GULF OF MEXICO

Jennifer E. Smith
Houston

The approximate route of Coastal's new Gulfstream Natural Gas System and Williams' new Buccaneer pipeline system, from Mobile Bay, Alabama to Florida. The exact routes of these pipelines are pending an open season and a regulatory approvals process. [8,431 bytes]
U. S. Gulf rig utilization [59,893 bytes]

New US Gulf pipeline plan well supported

Two pipeline operators are competing to build marine natural gas pipelines tapping Mobile Bay and eastern Gulf of Mexico supplies in order to south Florida:

Coastal announced it will develop a major new natural gas pipeline system to serve Florida's growing energy needs. The pipeline will begin around Mobile Bay, Alabama, and travel southeast to West Palm Beach on the east coast of Florida. The Gulfstream Natural Gas System will stretch 700 miles once complete. Coastal said that nine customers have executed letters providing enough of a volume commitment to proceed with development, but it also held an open season March 15-29 for other parties to express interest. Gulfstream will meet with local and state officials, environmental groups, various state agencies, and other stakeholders about the route of the pipeline and technical details. It will file a plan with the Federal Energy Regulatory Commission during the third quarter of this year. The targeted in-service date of the pipeline will be June 2002.
Williams subsidiary Buccaneer Gas Pipeline also plans to create a new natural gas pipeline system to transport gas from Alabama to Florida. The Buccaneer Pipeline, envisaged as a 36-in. line, will extend 420 miles from Mobile Bay, Ala., to hit land in western Florida. It will further extend about 250 miles to serve the center of the state. An open season for the proposed pipeline will run March 4-April 8. Williams soon will conduct preliminary surveys on public and private properties to determine the feasibility of potential routes. Williams has identified 14 potential delivery points in Pasco, Polk, Osceloa, Orange, Lake, Seminole, Volusia, Brevard and Bay counties, Florida. Williams will meet with local communities to consult on the route. It will apply to the Federal Energy Regulatory Commission in the third quarter. The target in-service date is 2002.

The Florida Reliability Coordinating Council last year said Florida will need more than 10,000 additional megawatts of power generation capacity by 2007, translating to 1.5 Bcf/d of gas.

US Gulf jackup rates increasingly dismal

An informal survey of jackup day rates in the Gulf of Mexico in early March found some rates at half what they were a few months ago. Rig utilization for all Gulf of Mexico MODUs is down that far or further for many companies (See accompanying utilization table).

A 350-ft jackup rig working in 350 ft water depths might fetch $25,000; in 300 ft, $16,000-17,000; and a jackup working in 250 ft water depths might get $13,000 a day. Pool's Ranger class rigs (rated at 70+ ft water depth) recently went for $11,000 a day working in about 20 ft water depths, and the firm's 50 series (rated for 90 ft) at $12,000. Two Rowan jackups recently worked for less than $10,000 a day, though after completion of a well, rig rates for both went back up.

Extremely cautious optimism marks some contractors. They look forward to demand recovery as commodity rates go back up, which some look to happen within a year. One contractor said he looks for 80-85% utilization in the second half - making him look like an extreme optimist next to some operating companies.

Black Marlin pipeline changing hands

A consortium led by Blue Dolphin Energy completed the previously announced acquisition of the 75-mile offshore Black Marlin pipeline from Enron Pipeline. Black Marlin is a system serving the High Island area offshore Texas with transportation capacity of 160 MMcf/d of gas and 1,500 b/d of condensate, though throughput is currently 60 MMcf/d and 300 b/d of condensate.

The pipeline begins on High Island Block 136 and connects to facilities in Texas City, Texas. Blue Dolphin, WBI Holdings, and MCNIC Pipeline hold 1/2, 1/6, and 1/3 shares, respectively. Upon the acquisition, Blue Dolphin sold a 1/6 interest in the Blue Dolphin Pipeline system to WBI.

ERT acquires seven more blocks

Cal Dive International subsidiary Energy Resource Technology completed its purchases of two offshore blocks from Vastar Resources and five from Shell Offshore. Transaction details were not disclosed. The blocks acquired from Vastar are High Island A-23 and East Cameron 88. High Island A-23 contains two wells on two caisson structures producing about 1.2 MMcf/d of gas.

The blocks acquired from Shell are Vermilion 199, 200, and 182, and East Cameron 230 and 182. These properties include 13 wells located on three platforms and one caisson, producing 1 MMcf/d of gas and 200 b/d of oil. Well work is planned for each acquisition to increase production rates above current levels. ERT will own 100% interest in the blocks, located in water depths ranging from 60 ft to 120 ft, and will operate them. ERT plans to make two more acquisitions this year.

Crude oil to be added to petroleum reserve

The Department of the Interior announced plans to add 28 million bbl of oil to the Strategic Petroleum Reserve to replenish oil sold off in an attempt to raise money. The oil will come from in-kind royalty payments from federal leaseholders in the Gulf of Mexico. Energy Secretary Bill Richardson indicated the move will take advantage of historically low oil price.

Gil Thurm, president of the Independent Petroleum Association of America, called the move "a first step on the road to preserving our nation's ability to continue to supply our energy needs and avoid complete reliance on uncertain and unstable international markets." Up to 100,000 b/d can be added to the reserve under the plan, which will take that much off the oil market, said the IPAA.