes, BP’s regional president for the Gulf of Mexico and Canada.
Yes, It Is Possible For Oil Prices To Be Too Low
via Forbes
The recent price drop comes as producers are deciding on capital budgets for 2019, and a weakening market and the uncertain price outlook could prompt a more cautious approach. Anything that causes companies to underinvest represents a threat to the “energy dominance” agenda that Trump has promoted since moving into the White House.

The president probably doesn’t need to be reminded that the shale boom was a key driver of the  economy and job growth  after the Great Recession a decade ago. If the oil and natural gas sector stalls, vast swaths of the economy – from the Gulf Coast to the Rust Belt – will suffer.
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